UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ To ________
Commission File Number: 001-36307
Installed Building Products, Inc.
(Exact name of registrant as specified in its charter)
Delaware 45-3707650
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
495 South High Street, Suite 50 
Columbus, Ohio
43215
(Address of principal executive offices) (Zip Code)
(614) 221-3399
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name onof each exchange on which registered
Common Stock,$0.01 par value per shareIBP The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer 
Non-accelerated filer Smaller reporting company 
 Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act). Yes No
On October 27, 2021,July 28, 2022, the registrant had 29,707,15528,746,452 shares of common stock, par value $0.01 per share, outstanding.



Table of Contents
TABLE OF CONTENTS

i

Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)

 September 30,December 31,
 20212020
ASSETS
Current assets
Cash and cash equivalents$191,435 $231,520 
Accounts receivable (less allowance for credit losses of $8,784 and $8,789 at September 30, 2021 and December 31, 2020, respectively)306,590 266,566 
Inventories118,093 77,179 
Prepaid expenses and other current assets56,803 48,678 
Total current assets672,921 623,943 
Property and equipment, net104,977 104,022 
Operating lease right-of-use assets61,028 53,766 
Goodwill257,106 216,870 
Customer relationships, net133,759 108,504 
Other intangibles, net70,341 62,889 
Other non-current assets26,996 17,682 
Total assets$1,327,128 $1,187,676 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt$24,557 $23,355 
Current maturities of operating lease obligations21,278 18,758 
Current maturities of finance lease obligations1,780 2,073 
Accounts payable119,583 101,462 
Accrued compensation60,623 45,876 
Other current liabilities56,970 44,951 
Total current liabilities284,791 236,475 
Long-term debt542,517 541,957 
Operating lease obligations39,155 34,413 
Finance lease obligations3,038 2,430 
Deferred income taxes9,035 35 
Other long-term liabilities55,866 53,184 
Total liabilities934,402 868,494 
Commitments and contingencies (Note 15)00
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively— — 
Common stock; $0.01 par value: 100,000,000 authorized, 33,271,659 and 33,141,879 issued and 29,707,155 and 29,623,272 shares outstanding at September 30, 2021 and December 31, 2020, respectively333 331 
Additional paid in capital208,535 199,847 
Retained earnings332,087 269,420 
Treasury stock; at cost: 3,564,504 and 3,518,607 shares at September 30, 2021 and December 31, 2020, respectively(147,228)(141,653)
Accumulated other comprehensive loss(1,001)(8,763)
Total stockholders’ equity392,726 319,182 
Total liabilities and stockholders’ equity$1,327,128 $1,187,676 

 June 30,December 31,
 20222021
ASSETS
Current assets
Cash and cash equivalents$69,940 $333,485 
Investments94,865 — 
Accounts receivable (less allowance for credit losses of $9,264 and $8,717 at June 30, 2022 and December 31, 2021, respectively)384,696 312,767 
Inventories192,387 143,039 
Prepaid expenses and other current assets74,830 70,025 
Total current assets816,718 859,316 
Property and equipment, net114,699 105,933 
Operating lease right-of-use assets73,280 69,871 
Goodwill354,971 322,517 
Customer relationships, net191,375 178,264 
Other intangibles, net94,443 86,157 
Other non-current assets56,601 31,144 
Total assets$1,702,087 $1,653,202 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt$30,642 $30,839 
Current maturities of operating lease obligations24,696 23,224 
Current maturities of finance lease obligations2,049 1,747 
Accounts payable155,287 132,705 
Accrued compensation65,692 50,964 
Other current liabilities84,524 68,090 
Total current liabilities362,890 307,569 
Long-term debt828,632 832,193 
Operating lease obligations48,298 46,075 
Finance lease obligations4,462 3,297 
Deferred income taxes14,834 4,819 
Other long-term liabilities42,370 42,409 
Total liabilities1,301,486 1,236,362 
Commitments and contingencies (Note 16)00
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively— — 
Common stock; $0.01 par value: 100,000,000 authorized, 33,428,587 and 33,271,659 issued and 28,745,614 and 29,706,401 shares outstanding at June 30, 2022 and December 31, 2021, respectively334 333 
Additional paid in capital222,270 211,430 
Retained earnings401,326 352,543 
Treasury stock; at cost: 4,682,973 and 3,565,258 shares at June 30, 2022 and December 31, 2021, respectively(251,363)(147,239)
Accumulated other comprehensive income (loss)28,034 (227)
Total stockholders’ equity400,601 416,840 
Total liabilities and stockholders’ equity$1,702,087 $1,653,202 

1

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(in thousands, except share and per share amounts)

Three months ended September 30,Nine months ended September 30, Three months ended June 30,Six months ended June 30,
2021202020212020 2022202120222021
Net revenueNet revenue$509,763 $420,486 $1,434,927 $1,211,756 Net revenue$676,749 $488,098 $1,264,241 $925,164 
Cost of salesCost of sales353,879 288,839 1,001,730 836,710 Cost of sales460,040 336,212 875,129 647,851 
Gross profitGross profit155,884 131,647 433,197 375,046 Gross profit216,709 151,886 389,112 277,313 
Operating expensesOperating expensesOperating expenses
SellingSelling24,188 20,843 67,677 60,209 Selling29,371 22,631 54,563 43,489 
AdministrativeAdministrative68,056 58,240 199,607 177,495 Administrative84,030 66,474 163,174 131,551 
AmortizationAmortization9,224 6,974 26,798 20,378 Amortization11,261 9,178 22,358 17,574 
Operating incomeOperating income54,416 45,590 139,115 116,964 Operating income92,047 53,603 149,017 84,699 
Other expense, netOther expense, netOther expense, net
Interest expense, netInterest expense, net7,687 7,564 22,781 22,679 Interest expense, net10,401 7,520 21,001 15,094 
Other (income) expense(483)176 (494)305 
Other expense (income)Other expense (income)368 (92)513 (11)
Income before income taxesIncome before income taxes47,212 37,850 116,828 93,980 Income before income taxes81,278 46,175 127,503 69,616 
Income tax provisionIncome tax provision12,320 9,773 27,432 24,578 Income tax provision21,374 8,962 33,777 15,112 
Net incomeNet income$34,892 $28,077 $89,396 $69,402 Net income$59,904 $37,213 $93,726 $54,504 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Net change on cash flow hedges, net of tax (provision) benefit of $(454) and $(408) for the three months ended September 30, 2021 and 2020, respectively, and $(2,638) and $1,582 for the nine months ended September 30, 2021 and 2020, respectively1,292 1,176 7,762 (4,582)
Net change on cash flow hedges, net of tax (provision) benefit of $(3,603) and $1,244 for the three months ended June 30, 2022 and 2021, respectively, and $(10,033) and $(2,184) for the six months ended June 30, 2022 and 2021, respectivelyNet change on cash flow hedges, net of tax (provision) benefit of $(3,603) and $1,244 for the three months ended June 30, 2022 and 2021, respectively, and $(10,033) and $(2,184) for the six months ended June 30, 2022 and 2021, respectively10,150 (3,687)28,261 6,470 
Comprehensive incomeComprehensive income$36,184 $29,253 $97,158 $64,820 Comprehensive income$70,054 $33,526 $121,987 $60,974 
Basic net income per share$1.19 $0.95 $3.05 $2.35 
Diluted net income per share$1.18 $0.95 $3.02 $2.33 
Earnings Per Share:Earnings Per Share:
BasicBasic$2.08 $1.27 $3.23 $1.86 
DilutedDiluted$2.07 $1.26 $3.21 $1.84 
Weighted average shares outstanding:Weighted average shares outstanding:Weighted average shares outstanding:
BasicBasic29,404,257 29,478,816 29,355,538 29,549,460 Basic28,781,866 29,374,801 29,040,693 29,330,910 
DilutedDiluted29,620,748 29,698,028 29,615,162 29,737,716 Diluted28,894,140 29,609,744 29,235,997 29,612,101 
Cash dividends declared per shareCash dividends declared per share$0.30 $— $0.90 $— Cash dividends declared per share$0.32 $0.30 $1.53 $0.60 


2

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND SEPTEMBERJUNE 30, 20212022
(in thousands, except share amounts)


Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated
 Other
Comprehensive
Loss
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - July 1, 202033,124,237 $331 $195,288 $213,506 (3,325,049)$(123,488)$(12,901)$272,736 
Net income28,077 28,077 
Issuance of common stock awards to employees3,073 00— 
Surrender of common stock awards(1,726)0— 
Share-based compensation expense2,094 2,094 
Share-based compensation issued to directors0104 104 
Other comprehensive income, net of tax1,176 1,176 
BALANCE - September 30, 202033,127,310 $331 $197,486 $241,583 (3,326,775)$(123,488)$(11,725)$304,187 
Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated Other
Comprehensive
Loss
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - July 1, 202133,264,517 $333 $205,597 $306,107 (3,562,942)$(147,204)$(2,293)$362,540 
Net income34,892 34,892 
Issuance of common stock awards to employees7,142 00— 
Surrender of common stock awards(1,562)(24)(24)
Share-based compensation expense2,812 2,812 
Share-based compensation issued to directors0126 126 
Dividends Declared ($0.30 per share)(8,912)(8,912)
Other comprehensive income, net of tax1,292 1,292 
BALANCE - September 30, 202133,271,659 $333 $208,535 $332,087 (3,564,504)$(147,228)$(1,001)$392,726 




Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated
 Other
Comprehensive Income
(Loss)
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - April 1, 202133,208,082 $331 $202,662 $277,804 (3,518,881)$(141,653)$1,394 $340,538 
Net income37,213 37,213 
Issuance of common stock awards to employees52,205 (2)— 
Surrender of common stock awards(44,061)(5,551)(5,551)
Share-based compensation expense2,826 2,826 
Share-based compensation issued to directors4,230 111 111 
Dividend declared ($0.30 per share)(8,910)(8,910)
Other comprehensive loss, net of tax(3,687)(3,687)
BALANCE - June 30, 202133,264,517 $333 $205,597 $306,107 (3,562,942)$(147,204)$(2,293)$362,540 
Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated Other
Comprehensive Income
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - April 1, 202233,351,843 $334 $218,642 $350,475 (4,076,251)$(197,104)$17,884 $390,231 
Net income59,904 59,904 
Issuance of common stock awards to employees71,409 — — — 
Surrender of common stock awards(52,995)(4,459)(4,459)
Share-based compensation expense3,503 3,503 
Share-based compensation issued to directors5,335 125 125 
Dividends declared ($0.32 per share)(9,053)(9,053)
Common stock repurchase(553,727)(49,800)(49,800)
Other comprehensive income, net of tax10,150 10,150 
BALANCE - June 30, 202233,428,587 $334 $222,270 $401,326 (4,682,973)$(251,363)$28,034 $400,601 





3

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20202021 AND SEPTEMBERJUNE 30, 20212022
(in thousands, except share amounts)

Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated
 Other
Comprehensive
Loss
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - January 1, 202032,871,504 $329 $190,230 $173,371 (2,855,164)$(106,756)$(7,143)$250,031 
Net income69,402 69,402 
Cumulative effect of accounting changes, net of tax(1,190)(1,190)
Issuance of common stock awards to employees249,435 (2)— 
Surrender of common stock awards(29,069)(973)(973)
Share-based compensation expense7,029 7,029 
Share-based compensation issued to directors6,371 229 229 
Common stock repurchase(442,542)(15,759)(15,759)
Other comprehensive loss, net of tax(4,582)(4,582)
BALANCE - September 30, 202033,127,310 $331 $197,486 $241,583 (3,326,775)$(123,488)$(11,725)$304,187 
Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated Other
Comprehensive
Loss
Stockholders’
Equity
Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated Other
Comprehensive Loss
Stockholders’
Equity
SharesAmountSharesAmountSharesAmountSharesAmount
BALANCE - January 1, 2021BALANCE - January 1, 202133,141,879 $331 $199,847 $269,420 (3,518,607)$(141,653)$(8,763)$319,182 BALANCE - January 1, 202133,141,879 $331 $199,847 $269,420 (3,518,607)$(141,653)$(8,763)$319,182 
Net incomeNet income89,396 89,396 Net income54,504 54,504 
Issuance of common stock awards to employeesIssuance of common stock awards to employees125,550 (2)— Issuance of common stock awards to employees118,408 (2)— 
Surrender of common stock awardsSurrender of common stock awards(45,897)(5,575)(5,575)Surrender of common stock awards(44,335)(5,551)(5,551)
Share-based compensation expenseShare-based compensation expense8,351 8,351 Share-based compensation expense5,539 5,539 
Share-based compensation issued to directorsShare-based compensation issued to directors4,230 339 339 Share-based compensation issued to directors4,230 213 213 
Dividends declared ($0.90 per share)(26,729)(26,729)
Dividends declared ($0.60 per share)Dividends declared ($0.60 per share)(17,817)(17,817)
Other comprehensive income, net of taxOther comprehensive income, net of tax6,470 6,470 
BALANCE - June 30, 2021BALANCE - June 30, 202133,264,517 $333 $205,597 $306,107 (3,562,942)$(147,204)$(2,293)$362,540 
Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated Other
Comprehensive Income Loss
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - January 1, 2022BALANCE - January 1, 202233,271,659 $333 $211,430 $352,543 (3,565,258)$(147,239)$(227)$416,840 
Net incomeNet income93,726 93,726 
Issuance of common stock awards to employeesIssuance of common stock awards to employees112,389 (1)— 
Surrender of common stock awardsSurrender of common stock awards(53,045)(4,459)(4,459)
Share-based compensation expenseShare-based compensation expense6,592 6,592 
Share-based compensation issued to directorsShare-based compensation issued to directors5,335 249 249 
Issuance of awards previously classified as liability awardsIssuance of awards previously classified as liability awards39,204 4,000 4,000 
Dividends declared ($1.53 per share)Dividends declared ($1.53 per share)(44,943)(44,943)
Common stock repurchaseCommon stock repurchase(1,064,670)(99,665)(99,665)
Other comprehensive income, net of taxOther comprehensive income, net of tax7,762 7,762 Other comprehensive income, net of tax28,261 28,261 
BALANCE - September 30, 202133,271,659 $333 $208,535 $332,087 (3,564,504)$(147,228)$(1,001)$392,726 
BALANCE - June 30, 2022BALANCE - June 30, 202233,428,587 $334 $222,270 $401,326 (4,682,973)$(251,363)$28,034 $400,601 

4

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Nine months ended September 30,
 20212020
Cash flows from operating activities
Net income$89,396 $69,402 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment32,498 30,850 
Amortization of operating lease right-of-use assets16,464 13,281 
Amortization of intangibles26,798 20,378 
Amortization of deferred financing costs and debt discount993 1,000 
Provision for credit losses1,135 3,839 
Gain on sale of property and equipment(1,405)(592)
Noncash stock compensation10,228 8,050 
Deferred income taxes— (3,405)
Amortization of terminated interest rate swap2,414 508 
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable(23,224)(9,624)
Inventories(37,122)5,983 
Other assets(8,116)9,027 
Accounts payable14,120 (14,746)
Income taxes receivable/payable(107)14,192 
Other liabilities(7,594)(4,259)
Net cash provided by operating activities116,478 143,884 
Cash flows from investing activities
Purchases of investments— (776)
Maturities of short term investments— 37,473 
Purchases of property and equipment(27,898)(25,515)
Acquisitions of businesses, net of cash acquired of $1,640 and $0 in 2021 and 2020, respectively(94,500)(38,825)
Proceeds from sale of property and equipment2,219 828 
Other(1,430)(2,662)
Net cash used in investing activities(121,609)(29,477)
Cash flows from financing activities
Proceeds from vehicle and equipment notes payable20,753 17,759 
Debt issuance costs— (157)
Principal payments on long-term debt(19,688)(19,801)
Principal payments on finance lease obligations(1,573)(1,998)
Dividends paid(26,428)— 
Acquisition-related obligations(2,442)(3,896)
Repurchase of common stock— (15,759)
Surrender of common stock awards by employees(5,576)(973)
Net cash used in financing activities(34,954)(24,825)
Net change in cash and cash equivalents(40,085)89,582 
Cash and cash equivalents at beginning of period231,520 177,889 
Cash and cash equivalents at end of period$191,435 $267,471 
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest$23,748 $24,130 
Income taxes, net of refunds27,428 13,798 
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations23,543 18,340 
Release of indemnification of acquisition-related debt2,036 — 
Property and equipment obtained in exchange for finance lease obligations1,918 853 
Seller obligations in connection with acquisition of businesses18,987 6,965 
Unpaid purchases of property and equipment included in accounts payable1,327 1,229 

Six months ended June 30,
 20222021
Cash flows from operating activities
Net income$93,726 $54,504 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment23,162 21,570 
Amortization of operating lease right-of-use assets13,224 10,549 
Amortization of intangibles22,358 17,574 
Amortization of deferred financing costs and debt discount961 663 
Provision for credit losses1,887 102 
Gain on sale of property and equipment(511)(560)
Noncash stock compensation7,078 6,693 
Amortization of terminated interest rate swap1,668 1,602 
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable(66,719)(3,953)
Inventories(33,481)(19,973)
Other assets(1,474)(1,225)
Accounts payable19,259 3,724 
Income taxes receivable/payable11,466 (297)
Other liabilities6,855 (7,538)
Net cash provided by operating activities99,460 83,435 
Cash flows from investing activities
Purchases of investments(124,713)— 
Maturities of short term investments30,000 — 
Purchases of property and equipment(24,512)(20,278)
Acquisitions of businesses, net of cash acquired of $337 and $168 in 2022 and 2021, respectively(72,463)(67,715)
Proceeds from sale of property and equipment830 1,112 
Other(7,047)(5)
Net cash used in investing activities(197,905)(86,886)
Cash flows from financing activities
Payments on Term Loan(2,500)— 
Proceeds from vehicle and equipment notes payable13,325 15,103 
Debt issuance costs(657)— 
Principal payments on long-term debt(16,158)(13,012)
Principal payments on finance lease obligations(1,085)(1,041)
Dividends paid(44,877)(17,607)
Acquisition-related obligations(9,024)(2,050)
Repurchase of common stock(99,665)— 
Surrender of common stock awards by employees(4,459)(5,551)
Net cash used in financing activities(165,100)(24,158)
Net change in cash and cash equivalents(263,545)(27,609)
Cash and cash equivalents at beginning of period333,485 231,520 
Cash and cash equivalents at end of period$69,940 $203,911 
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest$22,586 $12,899 
Income taxes, net of refunds22,311 15,288 
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations16,561 16,967 
Release of indemnification of acquisition-related debt980 2,036 
Property and equipment obtained in exchange for finance lease obligations2,600 1,134 
Seller obligations in connection with acquisition of businesses25,278 12,954 
Unpaid purchases of property and equipment included in accounts payable1,058 886 

5

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company operates in more than 190210 locations and its corporate office is located in Columbus, Ohio.

In the first quarter of 2022, we realigned our operating segments to reflect recent changes in our business. We have 13 operating segments consisting of our Installation, Manufacturing and Distribution operations. The Installation operating segment and a singleis also our 1 reportable segment. See Note 10, Information on Segments, for further information.
Substantially all of our Installation segment sales are derived from the service-based installation of various products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations.

Each of our Installation branches has the capacity to serve all of our end markets. See Note 3, Revenue Recognition, for information on our revenues by product and end market.

The COVID-19 pandemic ("COVID-19") has caused significant volatility, uncertainty and economic disruption. Many publicPublic health organizations and international, federal, state and local governments implementedresponded by implementing measures during various points of the pandemic to combatcontain the spread of COVID-19 during portions of 2020 and 2021 with some of these restrictions still in place as of the date of filing of this Quarterly Report on Form 10-Q. Some of these measures include restrictions on movement such as quarantines, “stay-at-home” orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity.COVID-19. We do not believe the various orders and restrictions significantly impacted our business in the first ninesix months of 2021.2022. However, COVID-19 has caused disruptions in the building products supply chain, impacting our ability to purchase certain materials we install through typical channels.channels and fueling producer price and consumer inflation. The extent to which COVID-19 will impact our future growth, operations, customers, suppliers, employees and financial results is uncertain. The future impact on our financial results will depend on numerous factors including government actions and the resulting impact on construction activity, the effect on our customers’ demand for our services, the effects on our supply chain for materials, and the ability of our customers to pay for our services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include all of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) have been omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to prevent the information presented from being misleading when read in conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 (the “2020“2021 Form 10-K”), as filed with the SEC on February 24, 2021.2022. The December 31, 20202021 Condensed Consolidated Balance Sheet data herein was derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP.

Our interim operating results for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results to be expected in future operating quarters.

Note 2 to the audited consolidated financial statements in our 20202021 Form 10-K describes the significant accounting policies and estimates used in preparation of the audited consolidated financial statements. Other than the recently implemented accounting policies described below, there have been no changes to our significant accounting policies during the three or ninesix months ended SeptemberJune 30, 2021.2022.
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Reclassifications
The change in reportable segments described in Note 1, Organization and Note 10, Information on Segments, requires certain prior year disclosures in Note 3, Revenue Recognition and Note 6, Goodwill and Intangibles to be recast to conform to the current year presentation.
Recently AdoptedIssued Accounting Pronouncements Not Yet Adopted
We are currently evaluating the impact of the following Accounting Standards Update ("ASU") on our Condensed Consolidated Financial Statements or Notes to Condensed Consolidated Financial Statements:
Standard  DescriptionEffective Date  AdoptionEffect on the financial statements or other significant matters
ASU 2021-01,2021-08, Reference Rate ReformBusiness Combinations (Topic 848):Scope805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
  Effective upon issuanceThis pronouncement amends Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts.  
This pronouncement clarifies the scope and application of ASU 2020-04, "Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)."Annual periods beginning after December 15, 2022, including interim periods therein. Early adoption is permitted.
  We continue to evaluateare currently assessing the impact of Topic 848 and may apply other elections as applicable as additional changes in the market occur.
ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income TaxesJanuary 1, 2021This pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and improves the consistent application of GAAP by clarifying and amending existing guidance. The adoption of this standard did not impact our financial statements or have a material effect on our disclosures.consolidated financial statements.

NOTE 3 - REVENUE RECOGNITION

Our revenuesRevenues for our Installation operating segment are derived primarily through contracts with customers whereby we install insulation and other complementary building products and are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. An insignificant portion of our sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs, adjusted accordingly for any return provisions. We do offer assurance-type warranties on certain of our installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method as we believe this represents the best measure of when goods and services are transferred to the customer. When this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

Our long-term contracts can be subject to modification to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Payment terms typically do not exceed 30 days for short-term contracts and typically do not exceed 60 days for long-term contracts with customers. All contracts are billed either contractually or as work is performed. Billing on our long-term contracts occurs primarily on a monthly basis throughout the contract period whereby we submit invoices for customer payment based on actual or estimated costs incurred during the billing period. On certain of our long-term contracts the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid after satisfactory completion of each installation project. This amount is referred to as retainage and is common practice in the construction industry, as it allows for customers to ensure the quality of the service performed prior to full payment. Retainage receivables are classified as current or long-term assets based on the expected time to project completion.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Revenues for our Distribution and Manufacturing operating segments included in the Other category are accounted for on a point-in-time basis when the sale occurs, adjusted accordingly for any return provisions. Sales taxes are not included in revenue as we act as a conduit for collecting and remitting sales taxes to the appropriate government authorities. The point-in-time recognition is when we transfer the promised products to the customer and the customer obtains control of the products depending upon the agreed upon terms in the contract.
We disaggregate our revenue from contracts with customers for our Installation segment by end market and product, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenues for the Other category are presented net of intercompany sales in the tables below. The following tables present our net revenues disaggregated by end market and product (in thousands):

Three months ended June 30,Six months ended June 30,
2022202120222021
Installation:
Residential new construction$505,513 75 %$369,736 76 %$947,916 75 %$696,979 75 %
Repair and remodel37,965 %30,245 %70,606 %58,534 %
Commercial94,520 14 %82,984 17 %181,107 14 %159,629 17 %
Net revenue, Installation$637,998 94 %$482,965 99 %$1,199,629 95 %$915,142 99 %
Other (1)
38,751 %5,133 %64,612 %10,022 %
Net revenue, as reported$676,749 100 %$488,098 100 %$1,264,241 100 %$925,164 100 %
Three months ended September 30,Nine months ended September 30,
2021202020212020
Residential new construction$386,346 76 %$315,434 75 %$1,091,414 76 %$912,095 75 %
Repair and remodel34,506 %28,625 %94,142 %75,702 %
Commercial88,911 17 %76,427 18 %249,371 17 %223,959 19 %
Net revenue$509,763 100 %$420,486 100 %$1,434,927 100 %$1,211,756 100 %
 Three months ended June 30,Six months ended June 30,
2022202120222021
Installation:
Insulation$409,602 61 %$308,231 63 %$774,546 62 %$586,798 63 %
Garage doors42,512 %26,044 %78,491 %50,483 %
Shower doors, shelving and mirrors41,264 %34,986 %77,604 %66,419 %
Waterproofing35,197 %34,264 %64,218 %64,213 %
Rain gutters28,723 %21,460 %52,269 %40,464 %
Fireproofing/firestopping16,166 %13,037 %32,088 %25,472 %
Window blinds15,414 %12,667 %28,472 %24,201 %
Other building products49,120 %32,276 %91,941 %57,092 %
Net revenue, Installation$637,998 94 %$482,965 99 %$1,199,629 95 %$915,142 99 %
Other (1)
38,751 %5,133 %64,612 %10,022 %
Net revenue, as reported$676,749 100 %$488,098 100 %$1,264,241 100 %$925,164 100 %

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Insulation$324,360 64 %$268,292 64 %$921,181 64 %$779,045 64 %
Waterproofing34,514 %33,272 %98,727 %89,855 %
Shower doors, shelving and mirrors35,411 %29,282 %101,830 %85,199 %
Garage doors26,951 %24,001 %77,434 %68,655 %
Rain gutters21,807 %17,295 %62,270 %41,942 %
Fireproofing/firestopping(1)
17,684 %11,047 %43,156 %36,325 %
Window blinds13,197 %12,166 %37,398 %34,651 %
Other building products35,839 %25,131 %92,931 %76,084 %
Net revenue$509,763 100 %$420,486 100 %$1,434,927 100 %$1,211,756 100 %

(1)Combined Net revenue for manufacturing operations are included in the Other category for all periods presented to conform with "Other building products"our change in previous years.

composition of operating segments.
Contract Assets and Liabilities

Our contract assets consist of unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized, based on costs incurred, exceeds the amount billed to the customer. Our contract assets are recorded in other current assets in our Condensed Consolidated Balance Sheets. Our contract liabilities consist of customer deposits and billings in excess of revenue recognized, based on costs incurred and are included in other current liabilities in our Condensed Consolidated Balance Sheets.

Contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows (in thousands):
 September 30, 2021December 31, 2020
Contract assets$32,265 $24,334 
Contract liabilities(10,611)(8,965)

Uncompleted contracts were as follows (in thousands):
 September 30, 2021December 31, 2020
Costs incurred on uncompleted contracts$216,929 $169,544 
Estimated earnings112,854 90,737 
Total329,783 260,281 
Less: Billings to date301,626 240,665 
Net under billings$28,157 $19,616 

 June 30, 2022December 31, 2021
Contract assets$41,416 $32,679 
Contract liabilities(17,827)(14,153)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Uncompleted contracts were as follows (in thousands):
 June 30, 2022December 31, 2021
Costs incurred on uncompleted contracts$229,832 $206,050 
Estimated earnings101,671 106,163 
Total331,503 312,213 
Less: Billings to date297,929 285,978 
Net under billings$33,574 $26,235 
Net under billings were as follows (in thousands):
 September 30, 2021December 31, 2020
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)$32,265 $24,334 
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)(4,108)(4,718)
Net under billings$28,157 $19,616 

 June 30, 2022December 31, 2021
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)$41,416 $32,679 
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)(7,842)(6,444)
Net under billings$33,574 $26,235 
The difference between contract assets and contract liabilities as of SeptemberJune 30, 20212022 compared to December 31, 20202021 is primarily the result of timing differences between our performance of obligations under contracts and customer payments. During the three and ninesix months ended SeptemberJune 30, 2021,2022, we recognized $0.1$2.8 million and $8.6$13.2 million of revenue that was included in the contract liability balance at December 31, 2020.2021. We did not recognize any impairment losses on our receivables and contract assets during the three and ninesix months ended SeptemberJune 30, 20212022 or 2020.

2021.
Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of SeptemberJune 30, 2021,2022, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $94.9$183.6 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

Practical Expedients and Exemptions

We generally expense sales commissions and other incremental costs of obtaining a contract when incurred because the amortization period is usually one year or less. Sales commissions are recorded within selling expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
NOTE 4 - CREDIT LOSSES

Our expected loss allowance methodology for accounts receivable is developed using historical losses, current economic conditions and future market forecasts. We also perform ongoing evaluations of our existing and potential customer’s creditworthiness. To date, the COVID-19 pandemic has not had a material impact on the collectability of our existing trade receivables.

Changes in our allowance for credit losses were as follows (in thousands):

Balance as of January 1, 20212022$8,7898,717 
Current period provision1,1351,887 
Recoveries collected and additions506152 
Amounts written off(1,646)(1,492)
Balance as of SeptemberJune 30, 20212022$8,7849,264 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 - INVESTMENTS AND CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid instruments with insignificant interest rate risk and original or remaining maturities of three months or less at the time of purchase. These instruments were $166.5amounted to approximately $34.1 million and $170.4$258.1 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. See Note 9, Fair Value Measurements, for additional information.

All other investments are classified as held-to-maturity and consist of highly liquid instruments, including commercial paper and treasury bills. As of June 30, 2022, the amortized cost of these investments equaled the net carrying value, which was approximately $94.9 million. All held-to-maturity securities as of June 30, 2022 mature in one year or less. We held no such investments as of December 31, 2021. See Note 9,
Fair Value Measurements, for additional information.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 - GOODWILL AND INTANGIBLES
We anticipate that the COVID-19 pandemic could continue to have an impact on the homebuilding industry in general, as it could result in further business interruptions (government-mandated or otherwise) and could affect, among other factors, inflation, interest rates, employment levels, consumer spending and consumer confidence, which could decrease demand for homes, adversely affecting our business. As such, we considered whether impairment indicators arose through the date of filing of this Quarterly Report on Form 10-Q for our goodwill, long-lived assets and other intangible assets and concluded that no such factors existed to cause us to test for goodwill impairment during the ninesix months ended SeptemberJune 30, 2021.2022. While we ultimately concluded that our goodwill, long-lived assets and other intangibles assets were not impaired as of SeptemberJune 30, 2021,2022, we will continue to assess impairment indicators related to the impact of the COVID-19 pandemic on our business.

Goodwill

In the first quarter of 2022, we changed our reporting units to align with our change in operating and reportable segments. See Note 10, Information on Segments, for details about our change in segment structure. Effective January 1, 2022, our Installation reporting unit is comprised of our Installation operating and reportable segment, and our Other category is comprised of our Manufacturing and Distribution operating segments which are also reporting units. All 3 reporting units contain goodwill and were previously combined and recorded as a single operating and reportable segment as of December 31, 2021.
The change in carrying amount of goodwill was as follows (in thousands):
 Goodwill
(Gross)
Accumulated
Impairment
Losses
Goodwill
(Net)
January 1, 2021$286,874 $(70,004)$216,870 
Business Combinations40,206 — 40,206 
Other30 — 30 
September 30, 2021$327,110 $(70,004)$257,106 
InstallationOtherConsolidated
Goodwill (gross) - January 1, 2022, after change in reporting units$331,782 $60,739 $392,521 
Business combinations4,859 27,595 32,454 
Goodwill (gross) - June 30, 2022336,641 88,334 424,975 
Accumulated impairment losses(70,004)— (70,004)
Goodwill (net) - June 30, 2022$266,637 $88,334 $354,971 

Other changes included in the above table primarily include minor adjustments for the purchase price allocation of certain acquisitions still under measurement. For additional information regarding changes to goodwill resulting from acquisitions, see Note 16,17, Business Combinations.

We test goodwill for impairment annually during the fourth quarter of our fiscal year or earlier if there is an impairment indicator. Accumulated impairment losses included within the above table were incurred over multiple periods and were all associated with the Installation segment, with the latest impairment charge being recorded during the year ended December 31, 2010.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Intangibles, net

The following table provides the gross carrying amount, accumulated amortization and net book value for each major class of intangibles (in thousands):
 As of September 30,As of December 31,
 20212020
 Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Amortized intangibles:      
Customer relationships$240,756 $106,997 $133,759 $197,641 $89,137 $108,504 
Covenants not-to-compete24,973 15,628 9,345 20,309 13,436 6,873 
Trademarks and tradenames89,804 31,164 58,640 79,657 27,245 52,412 
Backlog20,425 18,069 2,356 18,847 15,243 3,604 
 $375,958 $171,858 $204,100 $316,454 $145,061 $171,393 


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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 As of June 30,As of December 31,
 20222021
 Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Amortized intangibles:      
Customer relationships$320,791 $129,416 $191,375 $292,113 $113,849 $178,264 
Covenants not-to-compete29,905 18,255 11,650 27,717 16,471 11,246 
Trademarks and tradenames115,897 36,030 79,867 103,007 32,623 70,384 
Backlog23,725 20,799 2,926 23,724 19,197 4,527 
 $490,318 $204,500 $285,818 $446,561 $182,140 $264,421 
The gross carrying amount of intangibles increased approximately $59.5$43.8 million during the ninesix months ended SeptemberJune 30, 20212022 primarily due to business combinations. For more information, see Note 16,17, Business Combinations. Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):

Remainder of 2021$9,509 
202234,971 
202330,650 
202427,136 
202521,731 
Thereafter80,103 

Remainder of 2022$22,435 
202341,318 
202437,397 
202531,076 
202627,118 
Thereafter126,474 
NOTE 7 - LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):
 As of September 30,As of December 31,
 20212020
Senior Notes due 2028, net of unamortized debt issuance costs of $3,783 and $4,230, respectively$296,217 $295,770 
Term Loan, net of unamortized debt issuance costs of $1,094 and $1,343, respectively198,906 198,657 
Vehicle and equipment notes, maturing through September 2026; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8%68,759 67,493 
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0%3,192 3,392 
567,074 565,312 
Less: current maturities(24,557)(23,355)
Long-term debt, less current maturities$542,517 $541,957 
 As of June 30,As of December 31,
 20222021
Senior Notes due 2028, net of unamortized debt issuance costs of $3,335 and $3,633, respectively$296,665 $296,367 
Term loan, net of unamortized debt issuance costs of $6,251 and $6,735, respectively491,249 493,265 
Vehicle and equipment notes, maturing through June 2027; payable in various monthly installments, including interest rates ranging from 1.9% to 4.9%69,187 69,228 
Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0%2,173 4,172 
859,274 863,032 
Less: current maturities(30,642)(30,839)
Long-term debt, less current maturities$828,632 $832,193 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of SeptemberJune 30, 20212022 are as follows (in thousands):

Remainder of 2022$15,768 
202327,897 
202422,266 
202516,107 
202610,846 
Thereafter775,976 
Remainder of 2021$6,425 
202223,548 
202318,477 
202412,684 
2025209,147 
Thereafter301,670 

5.75% Senior Notes due 2028

Asset-Based Lending Credit Agreement Amendment
In September 2019, we issued $300.0 million in aggregate principal amount of 5.75% senior unsecured notes (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest is payable semi-annually in cash in arrears on February 1 and August 1 each year until maturity. The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Credit Facilities

In December 2019,2022, we amended and restated our $400.0 million, seven-year term loan facility due April 2025 (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of April 13, 2017 (as previously amended by the First Amendment thereto dated November 30, 2017 and by the Second Amendment thereto dated June 19, 2018). The amended Term Loan (i) effects a repricing of the interest rate applicable toextended the term loans thereunder from LIBOR plus 2.50% to LIBOR plus 2.25% and (ii) replaces Royal Bank of Canada with Bank of America, N.A. as the administrative agent and collateral agent thereunder. As of September 30, 2021, we had $198.9 million, net of unamortized debt issuance costs, due on our Term Loan. The amended Term Loan also has a margin of 1.25% in the case of base rate loans.

In September 2019, we entered into a new asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement provides for anincreased the commitment under the asset-based lending credit facility (the “ABL Revolver”) ofto $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $200.0 million with$300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest at either the base rate or the Secured Overnight Financing Rate ("Term SOFR"), at our election, plus a five-year maturity, which replacedmargin of 0.25% or 0.50% in the Company’s previous revolving credit facility. Borrowingcase of base rate loans or 1.25% or 1.50% for Term SOFR advances (in each case based on a measure of availability under the ABL Revolver is based on a percentageCredit Agreement). The amendment also allows for modification of the value ofspecified fees dependent upon achieving certain assets securing the Company’s obligations and those of the subsidiary guarantors thereunder. In connection with the Amended and Restated Term Loan, we entered into a Second Amendment (the “Second Amendment”)sustainability targets, in addition to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders undermaking other modifications to the ABL Credit Agreement, and Bank of America, N.A., as Term Loan Agent for the lenders under the Amended and Restated Term Loan.Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of SeptemberJune 30, 20212022 was $155.7$205.7 million.

All of the obligations under the Term Loan and ABL Revolver are guaranteed by all of the Company’s existing restricted subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second-priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.

The ABL Revolver bears interest at either the Eurodollar rate or the base rate (which approximated the prime rate), at the Company’s election, plus a margin of (A) 1.25% or 1.50% in the case of Eurodollar rate loans (based on a measure of availability under the ABL Credit Agreement) and (B) 0.25% or 0.50% in the case of base rate loans (based on a measure of availability under the ABL Credit Agreement).

The ABL Revolver also provides incremental revolving credit facility commitments of up to $50.0 million. The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the terms of the ABL Revolver. The ABL Revolver also allows for the issuance of letters of credit of up to $75.0$100.0 million in aggregate and borrowing of swingline loans of up to $20.0$25.0 million in aggregate.

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the
Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock;
(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal
year or in an aggregate amount exceeding certain applicable restricted payment baskets;basket amounts; (iii) prepay subordinated debt; (iv)
create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in
transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other
distributions from subsidiaries.

Vehicle and Equipment Notes

We are party to a Master Loan and Security Agreement (“Master Loan and Security Agreement”), a Master Equipment Lease Agreement (“Master Equipment Agreement”) and one or more Master Loan Agreements (“Master Loan Agreements” and together with the Master Loan and Security Agreement and Master Equipment Agreement, the “Master Loan and Equipment Agreements”) with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
the normal course of business. Each financing arrangement under these agreements constitutes a separate note and obligation. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. The specific terms of each note are based on specific criteria, including the type of vehicle or equipment and the market interest rates at the time.

Total gross assets relating to our Master Loan and Equipment Agreements were $135.4 million and $132.2 million as of September 30, 2021 and December 31, 2020, respectively. The net book value of assets under these agreements was $66.4 million and $65.7 million as of September 30, 2021 and December 31, 2020, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.
NOTE 8 - LEASES
We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install, various office spaces for selling and administrative activities to support our business, and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheets:

As of September 30,As of December 31,
(in thousands)Classification20212020
Assets   
Non-Current   
OperatingOperating lease right-of-use assets$61,028 $53,766 
FinanceProperty and equipment, net5,019 4,946 
Total lease assets $66,047 $58,712 
Liabilities 
Current 
OperatingCurrent maturities of operating lease obligations$21,278 $18,758 
FinancingCurrent maturities of finance lease obligations1,780 2,073 
Non-Current 
OperatingOperating lease obligations39,155 34,413 
FinancingFinance lease obligations3,038 2,430 
Total lease liabilities$65,251 $57,674 
Weighted-average remaining lease term:
Operating leases 3.9 years4.1 years
Finance leases 3.2 years2.6 years
Weighted-average discount rate:
Operating leases 3.37 %3.67 %
Finance leases 4.95 %5.08 %
+


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As of June 30,As of December 31,
(in thousands)Classification20222021
Assets   
Non-Current   
OperatingOperating lease right-of-use assets$73,280 $69,871 
FinanceProperty and equipment, net6,633 5,266 
Total lease assets $79,913 $75,137 
Liabilities 
Current 
OperatingCurrent maturities of operating lease obligations$24,696 $23,224 
FinancingCurrent maturities of finance lease obligations2,049 1,747 
Non-Current 
OperatingOperating lease obligations48,298 46,075 
FinancingFinance lease obligations4,462 3,297 
Total lease liabilities$79,505 $74,343 
Weighted-average remaining lease term:
Operating leases 4.2 years4.3 years
Finance leases 3.7 years3.3 years
Weighted-average discount rate:
Operating leases 3.72 %3.38 %
Finance leases 4.89 %4.96 %
Lease Costs

The table below presents certain information related to the lease costs for finance and operating leases:

Three months ended September 30,Nine months ended September 30,
(in thousands)Classification2021202020212020
Operating lease cost(1)
Administrative$6,927 $5,760 $19,947 $16,972 
Finance lease cost
Amortization of leased assets(2)
Cost of sales769 856 2,342 2,762 
Interest on finance lease obligationsInterest expense, net54 64 161 207 
Total lease costs$7,750 $6,680 $22,450 $19,941 

Three months ended June 30,Six months ended June 30,
(in thousands)Classification2022202120222021
Operating lease cost(1)
Administrative$8,180 $6,671 $15,939 $13,021 
Finance lease cost:
Amortization of leased assets(2)
Cost of sales855 781 1,571 1,573 
Interest on finance lease obligationsInterest expense, net68 52 129 107 
Total lease costs$9,103 $7,504 $17,639 $14,701 
(1)Includes variable lease costs of $0.7$0.8 million and $0.6 million for both the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $2.2$1.7 million and $1.9$1.5 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and short-term lease costs of $0.3 million and $0.2 million for both the three months ended SeptemberJune 30, 2022 and 2021, and 2020, respectively, and $0.8 million and $0.6 million and $0.5 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
(2)Includes variable lease costs of $0.2 million for each of the three months ended SeptemberJune 30, 2022 and 2021 and 2020, and $0.5 million and $0.6$0.4 million for each of the ninesix months ended SeptemberJune 30, 2022 and 2021, and 2020.

Other Information

The table below presents supplemental cash flow information related to leases (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$5,821 $4,949 $16,763 $14,501 
Operating cash flows for finance leases54 64 161 207 
Financing cash flows for finance leases532 606 1,573 1,998 

















respectively.






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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other Information
The table below presents supplemental cash flow information related to leases (in thousands):
 Three months ended June 30,Six months ended June 30,
 2022202120222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$6,803 $5,618 $13,266 $10,942 
Operating cash flows for finance leases68 52 129 107 
Financing cash flows for finance leases564 512 1,085 1,041 
Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of SeptemberJune 30, 20212022 (in thousands):
 Finance LeasesOperating Leases
  Related PartyOtherTotal Operating
Remainder of 2021$661 $342 $5,696 $6,038 
20221,751 1,347 20,432 21,779 
20231,278 906 14,878 15,784 
2024869 645 8,112 8,757 
2025501 519 4,481 5,000 
Thereafter200 — 7,496 7,496 
Total minimum lease payments5,260 $3,759 $61,095 64,854 
Less: Amounts representing executory costs(36)
Less: Amounts representing interest(406)(4,421)
Present value of future minimum lease payments4,818 60,433 
Less: Current obligation under leases(1,780)(21,278)
Long-term lease obligations$3,038 $39,155 

 Finance LeasesOperating Leases
  Related PartyOtherTotal Operating
Remainder of 2022$1,218 $733 $13,174 $13,907 
20232,020 1,375 22,493 23,868 
20241,602 1,128 14,748 15,876 
20251,234 973 9,288 10,261 
2026902 — 7,038 7,038 
Thereafter164 — 8,354 8,354 
Total minimum lease payments7,140 $4,209 $75,095 79,304 
Less: Amounts representing executory costs(15)— 
Less: Amounts representing interest(614)(6,310)
Present value of future minimum lease payments6,511 72,994 
Less: Current obligation under leases(2,049)(24,696)
Long-term lease obligations$4,462 $48,298 
NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. During the periods presented, there were no transfers between fair value hierarchical levels.

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets, specifically other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of SeptemberJune 30, 20212022 and December 31, 20202021 are categorized based on the lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Estimated Fair Value of Financial Instruments

Accounts receivable, accounts payable and accrued liabilities as of SeptemberJune 30, 20212022 and December 31, 20202021 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of certain long-term debt, including the Term Loan and ABL Revolver as of SeptemberJune 30, 20212022 and December 31, 2020,2021, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of our operating lease right-of-use assets and the obligations associated with our operating and finance leases as well as our vehicle and equipment notes approximate fair value as of SeptemberJune 30, 20212022 and December 31, 2020.2021. All debt classifications represent Level 2 fair value measurements.

Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods. Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments, calculated based on a weighted average of various future forecast scenarios, to
their net present value.
The fair values of financial assets and liabilities that are recorded at fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):
 As of September 30, 2021As of December 31, 2020
 TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial assets:
Cash equivalents$166,473 $166,473 $— $— $170,398 $170,398 $— $— 
Derivative financial instruments13,567 13,567 — 5,130 5,130 — 
Total financial assets$180,040 $166,473 $13,567 $— $175,528 $170,398 $5,130 $— 
Financial liabilities:
Contingent consideration$8,591 $— $— $8,591 $4,004 $— $— $4,004 
Derivative financial instruments774 — 774 — 324 — 324 — 
Total financial liabilities$9,365 $— $774 $8,591 $4,328 $— $324 $4,004 

 As of June 30, 2022As of December 31, 2021
 TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial assets:
Cash equivalents$34,087 $34,087 $— $— $258,055 $258,055 $— $— 
Derivative financial instruments49,519 49,519 — 14,830 14,830 — 
Total financial assets$83,606 $34,087 $49,519 $— $272,885 $258,055 $14,830 $— 
Financial liabilities:
Contingent consideration$18,925 $— $— $18,925 $11,170 $— $— $11,170 
Derivative financial instruments— — — — 1,937 — 1,937 — 
Total financial liabilities$18,925 $— $— $18,925 $13,107 $— $1,937 $11,170 
See Note 5, Investments and Cash and Cash Equivalents, for more information on cash equivalents included in the table above. Also see Note 10,11, Derivatives and Hedging Activities, for more information on derivative financial instruments.

The change in fair value of the contingent consideration (a Level 3 input) was as follows (in thousands):

Contingent consideration liability - January 1, 20212022$4,00411,170 
Preliminary purchase price6,00016,410 
Fair value adjustments(296)(946)
Accretion in value845324 
Amounts cancelled(1,036)(42)
Settlement Adjustments(505)
Amounts paid to sellers(926)(7,486)
Contingent consideration liability - SeptemberJune 30, 20212022$8,59118,925 

The accretion in value of contingent consideration liabilities is included within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The carrying value and associated fair value of financial assets and liabilities that are not recorded at fair value in the Condensed Consolidated Balance Sheets and not described above include our investments and Senior Notes. To estimate the fair value of our investments and Senior Notes, we utilized third-party quotes which are derived all or in part from model prices, external sources or market prices. The investments and Senior Notes representsrepresent a Level 2 fair value measurement and isare as follows (in thousands):

 As of September 30, 2021As of December 31, 2020
 Carrying ValueFair ValueCarrying ValueFair Value
Senior Notes(1)
$300,000 $316,197 $300,000 $320,013 
 As of June 30, 2022As of December 31, 2021
 Carrying ValueFair ValueCarrying ValueFair Value
Investments$94,865 $94,786 $— $— 
Senior Notes(1)
300,000 266,589 300,000 311,028 
(1)Excludes the impact of unamortized debt issuance costs.

See Note 5, Investments and Cash and Cash Equivalents, for more information on investments included in the table above. Also see Note 7, Long-Term Debt, for more information on our Senior Notes.
NOTE 10 - INFORMATION ON SEGMENTS
During the first quarter of 2022, our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), changed the manner in which he reviews financial information for purposes of assessing business performance, managing the business and allocating resources. In conjunction with this change, we realigned our segment structure resulting in our Company having 3 operating segments consisting of Installation, Distribution and Manufacturing.
Our Installation operating segment represents the majority of our net revenue and gross profit and forms our 1 reportable segment. This operating segment represents the service-based installation of insulation and complementary building products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. These branch locations have similar economic and operating characteristics including the nature of products and services offered, operating procedures and risks, customer bases, employee incentives, material procurement and shared corporate resources which led us to conclude that they combine to form 1 operating segment.
The Other category reported below reflects the operations of our 2 remaining operating segments, Distribution and Manufacturing, which do not meet the quantitative thresholds for separate reporting. Our Distribution operating segment includes our recently acquired distribution businesses that sell insulation, gutters and accessories primarily to installers of these products who operate in multiple end markets. Our Manufacturing operating segment consists of our cellulose insulation manufacturing operation which was previously combined with our Installation operating segment. In addition to sales of cellulose insulation, revenues from this operating segment consist of sales of asphalt and industrial fibers to distributors and installers of these products.
The key metrics used to assess the performance of our operating segments are revenue and adjusted gross profit as these are the metrics used by our CODM to review results, assess performance and allocate resources. We define adjusted gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets or related depreciation and amortization expenses by segment because our CODM does not use this information to assess segment performance or allocate resources.
The Installation reportable segment includes substantially all of our net revenue from services while net revenue included in the Other category includes substantially all of our net revenue from sales of products. The intercompany sales from the Other category to the Installation reportable segment include a profit margin while our Installation segment records these transactions at cost.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table represents our segment information for the three months ended June 30, 2022 and 2021 (in thousands):
Three months ended June 30, 2022Three months ended June 30, 2021
InstallationOtherEliminationsConsolidatedInstallationOtherEliminationsConsolidated
Revenue$637,998 $40,291 $(1,540)$676,749 $482,965 $5,623 $(490)$488,098 
Cost of sales (exclusive of depreciation and amortization shown separately below)419,812 30,392 (1,290)448,914 322,244 4,076 (386)325,934 
Adjusted gross profit218,186 9,899 (250)227,835 160,721 1,547 (104)162,164 
Depreciation and amortization11,126 10,278 
Gross profit, as reported216,709 151,886 
Selling29,371 22,631 
Administrative84,030 66,474 
Amortization11,261 9,178 
Operating income92,047 53,603 
Interest expense, net10,401 7,520 
Other expense (income)368 (92)
Income before income taxes$81,278 $46,175 
Three months ended June 30, 2022Three months ended June 30, 2021
InstallationOtherEliminationsConsolidatedInstallationOtherEliminationsConsolidated
Adjusted gross profit percentage34.2 %24.6 %16.2 %33.7 %33.3 %27.5 %21.2 %33.2 %

The following table represents our segment information for the six months ended June 30, 2022 and 2021 (in thousands):
Six months ended June 30, 2022Six months ended June 30, 2021
InstallationOtherEliminationsConsolidatedInstallationOtherEliminationsConsolidated
Revenue$1,199,629 $66,941 $(2,329)$1,264,241 $915,142 $10,877 $(855)$925,164 
Cost of sales (exclusive of depreciation and amortization shown separately below)805,504 49,765 (1,899)853,370 620,077 8,143 (669)627,551 
Adjusted gross profit394,125 17,176 (430)410,871 295,065 2,734 (186)297,613 
Depreciation and amortization21,759 20,300 
Gross profit, as reported389,112 277,313 
Selling54,563 43,489 
Administrative163,174 131,551 
Amortization22,358 17,574 
Operating income149,017 84,699 
Interest expense, net21,001 15,094 
Other expense (income)513 (11)
Income before income taxes$127,503 $69,616 
Six months ended June 30, 2022Six months ended June 30, 2021
InstallationOtherEliminationsConsolidatedInstallationOtherEliminationsConsolidated
Adjusted gross profit percentage32.9 %25.7 %18.5 %32.5 %32.2 %25.1 %21.8 %32.2 %
The prior period disclosures in the above table have been recast to conform to the current period segment presentation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1011 - DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges of Interest Rate Risk

Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. During the ninesix months ended SeptemberJune 30, 2021,2022, we used an interest rate swapswaps to hedge the variable cash flows associated with existing variable-rate debt. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of SeptemberJune 30, 2021,2022, we have not posted any collateral related to these agreements.

In August 2020,As of June 30, 2022, we terminated our 2 existinghad 3 interest rate swaps and our forwardswaps. One interest rate swap and simultaneously entered into a new forward interest rate swap that began July 30, 2021. The unrealized loss included in accumulated other comprehensive loss associated with the terminated swaps of $17.8 million at the time of termination will be amortized to interest expense over the course of the originally scheduled settlement dates of the terminated swaps. For the three2021 and nine months ended September 30, 2021, we amortized $0.8 million and $2.4 million of the unrealized loss to interest expense, net. As of September 30, 2021, we had one interest rate swap withhas a fixed notional amount of $200.0 million, a fixed rate of 0.51% and a maturity date of April 15, 2030. This swap servesWe also had 2 interest rate swaps that began December 31, 2021, each with a fixed notional amount of $100.0 million, a fixed rate of 1.37%, and a maturity date of December 15, 2028. Together, these 3 swaps serve to hedge substantially all$400.0 million of the variable cash flows on our variable rate Term Loan until its maturitythrough maturity. On July 8, 2022, we amended these existing swaps and if extended.simultaneously entered into 2 new forward interest rate swaps. See Note 19, Subsequent Events, for further information. The assets and liabilities associated with thethese interest rate swapswaps are included in other long-termnon-current assets and other current liabilities on the Condensed Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.

In August 2020, we terminated 2 then-existing interest rate swaps and one then-existing forward interest rate swap. For the three and six months ended June 30, 2022 we amortized $0.9 million and $1.7 million of the $17.8 million unrealized loss existing at the time of termination to interest expense, net.
The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in other comprehensive income (loss), net of tax on the Condensed Consolidated Statements of Operations and Comprehensive Income and in accumulated other comprehensive lossincome (loss) on the Condensed Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We had no such changes during the ninesix months ended SeptemberJune 30, 2021 or 2020.

2022.
Amounts reported in accumulated other comprehensive lossincome (loss) related to derivatives will be reclassified to interest expense, net as interest payments are made on our variable-rate debt.debt and as terminated swaps are amortized. Over the next twelve months, we estimate that an additional $4.3$4.5 million will be reclassified as an increasea decrease to interest expense, net.

In anticipation of future debt refinancing, on October 27, 2021, we entered into 2 new forward interest rate swap derivatives. These forward interest rate swaps will begin on December 31, 2021. Each swap has a fixed notional amount of $100.0 million, a fixed rate of 1.37%, and a maturity date of December 15, 2028.

LIBOR is used as a reference rate for our interest rate swap agreements we use to hedge our interest rate exposure. The Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the setting we use as a reference rate, to June 2023. In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.
NOTE 1112 - STOCKHOLDERS’ EQUITY

As of SeptemberJune 30, 2021 and December 31, 2020,2022 we had lossesincome of $1.0$28.0 million and $8.8 million, respectively, in accumulated other comprehensive lossincome (loss) on our Condensed Consolidated Balance Sheets. The loss asSheets, comprised of September 30, 2021 representedthe effective portion of the unrealized gain on our current interest rate swap of 36.7 million, net of taxes, less the unrealized loss on our terminated interest rate swaps of $10.3$(8.7) million, net of taxes. As of December 31, 2021 we had a loss of $(0.2) million in accumulated other comprehensive income (loss) on our Condensed Consolidated Balance Sheets, comprised of the unrealized loss on our terminated interest rate swaps of $(9.9) million, net of taxes, less the effective portion of the unrealized gain on our current interest rate swapswaps of $9.3$9.7 million, net of taxes. The loss asFor additional information, see Note 11, Derivatives and Hedging Activities.
During the three months ended June 30, 2022 we repurchased approximately 554 thousand shares of December 31, 2020 representedour common stock with an aggregate price of approximately $49.8 million, or $89.94 average price per share. During the unrealized loss on our terminated interest rate swaps of $12.2 million, net of taxes, less the effective portion of the unrealized gain on oursix months ended June 30, 2022

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forward interest rate swap of $3.4 million, net of taxes. For additional information, see Note 10, Derivatives and Hedging Activities.

During the nine months ended September 30, 2020, we repurchased approximately 443 thousand1.1 million shares of our common stock with an aggregate price of approximately $15.8$99.7 million, or $35.59$93.59 average price per share. We did not repurchase any shares during the ninesix months ended SeptemberJune 30, 2021. On February 22, 2021,24, 2022, we announced that our board of directors authorized an extension of our previous stock repurchase program through March 1, 20222023 and concurrently authorized an increase in the total amount of our outstanding common stock we can purchase up to $100.0$200.0 million. As of SeptemberJune 30, 2021,2022, we have $100.0had $100.3 million remaining on our currentprevious stock repurchase program. On August 4, 2022, we announced that our board of directors authorized a new stock repurchase program which replaces our previous program. See Note 19, Subsequent Events, for more information. The effect of these treasury shares in reducing the number of common shares outstanding is reflected in our earnings per share calculation.

Dividends

During the ninesix months ended SeptemberJune 30, 2022, we declared and paid the following cash dividends (amount declared and amount paid in thousands):
Declaration DateRecord DatePayment DateDividend Per ShareAmount DeclaredAmount Paid
2/24/20223/15/20223/31/2022$0.90 $26,585 $26,242 
2/24/20223/15/20223/31/20220.315 9,305 9,184 
5/5/20226/15/20226/30/20220.315 9,054 8,982 
During the six months ended June 30, 2021, we declared and paid the following cash dividends (amount declared and amount paid in thousands):

Declaration DateRecord DatePayment DateDividend Per ShareAmount DeclaredAmount Paid
2/23/20213/15/20213/31/2021$0.30 $8,907 $8,786 
5/5/20216/15/20216/30/2021$0.30 $8,910 $8,821 
8/5/20219/15/20219/30/2021$0.30 $8,912 $8,821 

Declaration DateRecord DatePayment DateDividend Per ShareAmount DeclaredAmount Paid
2/23/20213/15/20213/31/2021$0.30 $8,907 $8,786 
5/5/20216/15/20216/30/20210.30 8,910 8,821 
The amount of dividends declared may vary from the amount of dividends paid in a period due to the vesting of restricted stock awards and performance share awards, which accrue dividend equivalent rights that are paid when the award vests. During the three and six months ended June 30, 2022, we also paid $0.5 million in accrued dividends not included in the table above related to the vesting of these awards. The payment of future dividends will be at the discretion of our board of directors and will depend on our future earnings, capital requirements, financial condition, future prospects, results of operations, contractual restrictions, legal requirements, and other factors deemed relevant by our board of directors. We did not declare or pay any cash dividends on our capital stock during the three or nine months ended September 30, 2020.
NOTE 1213 - EMPLOYEE BENEFITS

Healthcare

We participate in multiple healthcare plans, the largest of which is partially self-funded with an insurance company paying benefits in excess of stop loss limits per individual/family. Our healthcare benefit expense (net of employee contributions) was approximately $6.5$7.3 million and $5.5$6.8 million for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively and $20.6$16.2 million and $18.2$14.1 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020, respectively, for all plans.2021. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Condensed Consolidated Balance Sheets and was $3.2$3.7 million and $3.1$3.3 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.

Workers’ Compensation

Workers’ compensation expense totaled $4.8$2.9 million and $4.1 million for both the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively and $11.9$8.6 million and $11.4$7.1 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020, respectively.2021. Workers’ compensation known claims and IBNR reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):

 September 30, 2021December 31, 2020
Included in other current liabilities$6,775 $7,703 
Included in other long-term liabilities12,490 11,986 
$19,265 $19,689 


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 June 30, 2022December 31, 2021
Included in other current liabilities$8,271 $8,048 
Included in other long-term liabilities13,573 13,397 
$21,844 $21,445 
We also had an insurance receivable for claims that exceeded the stop loss limit under our self-insured policies as well as claims under our fully insured policies included on the Condensed Consolidated Balance Sheets. This receivable offsets an equal liability included within the reserve amounts noted above and was as follows (in thousands):
 September 30, 2021December 31, 2020
Included in other non-current assets$2,082 $1,854 

 June 30, 2022December 31, 2021
Included in other non-current assets$2,131 $2,137 
Retirement Plans

We participate in multiple 401(k) plans, whereby we provide a matching contribution of wages deferred by employees and can also make discretionary contributions to each plan. Certain plans allow for discretionary employer contributions only. These plans cover substantially all our eligible employees. We recognized 401(k) plan expenses of $0.5$0.8 million and $0.4$0.7 million during the three months ended SeptemberJune 30, 2022 and 2021, and 2020, respectively and $1.9 million and $1.6 million and $1.4 million during the ninesix months ended SeptemberJune 30, 20212022 and 2020, respectively.2021. These expenses are included in administrative expenses on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
Multiemployer Pension Plans
We participate in various multiemployer pension plans under collective bargaining agreements in Washington, Oregon, California and Illinois with other companies in the construction industry. These plans cover our union-represented employees and contributions to these plans are expensed as incurred. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. We do not participate in any multiemployer pension plans that are considered to be individually significant.

Share-Based Compensation

Common Stock Awards

We periodically grant shares of our common stock to non-employee members of our board of directors and our employees. DuringWe granted approximately five thousand and four thousand during the ninethree and six months ended SeptemberJune 30, 2022 and 2021, and 2020, we granted approximately 4000 and 6000 shares ofunder our common stock, respectively, under our 2014 Omnibus Incentive Plan to non-employee members of our board of directors. The stock will vest over a one year service period.

In addition, we granted approximately 700063 thousand and 3000 shares during the three months ended September 30, 2021 and 2020, respectively and 0.1 million and 0.2 million39 thousand shares of our common stock to employees during the ninethree and six months ended SeptemberJune 30, 2022 and 2021, and 2020, respectively.

Employees – Performance-Based Stock Awards

During the ninesix months ended SeptemberJune 30, 2021,2022, we issued approximately 0.1 million41 thousand shares of our common stock to certain officers, which vest in 2 equal installments on each of April 20, 20222023 and April 20, 2023.2024. In addition, during the ninesix months ended SeptemberJune 30, 2021,2022, we established, and our board of directors approved, performance-based targets in connection with common stock awards to be issued to certain officers in 20222023 contingent upon achievement of these targets.

In addition, there are long-term performance-based restricted stock awards to be issued to certain employees annually through 20222024 contingent upon achievement of certain performance targets. These awards are accounted for as liability-based awards since they represent a predominantly-fixed monetary amount that will be settled with a variable number of common shares in the first quarter of 20222025 and as such are included in other currentlong-term liabilities on the Condensed Consolidated Balance Sheets. During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, we granted approximately five39 thousand and sevenfive thousand shares of our common stock, respectively, allwhich both vested in the second quarter of which will vest in 2022.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Employees – Performance-Based Restricted Stock Units

During 2020,2021, we established, and our board of directors approved, performance-based restricted stock units in connection with common stock awards which were issued to certain employees in 20212022 based upon achievement of a performance target. In

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
addition, during the ninesix months ended SeptemberJune 30, 2021,2022, we established, and our board of directors approved, performance-based restricted stock units in connection with common stock awards to be issued to certain employees in 20222023 based upon achievement of a performance target. These units will be accounted for as equity-based awards that will be settled with a fixed number of common shares.

Share-Based Compensation Summary

Amounts and changes for each category of equity-based award were as follows:
 Common Stock AwardsPerformance-Based Stock AwardsPerformance-Based Restricted Stock
Units
 AwardsWeighted
Average Grant
Date Fair Value
Per Share
AwardsWeighted
Average Grant
Date Fair Value
Per Share
UnitsWeighted
Average Grant
Date Fair Value
Per Share
Nonvested awards/units at December 31, 2020231,280 $48.05 166,961 $59.97 13,273 $36.51 
Granted55,815 124.88 42,449 123.32 8,470 126.89 
Vested(84,254)48.81 (64,525)52.79 (12,952)36.51 
Forfeited/Cancelled(2,448)57.85 — — (488)67.44 
Nonvested awards/units at September 30, 2021200,393 $69.01 144,885 $81.73 8,303 $126.89 

 Common Stock AwardsPerformance-Based Stock AwardsPerformance-Based Restricted Stock
Units
 AwardsWeighted
Average Grant
Date Fair Value
Per Share
AwardsWeighted
Average Grant
Date Fair Value
Per Share
UnitsWeighted
Average Grant
Date Fair Value
Per Share
Nonvested awards/units at December 31, 2021199,353 $68.99 143,401 $81.30 8,252 $126.89 
Granted108,219 89.33 54,585 102.98 16,618 80.55 
Vested(146,834)74.72 (71,933)59.07 (8,061)126.89 
Forfeited/Cancelled(554)78.13 — — (239)117.58 
Nonvested awards/units at June 30, 2022160,184 $77.45 126,053 $103.37 16,570 $80.55 
The following table summarizes the share-based compensation expense recognized under our 2014 Omnibus Incentive Plan (in
thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Common Stock Awards$1,426 $997 $3,843 $3,006 
Non-Employee Common Stock Awards126 104 339 230 
Performance-Based Stock Awards1,128 928 3,462 2,844 
Liability Performance-Based Stock Awards598 488 1,983 1,554 
Performance-Based Restricted Stock Units257 118 601 416 
$3,535 $2,635 $10,228 $8,050 

 Three months ended June 30,Six months ended June 30,
 2022202120222021
Common Stock Awards$1,767 $1,296 $3,298 $2,417 
Non-Employee Common Stock Awards125 111 249 213 
Performance-Based Stock Awards1,311 1,187 2,626 2,334 
Liability Performance-Based Stock Awards128 680 334 1,385 
Performance-Based Restricted Stock Units329 224 571 344 
$3,660 $3,498 $7,078 $6,693 
We recorded the following stock compensation expense by income statement category (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Cost of sales$161 $60 $287 $221 
Selling56 45 145 154 
Administrative3,318 2,530 9,796 7,675 
$3,535 $2,635 $10,228 $8,050 

 Three months ended June 30,Six months ended June 30,
 2022202120222021
Cost of sales$171 $63 $319 $126 
Selling141 38 203 89 
Administrative3,348 3,397 6,556 6,478 
$3,660 $3,498 $7,078 $6,693 
Administrative stock compensation expense includes all stock compensation earned by our administrative personnel, while cost of sales and selling stock compensation represents all stock compensation earned by our installation and sales employees, respectively.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Unrecognized share-based compensation expense related to unvested awards was as follows (in thousands):
As of September 30, 2021
Unrecognized
Compensation Expense
on Unvested Awards
Weighted Average
Remaining
Vesting Period
Common Stock Awards$9,201 1.8 years
Performance-Based Stock Awards6,082 1.7 years
Performance-Based Restricted Stock Units553 0.5 years
Total unrecognized compensation expense related to unvested awards$15,836 

 As of June 30, 2022
 Unrecognized
Compensation Expense
on Unvested Awards
Weighted Average
Remaining
Vesting Period
Common Stock Awards$9,395 2.0
Performance-Based Stock Awards7,828 1.9
Performance-Based Restricted Stock Units1,000 0.8
Total unrecognized compensation expense related to unvested awards$18,223 
Total unrecognized compensation expense is subject to future adjustments for forfeitures. This expense is expected to be recognized over the remaining weighted-average period shown above on a straight-line basis except for the Performance-Based Stock Awards which uses the graded-vesting method. Shares forfeited are returned as treasury shares and available for future issuances.

During the ninethree and six months ended SeptemberJune 30, 20212022 and 2020,2021, our employees surrendered approximately 4352 thousand and 2543 thousand shares of our common stock, respectively, to satisfy tax withholding obligations arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan. We recognized windfall tax benefits of $0.3 million and $3.0 million for the ninethree and six months ended SeptemberJune 30, 2022 and 2021, and we recognized a tax shortfall of $0.3 million for the nine months ended September 30, 2020respectively, within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income.

As of SeptemberJune 30, 2021,2022, approximately 1.91.7 million of the 3.0 million shares of common stock authorized for issuance were available for issuance under the 2014 Omnibus Incentive Plan.
NOTE 1314 - INCOME TAXES

Our provision for income taxes as a percentage of pretax earnings is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items.

During the three and ninesix months ended SeptemberJune 30, 2022, our effective tax rate was 26.3% and 26.5%, respectively. Each rate was favorably impacted by the recognition of a windfall tax benefit from equity vesting. During the three and six months ended June 30, 2021, our effective tax rate was 26.1%19.4% and 23.5%21.7% , respectively. TheEach rate for the nine months ended September 30, 2021 was favorably impacted by recognition of a windfall tax benefit from the vesting of share-based compensation. During the three and nine months ended September 30, 2020, our effective tax rate was 25.8% and 26.2%, respectively. The rate for the nine months ended September 30, 2020 was unfavorably impacted by recognition of a shortfall tax expense from the vesting of share-based compensation.equity vesting.
NOTE 1415 - RELATED PARTY TRANSACTIONS

We sell installation services to other companies related to us through common or affiliated ownership and/or board of directors and/or management relationships. We also purchase services and materials and pay rent to companies with common or affiliated ownership.

We lease our headquarters and certain other facilities from related parties. See Note 8, Leases, for future minimum lease payments to be paid to these related parties.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The amount of sales to common or related parties as well as the purchases from and rent expense paid to common or related parties were as follows (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Sales$260 $373 $1,081 $3,761 
Purchases486 331 1,218 1,457 
Rent370 297 983 867 

 Three months ended June 30,Six months ended June 30,
 2022202120222021
Sales$800 $543 $1,361 $821 
Purchases460 340 864 732 
Rent324 307 638 613 
We had a related party balance of approximately $0.5$1.0 million and $0.7$0.9 million included in accounts receivable on our Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. These balances primarily represent trade accounts receivable arising during the normal course of business with various related parties. M/I Homes, Inc., a customer whose Chairman, President and Chief Executive Officer was a member

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Table of our board of directors until his resignation from our board effective March 18, 2020, accounted for a significant portion of our related party sales during the nine months ended September 30, 2020.Contents
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1516 - COMMITMENTS AND CONTINGENCIES

Accrued General Liability and Auto Insurance

Accrued general liability and auto insurance reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):
September 30, 2021December 31, 2020 June 30, 2022December 31, 2021
Included in other current liabilitiesIncluded in other current liabilities$4,894 $5,102 Included in other current liabilities$6,046 $5,889 
Included in other long-term liabilitiesIncluded in other long-term liabilities17,845 16,440 Included in other long-term liabilities17,647 16,050 
$22,739 $21,542 $23,693 $21,939 

We also had insurance receivables and indemnification assets included on the Condensed Consolidated Balance Sheets that, in aggregate, offset equal liabilities included within the reserve amounts noted above. The amounts were as follows (in thousands):
 September 30, 2021December 31, 2020
Insurance receivables and indemnification assets for claims under fully insured policies$3,969 $4,400 
Insurance receivables for claims that exceeded the stop loss limit327 328 
Total insurance receivables and indemnification assets included in other non-current assets$4,296 $4,728 

 June 30, 2022December 31, 2021
Insurance receivables and indemnification assets for claims under fully insured policies$3,150 $3,578 
Insurance receivables for claims that exceeded the stop loss limit600 278 
Total insurance receivables and indemnification assets included in other non-current assets$3,750 $3,856 
Leases

See Note 8, Leases, for further information regarding our lease commitments.

Other Commitments and Contingencies

From time to time, various claims and litigation are asserted or commenced against us principally arising from contractual matters and personnel and employment disputes. In determining loss contingencies, management considers the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that such a liability has been incurred and when the amount of loss can be reasonably estimated. As litigation is subject to inherent uncertainties, we cannot be certain that we will prevail in these matters. However, we do not believe that the ultimate outcome of any pending matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.


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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
During the year ended December 31, 2018, we entered into an agreement with one of our suppliers to purchase a portion of the insulation materials we utilize across our business. This agreement is effective January 1, 2019 through December 31, 2021 with a purchase obligation of $15.0 million for 2021. For the nine months ended September 30, 2021, we have satisfied $10.3 million of our purchase obligation under this agreement. In addition, one of the entities we acquired during the nine months ended September 30, 2021 had an existing agreement with one of our suppliers to purchase a portion of the insulation materials it utilizes. This agreement is effective through December 31, 2021 with a total purchase obligation of $3.3 million. Between our acquisition of this entity on March 1, 2021 and September 30, 2021, we purchased $1.9 million under this agreement.
NOTE 1617 - BUSINESS COMBINATIONS

As part of our ongoing strategy to expand geographically and increase market share in certain markets, as well as diversify our products and end markets, we completed 7 business combination during the nine months ended September 30, 20213 and 5 business combinations during the ninesix months ended SeptemberJune 30, 2020.

2022 and 2021, respectively.
The largest of these acquisitions were Pisgah Insulation and Fireplaces of NC, LLC ("Pisgah") in March 2022, Central Aluminum Supply Corporation and Central Aluminum Supply of North Jersey, LLC ("Central Aluminum") in April 2022, Statewide Insulation, Inc. dba Tri County Insulation and Acoustical Contractor ("Tri-County") in May 2022, I.W. International Insulation, Inc., dba Intermountain West Insulation (“IWI”) in March 2021, Alert Insulation ("Alert") and Alpine Construction Services ("Alpine") in April 2021, and General Ceiling & Partitions, Inc. ("GCP") in June 2021, Five Star Building Products, LLC and Five Star Building Products of Southern Utah, LLC (collectively "Five Star") in September 2021, Royals Commercial Services, Inc. (“Royals”) in February 2020, and Energy One America ("Energy One") and Storm Master Gutters ("Storm Master") in August 2020.2021. Below is a summary of each significant acquisition by year, including revenue and net income (loss) since date of acquisition shown for the year of acquisition. Where noted, “Other” represents acquisitions that were individually immaterial in that year. Net income (loss) includes amortization, taxes and interest allocations when appropriate.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the three and ninesix months ended SeptemberJune 30, 2022 (in thousands):
Three months ended June 30, 2022Six months ended June 30, 2022
2022 AcquisitionsDateAcquisition TypeCash PaidSeller
Obligations
Total Purchase PriceRevenueNet Income (Loss)RevenueNet Income
(Loss)
Pisgah03/01/2022Share$8,050 $1,878 $9,928 $2,903 $256 $3,818 $353 
Central Aluminum4/11/2022Share55,150 22,927 78,077 12,724 243 12,724 243 
Tri-County5/23/2022Asset9,600 473 10,073 1,486 (139)1,486 (139)
$72,800 $25,278 $98,078 $17,113 $360 $18,028 $457 
For the three and six months ended June 30, 2021 (in thousands):

Three months ended September 30, 2021Nine months ended September 30, 2021
2021 AcquisitionsDateAcquisition
Type
Cash PaidSeller
Obligations
Total 
Purchase
Price
RevenueNet Income (Loss)RevenueNet Income
(Loss)
IWI03/01/2021Share$42,098 $5,959 $48,057 $10,556 $590 $24,315 $2,068 
Alert4/13/2021Asset5,850 2,980 8,830 4,764 8,890 147 
Alpine4/19/2021Asset7,945 2,208 10,153 3,045 263 4,996 216 
GCP6/7/2021Asset9,700 1,427 11,127 2,624 (152)3,270 (118)
Five Star9/13/2021Share26,308 5,466 31,774 1,243 25 1,243 25 
OtherVariousAsset4,240 947 5,187��956 (29)1,252 (43)
$96,141 $18,987 $115,128 $23,188 $699 $43,966 $2,295 

For the three and nine months ended September 30, 2020 (in thousands):
Three months ended September 30, 2020Nine months ended September 30, 2020
2020 AcquisitionsDateAcquisition
Type
Cash PaidSeller
Obligations
Total
 Purchase
Price
RevenueNet Income
(Loss)
RevenueNet Income
(Loss)
Royals02/29/2020Asset$7,590 $2,500 $10,090 $2,843 $279 $6,650 $628 
Energy One8/10/2020Asset13,200 1,595 14,795 2,853 (202)2,853 (202)
Storm Master8/31/2020Asset13,000 1,336 14,336 2,055 85 2,055 85 
OtherVariousAsset5,035 1,538 6,573 1,879 (252)2,643 (291)
$38,825 $6,969 $45,794 $9,630 $(90)$14,201 $220 

Three months ended June 30, 2021Six months ended June 30, 2021
2021 AcquisitionsDateAcquisition TypeCash PaidSeller
Obligations
Total Purchase PriceRevenueNet Income (Loss)RevenueNet Income
(Loss)
IWI03/01/2021Share$42,098 $5,959 $48,057 $10,151 $1,028 $13,759 $1,478 
Alert4/13/2021Asset5,850 2,980 8,830 4,126 155 4,126 155 
Alpine4/19/2021Asset7,945 2,208 10,153 1,951 (17)1,951 (17)
GCP6/7/2021Asset9,700 1,427 11,127 646 43 646 43 
Other5/10/2021Asset$2,290 $380 $2,670 $296 $(7)$296 $(7)
$67,883 $12,954 $80,837 $17,170 $1,202 $20,778 $1,652 
Acquisition-related costs recorded within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income amounted to $(0.3)$0.7 million for both the three months ended June 30, 2022 and 2021, respectively, and $1.4 million and $1.6$1.9 million for the three and ninesix months ended SeptemberJune 30, 2022 and 2021, respectively, and $0.8 million and $2.0 million for the three and nine months ended September 30, 2020, respectively.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The goodwill recognized in conjunction with these business combinations represents the excess cost of the acquired entity over the net amount assigned to assets acquired and liabilities assumed. We expect to deduct approximately $15.0$33.0 million of goodwill for tax purposes as a result of 20212022 acquisitions.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Purchase Price Allocations

The estimated fair values of the assets acquired and liabilities assumed for the acquisitions, as well as total purchase prices and cash paid, approximated the following (in thousands):

Six months ended June 30, 2022
PisgahCentral AluminumTri-CountyTotal
Estimated fair values:
Cash$94 $243 $— $337 
Accounts receivable772 3,502 2,823 7,097 
Inventories684 14,344 839 15,867 
Other current assets21 16 39 
Property and equipment1,049 2,590 927 4,566 
Operating lease right-of-use asset— 844 66 910 
Intangibles4,634 34,900 3,488 43,022 
Goodwill2,736 27,595 2,123 32,454 
Other non-current assets— 12 19 
Accounts payable and other current liabilities(69)(5,388)(185)(5,642)
Other long-term liabilities— (569)(22)(591)
Fair value of assets acquired and purchase price9,928 78,077 10,073 98,078 
Less seller obligations1,878 22,927 473 25,278 
Cash paid$8,050 $55,150 $9,600 $72,800 
 As of September 30, 2021
IWIAlertAlpineGCPFive StarOtherTotal
Estimated fair values:
Cash$168 $— $— $— $1,472 $— $1,640 
Accounts receivable5,122 4,710 — 3,067 4,597 446 17,942 
Inventories1,157 765 359 — 1,399 138 3,818 
Other current assets2,354 738 — — 330 — 3,422 
Property and equipment796 693 726 206 1,161 544 4,126 
Intangibles25,200 2,770 5,543 5,670 17,400 2,787 59,370 
Goodwill25,212 940 3,582 2,695 6,482 1,295 40,206 
Other non-current assets264 132 — — — — 396 
Accounts payable and other current liabilities(3,349)(1,184)(57)(493)(1,040)(20)(6,143)
Deferred income tax liabilities(6,537)— — — — — (6,537)
Other long-term liabilities(2,330)(734)— (18)(27)(3)(3,112)
Fair value of assets acquired and purchase price48,057 8,830 10,153 11,127 31,774 5,187 115,128 
Less seller obligations5,959 2,980 2,208 1,427 5,466 947 18,987 
Cash paid$42,098 $5,850 $7,945 $9,700 $26,308 $4,240 $96,141 

 As of September 30, 2020
RoyalsEnergy OneStorm MasterOtherTotal
Estimated fair values:
Accounts receivable2,848 3,350 2,362 1,418 $9,978 
Inventories305 812 175 278 $1,570 
Other current assets430 12 — 145 $587 
Property and equipment598 2,319 798 350 $4,065 
Intangibles3,930 6,500 8,720 2,996 $22,146 
Goodwill3,015 3,304 3,631 1,697 $11,647 
Other non-current assets58 — — 16 $74 
Accounts payable and other current liabilities(1,059)(1,483)(1,336)(196)$(4,074)
Other long-term liabilities(35)(19)(14)(131)$(199)
Fair value of assets acquired and purchase price10,090 14,795 14,336 6,573 45,794 
Less seller obligations2,500 1,595 1,336 1,538 6,969 
Cash paid$7,590 $13,200 $13,000 $5,035 $38,825 

Six months ended June 30, 2021
IWIAlertAlpineGCPOtherTotal
Estimated fair values:
Cash$168 $— $— $— $— $168 
Accounts receivable5,122 4,706 — 3,067 — 12,895 
Inventories1,157 742 359 — 72 2,330 
Other current assets3,014 738 — 47 — 3,799 
Property and equipment796 693 726 206 146 2,567 
Intangibles25,200 2,770 5,543 5,670 1,800 40,983 
Goodwill23,282 967 3,582 2,663 663 31,157 
Other non-current assets264 132 — — — 396 
Accounts payable and other current liabilities(8,416)(1,184)(57)(319)(11)(9,987)
Other long-term liabilities(2,530)(734)— (207)— (3,471)
Fair value of assets acquired and purchase price48,057 8,830 10,153 11,127 2,670 80,837 
Less seller obligations5,959 2,980 2,208 1,427 380 12,954 
Cash paid$42,098 $5,850 $7,945 $9,700 $2,290 $67,883 
Contingent consideration is included as “seller obligations” in the above table or within “fair value of assets acquired” if subsequently paid during the period presented. These contingent payments consist primarily of earnouts based on performance that are recorded at fair value at the time of acquisition, and/or non-compete agreements and amounts based on working capital calculations. When these payments are expected to be made over one year from the acquisition date, the contingent consideration is discounted to net present value of future payments based on a weighted average of various future forecast scenarios.

Further adjustments to the allocation for each acquisition still under its measurement period are expected as third-party or internal valuations are finalized, certain tax aspects of the transaction are completed, contingent consideration is settled and customary post-closing reviews are concluded during the measurement period attributable to each individual business

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
customary post-closing reviews are concluded during the measurement period attributable to each individual business combination. As a result, insignificant adjustments to the fair value of assets acquired, and in some cases total purchase price, have been made to certain business combinations since the date of acquisition and future adjustments may be made through the end of each measurement period. Any acquisition acquired after June 30, 2021 is deemed to be within the measurement period and its purchase price considered preliminary. Goodwill and intangibles per the above table may not agree to the total gross increases of these assets as shown in Note 6, Goodwill and Intangibles, during each of the ninesix months ended SeptemberJune 30, 20212022 and 20202021 due to adjustments to goodwill for the allocation of certain acquisitions still under measurement as well as other immaterial intangible assets added during the ordinary course of business.

All of the goodwill for Central Aluminum was assigned to our Distribution operating segment. All other acquisitions during the six months ended June 30, 2022 and 2021 had their respective goodwill assigned to our Installation operating segment.
Estimates of acquired intangible assets related to the acquisitions are as follows (in thousands):
 For the nine months ended September 30,
 20212020
Acquired intangibles assetsEstimated
Fair Value
Weighted
Average
Estimated
Useful Life
(yrs.)
Estimated
Fair Value
Weighted
Average
Estimated
Useful Life
(yrs.)
Customer relationships$43,115 12$14,528 8
Trademarks and tradenames10,147 153,796 15
Non-competition agreements4,530 51,946 5
Backlog1,578 1.51,876 1.5

 For the six months ended June 30,
 20222021
Acquired intangibles assetsEstimated
Fair Value
Weighted Average Estimated
Useful Life (yrs.)
Estimated
Fair Value
Weighted Average Estimated Useful Life (yrs.)
Customer relationships$28,676 12$27,869 12
Trademarks and tradenames12,891 157,890 15
Non-competition agreements1,455 53,647 5
Backlog— 01,577 1.5
Pro Forma Information

The unaudited pro forma information for the combined results of the Company has been prepared as if the 2022 acquisitions had taken place on January 1, 2021 and the 2021 acquisitions had taken place on January 1, 2020 and the 2020 acquisitions had taken place on January 1, 2019.2020. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transactions actually taken place on January 1, 20202021 and 2019,2020, respectively, and the unaudited pro forma information does not purport to be indicative of future financial operating results (in thousands, except per share data):

 Unaudited pro forma for the three months ended September 30,Unaudited pro forma for the nine months ended September 30,
 2021202020212020
Net revenue$516,057 $465,639 $1,474,979 $1,356,619 
Net income35,574 30,876 93,262 77,604 
Basic net income per share1.21 1.05 3.18 2.63 
Diluted net income per share1.20 1.04 3.15 2.61 

 Unaudited pro forma for the three months ended June 30,Unaudited pro forma for the six months ended June 30,
 2022202120222021
Net revenue$679,955 $541,958 $1,284,157 $1,036,460 
Net income59,919 40,735 93,755 61,810 
Basic net income per share2.08 1.39 3.23 2.11 
Diluted net income per share2.07 1.38 3.21 2.09 
Unaudited pro forma net income reflects additional intangible asset amortization expense of $0.3 millionapproximately $26 thousand and $2.2$3.2 million for the three and nine months ended SeptemberJune 30, 2022 and 2021, respectively, and $2.9$0.9 million and $9.7$7.1 million for the three and ninesix months ended SeptemberJune 30, 2020,2022 and 2021, respectively, as well as additional income tax expense of $0.2 millionapproximately $5 thousand and $1.2 million for the three and nine months ended SeptemberJune 30, 2022 and 2021, respectively, and $1.0$10 thousand and $2.4 million for the six months ended June 30, 2022 and 2021, respectively. Also there was an additional interest expense of $1.1 million and $2.9$2.2 million for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, that would have been recorded had the 2022 acquisitions taken place on January 1, 2021 and the 2021 acquisitions taken place on January 1, 2020 and the 2020 acquisitions taken place on January 1, 2019.2020.
NOTE 1718 - INCOME PER COMMON SHARE

Basic net income per common share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents.

Diluted net income per common share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. Potential common stock is

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
included in the diluted income per common share calculation when dilutive. The dilutive effect of outstanding restricted stock awards after application of the treasury stock method was 216approximately 112 thousand and 260195 thousand shares for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively and 219235 thousand and 188281 thousand shares for the three and ninesix months ended

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September June 30, 2020,2021, respectively. Approximately 214 thousand and 6 thousand shares of potential common stock was not included in the calculation of diluted net income per common share for the ninesix months ended SeptemberJune 30, 2022 and 2021, because the effect would have been anti-dilutive.
NOTE 1819 - SUBSEQUENT EVENTS

On July 8, 2022, we amended the maturity dates of our 3 interest rate derivative instruments and received a cash payment of $25.5 million shortly after the transaction date. Both of our $100.0 million interest rate swaps were originally contracted to mature on December 15, 2028 and will now mature on December 31, 2025. In addition, our $200.0 million interest rate swap was originally contracted to mature on April 15, 2030 and will now mature on December 31, 2025. The amount we received from these amendments is included in accumulated comprehensive income as an unrealized gain and will be amortized to interest expense over the course of the originally scheduled settlement dates of the amended swaps. At the time of the amendments, we simultaneously entered into 2 new forward interest rate swaps. These forward interest rate swaps will begin on December 31, 2025 with a maturity date of December 14, 2028 to coincide with the due date of our term loan. One swap has a fixed notional amount of $100.0 million with a fixed interest rate of 2.98% and the other swap has a fixed notional amount of $300.0 million with a fixed interest rate of 3.09%. See Note 11, Derivatives and Hedging Activities, for more information regarding our interest rate swaps as of June 30, 2022.
On NovemberAugust 1, 2021,2022, we acquired substantially all of the assets of Denison Glass and Mirror, Inc.,Ozark's Modern Insulation/Insulation Pros for total consideration of approximately $13.7$2.2 million. The initial accounting for the business combinationscombination was not complete at the time the financial statements were issued due to the timing of the acquisitions and the filing of this Quarterly Report on Form 10-Q. As a result, disclosures required under ASC 805-10-50, Business Combinations, cannot be made at this time.

In anticipation of future debt refinancing,We announced on October 27, 2021, we entered into 2 new forward interest rate swap derivatives. These forward interest rate swaps will begin on December 31, 2021. Each swap has a fixed notional amount of $100.0 million, a fixed rate of 1.37%, and a maturity date of December 15, 2028.

On NovemberAugust 4, 2021, we announced2022 that our board of directors declared a quarterly dividend, payable on December 31, 2021September 30, 2022 to stockholders of record on DecemberSeptember 15, 2021,2022, at a rate of $0.3031.5 cents per share.


We also announced on August 4, 2022 that our board of directors authorized a new stock repurchase program that allows for the repurchase of up to $200.0 million of our outstanding common stock through August 10, 2023. The new program replaces the existing program. For more information on our stock repurchase program, see Note 12, Stockholders' Equity.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes in “Item 1. Financial Statements” of this Form 10-Q, as well as our 20202021 Form 10-K.

OVERVIEW
We are one of the nation’s largest insulation installers for the residential new construction market and are also a diversified installer of complementary building products, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, mirrors and other products throughout the United States. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over 190210 branch locations. Substantially all94% of our net revenue comes from service-based installation of these products in the residential new construction, repair and remodel and commercial construction end markets.markets and forms our Installation operating segment and single reportable segment. Additionally, we manufacture and distribute building products and materials to installers and distributors in new construction projects and these two operations form our Distribution operating segment and our Manufacturing operating segment, respectively. We believe our business is well positioned to continue to profitably grow over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for a discussion of short-term impacts to our business.

A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, inflation, consumer confidence, employment rates, housing inventory levels, foreclosure rates, the health of the economy and availability of mortgage financing. The strategic acquisitions of multiple companies over the last several years contributed meaningfully to our 21.2%38.7% increase in net revenue during the three months ended SeptemberJune 30, 20212022 compared to 2020.2021.

2021 Third2022 Second Quarter Highlights
Net revenue increased 21.2%38.7%, or $89.3$188.7 million to $509.8$676.7 million, while gross profit increased 18.4%42.7% to $155.9$216.7 million during the three months ended SeptemberJune 30, 20212022 compared to 2020.2021. The increase in net revenue and gross profit was primarily driven by the contribution of our recent acquisitions, selling price and product mix improvements as evidenced by the 7.2%24.9% increase in our price/mix metric, and increased sales volume of 4.6%7.0% on a same branch basis. Gross profit grew slowerfaster than revenue primarily due to higher selling prices and resulting leverage gained on labor and other costs of sales, which was partially offset by higher material costs caused by pandemic-related supply chain constraints and higher fuel costs. Inflationary pressures continue to contribute to higher material costs, and reduced efficiencies within the large commercial construction market due to challenges from the COVID-19 pandemic. Inflationary pressure contributed to the year-over-year margin compression as materials, particularly for spray foam and several complementary installed products, continuedas some products continue to be difficult to source near volume and pricing levels secured in prior periods. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.
Our liquidity remains strong despite repurchasing $49.8 million of our Company's stock and paying our regular quarterly dividend of $9.0 million during the three months ended June 30, 2022. As of SeptemberJune 30, 2021,2022, we had $191.4$69.9 million of cash and cash equivalents, $94.9 million of short-term investments, and we have not drawn on our existing $200 million revolving line of credit.

Duringcredit, which we amended and extended during the three months ended September 30, 2021, we experienced growth in allMarch 31, 2022, increasing the commitment to $250.0 million from $200.0 million.
We continue to diversify our operations through our commitments to the diversification of our end marketsproduct mix and expanding our distribution business as evidenced by the second quarter acquisition of Central Aluminum Supply Corporation ("Central Aluminum"), a distributor of gutter supplies and accessories.
Key Measures of Performance
We utilize certain net revenue and industry metrics to monitor our operations. At the beginning of the six months ended June 30, 2022, we achieved 11.2% year-over-yearrealigned our operating segments to reflect recent changes in our business as described in Part I, Item 1, "Note 10 - Information on Segments." In conjunction with this realignment, we modified the key metrics we use to monitor company and segment performance. Specifically, we now present total sales growth and same branch sales growth. Our largest end market, metrics for our consolidated results, our Installation reportable segment and our Other category consisting of our Distribution and Manufacturing operating segments. In addition, our volume growth and price/mix growth metrics are now only presented for the single-family subset ofInstallation reportable segment to align with how we monitor our operations. While these changes do not significantly alter the residential new construction market, grew revenue 23.3% over the sameprior period ended September 30, 2020. Our commercial end market also experienced sales growth during this period due to acquisitions, but we continue to experience project delays due to macroeconomic concerns surrounding the pandemic, resulting in a decline in same branch sales within this market. These fluctuations are shown in further detail in the table below and impacts from COVID-19 are discussed further in the sections that follow.

metrics

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Key Measures of Performancepreviously disclosed, prior period Manufacturing operating segment growth metrics were reclassified from our Installation segment metrics to the Other category metrics.
The following table shows key measures of performance we utilize to evaluate our results:
Three months ended September 30,Nine months ended September 30,
2021202020212020
Period-over-period Growth
Sales Growth21.2 %6.1 %18.4 %9.1 %
Same Branch Sales Growth (1)
11.2 %1.7 %8.9 %5.1 %
Single-Family Sales Growth (2)
23.3 %1.8 %20.2 %4.0 %
Single-Family Same Branch Sales Growth (1)(2)
15.2 %(3.1)%13.0 %(0.5)%
Multi-Family Sales Growth (3)
18.2 %36.6 %17.0 %39.0 %
Multi-Family Same Branch Sales Growth (1)(3)
10.9 %34.6 %7.0 %37.3 %
Residential Sales Growth (4)
22.5 %6.2 %19.7 %8.5 %
Residential Same Branch Sales Growth (1)(4)
14.5 %1.6 %12.0 %4.4 %
Commercial Sales Growth (5)
16.3 %2.7 %11.3 %12.9 %
Commercial Same Branch Sales Growth (1)(5)
(5.6)%(1.5)%(8.3)%8.7 %
Same Branch Sales Growth (6)
Volume Growth (1)(7)
4.6 %2.2 %10.2 %0.0 %
Price/Mix Growth (1)(8)
7.2 %0.2 %(0.3)%5.5 %
Large Commercial Same Branch Sales Growth(1)(9)
(1.1)%(2.0)%(4.2)%7.3 %
U.S. Housing Market (10)
Total Completions Growth(1.9)%8.6 %6.0 %2.1 %
Single-Family Completions Growth (2)
2.0 %2.1 %7.1 %1.6 %
Multi-Family Completions Growth (3)
(12.1)%25.2 %1.5 %3.3 %
Three months ended June 30,Six months ended June 30,
2022202120222021
Period-over-period Growth
Consolidated Sales Growth38.7 %23.9 %36.7 %16.9 %
Consolidated Same Branch Sales Growth (1)
27.3 %13.1 %25.0 %7.6 %
Installation (2)
Sales Growth (3)
32.1 %23.5 %31.1 %16.7 %
Same Branch Sales Growth (1)(3)
27.4 %12.6 %24.9 %7.3 %
Single-Family Sales Growth (4)
37.8 %26.6 %37.6 %17.9 %
Single-Family Same Branch Sales Growth (1)(4)
33.1 %17.7 %31.4 %11.1 %
Multi-Family Sales Growth (5)
30.3 %14.1 %27.6 %16.3 %
Multi-Family Same Branch Sales Growth (1)(5)
30.3 %3.5 %26.8 %5.0 %
Residential Sales Growth (6)
36.6 %24.4 %35.9 %17.7 %
Residential Same Branch Sales Growth (1)(6)
32.7 %15.2 %30.6 %10.1 %
Commercial Sales Growth (7)
13.9 %16.2 %13.5 %9.3 %
Commercial Same Branch Sales Growth (1)(7)
4.7 %(0.6)%5.3 %(7.4)%
Other (2)
Sales Growth (8)
616.5 %89.0 %515.4 %59.9 %
Same Branch Sales Growth (1)(8)
36.8 %89.0 %43.5 %59.9 %
Same Branch Sales Growth - Installation (2)(9)
Volume Growth (1)(10)
7.0 %17.1 %8.2 %13.5 %
Price/Mix Growth (1)(11)
24.9 %(2.8)%19.8 %(4.4)%
U.S. Housing Market (12)
Total Completions Growth2.0 %12.0 %(0.6)%10.7 %
Single-Family Completions Growth (4)
5.7 %8.8 %3.7 %10.0 %
Multi-Family Completions Growth (5)
(5.9)%22.6 %(12.2)%14.0 %

(1)Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date.
(2)Calculated based on period-over-period growth in the single-family subset of the residential new construction end market.
(3)Calculated based on period-over-period growth in the multi-family subset of the residential new construction end market.
(4)Calculated based on period-over-period growth in the residential new construction end market.
(5)Calculated based on period-over-period growth in the total commercial end market. Our commercial end market consists of large and light commercial projects.
(6)During the nine months ended September 30, 2021, we changed the classification of one of our branches to the large commercial subset of the commercial end market, based on the type of work this branch performs. While this change is immaterial to the sales growth calculations, it affects comparability to the corresponding prior year metric as the change was made prospectively beginning January 1, 2021. We continually evaluate the branch classifications utilized in our sales growth metrics based on changes in our business and operations over time and future changes may occur to these classifications.
(7)Excludes the large commercial end market; calculated as period-over-period change in the number of completed same-branch residential new construction and repair and remodel jobs.
(8)Excludes the large commercial end market; defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch residential new construction and repair and remodel jobs multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job.
(9)The large commercial end market, as a subset of our total commercial market, comprises certain of our branches working on projects constructed primarily out of steel and concrete, which are much larger than our average residential job. This market is excluded from the above same branch price/mix and volume growth metrics as to not skew the rates given the much larger per-job revenue compared to our average job.
(10)U.S. Census Bureau data, as revised.


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(1)Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date.
(2)Prior period disclosures in this section of the above table have been recast to conform to the current period segment presentation.
(3)Calculated based on period-over-period growth of all end markets for our Installation segment.
(4)Calculated based on period-over-period growth in the single-family subset of the residential new construction end market for our Installation segment.
(5)Calculated based on period-over-period growth in the multi-family subset of the residential new construction end market for our Installation segment.
(6)Calculated based on period-over-period growth in the residential new construction end market for our Installation segment.
(7)Calculated based on period-over-period growth in the total commercial end market for our Installation segment. Our commercial end market consists of heavy and light commercial projects.
(8)Calculated based on period-over-period growth in our Other category which consists of our Manufacturing and Distribution operating segments. Our distribution businesses were acquired in December, 2021 and April, 2022.
(9)The heavy commercial end market, a subset of our total commercial end market, comprises projects that are much larger than our average installation job. This end market is excluded from the volume growth and price/mix growth calculations as to not skew the growth rates given its much larger per-job revenue compared to the average jobs in our remaining end markets.
(10)Calculated as period-over-period change in the number of completed same-branch jobs within our Installation segment for all markets we serve except the heavy commercial end market.
(11)Defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch jobs within our Installation segment for all markets we serve except the heavy commercial market, multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job.
(12)U.S. Census Bureau data, as revised.
We believe the revenue growth measures are important indicators of how our business is performing, however, we may rely on different metrics in the future. We also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers.

29


Net revenue, costRevenue, Cost of salesSales and gross profitGross Profit
The components of gross profit were as follows (in thousands):
Three months ended September 30,Nine months ended September 30, Three months ended June 30,Six months ended June 30,
2021Change20202021Change2020 2022Change20212022Change2021
Net revenueNet revenue$509,763 21.2 %$420,486 $1,434,927 18.4 %$1,211,756 Net revenue$676,749 38.7 %$488,098 $1,264,241 36.7 %$925,164 
Cost of salesCost of sales353,879 22.5 %288,839 1,001,730 19.7 %836,710 Cost of sales460,040 36.8 %336,212 875,129 35.1 %647,851 
Gross profitGross profit$155,884 18.4 %$131,647 $433,197 15.5 %$375,046 Gross profit$216,709 42.7 %$151,886 $389,112 40.3 %$277,313 
Gross profit percentageGross profit percentage30.6 %31.3 %30.2 %31.0 %Gross profit percentage32.0 %31.1 %30.8 %30.0 %

The year-over-year growth in our residential end market was the primary driver of the increase inIn addition to acquisitions, net revenue increased during the three and ninesix months ended SeptemberJune 30, 2021 compared2022 primarily due to 2020 (asincreased selling prices and organic growth from our existing branches as evidenced by the volume and price/mix metrics shown in the Key Measures of Performance section above). Growthabove. During the three and six months ended June 30, 2022, we experienced growth in all of our end markets and we achieved 27.3% and 25.0% year-over-year same branch sales growth, respectively. Installation revenue increased 32.1% and 31.1% for the three and six months ended June 30, 2022, respectively, driven by strong growth in the residential new construction, repair and remodel, and commercial markets. Our largest end market, is primarily duethe single-family subset of the residential new construction market, grew revenue 37.8% and 37.6%, respectively, over the same periods ended June 30, 2021. The vast majority of the growth in this end market was organic, attributable to selling price increases, higher volumegains and more favorable customer and product mix with the continued successremainder attributable to growth in the number of our acquisition strategy.completed jobs. In our commercial end market, continued challenges associated with the COVID-19 pandemic continue to havehad an impact, as evidenced by the 5.6% declinea modest increase of 4.7% in same branch sales within this end market.market. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for further information. Lastly, our price/mix metric was positively impacted duringThe remaining overall growth in net revenue for both the three and six months ended June 30, 2022 is attributable to the acquisitions of AMD Distribution and Central Aluminum, which added meaningfully to the growth in net revenue in the Distribution operating segment which, combined with the Manufacturing operating segment, grew from $5.6 million to $40.3 million for the three months ended SeptemberJune 30, 2021 as we were able to pass along selling price increases to offset rising material costs. However, on a full year basis, our price/mix improvements during the quarter were offset by a higher volume of insulation sales to production builders compared to the same period last year. This shift within the single-family end market impacted price/mix as the average insulation selling price for entry level production builder jobs is typically lower than a move-up or custom home builder.

2022.
As a percentage of net revenue, gross profit decreasedimproved during the three and ninesix months ended SeptemberJune 30, 20212022 compared to 2020. The building products supply chain has experienced significant disruptions in 2021 due in part to effectsthe prior period primarily on the strength of the COVID-19 pandemic. Industrysales growth across all end markets as well as strong price/mix growth. However, ongoing industry wide supply chain issues continue to impact our operating efficiency, driving our costs higher. In order to meet customer demand during the year,quarter, we purchased materials from distributors and home centers at a premium to what we typically would purchase directly from manufacturers. As a result, duringDuring the three and ninesix months ended SeptemberJune 30, 2021,2022, we estimate these purchases increased materials expense by approximately $2.0$1.1 million, and $7.0 million, respectively, therefore reducing gross profit. Demand remains strong, but we anticipate supply chain disruptions will continue into 2022. Gross profit in both periods of 2021 was also impacted by higher year-over-year fuel and union costs, reducing gross profit by a combined 70approximately 20 basis pointspoints. While inflation and 50 basis points as a percentagematerial supply chain issues are likely to persist throughout the year, we believe the large industry backlog in the new housing construction market will remain supportive of net revenue duringour business due to the three and nine months ended September 30, 2021, respectively. In addition, the lingering impactsubstantial number of the February 2021 winter storms continuedpermitted units that have yet to disrupt our ability to source certain materials during the third quarter. For example, materials needed for spray foam applications were in short supply after the storms as chemical processing facilities went offline.

be started.
Operating expensesExpenses
Operating expenses were as follows (in thousands):
Three months ended September 30,Nine months ended September 30, Three months ended June 30,Six months ended June 30,
2021Change20202021Change2020 2022Change20212022Change2021
SellingSelling$24,188 16.0 %$20,843 $67,677 12.4 %$60,209 Selling$29,371 29.8 %$22,631 $54,563 25.5 %$43,489 
Percentage of total net revenuePercentage of total net revenue4.7 %5.0 %4.7 %5.0 %Percentage of total net revenue4.3 %4.6 %4.3 %4.7 %
AdministrativeAdministrative$68,056 16.9 %$58,240 199,607 12.5 %$177,495 Administrative$84,030 26.4 %$66,474 163,174 24.0 %$131,551 
Percentage of total net revenuePercentage of total net revenue13.4 %13.9 %13.9 %14.6 %Percentage of total net revenue12.4 %13.6 %12.9 %14.2 %
AmortizationAmortization$9,224 32.3 %$6,974 $26,798 31.5 %$20,378 Amortization$11,261 22.7 %$9,178 $22,358 27.2 %$17,574 
Percentage of total net revenuePercentage of total net revenue1.8 %1.7 %1.9 %1.7 %Percentage of total net revenue1.7 %1.9 %1.8 %1.9 %
Selling
The dollar increase in selling expenses for the three and ninesix months ended SeptemberJune 30, 20212022 was primarily driven by an increase in selling wages and commissions to support our increased net revenue of 21.2% and 18.4%, respectively.38.7%. Selling expense as a percentage of sales decreased for the three and six months ended SeptemberJune 30, 20212022 compared to 20202021 primarily due to aincreased leverage on wages and commissions from selling price increases.

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lower credit loss provision as collections have remained strong. Selling expense as a percentage of sales decreased for the nine months ended September 30, 2021 compared to 2020 primarily due to the additional loss reserves recorded as a result of adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) during the first quarter of 2020.
Administrative
The dollar increase in administrative expenses for the three and ninesix months ended SeptemberJune 30, 20212022 was primarily due to an increase in wages and benefits, insurance and facility costs attributablefrom acquisitions and to both acquisitions andsupport organic growth. Administrative expenses decreased as a percentage of sales for the three and ninesix months ended SeptemberJune 30, 20212022 compared to 20202021 primarily due to the leverage gained on administrative wagesemployee expenses and facility costs from increased sales.sales and higher selling prices.
Amortization
The increase in amortization expense for the three and ninesix months ended SeptemberJune 30, 20212022 was attributable to the increase in finite-lived intangible assets recorded as a result of acquisitions.

Other expense, netExpense, Net
Other expense, net was as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2021Change20202021Change2020
Interest expense, net$7,687 1.6 %$7,564 $22,781 0.4 %$22,679 
Other (income) expense(483)(374.4)%176 (494)(262.0)%305 
Total other expense, net$7,204 $7,740 $22,287 $22,984 

Three months ended June 30,Six months ended June 30,
2022Change20212022Change2021
Interest expense, net$10,401 38.3 %$7,520 $21,001 39.1 %$15,094 
Other expense (income)368 500.0 %(92)513 4763.6 %(11)
Total other expense, net$10,769 $7,428 $21,514 $15,083 
The increase in interest expense, net during the three and ninesix months ended SeptemberJune 30, 20212022 compared to 20202021 was primarily due to the increase in interest expense from amortizing the swaps that were terminated in August 2020.debt levels. See Note 10, Derivatives and Hedging Activities,7, Long-Term Debt, for more information.

Income tax provisionTax Provision
Income tax provision and effective tax rates were as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2021202020212020
Income tax provision$12,320 $9,773 $27,432 $24,578 
Effective tax rate26.1 %25.8 %23.5 %26.2 %

Three months ended June 30,Six months ended June 30,
2022202120222021
Income tax provision$21,374 $8,962 $33,777 $15,112 
Effective tax rate26.3 %19.4 %26.5 %21.7 %
During the three and ninesix months ended SeptemberJune 30, 2021,2022, our effective tax rate was 26.1%rates were 26.3% and 23.5%26.5%, respectively. The raterates for the nine months ended September 30, 2021 wasboth periods were favorably impacted by recognition of a windfall tax benefit from the vesting of share-based compensation. Theequity vesting. Each rate for the ninethree and six months ended SeptemberJune 30, 20202021 was unfavorablyalso favorably impacted by recognition of a windfall tax shortfall expense from the vesting of share-based compensation.

benefit due to equity vesting.
Other comprehensive income (loss)Comprehensive Income (Loss), netNet of taxTax
Other comprehensive income (loss), net of tax was as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2021202020212020
Net change on cash flow hedges, net of taxes$1,292 $1,176 $7,762 $(4,582)
Three months ended June 30,Six months ended June 30,
2022202120222021
Net change on cash flow hedges, net of taxes$10,150 $(3,687)$28,261 $6,470 

During the three and six months ended SeptemberJune 30, 2021,2022, we recorded an unrealized gaingains of $0.7$9.5 million, and $27.0 million, net of tax,taxes, respectively, on our cash flow hedgehedges due to the market's expectations for higher interest rates in the future relative to our three existing interest rate swaps. We also amortized $0.9 million and amortized $0.8$1.7 million of our remaining unrealized loss on our terminated cash flow hedges. hedges to interest expense during the three and six months ended June 30, 2022, respectively, not including the offsetting tax effects of $0.2 million and $0.4 million, respectively.
During the ninethree months ended SeptemberJune 30, 2021, we recorded an unrealized loss of $(4.3) million, net of tax, and during the six months ended June 30, 2021 we recorded an unrealized gain of $6.0 $5.3 million, net of tax, and amortized $2.4 million of our remaining unrealized loss on our terminated cash flow hedges. The remaining activity for both the three and nine months ended September 30, 2021 was related to the income tax impact on our terminated swaps. The unrealized gains on our cash flow hedge during the three and nine months ended September 30, 2021, respectively, were driven primarily by changes to the

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projected one-month LIBOR forward curve. During the three months ended September 30, 2020, we recorded an unrealized gain on our then forward cash flow hedge due to favorablechanging market interest rate conditions. The remaining amounts were attributable to amortization of a portion of the unrealized loss recorded during the nine months ended September 30, 2020 on our now-terminatedterminated cash flow hedges were partially driven by market responses to the COVID-19 pandemic. For more information on our cash flow hedges, see “Liquidity and Capital Resources, Derivative Instruments” below.hedges.

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KEY FACTORS AFFECTING OUR OPERATING RESULTS

Inflation and Interest Rates
The fast recovery in residential housing demand helped offset prolonged impacts of the pandemic already experienced. However, the strong demand for residential housing has caused inflationary pressure on materials. Inflation has also affected the economy as a whole as consumer price inflation has reached 40-year highs, negatively impacting consumer sentiment and increasing market uncertainty. The Federal Reserve aims to moderate and stabilize inflation as it has raised the federal funds rate multiple times in 2022 and has signaled plans to continue raising this rate throughout 2022 and into 2023. This caused the average mortgage rate in the United States to rise each month in 2022, which began to curtail housing demand in the second quarter of 2022 as this has reduced mortgage financing affordability. Despite these developments, we believe both the demand for our installation services and the current residential construction backlog are strong and will support our business despite rising interest rates and inflation currently affecting the U.S. economy. We are closely watching our residential markets but have not yet witnessed any material signs of a slowdown in demand that could result from these risks.
Cost and availabilityAvailability of Materials
We typically purchase the materials that we install directly from manufacturers. The industry supplymanufacturers, and the products we sell are either purchased from manufacturers or other suppliers or are manufactured by us. Since the beginning of these materials has
experienced disruptions in the past. In 2021,COVID-19 pandemic, the industry supply of many of the materials we install was disrupted due to thehas been disrupted. The higher demand for materials and thecoupled with supply chain issues caused by the COVID-19 pandemicincluding raw material shortages, supplier labor shortages, bottlenecks and February 2021 winter storms. Thisshipping constraints has forced us to buy some materials at higher prices through distributors and local retailers to meet customer demand.demand, therefore reducing gross profit. The pandemic has also resulted in the need for some of our manufacturers to allocate materials across the industry which has affected the pricing and availability of those materials. We expect the supply chain disruptions affecting most of the materials used throughout our installation work to continue intothroughout 2022.
In addition, we experience price increases from our suppliers from time to time.time, including multiple increases over the last few years caused by supply shortages and general economic inflationary pressures. During the ninethree and six months ended SeptemberJune 30, 2021,2022, we saw increased pricing for fiberglass and spray foam insulation andas well as many of the other products we install and expect manufacturers to seek additional price increases during the year. The increase in demand, inflationary pressures, product shortages and other supply constraints caused these material price increases to be larger and more frequent than in a normal business cycle. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2021 andthroughout the remainder of 2022, to the extent that price increases cannot be passed on to our customers. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. See “COVID-19 Impacts” below for a discussion of the short-term impacts of the current economic climate on the availability of the materials we install.

Cost of Labor
Our business is labor intensive and the majority of our employees work as installers on local construction sites. We expect to spend more to hire, train and retain installers to support our growing business in 2021,2022, as tight labor availability continues within the construction industry. We offer a comprehensive benefits package, which many of our local competitors are not able to provide, which will increase costs as we hire additional personnel. Our workers’ compensation costs may continue to rise as we increase our coverage for additional personnel. We obtained leverage on our labor costs in the three and six months ended June 30, 2022 compared to 2021 due to increased selling prices per job, however, inflation and market competition could increase these costs in the near-term.

Despite temporary layoffs and furloughs driven by branch closures during portions of the first and second quarters of 2020 as a response to the effects of COVID-19, weWe experienced strong employee retention, turnover and labor efficiency rates in the year ended December 31, 2020, which continued into the ninethree and six months ended SeptemberJune 30, 2021.2022. We believe this is partially a result of various programs meant to benefit our employees, including our financial wellness plan, longevity stock compensation plan for employees and assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities. While improved retention drives lower costs to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives. See “COVID-19 Impacts” below for a discussion of the short-term impacts of the current economic climate on our workforce.

COVID-19 Impacts
In December 2019, a novel strain of coronavirus surfaced in Wuhan, China. Since then, the virus has spread globally, including to the United States. In response, the World Health Organization declared the situation a pandemic and the U.S. Secretary of Health and Human Services declared a public health emergency. The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption. Many public health organizations and international, federal, state and local governments implemented measures to combat the spread of COVID-19 during portions of 2020. Some of these measures include restrictions on movement such as quarantines, “stay-at-home” orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity. While portions of the economy have since reopened, there is still significant uncertainty surrounding the duration and scope of the pandemic, as well as its impact on the economy. We cannot predict if federal, state and local governments will implement additional restrictions, when restrictions currently in place will expire or whether restrictions currently in place will become more limiting.

While the COVID-19 pandemic and related events will likely have a negative effect on us inour business during the remainder of 2021 and into 2022, the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies, depends on

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numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic, additional government actions taken in response to the pandemic, the impact on construction activity

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and demand for homes (based on employment levels, consumer spending and consumer confidence). Most economic forecasts show the U.S. housing market outlook as positive for 2021, with total housing starts forecast as higher than 2020. As evidence of this trend, total U.S. housing market completions were up 6.0% during the nine months ended September 30, 2021 compared to 2020. In addition, U.S. housing starts increased 19.5% during the nine months ended September 30, 2021 compared to 2020, which highlights the continuedThe fast recovery in residential housing demand that should serve to helphelped offset prolonged impacts of the pandemic already experienced. However, we have experienced supply constraints and material price increases ultimately stemming from the effects of the pandemic across most of the products we install or sell, which we expect to continue throughout 2022.
In the commercial sector, we have experienced some impact to our commercial business, mainly in the form of project start delays and inefficiencies due to social distancing requirements in some areas. In the future, certain large-scale infrastructure programs may be at risk if the need for such structures decline, project funding declines or as consumer behaviors change in the wake of COVID-19 disruptions to the economy and changes to our general ways of life. For example, reduced demand for office buildings and/or educational facilities, decreased airport traffic, or decreased usage of sports arenas or similar commercial structures could impact our commercial end market.

Our management remains focused on mitigating the impact of COVID-19 on our business and the risk to our employees and customers. We have taken a number of precautionary measures intended to mitigate these risks, including increasing the frequency of regular cleaning and disinfecting processes at our facilities, adhering to social distancing protocols, limiting the number of workers on our jobsites, temporarily suspending non-essential air travel and periodically allowing employees to work remotely when possible. As is common practice in our industry, installers are required to wear protective equipment in the process of completing their work and this practice has been extended to employees at our facilities and within general office spaces. We are prepared to take additional actions if necessary as suggested or required by various health agencies. The U.S. Occupational Safety and Health Administration ("OSHA") issued an emergency temporary standard ("ETS") on November 4th, 2021 requiring all U.S. private businesses with 100 or more employees to ensure that their employees are fully vaccinated or require unvaccinated workers to undergo weekly COVID-19 testing. OSHA is exempting certain workers from the requirements. This ETS may be subject to numerous legal challenges.

We continue to evaluate the nature and extent of the COVID-19 pandemic’s impact on our financial condition, results of operations and cash flows. Other than branches that serve states where construction was not deemed “essential” during portions of 2020, we have experienced limited business disruptions to date and therefore have not needed to implement significant continuity measures and have not incurred significant related expenditures. Assuming a large number of additional states or markets in which we operate do not reverse their current positions about construction being an “essential” business, we do not anticipate having to implement any additional measures in the future.

Our corporate office remains fully operational. As such, we have made no modifications to internal controls over financial reporting and have confidence controls are operating as designed. We have enhanced our efforts to mitigate cyber threats and phishing, given some employees are still working remotely. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact of their design and operating effectiveness.

We expect some impact from the pandemic to our earnings, financial position and cash flows to continue in the remainder of 2021, however there is much uncertainty surrounding the estimated magnitude of these impacts. We estimate limited impact to our Consolidated Balance Sheets other than a potential reduction in working capital due to the possibility of reduced net revenue and net income. Trade accounts receivable may also be reduced somewhat by lower net revenue and a higher allowance for credit losses due to enhanced risk of collectibility from some customers, although we have not seen a significant impact to date. We anticipate revenue and net income may continue to be negatively impacted during the remainder of 2021 into 2022 due to supply constraints and/or material price increases. While our cash from operations may decline over recent performance due to a decrease in expected net income driven by lower net revenue, we do not anticipate any issues meeting debt obligations or making timely payments to vendors given our strong liquidity and large cash reserves. See "Liquidity and Capital Resources" below for further information. Given the continued uncertainty created by the COVID-19 pandemic and its potential effects, it is not possible to estimate the full, adverse impact to our future 2021 or 2022 sales or other financial results at this time.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES Act") was signed into law. The CARES Act provides numerous tax provision and other stimulus measures. We have benefited from the temporary suspension of certain payment requirements for the employer portion of Social Security taxes. As of December 31, 2020, we deferredtaxes by deferring $20.7 million of payments depending on the number of employees, that would have been paid during 2020, such that under the CARES Act,in 2020. 50% of the amount will now bewas paid on December 31, 2021 and the remaining 50% will be paid on December 31, 2022. It is important to note that this does not impact the timing of the expense, only the timing of the payment. We also benefited from the creation of certain refundable employee retention credits and the technical correction for qualified leasehold improvements, which provides for tax bonus depreciation.


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LIQUIDITY AND CAPITAL RESOURCES
Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capital equipment leases and loans. As of June 30, 2022, we had cash and cash equivalents of $69.9 million, short-term investments of $94.9 million, as well as access to $250.0 million under our asset-based lending credit facility (as defined below), less $44.3 million of outstanding letters of credit, resulting in total liquidity of $370.5 million. This total liquidity was reduced by $4.3 million within our cash and cash equivalents due to a deposit into a trust to serve as additional collateral for our workers' compensation, general liability and auto policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability of our asset-based lending facility (as defined below). Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability.
We experienced unprecedented increases in pricing for fiberglass and foam insulation materials in 2021 and the first two quarters of 2022 and expect manufacturers to seek additional price increases in 2022. Increased market pricing on the materials we purchase has and could continue to impact our results of operations in 2022 due to the higher prices we must pay for materials. See Part I, Item 1A, Risk Factors on the 2021 Form 10-K, for information on the potential and currently known impacts on our business and liquidity from the COVID-19 pandemic.
Short-Term Material Cash Requirements
Our primary capital requirements are to fund working capital needs, operating expenses, acquisitions and capital expenditures, and to meet required principal and interest obligations and to make required income tax payments. We may also use our resources to fund our optional stock repurchase program and dividend program. As discussed above,pay quarterly and annual dividends. In addition, we expect to spend cash and cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue acquired each fiscal year. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.
We expect to meet our short-term liquidity requirements primarily through net cash flows from operations, our cash reserves may also be used to fund payroll and other short-term requirements if our business is affected significantly by COVID-19. Ascash equivalents on hand and borrowings from banks under the Master Loan and Security Agreement, the Master Equipment Agreement and the Master Loan Agreements. Additional sources of September 30, 2021,funds, should we had no outstanding borrowingsneed them, include borrowing capacity under our asset-based lending credit facility (as defined below).

WeDespite the current known impacts of the COVID-19 pandemic, we believe that our cash flows from operations, combined with our current cash levels and available borrowing availability,capacity, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expendituresbusiness needs, commitments and working capitalcontractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operating activitiesoperations for each of the ninethree and six months ended SeptemberJune 30, 20212022 and 2020.2021. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions.

While the general economic environment within the United States and most markets around the world have been significantly impacted by the spread of COVID-19, prompting governmental and health agencies to issue unprecedented orders to close businesses not deemed “essential” during portions of 2021 and 2020,conditions, but we believe we have robust capital resources at our immediate disposal to meet our needs. We have cash and cash equivalents of $191.4 million as of September 30, 2021 as well as access to $200.0 million under our ABL Revolver, less $44.3 million of outstanding letters of credit. This amount available to us is based on eligible collateral, which may be reduced over time. While our cash from operations could decline later in 2021 due to COVID-19 impacts as described above, we believe it will remain at a level to fund our operations and not require us to draw on our ABL Revolver. However, as necessary or desirable, we may adjust or amend the terms of our credit facilities. With the uncertainty surrounding COVID-19, our ability to engage incannot guarantee that such transactions may be constrained by volatile credit market conditions. See Part II - Other Information, Item 1A. Risk Factors for more information on the potential impacts from the COVID-19 pandemic and resulting economic strain.

LIBOR is used as a reference rate for our Term Loan, as hereinafter defined, and our interest rate swap agreements we use to hedge our interest rate exposure. In 2017, the Financial Conduct Authority (“FCA”), the authority that regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and it is unclear whether new methods of calculating LIBORfinancing will be established. The Intercontinental Exchange Benchmark Administration,available on favorable terms, or at all. We also expect the administrator of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the settingseasonal trends we use as a reference rate, to June 2023. Our Term Loan Agreement, 2021 interest rate swap agreements and ABL Credit Agreement include a provision related to the potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate (SOFR) values or another alternate benchmark rate. However, if LIBOR ceases to exist after 2023, the interest rates under the alternative rate could be higher than LIBOR. In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.


typically

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experience throughout the year to be more muted in 2022 given the strong industry backlog. This could affect the timing of Contentscash collections and payments during each quarter of 2022.
Long-Term Material Cash Requirements
Beyond the next twelve months, our principal demands for funds will be to fund working capital needs and operating expenses, to meet principal and interest obligations on our long-term debts and finance leases as they become due or mature, and to make required income tax payments. Additional funds may be spent on acquisitions, capital improvements and dividend payments, at our discretion.
On a long-term basis, our sources of capital could be insufficient to meet our needs and growth strategy. We may refinance existing debt or obtain further debt financing in the future to the extent that our sources of capital are insufficient.
In "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the 2021 Form 10-K, we disclosed that we had $1.1 billion aggregate long-term material cash requirements as of December 31, 2021. There have been no material changes to our cash requirements during the period covered by this 10-Q outside of the normal course of our business.
Sources and Uses of Cash and Related Trends
Working Capital
We carefully manage our working capital and operating expenses. As of June 30, 2022 and December 31, 2021, our working capital, including cash and cash equivalents and investments, was $453.8 million and $551.7 million. Accounts receivable increased $71.9 million resulting from our increased net revenue, and inventories increased by $49.3 million due to material price inflation, increased selling activity and acquisitions. These increases were partially offset by an increase of $22.6 million in accounts payable primarily due material price inflation and increased sales volume. We continue to look for opportunities to reduce our working capital as a percentage of net revenue.
The following table summarizes our liquiditycash flow activity (in thousands):
 As of September 30, 2021As of December 31, 2020
Cash and cash equivalents$191,435 $231,520 
ABL Revolver200,000 200,000 
Less: outstanding letters of credit(44,272)(38,772)
Total liquidity(1)
$347,163 $392,748 
Six months ended June 30,
20222021
Net cash provided by operating activities$99,460 $83,435 
Net cash used in investing activities(197,905)(86,886)
Net cash used in financing activities(165,100)(24,158)
Cash Flows from Operating Activities
Our primary source of cash provided by operations is revenues generated from installing or selling building products and the resulting operating income generated by these revenues. Operating income is adjusted for certain non-cash items, and our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. The COVID-19 pandemic has not had a material impact on our cash collections to date.
Our primary uses of cash from operating activities include payments for installation materials, compensation costs, leases, income taxes and other general corporate expenditures included in net income.
Net cash provided by operating activities increased from 2021 to 2022 primarily due to the increases in net income and various noncash adjustments, offset by the changes in working capital.
Cash Flows from Investing Activities
Sources of cash from investing activities consist primarily of proceeds from the sales of property and equipment and, periodically, maturities from short term investments. Cash used in investing activities consists primarily of purchases of property and equipment, payments for acquisitions and, periodically, purchases of short term investments.
Net cash used by investing activities increased from 2021 to 2022 primarily due to the purchase of short-term investments during the six months ended June 30, 2022, partially offset by the maturities of some of these purchased short-term investments. See Note 5, Investments and Cash and Cash Equivalents, for more information on this investment.

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(1)
Total liquidity reflects full borrowing base capacity
Cash Flows from Financing Activities
Our sources of cash from financing activities consists of proceeds from the issuances of vehicle and equipment notes payable and, periodically, other sources of debt financing. Cash used in financing activities consists primarily of debt repayments, acquisition-related obligations, dividends and stock repurchases.
Net cash used by financing activities increased from 2021 to 2022 primarily due to the repurchase of common stock under our asset-based lending credit facility (as defined below) and may be limitedstock repurchase plan during the six months ended June 30, 2022. Our net cash used by certain cash collateral limitations depending uponfinancing activities also increased during the statussix months ended June 30, 2022 due to the payment of our borrowing base availability. These potential deductions would lower our available cashfirst annual dividend payment. See Note 12, Stockholders' Equity, for more information on the repurchase of common stock and cash equivalents balance shown in the table above. Aspayment of September 30, 2021, total liquidity would not be reduced due to these cash collateral limitations. In addition, total liquidity is further reduced by $5.3 million within cash and cash equivalents above which was deposited into a trust to serve as additional collateral for our workers’ compensation and general liability policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability on our asset-based lending credit facility (as defined below) included in the table above.

dividends.
Debt

5.75% Senior Notes due 2028

In September 2019, we issued $300.0 million in aggregate principal amount of 5.75% senior unsecured notes (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest is payable semi-annually in cash in arrears on February 1 and August 1, of each year until maturity. commencing on February 1, 2020. The net proceeds from the Senior Notes offering were $295.0 million after debt issuance costs.
The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Credit Facilities

In December 2019,2021, we amended and restated our $400.0$500 million, seven-year term loan facility due April 30, 2025December 2028 (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of April 13, 2017 (as previously amended by the First Amendment thereto dated November 30, 2017 and by the Second Amendment thereto dated June 19, 2018). The amended Term Loan: (i) effects a repricing of the interest rate applicable to the term loans thereunder from LIBOR plus 2.50% to LIBOR plus 2.25% and (ii) replacesDecember 14, 2021 with Royal Bank of Canada with Bank of America, N.A. as the administrative agent and collateral agent thereunder. The amended Term Loan amortizes in quarterly principal payments of $1.25 million starting on March 31, 2022, with any remaining unpaid balances due on the maturity date of December 14, 2028. The Term Loan bears interest at either the base rate (which approximates the prime rate) or the Eurodollar rate, plus a margin of (A) 1.25% in the case of base rate loans or (B) 2.25% in the case of Eurodollar rate loans. Proceeds from the Term Loan were used to refinance and repay in full all amounts outstanding under our previous term loan agreement. We intend to use the remaining funds to pay for certain fees and expenses associated with the closing of the Term Loan and for general corporate purposes, including acquisitions and other growth initiatives. As of SeptemberJune 30, 2021,2022, we had $198.9$491.2 million, net of unamortized debt issuance costs, due on our Term Loan. The amended
Subject to certain exceptions, the Term Loan also haswill be subject to mandatory prepayments of (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a margincertain amount and subject to reinvestment provision and certain other exception; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of 1.25%specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in the caseexcess of base rate loans.

$15.0 million, subject to certain exceptions and limitations.
In September 2019,February 2022, we entered into a newamended and extended the term of our asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement provides for anincreased the commitment under the asset-based lending credit facility (the “ABL Revolver”) ofto $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $200.0 million with$300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest at either the base rate or the Secured Overnight Financing Rate ("Term SOFR"), at our election, plus a five-year maturity, which replacedmargin of 0.25% or 0.50% in the Company’s previous revolving credit facility. Borrowingcase of base rate loans or 1.25% or 1.50% for Term SOFR advances (in each case based on a measure of availability under the ABL Revolver is based on a percentageCredit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the value of certain assets securing the Company’s obligations and those of the subsidiary guarantors thereunder.ABL Credit Agreement. In connection with the Amended and Restated Term Loan Agreement, we entered into a SecondThird Amendment (the “Third Amendment”) to the ABL/Term Loan

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Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Royal Bank of America, N.A.,Canada as collateral agent under the Term Loan Agent for the lenders under the Amended and Restated Term Loan.Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of SeptemberJune 30, 20212022 was $155.7$205.7 million.

All of the obligations under the Term Loan and ABL Revolver are guaranteed by all of the Company’s existing restricted subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second-prioritysecond- priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.

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The ABL Revolver bears interest at either the Eurodollar rate or the base rate (which approximated the prime rate), at the Company’s election, plus a margin of (A) 1.25% or 1.50% in the case of Eurodollar rate loans (based on a measure of availability under the ABL Credit Agreement) and (B) 0.25% or 0.50% in the case of base rate loans (based on a measure of availability under the ABL Credit Agreement).

The ABL Revolver also provides incremental revolving credit facility commitments of up to $50.0 million. The terms and conditions of any incremental revolving credit facility commitments must be no more favorable than the terms of the ABL Revolver. The ABL Revolver also allows for the issuance of letters of credit of up to $75.0$100.0 million in aggregate and borrowing of swingline loans of up to $20.0$25.0 million in aggregate.

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or in an aggregate amount exceeding certain applicable restricted payment baskets;basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

At SeptemberJune 30, 2021,2022, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement and the Senior Notes and we currently do not expect any covenant violations due to the impacts of COVID-19.

Notes.
Derivative Instruments

In August 2020,As of June 30, 2022, we terminated our two existinghad three interest rate swaps and our forwardswaps. One interest rate swap and simultaneously entered into a new interest rate swap that began July 30, 2021. The unrealized loss included in accumulated other comprehensive loss associated with the terminated swaps of $17.8 million at the time of termination will be amortized to interest expense over the course of the originally scheduled settlement dates of the terminated swaps. During the nine months ended September 30, 2021 we amortized $2.4 million of the unrealized loss to interest expense, net. As of September 30, 2021, we had one interest rate swap withand has a fixed notional amount of $200.0 million, a fixed rate of 0.51% and a maturity date of April 15, 2030. This swap serves to hedge substantially all of the variable cash flows on our Term Loan until its maturity and if extended. The assets and liabilities associated with the interest rate swap are included in other long-term assets and other current liabilities on the Condensed Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements. In anticipation of future debt refinancing, on October 27, 2021, we entered intoWe also had two new forward interest rate swap derivatives. These forward interest rate swaps will begin onthat began December 31, 2021. Each swap has2021, each with a fixed notional amount of $100.0 million, a fixed rate of 1.37%, and a maturity date of December 15, 2028. Together, these three swaps serve to hedge $400.0 million of the variable cash flows on our variable rate Term Loan through maturity. On July 8, 2022, we amended these existing swaps and simultaneously entered into two new forward interest rate swaps. See Note 19, Subsequent Events, for further information. The assets and liabilities associated with the interest rate swaps are included in other non-current assets and other current liabilities on the Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.

LIBOR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. For more information on the discontinuance of LIBOR, see Item 3. Quantitative and Qualitative Disclosures about Market Risk below.
Vehicle and Equipment Notes

We have financing loan agreements with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in the normal course of business. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. As of September 30, 2021, we had $68.8 million due on these various loan agreements.

Total gross assets and respective outstanding loan balances relating to our Master Loanmaster loan and Equipment Agreementsequipment agreements were $135.4$143.0 million and $132.2$69.2 million as of SeptemberJune 30, 20212022 and December 31, 2020, respectively. The net book value of assets under these agreements was $66.4$134.5 million and $65.7$69.2 million as of September 30, 2021 and December 31, 2020,2021, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income. See Note 7, Long-term Debt, for more information regarding our Master Loan and Security Agreement, Master Equipment Agreement and Master Loan Agreements.


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Letters of Credit and Bonds

We may use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. In addition, we occasionally use letters of credit and cash to secure our performance

36


under our general liability, and workers’ compensation and auto insurance programs. Permit and license bonds are typically issued for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.
The following table summarizes our outstanding bonds, letters of credit and cash-collateral (in thousands):
 As of SeptemberJune 30, 20212022
Performance bonds$59,89180,440 
Insurance letters of credit and cash collateral50,71650,433 
Permit and license bonds8,4399,445 
Total bonds and letters of credit$119,046140,318 

We have $4.3 million deposited $5.3 million into a trust in 2020as of June 30, 2022 to serve as additional collateral for our workers’ compensation, and general liability and auto policies. This collateral can be converted to a letter of credit at our discretion and is therefore not considered to be restricted cash.

Historical cash flow information

Cash flows from operating activities
Net cash provided by operating activities was $116.5 million and $143.9 million for the nine months ended September 30, 2021 and 2020, respectively. Generally, the primary driver of our cash flows from operating activities is operating income adjusted for certain noncash items, offset by cash payments for taxes and interest on our outstanding debt. Our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. During the nine months ended September 30, 2021, we saw a decrease in cash from operations from the same period in 2020 primarily due to higher volume of inventory purchases to support our growth and increased pricing on inventory due to price inflation on materials.

We may see a reduction in cash inflows in future quarters depending on pandemic impacts on housing starts and commercial projects, as well as larger cash outflows to acquire materials at a premium. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” above for further information on short-term impacts to our cash from operations.

Cash flows from investing activities
Business Combinations. During the nine months ended September 30, 2021 and 2020, we made cash payments, net of cash acquired, of $94.5 million and $38.8 million, respectively, on various business combinations. The amount of cash paid is dependent on various factors, including the size and determined value of the business being acquired. See Note 16, Business Combinations, for more information regarding our acquisitions in 2021 and 2020.

Capital Expenditures. Total cash paid for property and equipment was $27.9 million and $25.5 million for the nine months ended September 30, 2021 and 2020, respectively, and was primarily related to purchases of vehicles and various equipment to support our growing operations. We expect to continue to support any increases in future net revenue through further capital expenditures. A majority of these capital expenditures were subsequently reimbursed via various vehicle and equipment notes payable, with related cash inflows shown in cash flows from financing activities.

Other. During the nine months ended September 30, 2020, we invested $0.8 million in short-term investments consisting primarily of corporate bonds and commercial paper and had $37.5 million in short-term investments mature. We have temporarily discontinued investment purchases due to the relatively low returns provided from current interest rates associated with traditional investments, but may resume such activity in the future.


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Cash flows from financing activities
We utilize our credit facilities and Senior Notes to support our operations and continuing acquisitions as well as fund our discretionary stock repurchase program and pay dividends. The largest cash outflow from financing activities during the nine months ended September 30, 2021 was payment of three quarterly dividends of $26.4 million. During the nine months ended September 30, 2021 and 2020, we received proceeds of $20.8 million and $17.8 million, respectively, from our fixed asset loans which serve to offset a significant portion of the capital expenditures included in cash outflows from investing activities as described above. We made payments on these fixed asset loans and various other notes payable of $19.7 million and $19.8 million during the nine months ended September 30, 2021 and 2020, respectively. We also made $1.6 million and $2.0 million in principal payments on our finance leases and paid $2.4 million and $3.9 million of acquisition-related obligations during the nine months ended September 30, 2021 and 2020, respectively. Lastly, we paid $15.8 million to repurchase 443 thousand shares of our common stock during the nine months ended September 30, 2020. We did not repurchase any shares of our common stock during the nine months ended September 30, 2021.

Contractual Obligations
We had no significant changes to our obligations during the nine months ended September 30, 2021.

Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2022 from those previously disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 20202021 Form 10-K.

Recently AdoptedRecent Accounting Pronouncements

StandardAdoption
ASU 2021-01, Reference Rate Reform (Topic 848):Scope
This pronouncement clarifies the scope and application of ASU 2020-04, "Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)."We continue to evaluate the impact of Topic 848 and may apply other elections as applicable as additional changes in the market occur.
ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income TaxesThis pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and improves the consistent application of GAAP by clarifying and amending existing guidance. The adoption of this standard did not impact our financial statements or have a material effect on our disclosures.

For a description of recently issued and/or adopted accounting pronouncements, see Note 2, Significant Accounting Policies, to our audited consolidated financial statements included in the 2021 10-K.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, economic and industry conditions, our financial and business model, payments of dividends, the impact of COVID-19 on our business and end markets, the demand for our services and product offerings, trends in the commercial business, expansion of our national footprint and end markets, diversification of our products, our ability to grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our ability to improve sales and profitability, our efforts to navigate the material pricing environment, our ability to increase selling prices, our material and labor costs, supply chain and material constraints, the impact of COVID-19 on our financial results and expectations for demand for our services and our earnings in 2021 and 2022. Forward-looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “estimate,” “project,” “predict,” “possible,” “forecast,” “may,” “could,” “would,” “should,” “expect,” “intends,” “plan,” and “will” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation, the duration, effect and severity of the COVID-19 crisis; any recurrence of COVID-19, including through any new variant strains of the virus, and the related surges in positive COVID-19 cases; the adverse impact of the COVID-19 crisis on our business and financial results, our supply chain, the economy and the markets we serve; general economic and industry conditions; inflation and interest rates; the material price and supply environment; the timing of increases in our selling pricesprices; the risk that the Company may reduce, suspend or eliminate dividend payments in the future; and the factors discussed in the “Risk Factors”

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section of our 20202021 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, as the same may be updated from time to time in our subsequent filings with the SEC. In addition, any future declaration of dividends will be subject to the final determination of our Board of Directors. Any forward-looking statement made by the Company in this

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report speaks only as of the date hereof. New risks and uncertainties arise from time to time and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate debt. As of SeptemberJune 30, 2021,2022, we had $198.9$497.5 million outstanding on theour Term Loan, netgross of unamortized debt issuance costs, no outstanding borrowings on theour ABL Revolver and no outstanding borrowings under finance leases subject to variable interest rates. As of SeptemberJune 30, 2021,2022, we have onehad three interest rate swap with a fixed notional amount of $200.0 million that servesswaps which, when combined, serve to hedge substantially all$400.0 million of the variable cash flows on our Term Loan until its maturity and ifunless extended. As a result, we had nototal variable rate debt thatof $97.5 million was exposed to market risks as of SeptemberJune 30, 2021.2022. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would not increase (decrease) our annual interest expense. In anticipation of future debt refinancing, on October 27, 2021, we entered into two new forward interest rate swap derivatives. These forward interest rate swaps will begin on December 31, 2021. Each swap has a fixed notional amount of $100.0 million, a fixed rate of 1.37%, and a maturity date of December 15, 2028.expense by approximately $1.0 million. Our Senior Notes accruedaccrue interest at a fixed rate of 5.75%.

For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant. We have not entered into and currently do not hold derivatives for trading or speculative purposes.

LIBOR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. In 2017, the FCA announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and it is unclear whether new methods of calculating LIBOR will be established.2021. The Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the setting we use as a reference rate, to June 2023. It is unclear whether new methods of calculating LIBOR will be established after that date. Our Term Loan Agreement and 2021 interest rate swap agreements and ABL Credit Agreement include a provision related to the potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate (SOFR) values or another alternate benchmark rate. However, if LIBOR ceases to exist after 2023, the interest rates under the alternative rate could be higher than LIBOR. In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as required by Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of SeptemberJune 30, 2021.

2022.
Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended SeptemberJune 30, 20212022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that some of the employees at our corporate office are working remotely at times due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.



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PART II – OTHER INFORMATION
Item 1. Legal Proceedings

See Part I, Item 1. Financial Statements, Note 15,16, Commitments and Contingencies – Other Commitments and Contingencies, for information about existing legal proceedings.
Item 1A. Risk Factors
As of the date of this report, there have been no material changes from the risk factors disclosed in our 20202021 Form 10-K, other than below, which is an update to the risk factor included in the "Risks to our business from external threats" section of our 2020 Form 10-K.

The COVID-19 pandemic has had an adverse effect on the U.S. economy as well as our business, financial condition, operating results and cash flows.

According to the World Health Organization (“WHO”), in December 2019 China reported a cluster of cases of pneumonia in Wuhan, Hubei Province later identified as a novel strain of coronavirus. In response, the WHO declared the situation a pandemic and the U.S. Secretary of Health and Human Services has declared a public health emergency. The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption. Many public health organizations and international, federal, state and local governments implemented measures to combat the spread of COVID-19 during 2020. Some of these measures included restrictions on movement such as quarantines, “stay-at-home” orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity. While portions of the economy have reopened, there is still significant uncertainty surrounding the duration and scope of the pandemic, as well as its continued impact on the economy. We cannot predict if federal, state and local governments will implement additional restrictions, when restrictions currently in place will expire or whether restrictions currently in place will become more restrictive.

COVID-19 adversely affected many industries as well as the economies and financial markets of many countries, including the United States, causing a significant deceleration of economic activity during a portion of 2020. This slowdown reduced production, decreased the level of trade, and led to widespread corporate downsizing, causing a sharp increase in unemployment in 2020 from which the economy is still recovering. The continued impact of this pandemic on the U.S. and world economies is uncertain and these adverse impacts could worsen, impacting all segments of the global economy, and result in a significant recession or worse.

Our business has been adversely affected by the COVID-19 pandemic and the global response. The Company and its customers’ businesses were classified as “essential” businesses in most of the jurisdictions in which we operate, permitting us to continue operations in most of our markets when COVID-19-related shutdowns occurred during 2020. However, there can be no assurance that our operations will continue to be classified as “essential” in the future, or that we will not voluntarily limit or cease operations in one or more of our markets if we believe it is in our best interest. For example, during portions of March, April and May of 2020, we saw a temporary but significant reduction in activity in our branches located in seven states and the Bay Area of California, which collectively accounted for 10% of our net revenue during the year ended December 31, 2019. The reduced activity in these areas was attributable to construction being temporarily deemed non-essential during that time period. While operations have resumed to normal levels in all of these areas, future mandatory shutdowns or reductions in operations could have a material adverse effect on our business. During 2020, we laid off or furloughed approximately 600 employees in areas where construction was not deemed “essential.” We have since rehired or brought back substantially all of those employees, but we may need to layoff or furlough other employees in the future. Any employee layoffs or furloughs associated with future branch closures or slowdowns are assumed to be temporary in nature but could result in long-term labor shortages in certain markets if we cannot rehire these employees once operations resume.

While the U.S. housing industry has quickly rebounded from the initial onset of the pandemic in 2020, the COVID-19 pandemic may have a material adverse impact on our customers and the homebuilding industry in the future, as it has reduced employment levels and may adversely affect consumer spending or consumer confidence, which would typically decrease demand for homes. In the commercial sector, we have experienced delays in the onset of certain large-scale infrastructure programs due to declining need for such structures and/or project funding declines. Commercial projects could decline in the future if consumer behaviors change in the wake of COVID-19 disruptions to the economy and changes to our general ways of life. For example, reduced demand for office buildings, decreased airport traffic or decreased usage of sports arenas could impact our commercial end market.

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The industry is currently experiencing manufacturer supply constraints for many of the materials we install due to an unanticipated increase in demand as well as manufacturing curtailments due to COVID-19. These factors have affected our ability to complete installation work for certain customers during 2021 and have also required us to source many of the materials we install from distributors and retail outlets at a premium. These higher costs have had an adverse impact on our financial condition, operating results and cash flows. For example, we estimate our cost of sales for the three and nine months ended September 30, 2021 are approximately $2.0 million and $7.0 million higher than they would have been if we purchased these materials through regular channels. We anticipate this trend of higher materials costs as a result of disruptions caused by the COVID-19 pandemic to continue into 2022.

Our management is focused on mitigating the impact of COVID-19 on our business and the risk to our employees, which has partially diverted management’s attention away from normal business operations. Additionally, we have taken a number of precautionary measures intended to mitigate the impact of COVID-19 on our business and the risk to our employees, including increasing the frequency of regular cleaning and disinfecting processes at our facilities, adhering to social distancing protocols, limiting the number of workers on jobsites, temporarily suspending non-essential air travel and periodically allowing employees to work remotely when possible, which could adversely affect our business. Despite these measures, our key management personnel and/or a portion of our installer base could become temporarily or permanently incapacitated by COVID-19 or related complications. This could result in a material adverse impact on our business, financial condition, operating results and cash flows. While these and other measures we may take are believed to be temporary, they may continue until the pandemic is contained or indefinitely and could increase costs and amplify existing risks or introduce new risks that could adversely affect our business, including, but not limited to, internal controls and cybersecurity risks. Additionally, OSHA issued an ETS on November 4th, 2021 requiring all U.S. private businesses with 100 or more employees to ensure that their employees are fully vaccinated or require unvaccinated workers to undergo weekly COVID-19 testing. This ETS may be subject to numerous legal challenges. At this time, we cannot predict the impact of the ETS on us and the degree to which our business and results of operations may be adversely affected.

Considerable uncertainty still surrounds COVID-19 and its potential effects, and the extent of and effectiveness of any responses taken on a local, national and global level. To date, vaccines have been developed and treatments have improved, but it is too soon to know if they will protect against a worsening of the pandemic due to new variants of the virus or other factors, or to prevent COVID-19 from becoming endemic. While we expect the COVID-19 pandemic and related events may have a negative effect on us in the future, the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic, additional government actions taken in response to the pandemic, the impact on construction activity and demand for homes (based on employment levels, consumer spending and consumer confidence). Accordingly, our ability to conduct our business in the manner previously or currently expected could be materially and negatively affected, any of which could have a material adverse impact on our business, financial condition, operating results and cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows the stock repurchase activity, including shares surrendered by employees in connection with the vesting of restricted stock awards, for the three months ended SeptemberJune 30, 2021:2022:
 
Total Number
of Shares
Purchased (1)
Average
Price Paid
Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2)
July 1 - 31, 2021206 $116.5 — — 
August 1 - 31, 2021— — — — 
September 1 - 30, 2021— — — — 
206 $116.5 — $100.0 million

 Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2)
April 1 - April 30, 2022 (1)
52,491 $84.95 — $— 
May 1 - May 31, 2022478,727 88.96 478,727 107.5 million 
June 1 - June 30, 202275,000 96.04 75,000 100.3 million 
606,218 $89.49 553,727 $100.3 million
(1)Represents shares surrendered to the Company by employees to satisfy tax withholding obligations arising in connection with the vesting of 851226,147 shares of restricted stock awarded under our 2014 Omnibus Incentive Plan.
(2)On February 26, 2018, our board of directors authorized a $50 million stock repurchase program effective March 2, 2018 and on October 31, 2018, our board of directors approved an additional stock repurchase program, effective November 6, 2018, pursuant to which we may purchase up to an additional $100 million of our outstanding common stock. On February 20, 2020, our board of directors approved extending the current stock repurchase program to March 1, 2021. On

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February 22, 2021,24, 2022 our board of directors authorized an extension of our previous stock repurchase program through March 1, 20222023 and concurrently authorized an increase in the total amount of our outstanding common stock we can purchase under the extended program up to $100.0$200.0 million. As a resultWe repurchased $49.8 million and $99.7 million of this extension, we have $100.0 million remaining oncommon stock under our previous stock repurchase program asduring the three and six months ended June 30, 2022, respectively. We announced on August 4, 2022 that our board of directors authorized a new stock repurchase program that allows for the daterepurchase of filingup to $200.0 million of this Form 10-Q.our outstanding common stock through August 10, 2023. The new program replaces the existing program. For further information about our stock repurchase program, see Note 11,12, Stockholder's Equity. We did not repurchase any shares under our stock repurchase program during the nine months ended September 30, 2021.
Item 3. Defaults Upon Senior Securities

There have been no material defaults in senior securities.
Item 4. Mine Safety Disclosures

Not applicable.
Item 5. Other Information
None.    

None.    39


Item 6. Exhibits

(a)(3) Exhibits

The following exhibits are being filed as part of this Quarterly Report on Form 10-Q:

Exhibit
  Number
  Description
31.1*  
31.2*  
32.1*  
32.2*  
101**  
The following financial statements from the Company's Quarterly Report on Form 10-Q for the period ended SeptemberJune 30, 2021,2022, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements.
104**Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

*    Filed herewith.
**    ��Submitted electronically with the report.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: NovemberAugust 4, 20212022

INSTALLED BUILDING PRODUCTS, INC.
By: /s/ Jeffrey W. Edwards
 Jeffrey W. Edwards
 President and Chief Executive Officer
By: /s/ Michael T. Miller
 Michael T. Miller
 Executive Vice President and Chief Financial Officer