☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 45-3707650 | ||||||||||
(State or other jurisdiction of
| (I.R.S. Employer
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495 South High Street, Suite 50
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Columbus, Ohio | 43215 | ||||||||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||||||||
Common Stock, | $0.01 par value per share | IBP | The New York Stock Exchange |
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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 | ☐ |
$2,891,660,953.
PART I | ||||||||||||
Item 1. | ||||||||||||
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Item 1A. | ||||||||||||
Item 1B. | ||||||||||||
Item 2. | ||||||||||||
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Item 3. | ||||||||||||
Item 4. | ||||||||||||
PART II | ||||||||||||
Item 5. | ||||||||||||
Item 6. | ||||||||||||
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Item 7. | ||||||||||||
Item 7A. | ||||||||||||
Item 8. | ||||||||||||
Item 9. | ||||||||||||
Item 9A. | ||||||||||||
Item 9B. | ||||||||||||
Item 9C. | ||||||||||||
PART III | ||||||||||||
Item 10. | ||||||||||||
Item 11. | ||||||||||||
Item 12. | ||||||||||||
Item 13. | ||||||||||||
Item 14. | ||||||||||||
PART IV | ||||||||||||
Item 15. | ||||||||||||
Item 16. | ||||||||||||
and Risk Factors Summary
•our dependence on the economy, the housing market, the level of new residential and commercial construction activity and the credit markets;
•the cyclical and seasonal nature of our business;
•declines in the economy or slowing of the housing market recovery that could lead to significant impairment charges;
our exposure to severe weather conditions;
•the highly fragmented and competitive nature of our industry;
•product shortages or the loss of key suppliers;
•changes in the costs and availability of products;
inability to continue to successfully expand into new products or geographic markets;
inability to successfully acquire and integrate other businesses;
inability to successfully expand into the commercial construction market;
our exposure to claims arising from our operations;
•our reliance on key personnel;
•our ability to attract, train and retain qualified employees while controlling labor costs;
•scrutiny and expectations from stakeholders regarding our environmental, social and governance ("ESG") practices;
•our exposure to product liability, workmanship warranty, casualty, construction defect and other claims and legal proceedings;
•changes in, or failure to comply with, federal, state, local and other regulations;
disruptions in our information technology systems, including cybersecurity incidents;
•our ability to implement and maintain effective internal control over financial reporting;
•the reduction, suspension or elimination of dividend payments;
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products.
Our
recycling.
•Fiberglass and Cellulose Insulation – Fiber glassFiberglass insulation is made of fibrous glass that is held together by a thermoset resin creating insulating air pockets. It is typically containscomprised of an average of 50% recycled content.material, with some products containing up to 80% recycled material. It is primarily available in two forms: batts (also referred to as blankets) and loosefill (also referred to as blown in). Fiberglass is the most widely used residential insulation material
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•Spray Foam Insulation – Spray foam insulation, which is generally a polyurethane foam, is applied at a job site by mixing two chemical components together in specialized application equipment. While typically having the highest insulating value per inch and sealing effectiveness of all insulation materials that we offer, spray foam is also typically the most expensive on an installed basis. Spray foam insulation accounted for approximately 15% of our insulation sales for the year ended December 31, 2018.
•Basement and Crawl Space – These spaces often account for the second most energy loss in a residential structure.
•Building Envelope – We insulate the exterior walls of both residential and commercial structures by applying insulation on the wall or between the studs.
•Attic – We insulate the attics of new and existing residential structures. The attic is the area where the most energy may be lost in a home.
•Acoustical – Many builder or architect specifications call for acoustical insulation for sound reduction purposes in both residential and commercial structures. This product is generally installed in the interior walls to minimize sound transmission.
In each of these applications, we typically use fiberglass batts, except in attic installations where we typically install loosefill fiberglass or cellulose.
We also install a wide variety of advanced caulk and sealant products that control air infiltration in residential and commercial buildings to enhance energy efficiency, improve comfort and meet increasingly stringent energy code requirements.2021.
Garage Doors
2021.
2021.
2021.
2021.
COMPETITIVE ADVANTAGES
revenues, to the year ended December 31, 2021, where it comprised 64% of revenues. We service the residential new construction and repair and remodel markets, both of which consist of single-family and multi-family dwellings, as well as the commercial construction market. We have diversified our end customer demographic from the year ended December 31, 2013, when revenue from the commercial end market comprised approximately 11% of revenues, to the year ended December 31, 2021 where it comprised 17% of revenues. Our growing exposure to commercial end markets diversifies our customer base and makes our business less dependent on residential new construction. Commercial construction is also driven by longer term projects which tends to provide greater revenue visibility. In periods of declining insulation installation volumes, our sales force is able to leverage our diversity of products and reduce the impact of lost insulation sales by growing sales of complementary building products, further enhancing our ability to perform. Our national geographic footprint provides us a balanced business not concentrated in any single region.
We focus on the well-being of our employees through our Positive Production Program. This micro-video program is designed to help employees thrive in all aspects of life through learning and practicing research-backed physical, intellectual and emotional skills. Engaged, long-tenured employees benefit our business by being highly skilled and efficient, which drives profitability and encourages repeat business and customer loyalty. Higher employee retention also benefits our business through lower recruitment and training expense. We also consider safety and risk management to be a core business objective. Significant staffing, funding and other resources are allocated to our management systems that enhances safety and quality for our employees and our customers. Our branch managers are held accountable for the safety of employees and quality of workmanship at their locations. We provide our employees with ongoing training and development programs necessary to improve safety performance and work quality. Our regional managers, local branch managers and sales force have significant experience in the industry and have spent an average of
more than 11 years with our operations. We also created the Installed Building Products Foundation in 2019 as a separate, not-for-profit organization to help support our employees for their education, financial and philanthropic needs.installation employees are paid by completed job
. Our minimal capital expenditure requirements support the generation of strong free cash flow.Relationship While we serve many national and regional builders across multiple markets, we compete for business at the local level. Given our emphasis on quality service, customer turnover is extremely low.
terms and to keep purchases through distribution and retail to a minimum, giving us an advantage over our competitors.
•capitalize on the new residential and large commercial construction markets;
•continue to strengthen our market share position by working with the best customers. We seek to work with the most profitable and efficient builders and commercial general contractors in our markets;
continueorganic expansion and acquisitions. In addition to strengthen our market share position by working with the best customers;
pursue value enhancing acquisitions by being disciplined in our approach to valuationsinsulation and pricing;
•enhance profitability from our operating leverage and national scale;
•pursue value enhancing acquisitions in markets we currently serve as well as markets that are new to us by continuing our disciplined approach to valuations and pricing. We will continue organic expansionto be selective in identifying acquisition targets at attractive multiples. We target profitable markets and companies with strong reputations and customer bases. As part of our acquisition strategy, we seek to maintain the management teams of the commercialcompanies we acquire as well as retain their local branding, which further reduces associated risk; and
2022.
of our workforce.
BACKLOG
Certain2021. While our largest customers are homebuilders, our customer base is also diverse. We work on a range of commercial projects including office buildings, airports, sports complexes, museums, hospitals, hotels and educational facilities. Of our top 20 customers, 17
2020.
products we install. We have found that using multiple suppliers ensures a stable source of materials and favorable purchasing terms as suppliers compete to gain and maintain our business. In addition, our national purchasing volumes provide leverage with suppliers as we pursue additional purchasing synergies.
The industry is currently experiencing manufacturer supply constraints for some of the materials we purchase due to an unanticipated increase in demand as well as global supply chain bottlenecks caused by manufacturing curtailments due to COVID-19. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Key Factors Affecting our Operating Results" for more information.
As a result of the aforementioned material supply constraints, some jobs may be temporarily delayed, resulting in lower revenue in the first and/or second quarters of 2022 than we would normally expect. While we anticipate this will not have a significant effect on our business, we cannot predict the full impact on our results of operations at this time.
EMPLOYEES
trademarks and trade names are important to the development and conduct of our business as well as to the local marketing of our services. We also maintain domain name registrations for each of our local branch websites. We make efforts to protect our intellectual property rights, although the actions we take may be inadequate to prevent others from using similar intellectual property. In addition, third parties may assert claims against our use of intellectual property and we may be unable to successfully resolve such claims.
We are subject to various federal, state and local laws and regulations applicable in the jurisdictions in which we operate, including laws and regulations relating to our relationships with our employees, public health and safety, workplace safety, transportation, zoning and fire codes. We strive to operate in accordance with applicable laws, codes and regulations.
To date, costs to comply with applicable laws and regulations relating to pollution or the protection of human health and safety, the environment and natural resources have not had a material adverse effect on our financial condition or operating results, and we do not anticipate incurring material expenditures to comply with such laws and regulations in the current fiscal year.
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For a summary of the following risks, please see "Information Regarding Forward-Looking Statements and Risk Factors Summary"which appears immediately prior to Item 1, Business, of this Form 10-K.
AND INDUSTRY
•the number of new home and commercial building construction starts;
•short- and long-term interest rates;
•inflation;
•employment levels and job and personal income growth;
•housing demand from population growth, household formation and other demographic changes;
•housing affordability;
•availability and cost of labor;
•availability and cost of land;
•changes in material prices;
•local zoning and permitting processes, including the length of building cycles from permit to completion, based on local economic or environmental factors;
•federal, state and local energy efficiency programs, regulations, codes and standards;
•availability and pricing of mortgage financing for homebuyers and commercial financing for developers of multi-family homes and commercial projects;
•foreclosure rates;
•consumer confidence generally and the confidence of potential homebuyers in particular;
•U.S. and global financial system and credit market stability;
•federal government economic, trade, and spending laws and policies;
•private party and government mortgage loan programs and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices;
•federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, state and local income and real estate taxes and other expenses;
•general economic conditions, including in the markets in which we compete; and
•pandemics, natural disasters, war, acts of terrorism and response to these events.
A downturn in the housing market could materially and adversely affect our business and financial results.
Demand can also be negatively impacted by changing consumer tastes and demographic changes.
our business.
The commercial construction market, as measured by investment dollars, increased 8% in 2021 from 2020. However, this market has not rebounded from the pandemic as quickly as the new residential market as investment dollars in 2021 were below 2019 levels.
expected to increase 6% from 2021.
We cannot predict the duration of the current market conditions or the timing or strength of any future growth of commercial construction activity in our markets.
A decline in the economy and/or a deterioration in expectations regarding the housing market or the commercial construction market could cause us to record significantnon-cash impairment charges, which could negatively affect our earnings and reduce stockholders’ equity.
Our business is seasonal and may be affected by adverse weather conditions or natural disasters.
We tend to have higher sales during the second half of the year as our homebuilder customers complete construction of homes placed under contract for sale in the traditionally stronger spring selling season. In addition, some of our larger branches operate in states impacted by winter weather and, as such, experience a slowdown in construction activity during inclement months. This winter slowdown contributes to traditionally lower sales and profitability in our first quarter.
In addition, adverse weather conditions, such as unusually prolonged cold conditions, rain, blizzards, hurricanes, earthquakes, fires or other natural disasters could accelerate, delay or halt construction or installation activity. The impact of these types of events on our business may adversely impact quarterly or annual net revenue, cash flows from operations and results of operations.
done so from time to time, including in 2018 when we entered into a contract to provide a portion of the insulation materials we utilize across our
new challenges posed by such expansion, our future sales growth could be negatively impacted, our operating costs could increase, and our business operations and financial results could be adversely affected.
•our inability to manage acquired businesses or control integration costs and other costs relating to acquisitions;
•potential adverse short-term effects on operating results from increased costs, business disruption or otherwise;
•diversion of management’s attention;
•loss of suppliers, customers or other significant business partners of the acquired business;
•failure to retain existing key personnel of the acquired business and recruit qualified new employees at the location;
•failure to successfully implement infrastructure, logistics and systems integration;
•potential impairment of goodwill and other intangible assets;
•risks associated with new lines of business and business models;
•exposure to legal claims for activities of the acquired business prior to acquisition and inability to realize on any indemnification claims, including with respect to environmental and immigration claims;
•the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities; and
•our inability to obtain financing necessary to complete acquisitions on attractive terms or at all.
Our
typical contractual terms and arrangements and billing cycle for the commercial construction end market are different than the residential new construction end market. In addition, our expansion into these businesses may include opening new branches that have higherstart-up costs compared to our acquired branches. These factors and any other challenges we encounter could adversely affect our margins, financial condition, operating results and cash flows.
Our success depends on our key personnel.
Our business results depend largely upon the continued contributions of our senior management team. We do not have employment agreements with any of our executive officers other than Jeff Edwards, our Chief Executive Officer and President. Although Mr. Edwards’ employment agreement requires him to devote the amount of time necessary to conduct our business and affairs, he is also permitted to engage in other business activities that do not create a conflict of interest or substantially interfere with his service to us, includingnon-competitive operational activities for his real estate development business. If we lose members of our management team, our business, financial condition and results of operations, as well as the market price of our securities, could be adversely affected.
Our business results also depend upon our branch managers and sales personnel, including those of companies recently acquired. While we customarily signnon-competition agreements, which typically continue for two years following the termination of employment, with our branch managers and sales personnel in order to maintain key customer relationships in our markets, such agreements do not protect us fully against competition from former employees.
We are dependent on attracting, training and retaining qualified employees while controlling labor costs.
The labor market for the construction industry is competitive, including within the sector in which we operate. We must attract, train and retain a large number of qualified employees to install our products while controlling related labor costs. We face significant competition for these employees from our industry as well as from other industries. Tighter labor markets may make it even more difficult for us to hire and retain installers and control labor costs. Our ability to attract qualified employees and control labor costs is subject to numerous external factors, including competitive wage rates and health and other insurance and benefit costs. A significant increase in competition, minimum wage or overtime rates in localities where we have employees could have a significant impact on our operating costs and may require that we take steps to mitigate such increases, all of which may cause us to incur additional costs, expend resources responding to such increases and lower our margins.
Higher labor and health care costs could adversely affect our business.
Our labor costs may continue to increase as of result of competition, health and other insurance and benefit costs. In addition, health care coverage requirements, changes in workplace regulations and any future legislation could cause us to experience higher health care and labor costs in the future. Increased labor, health care and insurance costs could have an adverse effect on our business, financial condition and results of operations.
LEGAL AND REGULATORY RISKS
•employee classification as exempt ornon-exempt for overtime and other purposes;
•workers’ compensation rates;
•immigration status;
•mandatory health benefits;
•tax reporting; and
•other wage and benefit requirements.
be unauthorized, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and retain qualified employees. Termination of a significant number of employees due to work authorization or other regulatory issues may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration laws. These factors could have a material adverse effect on our reputation, business, financial condition and results of operations.
construction defects typically have statutes of limitations that can run as long as ten years. Claims of this nature could also have a negative impact on customer confidence in us and our services. Current or future claims could have a material adverse effect on our reputation, business, financial condition and results of operations. For additional information, see Note 14,16, Commitments and Contingencies, to our audited consolidated financial statements included in this Form10-K.
In the ordinary course of business, we are required to obtain performance bonds and licensing bonds, the unavailability of which could adversely affect our business, financial condition, results of operations and/or cash flows.
We are often required to obtain performance bonds and licensing bonds to secure our performance under certain contracts and other arrangements. In addition, the commercial construction end market also requires higher levels of performance bonding.
Our ability to obtain performance bonds and licensing bonds primarily depends on our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the overall capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain performance bonds and licensing bonds can also be impacted by the willingness of insurance companies to issue performance bonds and licensing bonds. If we are unable to obtain performance bonds and licensing bonds when required, our business, financial condition, results of operations and/or cash flows could be adversely impacted.
business.
of homes that can be built within the boundaries of a particular area. Regulatory restrictions and industry standards may require us to alter our installation processes and our sourcing, increase our operating expenses and limit the availability of suitable building lots for our customers, any of which could negatively affect our business, financial condition and results of operations.
Increases in union organizing activity
Less than one percent of our employees are currently covered by collective bargaining or other similar labor agreements. However, if a larger number of our employees were to unionize, including in the wake of any future legislation that makes it easier for employees to unionize, our business could be negatively affected. Any inability by us to negotiate collective bargaining arrangements could cause strikes or other work stoppages, and new contracts could result in increased operating costs. If any such strikes or other work stoppages occur, or if other employees become represented by a union, we could experience a disruption of our operations and higher labor costs.
In addition, certainimpair our ability to meet our obligations.
Increases in fuel costs could adversely affect our results of operations.
The price of oil has fluctuated over the last few years, creating volatility in our fuel costs. We do not currently hedge our fuel costs. Increases in fuel costs can negatively impact our cost to deliver our products to our customers and thus increase our cost of sales. If we are unable to increase the selling price of our products to our customers to cover any increases in fuel costs, net income may be adversely affected.
We may be adversely affected by disruptions in our information technology systems.
Our operations are dependent upon our information technology systems, including ourweb-enabled internal software technology, jobCORE. The jobCORE software providesin-depth operational and financial performance data from individual branch locations to the corporate office. We rely upon such information technology systems to manage customer orders on a timely basis, coordinate our sales and installation activities across locations and manage invoicing. As a result, the proper functioning of our information technology systems is critical to the successful operation of our business. Although our information technology systems are protected through physical and software safeguards, our information technology systems are still vulnerable to natural disasters, power losses, unauthorized access, delays and outages in our service, system capacity limits from unexpected increases in our volume of business, telecommunication failures, computer viruses and other problems. A substantial disruption in our information technology systems for any prolonged time period could result in delays in receiving inventory and supplies or installing our products on a timely basis for our customers, which could adversely affect our reputation and customer relationships.
In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional costs, become subject to legaldownturn in general economic conditions or regulatory proceedings or suffer damage to our reputation.
In addition to the disruptions that may occur from interruptions in our information technology systems, cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems. We have established security policies, processes and defenses designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology systems and information and disruption of our operations. Despite these efforts, our information technology systems may be damaged, disrupted or shut down due to attacks by unauthorized access, malicious software, computer viruses, undetected intrusion, hardware failures or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate. These breaches or intrusions could lead to business interruption, exposure of proprietary or confidential information, data corruption, damage to our reputation, exposure to legal and regulatory proceedings and other costs. Such events could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, we could be adversely affected if any of our significant customersbusinesses;
As cyberattacks become more sophisticated generally,reacting to, changes in our businesses and the industries in which we operate may be required to incur significant costs to strengthenlimited;
We carry cybersecurity insurance to help mitigate the financial exposurecontrol. Our business may not generate sufficient cash flow, and related notification procedures in the event of intentional intrusion. The measures that we implement to reduce and mitigate these risksfuture financings may not be effective. If such an event occurred, it could have a material adverse effect onavailable to provide sufficient net proceeds, to meet these obligations or to successfully execute our business financial condition, resultsstrategies. See Part II, Item 7, Management’s Discussion and Analysis of operationsFinancial Condition and cash flows.
Because we operate our business through highly dispersed locations across the United States, our operations may be materially adversely affected by inconsistent practicesResults of Operations, "Liquidity and the operating results of individual branches may vary.
We operate our business through a network of highly dispersed locations throughout the United States, supported by executives and services at our corporate office, with local branch management retaining responsibility forday-to-day operations and adherence to applicable local laws. Our operating structure can make it difficult for us to coordinate procedures across our operations in a timely manner or at all. In addition, our branches may require significant oversight and coordination from our corporate office to support their growth. Inconsistent implementation of corporate strategy and policies at the local level could materially and adversely affect our overall profitability, business, results of operations, financial condition and prospects.
In addition, the operating results of an individual branch may differ from those of another branch for a variety of reasons, including market size, management practices, competitive landscape, regulatory requirements, state and local taxes and local economic conditions. As a result, certain of our branches may experience higher or lower levels of growth than other branches. Therefore, our overall financial performance and results of operations may not be indicative of the performance and results of operations of any individual branch.
Capital Resources, Credit Facilities."
•incur or guarantee additional debt;
•make distributions or dividends on or redeem or repurchase shares of common stock;
•make certain investments and acquisitions;
•make capital expenditures;
•incur certain liens or permit them to exist;
•enter into certain types of transactions with affiliates;
•acquire, merge or consolidate with another company; or
•transfer, sell or otherwise dispose of all or substantially all of our assets.
Our use of interest rate hedging instruments could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations.
As of December 31, 2018, $196.0 million of our borrowings were at variable interest rates and expose us to interest rate risk.
2021, but should we have a balance in the future, we would incur interest based on a rate that varies per the conditions set forth in our agreement.
SECURITIES
•market conditions affecting the residential construction, commercial construction and building products industries;
•quarterly variations in our results of operations;
•changes in government regulations;
•the announcement of acquisitions by us or our competitors;
•changes in general economic and political conditions;
•volatility in the financial markets;
•results of our operations and the operations of others in our industry;
•changes in interest rates;
•the reduction, suspension or elimination of dividend payments;
•the addition or departure of key personnel;
•actions taken by our stockholders, including the sale or disposition of their shares of our common stock;
•differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections.
Jeff Edwards has significant ownership of our common stock and may have interests that conflict with those of our other stockholders.
a classified board of directors with three-year staggered terms;
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
elections; the exclusive right of our board of directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
board; the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of the holders of our stock or a hostile acquirer;
approval; a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
consent; a requirement that a special meeting of stockholders may be called only by a resolution duly adopted by our board of directors;board; and
advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or determeeting.
In addition,Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a stockholder owningperson who owns 15% or more of such corporation’sour outstanding voting stock from merging or combining with us for a period of three years followingafter the date on which such stockholder became an “interested” stockholder. In order for us to consummate a business
combination with an “interested” stockholder within three years of the date ontransaction in which the stockholder became “interested,” either (1) the business combinationperson acquired 15% or the transaction that resulted in the stockholder becoming “interested” must be approved by our board of directors prior to the date the stockholder became “interested,” (2) the “interested” stockholder must own at least 85%more of our outstanding voting stock, atunless the time the transaction commences (excluding voting stock owned by directors who are also officers and certain employee stock plans)merger or (3) the business combination must beis approved by our board of directors and authorized by at leasttwo-thirds of our stockholders (excluding the “interested” stockholder). This provision could have the effect of delaying or preventingin a change of control, whether or not it is desired by or beneficial to our stockholders.prescribed manner. Any delay or prevention of a change of control transaction or changes in our board of directors and management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares of our common stock.
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State | Number of Locations | Approximate Total Square Footage | ||||||
Alabama | 3 | 29,150 | ||||||
Arizona | 1 | 19,846 | ||||||
California | 14 | 139,586 | ||||||
Colorado | 9 | 80,162 | ||||||
Connecticut | 2 | 26,128 | ||||||
Delaware | 2 | 11,325 | ||||||
Florida | 22 | 156,208 | ||||||
Georgia | 12 | 159,704 | ||||||
Idaho | 3 | 43,000 | ||||||
Illinois | 4 | 47,118 | ||||||
Indiana | 13 | 237,536 | ||||||
Kansas | 1 | 14,206 | ||||||
Kentucky | 4 | 46,330 | ||||||
Louisiana | 1 | 10,000 | ||||||
Maine | 2 | 32,500 | ||||||
Maryland | 3 | 34,710 | ||||||
Massachusetts | 4 | 45,303 | ||||||
Michigan | 1 | 34,800 | ||||||
Minnesota | 2 | 87,550 |
State | Number of Locations | Approximate Total Square Footage | ||||||
Mississippi | 1 | 8,000 | ||||||
Nebraska | 1 | 12,000 | ||||||
Nevada | 2 | 18,732 | ||||||
New Hampshire | 7 | 60,812 | ||||||
New Jersey | 2 | 30,300 | ||||||
New York | 10 | 100,900 | ||||||
North Carolina | 14 | 128,380 | ||||||
Ohio | 11 | 365,826 | ||||||
Oklahoma | 2 | 25,007 | ||||||
Oregon | 1 | 30,013 | ||||||
Pennsylvania | 2 | 27,000 | ||||||
South Carolina | 7 | 99,511 | ||||||
Tennessee | 6 | 57,811 | ||||||
Texas | 16 | 310,512 | ||||||
Utah | 1 | 6,000 | ||||||
Vermont | 1 | 31,020 | ||||||
Virginia | 6 | 68,141 | ||||||
Washington | 3 | 56,393 | ||||||
Wisconsin | 9 | 111,798 |
State | Number of Locations | Approximate Total Square Footage | State | Number of Locations | Approximate Total Square Footage | |||||||||||||||||||||||||||
Alabama | 3 | 29,150 | Nebraska | 2 | 23,241 | |||||||||||||||||||||||||||
Arizona | 2 | 26,159 | Nevada | 1 | 15,350 | |||||||||||||||||||||||||||
California | 24 | 231,269 | New Hampshire | 8 | 76,920 | |||||||||||||||||||||||||||
Colorado | 13 | 124,621 | New Jersey | 4 | 41,100 | |||||||||||||||||||||||||||
Connecticut | 2 | 31,292 | New York | 8 | 101,630 | |||||||||||||||||||||||||||
Delaware | 4 | 37,175 | North Carolina | 13 | 155,765 | |||||||||||||||||||||||||||
Florida | 26 | 234,133 | Ohio | 10 | 443,995 | |||||||||||||||||||||||||||
Georgia | 14 | 220,471 | Oklahoma | 3 | 35,543 | |||||||||||||||||||||||||||
Idaho | 3 | 43,000 | Oregon | 2 | 32,928 | |||||||||||||||||||||||||||
Illinois | 6 | 80,118 | Pennsylvania | 3 | 41,894 | |||||||||||||||||||||||||||
Indiana | 13 | 237,676 | South Carolina | 7 | 103,475 | |||||||||||||||||||||||||||
Kansas | 1 | 14,206 | South Dakota | 2 | 50,000 | |||||||||||||||||||||||||||
Kentucky | 4 | 46,330 | Tennessee | 7 | 111,482 | |||||||||||||||||||||||||||
Louisiana | 2 | 19,535 | Texas | 18 | 349,982 | |||||||||||||||||||||||||||
Maine | 3 | 38,750 | Utah | 7 | 115,523 | |||||||||||||||||||||||||||
Maryland | 4 | 59,710 | Vermont | 1 | 31,020 | |||||||||||||||||||||||||||
Massachusetts | 4 | 45,303 | Virginia | 6 | 73,941 | |||||||||||||||||||||||||||
Michigan | 3 | 41,800 | Washington | 12 | 147,770 | |||||||||||||||||||||||||||
Minnesota | 8 | 231,885 | Wisconsin | 9 | 187,131 |
Our Fleet
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During
2/13/2014 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/29/2017 | 12/31/2018 | |||||||||||||||||||
IBP | 100 | 139 | 194 | 323 | 593 | 263 | ||||||||||||||||||
Russell 2000 | 100 | 112 | 107 | 130 | 149 | 133 | ||||||||||||||||||
S&P 500 Industrials | 100 | 124 | 121 | 143 | 174 | 151 | ||||||||||||||||||
S&P Smallcap 600 | 100 | 114 | 112 | 141 | 160 | 146 |
12/31/2016 12/29/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 IBP 100 184 82 167 247 342 Russell 2000 100 115 102 128 153 176 S&P 500 Industrials 100 121 105 136 151 182 S&P Smallcap 600 100 113 104 127 141 179
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 (1) | |||||||||||||
October 1—31, 2018 | — | $ | — | — | — | |||||||||||
November 1—30, 2018 (2) | 1,149,135 | 35.57 | 1,149,135 | $ | 66.3 million | |||||||||||
December 1—31, 2018 (3) | 159,275 | 35.54 | 159,156 | $ | 60.6 million | |||||||||||
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1,308,410 | $ | 33.57 | 1,308,291 | $ | 60.6 million | |||||||||||
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The following tables set forth selected historical consolidated financial dataTotal Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs October 1 - 31, 2021 101 $ 106.82 — — November 1 - 30, 2021 — — — — December 1 - 31, 2021 — — — — 101 $ 106.82 — $ 100.0 million
Years ended December 31, | ||||||||||||||||||||
2018 (1) | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Statement of operations: | ||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
Net revenue | $ | 1,336,432 | $ | 1,132,927 | $ | 862,980 | $ | 662,719 | $ | 518,020 | ||||||||||
Cost of sales | 964,841 | 808,901 | 610,532 | 474,426 | 377,968 | |||||||||||||||
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Gross profit | 371,591 | 324,026 | 252,448 | 188,293 | 140,052 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Selling | 67,105 | 58,450 | 49,667 | 37,702 | 30,951 | |||||||||||||||
Administrative and other | 211,269 | 191,310 | 136,731 | 105,639 | 83,515 | |||||||||||||||
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Operating income | 93,217 | 74,266 | 66,050 | 44,952 | 25,586 | |||||||||||||||
Other expense | 21,031 | 18,446 | 6,440 | 3,022 | 2,999 | |||||||||||||||
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Income before income taxes | 72,186 | 55,820 | 59,610 | 41,930 | 22,587 | |||||||||||||||
Income tax provision | 17,438 | 14,680 | 21,174 | 15,413 | 8,607 | |||||||||||||||
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Net income from continuing operations | 54,748 | 41,140 | 38,436 | 26,517 | 13,980 | |||||||||||||||
Discontinued Operations | ||||||||||||||||||||
Loss from discontinued operations, net of tax | — | — | — | — | 48 | |||||||||||||||
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Net income | 54,748 | 41,140 | 38,436 | 26,517 | 13,932 | |||||||||||||||
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Accretion charges on redeemable preferred stock | — | — | — | — | (19,897 | ) | ||||||||||||||
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Net income (loss) attributable to common shareholders | $ | 54,748 | $ | 41,140 | $ | 38,436 | $ | 26,517 | $ | (5,965 | ) | |||||||||
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Basic net income (loss) per share attributable to common shareholders | $ | 1.76 | $ | 1.30 | $ | 1.23 | $ | 0.85 | $ | (0.20 | ) | |||||||||
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Diluted net income (loss) per share attributable to common shareholders | $ | 1.75 | $ | 1.30 | $ | 1.23 | $ | 0.85 | $ | (0.20 | ) | |||||||||
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Balance sheet data: | ||||||||||||||||||||
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Cash | $ | 90,442 | $ | 62,510 | $ | 14,482 | $ | 6,818 | $ | 10,761 | ||||||||||
Total current assets | $ | 411,545 | $ | 354,942 | $ | 192,391 | $ | 150,232 | $ | 119,288 | ||||||||||
Property and equipment, net | $ | 90,117 | $ | 81,075 | $ | 67,788 | $ | 57,592 | $ | 39,370 | ||||||||||
Total assets | $ | 834,658 | $ | 738,746 | $ | 462,095 | $ | 373,572 | $ | 234,162 | ||||||||||
Total debt (2) | $ | 463,454 | $ | 359,722 | $ | 166,720 | $ | 143,677 | $ | 53,738 | ||||||||||
Total stockholders’ equity | $ | 182,498 | $ | 210,528 | $ | 153,977 | $ | 114,483 | $ | 91,874 |
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See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for a discussion of short-term impacts to our business from the pandemic.175210 branch locations. Substantially allThe vast majority 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. We believe our business is well positioned to continue to profitably grow due to our strong balance sheet, liquidity and our continuing acquisition strategy.TheOur strategic acquisitions of multiple companies over the last several years contributed meaningfully to our 18.0%19.1% increase in net revenue during the year ended December 31, 20182021 compared to 2017.The recently passed Tax Cuts and Jobs Act (the “Tax Act”) has added additional momentum2020.economic landscape. While there have been concerns about the impact of the new tax law on housing, initial readings and reviews are suggesting that it is generally stimulative to the economy. We may adjust our strategies based on housing demand and our performancediscussion previously included in eachPart II, Item 7, of our markets.2018Form 10-K for the year ended December 31, 2020.18.0%19.1%, or $203.5$315.4 million, while gross profit increased 15.6% to $589.5 million during 2018the year ended December 31, 2021 compared to 2017,2020. We also generated approximately $138.3 million of cash from operating activities. The increase in net revenue and gross profit was primarily driven by the continued recovery of housing markets, the contributionscontribution of our recent acquisitions, selling price and growth acrossproduct mix improvements as evidenced by the 3.2% increase in our end marketsprice/mix metric and products. However, grossincreased sales volume of 7.7% on a same branch basis. Gross profit grew slower than revenue primarily due to higher material costs caused by pandemic-related supply chain constraints, higher fuel 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 was affected by price increasescompression as materials, particularly spray foam, gutters, and other complementary installed products, continued to be difficult to source near volume and pricing levels secured in prior periods.insulation materials and costs$200.0 million revolving line of credit existing at December 31, 2021, which was increased to organically expand$250.0 million in February of 2022. Additionally, we paid our commercial branches. During 2018, we maintained momentum in our acquisition strategy, as we completed ten acquisitions, not including several smalltuck-in acquisitions merged into existing operations, which expanded our product line offerings and geographical reach. Acquisitions accounted for $73.5 million of the increase in net revenues.In June 2018, we extended the maturity date of our Term Loan (as hereinafter defined) from April 15, 2024 to April 15, 2025 and increased the aggregate principal amount of the facility from $297.8 million to $397.8 million, and extended the maturity date on our ABL Revolver (as hereinafter defined) from April 13, 2022 to June 19, 2023 and increased the aggregate revolving loan commitments from $100.0 million to $150.0 million.
In July 2018, we entered into a seven-year interest rate swap with a beginning notional of $100.0 million as wellfirst quarterly dividends as a forward interest rate swap beginning May 31, 2022 with a beginning notional of $100.0 million. Including our pre-existing swap, these three swaps serve to hedge $200.0 million of the variable cash flows on our Term Loan until maturity.
In February 2018, our board of directors authorized a $50 million stock repurchase program, effective March 2, 2018, andpublic company in October 2018 our board of directors approved an additional stock repurchase program, effective November 5, 2018, pursuant to which we may purchase up to an additional $100 million of our outstanding common stock. The program will remain in effect until February 28, 2020, unless extended by the board of directors. 2021.
end markets and we achieved 9.7% year-over-year same branch sales growth, with acquisitions contributing the remaining portion of our total sales growth. Our largest end market, the single-family subset of the residential new construction market, grew revenue 21.9% over the same period in 2020. Our commercial end market experienced sales growth of 10.2% during the year ended December 31, 2021 primarily through acquisitions, but we experienced 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 "Key Measures of Performance" section below, and impacts from COVID-19 are discussed further in the sections that follow.
2017
In April 2017, we entered into a term loan credit agreement (the “Term Loan Agreement”) which provides for a seven-year $300.0 million term loan facility (the “Term Loan”). In April 2017, we also entered into an asset-based lending credit agreement (the “ABL Credit Agreement” and together with the Term Loan Agreement, the “Senior Secured Credit Agreements”), which provides for a revolving credit facility up to approximately $100.0 million and up to $50.0 million for the issuance of letters of credit (the “ABL Revolver” and together with the Term Loan, the “Senior Secured Credit Facilities”). A portion of the proceeds from the Senior Secured Credit Facilities were used to repay, in full, all amounts outstanding under the previous credit and security agreement.
Sales performance
Net revenues increased during the year ended December 31, 20182020 compared to 2019. We also generated approximately $180.8 million of cash from operating activities, and at December 31, 2020 we had $231.5 million of cash and cash equivalents. We did not draw on our existing $200 million revolving line of credit. The increase in net revenue and gross profit was primarily driven by selling price increases, the contribution of our recent acquisitions, lower fuel costs and increased sales volume of complementary products. We experienced sales growth year-over-year as reflected in the sales and relative performance metrics detailed below.
Years ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||
Period-over-Period Growth | ||||||||||||||||||||
Sales Growth | 19.1 | % | 9.4 | % | 13.1 | % | ||||||||||||||
Same Branch Sales Growth (1) | 9.7 | % | 4.5 | % | 8.6 | % | ||||||||||||||
Single-Family Sales Growth (2) | 21.9 | % | 5.0 | % | 10.5 | % | ||||||||||||||
Single-Family Same Branch Sales Growth (1)(2) | 14.0 | % | 0.4 | % | 4.8 | % | ||||||||||||||
Multi-Family Sales Growth (3) | 14.7 | % | 37.5 | % | 13.5 | % | ||||||||||||||
Multi-Family Same Branch Sales Growth (1)(3) | 6.7 | % | 33.2 | % | 13.2 | % | ||||||||||||||
Residential Sales Growth (4) | 20.7 | % | 9.2 | % | 10.9 | % | ||||||||||||||
Residential Same Branch Sales Growth (1)(4) | 12.8 | % | 4.7 | % | 5.9 | % | ||||||||||||||
Commercial Sales Growth (5) | 10.2 | % | 10.4 | % | 24.7 | % | ||||||||||||||
Commercial Same Branch Sales Growth (1)(5) | (8.0) | % | 3.6 | % | 21.5 | % | ||||||||||||||
Same Branch Sales Growth(6) | ||||||||||||||||||||
Volume Growth (1)(7) | 7.7 | % | 1.9 | % | 2.6 | % | ||||||||||||||
Price/Mix Growth (1)(8) | 3.2 | % | 2.8 | % | 5.4 | % | ||||||||||||||
Large Commercial Same Branch Sales Growth (1)(9) | (3.8) | % | 2.8 | % | 14.3 | % | ||||||||||||||
U.S. Housing Market (10) | ||||||||||||||||||||
Total Completions Growth | 4.0 | % | 2.5 | % | 5.9 | % | ||||||||||||||
Single-Family Completions Growth (2) | 6.1 | % | 0.9 | % | 7.5 | % | ||||||||||||||
Multi-Family Completions Growth (3) | (0.3) | % | 6.3 | % | 2.2 | % | ||||||||||||||
(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 year ended December 31, 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 metrics 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 end 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 in 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. |
2021 | Change | 2020 | Change | 2019 | |||||||||||||||||||||||||
Net revenue | $ | 1,968,650 | 19.1 | % | $ | 1,653,225 | 9.4 | % | $ | 1,511,629 | |||||||||||||||||||
Cost of sales | 1,379,131 | 20.6 | % | 1,143,251 | 6.2 | % | 1,076,809 | ||||||||||||||||||||||
Gross profit | $ | 589,519 | 15.6 | % | $ | 509,974 | 17.3 | % | $ | 434,820 | |||||||||||||||||||
Gross profit percentage | 29.9 | % | 30.8 | % | 28.8 | % |
commercial constructionsingle-family end market of 10.4% duringimpacted price/mix as the year ended December 31, 2018 over the year ended December 21, 2017. Net revenue was as follows (dollars in thousands):
For the years ended December 31, | ||||||||
2018 | Change | 2017 | Change | 2016 | ||||
$1,336,432 | 18.0% | $1,132,927 | 31.3% | $862,980 |
See Note 15, Business Combinations, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form10-Kaverage insulation selling price for information on our acquisitions.
Cost of sales and gross profit
Gross profit for 2018, 2017 and 2016 was as follows (dollars in thousands):
2018 | Change | 2017 | Change | 2016 | ||||||||||||||||
Net revenues | $ | 1,336,432 | 18.0% | $ | 1,132,927 | 31.3% | $ | 862,980 | ||||||||||||
Cost of sales | 964,841 | 19.3% | 808,901 | 32.5% | 610,532 | |||||||||||||||
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Gross profit | $ | 371,591 | 14.7% | $ | 324,026 | 28.4% | $ | 252,448 | ||||||||||||
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Gross profit percentage | 27.8% | 28.6% | 29.3% |
entry level production builder jobs is typically lower than a move-up or custom home builder.
manufacturers. As a percent of net revenues, gross profit decreasedresult, during the year ended December 31, 2017 compared2021, we estimate these purchases increased materials expense by approximately $8.8 million, therefore reducing gross profit. While we expect new housing construction will remain supportive of our business in 2022, inflation and material supply chain issues are likely to persist throughout the year. Gross profit in 2021 was also impacted by higher year-over-year fuel and union costs, reducing gross profit by approximately 50 basis points as a percentage of net revenue during the year ended December 31, 2016 attributable primarily2021. In addition, the impact of the February 2021 winter storms had a lingering effect on portions of 2021 as it disrupted our ability to higher employee related costs, including costs associated withsource certain materials needed for spray foam applications. These materials were in short supply after the implementation of financial wellness and longevity stock compensation plans. On a dollar basis, cost of sales included increases from acquired businesses of approximately $130.5 million. Approximately $33.8 million was predominantly attributable to organic growth in the volume of completed jobs in the residential new construction end market. Depreciation expense increased $4.4 millionstorms as a result of increased investment in vehicles and equipment to support our growth, including growth from acquisitions. Additionally, cost of sales increased $29.6 million as a result of a variety of factors, including customer and product mix, market pricing variations and insulation volume requirement changes driven by building code requirements. No factor was more significant than any other.
chemical processing facilities went offline.
Expenses
2018 | Change | 2017 | Change | 2016 | ||||||||||||||||
Selling | $ | 67,105 | 14.8% | $ | 58,450 | 17.7% | $ | 49,667 | ||||||||||||
Percentage of total net revenue | 5.0% | 5.2% | 5.8% | |||||||||||||||||
Administrative | $ | 185,850 | 13.0% | $ | 164,453 | 31.1% | $ | 125,472 | ||||||||||||
Percentage of total net revenue | 13.9% | 14.5% | 14.5% | |||||||||||||||||
Amortization | $ | 25,419 | -5.4% | $ | 26,857 | 138.5% | $ | 11,259 | ||||||||||||
Percentage of total net revenue | 1.9% | 2.4% | 1.3% |
2021 Change 2020 Change 2019 Selling $ 93,204 14.2 % $ 81,613 8.8 % $ 75,016 Percentage of total net revenue 4.7 % 4.9 % 5.0 % Administrative $ 271,356 14.0 % $ 237,959 11.1 % $ 214,134 Percentage of total net revenue 13.8 % 14.4 % 14.2 % Amortization $ 37,079 29.9 % $ 28,535 16.4 % $ 24,510 Percentage of total net revenue 1.9 % 1.7 % 1.6 %
2020.
Administrative
The increase in administrative expenses in 20182021 was primarily due to an increase in wages and benefits in the amount of $15.2$20.2 million, which was attributable to both acquisitions and to support growth. In addition, our facility costs increased $3.8 million primarily due to leases from the facilities of acquired companies and expanded facilities to support our growth.
The increase in administrative expenses in 2017 was primarily due to an increase in wages and benefits in the amount of $25.3 million, which was attributable to acquisitions, stock compensation and to support our organic growth. In addition, our facility costs increased $4.8 million primarily due to leases from the facilities of acquired companies and expanded facilities to support our growth. During 2017, we saw our costs related to liability insurance increase due to overall growth as well as an increase infavorable company performance. During 2021, we saw our accounting and legal feesadministrative costs decrease as a resultpercentage of no longer qualifying as an emerging growth company.
sales primarily due to the leverage gained on these administrative wages.
Amortization expense increased in 2017 primarily due to intangible assets acquired through the acquisition of Alpha in January 2017, $9.1 million of which is related to amortization of acquired backlog.
Expense, net
2018 | Change | 2017 | Change | 2016 | ||||||||||||||||
Interest expense, net | $ | 20,496 | 17.9 | % | $ | 17,381 | 181 | % | $ | 6,177 | ||||||||||
Other | 535 | -49.8 | % | 1,065 | 305 | % | 263 | |||||||||||||
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Total other expense | $ | 21,031 | 14.0 | % | $ | 18,446 | 186 | % | $ | 6,440 | ||||||||||
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2021 | Change | 2020 | Change | 2019 | |||||||||||||||||||||||||
Interest expense, net | $ | 32,842 | 8.4 | % | $ | 30,291 | 7.8 | % | $ | 28,104 | |||||||||||||||||||
Other | (437) | -209.5 | % | 399 | -11.5 | % | 451 | ||||||||||||||||||||||
Total other expense, net | $ | 32,405 | 5.6 | % | $ | 30,690 | 7.5 | % | $ | 28,555 |
Income tax provision
Tax Provision
2018 | 2017 | 2016 | ||||||||||
Income tax provision | $ | 17,438 | $ | 14,680 | $ | 21,174 | ||||||
Effective tax rate | 24.2% | 26.3% | 35.5% |
2021 | 2020 | 2019 | |||||||||||||||
Income tax provision | $ | 36,712 | $ | 33,938 | $ | 24,446 | |||||||||||
Effective tax rate | 23.6 | % | 25.9 | % | 26.4 | % |
2021 | 2020 | 2019 | |||||||||||||||
Unrealized gain (loss) on cash flow hedge, net of taxes | $ | 8,536 | $ | (1,620) | $ | (6,712) |
For eachCOVID-19 pandemic of $6.3 million. This loss was offset by an unrealized gain, net of taxes of $3.4 million on our remaining cash flow hedge due to favorable market conditions. We also amortized $1.3 million of the yearsunrealized loss on our terminated cash flow hedges to interest expense, net during the year ended December 31, 2018, 2017 and 20162020.
Impactscourse of the Tax Act
The Tax Act was enacted on December 22, 2017. The Tax Act reducedoriginally scheduled settlement dates of the U.S. federal corporate tax rate from 35% to 21%, which had a positive impactterminated swaps. For more information on our 2018cash flow hedges, see "Liquidity and 2017 effective tax rates due to the revaluation of our ending net deferred tax liabilities.
Under the guidance in the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin No. 118 (“SAB 118”), we recorded provisional amounts for the impact of the Tax Act as of December 31, 2017, representing a $3.8 million tax benefit related to the revaluation of the ending net deferred tax liabilities from 35% to the newly enacted U.S. corporate income tax rate of 21%, which was partially offset by tax expense of $0.4 million net amount for the revaluation of the uncertain tax positions and the valuation allowance. Under the transitional provisions of SAB 118, we had aone-year measurement period to complete the accounting for the initial tax effects of the Tax Act. We recorded its final adjustments to the provisional amounts in 2018 which resulted in a $0.8 million tax benefit largely due to timing provision to return adjustments which impacted deferred balances at the 35% rate that were then revalued at the lower corporate rate. Final regulations will be issued in the future and may be applied retroactively to the date of enactment of U.S. Tax Reform that may result in changes to the tax amounts recorded as a result of the Tax Act.
Capital Resources, Derivative Instruments" below.
Construction Industry
The industry experienced manufacturer supply constraints for most of the materials we installed during 2021 due to an unanticipated increase in demand as well as manufacturing curtailments due to COVID-19. We anticipate these shortages will continue into 2022. Our results of operations in 2022 are likely to be impacted by the current supply constraints as we may be unable to complete jobs at our preferred pace, but we will continue to respond to the strong demand by continuing to proactively work with our suppliers and customers to offset any potential impact on our operations and profitability. This outlook may change depending on continued increased housing demand and the ability of manufacturers to produce adequate supply.
Materials
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.
Factors
INFLATION
Our performance is dependent to a significant extent upon the levels of U.S. residential new construction spending, which is affected by factors such as interest rates, inflation, consumer confidence and unemployment. We do not believe that inflation has had a material impact on our business, financial condition or results of operations in 2018.
Weasset-based lending credit facility (as defined below).
The following table summarizes
2023 | $57,945 | ||||
2024 | 51,568 | ||||
2025 | 49,442 | ||||
2026 | 39,868 | ||||
Thereafter | 829,246 |
2018 | 2017 | |||||||
Cash and cash equivalents | $ | 90,442 | $ | 62,510 | ||||
Short-term investments | 10,060 | 30,053 | ||||||
ABL Revolver (1) | 150,000 | 100,000 | ||||||
Less: outstanding letters of credit | (28,887 | ) | (17,902 | ) | ||||
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Total liquidity | $ | 221,615 | $ | 174,661 | ||||
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2021 and 2020, our working capital, including cash and cash equivalents, was $551.7 million, or 28.0% of net revenue, and $387.5 million, or 23.4% of net revenue, respectively. The increase in working capital year-over-year was driven primarily by a $102.0 million increase in cash and cash equivalents resulting from the increase in Term Loan debt and positive operating cash flows. Additionally, accounts receivable increased $46.2 million resulting from our increased net revenue, and inventories increased by $65.8 million due to material price inflation, increased selling activity and acquisitions. These increases were partially offset by an increase of $31.2 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.
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Net cash provided by operating activities | $ | 138,314 | $ | 180,789 | $ | 123,067 | |||||||||||
Net cash used in investing activities | $ | (278,439) | $ | (77,794) | $ | (131,733) | |||||||||||
Net cash provided by (used in) financing activities | $ | 242,090 | $ | (49,364) | $ | 96,113 |
2018 | 2017 | 2016 | ||||||||||
Cash, cash equivalents and investments | $ | 100,502 | $ | 92,563 | $ | 14,482 | ||||||
Property, plant and equipment, net | 90,117 | 81,075 | 67,788 | |||||||||
Total term debt | 454,824 | 347,577 | 151,427 | |||||||||
Capital lease obligation | 8,630 | 12,145 | 15,293 | |||||||||
Working capital | 229,859 | 195,136 | 62,286 | |||||||||
Cash provided by operating activities | 96,633 | 68,772 | 73,266 | |||||||||
Cash used in investing activities | (74,069 | ) | (200,443 | ) | (79,597 | ) | ||||||
Cash provided by financing activities | 5,368 | 179,699 | 13,995 |
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.
On April 13, 2017,
December 14, 2028. The Term Loan Agreement was amended on November 30, 2017 to refinance the total principal amount of the Term Loan outstanding immediately prior to the effective date of the amendment on substantially the same terms as the initial Term Loan, except for (i) a decrease in the margins applicable to the base rate and Eurodollar rate loans, (ii) an increase in the cap on permitted indebtedness related to capital expenditures other than capital lease obligations and (iii) the inclusion of a mechanism to establish an alternative Eurodollar rate if certain circumstances have arisen such that the London Interbank Offered Rate may no longer be used. The ABL Credit Agreement was amended in December 2017 to revise the formula for maximum indebtedness incurred by the Company while subject to the terms of such agreement.
On June 19, 2018, we entered into a second amendment to the Term Loan Agreement to (i) extend the maturity date from April 15, 2024 to April 15, 2025 and (ii) increase the aggregate principal amount of the facility from $297.8 million to $397.8 million. All other provisions of the Term Loan were unchanged. Also on June 19, 2018, we entered into a third amendment to the ABL Credit Agreement to (i) extend the maturity date from April 13, 2022 to June 19, 2023, (ii) increase the aggregate revolving loan commitments from $100.0 million to $150.0 million and (iii) provide enhanced borrowing availability against certain types of accounts receivable.
Our Senior Secured Credit Facilities bearbears interest at either the Eurodollar rate (“LIBOR”) or the base rate (which approximated the prime rate), at our election, or the Eurodollar rate, plus a margin based on the type of rate applied and leverage ratio. The margin in respect of loans under (i) the Term Loan will be (A) 2.50% in the case of Eurodollar rate loans and
(B) 1.50%1.25% in the case of base rate loans and (ii) the ABL Revolver will be (A) 1.25%, 1.50% or 1.75%(B) 2.25% in the case of Eurodollar rate loans (basedloans. 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 December 31, 2021, we had $493.3 million, net of unamortized debt issuance costs, due on our Term Loan.
The borrowing base for the ABL Revolver which determines availability under the facility, is based on a percentage of the value of certain assets securing the Company’s obligations and those of the Company and the subsidiary guarantors thereunder. In connection with the Term Loan Agreement, we entered into a Third Amendment (the “Third Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the agreement. ABL Credit Agreement, and Royal Bank of Canada as collateral agent under the Term Loan Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of December 31, 2021 was $155.7 million. In February 2022, we amended and extended our ABL Credit Agreement. See Note 19, Subsequent Events, for additional information.
The Senior Secured Credit Agreements each containliens, including a number of customary affirmative and negativenon-financial covenants, andfirst-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.
Notes.
2018 | ||||
Performance bonds | $ | 42,740 | ||
Insurance letters of credit and cash-collateral | 38,887 | |||
Permit and license bonds | 6,914 | |||
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Total bonds and letters of credit | $ | 88,541 | ||
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As of December 31, 2021 | |||||
Performance bonds | $ | 66,838 | |||
Insurance letters of credit and cash collateral | 51,393 | ||||
Permit and license bonds | 7,002 | ||||
Total bonds and letters of credit | $ | 125,233 |
Historical cash flow information
Working capital
We carefully manage our working capital and operating expenses. As of December 31, 2018 and 2017, our working capital, including cash, was $229.9 million, or 17.2% of net revenue, and $195.1 million, or 17.2% of net revenue, respectively. The increase in working capital year-over-year in 2018 was driven primarily by a $27.9 million increase in cash and cash equivalents resulting from operating cash flows, an increase in accounts receivable and inventories resulting from, and supporting, our increased net revenue, offset by a maturity of investments and an increase in current maturities of long-term debt and accounts payable. We continue to look for opportunities to reduce our working capital as a percentage of net revenue, as demonstrated by this ratio remaining flat as of December 31, 2018 compared to December 31, 2017.
Cash flows from operating activities
Net cash provided by operating activities was $96.6 million, $68.8 million and $73.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. Generally, the primary drivers of our cash flow from operations are operating income, adjusted for certainnon-cash 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. In addition, cash flows are seasonally stronger in the third and fourth quarters as a result of increased construction activity.
Cash flows from investing activities
Business Combinations.In 2018, 2017 and 2016, we made cash payments, net of cash acquired, of $57.7 million, $137.1 million and $53.3 million, respectively, on business combinations. Our acquisition of Alpha in January 2017 required an investing cash outlay of $103.8 million. See Note 15, Business Combinations, to our audited consolidated financial statements included in this Form10-K for more information regarding our business acquisitions in 2018, 2017 and 2016.
Capital Expenditures.Total cash paid for property and equipment was $35.2 million, $31.7 million and $27.0 million for the years ended December 31, 2018, 2017 and 2016, respectively, and primarily related to purchases of vehicles and various equipment to support our growing operations and increased net revenue. We expect to continue to support any increases in 2019 net revenue through further capital expenditures.
Other. In 2018 and 2017, we invested $22.8 million and $30.2 million, respectively, in short-term investments consisting primarily of corporate bonds and commercial paper and had $42.8 million in short-term investments mature in 2018. We made no such investments in 2016.
Cash flows from financing activities
We utilize our credit facilities to support our operations and continuing acquisitions, fund our stock repurchase program and finance our fleet expansion. During the years ended December 31, 2018, 2017 and 2016, we had cash inflows from our credit facilities, net of payments on these instruments, amounting to $97.3 million, $202.2 million and $27.7 million, respectively, to support those initiatives. In addition, we made $5.6 million, $7.3 million and $5.8 million in principal payments on our capital leases during the years ended December 31, 2018, 2017 and 2016, respectively, and received proceeds of $25.4 million, $22.5 million and $22.9 million during the years ended December 31, 2018, 2017 and 2016, respectively, from our fixed asset loans, which serve to offset a significant portion of the capital expenditures included in cash flows from investing activities as described above. Lastly, we repurchased approximately 2.1 million shares of our common stock for $89.4 million during the year ended December 31, 2018 as part of our stock repurchase plan. See Note 9, Stockholders’ Equity, for more information surrounding our stock repurchase plan.
Financial Instruments
Interest Rate Derivatives
We have various borrowing facilities which charge interest based on the one month U.S. dollar LIBOR rate plus an interest spread. All of our derivatives combine to reduce our variable rate debt by $200.0 million, resulting in total variable rate debt exposed to market risks of $196.0 million as of December 31, 2018. These derivatives are designated as cash flow hedges for accounting purposes. For additional disclosures of the gain or loss included with other comprehensive income and earnings in 2018, see Note 9, Derivatives and Hedging Activities, to our audited consolidated financial statements included in this Form10-K. The assumptions used in measuring fair value of the interest rate derivatives are considered level 2 inputs, which are based upon LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements.
Capped Call Agreement
Certain of our stockholders entered into a capped call agreement with the underwriters of the secondary offering of our common stock completed on June 17, 2014. This agreement provided these stockholders with an option to call from the underwriters a total of approximately 1.0 million shares of our common stock at a capped price, with settlement required to be made in cash. During 2016, these stockholders exercised the call option with respect to approximately 0.7 million of the shares. In addition, in the fourth quarter of 2016, these stockholders simultaneously cancelled the remaining portion of the call option and purchased a new call option from the underwriters. This new capped call agreement provided these stockholders with the option to call from the underwriters a total of approximately 0.4 million shares of our common stock at a capped price. The option was exercised on April 16, 2018 and was settled in cash. The capped call agreement was between these stockholders and the underwriters and does not represent compensation to the stockholders for services rendered to us. The price paid for the option represents the fair value of that transaction and we are not a party to the agreement. Accordingly, we have not recorded any expense related to this transaction.
Contractual Obligations
In the table below, we set forth our enforceable and legally binding obligations as of December 31, 2018. Some of the amounts included in the table are based on management’s estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. In addition, certain other long-term liabilities included on the Consolidated Balance Sheets as well as our unrecognized tax benefits under ASC 740, “Income Taxes,” have been excluded from the contractual obligations table because of the inherent uncertainty and the inability to reasonably estimate the timing of cash outflows.
Payments due by period | ||||||||||||||||||||||||||||
(in thousands) | Total | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | |||||||||||||||||||||
Long-term debt obligations (1) | $ | 580,229 | $ | 43,798 | $ | 42,248 | $ | 36,256 | $ | 31,484 | $ | 25,387 | $ | 401,056 | ||||||||||||||
Capital lease obligations (2) | 9,344 | 5,207 | 2,253 | 1,339 | 452 | 93 | — | |||||||||||||||||||||
Operating lease obligations (3) | 48,792 | 15,577 | 12,477 | 8,072 | 5,307 | 2,664 | 4,695 | |||||||||||||||||||||
Purchase obligations (4) | 53,381 | 17,046 | 21,355 | 14,980 | — | — | — |
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Off-Balance Sheet Arrangements
As of December 31, 2018 and 2017, other than operating leases, letters of credit issued under the ABL Revolver and performance and license bonds, we had no materialoff-balance sheet arrangements with unconsolidated entities. Upon adoption of ASU 2016-02 on January 1, 2019, long-term operating leases will be recorded on the balance sheet as a lease liability measured as the present value of the future lease payments with a corresponding right-of-use asset. See Note 2, Significant Accounting Policies, to our audited consolidated financial statements included in this Form 10-K for further information.
Critical Accounting Policies and Estimates
and to be fundamental to our results of operations. See Note 2, Significant Accounting Policies included in Item 8 of the Form 10-K for a summary of all of our significant accounting policies and their effect on our financial statements.
Ourrecognition
When thepercentage-of-completionthis 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 (thecost-to-cost approach).costs. Under thecost-to-cost approach, method, the
use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue requires significant 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,cost estimation process is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulativecatch-up basis.
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 timeknowledge, significant experience and judgement of project management, finance professionals and operational management to project completion.
We disaggregate our revenue from contracts with customers by end market and product, as we believe it best depicts how the nature, amount, timing and uncertaintyassess a variety of our revenue and cash flows are affected by economic factors.
Accounts Receivable
We account for trade receivables based on amounts billed to customers. Past due receivables are determined based on contractual terms. We do not accrue interest on any of our trade receivables.
Retainage receivables represent the amount retained by our customers to ensure the quality of the installation and is received after satisfactory completion of each installation project. Management regularly reviews aging of retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered at risk. Amounts retained by project owners under construction contracts and included in accounts receivable were $28.0 million and $23.1 million as of December 31, 2018 and 2017, respectively.
Goodwill
Goodwill results from business combinations and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Annually, on October 1, or if conditions indicate an earlier review is necessary, we either perform a quantitative test or assess qualitative factors to determine if it is more likely than notrevenues on uncompleted contracts. Such factors include historical performance, costs of materials and labor, change orders and the nature of the work to be performed. We generally review and reassess our estimates for each uncompleted contract at least quarterly to reflect the latest reliable information available. Changes in these estimates could favorably or unfavorable impact revenues and their related profits.
unit is less than the carrying value, a second step is performed to determine the amount of the potential goodwill impairment. If impaired, goodwillasset is written downreduced to its estimated implied fair value.
Derivatives and Hedging Activities
We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of ourImpairment losses would negatively affect earnings.
Share-Based Compensation
Our share-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our stockholders. Restricted stock awards are periodically granted to certain employees, officers andnon-employee members of our board of directors under the stockholder-approved 2014 Omnibus Incentive Plan.
Certain of our stock awards are deemed to be equity-based with a service condition and do not contain a market or performance condition with the exception of performance-based awards granted to certain officers and performance-based stock units. Fair value of thenon-performance-based awards to employees and officers is measured at the grant date and amortized to expense over the vesting period of the awards using the straight-line attribution method for all service-based awards with a graded vesting feature. This fair value is reduced by assumed forfeitures and adjusted for actual forfeitures until vesting. We also issue performance-based stock awards to certain officers under our 2014 Omnibus Incentive Plan. The performance-based compensation expense is recorded over the requisite service period using the graded-vesting method for the entire award. Performance-based stock awards are accounted for at fair value at date of grant. We also periodically grant performance-based stock units to certain employees under the stockholder-approved 2014 Omnibus Incentive Plan. These units convert to shares upon meeting time- and performance-based requirements.
Compensation expense for performance-based stock units is recorded based on an assessment each reporting period of the probability that certain performance goals will be met during the contingent vesting period. If performance goals are not probable of occurrence, no compensation expense will be recognized. If performance goals that were previously deemed probable are not or are not expected to be met, the previously recognized compensation cost related to such performance goals will be reversed. Employees and officers are subject to tax at the vesting date based on the market price of the shares on that date, or on the grant date if an election is made.
Business Combinations
The purchase price for business combinations is allocated to the estimated fair values of acquired tangible and intangible assets, including goodwill and assumed liabilities, where applicable. Additionally, we recognize customer relationships, trademarks and trade names andnon-competition agreements as identifiable intangible assets. These assets are recorded at fair value as of the transaction date. The fair value of these intangibles is determined primarily using the income approach and using current industry information which involves significant unobservable inputs classified as Level 3 inputs. These inputs include projected sales, margin and tax rate.
At times, the total purchase price for a business combination could be less than the estimated fair values of acquired tangible and intangible assets. In these cases, we record a gain on bargain purchase within Other Expenses in the Consolidated Statements of Operations and Comprehensive Income rather than goodwill in accordance with generally accepted accounting principles.
Insurance Liabilities
We carry insurance policies for a number of risks, including, but not limited to, workers’ compensation, general liability, vehicle liability, property and our obligation for employee-related health care benefits. Most of our insurance policies contain an element for which we assume a portion of the risk by having high deductibles or a large cap on claims. For a description of our different insurance programs, see Note 2, Significant Accounting Policies in Item 8, Financial Statements and Supplementary Data in this Form 10-K.
Taxes
Valuation allowances are established against deferred tax assets when it is more likely thanhave not that the realization of those deferred tax assets will not occur. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, the ability to produce future taxable income, tax planning strategies available and recent financial operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations andmade any material changes in accounting policies and incorporate assumptions, including the amount of future federal and state pretax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.
Deferred tax assets and liabilities are measured using the enacted tax rates in effect inour methodology used to establish our insurance reserves during the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate is recognized through operations in the period that includes the enactment dateended December 31, 2021 and 2020, and none of the change. Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. The Tax Act that was enacted on December 22, 2017 reduced the U.S. federal corporate tax rate from 35%adjustments to 21% effective January 1, 2018. During the year end December 31, 2017, The Company recognized a $3.8 million tax benefit as a result of revaluing the ending net deferred tax liabilities from 35% to the newly enacted U.S. corporate income tax rate of 21%, and also recognized a $0.8 million benefit in 2018 due to timing provision to return adjustments which impacted deferred balances at the 35% rate that were then revalued at the lower corporate rate. See Note 12, Income Taxes, for additional information.
A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. We recognize tax liabilities for uncertain tax positions and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available.
Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in the United States, which includes numerous state and local jurisdictions. Significant judgments and estimates are required in determining the income tax expense.
Estimated Fair Value of Financial Instruments
Accounts receivable, accounts payable and accrued liabilities as of December 31, 2018 and 2017 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of our long-term debt, including the Term Loan and ABL Revolver as of December 31, 2018 and 2017, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of the obligations associated with our capital leases and vehicle and equipment notes approximate fair value as of December 31, 2018 and 2017. 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 considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments to their net present value using the appropriate weighted average cost of capital (WACC).
Recent Accounting Pronouncements
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Our Senior Notes accrued interest at a fixed rate of 5.75%.
Item 8. Financial Statements and Supplementary Data |
Installed Building Products, Inc.
24, 2022
As of December 31, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 90,442 | $ | 62,510 | ||||
Investments | 10,060 | 30,053 | ||||||
Accounts receivable (less allowance for doubtful accounts of $5,085 and $4,805 at December 31, 2018 and 2017, respectively) | 214,121 | 180,725 | ||||||
Inventories | 61,162 | 48,346 | ||||||
Other current assets | 35,760 | 33,308 | ||||||
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Total current assets | 411,545 | 354,942 | ||||||
Property and equipment, net | 90,117 | 81,075 | ||||||
Non-current assets | ||||||||
Goodwill | 173,049 | 155,466 | ||||||
Intangibles, net | 149,790 | 137,991 | ||||||
Othernon-current assets | 10,157 | 9,272 | ||||||
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Totalnon-current assets | 332,996 | 302,729 | ||||||
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Total assets | $ | 834,658 | $ | 738,746 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current maturities of long-term debt | $ | 22,642 | $ | 16,650 | ||||
Current maturities of capital lease obligations | 4,806 | 5,666 | ||||||
Accounts payable | 96,949 | 87,425 | ||||||
Accrued compensation | 27,923 | 25,399 | ||||||
Other current liabilities | 29,366 | 24,666 | ||||||
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Total current liabilities | 181,686 | 159,806 | ||||||
Long-term debt | 432,182 | 330,927 | ||||||
Capital lease obligations, less current maturities | 3,824 | 6,479 | ||||||
Deferred income taxes | 6,695 | 6,444 | ||||||
Other long-term liabilities | 27,773 | 24,562 | ||||||
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Total liabilities | 652,160 | 528,218 | ||||||
Commitments and contingencies (Note 15) | ||||||||
Stockholders’ equity | ||||||||
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at December 31, 2018 and 2017, respectively | — | — | ||||||
Common stock; $0.01 par value: 100,000,000 authorized, 32,723,972 and 32,524,934 issued and 29,915,611 and 31,862,146 shares outstanding at December 31, 2018 and 2017, respectively | 327 | 325 | ||||||
Additional paid in capital | 181,815 | 174,043 | ||||||
Retained earnings | 105,212 | 48,434 | ||||||
Treasury stock; at cost: 2,808,361 and 662,788 shares at December 31, 2018 and 2017, respectively | (104,425 | ) | (12,781 | ) | ||||
Accumulated other comprehensive (loss) income | (431 | ) | 507 | |||||
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Total stockholders’ equity | 182,498 | 210,528 | ||||||
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Total liabilities and stockholders’ equity | $ | 834,658 | $ | 738,746 | ||||
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As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 333,485 | $ | 231,520 | |||||||
Accounts receivable (less allowance for credit losses of $8,717 and $8,789 at December 31, 2021 and 2020, respectively) | 312,767 | 266,566 | |||||||||
Inventories | 143,039 | 77,179 | |||||||||
Prepaid expenses and other current assets | 70,025 | 48,678 | |||||||||
Total current assets | 859,316 | 623,943 | |||||||||
Property and equipment, net | 105,933 | 104,022 | |||||||||
Operating lease right-of-use assets | 69,871 | 53,766 | |||||||||
Goodwill | 322,517 | 216,870 | |||||||||
Customer relationships, net | 178,264 | 108,504 | |||||||||
Other intangibles, net | 86,157 | 62,889 | |||||||||
Other non-current assets | 31,144 | 17,682 | |||||||||
Total assets | $ | 1,653,202 | $ | 1,187,676 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities | |||||||||||
Current maturities of long-term debt | $ | 30,839 | $ | 23,355 | |||||||
Current maturities of operating lease obligations | 23,224 | 18,758 | |||||||||
Current maturities of finance lease obligations | 1,747 | 2,073 | |||||||||
Accounts payable | 132,705 | 101,462 | |||||||||
Accrued compensation | 50,964 | 45,876 | |||||||||
Other current liabilities | 68,090 | 44,951 | |||||||||
Total current liabilities | 307,569 | 236,475 | |||||||||
Long-term debt | 832,193 | 541,957 | |||||||||
Operating lease obligations | 46,075 | 34,413 | |||||||||
Finance lease obligations | 3,297 | 2,430 | |||||||||
Deferred income taxes | 4,819 | 35 | |||||||||
Other long-term liabilities | 42,409 | 53,184 | |||||||||
Total liabilities | 1,236,362 | 868,494 | |||||||||
Commitments and contingencies (Note 16) | 0 | 0 | |||||||||
Stockholders’ equity | |||||||||||
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at December 31, 2021 and 2020, respectively | — | — | |||||||||
Common stock; $0.01 par value: 100,000,000 authorized, 33,271,659 and 33,141,879 issued and 29,706,401 and 29,623,272 shares outstanding at December 31, 2021 and 2020, respectively | 333 | 331 | |||||||||
Additional paid in capital | 211,430 | 199,847 | |||||||||
Retained earnings | 352,543 | 269,420 | |||||||||
Treasury stock; at cost: 3,565,258 and 3,518,607 shares at December 31, 2021 and 2020, respectively | (147,239) | (141,653) | |||||||||
Accumulated other comprehensive loss | (227) | (8,763) | |||||||||
Total stockholders’ equity | 416,840 | 319,182 | |||||||||
Total liabilities and stockholders’ equity | $ | 1,653,202 | $ | 1,187,676 |
Years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net revenue | $ | 1,336,432 | $ | 1,132,927 | $ | 862,980 | ||||||
Cost of sales | 964,841 | 808,901 | 610,532 | |||||||||
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Gross profit | 371,591 | 324,026 | 252,448 | |||||||||
Operating expenses | ||||||||||||
Selling | 67,105 | 58,450 | 49,667 | |||||||||
Administrative | 185,850 | 164,453 | 125,472 | |||||||||
Amortization | 25,419 | 26,857 | 11,259 | |||||||||
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Operating income | 93,217 | 74,266 | 66,050 | |||||||||
Other expense | ||||||||||||
Interest expense, net | 20,496 | 17,381 | 6,177 | |||||||||
Other | 535 | 1,065 | 263 | |||||||||
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Income before income taxes | 72,186 | 55,820 | 59,610 | |||||||||
Income tax provision | 17,438 | 14,680 | 21,174 | |||||||||
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Net income | $ | 54,748 | $ | 41,140 | $ | 38,436 | ||||||
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Other comprehensive (loss) income, net of tax: | ||||||||||||
Unrealized (loss) gain on cash flow hedge, net of tax benefit (provision) of $284, $(206) and $0 for the twelve months ended December 31, 2018, 2017 and 2016, respectively | (1,050 | ) | 507 | — | ||||||||
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Comprehensive income | $ | 53,698 | $ | 41,647 | $ | 38,436 | ||||||
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Basic net income per share | $ | 1.76 | $ | 1.30 | $ | 1.23 | ||||||
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Diluted net income per share | $ | 1.75 | $ | 1.30 | $ | 1.23 | ||||||
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Weighted average shares outstanding: | ||||||||||||
Basic | 31,107,231 | 31,639,283 | 31,301,887 | |||||||||
Diluted | 31,229,558 | 31,756,363 | 31,363,290 |
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Net revenue | $ | 1,968,650 | $ | 1,653,225 | $ | 1,511,629 | |||||||||||
Cost of sales | 1,379,131 | 1,143,251 | 1,076,809 | ||||||||||||||
Gross profit | 589,519 | 509,974 | 434,820 | ||||||||||||||
Operating expenses | |||||||||||||||||
Selling | 93,204 | 81,613 | 75,016 | ||||||||||||||
Administrative | 271,356 | 237,959 | 214,134 | ||||||||||||||
Amortization | 37,079 | 28,535 | 24,510 | ||||||||||||||
Operating income | 187,880 | 161,867 | 121,160 | ||||||||||||||
Other expense | |||||||||||||||||
Interest expense, net | 32,842 | 30,291 | 28,104 | ||||||||||||||
Other (income) expense | (437) | 399 | 451 | ||||||||||||||
Income before income taxes | 155,475 | 131,177 | 92,605 | ||||||||||||||
Income tax provision | 36,712 | 33,938 | 24,446 | ||||||||||||||
Net income | $ | 118,763 | $ | 97,239 | $ | 68,159 | |||||||||||
Other comprehensive gain (loss), net of tax: | |||||||||||||||||
Net change on cash flow hedges, net of tax (provision) benefit of $(2,773), $550 and $2,225 for the twelve months ended December 31, 2021, 2020 and 2019, respectively | 8,536 | (1,620) | (6,712) | ||||||||||||||
Comprehensive income | $ | 127,299 | $ | 95,619 | $ | 61,447 | |||||||||||
Earnings Per Share: | |||||||||||||||||
Basic | $ | 4.04 | $ | 3.30 | $ | 2.29 | |||||||||||
Diluted | $ | 4.01 | $ | 3.27 | $ | 2.28 | |||||||||||
Weighted average shares outstanding: | |||||||||||||||||
Basic | 29,367,676 | 29,504,115 | 29,752,644 | ||||||||||||||
Diluted | 29,628,527 | 29,717,609 | 29,873,106 | ||||||||||||||
Cash dividends declared per share | $ | 1.20 | $ | — | $ | — |
Additional Paid In Capital | (Accumulated Deficit) / Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | |||||||||||||||||||||||||||||
Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
BALANCE—January 1, 2016 | 31,982,888 | $ | 320 | $ | 156,688 | $ | (31,142 | ) | (616,560 | ) | $ | (11,383 | ) | $ | — | $ | 114,483 | |||||||||||||||
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| |||||||||||||||||
Net income | 38,436 | 38,436 | ||||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 143,528 | 1 | (1 | ) | — | |||||||||||||||||||||||||||
Surrender of common stock awards by employees | (33,842 | ) | (836 | ) | (836 | ) | ||||||||||||||||||||||||||
Share-based compensation expense | 1,594 | 1,594 | ||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 8,760 | 300 | 300 | |||||||||||||||||||||||||||||
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BALANCE—January 1, 2017 | 32,135,176 | $ | 321 | $ | 158,581 | $ | 7,294 | (650,402 | ) | $ | (12,219 | ) | $ | — | $ | 153,977 | ||||||||||||||||
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| |||||||||||||||||
Net income | 41,140 | 41,140 | ||||||||||||||||||||||||||||||
Purchase of remaining interest in subsidiary | (1,888 | ) | (1,888 | ) | ||||||||||||||||||||||||||||
Issuance of common stock for acquisition | 282,577 | 3 | 10,856 | 10,859 | ||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 101,241 | 1 | (1 | ) | — | |||||||||||||||||||||||||||
Surrender of common stock awards by employees | (12,386 | ) | (562 | ) | (562 | ) | ||||||||||||||||||||||||||
Share-based compensation expense | 6,195 | 6,195 | ||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 5,940 | 300 | 300 | |||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 507 | 507 | ||||||||||||||||||||||||||||||
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BALANCE—January 1, 2018 | 32,524,934 | $ | 325 | $ | 174,043 | $ | 48,434 | (662,788 | ) | $ | (12,781 | ) | $ | 507 | $ | 210,528 | ||||||||||||||||
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| |||||||||||||||||
Net income | 54,748 | 54,748 | ||||||||||||||||||||||||||||||
Cumulative effect of accounting changes, net of tax | 2,030 | 112 | 2,142 | |||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 194,093 | 2 | (2 | ) | — | |||||||||||||||||||||||||||
Surrender of common stock awards by employees | (43,871 | ) | (2,282 | ) | (2,282 | ) | ||||||||||||||||||||||||||
Share-based compensation expense | 7,598 | 7,598 | ||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 4,945 | 176 | 176 | |||||||||||||||||||||||||||||
Common stock repurchase | (2,101,702 | ) | (89,362 | ) | (89,362 | ) | ||||||||||||||||||||||||||
Other comprehensive loss, net of tax | (1,050 | ) | (1,050 | ) | ||||||||||||||||||||||||||||
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BALANCE—December 31, 2018 | 32,723,972 | $ | 327 | $ | 181,815 | $ | 105,212 | (2,808,361 | ) | $ | (104,425 | ) | $ | (431 | ) | $ | 182,498 | |||||||||||||||
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Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE—January 1, 2019 | 32,723,972 | $ | 327 | $ | 181,815 | $ | 105,212 | (2,808,361) | $ | (104,425) | $ | (431) | $ | 182,498 | |||||||||||||||||||||||||||||||||
Net income | 68,159 | 68,159 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 139,862 | 2 | (2) | — | |||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock awards | (46,803) | (2,331) | (2,331) | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | 8,057 | 8,057 | |||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 7,670 | 360 | 360 | ||||||||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges, net of tax | (6,712) | (6,712) | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE—January 1, 2020 | 32,871,504 | $ | 329 | $ | 190,230 | $ | 173,371 | (2,855,164) | $ | (106,756) | $ | (7,143) | $ | 250,031 | |||||||||||||||||||||||||||||||||
Net income | 97,239 | 97,239 | |||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change | (1,190) | (1,190) | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 264,004 | 2 | (2) | — | |||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock awards | (30,223) | (973) | (973) | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | 9,286 | 9,286�� | |||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 6,371 | 333 | 333 | ||||||||||||||||||||||||||||||||||||||||||||
Common stock repurchase | (633,220) | (33,924) | (33,924) | ||||||||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges, net of tax | (1,620) | (1,620) | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE—January 1, 2021 | 33,141,879 | $ | 331 | $ | 199,847 | $ | 269,420 | (3,518,607) | $ | (141,653) | $ | (8,763) | $ | 319,182 | |||||||||||||||||||||||||||||||||
Net income | 118,763 | 118,763 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 125,550 | 2 | (2) | — | |||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock awards | (46,651) | (5,586) | (5,586) | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | 11,118 | 11,118 | |||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 4,230 | 467 | 467 | ||||||||||||||||||||||||||||||||||||||||||||
Dividends Declared ($1.20 per share) | (35,640) | (35,640) | |||||||||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges, net of tax | 8,536 | 8,536 | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE—December 31, 2021 | 33,271,659 | $ | 333 | $ | 211,430 | $ | 352,543 | (3,565,258) | $ | (147,239) | $ | (227) | $ | 416,840 |
Years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 54,748 | $ | 41,140 | $ | 38,436 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation and amortization of property and equipment | 33,306 | 28,285 | 23,571 | |||||||||
Amortization of intangibles | 25,419 | 26,857 | 11,259 | |||||||||
Amortization of deferred financing costs and debt discount | 1,164 | 1,093 | 383 | |||||||||
Provision for doubtful accounts | 2,630 | 2,834 | 2,928 | |||||||||
Write-off of debt issuance costs | 1,164 | 2,113 | 286 | |||||||||
Gain on sale of property and equipment | (1,098 | ) | (492 | ) | (254 | ) | ||||||
Noncash stock compensation | 7,839 | 6,592 | 1,894 | |||||||||
Deferred income taxes | 470 | (6,160 | ) | (605 | ) | |||||||
Changes in assets and liabilities, excluding effects of acquisitions | ||||||||||||
Accounts receivable | (30,166 | ) | (19,955 | ) | (18,760 | ) | ||||||
Inventories | (15,717 | ) | (3,667 | ) | (8,677 | ) | ||||||
Other assets | (4,552 | ) | (4,602 | ) | 2,803 | |||||||
Accounts payable | 8,146 | 6,303 | 12,400 | |||||||||
Income taxes payable/receivable | 10,273 | (18,605 | ) | 1,484 | ||||||||
Other liabilities | 3,007 | 7,036 | 6,118 | |||||||||
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| |||||||
Net cash provided by operating activities | 96,633 | 68,772 | 73,266 | |||||||||
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| |||||||
Cash flows from investing activities | ||||||||||||
Purchases of investments | (22,818 | ) | (30,194 | ) | — | |||||||
Maturities of short-term investments | 42,782 | — | — | |||||||||
Purchases of property and equipment | (35,232 | ) | (31,668 | ) | (27,013 | ) | ||||||
Acquisitions of businesses, net of cash acquired of $0, $247 and $2,181 in 2018, 2017 and 2016, respectively | (57,740 | ) | (137,120 | ) | (53,312 | ) | ||||||
Proceeds from sale of property and equipment | 1,958 | 959 | 691 | |||||||||
Other | (3,019 | ) | (2,420 | ) | 37 | |||||||
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| |||||||
Net cash used in investing activities | (74,069 | ) | (200,443 | ) | (79,597 | ) | ||||||
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| |||||||
Cash flows from financing activities | ||||||||||||
Proceeds from revolving line of credit under credit agreement applicable to respective period (Note 7) | — | — | 37,975 | |||||||||
Payments on revolving line of credit under credit agreement applicable to respective period (Note 7) | — | — | (37,975 | ) | ||||||||
Proceeds from term loan under credit agreement applicable to respective period (Note 7) | 100,000 | 300,000 | 100,000 | |||||||||
Payments on term loan under credit agreement applicable to respective period (Note 7) | (2,750 | ) | (97,750 | ) | (51,875 | ) | ||||||
Proceeds from delayed draw term loan under credit agreement applicable to respective period (Note 7) | — | 112,500 | 12,500 | |||||||||
Payments on delayed draw term loan under credit agreement applicable to respective period (Note 7) | — | (125,000 | ) | (50,000 | ) | |||||||
Proceeds from vehicle and equipment notes payable | 25,443 | 22,460 | 22,948 | |||||||||
Debt issuance costs | (1,992 | ) | (8,281 | ) | (1,238 | ) | ||||||
Principal payments on long-term debt | (14,130 | ) | (10,002 | ) | (5,849 | ) | ||||||
Principal payments on capital lease obligations | (5,604 | ) | (7,314 | ) | (8,598 | ) | ||||||
Acquisition-related obligations | (3,954 | ) | (4,464 | ) | (3,057 | ) | ||||||
Repurchase of common stock | (89,363 | ) | — | — | ||||||||
Surrender of common stock awards by employees | (2,282 | ) | (562 | ) | (836 | ) | ||||||
Purchase of remaining interest in subsidiary | — | (1,888 | ) | — | ||||||||
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| |||||||
Net cash provided by financing activities | 5,368 | 179,699 | 13,995 | |||||||||
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| |||||||
Net change in cash and cash equivalents | 27,932 | 48,028 | 7,664 | |||||||||
Cash and cash equivalents at beginning of year | 62,510 | 14,482 | 6,818 | |||||||||
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Cash and cash equivalents at end of year | $ | 90,442 | $ | 62,510 | $ | 14,482 | ||||||
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| |||||||
Supplemental disclosures of cash flow information | ||||||||||||
Net cash paid during the year for: | ||||||||||||
Interest | $ | 20,075 | $ | 13,758 | $ | 5,342 | ||||||
Income taxes, net of refunds | 4,950 | 38,887 | 18,929 | |||||||||
Supplemental disclosure of noncash investing and financing activities | ||||||||||||
Common stock issued for acquisition of business | — | 10,859 | — | |||||||||
Vehicles capitalized under capital leases and related lease obligations | 2,208 | 4,440 | 3,737 | |||||||||
Seller obligations in connection with acquisition of businesses | 7,540 | 5,128 | 4,459 | |||||||||
Unpaid purchases of property and equipment included in accounts payable | 1,773 | 2,003 | 775 |
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Cash flows from operating activities | |||||||||||||||||
Net income | $ | 118,763 | $ | 97,239 | $ | 68,159 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||||||
Depreciation and amortization of property and equipment | 43,562 | 41,339 | 38,862 | ||||||||||||||
Amortization of operating lease right-of-use assets | 22,258 | 18,122 | 15,691 | ||||||||||||||
Amortization of intangibles | 37,079 | 28,535 | 24,510 | ||||||||||||||
Amortization of deferred financing costs and debt discount | 1,354 | 1,332 | 1,184 | ||||||||||||||
Provision for credit losses | 2,227 | 4,444 | 4,312 | ||||||||||||||
Write-off of debt issuance costs | 1,767 | — | 3,725 | ||||||||||||||
Gain on sale of property and equipment | (1,840) | (786) | (140) | ||||||||||||||
Noncash stock compensation | 13,752 | 10,826 | 8,727 | ||||||||||||||
Deferred income taxes | (438) | (8,475) | 5,341 | ||||||||||||||
Amortization of terminated interest rate swap | 3,223 | 1,326 | — | ||||||||||||||
Changes in assets and liabilities, excluding effects of acquisitions | |||||||||||||||||
Accounts receivable | (16,775) | (10,489) | (29,582) | ||||||||||||||
Inventories | (54,003) | 187 | (10,597) | ||||||||||||||
Other assets | (19,885) | (870) | (16,959) | ||||||||||||||
Accounts payable | 26,424 | (203) | 947 | ||||||||||||||
Income taxes receivable/payable | (4,403) | 4,296 | (3,944) | ||||||||||||||
Other liabilities | (34,751) | (6,034) | 12,831 | ||||||||||||||
Net cash provided by operating activities | 138,314 | 180,789 | 123,067 | ||||||||||||||
Cash flows from investing activities | |||||||||||||||||
Purchases of investments | — | (776) | (52,795) | ||||||||||||||
Maturities of short term investments | — | 38,693 | 25,061 | ||||||||||||||
Purchases of property and equipment | (36,979) | (33,587) | (50,167) | ||||||||||||||
Acquisitions of businesses, net of cash acquired of $1,707, $0 and $334 in 2021, 2020 and 2019, respectively | (241,308) | (76,446) | (51,706) | ||||||||||||||
Proceeds from sale of property and equipment | 2,694 | 1,187 | 761 | ||||||||||||||
Other | (2,846) | (6,865) | (2,887) | ||||||||||||||
Net cash used in investing activities | (278,439) | (77,794) | (131,733) | ||||||||||||||
Cash flows from financing activities | |||||||||||||||||
Proceeds from senior notes (Note 8) | — | — | 300,000 | ||||||||||||||
Proceeds from term loan (Note 8) | 500,000 | — | — | ||||||||||||||
Payments on term loan (Note 8) | (200,000) | — | (195,750) | ||||||||||||||
Proceeds from vehicle and equipment notes payable | 27,834 | 21,290 | 33,090 | ||||||||||||||
Debt issuance costs | (7,520) | (157) | (6,691) | ||||||||||||||
Principal payments on long-term debt | (26,301) | (26,685) | (21,316) | ||||||||||||||
Principal payments on finance lease obligations | (2,125) | (2,632) | (4,157) | ||||||||||||||
Acquisition-related obligations | (8,918) | (6,283) | (6,732) | ||||||||||||||
Dividends paid | (35,294) | — | — | ||||||||||||||
Repurchase of common stock | — | (33,924) | — | ||||||||||||||
Surrender of common stock awards by employees | (5,586) | (973) | (2,331) | ||||||||||||||
Net cash provided by (used in) financing activities | 242,090 | (49,364) | 96,113 | ||||||||||||||
Net change in cash and cash equivalents | 101,965 | 53,631 | 87,447 | ||||||||||||||
Cash and cash equivalents at beginning of period | 231,520 | 177,889 | 90,442 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 333,485 | $ | 231,520 | $ | 177,889 | |||||||||||
Supplemental disclosures of cash flow information | |||||||||||||||||
Net cash paid during the period for: | |||||||||||||||||
Interest | $ | 25,976 | $ | 26,324 | $ | 20,943 | |||||||||||
Income taxes, net of refunds | 39,241 | 37,072 | 22,633 | ||||||||||||||
Supplemental disclosure of noncash activities | |||||||||||||||||
Right-of-use assets obtained in exchange for operating lease obligations | 38,084 | 26,001 | 18,907 | ||||||||||||||
Release of indemnification of acquisition-related debt | 2,036 | — | — | ||||||||||||||
Termination of operating lease obligations and right-of-use assets | — | — | (2,946) | ||||||||||||||
Property and equipment obtained in exchange for finance lease obligations | 2,735 | 1,000 | 2,809 | ||||||||||||||
Seller obligations in connection with acquisition of businesses | 29,169 | 14,086 | 7,543 | ||||||||||||||
Unpaid purchases of property and equipment included in accounts payable | 441 | 1,013 | 1,903 |
Years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Insulation | 66 | % | 67 | % | 77 | % | ||||||
Waterproofing | 7 | 8 | 2 | |||||||||
Shower doors, shelving and mirrors | 7 | 7 | 5 | |||||||||
Garage doors | 6 | 5 | 6 | |||||||||
Rain gutters | 3 | 4 | 4 | |||||||||
Blinds | 2 | 2 | 1 | |||||||||
Other building products | 9 | 7 | 5 | |||||||||
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| |||||||
100 | % | 100 | % | 100 | % |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and Cash Equivalents
On January 1, 2018, we adopted the new accounting standard ASC
(either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Investment Policy
Marketable securities with original maturities longer than three months but less than one year from the settlement date are classified as investments within current assets. These investments consist of highly liquid investment grade instruments primarily including corporate bonds and commercial paper. Investments for which we have the ability and positive intent to hold to maturity are carried at amortized cost. The difference between the acquisition costs and face values ofheld-to-maturity investments is amortized over the remaining term of the investments and added to or subtracted from the acquisition cost and interest income. As of December 31, 2018, all of our investments were classified asheld-to-maturity.
Allowance(unbilled receivables).
We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. The allowancereceivable is determined by management based on ourdeveloped using historical losses, specific customer circumstancescurrent economic conditions and general economic conditions.future market forecasts. We analyze aged accounts receivablealso perform ongoing evaluations of our existing and generally increasepotential customer’s creditworthiness. To date, the allowance as receivables age. Management reviews accounts receivable and records an allowanceCOVID-19 pandemic has not yet had a material impact on the collectability of our existing trade receivables. See Note 4, Credit Losses, for specific customers based on current circumstances and charges off the receivable against the allowance when all attempts to collect the receivable have failed. This analysis is performed regularly and the allowance is adjusted accordingly. The following table sets forth our allowance for doubtful accounts (in thousands):
Allowance for doubtful accounts receivable | ||||
January 1, 2016 | $ | 2,486 | ||
Charged to costs and expenses | 2,928 | |||
Charged to other accounts (1) | 435 | |||
Deductions (2) | (2,452 | ) | ||
|
| |||
December 31, 2016 | $ | 3,397 | ||
|
| |||
Charged to costs and expenses | 2,834 | |||
Charged to other accounts (1) | 699 | |||
Deductions (2) | (2,125 | ) | ||
|
| |||
December 31, 2017 | $ | 4,805 | ||
|
| |||
Charged to costs and expenses | 2,630 | |||
Charged to other accounts (1) | 675 | |||
Deductions (2) | (3,025 | ) | ||
|
| |||
December 31, 2018 | $ | 5,085 | ||
|
|
|
|
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk
2019.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment of Other Intangible and Long-Lived Assets
2019.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Estimated Fair Value of Financial Instruments
Standard | Effective Date | Adoption | ||||||||||||
ASU | This pronouncement clarifies the | |||||||||||||
This pronouncement simplifies the | ||||||||||||||
|
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Pronouncements Not Yet Adopted
Standard | Description | Effective | Effect on the financial statements | |||||||||||||||||
ASU | This pronouncement | Annual periods beginning after December 15, |
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Adoption of ASC Topic 606, “Revenue from Contracts with Customers”
On January 1, 2018, we adopted the new accounting standard ASC 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.
We recorded a $2.1 million cumulative effect adjustment as an increase to opening retained earnings, a $2.8 million increase to current assets and a $0.7 million increase to deferred income taxes, respectively, on January 1, 2018 due to the impact of adopting Topic 606, with the impact primarily related to the change in accounting for certain of our short-term contracts that were previously accounted for on a completed contract basis, whereas, under ASC 606, we now recognize revenue associated with these contracts over time as service is performed and the transfer of control occurs, based on apercentage-of-completion method usingcost-to-cost input methods as a measure of progress. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.The cumulative effect adjustment has been revised from the amount previously disclosed in our interim financial statements filed on Form10-Q for the quarterly periods ended March 31, 2018 and June 30, 2018 to correct certain immaterial misstatements. The result of correcting these misstatements was an $0.8 million decrease to opening retained earnings, a $1.0 million decrease to current assets and a $0.2 million decrease to deferred income taxes recorded in our interim financial statements filed on Form10-Q for the quarterly period ended September 30, 2018.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impact of New Revenue Recognition Standard on Financial Statement Line Items
The following table summarizes the impact of the new revenue standard on the Consolidated Balance Sheets as of December 31, 2018, including the cumulative effect of applying the new standard to all contracts upon adoption (in thousands):
Impact of Change in Accounting Policy | ||||||||||||
As reported | Adjustments | Without adoption | ||||||||||
Inventories | $ | 61,162 | $ | 5,801 | $ | 66,963 | ||||||
Other current assets | 35,760 | (8,607 | ) | 27,153 | ||||||||
Total assets | 834,658 | (2,806 | ) | 831,852 | ||||||||
Deferred income taxes | 6,695 | (534 | ) | 6,161 | ||||||||
Retained earnings | 105,212 | (2,272 | ) | 102,940 | ||||||||
Total liabilities and stockholders’ equity | 834,658 | (2,806 | ) | 831,852 |
The following table summarizes the impact of the new revenue standard on the Consolidated Statements of Operations and Comprehensive Income (in thousands):
Year Ended December 31, 2018 | ||||||||||||
As reported | Adjustments | Without adoption | ||||||||||
Net revenue | $ | 1,336,432 | $ | (751 | ) | $ | 1,335,681 | |||||
Cost of sales | 964,841 | (578 | ) | 964,263 | ||||||||
Income before income taxes | $ | 72,186 | $ | (173 | ) | $ | 72,013 | |||||
Income tax provision | 17,438 | (43 | ) | 17,395 | ||||||||
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Net income | $ | 54,748 | $ | (130 | ) | $ | 54,618 | |||||
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Revenue Recognition
Our revenues 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. We recognize revenue using thepercentage-of-completion method of accounting, utilizing acost-to-cost input approach as we believe this represents the best measure of when goods and services are transferred to the customer. An insignificant portion of our sales, primarily retail sales, is accounted for on apoint-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.
When thepercentage-of-completion 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 (thecost-to-cost approach). Under thecost-to-cost approach, 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.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 cumulativecatch-up basis.
Sales 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.
We disaggregate our revenue from contracts with customers 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. The following tables present our revenues disaggregated by end market and product (in thousands):
Year ended December 31, 2018 | ||||||||
Residential new construction | $ | 1,026,473 | 77 | % | ||||
Repair and remodel | 89,977 | 7 | % | |||||
Commercial | 219,982 | 16 | % | |||||
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Net revenues | $ | 1,336,432 | 100 | % | ||||
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Year ended December 31, 2018 | ||||||||
Insulation | $ | 876,118 | 66 | % | ||||
Waterproofing | 97,683 | 7 | % | |||||
Shower doors, shelving and mirrors | 90,352 | 7 | % | |||||
Garage doors | 79,539 | 6 | % | |||||
Rain gutters | 44,203 | 3 | % | |||||
Blinds | 28,981 | 2 | % | |||||
Other building products | 119,556 | 9 | % | |||||
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Net revenues | $ | 1,336,432 | 100 | % | ||||
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2021 | 2020 | 2019 | |||||||||||||||||||||||||||||||||
Residential new construction | $ | 1,500,750 | 76 | % | $ | 1,243,498 | 75 | % | $ | 1,138,475 | 75 | % | |||||||||||||||||||||||
Repair and remodel | 133,986 | 7 | % | 106,784 | 7 | % | 98,771 | 7 | % | ||||||||||||||||||||||||||
Commercial | 333,914 | 17 | % | 302,943 | 18 | % | 274,383 | 18 | % | ||||||||||||||||||||||||||
Net revenues | $ | 1,968,650 | 100 | % | $ | 1,653,225 | 100 | % | $ | 1,511,629 | 100 | % |
Years ended December 31, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||||||||||||||||||||
Insulation | $ | 1,262,628 | 64 | % | $ | 1,058,316 | 64 | % | $ | 970,070 | 64 | % | |||||||||||||||||||||||
Shower doors, shelving and mirrors | 138,797 | 7 | % | 117,131 | 7 | % | 105,745 | 7 | % | ||||||||||||||||||||||||||
Waterproofing | 130,924 | 7 | % | 122,962 | 7 | % | 112,075 | 7 | % | ||||||||||||||||||||||||||
Garage doors | 108,675 | 5 | % | 93,516 | 6 | % | 89,959 | 6 | % | ||||||||||||||||||||||||||
Rain gutters | 86,406 | 4 | % | 62,672 | 4 | % | 49,788 | 3 | % | ||||||||||||||||||||||||||
Fireproofing/firestopping | 59,381 | 3 | % | 49,648 | 3 | % | 41,845 | 3 | % | ||||||||||||||||||||||||||
Window blinds | 50,255 | 3 | % | 46,984 | 3 | % | 41,641 | 3 | % | ||||||||||||||||||||||||||
Other building products | 131,584 | 7 | % | 101,996 | 6 | % | 100,506 | 7 | % | ||||||||||||||||||||||||||
Net revenues | $ | 1,968,650 | 100 | % | $ | 1,653,225 | 100 | % | $ | 1,511,629 | 100 | % |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, | ||||||||
2018 | 2017 | |||||||
Contract assets | $ | 15,092 | $ | 14,476 | ||||
Contract liabilities | (7,468 | ) | (7,519 | ) |
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Contract assets | $ | 32,679 | $ | 24,334 | |||||||
Contract liabilities | (14,153) | (8,965) |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Costs incurred on uncompleted contracts | $ | 114,826 | $ | 84,563 | ||||
Estimated earnings | 58,952 | 47,000 | ||||||
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Total | 173,778 | 131,563 | ||||||
Less: Billings to date | 163,112 | 122,144 | ||||||
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Net under (over) billings | $ | 10,666 | $ | 9,419 | ||||
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2021 | 2020 | ||||||||||
Costs incurred on uncompleted contracts | $ | 206,050 | $ | 169,544 | |||||||
Estimated earnings | 106,163 | 90,737 | |||||||||
Total | 312,213 | 260,281 | |||||||||
Less: Billings to date | 285,978 | 240,665 | |||||||||
Net under billings | $ | 26,235 | $ | 19,616 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) | $ | 15,092 | $ | 14,476 | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) | (4,426 | ) | (5,057 | ) | ||||
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Net under (over) billings | $ | 10,666 | $ | 9,419 | ||||
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2021 | 2020 | ||||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) | $ | 32,679 | $ | 24,334 | |||||||
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) | (6,444) | (4,718) | |||||||||
Net under billings | $ | 26,235 | $ | 19,616 |
2020.
Practical Expedients and Exemptions
We generally expense sales commissions and other incremental costs
We do not disclose the value of unsatisfied performance obligations for contractsloss impairment model with an original expected lengthcredit loss impairment model for financial instruments, including trade receivables, retainage receivables and contract assets (unbilled receivables). Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts are not adjusted. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of one yearlosses for receivables that are current or less.
January 1, 2019 | $ | 5,085 | |||
Current period provision | 4,312 | ||||
Recoveries collected and additions | 1,269 | ||||
Amounts written off | (3,788) | ||||
December 31, 2019 | $ | 6,878 | |||
Cumulative effect of change in accounting principle | 1,600 | ||||
Current period provision | 4,444 | ||||
Recoveries collected and additions | 503 | ||||
Amounts written off | (4,636) | ||||
December 31, 2020 | $ | 8,789 | |||
Current period provision | 2,227 | ||||
Recoveries collected and additions | 574 | ||||
Amounts written off | (2,873) | ||||
December 31, 2021 | $ | 8,717 |
CASH AND CASH EQUIVALENTS
All other investments are classified asheld-to-maturity and consist of highly liquid instruments including primarily corporate bonds and commercial paper. As of December 31, 2018 and 2017, the amortized cost of these investments equaled the net carrying value, which was $10.1 million and $30.1 million, respectively. Allheld-to-maturity securities as of December 31, 2018 mature in one year or less. See Note 8,10, Fair Value Measurements, for additional information.
As of December 31, | ||||||||
2018 | 2017 | |||||||
Land | $ | — | $ | 66 | ||||
Buildings | — | 218 | ||||||
Leasehold improvements | 6,717 | 6,152 | ||||||
Furniture, fixtures and equipment | 38,369 | 30,863 | ||||||
Vehicles and equipment | 177,969 | 153,744 | ||||||
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Less: accumulated depreciation and amortization | (132,938 | ) | (109,968 | ) | ||||
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During the twelve months ended December 31, 2018 and 2017 we
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Land | $ | 108 | $ | 108 | |||||||
Buildings | 3,901 | 3,901 | |||||||||
Leasehold improvements | 10,935 | 10,288 | |||||||||
Furniture, fixtures and equipment | 64,556 | 55,780 | |||||||||
Vehicles and equipment | 248,848 | 223,003 | |||||||||
328,348 | 293,080 | ||||||||||
Less: accumulated depreciation and amortization | (222,415) | (189,058) | |||||||||
$ | 105,933 | $ | 104,022 |
As of December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cost of sales | $ | 31,526 | $ | 26,731 | $ | 22,294 | ||||||
Administrative | 1,779 | 1,554 | 1,276 |
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Cost of sales | $ | 40,938 | $ | 39,011 | $ | 36,922 | |||||||||||
Administrative | 2,623 | 2,328 | 1,939 |
Goodwill (Gross) | Accumulated Impairment Losses | Goodwill (Net) | ||||||||||
January 1, 2017 | $ | 177,090 | $ | (70,004 | ) | $ | 107,086 | |||||
Business combinations | 47,727 | — | 47,727 | |||||||||
Other | 653 | — | 653 | |||||||||
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December 31, 2017 | 225,470 | (70,004 | ) | 155,466 | ||||||||
Business combinations | 17,023 | — | 17,023 | |||||||||
Other | 560 | — | 560 | |||||||||
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December 31, 2018 | $ | 243,053 | $ | (70,004 | ) | $ | 173,049 | |||||
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Goodwill (Gross) | Accumulated Impairment Losses | Goodwill (Net) | |||||||||||||||
January 1, 2020 | $ | 265,656 | $ | (70,004) | $ | 195,652 | |||||||||||
Business combinations | 21,305 | — | 21,305 | ||||||||||||||
Other | (87) | — | (87) | ||||||||||||||
December 31, 2020 | 286,874 | (70,004) | 216,870 | ||||||||||||||
Business combinations | 105,617 | — | 105,617 | ||||||||||||||
Other | 30 | — | 30 | ||||||||||||||
December 31, 2021 | $ | 392,521 | $ | (70,004) | $ | 322,517 |
2019. Accumulated impairment losses included within the above table were incurred over multiple periods, with the latest impairment charge being recorded during the year ended December 31, 2010.
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Carrying | Accumulated | Book | Carrying | Accumulated | Book | |||||||||||||||||||
Amount | Amortization | Value | Amount | Amortization | Value | |||||||||||||||||||
Amortized intangibles: | ||||||||||||||||||||||||
Customer relationships | $ | 148,635 | $ | 52,514 | $ | 96,121 | $ | 121,015 | $ | 38,651 | $ | 82,364 | ||||||||||||
Covenantsnot-to-compete | 14,682 | 7,572 | 7,110 | 11,807 | 4,773 | 7,034 | ||||||||||||||||||
Trademarks and tradenames | 64,432 | 18,256 | 46,176 | 58,136 | 14,076 | 44,060 | ||||||||||||||||||
Backlog | 14,060 | 13,677 | 383 | 13,600 | 9,067 | 4,533 | ||||||||||||||||||
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$ | 241,809 | $ | 92,019 | $ | 149,790 | $ | 204,558 | $ | 66,567 | $ | 137,991 | |||||||||||||
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Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
Amortized intangibles: | |||||||||||||||||||||||||||||||||||
Customer relationships | $ | 292,113 | $ | 113,849 | $ | 178,264 | $ | 197,641 | $ | 89,137 | $ | 108,504 | |||||||||||||||||||||||
Covenants not-to-compete | 27,717 | 16,471 | 11,246 | 20,309 | 13,436 | 6,873 | |||||||||||||||||||||||||||||
Trademarks and tradenames | 103,007 | 32,623 | 70,384 | 79,657 | 27,245 | 52,412 | |||||||||||||||||||||||||||||
Backlog | 23,724 | 19,197 | 4,527 | 18,847 | 15,243 | 3,604 | |||||||||||||||||||||||||||||
$ | 446,561 | $ | 182,140 | $ | 264,421 | $ | 316,454 | $ | 145,061 | $ | 171,393 |
2019.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accounted for approximately $36.1$130.0 million and $76.8$46.2 million of the increases during the years ended December 31, 20182021 and 2017, respectively, with the remaining changes due to other factors.2020, respectively. For more information, see Note 15,17, Business Combinations. Amortization expense on intangible assets totaled approximately $25.4$37.1 million, $26.9$28.5 million, and $11.3$24.5 million during the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively. Remaining estimated aggregate annual amortization expense is as follows (in thousands):
2019 | $ | 23,250 | ||
2020 | 22,318 | |||
2021 | 21,012 | |||
2022 | 20,094 | |||
2023 | 17,183 | |||
Thereafter | 45,933 |
2022 | $41,780 | ||||
2023 | 37,458 | ||||
2024 | 33,762 | ||||
2025 | 27,440 | ||||
2026 | 23,489 | ||||
Thereafter | 100,492 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Term loans, in effect, net of unamortized debt issuance costs of $4,834 and $5,146, respectively | $ | 390,916 | $ | 293,354 | ||||
Vehicle and equipment notes, maturing through December 2023; payable in various monthly installments, including interest rates ranging from 2.5% to 4.9% | 60,391 | 50,357 | ||||||
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 4% to 6% | 3,517 | 3,866 | ||||||
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Less: current maturities | (22,642 | ) | (16,650 | ) | ||||
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Long-term debt, less current maturities | $ | 432,182 | $ | 330,927 | ||||
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2021 | 2020 | ||||||||||
Senior Notes due 2028, net of unamortized debt issuance costs of $3,633 and $4,230, respectively | $ | 296,367 | $ | 295,770 | |||||||
Term loan, net of unamortized debt issuance costs of $6,735 and $1,343, respectively | 493,265 | 198,657 | |||||||||
Vehicle and equipment notes, maturing through December 2026; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8% | 69,228 | 67,493 | |||||||||
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 1.0% to 5.0% | 4,172 | 3,392 | |||||||||
863,032 | 565,312 | ||||||||||
Less: current maturities | (30,839) | (23,355) | |||||||||
Long-term debt, less current maturities | $ | 832,193 | $ | 541,957 |
2022 | $30,839 | ||||
2023 | 24,850 | ||||
2024 | 19,098 | ||||
2025 | 15,600 | ||||
2026 | 8,013 | ||||
Thereafter | 775,000 |
The Term Loan Agreement was amended on November 30, 2017 to refinance the total principal amount of the Term Loan outstanding immediately prior to the effective date of the amendment on substantially the same terms as the initial Term Loan, except for (i) a decrease in the margins applicable to the base rate and Eurodollar rate loans, (ii) an increase in the cap on permitted indebtedness related to capital expenditures other than capital lease obligations and (iii) the inclusion of a mechanism to establish an alternative Eurodollar rate if certain circumstances
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
have arisen such that the London Interbank Offered Rate may no longer be used. The ABL Credit Agreement was amended in December 2017provides for an asset-based lending credit facility (the “ABL Revolver”) of up to revise the formula for maximum indebtedness incurred by the Company while subject to the terms of such agreement.
On June 19, 2018, we entered into$200.0 million with a second amendment to the Term Loan Agreement to (i) extend the maturity date from April 15, 2024 to April 15, 2025 and (ii) increase the aggregate principal amount of the facility from $297.8 million to $397.8 million. All other provisions of the Term Loan Agreement were unchanged. On June 19, 2018, we also entered into a third amendment to the agreement for the ABL Credit Agreement to (i) extend the maturity date from April 13, 2022 to June 19, 2023, (ii) increase the aggregate revolving loan commitments from $100.0 million to $150.0 million and (iii) provide enhanced borrowing availability against certain types of accounts receivable.
Our Senior Secured Credit Facilities bear interest at either the Eurodollar rate (“LIBOR”) or the base rate (which approximated the prime rate), at our election, plus a margin based on the type of rate applied and leverage ratio. The margin in respect of loans under (i) the Term Loan will be (A) 2.50% in the case of Eurodollar rate loans and (B) 1.50% in the case of base rate loans, and (ii) the ABL Revolver will be (A) 1.25%, 1.50% or 1.75% in the case of Eurodollar rate loans (based on a measure offive-year maturity. Borrowing availability under the agreement) and (B) 0.25%, 0.50% or 0.75% in the case of base rate loans (based on a measure of availability under the agreement).
The borrowing base for the ABL Revolver which determines availability under the facility, is based on a percentage of the value of certain assets securing the Company’s obligations and those of the Company and the subsidiary guarantors thereunder. In connection with the Term Loan Agreement, we entered into a Third Amendment (the “Third Amendment”) to the Third ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the agreement. ABL Credit Agreement, and Royal Bank of Canada as collateral agent under the Term Loan Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of December 31, 2021 was $155.7 million. In February 2022, we amended and extended our ABL Credit Agreement. See Note 19, Subsequent Events, for additional information.
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.
(in thousands) | Classification | As of December 31, | ||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
Assets | ||||||||||||||||||||
Non-Current | ||||||||||||||||||||
Operating | Operating lease right-of-use assets | $ | 69,871 | $ | 53,766 | |||||||||||||||
Finance | Property and equipment, net | 5,266 | 4,946 | |||||||||||||||||
Total lease assets | $ | 75,137 | $ | 58,712 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Operating | Current maturities of operating lease obligations | $ | 23,224 | $ | 18,758 | |||||||||||||||
Financing | Current maturities of finance lease obligations | 1,747 | 2,073 | |||||||||||||||||
Non-Current | ||||||||||||||||||||
Operating | Operating lease obligations | 46,075 | 34,413 | |||||||||||||||||
Financing | Finance lease obligations | 3,297 | 2,430 | |||||||||||||||||
Total lease liabilities | $ | 74,343 | $ | 57,674 |
Weighted-average remaining lease term | ||||||||
Operating leases | 4.3 years | 4.1 years | ||||||
Finance leases | 3.3 years | 2.6 years | ||||||
Weighted-average discount rate | ||||||||
Operating leases | 3.38 | % | 3.67 | % | ||||
Finance leases | 4.96 | % | 5.08 | % |
Years ended December 31, | ||||||||||||||||||||||||||
(in thousands) | Classification | 2021 | 2020 | 2019 | ||||||||||||||||||||||
Operating lease cost (1) | Administrative | $ | 27,357 | $ | 23,454 | $ | 21,024 | |||||||||||||||||||
Finance lease cost | ||||||||||||||||||||||||||
Amortization of leased assets (2) | Cost of sales | 3,083 | 3,645 | 4,942 | ||||||||||||||||||||||
Interest on finance lease obligations | Interest expense, net | 218 | 268 | 341 | ||||||||||||||||||||||
Total lease costs | $ | 30,658 | $ | 27,367 | $ | 26,307 |
Years ended December 31, | |||||||||||||||||
(in thousands) | 2021 | 2020 | 2019 | ||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
Operating cash flows for operating leases | $ | 22,930 | $ | 19,668 | $ | 17,521 | |||||||||||
Operating cash flows for finance leases | 218 | 268 | 341 | ||||||||||||||
Financing cash flows for finance leases | 2,125 | 2,632 | 4,157 |
Finance Leases | Operating Leases | ||||||||||||||||||||||
(in thousands) | Related Party | Other | Total Operating | ||||||||||||||||||||
2022 | $ | 2,001 | $ | 1,347 | $ | 23,832 | $ | 25,179 | |||||||||||||||
2023 | 1,452 | 906 | 18,139 | 19,045 | |||||||||||||||||||
2024 | 1,043 | 645 | 11,006 | 11,651 | |||||||||||||||||||
2025 | 674 | 519 | 6,502 | 7,021 | |||||||||||||||||||
2026 | 343 | — | 4,701 | 4,701 | |||||||||||||||||||
Thereafter | — | — | 7,283 | 7,283 | |||||||||||||||||||
Total minimum lease payments | 5,513 | $ | 3,417 | $ | 71,463 | 74,880 | |||||||||||||||||
Less: Amounts representing executory costs | (29) | — | |||||||||||||||||||||
Less: Amounts representing interest | (440) | (5,581) | |||||||||||||||||||||
Present value of future minimum lease payments | 5,044 | 69,299 | |||||||||||||||||||||
Less: Current obligation under leases | (1,747) | (23,224) | |||||||||||||||||||||
Long-term lease obligations | $ | 3,297 | $ | 46,075 |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These future payments are estimated by 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 using the appropriate weighted average cost of capital (WACC). value.
As of December 31, 2018 | As of December 31, 2017 | |||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||||||
Cash equivalents | $ | 69,807 | $ | 69,807 | $ | — | $ | — | $ | 55,634 | $ | 55,634 | $ | — | $ | — | ||||||||||||||||
Derivative financial instruments | 1,765 | — | 1,765 | — | 618 | — | 618 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total financial assets | $ | 71,572 | $ | 69,807 | $ | 1,765 | $ | — | $ | 56,252 | $ | 55,634 | $ | 618 | $ | — | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
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|
|
|
|
| |||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||||||
Derivative financial instruments | $ | 2,275 | $ | — | $ | 2,275 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Contingent consideration | 5,098 | — | — | 5,098 | 1,834 | — | — | 1,834 | ||||||||||||||||||||||||
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|
|
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|
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|
|
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|
|
|
|
|
|
| |||||||||||||||||
Total financial liabilities | $ | 7,373 | $ | — | $ | 2,275 | $ | 5,098 | $ | 1,834 | $ | — | $ | — | $ | 1,834 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Cash equivalents | $ | 258,055 | $ | 258,055 | $ | — | $ | — | $ | 170,398 | $ | 170,398 | $ | — | $ | — | |||||||||||||||||||||||||||||||
Derivative financial instruments | 14,830 | — | 14,830 | — | 5,130 | — | 5,130 | — | |||||||||||||||||||||||||||||||||||||||
Total financial assets | $ | 272,885 | $ | 258,055 | $ | 14,830 | $ | — | $ | 175,528 | $ | 170,398 | $ | 5,130 | $ | — | |||||||||||||||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
Contingent consideration | $ | 11,170 | $ | — | $ | — | $ | 11,170 | $ | 4,004 | $ | — | $ | — | $ | 4,004 | |||||||||||||||||||||||||||||||
Derivative financial instruments | 1,937 | — | 1,937 | — | 324 | — | 324 | — | |||||||||||||||||||||||||||||||||||||||
Total financial liabilities | $ | 13,107 | $ | — | $ | 1,937 | $ | 11,170 | $ | 4,328 | $ | — | $ | 324 | $ | 4,004 |
Contingent consideration liability—January 1, 2018 | $ | 1,834 | ||
Preliminary purchase price | 3,683 | |||
Fair value adjustments | (586 | ) | ||
Accretion in value | 569 | |||
Amounts paid to sellers | (402 | ) | ||
|
| |||
Contingent consideration liability—December 31, 2018 | $ | 5,098 | ||
|
|
Contingent consideration liability—January 1, 2021 | $ | 4,004 | |||
Preliminary purchase price | 8,400 | ||||
Fair value adjustments | (413) | ||||
Accretion in value | 1,154 | ||||
Amounts cancelled | (1,035) | ||||
Amounts paid to sellers | (940) | ||||
Contingent consideration liability—December 31, 2021 | $ | 11,170 |
As of December 31, 2018 | As of December 31, 2017 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Financial assets: | ||||||||||||||||
Investments | $ | 10,060 | $ | 10,053 | $ | 30,053 | $ | 30,038 |
See
As of December 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Senior Notes (1) | $ | 300,000 | $ | 311,028 | $ | 300,000 | $ | 320,013 |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2021 and 2020, we amortized $3.2 million and $1.3 million, respectively, of the unrealized loss to interest expense, net.
Additionally,
provide relief for impacted areas as it relates to impending reference rate reform. We elected to early adopt ASU2017-12, “Derivativesapply the hedge accounting expedients related to probability and Hedging (Topic 815): Targeted Improvementsthe assessments of effectiveness for future LIBOR-indexed cash flows to Accounting for Hedging Activities,” asassume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of January 1, 2018 and, as such, recognized a $0.1 million adjustment to our opening retained earnings and accumulated other comprehensive income asthese expedients preserves the presentation of January 1, 2018 to reclassify the cash flow hedge ineffectiveness previously recorded in net income in the fourth quarter of 2017 to accumulated other comprehensive income.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On February 28, 2018, our board of directors authorized a $50 million stock repurchase program effective March 2, 2018 and on October 31, 2018, our
any shares during the year ended December 31, 2021. The effect of these treasury shares reducing the number of common shares outstanding is reflected in our earnings per share calculation.
In response to COVID-19, we temporarily suspended our share repurchase program from March 2020 until it was reinstated in November 2020.Declaration Date | Record Date | Payment Date | Dividend Per Share | Amount Declared | Amount Paid | |||||||||||||||||||||||||||
2/23/2021 | 3/15/2021 | 3/31/2021 | $ | 0.30 | $ | 8,907 | $ | 8,786 | ||||||||||||||||||||||||
5/5/2021 | 6/15/2021 | 6/30/2021 | 0.30 | 8,910 | 8,821 | |||||||||||||||||||||||||||
8/5/2021 | 9/15/2021 | 9/30/2021 | 0.30 | 8,912 | 8,821 | |||||||||||||||||||||||||||
11/4/2021 | 12/15/2021 | 12/31/2021 | 0.30 | 8,911 | 8,866 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Included in other current liabilities | $ | 5,795 | $ | 5,899 | ||||
Included in other long-term liabilities | 9,447 | 8,721 | ||||||
|
|
|
| |||||
$ | 15,242 | $ | 14,620 | |||||
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|
|
|
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2021 2020 Included in other current liabilities $ 8,048 $ 7,703 Included in other long-term liabilities 13,397 11,986 $ 21,445 $ 19,689
As of December 31, | ||||||||
2018 | 2017 | |||||||
Included in othernon-current assets | $ | 1,888 | $ | 1,826 |
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Included in other non-current assets | $ | 2,137 | $ | 1,854 |
Share-Based Compensation
Common Stock Awards
During
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Pension plans | $ | 2,783 | $ | 1,128 | $ | 809 | |||||||||||
Health & welfare plans | 2,893 | 952 | 674 | ||||||||||||||
Total contributions | $ | 5,676 | $ | 2,080 | $ | 1,483 |
In addition, during the years ended December 31, 2018, 2017 and 2016, we granted approximately 0.1 million shares of our common stock under our 2014 Omnibus Incentive Plan to non-employee members of our board of directors and our employees. The shares granted during each yearDuring the years ended December 31, 2018, 20172021, 2020 and 20162019, we granted approximately 4000, 6000 and 8000 shares of restricted stock, respectively, to non-employee members of our board of directors. Substantially all of the stock will vest over a one-year service period.
During the years ended December 31, 2018, 2017 and 2016, our employees surrendered approximately 41 thousand, 11 thousand, and 32 thousand shares, respectively, of our common stock to satisfy tax withholding obligations arising in connection with the vesting of commonover a three-year service period.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance-Based Stock Awards
certain officers. During the year ended December 31, 2018,2021, we granted under our 2014 Omnibus Incentive Planissued approximately 0.1 million shares of our common stock to certain officers, which vest in two2 equal installments on each of April 20, 20192022 and April 20, 2020. These shares were issued in connection with the performance-based targets established in 2017.2023. In addition, during the year ended December 31, 2018,2021, we established, and our board of directors approved, performance-based targets in connection with common stock awards to be issued to certain officers in 20192022 contingent upon achievement of these targets. Share-based compensation expense associated
As2019 we granted approximately five thousand, seven thousand and 11 thousand shares of December 31, 2018, there was $2.7 million of unrecognized compensation expense related to nonvested performance-basedour common stock, awards. This expense is subject to future adjustments for forfeitures and is expected to be recognized over the remaining weighted-average periodrespectively, all of 1.6 years using the graded-vesting method. See the table below for changeswhich will vest in shares and related weighted average fair market value per share.
2022.
As2019 we granted approximately eight thousand, 14 thousand and 14 thousand units, respectively, each of December 31, 2018, there was $0.2 million of unrecognized compensation expense related to nonvested performance-based stock units. This expense is subject to future adjustments for forfeitures and is expected to be recognized onwhich will vest over a straight-line basis over the remaining weighted-average period of 0.3 years. See the table below for changes in shares and related weighted average fair market value per share.
one-year service period.
Common Stock Awards | Performance-Based Stock Awards | Performance-Based Stock Units | ||||||||||||||||||||||
Awards | Weighted Average Fair Market Value Per Share | Awards | Weighted Average Fair Market Value Per Share | Units | Weighted Average Fair Market Value Per Share | |||||||||||||||||||
Nonvested awards/units at December 31, 2017 | 202,331 | $ | 39.09 | 77,254 | $ | 41.00 | 72,000 | $ | 52.16 | |||||||||||||||
Granted | 65,112 | 57.51 | 52,892 | 65.60 | 14,072 | 55.92 | ||||||||||||||||||
Vested | (91,291 | ) | 36.14 | — | — | (71,120 | ) | 52.15 | ||||||||||||||||
Forfeited/Cancelled | (2,963 | ) | 49.65 | (14,448 | ) | 41.00 | (1,704 | ) | 53.38 | |||||||||||||||
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| |||||||||||||
Nonvested awards/units at December 31, 2018 | 173,189 | $ | 47.40 | 115,698 | $ | 52.25 | 13,248 | $ | 56.05 | |||||||||||||||
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DuringCommon Stock Awards Performance-Based Stock Awards Performance-Based Restricted Stock Units Awards Weighted Average Grant Date Fair Value Per Share Awards Weighted Average Grant Date Fair Value Per Share Units Weighted Average Grant Date Fair Value Per Share Nonvested awards/units at December 31, 2020 231,280 $ 48.05 166,961 $ 59.97 13,273 $ 36.51 Granted 55,815 124.88 42,449 123.32 8,470 126.89 Vested (84,641) 48.87 (64,525) 52.79 (12,952) 36.51 Forfeited/Cancelled (3,101) 62.36 (1,484) 123.26 (539) 73.06 Nonvested awards/units at December 31, 2021 199,353 $ 68.99 143,401 $ 81.30 8,252 $ 126.89
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Common Stock Awards | $ | 5,285 | $ | 4,116 | $ | 4,242 | |||||||||||
Non-Employee Common Stock Awards | 465 | 333 | 359 | ||||||||||||||
Performance-Based Stock Awards | 4,528 | 3,869 | 3,034 | ||||||||||||||
Liability Performance-Based Stock Awards | 2,612 | 1,969 | 432 | ||||||||||||||
Performance-Based Restricted Stock Units | 862 | 539 | 660 | ||||||||||||||
$ | 13,752 | $ | 10,826 | $ | 8,727 |
2018 | 2017 | 2016 | ||||||||||
Cost of sales | $ | 846 | $ | 965 | $ | — | ||||||
Selling | 451 | 571 | — | |||||||||
Administrative | 6,549 | 5,055 | 1,894 | |||||||||
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|
|
| |||||||
$ | 7,846 | $ | 6,591 | $ | 1,894 | |||||||
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|
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Cost of sales | $ | 448 | $ | 284 | $ | 374 | |||||||||||
Selling | 204 | 202 | 194 | ||||||||||||||
Administrative | 13,100 | 10,340 | 8,159 | ||||||||||||||
$ | 13,752 | $ | 10,826 | $ | 8,727 |
As of December 31, 2021 | |||||||||||
Unrecognized Compensation Expense on Unvested Awards | Weighted Average Remaining Vesting Period | ||||||||||
Common Stock Awards | $ | 7,518 | 1.7 | ||||||||
Performance-Based Stock Awards | 4,832 | 1.6 | |||||||||
Performance-Based Restricted Stock Units | 301 | 0.3 | |||||||||
Total unrecognized compensation expense related to unvested awards | $ | 12,651 |
Years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current: | ||||||||||||
Federal | $ | 13,486 | $ | 17,557 | $ | 18,307 | ||||||
State | 3,641 | 3,302 | 3,472 | |||||||||
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|
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| |||||||
17,127 | 20,859 | 21,779 | ||||||||||
Deferred: | ||||||||||||
Federal | 221 | (5,895 | ) | (338 | ) | |||||||
State | 90 | (284 | ) | (267 | ) | |||||||
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|
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| |||||||
311 | (6,179 | ) | (605 | ) | ||||||||
|
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|
|
| |||||||
Total tax expense | $ | 17,438 | $ | 14,680 | $ | 21,174 | ||||||
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|
|
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 27,011 | $ | 33,495 | $ | 14,850 | |||||||||||
State | 10,139 | 8,918 | 4,127 | ||||||||||||||
37,150 | 42,413 | 18,977 | |||||||||||||||
Deferred: | |||||||||||||||||
Federal | (437) | (7,177) | 4,585 | ||||||||||||||
State | (1) | (1,298) | 884 | ||||||||||||||
(438) | (8,475) | 5,469 | |||||||||||||||
Total tax expense | $ | 36,712 | $ | 33,938 | $ | 24,446 |
Years ended December 31, | ||||||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||||||
Income tax at federal statutory rate | $ | 15,159 | 21.0 | % | $ | 19,537 | 35.0 | % | $ | 20,864 | 35.0 | % | ||||||||||||
Stock compensation | (436 | ) | (0.6 | %) | (581 | ) | (1.0 | %) | (227 | ) | (0.4 | %) | ||||||||||||
Qualified Production Activity Deduction | — | 0.0 | % | (1,715 | ) | (3.1 | %) | (1,776 | ) | (3.0 | %) | |||||||||||||
Other permanent items | (667 | ) | (0.8 | %) | 197 | 0.4 | % | (92 | ) | (0.1 | %) | |||||||||||||
Change in valuation allowance | 312 | 0.4 | % | 285 | 0.5 | % | 442 | 0.7 | % | |||||||||||||||
Change in uncertain tax positions | 969 | 1.3 | % | (1,807 | ) | (3.2 | %) | 66 | 0.1 | % | ||||||||||||||
State income taxes, net of federal benefit | 2,911 | 4.0 | % | 2,150 | 3.8 | % | 1,897 | 3.2 | % | |||||||||||||||
Rate impact of the Tax Act | (810 | ) | (1.1 | %) | (3,386 | ) | (6.1 | %) | — | — | % | |||||||||||||
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|
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|
|
| |||||||||||||||||||
Total tax expense | $ | 17,438 | 24.2 | % | $ | 14,680 | 26.3 | % | $ | 21,174 | 35.5 | % | ||||||||||||
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|
|
Years ended December 31, 2021 2020 2019 Income tax at federal statutory rate $ 32,650 21.0 % $ 27,547 21.0 % $ 19,447 21.0 % Stock compensation (1,567) (1.0) % 331 0.3 % (255) (0.3) % Other permanent items 1,274 0.8 % 424 0.3 % 737 0.8 % Change in valuation allowance (922) (0.6) % (207) (0.2) % 276 0.3 % Change in uncertain tax positions (2,867) (1.8) % 65 0.1 % 67 0.1 % State income taxes, net of federal benefit 8,144 5.2 % 5,778 4.4 % 4,174 4.5 % Total tax expense $ 36,712 23.6 % $ 33,938 25.9 % $ 24,446 26.4 %
As of December 31, | ||||||||
2018 | 2017 | |||||||
Deferred Tax Assets | ||||||||
Long-term | ||||||||
Accrued reserves and allowances | $ | 4,245 | $ | 3,916 | ||||
Allowance for doubtful accounts | 500 | 426 | ||||||
Inventories | 335 | 213 | ||||||
Intangibles | 4,937 | 3,279 | ||||||
Net operating loss carryforwards | 1,446 | 2,623 | ||||||
Other | 4 | 10 | ||||||
|
|
|
| |||||
Long-term deferred tax assets | 11,467 | 10,467 | ||||||
Less: Valuation allowance | (1,255 | ) | (1,746 | ) | ||||
|
|
|
| |||||
Net deferred tax assets | 10,212 | 8,721 | ||||||
Deferred Tax Liabilities | ||||||||
Long-term | ||||||||
Accrued reserves and allowances | (365 | ) | (308 | ) | ||||
Property and equipment | (2,091 | ) | (1,453 | ) | ||||
Intangibles | (3,850 | ) | (3,543 | ) | ||||
Investment in partnership | (10,266 | ) | (9,189 | ) | ||||
Other | (242 | ) | (208 | ) | ||||
|
|
|
| |||||
Long-term deferred tax liabilities | (16,814 | ) | (14,701 | ) | ||||
|
|
|
| |||||
Net deferred tax liabilities | $ | (6,602 | ) | $ | (5,980 | ) | ||
|
|
|
|
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Deferred Tax Assets | |||||||||||
Long-term | |||||||||||
Accrued liabilities and allowances | $ | 10,200 | $ | 9,106 | |||||||
Allowance for doubtful accounts | 979 | 987 | |||||||||
Inventories | 900 | 402 | |||||||||
Property and equipment | 333 | 280 | |||||||||
Intangibles | 7,042 | 6,582 | |||||||||
Net operating loss carryforwards | 1,049 | 1,206 | |||||||||
Other | 14 | 16 | |||||||||
Long-term deferred tax assets | 20,517 | 18,579 | |||||||||
Less: Valuation allowance | (216) | (1,263) | |||||||||
Net deferred tax assets | 20,301 | 17,316 | |||||||||
Deferred Tax Liabilities | |||||||||||
Long-term | |||||||||||
Accrued liabilities and allowances | (669) | (151) | |||||||||
Property and equipment | (7,629) | (4,587) | |||||||||
Intangibles | (6,783) | (4,810) | |||||||||
Investment in partnership | (8,271) | (6,660) | |||||||||
Other | (793) | (650) | |||||||||
Long-term deferred tax liabilities | (24,145) | (16,858) | |||||||||
Net deferred tax (liabilities) assets | $ | (3,844) | $ | 458 | |||||||
The above amounts are included in our Consolidated Balance Sheets as follows: | |||||||||||
Other non-current assets | 975 | 493 | |||||||||
Long-term deferred income tax liabilities | (4,819) | (35) | |||||||||
Net deferred tax (liabilities) assets | $ | (3,844) | $ | 458 |
Unrecognized tax benefit, January 1, 2016 | $ | 3,586 | ||
Increase as a result of tax positions taken during the period | 2,354 | |||
Decrease as a result of tax positions taken during the period | (1,356 | ) | ||
Decrease as a result of expiring statutes | (487 | ) | ||
|
| |||
Unrecognized tax benefit, December 31, 2016 | $ | 4,097 | ||
|
| |||
Increase as a result of tax positions taken during the period | 4,353 | |||
Decrease as a result of tax positions taken during the period | (2,311 | ) | ||
Decrease as a result of expiring statutes | (1,689 | ) | ||
|
| |||
Unrecognized tax benefit, December 31, 2017 | $ | 4,450 | ||
|
| |||
Increase as a result of tax positions taken during the period | 3,846 | |||
Decrease as a result of tax positions taken during the period | (2,850 | ) | ||
Decrease as a result of expiring statutes | (97 | ) | ||
|
| |||
Unrecognized tax benefit, December 31, 2018 | $ | 5,349 | ||
|
|
Unrecognized tax benefit, January 1, 2019 | $ | 5,349 | |||
Increase as a result of tax positions taken during the period | 2,866 | ||||
Decrease as a result of tax positions taken during the period | (2,482) | ||||
Decrease as a result of expiring statutes | (16) | ||||
Unrecognized tax benefit, December 31, 2019 | $ | 5,717 | |||
Increase as a result of tax positions taken during the period | 3,822 | ||||
Decrease as a result of tax positions taken during the period | (2,873) | ||||
Increase as a result of expiring statutes | 10 | ||||
Unrecognized tax benefit, December 31, 2020 | $ | 6,676 | |||
Increase as a result of tax positions taken during the period | 4,482 | ||||
Decrease as a result of tax positions taken during the period | (3,999) | ||||
Decrease as a result of expiring statutes | (2,857) | ||||
Unrecognized tax benefit, December 31, 2021 | $ | 4,302 |
Impacts of the Tax Act
The Tax Act was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%, which had a positive impact on our 2018 and 2017 effective tax rates due to the revaluation of our ending net deferred tax liabilities.
Under the guidance in the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin No. 118 (“SAB 118”), we recorded provisional amounts for the impact of the Tax Act as of December 31, 2017, representing a $3.8 million tax benefit related to the revaluation of the ending net deferred tax liabilities from 35% to the newly
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
enacted U.S. corporate income tax rate of 21%, which was partially offset by tax expense of $0.4 million net amount for the revaluation of the uncertain tax positions and the valuation allowance. Under the transitional provisions of SAB 118, we had aone-year measurement period to complete the accounting for the initial tax effects of the Tax Act. We recorded its final adjustments to the provisional amounts in 2018 which resulted in a $0.8 million tax benefit largely due to timing provision to return adjustments which impacted deferred balances at the 35% rate that were then revalued at the lower corporate rate. Final regulations will be issued in the future and may be applied retroactively to the date of enactment of U.S. Tax Reform that may result in changes to the tax amounts recorded as a result of the Tax Act.
For the years ended December 31, 2018, 2017 and 2016, the9, Leases, for future minimum lease payments to be paid to these related parties.
Years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Sales | $ | 12,636 | $ | 10,250 | $ | 7,914 | ||||||
Purchases | 1,587 | 1,294 | 579 | |||||||||
Rent | 1,099 | 1,154 | 635 |
Years ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Sales | $ | 1,452 | $ | 3,987 | $ | 13,488 | |||||||||||
Purchases | 1,544 | 1,841 | 1,810 | ||||||||||||||
Rent | 1,322 | 1,125 | 1,040 |
On November 5, 2018,2020 as part of our stock repurchase program, we entered intowell as the year ended December 31, 2019 while it was classified as a share repurchase agreement with PJAM IBP Holdings, Inc. (“PJAM”) for the purchase of 150 thousand shares of our common stock for a purchase price of approximately $5.1 million, or $34.11 per share, which represented a 3.0% discountrelated party to the last reported price of our common stock on November 2, 2018. Jeff Edwards, our Chief Executive Officer, is the President of PJAM and, in such role, has sole voting and dispositive power over the shares held by PJAM and is deemed the beneficial owner of the shares of our common stock held by PJAM.
and Auto Insurances
As of December 31, | ||||||||
2018 | 2017 | |||||||
Included in other current liabilities | $ | 1,848 | $ | 2,033 | ||||
Included in other long-term liabilities | 6,608 | 7,073 | ||||||
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|
|
| |||||
$ | 8,456 | $ | 9,106 | |||||
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|
|
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Included in other current liabilities | $ | 5,889 | $ | 5,102 | |||||||
Included in other long-term liabilities | 16,050 | 16,440 | |||||||||
$ | 21,939 | $ | 21,542 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Insurance receivable and indemnification asset for claims under a fully insured policy | $ | 2,484 | $ | 2,773 | ||||
Insurance receivable for claims that exceeded the stop loss limit | 53 | 2 | ||||||
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| |||||
Total insurance receivables included in othernon-current assets | $ | 2,537 | $ | 2,775 | ||||
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|
|
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Insurance receivables and indemnification assets for claims under fully insured policies | $ | 3,578 | $ | 4,400 | |||||||
Insurance receivables for claims that exceeded the stop loss limit | 278 | 328 | |||||||||
Total insurance receivables and indemnification assets included in other non-current assets | $ | 3,856 | $ | 4,728 |
We are obligated under capital leases covering vehicles and certain equipment. The vehicle and equipment leases generally have initial terms ranging from four to six years. Total assets relating to capital leases were approximately $58.7 million and $63.4 million as of December 31, 2018 and 2017, respectively, and a total of approximately $32.0 million and $26.8 million were fully depreciated as of December 31, 2018 and 2017, respectively. The net book value of assets under capital leases was approximately $9.5 million and $13.0 million as of December 31, 2018 and 2017, respectively. Amortization of assets held under capital leases is included within cost of sales
We also have several noncancellable operating leases, primarily for buildings, improvements, equipment and certain vehicles. These leases generally contain renewal options for periods ranging from one to five years and require us to pay all executory costs such as property taxes, maintenance and insurance.
Future minimumour lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2018 are as follows (in thousands):
Capital Leases | Operating Leases | |||||||||||||||
Related Party | Other | Total Operating | ||||||||||||||
2019 | $ | 5,207 | $ | 1,159 | $ | 14,418 | $ | 15,577 | ||||||||
2020 | 2,253 | 1,184 | 11,293 | 12,477 | ||||||||||||
2021 | 1,339 | 1,058 | 7,014 | 8,072 | ||||||||||||
2022 | 452 | 972 | 4,335 | 5,307 | ||||||||||||
2023 | 93 | 51 | 2,613 | 2,664 | ||||||||||||
Thereafter | — | — | 4,695 | 4,695 | ||||||||||||
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| |||||||||
9,344 | $ | 4,424 | $ | 44,368 | $ | 48,792 | ||||||||||
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| |||||||||||
Less: Amounts representing executory costs | (255 | ) | ||||||||||||||
Less: Amounts representing interest | (459 | ) | ||||||||||||||
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| |||||||||||||||
Total obligation under capital leases | 8,630 | |||||||||||||||
Less: Current portion of capital leases | (4,806 | ) | ||||||||||||||
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| |||||||||||||||
Long term capital lease obligation | $ | 3,824 | ||||||||||||||
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total rent expense under these operating leases, which is included in the Consolidated Statements of Operations and Comprehensive Income, was as follows (in thousands):
Years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cost of Sales | $ | 546 | $ | 813 | $ | 848 | ||||||
Administrative | 16,693 | 14,310 | 10,732 | |||||||||
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| |||||||
Total | $ | 17,239 | $ | 15,123 | $ | 11,580 | ||||||
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Other Commitments and Contingencies
The largest of our 2018 acquisitions was Custom Overhead Door, LLC dba Custom Door & Gate (collectively, “CDG”) and Advanced Fiber Technology, Inc. (collectively, “AFT”). The remaining acquisitions were individually insignificant but material in the aggregate, as follows. Net income (loss), as noted below, includes amortization, taxes and interest allocations when appropriate.
Name | Date | Acquisition | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | |||||||||||||||||
CDG | 3/19/2018 | Asset | $ | 9,440 | $ | 1,973 | $ | 11,413 | $ | 11,466 | $ | 531 | ||||||||||||
AFT | 10/31/2018 | Asset | 19,707 | 1,510 | 21,217 | 3,530 | (13 | ) | ||||||||||||||||
Other | Various | Shares/Asset | 28,593 | 4,057 | 32,650 | 24,329 | 639 | |||||||||||||||||
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| |||||||||||||||
Total | $ | 57,740 | $ | 7,540 | $ | 65,280 | $ | 39,325 | $ | 1,157 | ||||||||||||||
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2021 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | |||||||||||||||||||||||||||||||||||||
IWI | 03/01/2021 | Share | $ | 42,098 | $ | 5,959 | $ | 48,057 | $ | 36,259 | $ | 3,373 | ||||||||||||||||||||||||||||||||
Alert | 4/13/2021 | Asset | 5,850 | 2,980 | 8,830 | 13,494 | (151) | |||||||||||||||||||||||||||||||||||||
Alpine | 4/19/2021 | Asset | 7,945 | 2,208 | 10,153 | 8,267 | 189 | |||||||||||||||||||||||||||||||||||||
GCP | 6/7/2021 | Asset | 9,700 | 1,427 | 11,127 | 7,125 | 83 | |||||||||||||||||||||||||||||||||||||
Five Star | 9/13/2021 | Share | 26,308 | 5,466 | 31,774 | 6,861 | (119) | |||||||||||||||||||||||||||||||||||||
DGM | 11/1/2021 | Asset | 11,634 | 2,069 | 13,703 | 2,198 | (462) | |||||||||||||||||||||||||||||||||||||
CFI | 11/22/2021 | Share | 13,450 | 1,145 | 14,595 | 1,289 | 53 | |||||||||||||||||||||||||||||||||||||
AMD | 12/13/2021 | Asset | 119,490 | 6,631 | 126,121 | 3,707 | (225) | |||||||||||||||||||||||||||||||||||||
Other | Various | Asset | 6,540 | 1,284 | 7,824 | 3,231 | (102) | |||||||||||||||||||||||||||||||||||||
Total | $ | 243,015 | $ | 29,169 | $ | 272,184 | $ | 82,431 | $ | 2,639 |
Name | Date | Acquisition Type | Cash Paid | Seller Obligations | Fair Value of Common Stock Issued | Total Purchase Price | Revenue | Net (Loss) Income | ||||||||||||||||||||||||
Alpha (1) | 1/5/2017 | Share | $ | 103,810 | $ | 2,002 | $ | 10,859 | $ | 116,671 | $ | 116,070 | $ | (1,148 | ) | |||||||||||||||||
Columbia | 6/26/2017 | Asset | 8,768 | 225 | — | 8,993 | 6,046 | 86 | ||||||||||||||||||||||||
Astro | 9/18/2017 | Asset | 9,144 | 482 | — | 9,626 | 1,829 | 11 | ||||||||||||||||||||||||
Other | Various | Asset | 15,645 | �� | 2,419 | — | 18,064 | 20,457 | 573 | |||||||||||||||||||||||
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| |||||||||||||||||||||
Total | $ | 137,367 | $ | 5,128 | $ | 10,859 | $ | 153,354 | $ | 144,402 | $ | (478 | ) | |||||||||||||||||||
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2020 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | |||||||||||||||||||||||||||||||||||||
Royals | 2/29/2020 | Asset | $ | 7,590 | $ | 2,500 | $ | 10,090 | $ | 11,095 | $ | 1,332 | ||||||||||||||||||||||||||||||||
Energy One | 8/10/2020 | Asset | 13,200 | 1,591 | 14,791 | 7,454 | (558) | |||||||||||||||||||||||||||||||||||||
Storm Master | 8/31/2020 | Asset | 13,000 | 1,336 | 14,336 | 8,131 | 619 | |||||||||||||||||||||||||||||||||||||
ICON | 10/13/2020 | Asset | 16,900 | 3,598 | 20,498 | 4,798 | 449 | |||||||||||||||||||||||||||||||||||||
Norkote | 10/26/2020 | Asset | 8,725 | 2,426 | 11,151 | 2,702 | 417 | |||||||||||||||||||||||||||||||||||||
WeatherSeal | 11/16/2020 | Asset | 9,500 | 922 | 10,422 | 766 | (23) | |||||||||||||||||||||||||||||||||||||
Other | Various | Asset | 7,531 | 1,713 | 9,244 | 5,548 | (344) | |||||||||||||||||||||||||||||||||||||
Total | $ | 76,446 | $ | 14,086 | $ | 90,532 | $ | 40,494 | $ | 1,892 |
Name | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | |||||||||||||||||||||
Alpine Insulation Co., Inc. | 4/12/2016 | Asset | $ | 21,151 | $ | 1,560 | $ | 22,711 | $ | 21,359 | $ | 1,370 | ||||||||||||||||
East Coast | 10/17/2016 | Asset | 15,589 | 600 | 16,189 | 4,701 | 21 | |||||||||||||||||||||
Other | Various | Asset | 18,753 | 2,299 | 21,052 | 19,974 | (592 | ) | ||||||||||||||||||||
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Total | $ | 55,493 | $ | 4,459 | $ | 59,952 | $ | 46,034 | $ | 799 | ||||||||||||||||||
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2019 Acquisitions Date Acquisition Type Cash Paid Seller Obligations Total Purchase Price Revenue Net Income (Loss) 1st State Insulation 3/18/2019 Asset $ 5,125 $ 1,355 $ 6,480 $ 9,828 $ 476 Expert Insulation 6/24/2019 Asset 16,165 1,993 18,158 6,484 155 Premier 11/18/2019 Share 25,000 2,765 27,765 2,161 (62) Other Various Asset 5,750 1,430 7,180 3,339 23 Total $ 52,040 $ 7,543 $ 59,583 $ 21,812 $ 592
2018 | ||||||||||||||||
CDG | AFT | Other | Total | |||||||||||||
Estimated fair values: | ||||||||||||||||
Cash | $ | — | $ | — | $ | — | $ | — | ||||||||
Accounts receivable | 1,731 | — | 4,181 | 5,912 | ||||||||||||
Inventories | 514 | 565 | 1,136 | 2,215 | ||||||||||||
Other current assets | 28 | — | 918 | 946 | ||||||||||||
Property and equipment | 933 | 2,882 | 2,169 | 5,984 | ||||||||||||
Intangibles | 3,711 | 13,470 | 18,904 | 36,085 | ||||||||||||
Goodwill | 4,898 | 4,415 | 7,711 | 17,024 | ||||||||||||
Othernon-current assets | 36 | 13 | 82 | 131 | ||||||||||||
Accounts payable and other current liabilities | (438 | ) | (128 | ) | (2,451 | ) | (3,017 | ) | ||||||||
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Fair value of assets acquired and purchase price | 11,413 | 21,217 | 32,650 | 65,280 | ||||||||||||
Less fair value of common stock issued | — | — | — | — | ||||||||||||
Less seller obligations | 1,973 | 1,510 | 4,057 | 7,540 | ||||||||||||
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Cash paid | $ | 9,440 | $ | 19,707 | $ | 28,593 | $ | 57,740 | ||||||||
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2017 | ||||||||||||||||||||
Alpha | Columbia | Astro | Other | Total | ||||||||||||||||
Estimated fair values: | ||||||||||||||||||||
Cash | $ | 247 | $ | — | $ | — | $ | — | $ | 247 | ||||||||||
Accounts receivable | 29,851 | 989 | 924 | 3,157 | 34,921 | |||||||||||||||
Inventories | 1,852 | 704 | 296 | 1,544 | 4,396 | |||||||||||||||
Other current assets | 4,500 | 8 | 36 | 96 | 4,640 | |||||||||||||||
Property and equipment | 1,528 | 659 | 640 | 1,820 | 4,647 | |||||||||||||||
Intangibles | 57,200 | 4,760 | 5,168 | 9,688 | 76,816 | |||||||||||||||
Goodwill | 38,511 | 2,209 | 2,932 | 4,190 | 47,842 | |||||||||||||||
Othernon-current assets | 383 | 36 | — | 219 | 638 | |||||||||||||||
Accounts payable and other current liabilities | (17,401 | ) | (372 | ) | (370 | ) | (2,650 | ) | (20,793 | ) | ||||||||||
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Fair value of assets acquired | 116,671 | 8,993 | 9,626 | 18,064 | 153,354 | |||||||||||||||
Less fair value of common stock issued | 10,859 | — | — | — | 10,859 | |||||||||||||||
Less seller obligations | 2,002 | 225 | 482 | 2,419 | 5,128 | |||||||||||||||
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Cash paid | $ | 103,810 | $ | 8,768 | $ | 9,144 | $ | 15,645 | $ | 137,367 | ||||||||||
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2021 IWI Alert Alpine GCP Five Star DGM CFI AMD Other Total Estimated fair values: Cash $ 168 $ — $ — $ — $ 1,472 $ — $ 67 $ — $ — $ 1,707 Accounts receivable 5,122 4,710 — 3,067 4,597 4,007 1,318 8,393 446 31,660 Inventories 1,157 765 359 — 1,399 6 311 7,540 345 11,882 Other current assets 3,014 738 — — 330 1,016 26 — 74 5,198 Property and equipment 796 693 726 206 1,161 853 714 1,133 932 7,214 Intangibles 25,200 2,770 5,543 5,670 17,400 8,800 7,699 52,800 4,072 129,954 Goodwill 23,282 940 3,582 2,695 6,482 3,447 6,799 56,327 2,063 105,617 Other non-current assets 264 132 — — — 213 — — 18 627 Accounts payable and other current liabilities (8,416) (1,184) (57) (493) (1,040) (4,625) (242) (23) (123) (16,203) Deferred income tax liabilities — — — — — — (2,089) — — (2,089) Other long-term liabilities (2,530) (734) — (18) (27) (14) (8) (49) (3) (3,383) Fair value of assets acquired and purchase price 48,057 8,830 10,153 11,127 31,774 13,703 14,595 126,121 7,824 272,184 Less seller obligations 5,959 2,980 2,208 1,427 5,466 2,069 1,145 6,631 1,284 29,169 Cash paid $ 42,098 $ 5,850 $ 7,945 $ 9,700 $ 26,308 $ 11,634 $ 13,450 $ 119,490 $ 6,540 $ 243,015
2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Royals | Energy One | Storm Master | ICON | Norkote | WeatherSeal | Other | Total | ||||||||||||||||||||||||||||||||||||||||
Estimated fair values: | |||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable | $ | 2,848 | $ | 3,357 | $ | 2,362 | $ | 4,828 | $ | 1,926 | $ | 865 | $ | 1,419 | $ | 17,605 | |||||||||||||||||||||||||||||||
Inventories | 305 | 838 | 175 | 243 | 444 | 156 | 600 | 2,761 | |||||||||||||||||||||||||||||||||||||||
Other current assets | 430 | 12 | — | 675 | 178 | 14 | 145 | 1,454 | |||||||||||||||||||||||||||||||||||||||
Property and equipment | 598 | 2,319 | 798 | 380 | 584 | 520 | 663 | 5,862 | |||||||||||||||||||||||||||||||||||||||
Intangibles | 3,930 | 6,500 | 8,720 | 11,830 | 5,310 | 5,450 | 4,483 | 46,223 | |||||||||||||||||||||||||||||||||||||||
Goodwill | 3,015 | 3,253 | 3,631 | 2,870 | 2,841 | 3,472 | 2,223 | 21,305 | |||||||||||||||||||||||||||||||||||||||
Other non-current assets | 58 | — | — | 145 | — | — | 38 | 241 | |||||||||||||||||||||||||||||||||||||||
Accounts payable and other current liabilities | (1,059) | (1,469) | (1,336) | (445) | (86) | (50) | (196) | (4,641) | |||||||||||||||||||||||||||||||||||||||
Other long-term liabilities | (35) | (19) | (14) | (28) | (46) | (5) | (131) | (278) | |||||||||||||||||||||||||||||||||||||||
Fair value of assets acquired and purchase price | 10,090 | 14,791 | 14,336 | 20,498 | 11,151 | 10,422 | 9,244 | 90,532 | |||||||||||||||||||||||||||||||||||||||
Less seller obligations | 2,500 | 1,591 | 1,336 | 3,598 | 2,426 | 922 | 1,713 | 14,086 | |||||||||||||||||||||||||||||||||||||||
Cash paid | $ | 7,590 | $ | 13,200 | $ | 13,000 | $ | 16,900 | $ | 8,725 | $ | 9,500 | $ | 7,531 | $ | 76,446 |
2016 | ||||||||||||||||
Alpine | East Coast | Other | Total | |||||||||||||
Estimated fair values: | ||||||||||||||||
Cash | $ | — | $ | 2,181 | $ | — | $ | 2,181 | ||||||||
Accounts receivable | 3,959 | 3,093 | 2,502 | 9,554 | ||||||||||||
Inventories | 700 | 332 | 1,183 | 2,215 | ||||||||||||
Other current assets | — | 1 | 24 | 25 | ||||||||||||
Property and equipment | 656 | 666 | 1,616 | 2,938 | ||||||||||||
Intangibles | 12,800 | 6,400 | 11,067 | 30,267 | ||||||||||||
Goodwill | 6,642 | 4,346 | 5,933 | 16,921 | ||||||||||||
Othernon-current assets | — | 116 | 345 | 461 | ||||||||||||
Accounts payable and other current liabilities | (2,046 | ) | (946 | ) | (1,618 | ) | (4,610 | ) | ||||||||
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Fair value of assets acquired | 22,711 | 16,189 | 21,052 | 59,952 | ||||||||||||
Less seller obligations | 1,560 | 600 | 2,299 | 4,459 | ||||||||||||
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Cash paid | $ | 21,151 | $ | 15,589 | $ | 18,753 | $ | 55,493 | ||||||||
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2019 | |||||||||||||||||||||||||||||
1st State | Expert | Premier | Other | Total | |||||||||||||||||||||||||
Estimated fair values: | |||||||||||||||||||||||||||||
Cash | $ | — | $ | — | $ | 334 | $ | — | $ | 334 | |||||||||||||||||||
Accounts receivable | — | 1,796 | 2,929 | 479 | 5,204 | ||||||||||||||||||||||||
Inventories | 291 | 723 | 1,242 | 410 | 2,666 | ||||||||||||||||||||||||
Other current assets | — | — | — | 3 | 3 | ||||||||||||||||||||||||
Property and equipment | 989 | 235 | 876 | 887 | 2,987 | ||||||||||||||||||||||||
Intangibles | 3,382 | 6,740 | 14,300 | 3,619 | 28,041 | ||||||||||||||||||||||||
Goodwill | 1,857 | 8,545 | 10,151 | 1,765 | 22,318 | ||||||||||||||||||||||||
Other non-current assets | — | 161 | 329 | 41 | 531 | ||||||||||||||||||||||||
Accounts payable and other current liabilities | (39) | (42) | (2,396) | (24) | (2,501) | ||||||||||||||||||||||||
Fair value of assets acquired and purchase price | 6,480 | 18,158 | 27,765 | 7,180 | 59,583 | ||||||||||||||||||||||||
Less seller obligations | 1,355 | 1,993 | 2,765 | 1,430 | 7,543 | ||||||||||||||||||||||||
Cash paid | $ | 5,125 | $ | 16,165 | $ | 25,000 | $ | 5,750 | $ | 52,040 |
various future forecast scenarios.
2018 | 2017 | 2016 | ||||||||||||||||||||||
Acquired intangibles assets | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs) | ||||||||||||||||||
Customer relationships | $ | 27,149 | 8 | $ | 39,922 | 8 | $ | 18,511 | 9 | |||||||||||||||
Trademarks and trade names | 6,075 | 15 | 20,667 | 15 | 8,983 | 15 | ||||||||||||||||||
Non-competition agreements | 2,401 | 5 | 2,628 | 5 | 2,773 | 5 | ||||||||||||||||||
Backlog | 460 | 2 | 13,600 | 1.5 | — | — |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2021 2020 2019 Acquired intangibles assets Estimated Fair Value Weighted Average Estimated Useful Life (yrs) Estimated Fair Value Weighted Average Estimated Useful Life (yrs) Estimated Fair Value Weighted Average Estimated Useful Life (yrs) Customer relationships $ 94,473 12 $ 28,307 8 $ 20,659 8 Trademarks and trade names 23,349 15 9,834 15 5,286 15 Non-competition agreements 7,254 5 3,315 5 2,096 5 Backlog 4,878 2.5 4,767 1.5 — —
Unaudited Pro Forma for the years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net revenue | $ | 1,381,711 | $ | 1,246,017 | $ | 1,058,707 | ||||||
Net income | 58,217 | 48,016 | 43,891 | |||||||||
Basic net income per share | 1.87 | 1.52 | 1.39 | |||||||||
Diluted net income per share | 1.86 | 1.51 | 1.39 |
December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Net revenue | $ | 2,105,295 | $ | 1,922,327 | $ | 1,660,326 | |||||||||||
Net income | 129,825 | 107,791 | 76,474 | ||||||||||||||
Basic net income per share | 4.42 | 3.65 | 2.57 | ||||||||||||||
Diluted net income per share | 4.38 | 3.63 | 2.56 |
None
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized unauditedDuring the first quarter of 2022, our Chief Executive Officer, who is also our chief operating decision maker, changed the manner in which he reviews financial information for purposes of assessing business performance and allocating resources. In response, we are in the process of modifying our internal reporting and supporting systems to reflect these changes and are evaluating the future impact on our reporting of segments.
2018 | Three months ended | |||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Total Year | ||||||||||||||||
Net revenue | $ | 301,728 | $ | 332,584 | $ | 348,999 | $ | 353,121 | $ | 1,336,432 | ||||||||||
Gross profit | 79,976 | 95,643 | 97,334 | 98,638 | 371,591 | |||||||||||||||
Net income | 6,394 | 16,315 | 15,563 | 16,476 | 54,748 | |||||||||||||||
Comprehensive income | 7,554 | 16,790 | 16,381 | 12,973 | 53,698 | |||||||||||||||
Basic net income per share | 0.20 | 0.52 | 0.50 | 0.54 | 1.76 | |||||||||||||||
Diluted net income per share | 0.20 | 0.52 | 0.50 | 0.53 | 1.75 | |||||||||||||||
2017 | Three months ended | |||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Total Year | ||||||||||||||||
Net revenue | $ | 255,669 | $ | 282,196 | $ | 295,193 | $ | 299,869 | $ | 1,132,927 | ||||||||||
Gross profit | 72,172 | 84,928 | 85,581 | 81,345 | 324,026 | |||||||||||||||
Net income | 6,364 | 11,973 | 12,010 | 10,793 | 41,140 | |||||||||||||||
Comprehensive income | 6,364 | 11,896 | 12,042 | 11,345 | 41,647 | |||||||||||||||
Basic and diluted net income per share | 0.20 | 0.38 | 0.38 | 0.34 | 1.30 |
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Not applicable.
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management, under the supervision of the principal executive officer and the principal financial officer, assessed the effectiveness of our internal control over financial reporting, excluding the internal control over financial reporting at the subsidiaries listed below that we acquired during 20182021 as of December 31, 20182021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control – Integrated Framework (2013). The scope of management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 20182021 includes all of the Company’s subsidiaries except the subsidiaries listed below, which were acquired during 20182021 and whose financial statements constitute the percentages of total assets and net revenue listed below of the consolidated financial statements of the Company as of and for the year ended December 31, 2018:
Percentage of Total Assets | Percentage of Net Revenue | |||||||||
Rocket Insulation & Coatings Inc. | January 15, 2018 | 0.4 | % | 0.5 | % | |||||
Custom Overhead Door, LLC dba Custom Door & Gate | March 19, 2018 | 1.4 | % | 0.9 | % | |||||
H2H Blinds, LLC | April 9, 2018 | 0.6 | % | 0.6 | % | |||||
Green Star Plus Insulation | May 7, 2018 | 0.3 | % | 0.1 | % | |||||
Advanced Insulation | May 21, 2018 | 0.1 | % | 0.1 | % | |||||
Cutting Edge Glass | August 13, 2018 | 1.0 | % | 0.2 | % | |||||
Trademark Roofing and Gutters | September 4, 2018 | 0.6 | % | 0.2 | % | |||||
Water-Tite Solution, Inc. | September 17, 2018 | 0.7 | % | 0.1 | % | |||||
Advanced Fiber Technology | October 31, 2018 | 2.6 | % | 0.3 | % | |||||
Carolina Glass & Mirror, Inc. | December 10, 2018 | 0.5 | % | 0.0 | % |
2021:
Subsidiary | Acquisition Date | Percentage of Total Assets | Percent of Net Revenue | |||||||||||||||||
Intermountain West | March 1, 2021 | 3.6% | 1.8% | |||||||||||||||||
Alert | April 13, 2021 | 0.7% | 0.7% | |||||||||||||||||
Alpine Construction | April 19, 2021 | 0.6% | 0.4% | |||||||||||||||||
Reliable | May 11, 2021 | 0.2% | 0.1% | |||||||||||||||||
GCP | June 7, 2021 | 0.7% | 0.4% | |||||||||||||||||
MT Insulation | August 23, 2021 | 0.2% | 0.1% | |||||||||||||||||
5 Star | September 13, 2021 | 2.0% | 0.3% | |||||||||||||||||
Mr. Insulation | October 4, 2021 | 0.2% | 0.0% | |||||||||||||||||
DGM | November 1, 2021 | 1.1% | 0.1% | |||||||||||||||||
CFI | November 22, 2021 | 1.0% | 0.1% | |||||||||||||||||
AMD | December 13, 2021 | 7.6% | 0.2% |
2021. We have not experienced any material impact to our internal controls over financial reporting due to the
Item 9B. Other Information |
None.
On February 24, 2022, we announced that the Board of Directors of Installed Building Products, Inc. (the “Company”) approved the appointment of Jason R. Niswonger, 49, as its Chief Administrative and Sustainability Officer, effective March 1, 2022. Mr. Niswonger was formerly the Company’s Senior Vice President, Finance and Investor Relations since March 2015. Additional biographical information is available on page 34 of our 2021 Definitive Proxy Statement filed on April 16, 2021 ("2021 Proxy Statement").
Installed Building Products, Inc.
Percentage of Total Assets | Percentage of Net Revenue | |||||||||
Rocket Insulation & Coatings Inc. | January 15, 2018 | 0.4 | % | 0.5 | % | |||||
Custom Overhead Door, LLC dba Custom Door & Gate | March 19, 2018 | 1.4 | % | 0.9 | % | |||||
H2H Blinds, LLC | April 9, 2018 | 0.6 | % | 0.6 | % | |||||
Green Star Plus Insulation | May 7, 2018 | 0.3 | % | 0.1 | % | |||||
Advanced Insulation | May 21, 2018 | 0.1 | % | 0.1 | % | |||||
Cutting Edge Glass | August 13, 2018 | 1.0 | % | 0.2 | % | |||||
Trademark Roofing and Gutters | September 4, 2018 | 0.6 | % | 0.2 | % | |||||
Water-Tite Solution, Inc. | September 17, 2018 | 0.7 | % | 0.1 | % | |||||
Advanced Fiber Technology | October 31, 2018 | 2.6 | % | 0.3 | % | |||||
Carolina Glass & Mirror, Inc. | December 10, 2018 | 0.5 | % | 0.0 | % |
2021.
Subsidiary | Acquisition Date | Percentage of Total Assets | Percent of Net Revenue | |||||||||||||||||
Intermountain West | March 1, 2021 | 3.6% | 1.8% | |||||||||||||||||
Alert | April 13, 2021 | 0.7% | 0.7% | |||||||||||||||||
Alpine Construction | April 19, 2021 | 0.6% | 0.4% | |||||||||||||||||
Reliable | May 11, 2021 | 0.2% | 0.1% | |||||||||||||||||
GCP | June 7, 2021 | 0.7% | 0.4% | |||||||||||||||||
MT Insulation | August 23, 2021 | 0.2% | 0.1% | |||||||||||||||||
5 Star | September 13, 2021 | 2.0% | 0.3% | |||||||||||||||||
Mr. Insulation | October 4, 2021 | 0.2% | 0.0% | |||||||||||||||||
DGM | November 1, 2021 | 1.1% | 0.1% | |||||||||||||||||
CFI | November 22, 2021 | 1.0% | 0.1% | |||||||||||||||||
AMD | December 13, 2021 | 7.6% | 0.2% |
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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(b)Exhibits.
10.9 | ||||||||
10.10 | ||||||||
10.11 | ||||||||
10.25 | ||||||||
10.26 | ||||||||
10.28 | Consent and Amendment No. 2 to Credit Agreement, dated December 14, 2021, by and among Installed Building Products, Inc., the financial institutions party thereto and Bank of America N.A., as administrative agent, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on December 14, 2021. | |||||||
10.29# | ||||||||
10.30 | ||||||||
10.31# | ||||||||
10.32# | ||||||||
10.33# | ||||||||
10.34# | ||||||||
10.35# | ||||||||
10.36# | ||||||||
10.37# | ||||||||
21.1* | ||||||||
23.1* | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
32.2* | ||||||||
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101** | The following financial statements from the Company's Annual Report on Form 10-K for the period ended December 31, 2021, formatted in inline XBRL, include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements. | |||||||
Cover Page Interactive Data File (formatted in Inline XBRL | ||||||||
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INSTALLED BUILDING PRODUCTS, INC. | |||||||||||
/s/ Jeffrey W. Edwards | |||||||||||
By: | Jeffrey W. Edwards | ||||||||||
President and Chief Executive Officer |
Signature | Title | Date | ||||||||||||
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| ||||||||||||
/s/ Jeffrey W. Edwards
| President, Chief Executive Officer and
| February | ||||||||||||
Jeffrey W. Edwards | ||||||||||||||
/s/ Michael T. Miller
| Executive Vice President, Chief Financial Officer and Director
| February | ||||||||||||
Michael T. Miller | ||||||||||||||
/s/ Todd R. Fry
| Chief Accounting Officer
| February | ||||||||||||
Todd R. Fry | ||||||||||||||
/s/ Margot L. Carter | Director | February 24, 2022 | ||||||||||||
Margot L. Carter | ||||||||||||||
/s/ Lawrence A. Hilsheimer | Director | February 24, 2022 | ||||||||||||
Lawrence A. Hilsheimer | ||||||||||||||
/s/ Janet E. Jackson | Director | February 24, 2022 | ||||||||||||
Janet E. Jackson | ||||||||||||||
/s/
| Director | February | ||||||||||||
David R. Meuse | ||||||||||||||
/s/ Michael H. Thomas | Director | February 24, 2022 | ||||||||||||
Michael H. Thomas | ||||||||||||||
/s/ Vikas Verma | Director | February 24, 2022 | ||||||||||||
Vikas Verma |
92