FORM10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
March 31, 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 on each exchange on which registered | ||||||||||||
| Common Stock, | $0.01 par value per share | IBP | The New York Stock Exchange | |||||||||||
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||||||
| ☐ | ||||||||||||||||||||||||
| Emerging growth company | ☐ | |||||||||||||||||||||||
373737
Item 1.Financial Statements
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 67,008 | $ | 14,482 | ||||
Investments | 25,114 | — | ||||||
Accounts receivable (less allowance for doubtful accounts of $4,846 and $3,397 | ||||||||
at September 30, 2017 and December 31, 2016, respectively) | 185,470 | 128,466 | ||||||
Inventories | 44,074 | 40,229 | ||||||
Other current assets | 19,599 | 9,214 | ||||||
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Total current assets | 341,265 | 192,391 | ||||||
Property and equipment, net | 78,045 | 67,788 | ||||||
Non-current assets | ||||||||
Goodwill | 153,660 | 107,086 | ||||||
Intangibles, net | 140,714 | 86,317 | ||||||
Othernon-current assets | 9,969 | 8,513 | ||||||
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Totalnon-current assets | 304,343 | 201,916 | ||||||
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Total assets | $ | 723,653 | $ | 462,095 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current maturities of long-term debt | $ | 15,550 | $ | 17,192 | ||||
Current maturities of capital lease obligations | 6,044 | 6,929 | ||||||
Accounts payable | 82,329 | 67,921 | ||||||
Accrued compensation | 25,975 | 18,212 | ||||||
Other current liabilities | 23,703 | 19,851 | ||||||
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Total current liabilities | 153,601 | 130,105 | ||||||
Long-term debt | 328,295 | 134,235 | ||||||
Capital lease obligations, less current maturities | 7,509 | 8,364 | ||||||
Deferred income taxes | 13,755 | 14,239 | ||||||
Other long-term liabilities | 23,135 | 21,175 | ||||||
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Total liabilities | 526,295 | 308,118 | ||||||
Commitments and contingencies (Note 12) | ||||||||
Stockholders’ equity | ||||||||
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | — | — | ||||||
Common Stock; $0.01 par value: 100,000,000 authorized, 32,524,934 and 32,135,176 issued and 31,862,561 and 31,484,774 shares outstanding at September 30, 2017 and December 31, 2016, respectively | 325 | 321 | ||||||
Additional paid in capital | 172,206 | 158,581 | ||||||
Retained earnings | 37,641 | 7,294 | ||||||
Treasury Stock; at cost: 662,373 and 650,402 shares at September 30, 2017 and December 31, 2016, respectively | (12,769 | ) | (12,219 | ) | ||||
Accumulated other comprehensive loss | (45 | ) | — | |||||
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Total stockholders’ equity | 197,358 | 153,977 | ||||||
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Total liabilities and stockholders’ equity | $ | 723,653 | $ | 462,095 | ||||
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| March 31, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 207,343 | $ | 231,520 | |||||||
| Accounts receivable (less allowance for credit losses of $8,615 and $8,789 at March 31, 2021 and December 31, 2020, respectively) | 270,498 | 266,566 | |||||||||
| Inventories | 85,980 | 77,179 | |||||||||
| Prepaid expenses and other current assets | 46,344 | 48,678 | |||||||||
| Total current assets | 610,165 | 623,943 | |||||||||
| Property and equipment, net | 105,162 | 104,022 | |||||||||
| Operating lease right-of-use assets | 54,442 | 53,766 | |||||||||
| Goodwill | 242,036 | 216,870 | |||||||||
| Customer relationships, net | 121,051 | 108,504 | |||||||||
| Other intangibles, net | 67,151 | 62,889 | |||||||||
| Other non-current assets | 33,609 | 17,682 | |||||||||
| Total assets | $ | 1,233,616 | $ | 1,187,676 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Current maturities of long-term debt | $ | 23,770 | $ | 23,355 | |||||||
| Current maturities of operating lease obligations | 19,210 | 18,758 | |||||||||
| Current maturities of finance lease obligations | 1,875 | 2,073 | |||||||||
| Accounts payable | 104,001 | 101,462 | |||||||||
| Accrued compensation | 47,520 | 45,876 | |||||||||
| Other current liabilities | 48,926 | 44,951 | |||||||||
| Total current liabilities | 245,302 | 236,475 | |||||||||
| Long-term debt | 545,138 | 541,957 | |||||||||
| Operating lease obligations | 34,618 | 34,413 | |||||||||
| Finance lease obligations | 2,367 | 2,430 | |||||||||
| Deferred income taxes | 9,957 | 35 | |||||||||
| Other long-term liabilities | 55,696 | 53,184 | |||||||||
| Total liabilities | 893,078 | 868,494 | |||||||||
| Commitments and contingencies (Note 15) | 0 | 0 | |||||||||
| Stockholders’ equity | |||||||||||
| Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 0 | 0 | |||||||||
| Common stock; $0.01 par value: 100,000,000 authorized, 33,208,082 and 33,141,879 issued and 29,689,201 and 29,623,272 shares outstanding at March 31, 2021 and December 31, 2020, respectively | 331 | 331 | |||||||||
| Additional paid in capital | 202,662 | 199,847 | |||||||||
| Retained earnings | 277,804 | 269,420 | |||||||||
| Treasury stock; at cost: 3,518,881 and 3,518,607 shares at March 31, 2021 and December 31, 2020, respectively | (141,653) | (141,653) | |||||||||
| Accumulated other comprehensive income (loss) | 1,394 | (8,763) | |||||||||
| Total stockholders’ equity | 340,538 | 319,182 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,233,616 | $ | 1,187,676 | |||||||
INCOME (UNAUDITED)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenue | $ | 295,193 | $ | 225,392 | $ | 833,058 | $ | 629,003 | ||||||||
Cost of sales | 209,612 | 158,132 | 590,377 | 444,909 | ||||||||||||
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Gross profit | 85,581 | 67,260 | 242,681 | 184,094 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling | 14,865 | 13,028 | 42,541 | 36,239 | ||||||||||||
Administrative | 41,657 | 31,504 | 122,679 | 92,677 | ||||||||||||
Amortization | 6,824 | 2,889 | 19,790 | 8,178 | ||||||||||||
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Operating income | 22,235 | 19,839 | 57,671 | 47,000 | ||||||||||||
Other expense | ||||||||||||||||
Interest expense | 4,421 | 1,544 | 11,456 | 4,605 | ||||||||||||
Other | 83 | 23 | 366 | 248 | ||||||||||||
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Income before income taxes | 17,731 | 18,272 | 45,849 | 42,147 | ||||||||||||
Income tax provision | 5,721 | 6,723 | 15,502 | 14,792 | ||||||||||||
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Net income | $ | 12,010 | $ | 11,549 | $ | 30,347 | $ | 27,355 | ||||||||
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Other comprehensive income, net of tax: | ||||||||||||||||
Unrealized gain (loss) on cash flow hedge, net of tax (provision) benefit of ($21) and $30 for the three and nine months ended September 30, 2017, respectively | 32 | — | (45 | ) | — | |||||||||||
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Comprehensive income | $ | 12,042 | $ | 11,549 | $ | 30,302 | $ | 27,355 | ||||||||
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Basic and diluted net income per share | $ | 0.38 | $ | 0.37 | $ | 0.96 | $ | 0.87 | ||||||||
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Weighted average shares outstanding: | ||||||||||||||||
Basic | 31,659,503 | 31,323,600 | 31,632,400 | 31,294,596 | ||||||||||||
Diluted | 31,766,881 | 31,377,790 | 31,712,515 | 31,351,991 | ||||||||||||
| Three months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net revenue | $ | 437,066 | $ | 397,331 | |||||||
| Cost of sales | 311,639 | 281,071 | |||||||||
| Gross profit | 125,427 | 116,260 | |||||||||
| Operating expenses | |||||||||||
| Selling | 20,858 | 20,355 | |||||||||
| Administrative | 65,077 | 60,195 | |||||||||
| Amortization | 8,396 | 6,680 | |||||||||
| Operating income | 31,096 | 29,030 | |||||||||
| Other expense | |||||||||||
| Interest expense, net | 7,574 | 7,358 | |||||||||
| Other | 81 | 0 | |||||||||
| Income before income taxes | 23,441 | 21,672 | |||||||||
| Income tax provision | 6,150 | 5,684 | |||||||||
| Net income | $ | 17,291 | $ | 15,988 | |||||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Net change on cash flow hedges, net of tax (provision) benefit of $(3,428) and $1,939 for the three months ended March 31, 2021 and 2020, respectively | 10,157 | (5,608) | |||||||||
| Comprehensive income | $ | 27,448 | $ | 10,380 | |||||||
| Basic net income per share | $ | 0.59 | $ | 0.54 | |||||||
| Diluted net income per share | $ | 0.58 | $ | 0.53 | |||||||
| Weighted average shares outstanding: | |||||||||||
| Basic | 29,286,044 | 29,722,444 | |||||||||
| Diluted | 29,613,484 | 29,930,954 | |||||||||
| Cash dividends declared per share | $ | 0.30 | 0 | ||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
| Common Stock | Additional Paid In | Accumulated | Treasury Shares | Accumulated Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Shares | Amount | Loss | Equity | |||||||||||||||||||||||||
BALANCE—January 1, 2016 | 31,982,888 | $ | 320 | $ | 156,688 | $ | (31,142 | ) | (616,560 | ) | $ | (11,383 | ) | $ | — | $ | 114,483 | |||||||||||||||
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Net Income | 27,355 | 27,355 | ||||||||||||||||||||||||||||||
Issuance of Common Stock Awards to Employees | 143,528 | 1 | (1 | ) | — | |||||||||||||||||||||||||||
Surrender of Common Stock Awards by Employees | (33,091 | ) | (836 | ) | (836 | ) | ||||||||||||||||||||||||||
Share-Based Compensation Expense | 1,231 | 1,231 | ||||||||||||||||||||||||||||||
Share-Based Compensation Issued to Directors | 8,760 | 300 | 300 | |||||||||||||||||||||||||||||
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BALANCE—September 30, 2016 | 32,135,176 | $ | 321 | $ | 158,218 | $ | (3,787 | ) | (649,651 | ) | $ | (12,219 | ) | $ | — | $ | 142,533 | |||||||||||||||
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| Common Stock | Additional Paid In | Retained | Treasury Shares | Accumulated Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Amount | Loss | Equity | |||||||||||||||||||||||||
BALANCE—January 1, 2017 | 32,135,176 | $ | 321 | $ | 158,581 | $ | 7,294 | (650,402 | ) | $ | (12,219 | ) | $ | — | $ | 153,977 | ||||||||||||||||
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Net Income | 30,347 | 30,347 | ||||||||||||||||||||||||||||||
Purchase of Remaining Interest in Subsidiary | (1,890 | ) | (1,890 | ) | ||||||||||||||||||||||||||||
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 | (11,971 | ) | (550 | ) | (550 | ) | ||||||||||||||||||||||||||
Share-Based Compensation Expense | 4,360 | 4,360 | ||||||||||||||||||||||||||||||
Share-Based Compensation Issued to Directors | 5,940 | 300 | 300 | |||||||||||||||||||||||||||||
Other Comprehensive Loss, Net of Tax | (45 | ) | (45 | ) | ||||||||||||||||||||||||||||
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BALANCE—September 30, 2017 | 32,524,934 | $ | 325 | $ | 172,206 | $ | 37,641 | (662,373 | ) | $ | (12,769 | ) | $ | (45 | ) | $ | 197,358 | |||||||||||||||
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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, 2020 | 32,871,504 | $ | 329 | $ | 190,230 | $ | 173,371 | (2,855,164) | $ | (106,756) | $ | (7,143) | $ | 250,031 | |||||||||||||||||||||||||||||||||
| Net income | 15,988 | 15,988 | |||||||||||||||||||||||||||||||||||||||||||||
| Cumulative effect of accounting changes, net of tax | (1,190) | (1,190) | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock awards to employees | 89,957 | 1 | (1) | 0 | |||||||||||||||||||||||||||||||||||||||||||
| Surrender of common stock awards | (1,759) | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | 2,302 | 2,302 | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation issued to directors | 316 | 33 | 33 | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchase | (442,542) | (15,759) | (15,759) | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | (5,608) | (5,608) | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - March 31, 2020 | 32,961,777 | $ | 330 | $ | 192,564 | $ | 188,169 | (3,299,465) | $ | (122,515) | $ | (12,751) | $ | 245,797 | |||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - January 1, 2021 | 33,141,879 | $ | 331 | $ | 199,847 | $ | 269,420 | (3,518,607) | $ | (141,653) | $ | (8,763) | $ | 319,182 | |||||||||||||||||||||||||||||||||
| Net income | 17,291 | 17,291 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock awards to employees | 66,203 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
| Surrender of common stock awards | (274) | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | 2,713 | 2,713 | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation issued to directors | 102 | 102 | |||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared ($0.30 per share) | (8,907) | (8,907) | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 10,157 | 10,157 | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - March 31, 2021 | 33,208,082 | $ | 331 | $ | 202,662 | $ | 277,804 | (3,518,881) | $ | (141,653) | $ | 1,394 | $ | 340,538 | |||||||||||||||||||||||||||||||||
| Nine months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 30,347 | $ | 27,355 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization of property and equipment | 20,732 | 17,240 | ||||||
Amortization of intangibles | 19,790 | 8,178 | ||||||
Amortization of deferred financing costs and debt discount | 768 | 282 | ||||||
Provision for doubtful accounts | 2,208 | 1,960 | ||||||
Write-off of debt issuance costs | 1,201 | 286 | ||||||
Gain on sale of property and equipment | (329 | ) | (218 | ) | ||||
Noncash stock compensation | 4,750 | 1,531 | ||||||
Deferred income taxes | — | 708 | ||||||
Changes in assets and liabilities, excluding effects of acquisitions | ||||||||
Accounts receivable | (24,636 | ) | (17,878 | ) | ||||
Inventories | 68 | (3,158 | ) | |||||
Other assets | 695 | 4,727 | ||||||
Accounts payable | 2,665 | 3,879 | ||||||
Income taxes payable/receivable | (10,167 | ) | 3,652 | |||||
Other liabilities | 5,249 | 6,033 | ||||||
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Net cash provided by operating activities | 53,341 | 54,577 | ||||||
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Cash flows from investing activities | ||||||||
Purchases of investments | (25,195 | ) | — | |||||
Purchases of property and equipment | (22,947 | ) | (19,169 | ) | ||||
Acquisitions of businesses, net of cash acquired of $247 and $0, respectively | (130,994 | ) | (36,427 | ) | ||||
Proceeds from sale of property and equipment | 682 | 523 | ||||||
Other | (1,845 | ) | — | |||||
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Net cash used in investing activities | (180,299 | ) | (55,073 | ) | ||||
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Cash flows from financing activities | ||||||||
Proceeds from revolving line of credit under credit agreement applicable to respective period (Note 5) | — | 37,975 | ||||||
Payments on revolving line of credit under credit agreement applicable to respective period (Note 5) | — | (37,975 | ) | |||||
Proceeds from term loan under credit agreement applicable to respective period (Note 5) | 300,000 | 100,000 | ||||||
Payments on term loan under credit agreement applicable to respective period (Note 5) | (97,000 | ) | (50,625 | ) | ||||
Proceeds from delayed draw term loan under credit agreement applicable to respective period (Note 5) | 112,500 | 12,500 | ||||||
Payments on delayed draw term loan under credit agreement applicable to respective period (Note 5) | (125,000 | ) | (50,000 | ) | ||||
Proceeds from vehicle and equipment notes payable | 15,817 | 16,310 | ||||||
Debt issuance costs | (8,175 | ) | (1,238 | ) | ||||
Principal payments on long term debt | (7,201 | ) | (4,055 | ) | ||||
Principal payments on capital lease obligations | (5,583 | ) | (6,596 | ) | ||||
Acquisition-related obligations | (3,434 | ) | (2,732 | ) | ||||
Surrender of common stock awards by employees | (550 | ) | (836 | ) | ||||
Purchase of remaining interest in subsidiary | (1,890 | ) | — | |||||
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Net cash provided by financing activities | 179,484 | 12,728 | ||||||
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Net change in cash | 52,526 | 12,232 | ||||||
Cash at beginning of period | 14,482 | 6,818 | ||||||
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Cash at end of period | $ | 67,008 | $ | 19,050 | ||||
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Supplemental disclosures of cash flow information | ||||||||
Net cash paid during the period for: | ||||||||
Interest | $ | 9,733 | $ | 3,904 | ||||
Income taxes, net of refunds | 26,292 | 10,428 | ||||||
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 | 4,073 | 2,956 | ||||||
Seller obligations in connection with acquisition of businesses | 3,759 | 2,849 | ||||||
Unpaid purchases of property and equipment included in accounts payable | 1,108 | 2,140 | ||||||
| Three months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | 17,291 | $ | 15,988 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation and amortization of property and equipment | 10,663 | 10,374 | |||||||||
| Amortization of operating lease right-of-use assets | 5,050 | 4,207 | |||||||||
| Amortization of intangibles | 8,396 | 6,680 | |||||||||
| Amortization of deferred financing costs and debt discount | 331 | 325 | |||||||||
| Provision for credit losses | 127 | 1,298 | |||||||||
| Gain on sale of property and equipment | (252) | (35) | |||||||||
| Noncash stock compensation | 3,196 | 2,681 | |||||||||
| Amortization of terminated interest rate swap | 798 | 0 | |||||||||
| Changes in assets and liabilities, excluding effects of acquisitions | |||||||||||
| Accounts receivable | 1,056 | (1,000) | |||||||||
| Inventories | (7,644) | 1,411 | |||||||||
| Other assets | (1,794) | 6,933 | |||||||||
| Accounts payable | 524 | (8,308) | |||||||||
| Income taxes receivable/payable | 4,633 | 5,649 | |||||||||
| Other liabilities | (4,757) | (10,291) | |||||||||
| Net cash provided by operating activities | 37,618 | 35,912 | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of investments | 0 | (776) | |||||||||
| Maturities of short term investments | 0 | 12,275 | |||||||||
| Purchases of property and equipment | (10,846) | (9,919) | |||||||||
| Acquisitions of businesses, net of cash acquired of $168 and $0 in 2021 and 2020, respectively | (41,930) | (8,501) | |||||||||
| Proceeds from sale of property and equipment | 389 | 162 | |||||||||
| Other | (5) | (1,340) | |||||||||
| Net cash used in investing activities | (52,392) | (8,099) | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from vehicle and equipment notes payable | 7,808 | 7,094 | |||||||||
| Debt issuance costs | 0 | (22) | |||||||||
| Principal payments on long-term debt | (6,481) | (6,711) | |||||||||
| Principal payments on finance lease obligations | (530) | (738) | |||||||||
| Dividends paid | (8,786) | 0 | |||||||||
| Acquisition-related obligations | (1,414) | (2,378) | |||||||||
| Repurchase of common stock | 0 | (15,759) | |||||||||
| Net cash used in financing activities | (9,403) | (18,514) | |||||||||
| Net change in cash and cash equivalents | (24,177) | 9,299 | |||||||||
| Cash and cash equivalents at beginning of period | 231,520 | 177,889 | |||||||||
| Cash and cash equivalents at end of period | $ | 207,343 | $ | 187,188 | |||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Net cash paid during the period for: | |||||||||||
| Interest | $ | 10,839 | $ | 9,798 | |||||||
| Income taxes, net of refunds | 1,474 | 37 | |||||||||
| Supplemental disclosure of noncash activities | |||||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | 5,679 | 5,612 | |||||||||
| Property and equipment obtained in exchange for finance lease obligations | 268 | 343 | |||||||||
| Seller obligations in connection with acquisition of businesses | 5,959 | 2,570 | |||||||||
| Unpaid purchases of property and equipment included in accounts payable | 1,043 | 1,346 | |||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Residential | 84 | % | 89 | % | 83 | % | 88 | % | ||||||||
Commercial | 16 | 11 | 17 | 12 | ||||||||||||
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| |||||||||
| 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
quarters.
| Standard | Effective Date | Adoption | ||||||||||||
ASU 2021-01, Reference Rate Reform (Topic 848):Scope | Effective upon issuance | This pronouncement clarifies the scope and application of ASU 2020-04, "Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)."We continue to evaluate the impact of Topic 848 and may apply other elections as applicable as additional changes in the market occur. | ||||||||||||
| ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes | January 1, 2021 | This pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and improves the consistent application of GAAP by clarifying and amending existing guidance. The adoption of this standard did not impact our financial statements or have a material effect on our disclosures. | ||||||||||||
Accounting Policy for Derivative Instruments 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 useare recognized when control of the derivative, whetherpromised goods or services is transferred to our customers, in an amount that reflects the consideration we have electedexpect to designatebe entitled to in exchange for those goods or services. We account for a derivative in a hedging relationshipcontract when it has approval and apply hedge accounting and whethercommitment from both parties, the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedgerights of the exposure to variability in expected future cash flows, or other typesparties are identified, payment terms are identified, the contract has commercial substance and collectability of forecasted transactions, are considered cash flow hedges. Hedge accounting generally providesconsideration is probable. An insignificant portion of our sales, primarily retail sales, is accounted for on a point-in-time basis when the matchingsale 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 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 derivativerevenue recognition.
Revenue and Cost Recognition
Revenue from the sale and installation of products is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured. We recognize revenue using eitherover time utilizing a cost-to-cost input method as we believe this represents the completed contract method orbest measure of when goods and services are transferred to thepercentage-of-completion method of accounting, depending primarily on length of time required to complete the contract. The completed contract method is used for short-term contracts for which financial position and results of operations reported on the completed-contract basis would not vary materially from those resulting from use of thepercentage-of-completion method. Revenue from the sale and installation of products is recognized net of adjustments and discounts and, for revenue using the completed contract method of accounting, at the time the installation is complete. customer. 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 whichthat is considered complete based on the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.
Investment Policy
Marketable securities with original maturities longer than three months but less than one year
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Accounts Receivable
We account retainage and is common practice in the construction industry, as it allows 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 retainageservice performed prior to full payment. Retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered not probable. Amounts retained by project owners under construction contracts and included in accounts receivable and othernon-currentclassified as current or long-term assets were $22.1 million and $0.6 million as of September 30, 2017, respectively. Amounts retained by project owners under construction contracts and included in accounts receivable as of December 31, 2016 were $10.3 million.
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.
Equity-based awards: 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 restricted 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 stock-based 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 restricted 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.
Liability-based awards:Certain of our stock awards represent a predominately-fixed monetary amount that is to be settled with a variable number of shares. These awards contain both time and performance requirements, and are deemed to be liability-based, which requires that were-measure to reflect the fair value at the end of each reporting period. The change in fair value each reporting period is recorded as compensation cost, with a corresponding increase or decrease in the share-based liability, either immediately or over the remaining service period depending on the vested status of the award.
Compensation expense for both equity and liability-based restricted 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 priceexpected time to project completion.
Use
Preparationour revenue and cash flows are affected by economic factors. The following tables present our revenues disaggregated by end market and product (in thousands):
| Three months ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Residential new construction | $ | 326,858 | 75 | % | $ | 298,340 | 75 | % | ||||||||||||||||||||||||||||||||||||
| Repair and remodel | 33,563 | 8 | % | 24,043 | 6 | % | ||||||||||||||||||||||||||||||||||||||
| Commercial | 76,645 | 17 | % | 74,948 | 19 | % | ||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 437,066 | 100 | % | $ | 397,331 | 100 | % | ||||||||||||||||||||||||||||||||||||
| Three months ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Insulation | $ | 283,456 | 65 | % | $ | 259,701 | 65 | % | ||||||||||||||||||||||||||||||||||||
| Waterproofing | 29,949 | 7 | % | 28,505 | 7 | % | ||||||||||||||||||||||||||||||||||||||
| Shower doors, shelving and mirrors | 31,433 | 7 | % | 27,015 | 7 | % | ||||||||||||||||||||||||||||||||||||||
| Garage doors | 24,439 | 5 | % | 22,987 | 6 | % | ||||||||||||||||||||||||||||||||||||||
| Rain gutters | 19,003 | 4 | % | 11,576 | 3 | % | ||||||||||||||||||||||||||||||||||||||
Fireproofing/firestopping(1) | 12,435 | 3 | % | 11,741 | 3 | % | ||||||||||||||||||||||||||||||||||||||
| Window blinds | 11,534 | 3 | % | 10,931 | 3 | % | ||||||||||||||||||||||||||||||||||||||
| Other building products | 24,817 | 6 | % | 24,875 | 6 | % | ||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 437,066 | 100 | % | $ | 397,331 | 100 | % | ||||||||||||||||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Contract assets | $ | 27,641 | $ | 24,334 | |||||||
| Contract liabilities | (9,724) | (8,965) | |||||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Costs incurred on uncompleted contracts | $ | 182,748 | $ | 169,544 | |||||||
| Estimated earnings | 94,802 | 90,737 | |||||||||
| Total | 277,550 | 260,281 | |||||||||
| Less: Billings to date | 254,840 | 240,665 | |||||||||
| Net under billings | $ | 22,710 | $ | 19,616 | |||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) | $ | 27,641 | $ | 24,334 | |||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) | (4,931) | (4,718) | |||||||||
| Net under billings | $ | 22,710 | $ | 19,616 | |||||||
Advertising Costs
Advertising costs are generally expensed as incurred. Advertising expense was approximately $0.8 million and $2.4 million for the three and nine months ended September 30, 2017, respectively, and $0.8 million and $2.2 million for the three and nine months ended September 30, 2016, respectively, and is included inrecorded within selling expenseexpenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.
Recently Adopted Accounting Pronouncements
In July 2015,
In March 2016, the FASB issued ASU2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments.” This ASU clarifies the requirement for assessing whether contingent call/put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this amendment is required to assess the embedded call/put options solely in accordance with the four-step decision sequence. Consequently, when a call/put option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call/put option is related to interest rates or credit risks. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. This ASU did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323).” The portion of this ASU related to Topic 250 states that when a registrant does not know or cannot reasonably estimate the impact that future adoption of certain ASUs (ASU2014-09,2016-02 and2016-13) are expected to have on the financial statements, then in addition to making a statement to that effect, that registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted. We have included such disclosures for ASU2014-09 but not for ASU2016-02 or ASU2016-13 since we have not yet performed sufficient analysis on future effects upon implementation of the new standards. We have concluded that the portion of this ASU related to Topic 323 is not applicable and, therefore, did not have a material impact on our consolidated financial statements. This ASU is effective upon issuance.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU2014-09 and related subsequently issued amendments set forth a new revenue recognition model that requires identifying the contract(s) with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing the revenue upon satisfaction of performance obligations. In July 2015, the FASB voted to defer the application of the provisions of this standard for public companies until annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. We have substantially completed our assessment on the applicability of the standard on accounting for contracts with customers with the exception of certain 2017 business combinations which we are currently assessing. The standard is expected to result in the disaggregation of certaincollectability of our insulation contracts into multiple separately identifiable performance obligations as well as additional revenue recognition disclosures. Under current accounting standards, we consider the installation service to represent one performance obligation, whereasexisting trade receivables.
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842).” This update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. For public business entities, this update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted as of the standard’s issuance date. We are evaluating whether this ASU will have a material impact on our consolidated financial statements.
In May 2016, the FASB issued ASUNo. 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates2014-09 and2014-16 pursuant to Staff announcements at the March 3, 2016 EITF Meeting.” This ASU rescinds from the FASB Accounting Standards Codification certain SEC paragraphs as a result of two SEC Staff Announcements at the March 3, 2016 meeting. For public entities, the amendments related to Topic 605 are effective for interim and annual reporting periods beginning after December 15, 2017 and amendments related to Topic 815 are effective for interim and annual reporting periods beginning after December 15, 2015. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU amends the accountingallowance for credit losses onavailable-for-sale debt securities and purchased financial assets with credit deterioration. In addition, these amendments require the measurement of all expected credit losses for financial assets, including trade accounts receivable, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. We are evaluating whether this ASU will have a material impact on our consolidated financial statements.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In August 2016, the FASB issued ASU2016-15, “Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments (Topic 230).” This ASU addresses the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. We have determined that this update addresses one issue that specifically impacts us, which is the classification of contingent consideration payments made after a business combination, and we are evaluating whether it will have a material impact on our consolidated financial statements. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years.
In October 2016, the FASB issued ASU2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory.” This ASU aligns the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (“IFRS”). For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASUNo. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This ASU provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. This standard is effective for interim and annual reporting periods beginning after December 15, 2017. We will adopt this standard effective January 1, 2018were as we expect it to be applicable to us at that time.
In January 2017, the FASB issued ASU2017-01, “Business Combinations (Topic 805)follows (in thousands): Clarifying the Definition of a Business.” This ASU clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments should be applied prospectively to an award modified on or after the adoption date. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In August 2017, the FASB issued ASU2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU better aligns a company’s risk management activities and financial reporting for hedging relationships and makes certain improvements to simplify the application of hedge accounting guidance. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. We are evaluating whether this ASU will have a material impact on our consolidated financial statements.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Balance as of January 1, 2021 | $ | 8,789 | |||
| Current period provision | 127 | ||||
| Recoveries collected | 253 | ||||
| Amounts written off | (554) | ||||
| Balance as of March 31, 2021 | $ | 8,615 | |||
All other investments are classified asheld-to-maturity and consist of highly liquid instruments including corporate bonds and commercial paper. As of September 30, 2017, the amortized cost of these investments equaled the net carrying value, which was $25.1 million. We had no such investments as of December 31, 2016. Allheld-to-maturity securities as of September 30, 2017 mature in one year or less and are Level 2 measurements.2020, respectively. See Note 7,9, Fair Value Measurements, for additional information.
| Goodwill (Gross) | Accumulated Impairment Losses | Goodwill (Net) | ||||||||||
January 1, 2017 | $ | 177,090 | $ | (70,004 | ) | $ | 107,086 | |||||
Business Combinations | 46,059 | — | 46,059 | |||||||||
Other | 515 | — | 515 | |||||||||
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September 30, 2017 | $ | 223,664 | $ | (70,004 | ) | $ | 153,660 | |||||
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| Goodwill (Gross) | Accumulated Impairment Losses | Goodwill (Net) | |||||||||||||||
| January 1, 2021 | $ | 286,874 | $ | (70,004) | $ | 216,870 | |||||||||||
| Business Combinations | 25,141 | — | 25,141 | ||||||||||||||
| Other | 25 | — | 25 | ||||||||||||||
| March 31, 2021 | $ | 312,040 | $ | (70,004) | $ | 242,036 | |||||||||||
see Note 16, Business Combinations.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 2010.
| As of September 30, 2017 | As of December 31, 2016 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | |||||||||||||||||||
Amortized intangibles: | ||||||||||||||||||||||||
Customer relationships | $ | 118,448 | $ | 35,560 | $ | 82,888 | $ | 80,909 | $ | 27,533 | $ | 53,376 | ||||||||||||
Covenantsnot-to-compete | 11,581 | 4,139 | 7,442 | 8,602 | 2,466 | 6,136 | ||||||||||||||||||
Trademarks and trade names | 56,781 | 13,097 | 43,684 | 37,303 | 10,498 | 26,805 | ||||||||||||||||||
Backlog | 13,400 | 6,700 | 6,700 | — | — | — | ||||||||||||||||||
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| $ | 200,210 | $ | 59,496 | $ | 140,714 | $ | 126,814 | $ | 40,497 | $ | 86,317 | |||||||||||||
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| As of March 31, | As of December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
| Amortized intangibles: | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | 215,841 | $ | 94,790 | $ | 121,051 | $ | 197,641 | $ | 89,137 | $ | 108,504 | |||||||||||||||||||||||
| Covenants not-to-compete | 22,914 | 14,127 | 8,787 | 20,309 | 13,436 | 6,873 | |||||||||||||||||||||||||||||
| Trademarks and tradenames | 84,057 | 28,488 | 55,569 | 79,657 | 27,245 | 52,412 | |||||||||||||||||||||||||||||
| Backlog | 18,847 | 16,052 | 2,795 | 18,847 | 15,243 | 3,604 | |||||||||||||||||||||||||||||
| $ | 341,659 | $ | 153,457 | $ | 188,202 | $ | 316,454 | $ | 145,061 | $ | 171,393 | ||||||||||||||||||||||||
Remainder of 2017 | $ | 6,916 | ||
2018 | 22,983 | |||
2019 | 17,928 | |||
2020 | 17,212 | |||
2021 | 16,194 | |||
Thereafter | 59,481 |
| Remainder of 2021 | $ | 25,886 | |||
| 2022 | 31,215 | ||||
| 2023 | 27,778 | ||||
| 2024 | 24,265 | ||||
| 2025 | 18,860 | ||||
| Thereafter | 60,198 | ||||
Debt
| As of September 30, | As of December 31, | |||||||
| 2017 | 2016 | |||||||
Term loans under agreements applicable to respective period, in effect, net of unamortized original issue discount and debt issuance costs of $6,184 and $447, respectively | $ | 293,066 | $ | 95,803 | ||||
Delayed draw term loans, in effect, net of unamortized debt issuance costs of $0 and $50, respectively | — | 12,450 | ||||||
Vehicle and equipment notes, maturing June 2022 to September 2022; payable in various monthly installments, including interest rates ranging from 2% to 4% | 46,713 | 38,186 | ||||||
Various notes payable, maturing through March 2025; payable in various installments, including interest rates ranging from 4% to 6% | 4,066 | 4,988 | ||||||
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| 343,845 | 151,427 | |||||||
Less: current maturities | (15,550 | ) | (17,192 | ) | ||||
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Long-term debt, less current maturities | $ | 328,295 | $ | 134,235 | ||||
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| As of March 31, | As of December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| Senior Notes due 2028, net of unamortized debt issuance costs of $4,081 and $4,230, respectively | $ | 295,919 | $ | 295,770 | |||||||
| Term loan, net of unamortized debt issuance costs of $1,260 and $1,343, respectively | 198,740 | 198,657 | |||||||||
| Vehicle and equipment notes, maturing through March 2026; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8% | 68,821 | 67,493 | |||||||||
| Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 1.0% to 5.0% | 5,428 | 3,392 | |||||||||
| 568,908 | 565,312 | ||||||||||
| Less: current maturities | (23,770) | (23,355) | |||||||||
| Long-term debt, less current maturities | $ | 545,138 | $ | 541,957 | |||||||
| Remainder of 2021 | $ | 18,264 | |||
| 2022 | 23,154 | ||||
| 2023 | 15,963 | ||||
| 2024 | 10,095 | ||||
| 2025 | 206,494 | ||||
| Thereafter | 300,279 | ||||
Senior Secured
On April 13, 2017,Facilities
Proceeds from the Senior Secured Credit Facilities were used to repayAgreement, and a second-priority security interest in full all amounts outstanding under the credit and security agreement, dated as of February 29, 2016, by and among the Company and the lenders named therein (the “Credit and Security Agreement”).
Thesuch assets that constitute Term Loan amortizesPriority Collateral, as defined in quarterly principal payments of approximately $0.8 million starting on September 30, 2017, with any remaining unpaid balances due on April 15, 2024, which is the maturity date. Loans incurred under the ABL Revolver will have a final maturity of April 13, 2022.
Subject to certain exceptions, the Term Loan will be subject to mandatorypre-payments equal to (i) 100% ofAgreement.
Loans under the Senior Secured Credit Facilities bear interest based on,prime rate), at the Company’s election, either the base rateplus a margin of (A) 1.25% or the Eurodollar rate plus, in each case, an applicable margin (the “Applicable Margin”). The Applicable Margin in respect of loans under (i) the Term Loan Agreement will be (A) 3.00% in the case of Eurodollar rate loans and (B) 2.00% in the case of base rate loans, and (ii) the ABL Facility will be (A) 1.25%, 1.50% or 1.75% in the case of Eurodollar rate loans (based on a measure of availability under the ABL Facility)Credit Agreement) and (B) 0.25%, or 0.50% or 0.75% in the case of base rate loans (based on a measure of availability under the ABL Facility)Credit Agreement).
In addition, we will pay customary commitment fees
The Senior Secured Credit Agreements each contain a number of customary affirmative and negativenon-financial covenants, and the ABL Credit Agreement also contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.00 to 1.001.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver.
The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
arrangement under these agreements constitutes a separate note and obligation. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. The specific terms of each note are based on specific criteria, including the type of vehicle or equipment and the market interest rates at the time. No termination date applies to these agreements.
As of March 31, 2021, approximately $56.3 million of the various loan agreements was available for purchases of equipment.
Uncompleted contracts were as follows for the nine months ended September 30 (in thousands):
| 2017 | ||||
Costs incurred on uncompleted contracts | $ | 70,403 | ||
Estimated earnings | 38,691 | |||
|
| |||
Total | 109,094 | |||
Less: Billings to date | 108,798 | |||
|
| |||
Net under (over) billings | $ | 296 | ||
|
| |||
Net under (over) billings were as follows as of September 30 (in thousands):
| 2017 | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 5,323 | ||
Billings in excess of costs and estimated earnings on uncompleted contracts | (5,027 | ) | ||
|
| |||
Net under (over) billings | $ | 296 | ||
|
| |||
The asset, costs and estimated earnings in excess of billings on uncompleted contracts, represents revenues recognized in excess of amounts billed and is included in other current8 - LEASES
| (in thousands) | Classification | As of March 31, 2021 | As of December 31, 2020 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Non-Current | ||||||||||||||||||||
| Operating | Operating lease right-of-use assets | $ | 54,442 | $ | 53,766 | |||||||||||||||
| Finance | Property and equipment, net | 4,591 | 4,946 | |||||||||||||||||
| Total lease assets | $ | 59,033 | $ | 58,712 | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| Operating | Current maturities of operating lease obligations | $ | 19,210 | $ | 18,758 | |||||||||||||||
| Financing | Current maturities of finance lease obligations | 1,875 | 2,073 | |||||||||||||||||
| Non-Current | ||||||||||||||||||||
| Operating | Operating lease obligations | 34,618 | 34,413 | |||||||||||||||||
| Financing | Finance lease obligations | 2,367 | 2,430 | |||||||||||||||||
| Total lease liabilities | $ | 58,070 | $ | 57,674 | ||||||||||||||||
| Weighted-average remaining lease term: | ||||||||||||||||||||
| Operating leases | 4.0 years | 4.1 years | ||||||||||||||||||
| Finance leases | 2.6 years | 2.6 years | ||||||||||||||||||
| Weighted-average discount rate: | ||||||||||||||||||||
| Operating leases | 3.56 | % | 3.67 | % | ||||||||||||||||
| Finance leases | 5.11 | % | 5.08 | % | ||||||||||||||||
| Three months ended March 31, | ||||||||||||||||||||
| (in thousands) | Classification | 2021 | 2020 | |||||||||||||||||
Operating lease cost(1) | Administrative | $ | 6,350 | $ | 5,572 | |||||||||||||||
| Finance lease cost | ||||||||||||||||||||
Amortization of leased assets(2) | Cost of sales | 792 | 965 | |||||||||||||||||
| Interest on finance lease obligations | Interest expense, net | 55 | 73 | |||||||||||||||||
| Total lease costs | $ | 7,197 | $ | 6,610 | ||||||||||||||||
| Three months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows for operating leases | $ | 5,324 | $ | 4,746 | |||||||
| Operating cash flows for finance leases | 55 | 73 | |||||||||
| Financing cash flows for finance leases | 530 | 738 | |||||||||
| Finance Leases | Operating Leases | ||||||||||||||||||||||
| Related Party | Other | Total Operating | |||||||||||||||||||||
| Remainder of 2021 | $ | 1,762 | $ | 754 | $ | 15,242 | $ | 15,996 | |||||||||||||||
| 2022 | 1,287 | 986 | 15,751 | 16,737 | |||||||||||||||||||
| 2023 | 926 | 534 | 10,490 | 11,024 | |||||||||||||||||||
| 2024 | 512 | 548 | 4,835 | 5,383 | |||||||||||||||||||
| 2025 | 144 | 561 | 2,649 | 3,210 | |||||||||||||||||||
| Thereafter | 9 | 526 | 5,131 | 5,657 | |||||||||||||||||||
| Total minimum lease payments | 4,640 | $ | 3,909 | $ | 54,098 | 58,007 | |||||||||||||||||
| Less: Amounts representing executory costs | (67) | — | |||||||||||||||||||||
| Less: Amounts representing interest | (331) | (4,179) | |||||||||||||||||||||
| Present value of future minimum lease payments | 4,242 | 53,828 | |||||||||||||||||||||
| Less: Current obligation under leases | (1,875) | (19,210) | |||||||||||||||||||||
| Long-term lease obligations | $ | 2,367 | $ | 34,618 | |||||||||||||||||||
Fair value is the price that would be received for an asset or paid to transferValue on a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ASC 820, “Fair Value Measurement,” establishesRecurring Basis
Level 1: Quoted prices (unadjusted) for identicalvalue includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. During the periods presented, there were no transfers between fair value hierarchical levels.
lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar3 input, are utilized in determining estimated fair values. During each of the three months ended March 31, 2021 and 2020, we did not record any impairments on these assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or canrequired to be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflectmeasured at fair value on a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
nonrecurring basis.
| Fair value as of September 30, 2017 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets: | ||||||||||||||||
Cash equivalents | $ | 58,825 | $ | 58,825 | $ | — | $ | — | ||||||||
Investments | 25,106 | — | 25,106 | — | ||||||||||||
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| |||||||||
Total financial assets | $ | 83,931 | $ | 58,825 | $ | 25,106 | $ | — | ||||||||
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Financial liabilities: | ||||||||||||||||
Derivative financial instruments, net of tax | $ | 45 | $ | — | $ | 45 | $ | — | ||||||||
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| |||||||||
We had no such items upon which to report fair value as of December 31, 2016.
| As of March 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 | $ | 175,475 | $ | 175,475 | $ | 0 | $ | 0 | $ | 170,398 | $ | 170,398 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||||||
| Derivative financial instruments | 18,075 | 0 | 18,075 | 0 | 5,130 | 0 | 5,130 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total financial assets | $ | 193,550 | $ | 175,475 | $ | 18,075 | $ | 0 | $ | 175,528 | $ | 170,398 | $ | 5,130 | $ | 0 | |||||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration | $ | 7,510 | $ | 0 | $ | 0 | $ | 7,510 | $ | 4,004 | $ | 0 | $ | 0 | $ | 4,004 | |||||||||||||||||||||||||||||||
| Derivative financial instruments | 482 | 0 | 482 | 0 | 324 | 0 | 324 | 0 | |||||||||||||||||||||||||||||||||||||||
| Total financial liabilities | $ | 7,992 | $ | 0 | $ | 482 | $ | 7,510 | $ | 4,328 | $ | 0 | $ | 324 | $ | 4,004 | |||||||||||||||||||||||||||||||
| Contingent consideration liability - January 1, 2021 | $ | 4,004 | |||
| Preliminary purchase price | 4,000 | ||||
| Fair value adjustments | (200) | ||||
| Accretion in value | 561 | ||||
| Amounts cancelled | (36) | ||||
| Amounts paid to sellers | (819) | ||||
| Contingent consideration liability - March 31, 2021 | $ | 7,510 | |||
| As of March 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Senior Notes(1) | $ | 300,000 | $ | 313,287 | $ | 300,000 | $ | 320,013 | |||||||||||||||
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. We manage exposure to a wide variety of business and operational risks through our core business activities.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We manage economic risks, including interest rate, liquidity and credit risk primarily by overseeing the amount, sources and duration of debt funding and the use of derivative financial instruments. Specifically, we have entered into derivative financial instruments to manage exposure to interest rate movements that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing and duration of our known or expected cash receipts and known or expected cash payments principally related to our investments and borrowings.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2017, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives, when present, is recognized directly in earnings. During the nine months ended September 30, 2017, we did not record any hedge ineffectiveness in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. Over the next twelve months, we estimate that an additional $0.5 million will be reclassified as an increase to interest expense.
Additionally, weWe do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of September 30, 2017, the Company hasMarch 31, 2021, we have not posted any collateral related to these agreements.
| 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 | ||||||||||||||||||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| September 30, 2017 | December 31, 2016 | |||||||
Included in other current liabilities | $ | 4,913 | $ | 4,595 | ||||
Included in other long-term liabilities | 8,837 | 7,052 | ||||||
|
|
|
| |||||
| $ | 13,750 | $ | 11,647 | |||||
|
|
|
| |||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Included in other current liabilities | $ | 6,876 | $ | 7,703 | |||||||
| Included in other long-term liabilities | 12,618 | 11,986 | |||||||||
| $ | 19,494 | $ | 19,689 | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
Included in othernon-current assets | $ | 1,828 | $ | 1,249 | ||||
Share-Based Compensation
Directors
During
| March 31, 2021 | December 31, 2020 | ||||||||||
| Included in other non-current assets | $ | 1,997 | $ | 1,854 | |||||||
Employees – applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. We do not participate in any multiemployer pension plans that are considered to be individually significant.
During the nine months ended September 30, 2017, our employees surrendered approximately ten thousand shares of our common stock to satisfy tax withholding obligations arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan. Share-based compensation expense associated with common stock awards was $0.8 million and $1.9 million for the three and nine months ended September 30, 2017, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2016, respectively. We recognized excess tax benefits of $0.6 million and $0.3 million within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2017 and 2016, respectively. We did not recognize any such excess tax benefits in2023. In addition, during the three months ended September 30, 2017 or 2016.
As of September 30, 2017, there was $6.2 million of unrecognized compensation expense related to these nonvested common stock awards. This expense is subject to future adjustments for forfeitures and is expected to be recognized on a straight-line basis over the remaining weighted-average period of 2.2 years. Shares forfeited are returned as treasury shares and available for future issuances. See the table below for changes in shares and related weighted average fair market value per share.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Employees – Performance-Based Stock Awards
During the nine months ended September 30, 2017,March 31, 2021, we established, and our Boardboard of Directorsdirectors approved, performance-based targets in connection with common stock awards to be issued to certain officers in 20182022 contingent upon achievement of these targets. Share-based compensation expense associated
AsMarch 31, 2021 and 2020, we granted approximately five thousand and seven thousand shares of September 30, 2017, there was $2.4 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 2.1 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.
| Common 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 | 5,190 | 123.32 | 42,449 | 123.32 | 0 | 0 | |||||||||||||||||||||||||||||
| Forfeited/Cancelled | (274) | 36.51 | 0 | 0 | (99) | 36.51 | |||||||||||||||||||||||||||||
| Nonvested awards/units at March 31, 2021 | 236,196 | $ | 49.72 | 209,410 | $ | 72.81 | 13,174 | $ | 36.51 | ||||||||||||||||||||||||||
| Three months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Common Stock Awards | $ | 1,120 | $ | 982 | |||||||
| Non-Employee Common Stock Awards | 102 | 33 | |||||||||
| Performance-Based Stock Awards | 1,148 | 969 | |||||||||
| Liability Performance-Based Stock Awards | 705 | 529 | |||||||||
| Performance-Based Restricted Stock Units | 121 | 168 | |||||||||
| $ | 3,196 | $ | 2,681 | ||||||||
| Three months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cost of sales | $ | 62 | $ | 96 | |||||||
| Selling | 51 | 49 | |||||||||
| Administrative | 3,083 | 2,536 | |||||||||
| $ | 3,196 | $ | 2,681 | ||||||||
Asthe amount in the table is comprised of September 30, 2017, there was $2.1 million of unrecognizedexpenses related to immaterial nonrecurring awards.
| As of March 31, 2021 | |||||||||||
| Unrecognized Compensation Expense on Unvested Awards | Weighted Average Remaining Vesting Period | ||||||||||
| Common Stock Awards | $ | 6,466 | 1.7 years | ||||||||
| Performance-Based Stock Awards | 8,397 | 2.1 years | |||||||||
| Performance-Based Restricted Stock Units | 20 | 0.1 years | |||||||||
| Total unrecognized compensation expense related to unvested awards | $ | 14,883 | |||||||||
In addition, during the three months ended September 30, 2017, we established, and our Board of Directors approved, performance-based restricted stock units in connection with common stock awards to be issued to certain employees between 2018 and 2022 contingent upon achievement of certain performance targets. These units will be accounted for as liability-based awards since they represent a predominantly-fixed monetary amount that will be settled with a variable number of common shares and as such are included in other long-term liabilities on the Condensed Consolidated Balance Sheets. Share-based compensation expense associated with these performance-based awards was $0.1 million for the three and nine months ended September 30, 2017. The unrecognized compensation expense associated with the liability-based awards is subject to fair value adjustment each reporting period, and is expected to be recognizedshown above on a straight-line basis overexcept for the remaining vesting period of 4.25 years.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Share-Based Compensation Summary
AmountsPerformance-Based Stock Awards which uses the graded-vesting method. Shares forfeited are returned as treasury shares and available for each category of equity-based award for employees as of December 31, 2016 and changes during the nine months ended September 30, 2017 were as follows:
| Common Stock Awards | Performance-Based Stock Awards | Performance-Based Restricted 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, 2016 | 161,174 | $ | 26.36 | — | $ | — | — | $ | — | |||||||||||||||
Granted | 101,241 | 52.00 | 77,254 | 41.00 | 73,880 | 52.00 | ||||||||||||||||||
Vested | (57,816 | ) | 26.30 | — | — | — | — | |||||||||||||||||
Forfeited/Cancelled | (1,541 | ) | 36.33 | — | — | (475 | ) | 52.00 | ||||||||||||||||
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Nonvested awards/units at September 30, 2017 | 203,058 | $ | 39.09 | 77,254 | $ | 41.00 | 73,405 | $ | 52.00 | |||||||||||||||
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future issuances.
For the three and nine months ended September 30, 2017 and 2016, the
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Sales | $ | 2,641 | $ | 2,182 | $ | 7,363 | $ | 5,282 | ||||||||
Purchases | 302 | 114 | 901 | 370 | ||||||||||||
Rent | 290 | 163 | 875 | 472 | ||||||||||||
As of September 30, 2017 and December 31, 2016, we
| Three months ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Sales | $ | 278 | $ | 3,282 | |||||||
| Purchases | 392 | 607 | |||||||||
| Rent | 306 | 272 | |||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
course of business with various related parties. M/I Homes, Inc., a customer whose Chairman, President and Chief Executive Officer iswas a member of our Boardboard of Directors,directors until his resignation from our board effective March 18, 2020, accounted for $1.0 million and $0.8 milliona significant portion of these balances as of September 30, 2017 and Decemberour related party sales during the three months ended March 31, 2016, respectively.
and Auto Insurance
| September 30, 2017 | December 31, 2016 | |||||||
Included in other current liabilities | $ | 2,069 | $ | 1,949 | ||||
Included in other long-term liabilities | 7,627 | 7,104 | ||||||
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| |||||
| $ | 9,696 | $ | 9,053 | |||||
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| |||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Included in other current liabilities | $ | 4,901 | $ | 5,102 | |||||||
| Included in other long-term liabilities | 19,037 | 16,440 | |||||||||
| $ | 23,938 | $ | 21,542 | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
Insurance receivable and indemnification asset for claims under a | $ | 2,773 | $ | 2,773 | ||||
Insurance receivable for claims that exceeded the stop loss limit | 2 | 26 | ||||||
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| |||||
Total insurance receivables included in othernon-current assets | $ | 2,775 | $ | 2,799 | ||||
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| March 31, 2021 | December 31, 2020 | ||||||||||
| Insurance receivables and indemnification assets for claims under fully insured policies | $ | 4,845 | $ | 4,400 | |||||||
| Insurance receivables for claims that exceeded the stop loss limit | 328 | 328 | |||||||||
| Total insurance receivables and indemnification assets included in other non-current assets | $ | 5,173 | $ | 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 gross assets relating to capital leases were approximately $64.2 million and $64.2 million as of September 30, 2017 and December 31, 2016, respectively, and a total of approximately $23.7 million and $22.8 million were fully depreciated as of September 30, 2017 and December 31, 2016, respectively. The net book value of assets under capital leases was approximately $14.4 million and $16.4 million as of September 30, 2017 and December 31, 2016, respectively. Amortization of assets held under capital leases is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.
We also have several noncancellable operating leases, primarily
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Future minimumfurther information regarding our lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) with related parties as of September 30, 2017 are as follows (in thousands):
Remainder of 2017 | $ | 295 | ||
2018 | 988 | |||
2019 | 829 | |||
2020 | 566 | |||
2021 | 583 | |||
Thereafter | 600 |
commitments.
| Fair Value | Total | Three months ended September 30, 2017 | Nine months ended September 30, 2017 | |||||||||||||||||||||||||||||||||||||
2017 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | of Common Stock Issued | Purchase Price | Revenue | Net (Loss) Income | Revenue | Net Income (Loss) | ||||||||||||||||||||||||||||||
Alpha(1) | 1/5/2017 | Share | $ | 103,810 | $ | 2,002 | $ | 10,859 | $ | 116,671 | $ | 29,334 | $ | (271 | ) | $ | 87,830 | $ | 190 | |||||||||||||||||||||
Columbia | 6/26/2017 | Asset | 8,768 | 225 | — | 8,993 | 3,026 | 73 | 3,241 | 80 | ||||||||||||||||||||||||||||||
Astro | 9/18/2017 | Asset | 8,851 | 490 | — | 9,341 | 264 | 46 | 264 | 46 | ||||||||||||||||||||||||||||||
Other | Various | Asset | 9,812 | 1,042 | — | 10,854 | 6,499 | 84 | 11,671 | 366 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Total | $ | 131,241 | $ | 3,759 | $ | 10,859 | $ | 145,859 | $ | 39,123 | $ | (68 | ) | $ | 103,006 | $ | 682 | |||||||||||||||||||||||
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| Three months ended September 30, 2016 | Nine months ended September 30, 2016 | |||||||||||||||||||||||||||||||||||
2016 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | Revenue | Net Income (Loss) | |||||||||||||||||||||||||||
Alpine Insulation Co., Inc. | 4/12/2016 | Asset | $ | 21,151 | $ | 1,560 | $ | 22,711 | $ | 7,957 | $ | 806 | $ | 14,734 | $ | 1,238 | ||||||||||||||||||||
Other | Various | Asset | 15,276 | 1,289 | 16,565 | 5,519 | (200 | ) | 12,283 | (664 | ) | |||||||||||||||||||||||||
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Total | $ | 36,427 | $ | 2,849 | $ | 39,276 | $ | 13,476 | $ | 606 | $ | 27,017 | $ | 574 | ||||||||||||||||||||||
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Three months ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| 2021 Acquisition | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income | |||||||||||||||||||||||||||||||||||||
| Intermountain West | 3/1/2021 | Share | $ | 42,098 | $ | 5,959 | $ | 48,057 | $ | 3,608 | $ | 450 | ||||||||||||||||||||||||||||||||
| Three months ended March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Loss | |||||||||||||||||||||||||||||||||||||
| Royals | 2/29/2020 | Asset | $ | 7,590 | $ | 2,500 | $ | 10,090 | $ | 784 | $ | (87) | ||||||||||||||||||||||||||||||||
| Other | 1/13/2020 | Asset | 911 | 70 | 981 | 226 | (21) | |||||||||||||||||||||||||||||||||||||
| $ | 8,501 | $ | 2,570 | $ | 11,071 | $ | 1,010 | $ | (108) | |||||||||||||||||||||||||||||||||||
| As of March 31, 2021 | As of March 31, 2020 | ||||||||||||||||||||||
| Intermountain West | Royals | Other | Total | ||||||||||||||||||||
| Estimated fair values: | |||||||||||||||||||||||
| Cash | $ | 168 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||
| Accounts receivable | 5,122 | 2,848 | 0 | 2,848 | |||||||||||||||||||
| Inventories | 1,157 | 305 | 70 | 375 | |||||||||||||||||||
| Other current assets | 2,354 | 430 | 11 | 441 | |||||||||||||||||||
| Property and equipment | 796 | 598 | 118 | 716 | |||||||||||||||||||
| Intangibles | 25,200 | 3,930 | 582 | 4,512 | |||||||||||||||||||
| Goodwill | 25,141 | 3,015 | 206 | 3,221 | |||||||||||||||||||
| Other non-current assets | 264 | 58 | 8 | 66 | |||||||||||||||||||
| Accounts payable and other current liabilities | (3,278) | (1,059) | (14) | (1,073) | |||||||||||||||||||
| Deferred income tax liabilities | (6,537) | 0 | 0 | 0 | |||||||||||||||||||
| Long-term debt | (2,036) | 0 | 0 | 0 | |||||||||||||||||||
| Other long-term liabilities | (294) | (35) | 0 | (35) | |||||||||||||||||||
| Fair value of assets acquired and purchase price | 48,057 | 10,090 | 981 | 11,071 | |||||||||||||||||||
| Less seller obligations | 5,959 | 2,500 | 70 | 2,570 | |||||||||||||||||||
| Cash paid | $ | 42,098 | $ | 7,590 | $ | 911 | $ | 8,501 | |||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||||||||||
| Alpha | Columbia | Astro | Other | Total | Alpine | Other | Total | |||||||||||||||||||||||||
Estimated fair values: | ||||||||||||||||||||||||||||||||
Cash | $ | 247 | $ | — | $ | — | $ | — | $ | 247 | $ | — | $ | — | $ | — | ||||||||||||||||
Accounts receivable | 30,361 | 990 | 924 | 2,137 | 34,412 | 3,959 | 2,080 | 6,039 | ||||||||||||||||||||||||
Inventories | 1,851 | 704 | 296 | 1,014 | 3,865 | 700 | 888 | 1,588 | ||||||||||||||||||||||||
Other current assets | 4,827 | 8 | 36 | 8 | 4,879 | — | 12 | 12 | ||||||||||||||||||||||||
Property and equipment | 1,528 | 659 | 640 | 1,144 | 3,971 | 656 | 1,188 | 1,844 | ||||||||||||||||||||||||
Intangibles | 57,100 | 4,760 | 4,966 | 5,939 | 72,765 | 12,800 | 8,492 | 21,292 | ||||||||||||||||||||||||
Goodwill | 38,679 | 2,211 | 2,808 | 2,361 | 46,059 | 6,642 | 5,270 | 11,912 | ||||||||||||||||||||||||
Othernon-current assets | 150 | 31 | — | 191 | 372 | — | 94 | 94 | ||||||||||||||||||||||||
Accounts payable and other current liabilities | (18,072 | ) | (370 | ) | (329 | ) | (1,940 | ) | (20,711 | ) | (2,046 | ) | (1,459 | ) | (3,505 | ) | ||||||||||||||||
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Fair value of assets acquired and purchase price | 116,671 | 8,993 | 9,341 | 10,854 | 145,859 | 22,711 | 16,565 | 39,276 | ||||||||||||||||||||||||
Less fair value of common stock issued | 10,859 | — | — | — | 10,859 | — | — | — | ||||||||||||||||||||||||
Less seller obligations | 2,002 | 225 | 490 | 1,042 | 3,759 | 1,560 | 1,289 | 2,849 | ||||||||||||||||||||||||
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Cash paid | $ | 103,810 | $ | 8,768 | $ | 8,851 | $ | 9,812 | $ | 131,241 | $ | 21,151 | $ | 15,276 | $ | 36,427 | ||||||||||||||||
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and/or non-compete agreements and amounts based on working capital calculations. When these payments are expected to be made over one year from the acquisition date, the contingent consideration is discounted to net present value of future payments based on a weighted average of various future forecast scenarios.
The provisional amounts for Alpha originally reported in our Condensed Consolidated Balance Sheets included in our Quarterly Report on Form10-Q for the period ended March 31, 2017 were adjusted to reflect the review and ongoing analysis
| 2017 | 2016 | |||||||||||||||
Acquired intangibles assets | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | ||||||||||||
Customer relationships | $ | 37,533 | 8 | $ | 12,862 | 9 | ||||||||||
Trademarks and trade names | 19,403 | 15 | 6,116 | 15 | ||||||||||||
Non-competition agreements | 2,429 | 5 | 2,315 | 5 | ||||||||||||
Backlog | 13,400 | 1.5 | — | — | ||||||||||||
| For the three months ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Acquired intangibles assets | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | |||||||||||||||||||
| Customer relationships | $ | 18,200 | 12 | $ | 2,611 | 8 | |||||||||||||||||
| Trademarks and tradenames | 4,400 | 15 | 1,145 | 15 | |||||||||||||||||||
| Non-competition agreements | 2,600 | 5 | 227 | 5 | |||||||||||||||||||
| Backlog | 0 | 0 | 529 | 2 | |||||||||||||||||||
| Pro forma for the three months ended September 30, | Pro forma for the nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenue | $ | 297,820 | $ | 272,010 | $ | 853,897 | $ | 771,313 | ||||||||
Net income | 11,836 | 12,328 | 31,544 | 32,117 | ||||||||||||
Basic net income per share | 0.37 | 0.39 | 1.00 | 1.02 | ||||||||||||
Diluted net income per share | 0.37 | 0.39 | 0.99 | 1.02 | ||||||||||||
| Unaudited pro forma for the three months ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Net revenue | $ | 443,217 | $ | 431,379 | |||||||||||||||||||
| Net income | 18,403 | 17,638 | |||||||||||||||||||||
| Basic net income per share | 0.63 | 0.59 | |||||||||||||||||||||
| Diluted net income per share | 0.62 | 0.59 | |||||||||||||||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income - basic and diluted | $ | 12,010 | $ | 11,549 | $ | 30,347 | $ | 27,355 | ||||||||
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Weighted average number of common shares outstanding | 31,659,503 | 31,323,600 | 31,632,400 | 31,294,596 | ||||||||||||
Dilutive effect of outstanding common stock awards after application of the Treasury Stock Method | 107,378 | 54,190 | 80,115 | 57,395 | ||||||||||||
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Diluted shares outstanding | 31,766,881 | 31,377,790 | 31,712,515 | 31,351,991 | ||||||||||||
Basic and diluted net income per share | $ | 0.38 | $ | 0.37 | $ | 0.96 | $ | 0.87 | ||||||||
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None209 thousand shares for the three months ended March 31, 2021 and 2020, respectively. Approximately 30 thousand and 5 thousand shares of thenon-vestedpotential common stock awards had an antidilutive effect onwas not included in the calculation of diluted net income per common share for either of the three or nine months ended September 30, 2017March 31, 2021 and 2016.
Substantially all 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 over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for a discussion of short-term impacts to our business. 2020. Administrative COVID-19 pandemic. For more information on our cash flow hedges, see “Liquidity and Capital Resources, Derivative Instruments” below. loans. Our primary capital requirements are to fund working capital needs, operating expenses, acquisitions and capital expenditures and to meet required principal and interest payments. COVID-19. As of facility (as defined below). months as evidenced by our net positive cash flows from operating activities for each of the three months ended March 31, 2021 and 2020. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions. Notes and we currently do not expect any covenant violations due to the impacts of COVID-19. remaining availability for purchases of equipment. See Note 7, Long-term Debt, for more information regarding our Master Loan and Security Agreement, Master Equipment Agreement and Master Loan Agreements. to be restricted cash. operations. (in thousands) Long-term debt obligations (2) Capital lease obligations (3) Operating lease obligations (4)20162020 Form10-K.mirrors,other products throughout the United States. Our acquisition of Alpha in January 2017 expanded our market position in commercial insulation installation and strengthens our complementary installed product offerings in waterproofing, fire-stopping and fireproofing. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over 190 branch locations.We believe our business is well positioned to continue to profitably grow during The strategic acquisitions of multiple companies over the housing recovery duelast several years contributed meaningfully to our strong balance sheet, liquidity and continuing acquisition strategy. We may adjust our strategies based on housing demand and our performance10.0% increase in each of our markets. Nevertheless, the pace of the housing recovery and our future results could be negatively affected by weakening economic conditions and decreases in housing demand and affordability as well as increases in interest rates and tightening of mortgage lending practices.We manage all aspects of the installation process for our customers, from our direct purchase and receipt of materials from national manufacturers, to our timely supply of materials to job sites and quality installation. Installation of insulation is a critical phase in the construction process, as certain interior work cannot begin until the insulation phase passes inspection. We benefit from our national scale, long-standing supplier relationships and a broad customer base that includes production and custom homebuilders, multi-family and commercial construction firms and homeowners.Contracts fulfilled by Alpha are primarily accounted for under thepercentage-of-completion method of accounting. When thepercentage-of-completion method is used, we estimate the costs to complete individual contracts and record asnet 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. 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. As a result of the acquisition of Alpha, we currently estimate backlog to be $81.4 million as of September 30, 2017. Backlog represents expected revenue on uncompleted contracts, including the amount of revenue on contracts for which our work has not yet commenced, less the revenue recognized under these contracts.As a result of Hurricanes Harvey and Irma, we closed our locations in Texas and Florida during and in the days immediately following the storms.This negatively impacted our revenue and gross profit for the three months ended September 30, 2017.Three Months Ended September 30, 2017 ComparedMarch 31, 2021 compared to the Three Months Ended September 30, 2016For increased 10.0%, or $39.7 million to $437.1 million, while gross profit increased 7.9% to $125.4 million during the three months ended September 30, 2017, net revenue increased $69.8March 31, 2021 compared to 2020. We also generated approximately $37.6 million or 31.0%, to $295.2of cash from operating activities, and at March 31, 2021, we had $207.3 million from $225.4of cash and cash equivalents. We have not drawn on our existing $200 million for the three months ended September 30, 2016.revolving line of credit. The increase in net revenue included revenue fromand gross profit was primarily driven by the contribution of our recent acquisitions, of approximately $48.7 million. Approximately $8.3 million was predominantly attributable to organicthe 9.6% year-over-year growth in theour residential end markets, and increased sales volume of completed jobs in all of our end markets.complementary products. The remaining increase in net revenue was in spite of $12.8 million resultedhistoric February 2021 winter storms that led to lost production in the southern United States, especially Texas. The February winter storms also impacted the manufacturing capabilities at two of our large fiberglass insulation suppliers, disrupting our ability to source material and forcing us to buy through distributors and local retailers to meet customer demand. In addition, materials needed for spray foam applications were in short supply after the storms, as chemical processing facilities went offline. See "Net revenue, cost of sales and gross profit" below for further information about impacts from a variety of factors, including customer and product mix, market pricing variations and insulation volumes driven by building code requirements. None of these additional factors was more significant than any other. Partially offsetting the increase in revenue were the effects of Hurricanes Harvey and Irma that negatively impacted our productivity duringweather events.September 30, 2017.CostMarch 31, 2021, our single-family residential new construction market revenue grew 7.8% over the same period ended March 31, 2020. We experienced higher levels of growth in our repair and remodel end market and our multi-family end marketFor growth during this period as well, primarily due to acquisitions, but we experienced some project delays due to macroeconomic concerns surrounding the threepandemic and the February storms, resulting in a decline in same branch sales within this market. TThree months ended March 31, 2021 2020 Period-over-period Growth Sales Growth 10.0 % 16.1 % 2.2 % 12.1 % 7.8 % 11.0 % 3.2 % 5.9 % 18.8 % 34.9 % 6.6 % 34.1 % 9.6 % 14.2 % 3.7 % 9.7 % 2.3 % 26.4 % (14.5) % 24.0 % 10.1 % (0.2) % (6.1) % 12.1 % (13.1) % 14.1 % Total Completions Growth 11.4 % (0.5) % 14.1 % 4.4 % 4.2 % (11.7) % ended September 30, 2017, costas of sales increased $51.5 million, or 32.6%, to $209.6 million from $158.1 million for the three months ended September 30, 2016. As a percentage of net revenue, cost of sales increased to 71.0% during the three months ended September 30, 2017 from 70.2% during the three months ended September 30, 2016. On a dollar basis, cost of sales included increases from acquired businesses of approximately $34.8 million. Approximately $5.5 million was predominantly attributable to organiceach financial statement date.volumesingle-family subset of completed jobsthe residential new construction end market. Additionally, costsales increased $11.2 million as a result of a variety of factors including customerlarge and product mix, market pricing variations and insulation volumes driven by building code requirements, as well as expense associated with our recently introduced share-based compensation program for certain of our installers. None of these additional factors was more significant than any other.Gross ProfitForlight commercial projects.September 30, 2017,March 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 metric as the change was made prospectively beginning January 1, 2021. We continually evaluate the branch classifications utilized in our sales growth metrics based on changes in our business and operations over time and future changes may occur to these classifications. Three months ended March 31, 2021 Change 2020 Net revenue $ 437,066 10.0 % $ 397,331 Cost of sales 311,639 10.9 % 281,071 Gross profit $ 125,427 7.9 % $ 116,260 Gross profit percentage 28.7 % 29.3 % $18.3 million to $85.6 million from $67.3 million forduring the three months ended September 30, 2016. March 31, 2021 compared to 2020 due primarily to acquisitions, the 9.6% year-over-year growth in our residential end market, and increased sales volume of complementary products. During the three months ended March 31, 2021, we believe our combined sales in all end markets, excluding the commercial end market, were not significantly affected by the COVID-19 pandemic. While the pandemic continues to impact our commercial business as evidenced by the 14.5% decline in same branch sales within this end market, we expect trends will improve later this year. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for further information. In addition, we believe year-to-date net revenue during the three months ended March 31, 2021 was impacted by temporary branch closures caused by the severe winter weather events in the southern United States, primarily Texas. We estimate net revenue during the first quarter of 2021 was reduced by a range of $3.0 million to $3.5 million due to these weather events. Lastly, our price/mix metric was negatively impacted during the quarter as we continue to experience a higher volume of insulation sales to production builders compared to the same period last year. This shift within the single-family end market impacted price/mix as the average insulation selling price for entry level production builder jobs is typically lower than a move-up or custom home builder.29.0%2020 attributable primarily to higher material costs. The pandemic has resulted in supply constraints for some of the materials we install which in turn has resulted in increased pricing of some of these materials. In addition, the aforementioned winter storms disrupted our ability to source certain materials, forcing us to buy through distributors and local retailers to meet customer demand. Materials needed for spray foam applications were also in short supply after the storms, as chemical processing facilities went offline. We estimate gross profit was reduced during the first quarter of 2021 by a range of $1.0 million to $1.5 million due to the weather events, and we estimate the material supply shortages further impacted gross profit by approximately $2.0 million and affected our ability to complete installation work for certain customers during the quarter. Supply chain efficiencies have steadily improved during April and into May, relative to the first quarter of 2021, but we expect the supply chain to be tight over the remainder of the year for many of the materials and products used throughout our installation work. Three months ended March 31, 2021 2020 Selling $ 20,858 2.5 % $ 20,355 Percentage of total net revenue 4.8 % 5.1 % Administrative $ 65,077 8.1 % $ 60,195 Percentage of total net revenue 14.9 % 15.1 % Amortization $ 8,396 25.7 % $ 6,680 Percentage of total net revenue 1.9 % 1.7 % September 30, 2017 from 29.8%March 31, 2021 was primarily driven by an increase in selling wages and commissions to support our increased net revenue of 10.0%. Selling expense as a percentage of sales decreased for the three months ended September 30, 2016March 31, 2021 compared to 2020 primarily due to the factors discussed above.Operatingadditional loss reserves recorded as a result of adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) during the first quarter of 2020.SellingFor the three months ended September 30, 2017, selling expenses increased $1.9 million, or 14.1%, to $14.9 million from $13.0 million for the three months ended September 30, 2016. As a percentage of net revenue, selling expenses decreased to 5.0% during the three months ended September 30, 2017 from 5.8% during the three months ended September 30, 2016. On a dollar basis, the increase in selling expensesMarch 31, 2021 was primarily due to higheran increase in wages, benefits and commissions which supportedfacility costs attributable to both acquisitions and organic and acquisition-related growth.For the three months ended September 30, 2017, administrative expenses increased $10.2 million, or 32.2%, to $41.7 million from $31.5 milliondecreased as a percentage of sales for the three months ended September 30, 2016. March 31, 2021 compared to 2020 primarily due to the leverage gained on administrative wages from increased sales.administrative expenses is generally related to the cost of completing acquisitions, the ongoing costs associated with these newly-acquired entities and costs to support our growth. Wages and benefits increased $6.7 million, of which $4.0 million was attributable to acquisitions and $2.7 million was to support our growth. In addition, facility costs increased $1.2 million to support both organic and acquisition related growth and accounting, legal and consulting fees increased $0.5 million primarily to facilitate our transition into large accelerated filer status. The remaining increase in administrative expenses of $1.8 million included individually minor increases in several categories necessary to support our growing business, such as supplies and information technology costs.AmortizationFor the three months ended September 30, 2017, amortization expense increased $3.9 million to $6.8 million from $2.9 million for the three months ended September 30, 2016. The increase in amortization expenseMarch 31, 2021 was attributable to the additionalincrease in finite-lived intangible assets recorded as a result of acquisitions.For netThree months ended March 31, 2021 Change 2020 Interest expense, net $ 7,574 2.9 % $ 7,358 Other 81 100.0 % — Total other expense, net $ 7,655 $ 7,358 September 30, 2017, other expense increased $2.9 millionMarch 31, 2021 compared to $4.5 million from $1.6 million2020 was primarily due to the amortization of our unrealized loss on our terminated interest rate swap derivatives. See Note 10, Derivatives and Hedging Activities, for more information.Three months ended March 31, 2021 2020 Income tax provision $ 6,150 $ 5,684 Effective tax rate 26.2 % 26.2 % September 30, 2016 due to increased interest expense on our new Term Loan to support our growth related to acquisitions.IncomeMarch 31, 2021 was unfavorably impacted by certain expenses not being deductible for income tax provisionDuringreporting purposes, while the rate for the three months ended September 30, 2017, we recorded an income tax provision of $5.7 million on our income before income taxes of $17.7 million, or an effective tax rate of 32.3%. This rateMarch 31, 2020 was favorablyunfavorably impacted by deductions related to domestic production activities, usage of net operating losses for a tax filing entity which previously had a full valuation allowance, excess tax benefits from share-based compensation arrangements and the statute expiring for various uncertain tax positions. The favorable impact was partially offset by the tax effect of losses incurred by separate companies to which no benefit can be recognized due to a full valuation allowance against the losses.During the three months ended September 30, 2016, we recorded an income tax provision of $6.7 million on our income before income taxes of $18.3 million, or an effective tax rate of 36.8%. This rate was favorably impacted by deductions related to domestic production activities and the release of a valuation allowance due to utilization of net operating losses. The favorable impact was partially offset by separate tax filing entities in a loss position for which a full valuation allowance will be accounted for against the losses, causingis required, resulting in no tax benefit for recognized losses.Three months ended March 31, 2021 2020 Net change on cash flow hedges, net of taxes $ 10,157 $ (5,608) be recognizedfavorable market conditions and also amortized $0.6 million, net of tax, of the remaining unrealized loss on our terminated cash flow hedges. The unrealized losses recorded during the losses.Nine Months Ended September 30, 2017 Comparedthree months ended March 31, 2020 on our now-terminated cash flow hedges were partially driven by market responses to the Nine Months Ended September 30, 2016Net revenuenine months ended September 30, 2017, net revenue increased $204.1 million, or 32.4%, to $833.1 millionmaterials that we install directly from $629.0 million for the nine months ended September 30, 2016.manufacturers. The increase in net revenue included revenue from acquisitionsindustry supply of approximately $141.8 million. Approximately $35.8 million was predominantly attributable to organic growththese materials hasvolumepast. In 2021, the industry supply of completed jobs in allsome of our end markets. The remaining increase in net revenue of $26.5 million resulted from a variety of factors, including customer and product mix, market pricing variations and insulation volumes driven by building code requirements. None of these additional factorsthe materials we install was more significant than any other. Partially offsetting the increase in revenue were the effects of Hurricanes Harvey and Irma that negatively impacted our productivity during the nine months ended September 30, 2017.Cost of salesFor the nine months ended September 30, 2017, cost of sales increased $145.5 million, or 32.7%, to $590.4 million from $444.9 million for the nine months ended September 30, 2016. As a percentage of net revenue, cost of sales increased to 70.9% during the nine months ended September 30, 2017 from 70.7% during the nine months ended September 30, 2016. On a dollar basis, cost of sales included increases from acquired businesses of approximately $100.2 million. Approximately $24.4 million was predominantly attributable to organic growth in the volume of completed jobs in the residential new construction end market. Additionally, cost of sales increased $20.9 million as a result of a variety of factors including customer and product mix, market pricing variations and insulation volumes driven by building code requirements, as well as expense associated with our recently introduced share-based compensation program for certain of our installers. None of these additional factors was more significant than any other.Gross ProfitFor the nine months ended September 30, 2017, gross profit increased $58.6 million to $242.7 million from $184.1 million for the nine months ended September 30, 2016. As a percentage of net revenue, gross profit decreased to 29.1% for the nine months ended September 30, 2017 from 29.3% for the nine months ended September 30, 2016disrupted due to the factors discussed above.Operating expensesSellingForhigher demand for materials and the ninesupply chain issues caused by the weather events in the southern United States. especially Texas and the COVID-19 pandemic. This has forced us to buy materials at higher prices through distributors and local retailers to meet customer demand. The pandemic has also resulted in the need for some of our manufacturers to allocate materials across the industry which has affected the pricing and availability of those materials. Supply chain efficiencies have steadily improved during April and into May, relative to the first quarter of 2021, but we expect the supply chain to be tight over the remainder of the year for many of the materials and products used throughout our installation work.September 30, 2017, selling expensesMarch 31, 2021, we saw increased $6.3 million, or 17.4%,pricing for fiberglass insulation materials and expect manufacturers to $42.5 million from $36.2 million for the nine months ended September 30, 2016. As a percentage of net revenue, selling expenses decreased to 5.1%seek additional price increases during the nine months ended September 30, 2017 from 5.8% duringyear. Increased market pricing, regardless of the nine months ended September 30, 2016. Oncatalyst, has and could continue to impact our results of operations in 2021, to the extent that price increases cannot be passed on to our customers. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. See “COVID-19 Impacts” below for a dollar basis,discussion of the increase in selling expenses was primarily dueshort-term impacts of the current economic climate on the availability of the materials we install.higher wages, benefitsspend more to hire, train and commissions of $5.8 million which supported both organic and acquisition-related growth. The remaining increase of $0.5 million included individually minor increases in several categories necessaryretain installers to support our growing business.AdministrativeForbusiness in 2021, as tight labor availability continues within the nineconstruction industry. We offer a comprehensive benefits package, which many of our local competitors are not able to provide, which will increase costs as we hire additional personnel. Our workers’ compensation costs also continue to rise as we increase our coverage for additional personnel.September 30, 2017, administrative expenses increased $30.0 million, or 32.4%, to $122.7 million from $92.7 million for the nine months ended September 30, 2016. The increase in administrative expensesMarch 31, 2021. We believe this is generally related to the cost of completing acquisitions, the ongoing costs associated with these newly-acquired entities and costs to support our growth. Wages and benefits increased $18.9 million, of which $11.8 million was attributable to acquisitions and $7.1 million was to support our growth. In addition, facility costs increased $3.7 million to support both organic and acquisition-related growth and accounting, legal and consulting fees increased $2.3 million primarily to facilitate our transition into accelerated filer status. We also incurred $1.1 million of increased general liability insurance costs due to claims development and to support growth and $0.9 million of increased information technology-related expenses. The remaining increase in administrative expenses of $3.1 million included individually minor increases in several categories necessary to support our growing business.AmortizationFor the nine months ended September 30, 2017, amortization expense increased $11.6 million to $19.8 million from $8.2 million for the nine months ended September 30, 2016. The increase in amortization expense was attributable to the additional finite-lived intangible assets recorded aspartially a result of acquisitions.Other expenseForvarious programs meant to benefit our employees, including our financial wellness plan, longevity stock compensation plan for employees and assistance from the nine months ended September 30, 2017, other expense increased $6.9 millionInstalled Building Products Foundation meant to $11.8 million from $4.9 million for the nine months ended September 30, 2016 duebenefit our employees, their families and their communities. While improved retention drives lower costs to increased interest expense on higher debt levels to support our growth related to acquisitions.Income tax provisionDuring the nine months ended September 30, 2017, we recorded an income tax provision of $15.5 million on our income before income taxes of $45.8 million, or an effective tax rate of 33.8%. This rate was favorably impacted by deductions related to domestic production activities, usage of net operating losses for a tax filing entity which previously had a full valuation allowance, excess tax benefits from share-based compensation arrangementsrecruit and the statute expiring for various uncertain tax positions. The favorable impact was partiallytrain new employees, resulting in greater installer productivity, these improvements are somewhat offset by the taxadditional costs of these incentives. See “COVID-19 Impacts” below for a discussion of the short-term impacts of the current economic climate on our workforce.incurred by separate companiesdue to which no benefit canenhanced risk of uncollectibility from some customers, although we have not seen a significant impact to date. We anticipate revenue and net income may be recognizednegatively impacted in 2021 due to supply constraints and/or material price increases. While our cash from operations may decline over recent performance due to a decrease in expected net income driven by lower net revenue, we do not anticipate any issues meeting debt obligations or making timely payments to vendors given our strong liquidity and large cash reserves. See "Liquidity and Capital Resources" below for further information. Given the continued uncertainty created by the COVID-19 pandemic and its potential effects, it is not possible to estimate the full, valuation allowanceadverse impact to our future 2021 sales or other financial results at this time.losses.Duringnumber of employees, that would have been paid during 2020, such that under the nine months ended September CARES Act, 2016,recorded an income tax provision of approximately $14.8 million on our income before income taxes of approximately $42.1 million, or an effective tax rate of 35.1%. This rate was favorably impacted by deductionswere adhering to the Families First Coronavirus Response Act which required employers to provide their employees with paid sick leave and extended family and medical leave for specified reasons related to domestic production activities,COVID-19. Qualifying reasons for leave related to COVID-19 include when an employee is quarantined, is experiencing COVID-19 symptoms and is seeking a medical diagnosis, is being advised by a healthcare provider to self-quarantine, is caring for an individual subject to a quarantine order or self-quarantine situation, is caring for a child whose school or place of care is closed, or is experiencing any other substantially similar condition specified by the early adoptionU.S. Department of ASU2016-09Health and the release of a valuation allowance due to utilization of net operating losses. The favorable impact was partially offset by separate tax filing entitiesHuman Services. These provisions were in a loss position for which a full valuation allowance will be accounted for against the losses, causing no tax benefit to be recognized on the losses.Liquidity and Capital ResourcesOur primary sources of liquidity are our cash and cash equivalents, our marketable securities and the cash generated by our operations. As of September 30, 2017 andeffect until December 31, 2016, we had $92.1 million2020.$14.5 million, respectively, in cash, cash equivalentsborrowings under our various debt agreements and marketable securities. Our marketable securities consist primarily of commercial paper, corporate bondscapital equipment leases and money market funds. Our investment policy requires the purchase of high grade investment securities and the diversification of asset types and includes certain limits to avoid over-concentration into specific maturities, a specific issuer or a specific class of securities. As of September 30, 2017, we are in compliance with our investment policy. As of September 30, 2017, the financial sector accounted for 100% of our total investment portfolio.Our capitalWe may also use our resources primarily consist of cash from operationsto fund our optional stock repurchase program and borrowings under our credit agreements and capital equipment leases and loans.Since 2012, when housing completions began to increase meaningfully after a previous significant downturn in the residential construction industry, we have experienced improved profitability and liquidity and invested significantly in acquisitions, supported byrecently announced quarterly dividend program. As discussed above, our cash from operationsreserves may also be used to fund payroll and other short-term requirements if our credit agreements. Additionally, we have utilized capital leases and loans to finance the increase in the number of our vehicles and equipment.In addition, our acquisition of Alpha, which was completed on January 5, 2017, requires us to commit significant resources to the acquisition and ongoing support of Alpha’s business. This acquisition was fundedbusiness is affected significantly by drawing on our previous credit facility. September 30, 2017,March 31, 2021, we had no outstanding borrowings under our ABL Revolver and our borrowing availability was $82.1 million after being reduced by outstanding letters ofasset-based lending credit of $17.9 million.available borrowing capacity,availability, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital for at least the next 12 months.Senior Secured Credit Agreementsprovidesinterest rate swap agreement and ABL Credit Agreement include a provision related to the potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate (SOFR) values or another alternate benchmark rate. However, if LIBOR ceases to exist after 2023, the interest rates under the alternative rate could be higher than LIBOR. In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. As of March 31, 2021 As of December 31, 2020 Cash and cash equivalents $ 207,343 $ 231,520 ABL Revolver 200,000 200,000 Less: outstanding letters of credit (38,772) (38,772) $ 368,571 $ 392,748 seven-yeartrust to serve as additional collateral for our workers’ compensation and general liability policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability on our asset-based lending credit facility (as defined below) included in the table above. We have additional collateral requirements of $5.2 million that we expect to remit in the second quarter of 2021.OurThe amended Term Loan also has a margin of 1.25% in the case of base rate loans.the ABL Revolveran asset-based lending credit facility (the “ABL Revolver”) of up to approximately $100.0$200.0 million with a sublimit up to $50.0 million forfive-year maturity, which replaced the issuance of letters ofCompany’s previous revolving credit which may be reduced or increased pursuant to the ABL Credit Agreement. The borrowing base for the ABL Revolver, which determinesfacility. Borrowing availability under the facility,ABL Revolver is based on a percentage of the value of certain assets securing the Company’s obligations and those of the subsidiary guarantors thereunder. In connection with the Amended and Restated Term Loan, we entered into a Second Amendment to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Bank of America, N.A., as Term Loan Agent for the lenders under the Amended and Restated Term Loan. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of March 31, 2021 was $161.2 million.subsidiary guarantors, undersubject to certain exceptions and permitted liens, including a first-priority security interest in suchAgreement.Proceeds from the Senior Secured Credit Facilities were used to repayAgreement, and a second- priority security interest in full all amounts outstanding under the Credit and Security Agreement.Thesuch assets that constitute Term Loan amortizesPriority Collateral, as defined in quarterly principal payments of approximately $0.8 million starting on September 30, 2017, with any remaining unpaid balances due on April 15, 2024, which is the maturity date. Loans incurred under the ABL Revolver will have a final maturity of April 13, 2022.Subject to certain exceptions, the Term Loan will be subject to mandatorypre-payments equal to (i) 100% ofAgreement.net cash proceeds from issuancesEurodollar rate or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness); (ii) 100% ofbase rate (which approximated the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to customary reinvestment provisions and certain other expenses; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in excess of $5.0 million, subject to customary exceptions and limitations.Loans under the Senior Secured Credit Facilities bear interest based on,prime rate), at the Company’s election, either the base rateplus a margin of (A) 1.25% or the Eurodollar rate plus, in each case, the Applicable Margin. The Applicable Margin in respect of loans under (i) the Term Loan Agreement will be (A) 3.00% in the case of Eurodollar rate loans and (B) 2.00% in the case of base rate loans, and (ii) the ABL Facility will be (A) 1.25%, 1.50% or 1.75% in the case of Eurodollar rate loans (based on a measure of availability under the ABL Facility)Credit Agreement) and (B) 0.25%, or 0.50% or 0.75% in the case of base rate loans (based on a measure of availability under the ABL Facility)Credit Agreement).In addition, we will pay customary commitment feesletterconditions of any incremental revolving credit facility commitments must be no more favorable than the terms of the ABL Revolver. The ABL Revolver also allows for the issuance of letters of credit fees under theof up to $75.0 million in aggregate and borrowing of swingline loans of up to $20.0 million in aggregate.Agreement. The commitment fees will vary based upon a measure of our utilization under the ABL Revolver.The Senior Secured Credit Agreements each contain a number of customary affirmative and negativenon-financial covenants, and the ABL Credit Agreement also contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.00 to 1.001.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.September 30, 2017,March 31, 2021, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement and the Senior Secured Credit Agreements.are party to a Master Loan and Security Agreement, a Master Equipment Lease Agreement and one or more Master Loan Agreementshave financing loan agreements with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in the normal course of business. Each financing arrangement under these agreements constitutes a separate note and obligation. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. The specific termsAs of each note are basedMarch 31, 2021, we had $68.8 million due on specific criteria, including the typethese various loan agreements and approximately $56.3 million of vehicle or equipment and the market interest rates at the time. No termination date applies to these agreements.master loanMaster Loan and equipment agreementsEquipment Agreements were $66.8$134.5 million and $48.7$132.2 million as of September 30, 2017March 31, 2021 and December 31, 2016, respectively, none of which were fully depreciated as of September 30, 2017 or December 31, 2016,2020, respectively. The net book value of assets under these agreements was $47.3$66.5 million and $38.0$65.7 million as of September 30, 2017March 31, 2021 and December 31, 2016,2020, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.use letters of credit to secure our performance under our general liability and workers’ compensation insurance programs. Our largest workers’ compensation insurance program is considered a high deductible program whereby we are responsible for the cost of claims under approximately $0.8 million. If we do not pay these claims, our workers’ compensation insurance carriers are required to make these payments to the claimants on our behalf. Effective with the plan year beginning October 1, 2015, our largest general liability insurance program is considered a high retention program whereby we are responsible for the cost of claims up to approximately $2.0 million, subject to an aggregate cap of $8.0 million. If we do not pay these claims, our general liability insurance carrier is required to make these payments to the claimants on our behalf. Prior to the claim year beginning October 1, 2015, our largest general liability insurance program has a self-insured retention (“SIR”) of $0.35 million whereby we continue to be responsible for all claims below the SIR and the insurance company continues to be responsible for all liabilities above the SIR. As of September 30, 2017, we had $17.9 million of outstanding letters of credit and $0.3 million in cash securing our performance under these insurance programs. We expect to increase the collateral for these programs by approximately $10.0 million during the fourth quarter of 2017.We occasionallymay use performance bonds to ensure completion of our work on certain larger customer contracts that can span several months. As of September 30, 2017, we had 56 performance bonds outstanding, totaling approximately $24.1 million. The acquisition of Alpha resulted in a significant increase in the level of contracts in the commercial end market, which typically require a greater value of performance bonds.multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. AsIn addition, we occasionally use letters of September 30, 2017, we had 358 permitcredit and license bonds outstanding, totaling approximately $5.9 million.cash to secure our performance under our general liability and workers’ compensation insurance programs. Permit and license bonds are typically issued for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.Financial InstrumentsInterest Rate DerivativesAs of March 31, 2021 Performance bonds $ 36,014 Insurance letters of credit and cash collateral 45,216 Permit and license bonds 8,122 Total bonds and letters of credit $ 89,352 have various borrowing facilities which charge interest based on the one month U.S. dollar LIBOR rate plus an interest spread. On May 8, 2017, we enteredposted $5.3 million into two interest rate swaps with a notional amount of $100.0 million. During the second quarter of 2017, we begantrust in 2020 to receive variable rate interest payments based upon one month U.S. dollar LIBORserve as additional collateral for our workers’ compensation and in return were obligated to pay interest at a fixed rate of 1.9%.general liability policies. This effectivelycollateral can be converted the borrowing rate on $100.0 million of debt from a variable rate to a fixed rate. These derivatives are designated as cash flow hedges for accounting purposes. Accordingly, any effective portionletter of the unrealized gain or loss on these derivative instrumentscredit at our discretion and is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transactions and in the same period during which the hedged transactions affect earnings. Any ineffective portion of the gain or loss on the derivative instrument is recognized into earnings. For additional disclosures of the gain or loss included with other comprehensive income, see Note 8, Derivative and Hedging Activities, included in Item 1 of Part I of this Form10-Q. The assumptions used in measuring fair value of the interest rate derivatives aretherefore not 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.Cash flowof $53.3was $37.6 million and $54.6$35.9 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016, respectively, consisted primarily2020, respectively. Generally, the primary driver of netour cash flows from operating activities is operating income of $30.3 millionadjusted for certain noncash items, offset by cash payments for taxes and $27.4 million, respectively, adjusted fornon-cash and certain other items. Included in the net cash provided in 2017 werenon-cash adjustments for depreciation and amortization expenseinterest on our expanded baseoutstanding debt. Our cash flows from operations can be impacted by the timing of property, plantour cash collections on sales and equipment to support our growth totaling $20.7 million as well as for amortization on our growing intangible asset base from acquisitions totaling $19.8 million. These increases were offset by changes to certain assets and liabilities, excluding effectscollection of acquisitions, most notably additional accounts receivable resulting from our growth and additional income tax receivables due to changes in estimated tax payments.Included inretainage amounts. During the net cash provided in 2016 werenon-cash adjustments for depreciation and amortization expense on our expanded base of property, plant and equipment to support our growth totaling $17.2 million as well as for amortization on our growing intangible asset base from acquisitions totaling $8.2 million. These increases were coupled with other changes in working capital, most notably $6.0 million of additional other liabilities primarily driven by higher accrued wages due tothree months ended March 31, 2021, we saw an increase in number of dayscash from operations primarily due to higher net income from improved results as described above.pay cycle to accrue,third and fourth quarters as a $4.7 million change in other assets due primarily toresult of increased construction activity. However, we may see a reduction of various prepaid assetsin cash inflows in future quarters depending on pandemic impacts on housing starts and other receivables and $3.9 million of additional accounts payable resultingcommercial projects. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” above for further information on short-term impacts to our cash from the increase in purchases to support our growth, offset by a reduction of cash of $17.9 million due to increased accounts receivable resulting from our growth.Net cash used in investing activities was $180.3 million and $55.1 million forninethree months ended September 30, 2017March 31, 2021 and 2016, respectively. In 2017,2020, we made cash payments netof $41.9 million and $8.5 million, respectively, on various business combinations. The amount of cash acquired,paid is dependent on various factors, including the size and determined value of $131.0 million onthe business combinations, $25.2 million on purchases of short-term investmentsbeing acquired. See Note 16, Business Combinations, for more information regarding our acquisitions in 2021 and $22.9 million primarily to purchase fleet to support our growing business.In 2016, we made2020.payments, net of cash acquired, of $36.4 million on business combinationspaid for property and $19.2 million primarily to purchase fleet to support our growing business.Cash flows from financing activitiesNet cash provided by financing activitiesequipment was $179.5$10.8 million and $12.7$9.9 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016, respectively. Net cash provided in 2017 was primarily due to net proceeds of $190.5 million from our current and prior credit agreements to support continuing acquisitions and $15.8 million of proceeds from notes payable to finance our vehicle purchases. This increase in cash was offset by $8.2 million in debt issuance costs, $7.2 million in principal payments on other long term debt, $5.6 million in principal payments on capital lease obligations and $3.4 million in principal payments on acquisition-related obligations.Net cash provided in 2016 was primarily due to net proceeds of $11.9 million as a result of amending our credit agreement, resulting in increased borrowing capacity to support operations and continuing acquisitions and $16.3 million of proceeds from notes payable to finance our vehicle purchases. This increase in cash was offset by $6.6 million in principal payments on capital lease obligations, $1.2 million in costs related to amending our credit agreement and $4.1 million in principal payments on other long term debt.Capital expendituresCapital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. Total capital expenditures, including unpaid purchases as of each balance sheet date, were $23.3 million and $21.3 million for the nine months ended September 30, 2017 and 2016,2020, respectively, and was primarily related to purchases of vehicles and various equipment to support our operations and increasedgrowing operations. We expect to continue to support any increases in future net revenue. We finance a significant portionrevenue through further capital expenditures. A majority of ourthese capital expenditures under the Master Loanwere subsequently reimbursed via various vehicle and Security Agreement, the Master Equipment Agreement or the Master Loan Agreement, which allow us to benefitequipment notes payable, with related cash inflows shown in cash flows from depreciation for tax purposes. These arrangements require us to pay cash up front for vehicles and equipment. We are reimbursed for the upfront cash payments after the assets are financed under the agreements. Of the $23.3 million in capital expenditures during the nine months ended September 30, 2017, $15.8 million was converted to a financing arrangement by September 30, 2017 under the Master Loan and Security Agreement, Master Equipment Agreement and one or more Master Loan Agreements.Capped Call AgreementCertain 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.activities. 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 provides 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 becomes exercisable and expires on April 16, 2018 and will be settled in cash. The capped call agreement is 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 ObligationsOur enforceable and legally binding obligations as of September 30, 2017, included in the table below 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: Payments due by year (1) Total Remainder of
2017 2018 2019 2020 2021 Thereafter $ 433,469 $ 7,274 $ 29,347 $ 28,917 $ 27,482 $ 21,678 $ 318,771 14,786 2,017 6,128 4,229 1,606 806 — 40,246 3,442 12,319 9,856 6,594 3,370 4,665 (1)Our unrecognized tax benefits under ASC 740, “Income Taxes,” have been excluded from the table because of the inherent uncertainty and the inability to reasonably estimate the timing of cash outflows.(2)Long-term debt obligations include principal and interest payments on our Term Loan Agreement and ABL Credit Agreement as well as our notes payable to sellers of acquisitions and vehicles purchased under the Master Loan and Security Agreement, the Master Equipment Agreement and the Master Loan Agreements. Long-term debt obligations do not include commitment fees on the unused portion of the ABL Revolver since these fees are subject to change based on the factors described in our Credit and Security Agreement. Interest on seller obligations maturing through March 2025 is estimated using current market rates. See Item 1, Financial Statements, Note 5, Long-Term Debt, for information on our vehicle and equipment notes.(3)We maintain certain production vehicles under a capital lease structure. The leases expire on various dates through November 2021. Capital lease obligations, as disclosed above, include estimated interest expense payments. In determining expected interest expense payments, we utilize the rates embedded in the lease documentation.(4)We lease certain locations, vehicles and equipment under operating lease agreements, including, but not limited to, corporate offices, branch locations and various office and operating equipment. In some instances, these location lease agreements exist with related parties. See Item 1, Financial Statements, Note 11, Related Party Transactions, for further information.Off-Balance Sheet ArrangementsAs of September 30, 2017, other than operating leases and purchase obligations described above, letters of credit issued under the ABL Revolver and performance and license bonds, we had no materialoff-balance sheet arrangements.Critical Accounting Policies and EstimatesThere have been no material changes for the three months ended September 30, 2017 from the critical accounting policies and estimates as previously disclosed in our 2016 Form10-K and in our Form10-Q for the three months ended March 31, 20172020, we invested $0.8 million in short-term investments consisting primarily of corporate bonds and June 30, 2017, exceptcommercial paper and had $12.3 million in short-term investments mature. We have temporarily discontinued investment purchases due to the relatively low returns provided from current interest rates associated with traditional investments, but may resume such activity in the areafuture.below:Share-Based CompensationOur share-based compensation program is designedabove. We made payments on these fixed asset loans and various other notes payable of $6.5 million and $6.7 million during the three months ended March 31, 2021 and 2020, respectively. We also made $0.5 million and $0.7 million in principal payments on our finance leases and paid $1.4 million and $2.4 million of acquisition-related obligations during the three months ended March 31, 2021 and 2020, respectively. Lastly, we paid $15.8 million to attract and retain employees while also aligning employees’ interests with the interestsrepurchase 443 thousand shares of our stockholders. Restrictedcommon stock awards are periodically granted to certain employees, officers andnon-employee membersduring the three months ended March 31, 2020. We did not repurchase any shares of our board of directors under the stockholder-approved 2014 Omnibus Incentive Plan.Equity-based awards: Certain of ourcommon 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 restricted 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 stock-based 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 restricted 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.Liability-based awards:Certain of our stock awards represent a predominately-fixed monetary amount that is to be settled with a variable number of shares. These awards contain both time and performance requirements, and are deemed to be liability-based, which requires that were-measure to reflect the fair value at the end of each reporting period. The change in fair value each reporting period is recorded as compensation cost, with a corresponding increase or decrease in the share-based liability, either immediately or over the remaining service period depending on the vested status of the award.Compensation expense for both equity and liability-based restricted 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,three months ended March 31, 2021.compensation expense will be recognized. If performance goals that weresignificant changes to our obligations during the three months ended March 31, 2021.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 baseddisclosed in our 2020 Form 10-K.Standard Adoption ASU 2021-01, Reference Rate Reform (Topic 848):Scope ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes This pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and improves the consistent application of GAAP by clarifying and amending existing guidance. The adoption of this standard did not impact our financial statements or have a material effect on our disclosures. the market price of the shares on that date, or on the grant date if an election is made.Forward-Looking StatementsThis reportForm 10-Q contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, industry conditions, our financial and business model, payments of dividends, the impact of COVID-19 on our business and end markets, the demand for our services our financial model,and product offerings, trends in the commercial business, expansion of our national footprint and end markets, diversification of our products, our ability to capitalize on the new home construction recovery, our ability togrow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our ability to improve sales and profitability, our efforts to navigate the material pricing environment, our ability to increase selling prices, our material and labor costs, supply chain constraints, the impact of COVID-19 on our financial results and expectations for future demand for our services.services and our earnings in 2021. Forward-looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “estimate,” “project,” “predict,” “possible,” “forecast,” “may,” “could,” “would,” “should,” “expect,” “intends,” “plan,” and “will” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation, the duration, effect and severity of the COVID-19 crisis; the adverse impact of the COVID-19 crisis on our business and financial results, the economy and the markets we serve; general economic and industry conditions; the material price and supply environment; the timing of increases in our selling prices and the factors discussed in the “Risk Factors” section of our 20162020 Annual Report on Form10-K and this Quarterly Report on Form 10-Q, as the same may be updated from time to time in our subsequent filings with the SEC. Any forward-looking statement made by the Company in this report speaks only as of the date hereof. New risks and uncertainties arise from time to time and it is impossible for the Company to predict these events or how they may affect it. The Company
There have beenmaterial changesoutstanding borrowings on the ABL Revolver and no outstanding borrowings under finance leases subject to ourvariable interest rates. Our interest rate swap is a forward rate swap that begins July 30, 2021 and does not reduce exposure to market risk since Decemberrisks on our Term Loan as of March 31, 2016.2021. As a result, total variable rate debt of $200.0 million was exposed to market risks as of March 31, 2021 through the effective date of the forward rate swap. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately $2.0 million. Our Senior Notes accrued interest at a fixed rate of 5.75%.
March 31, 2021. We have not experienced any material impact to our internal controls over financial reporting despite the fact that many of the employees at our corporate office are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.September 30, 2017.September 30, 2017March 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
12,15, Commitments and Contingencies – Other Commitments and Contingencies, for information about existing legal proceedings.
ThereSeptember 30, 2017March 31, 2021 from the risk factors as disclosed in our 20162020 Form10-K.
None.Total Number
of Shares
PurchasedAverage
Price Paid
Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs January 1 - 31, 2021 — $ — — — February 1 - 28, 2021 — — — — March 1 - 31, 2021 — — — — — $ — — $ 100.0 million
Description ExhibitNumberDescription 31.110.2*# 31.1* 31.2 32.1 32.2101 (a)The following financial statements from the Company's Annual Report on Form 10-Q for the period ended March 31, 2021, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial statementsStatements.104** Cover Page Interactive Data File (formatted in Inline XBRL Formatand contained in Exhibit 101) of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.November 6, 2017May 7, 2021INSTALLED BUILDING PRODUCTS, INC. By: /s/ Jeffrey W. Edwards Jeffrey W. Edwards President and Chief Executive Officer By: /s/ Michael T. Miller Michael T. Miller Executive Vice President and Chief Financial Officer
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