FORM10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2023
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware | 45-3707650 | ||||||||||
(State or other jurisdiction of | (I.R.S. Employer
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495 South High Street, Suite 50
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Columbus, Ohio | 43215 | ||||||||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Stock, | $0.01 par value per share | IBP | The New York Stock Exchange |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||||||
☐ | ||||||||||||||||||||||||
Emerging growth company | ☐ |
36373737373737373739
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, | ||||||||||
2023 | 2022 | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 218,690 | $ | 229,627 | |||||||
Accounts receivable (less allowance for credit losses of $10,059 and $9,549 at March 31, 2023 and December 31, 2022, respectively) | 397,573 | 397,222 | |||||||||
Inventories | 170,115 | 176,629 | |||||||||
Prepaid expenses and other current assets | 76,217 | 80,933 | |||||||||
Total current assets | 862,595 | 884,411 | |||||||||
Property and equipment, net | 126,384 | 118,774 | |||||||||
Operating lease right-of-use assets | 74,602 | 76,174 | |||||||||
Goodwill | 392,625 | 373,555 | |||||||||
Customer relationships, net | 194,850 | 192,328 | |||||||||
Other intangibles, net | 94,751 | 91,145 | |||||||||
Other non-current assets | 33,756 | 42,545 | |||||||||
Total assets | $ | 1,779,563 | $ | 1,778,932 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities | |||||||||||
Current maturities of long-term debt | $ | 31,165 | $ | 30,983 | |||||||
Current maturities of operating lease obligations | 26,000 | 26,145 | |||||||||
Current maturities of finance lease obligations | 2,588 | 2,508 | |||||||||
Accounts payable | 134,836 | 149,186 | |||||||||
Accrued compensation | 45,613 | 51,608 | |||||||||
Other current liabilities | 76,136 | 67,631 | |||||||||
Total current liabilities | 316,338 | 328,061 | |||||||||
Long-term debt | 830,225 | 830,171 | |||||||||
Operating lease obligations | 48,339 | 49,789 | |||||||||
Finance lease obligations | 6,559 | 6,397 | |||||||||
Deferred income taxes | 25,993 | 28,458 | |||||||||
Other long-term liabilities | 46,887 | 42,557 | |||||||||
Total liabilities | 1,274,341 | 1,285,433 | |||||||||
Commitments and contingencies (Note 16) | |||||||||||
Stockholders’ equity | |||||||||||
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | — | — | |||||||||
Common stock; $0.01 par value: 100,000,000 authorized, 33,498,693 and 33,429,557 issued and 28,375,037 and 28,306,482 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 335 | 334 | |||||||||
Additional paid in capital | 232,503 | 228,827 | |||||||||
Retained earnings | 527,468 | 513,095 | |||||||||
Treasury stock; at cost: 5,123,656 and 5,123,075 shares at March 31, 2023 and December 31, 2022, respectively | (289,335) | (289,317) | |||||||||
Accumulated other comprehensive income | 34,251 | 40,560 | |||||||||
Total stockholders’ equity | 505,222 | 493,499 | |||||||||
Total liabilities and stockholders’ equity | $ | 1,779,563 | $ | 1,778,932 |
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, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Net revenue | $ | 659,309 | $ | 587,492 | |||||||||||||||||||
Cost of sales | 448,887 | 415,089 | |||||||||||||||||||||
Gross profit | 210,422 | 172,403 | |||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Selling | 32,607 | 25,192 | |||||||||||||||||||||
Administrative | 89,504 | 79,144 | |||||||||||||||||||||
Amortization | 11,435 | 11,097 | |||||||||||||||||||||
Operating income | 76,876 | 56,970 | |||||||||||||||||||||
Other expense, net | |||||||||||||||||||||||
Interest expense, net | 9,670 | 10,600 | |||||||||||||||||||||
Other (income) expense | (153) | 145 | |||||||||||||||||||||
Income before income taxes | 67,359 | 46,225 | |||||||||||||||||||||
Income tax provision | 18,085 | 12,403 | |||||||||||||||||||||
Net income | $ | 49,274 | $ | 33,822 | |||||||||||||||||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||||||||||
Net change on cash flow hedges, net of tax benefit (provision) of $2,252 and $(6,430) for the three months ended March 31, 2023 and 2022, respectively. | (6,309) | 18,111 | |||||||||||||||||||||
Comprehensive income | $ | 42,965 | $ | 51,933 | |||||||||||||||||||
Earnings Per Share: | |||||||||||||||||||||||
Basic | $ | 1.76 | $ | 1.15 | |||||||||||||||||||
Diluted | $ | 1.74 | $ | 1.14 | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | 28,075,678 | 29,302,396 | |||||||||||||||||||||
Diluted | 28,278,220 | 29,580,731 | |||||||||||||||||||||
Cash dividends declared per share | $ | 1.23 | $ | 1.22 |
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) Income | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE - January 1, 2022 | 33,271,659 | $ | 333 | $ | 211,430 | $ | 352,543 | (3,565,258) | $ | (147,239) | $ | (227) | $ | 416,840 | |||||||||||||||||||||||||||||||||
Net income | 33,822 | 33,822 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 40,980 | 1 | (1) | — | |||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock awards | (50) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | 3,089 | 3,089 | |||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 124 | 124 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of awards previously classified as liability awards | 39,204 | 4,000 | 4,000 | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($1.22 per share) | (35,890) | (35,890) | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock repurchase | (510,943) | (49,865) | (49,865) | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 18,111 | 18,111 | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE - March 31, 2022 | 33,351,843 | $ | 334 | $ | 218,642 | $ | 350,475 | (4,076,251) | $ | (197,104) | $ | 17,884 | $ | 390,231 | |||||||||||||||||||||||||||||||||
Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
BALANCE - January 1, 2023 | 33,429,557 | $ | 334 | $ | 228,827 | $ | 513,095 | (5,123,075) | $ | (289,317) | $ | 40,560 | $ | 493,499 | |||||||||||||||||||||||||||||||||
Net income | 49,274 | 49,274 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock awards to employees | 69,136 | 1 | (1) | — | |||||||||||||||||||||||||||||||||||||||||||
Surrender of common stock awards | (581) | (18) | (18) | ||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | 3,529 | 3,529 | |||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation issued to directors | 148 | 148 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($1.23 per share) | (34,901) | (34,901) | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive (loss), net of tax | (6,309) | (6,309) | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE - March 31, 2023 | 33,498,693 | $ | 335 | $ | 232,503 | $ | 527,468 | (5,123,656) | $ | (289,335) | $ | 34,251 | $ | 505,222 |
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, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | 49,274 | $ | 33,822 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
Depreciation and amortization of property and equipment | 12,525 | 11,329 | |||||||||
Amortization of operating lease right-of-use assets | 7,316 | 6,371 | |||||||||
Amortization of intangibles | 11,435 | 11,097 | |||||||||
Amortization of deferred financing costs and debt discount | 475 | 484 | |||||||||
Provision for credit losses | 1,678 | 653 | |||||||||
Gain on sale of property and equipment | (639) | (92) | |||||||||
Noncash stock compensation | 3,436 | 3,418 | |||||||||
Other, net | (2,523) | 790 | |||||||||
Changes in assets and liabilities, excluding effects of acquisitions | |||||||||||
Accounts receivable | 1,716 | (32,700) | |||||||||
Inventories | 7,699 | (16,300) | |||||||||
Other assets | 4,434 | 169 | |||||||||
Accounts payable | (16,906) | 16,486 | |||||||||
Income taxes receivable/payable | 16,450 | 11,433 | |||||||||
Other liabilities | (22,537) | 1,265 | |||||||||
Net cash provided by operating activities | 73,833 | 48,225 | |||||||||
Cash flows from investing activities | |||||||||||
Purchases of investments | — | (49,957) | |||||||||
Purchases of property and equipment | (14,949) | (10,362) | |||||||||
Acquisitions of businesses, net of cash acquired of $10 and $0 in 2023 and 2022, respectively | (38,008) | (8,050) | |||||||||
Proceeds from sale of property and equipment | 741 | 265 | |||||||||
Other | 4,602 | (614) | |||||||||
Net cash used in investing activities | $ | (47,614) | $ | (68,718) |
Three months ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from financing activities | |||||||||||
Payments on Term Loan | $ | (1,250) | $ | (1,250) | |||||||
Proceeds from vehicle and equipment notes payable | 8,119 | 4,752 | |||||||||
Debt issuance costs | — | (627) | |||||||||
Principal payments on long-term debt | (7,024) | (6,618) | |||||||||
Principal payments on finance lease obligations | (727) | (521) | |||||||||
Dividends paid | (34,536) | (35,426) | |||||||||
Acquisition-related obligations | (1,720) | (6,003) | |||||||||
Repurchase of common stock | — | (49,865) | |||||||||
Surrender of common stock awards by employees | (18) | — | |||||||||
Net cash used in financing activities | (37,156) | (95,558) | |||||||||
Net change in cash and cash equivalents | (10,937) | (116,051) | |||||||||
Cash and cash equivalents at beginning of period | 229,627 | 333,485 | |||||||||
Cash and cash equivalents at end of period | $ | 218,690 | $ | 217,434 | |||||||
Supplemental disclosures of cash flow information | |||||||||||
Net cash paid during the period for: | |||||||||||
Interest | $ | 14,658 | $ | 14,293 | |||||||
Income taxes, net of refunds | 1,524 | 1,088 | |||||||||
Supplemental disclosure of noncash activities | |||||||||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | 5,650 | $ | 5,514 | |||||||
Property and equipment obtained in exchange for finance lease obligations | 957 | 544 | |||||||||
Seller obligations in connection with acquisition of businesses | 6,035 | 1,878 | |||||||||
Unpaid purchases of property and equipment included in accounts payable | 2,316 | 1,884 |
We have
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Residential | 84 | % | 89 | % | 83 | % | 88 | % | ||||||||
Commercial | 16 | 11 | 17 | 12 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
100 | % | 100 | % | 100 | % | 100 | % |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
quarters.
Standard | Effective Date | Adoption | ||||||||||||
ASU 2021-08, Business Combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers | December 15, 2022 | This pronouncement amended Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. This did not have a material impact on our consolidated financial statements |
Standard | Description | Effective Date | Effect on the financial statements or other significant matters | |||||||||||||||||
ASU 2023-01 Leases (Topic 842): Common Control Arrangements | This pronouncement amends Topic 842 to require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. | Annual periods beginning after December 15, 2023, including interim periods therein. Early adoption is permitted. | We are currently assessing the impact of adoption on our consolidated financial statements. |
Three months ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Installation: | |||||||||||||||||||||||||||||||||||||||||||||||
Residential new construction | $ | 475,095 | 72 | % | $ | 442,404 | 75 | % | |||||||||||||||||||||||||||||||||||||||
Repair and remodel | 37,675 | 6 | % | 32,641 | 6 | % | |||||||||||||||||||||||||||||||||||||||||
Commercial | 109,972 | 16 | % | 86,586 | 15 | % | |||||||||||||||||||||||||||||||||||||||||
Net revenue, Installation | $ | 622,742 | 94 | % | $ | 561,631 | 96 | % | |||||||||||||||||||||||||||||||||||||||
Other | 36,567 | 6 | % | 25,861 | 4 | % | |||||||||||||||||||||||||||||||||||||||||
Net revenue, as reported | $ | 659,309 | 100 | % | $ | 587,492 | 100 | % |
Three months ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insulation | $ | 394,043 | 60 | % | $ | 364,943 | 63 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shower doors, shelving and mirrors | 45,513 | 7 | % | 36,340 | 6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Garage doors | 43,312 | 7 | % | 35,979 | 6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Waterproofing | 29,939 | 4 | % | 29,022 | 5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rain gutters | 27,800 | 4 | % | 23,546 | 4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Window Blinds | 15,881 | 2 | % | 13,058 | 2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fireproofing/firestopping | 15,175 | 2 | % | 15,922 | 3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other building products | 51,079 | 8 | % | 42,821 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net revenue, Installation | $ | 622,742 | 94 | % | $ | 561,631 | 96 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 36,567 | 6 | % | 25,861 | 4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net revenue, as reported | $ | 659,309 | 100 | % | $ | 587,492 | 100 | % |
Preparationcustomer deposits and billings in excess of the consolidated financial statementsrevenue recognized, based on costs incurred and are included in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts ofother current liabilities in our Condensed Consolidated Balance Sheets.
March 31, 2023 | December 31, 2022 | ||||||||||
Contract assets | $ | 36,048 | $ | 29,431 | |||||||
Contract liabilities | (17,331) | (18,884) |
March 31, 2023 | December 31, 2022 | ||||||||||
Costs incurred on uncompleted contracts | $ | 279,994 | $ | 273,788 | |||||||
Estimated earnings | 116,621 | 114,781 | |||||||||
Total | 396,615 | 388,569 | |||||||||
Less: Billings to date | 369,686 | 368,009 | |||||||||
Net under billings | $ | 26,929 | $ | 20,560 |
March 31, 2023 | December 31, 2022 | ||||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) | $ | 36,048 | $ | 29,431 | |||||||
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) | (9,119) | (8,871) | |||||||||
Net under billings | $ | 26,929 | $ | 20,560 |
Balance as of January 1, 2023 | $ | 9,549 | |||
Current period provision | 1,678 | ||||
Recoveries collected and additions | 61 | ||||
Amounts written off | (1,229) | ||||
Balance as of March 31, 2023 | $ | 10,059 |
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 certain 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, whereas in accordance with this ASU, we have identified multiple phases to certain of our insulation projects that should be considered separate performance obligations. Currently, we intend to adopt the new standard using the modified retrospective approach, which would allow us to recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings.
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 accounting 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, 2018 as we expect it to be applicable to us at that time.
In January 2017, the FASB issued ASU2017-01, “Business Combinations (Topic 805): 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)
5 - CASH AND CASH EQUIVALENTS
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.2022, 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 | |||||||||
|
|
|
|
|
| |||||||
September 30, 2017 | $ | 223,664 | $ | (70,004 | ) | $ | 153,660 | |||||
|
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|
|
|
|
Installation | Other | Consolidated | |||||||||||||||
Goodwill (gross) - January 1, 2023 | $ | 355,226 | $ | 88,333 | $ | 443,559 | |||||||||||
Business combinations | 13,540 | — | 13,540 | ||||||||||||||
Other | 257 | 5,273 | 5,530 | ||||||||||||||
Goodwill (gross) - March 31, 2023 | 369,023 | 93,606 | 462,629 | ||||||||||||||
Accumulated impairment losses | (70,004) | — | (70,004) | ||||||||||||||
Goodwill (net) - March 31, 2023 | $ | 299,019 | $ | 93,606 | $ | 392,625 | |||||||||||
March 31, 2023, including a change in tax election that resulted in a $4.9 million change in purchase price for a 2022 acquisition. For additional information regarding changes to goodwill resulting from acquisitions, see Note 17, 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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|
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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, | ||||||||||||||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
Amortized intangibles: | |||||||||||||||||||||||||||||||||||
Customer relationships | $ | 349,019 | $ | 154,169 | $ | 194,850 | $ | 338,050 | $ | 145,722 | $ | 192,328 | |||||||||||||||||||||||
Covenants not-to-compete | 31,207 | 21,028 | 10,179 | 30,899 | 20,086 | 10,813 | |||||||||||||||||||||||||||||
Trademarks and tradenames | 125,078 | 41,518 | 83,560 | 119,612 | 39,638 | 79,974 | |||||||||||||||||||||||||||||
Backlog | 21,635 | 20,623 | 1,012 | 20,815 | 20,457 | 358 | |||||||||||||||||||||||||||||
$ | 526,939 | $ | 237,338 | $ | 289,601 | $ | 509,376 | $ | 225,903 | $ | 283,473 |
Remainder of 2017 | $ | 6,916 | ||
2018 | 22,983 | |||
2019 | 17,928 | |||
2020 | 17,212 | |||
2021 | 16,194 | |||
Thereafter | 59,481 |
Remainder of 2023 | $ | 32,834 | |||
2024 | 39,843 | ||||
2025 | 34,301 | ||||
2026 | 30,350 | ||||
2027 | 26,064 | ||||
Thereafter | 126,209 |
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, | ||||||||||
2023 | 2022 | ||||||||||
Senior Notes due 2028, net of unamortized debt issuance costs of $2,887 and $3,036, respectively | $ | 297,113 | $ | 296,964 | |||||||
Term loan, net of unamortized debt issuance costs of $5,524 and $5,767, respectively | 488,226 | 489,233 | |||||||||
Vehicle and equipment notes, maturing through March 2028; payable in various monthly installments, including interest rates ranging from 1.9% to 6.2% | 74,078 | 72,984 | |||||||||
Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0% | 1,973 | 1,973 | |||||||||
861,390 | 861,154 | ||||||||||
Less: current maturities | (31,165) | (30,983) | |||||||||
Long-term debt, less current maturities | $ | 830,225 | $ | 830,171 |
Remainder of 2023 | $ | 23,976 | |||
2024 | 27,027 | ||||
2025 | 21,201 | ||||
2026 | 16,250 | ||||
2027 | 11,002 | ||||
Thereafter | 770,345 |
Senior Secured Credit Agreements
On April 13, 2017, we entered into a term loan credit agreement (the “Term Loan Agreement”) which provides
As of March 31, | As of December 31, | |||||||||||||||||||
(in thousands) | Classification | 2023 | 2022 | |||||||||||||||||
Assets | ||||||||||||||||||||
Non-Current | ||||||||||||||||||||
Operating | Operating lease right-of-use assets | $ | 74,602 | $ | 76,174 | |||||||||||||||
Finance | Property and equipment, net | 9,159 | 8,928 | |||||||||||||||||
Total lease assets | $ | 83,761 | $ | 85,102 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Operating | Current maturities of operating lease obligations | $ | 26,000 | $ | 26,145 | |||||||||||||||
Financing | Current maturities of finance lease obligations | 2,588 | 2,508 | |||||||||||||||||
Non-Current | ||||||||||||||||||||
Operating | Operating lease obligations | 48,339 | 49,789 | |||||||||||||||||
Financing | Finance lease obligations | 6,559 | 6,397 | |||||||||||||||||
Total lease liabilities | $ | 83,486 | $ | 84,839 | ||||||||||||||||
Weighted-average remaining lease term: | ||||||||||||||||||||
Operating leases | 3.9 years | 4.0 years | ||||||||||||||||||
Finance leases | 3.8 years | 3.6 years | ||||||||||||||||||
Weighted-average discount rate: | ||||||||||||||||||||
Operating leases | 4.60 | % | 4.41 | % | ||||||||||||||||
Finance leases | 6.08 | % | 5.76 | % |
Three months ended March 31, | ||||||||||||||||||||||||||||||||
(in thousands) | Classification | 2023 | 2022 | |||||||||||||||||||||||||||||
Operating lease cost(1) | Administrative | $ | 9,203 | $ | 7,759 | |||||||||||||||||||||||||||
Finance lease cost: | ||||||||||||||||||||||||||||||||
Amortization of leased assets(2) | Cost of sales | 977 | 716 | |||||||||||||||||||||||||||||
Interest on finance lease obligations | Interest expense, net | 131 | 61 | |||||||||||||||||||||||||||||
Total lease costs | $ | 10,311 | $ | 8,536 |
Proceeds from the Senior Secured Credit Facilities were used to repay 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”).
2022.
Subject to certain exceptions, the Term Loan will be subject to mandatorypre-payments equal to (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness); (ii) 100% of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a 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 excesstable below presents supplemental cash flow information related to leases (in thousands):
Three months ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||||||||
Operating cash flows for operating leases | $ | 7,691 | $ | 6,463 | |||||||||||||||||||
Operating cash flows for finance leases | 131 | 61 | |||||||||||||||||||||
Financing cash flows for finance leases | 727 | 521 |
Total gross assets relating to our master loan and equipment agreements were $66.8 million and $48.7 million as of September 30, 2017 and December 31, 2016, respectively, none of which were fully depreciated as of September 30, 2017 or December 31, 2016, respectively. The net book value of assets under these agreements was $47.3 million and $38.0 million as of September 30, 2017 and December 31, 2016, respectively. Depreciation of assets held under these agreements is included within cost of salesoperating lease obligations recorded on the Condensed Consolidated StatementsBalance Sheet as of Operations and Comprehensive Income.
NOTE 6 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Uncompleted contracts were as follows for the nine months ended September 30March 31, 2023 (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 current assets in our Condensed Consolidated Balance Sheets. The liability, billings in excess of costs and estimated earnings on uncompleted contracts, represents billings in excess of revenues recognized and is included in other current liabilities in our Condensed Consolidated Balance Sheets.
Finance Leases | Operating Leases | ||||||||||||||||||||||
Related Party | Other | Total Operating | |||||||||||||||||||||
Remainder of 2023 | $ | 2,354 | $ | 1,068 | $ | 21,268 | $ | 22,336 | |||||||||||||||
2024 | 2,668 | 1,175 | 21,565 | 22,740 | |||||||||||||||||||
2025 | 2,299 | 1,017 | 14,742 | 15,759 | |||||||||||||||||||
2026 | 1,968 | — | 9,616 | 9,616 | |||||||||||||||||||
2027 | 997 | — | 5,252 | 5,252 | |||||||||||||||||||
Thereafter | 17 | — | 5,559 | 5,559 | |||||||||||||||||||
Total minimum lease payments | 10,303 | $ | 3,260 | $ | 78,002 | 81,262 | |||||||||||||||||
Less: Amounts representing executory costs | (2) | — | |||||||||||||||||||||
Less: Amounts representing interest | (1,154) | (6,923) | |||||||||||||||||||||
Present value of future minimum lease payments | 9,147 | 74,339 | |||||||||||||||||||||
Less: Current obligation under leases | (2,588) | (26,000) | |||||||||||||||||||||
Long-term lease obligations | $ | 6,559 | $ | 48,339 |
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, 2023 and 2022, 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.
Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods.
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, 2023 | As of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Cash equivalents | $ | 197,910 | $ | 197,910 | $ | — | $ | — | $ | 191,881 | $ | 191,881 | $ | — | $ | — | |||||||||||||||||||||||||||||||
Derivative financial instruments | 30,020 | — | 30,020 | — | 38,671 | — | 38,671 | — | |||||||||||||||||||||||||||||||||||||||
Total financial assets | $ | 227,930 | $ | 197,910 | $ | 30,020 | $ | — | $ | 230,552 | $ | 191,881 | $ | 38,671 | $ | — | |||||||||||||||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
Contingent consideration | $ | 968 | $ | — | $ | — | $ | 968 | $ | 1,858 | $ | — | $ | — | $ | 1,858 | |||||||||||||||||||||||||||||||
Derivative financial instruments | 1,014 | — | 1,014 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Total financial liabilities | $ | 1,982 | $ | — | $ | 1,014 | $ | 968 | $ | 1,858 | $ | — | $ | — | $ | 1,858 |
Contingent consideration liability - January 1, 2023 | $ | 1,858 | |||
Accretion in value | 110 | ||||
Amounts paid to sellers | (1,000) | ||||
Contingent consideration liability - March 31, 2023 | $ | 968 |
As of March 31, 2023 | As of December 31, 2022 | ||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Senior Notes(1) | $ | 300,000 | $ | 278,709 | $ | 300,000 | $ | 270,993 |
Three months ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Installation | Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 622,742 | $ | 38,722 | $ | (2,155) | $ | 659,309 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales (1) | 410,384 | 28,459 | (1,766) | 437,077 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment gross profit | $ | 212,358 | $ | 10,263 | $ | (389) | $ | 222,232 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment gross profit percentage | 34.1 | % | 26.5 | % | 18.1 | % | 33.7 | % |
Three months ended March 31, 2022 | |||||||||||||||||||||||
Installation | Other | Eliminations | Consolidated | ||||||||||||||||||||
Revenue | $ | 561,631 | $ | 26,650 | $ | (789) | $ | 587,492 | |||||||||||||||
Cost of sales (1) | 385,692 | 19,373 | (609) | 404,456 | |||||||||||||||||||
Segment gross profit | $ | 175,939 | $ | 7,277 | $ | (180) | $ | 183,036 | |||||||||||||||
Segment gross profit percentage | 31.3 | % | 27.3 | % | 22.8 | % | 31.2 | % |
Three months ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Segment gross profit - consolidated | $ | 222,232 | $ | 183,036 | |||||||
Depreciation and amortization (1) | 11,810 | 10,633 | |||||||||
Gross profit, as reported | 210,422 | 172,403 | |||||||||
Operating expenses | 133,546 | 115,433 | |||||||||
Operating income | 76,876 | 56,970 | |||||||||
Other expense, net | 9,517 | 10,745 | |||||||||
Income before income taxes | $ | 67,359 | $ | 46,225 |
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, 2023, we have not posted any collateral related to these agreements.
Effective Date | Notional Amount | Fixed Rate | Maturity Date | |||||||||||||||||
(in millions) | ||||||||||||||||||||
July 30, 2021 | $ | 200.0 | 0.51 | % | December 31, 2025 | |||||||||||||||
December 31, 2021 | 100.0 | 1.37 | % | December 31, 2025 | ||||||||||||||||
December 31, 2021 | 100.0 | 1.37 | % | December 31, 2025 | ||||||||||||||||
December 31, 2025 | 300.0 | 3.09 | % | December 14, 2028 | ||||||||||||||||
December 31, 2025 | 100.0 | 2.98 | % | December 14, 2028 |
Three months ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(Benefit) expense associated with swap net settlements | $ | (3,593) | $ | 795 | |||||||||||||||||||
Expense associated with amortization of amended/terminated swaps | 1,104 | 790 |
Three months ended March 31, | ||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||
Accumulated gain (loss) at beginning of period | $ | 40,560 | $ | (227) | ||||||||||||||||||||||
Unrealized (losses) gains in fair value | (7,126) | 17,527 | ||||||||||||||||||||||||
Reclassifications of realized net losses to earnings | 817 | 584 | ||||||||||||||||||||||||
Accumulated gain at end of period | $ | 34,251 | $ | 17,884 |
Declaration Date | Record Date | Payment Date | Dividend Per Share | Amount Declared | Amount Paid | |||||||||||||||||||||||||||
2/22/2023 | 3/15/2023 | 3/31/2023 | $ | 0.90 | $ | 25,537 | $ | 25,270 | ||||||||||||||||||||||||
2/22/2023 | 3/15/2023 | 3/31/2023 | 0.33 | 9,364 | 9,266 | |||||||||||||||||||||||||||
Declaration Date | Record Date | Payment Date | Dividend Per Share | Amount Declared | Amount Paid | |||||||||||||||||||||||||||
2/24/2022 | 3/15/2022 | 3/31/2022 | $ | 0.90 | $ | 26,585 | $ | 26,242 | ||||||||||||||||||||||||
2/24/2022 | 3/15/2022 | 3/31/2022 | 0.315 | 9,305 | 9,184 | |||||||||||||||||||||||||||
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 | ||||||
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$ | 13,750 | $ | 11,647 | |||||
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March 31, 2023 | December 31, 2022 | ||||||||||
Included in other current liabilities | $ | 8,782 | $ | 9,946 | |||||||
Included in other long-term liabilities | 16,550 | 13,730 | |||||||||
$ | 25,332 | $ | 23,676 |
September 30, 2017 | December 31, 2016 | |||||||
Included in othernon-current assets | $ | 1,828 | $ | 1,249 |
Share-Based Compensation
Directors
During
March 31, 2023 | December 31, 2022 | ||||||||||
Included in other non-current assets | $ | 2,743 | $ | 2,318 |
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, we granted approximately 0.1 million
included in other long-term liabilities on the Condensed Consolidated Balance Sheets. During the ninethree months ended September 30, 2017,March 31, 2023 and 2022, we granted approximately 8 thousand and 39 thousand shares of our common stock, respectively. The shares granted in 2023 will vest in 2025, and the shares granted in 2022 vested in the second quarter of 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, 2022 | 157,117 | $ | 77.31 | 126,053 | $ | 103.37 | 15,711 | $ | 80.55 | ||||||||||||||||||||||||||
Granted | 7,690 | 109.76 | 69,281 | 109.09 | — | — | |||||||||||||||||||||||||||||
Vested | (569) | 82.14 | — | — | — | — | |||||||||||||||||||||||||||||
Forfeited/Cancelled | (398) | 86.72 | — | — | (289) | 80.55 | |||||||||||||||||||||||||||||
Nonvested awards/units at March 31, 2023 | 163,840 | $ | 78.79 | 195,334 | $ | 105.40 | 15,422 | $ | 80.55 |
Three months ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Common Stock Awards | $ | 1,393 | $ | 1,531 | |||||||||||||||||||
Non-Employee Common Stock Awards | 148 | 124 | |||||||||||||||||||||
Performance-Based Stock Awards | 1,563 | 1,315 | |||||||||||||||||||||
Liability Performance-Based Stock Awards | 26 | 206 | |||||||||||||||||||||
Performance-Based Restricted Stock Units | 306 | 242 | |||||||||||||||||||||
$ | 3,436 | $ | 3,418 |
Three months ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Cost of sales | $ | 165 | $ | 149 | |||||||||||||||||||
Selling | 136 | 62 | |||||||||||||||||||||
Administrative | 3,135 | 3,207 | |||||||||||||||||||||
$ | 3,436 | $ | 3,418 |
As of March 31, 2023 | |||||||||||
Unrecognized Compensation Expense on Unvested Awards | Weighted Average Remaining Vesting Period | ||||||||||
Common Stock Awards | $ | 5,561 | 1.7 | ||||||||
Performance-Based Stock Awards | 11,112 | 2.1 | |||||||||
Performance-Based Restricted Stock Units | 41 | 0.1 | |||||||||
Total unrecognized compensation expense related to unvested awards | $ | 16,714 |
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Employees – Performance-Based Stock Awards
During the nine months ended September 30, 2017, we established, and our Board of Directors approved, performance-based targets in connection with common stock awards to be issued to certain officers in 2018 contingent upon achievement of these targets. Share-based compensation expense associated with these performance-based awards was $0.3 million and $0.7 million for the three and nine months ended September 30, 2017, respectively.
As of September 30, 2017, there was $2.4 million of unrecognized compensation expense related to nonvested performance-based common stock awards. This expense is subject to future adjustments for forfeitures and is expected to be recognized over the remaining weighted-average period of 2.1 years using the graded-vesting method. See the table below for changes in shares and related weighted average fair market value per share.
Employees – Performance-Based Restricted Stock Units
During the nine 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 in 2018 contingent upon achievement of a performance target. These units will be accounted for as equity-based awards that will be settled with a fixed number of common shares. Share-based compensation expense associated with these performance-based awards was $1.0 million and $1.7 million for the three and nine months ended September 30, 2017, respectively.
As of September 30, 2017, there was $2.1 million of unrecognized compensation expense related to nonvested performance-based common stock units. 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 0.6 years. See the table below for changes in shares and related weighted average fair market value per share.
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 recognized on a straight-line basis over the remaining vesting period of 4.25 years.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Share-Based Compensation Summary
Amounts 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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As of September 30, 2017, approximately 2.63.0 million shares of common stock authorized for issuance were available for issuance under the 2014 Omnibus Incentive Plan.
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, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Sales | $ | 4,015 | $ | 560 | |||||||||||||||||||
Purchases | 666 | 407 | |||||||||||||||||||||
Rent | 352 | 314 |
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 is a memberand President rejoined our board of our Boarddirectors in July of Directors,2022, accounted for $1.0$1.5 million and $0.8$2.5 million of these balancesthe related party accounts receivable balance as of September 30, 2017March 31, 2023 and December 31, 2016, 2022,
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, 2023 | December 31, 2022 | ||||||||||
Included in other current liabilities | $ | 7,162 | $ | 7,479 | |||||||
Included in other long-term liabilities | 16,621 | 17,528 | |||||||||
$ | 23,783 | $ | 25,007 |
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, 2023 | December 31, 2022 | ||||||||||
Insurance receivables and indemnification assets for claims under fully insured policies | $ | 2,643 | $ | 4,933 | |||||||
Insurance receivables for claims that exceeded the stop loss limit | 75 | 380 | |||||||||
Total insurance receivables and indemnification assets included in other non-current assets | $ | 2,718 | $ | 5,313 |
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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taxes when appropriate.
Three months ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income | |||||||||||||||||||||||||||||||||||||||||||||||||
Anchor | 3/12/2023 | Share | $ | 35,928 | $ | 1,000 | $ | 36,928 | $ | 2,193 | $ | 51 | ||||||||||||||||||||||||||||||||||||||||||||
Other | 2/13/2023 | Asset | 2,090 | 131 | 2,221 | 444 | 15 | |||||||||||||||||||||||||||||||||||||||||||||||||
$ | 38,018 | $ | 1,131 | $ | 39,149 | $ | 2,637 | $ | 66 |
Three months ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income | |||||||||||||||||||||||||||||||||||||||||||||||||
Other | 03/01/2022 | Share | $ | 8,050 | $ | 1,878 | $ | 9,928 | $ | 915 | $ | 97 | ||||||||||||||||||||||||||||||||||||||||||||
Three months ended March 31, 2023 | Three months ended March 31, 2022 | ||||||||||||||||||||||||||||||||||
Anchor | Other | Total | Other | ||||||||||||||||||||||||||||||||
Estimated fair values: | |||||||||||||||||||||||||||||||||||
Cash | $ | 10 | $ | — | $ | 10 | $ | 87 | |||||||||||||||||||||||||||
Accounts receivable | 3,661 | — | 3,661 | 772 | |||||||||||||||||||||||||||||||
Inventories | 1,527 | 64 | 1,591 | 684 | |||||||||||||||||||||||||||||||
Other current assets | 1,732 | — | 1,732 | 21 | |||||||||||||||||||||||||||||||
Property and equipment | 2,428 | 381 | 2,809 | 1,049 | |||||||||||||||||||||||||||||||
Operating lease right-of-use asset | — | 28 | 28 | — | |||||||||||||||||||||||||||||||
Intangibles | 16,420 | 1,120 | 17,540 | 4,634 | |||||||||||||||||||||||||||||||
Goodwill | 12,870 | 670 | 13,540 | 2,743 | |||||||||||||||||||||||||||||||
Other non-current assets | 184 | 13 | 197 | 7 | |||||||||||||||||||||||||||||||
Accounts payable and other current liabilities | (1,904) | (46) | (1,950) | (69) | |||||||||||||||||||||||||||||||
Other long-term liabilities | — | (9) | (9) | — | |||||||||||||||||||||||||||||||
Fair value of assets acquired and purchase price | 36,928 | 2,221 | 39,149 | 9,928 | |||||||||||||||||||||||||||||||
Less seller obligations | 1,000 | 131 | 1,131 | 1,878 | |||||||||||||||||||||||||||||||
Cash paid | $ | 35,928 | $ | 2,090 | $ | 38,018 | $ | 8,050 |
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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date, the contingent
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 adjusted2023 and 2022 had their respective goodwill assigned to reflect the review and ongoing analysis of the fair value measurements. As a result of our continued evaluation during the measurement period, we increased goodwill by approximately $2.2 million, offset by a corresponding net reduction in various working capital accounts.
The provisional amounts for Columbia originally reported in our Condensed Consolidated Balance Sheets included in our Quarterly Report on Form10-Q for the period ended June 30, 2017 were adjusted to reflect the review and ongoing analysis of the fair value measurements. As a result of an independent appraisal, we increased goodwill by approximately $0.5 million and our seller obligations by approximately $0.4 million for an adjustment to the fair value of a working capital contingent liability. These adjustments, as well as various other insignificant adjustments, resulted in a total purchase price increase for Columbia of approximately $0.6 million as reflected within the above table and were within applicable measurement period guidelines.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Installation operating segment.
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, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Acquired intangibles assets | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | |||||||||||||||||||
Customer relationships | $ | 10,969 | 12 | $ | 3,125 | 12 | |||||||||||||||||
Trademarks and tradenames | 5,466 | 15 | 1,136 | 15 | |||||||||||||||||||
Non-competition agreements | 285 | 5 | 374 | 5 | |||||||||||||||||||
Backlog | 820 | 1 | — | 0 |
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, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net revenue | $ | 667,915 | $ | 623,603 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 49,590 | 34,974 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic net income per share | 1.77 | 1.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted net income per share | 1.75 | 1.18 |
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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None278 thousand shares for the three months ended March 31, 2023 and 2022, respectively. Approximately 4 thousand shares of thenon-vestedpotential common stock awards had an antidilutive effect onwere not included in the calculation of diluted net income per common share for either of the three or nine months ended September 30, 2017 and 2016.
On October
rates.
94% of our net revenue comes from the service-based installation of these products across all of our end markets and forms our Installation operating segment and single reportable segment. In addition, two regional distribution operations serve the Midwest, Mountain West, Northeast and Mid-Atlantic regions of the United States, and we operate a cellulose manufacturing facility. 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. The strategic acquisitions of multiple companies over the last several years contributed meaningfully to our 12.2% increase in net revenue during the three months ended March 31, 2023 compared to 2022. Administrative effective tax rates were 26.8%. The rates for both periods were unfavorably impacted by certain expenses not deductible for income tax reporting purposes. was as follows (in thousands): market's expectations for lower long-term interest rates in the future relative to our three existing interest rate swaps and our two forward interest rate swaps. We also amortized $1.1 million of our remaining unrealized gains and losses, net, on our terminated cash flow hedges to interest expense during three months ended March 31, 2023, not including the offsetting tax effects of $0.3 million. materials we install. asset-based lending facility (as defined below). Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability. facility (as defined below). months as evidenced by our net positive cash flows from operations for the three months ended March 31, 2023 and 2022. 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, but we cannot guarantee that such financing will be available on favorable terms, or at all. In the short-term, we expect the seasonal trends we typically experience to vary from historical patterns, with the first half of 2023 experiencing stronger volumes than the second half of 2023 due to the large industry backlog of projects either in process or authorized but not started. This could affect the timing of cash collections and payments during each quarter of 2023. collateral agent thereunder. The amended Term Loan amortizes in quarterly principal payments of the Term Loan and for general corporate purposes, including acquisitions and other growth initiatives. As of March 31, 2023, we had $488.2 million, net of unamortized debt issuance costs, due on our Term Loan. Notes. (in thousands) Long-term debt obligations (2) Capital lease obligations (3) Operating lease obligations (4) consolidated financial statements. There have been no 2022 Form 10-K.20162022 Form10-K.mirrors, 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.other products. 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 240 branch locations.well positionedperforming, however, we may rely on different metrics in the future. We also utilize gross profit percentage as shown in the following section to continuemonitor our most significant variable costs and to profitably grow during the housing recovery due to our strong balance sheet, liquidityevaluate labor efficiency and continuing acquisition strategy. We may adjust our strategies based on housing demand and our performance 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 supplysuccess at passing increasing costs of materials to job sitescustomers.Three months ended March 31, 2023 2022 Period-over-period Growth Consolidated Sales Growth 12.2 % 34.4 % 7.1 % 22.5 % 10.9 % 30.0 % 7.0 % 22.2 % 1.6 % 37.4 % (2.6) % 29.4 % 38.1 % 24.6 % 37.9 % 23.1 % 7.4 % 35.2 % 3.8 % 28.3 % 27.0 % 13.0 % 22.4 % 5.9 % 45.3 % 407.3 % 12.9 % 50.8 % (9.3) % 9.7 % 16.5 % 14.6 % Total Completions Growth 11.7 % (3.4) % 1.4 % 1.5 % 50.8 % (18.7) % (1) Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date. (2) Calculated based on period-over-period growth of all end markets for our Installation segment. (3) Calculated based on period-over-period growth in the single-family subset of the residential new construction end market for our Installation segment. (4) Calculated based on period-over-period growth in the multi-family subset of the residential new construction end market for our Installation segment. (5) Calculated based on period-over-period growth in the residential new construction end market for our Installation segment. (6) Calculated based on period-over-period growth in the total commercial end market for our Installation segment. Our commercial end market consists of heavy and light commercial projects. (7) Calculated based on period-over-period growth in our Other category which consists of our Manufacturing and Distribution operating segments. Our distribution businesses were acquired in December, 2021 and April, 2022. (8) The heavy commercial end market, a subset of our total commercial end market, comprises projects that are much larger than our average installation job. This end market is excluded from the volume growth and price/mix growth calculations as to not skew the growth rates given its much larger per-job revenue compared to the average jobs in our remaining end markets. (9) Calculated as period-over-period change in the number of completed same-branch jobs within our Installation segment for all markets we serve except the heavy commercial end market. (10) Defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch jobs within our Installation segment for all markets we serve except the heavy commercial market, multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job. (11) U.S. Census Bureau data, as revised. quality installation. InstallationGross Profitinsulation is a critical phasegross profit were as follows (in thousands): Three months ended March 31, 2023 Change 2022 Net revenue $ 659,309 12.2 % $ 587,492 Cost of sales 448,887 8.1 % 415,089 Gross profit $ 210,422 22.1 % $ 172,403 Gross profit percentage 31.9 % 29.3 % 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 methodKey Measures of accounting. When thepercentage-of-completion method is used, we estimate the costs to complete individual contracts and record asPerformance section above. Installation 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 profitincreased 10.9% for the three months ended September 30, 2017.Three Months Ended September 30, 2017 Compared toMarch 31, 2023, respectively, driven by continued strong growth in the Three Months Ended September 30, 2016Netnew residential multifamily market which grew 38.1% as well as growth in the commercial market which increased 27.0% over the prior year period. Our largest end market, the single-family subset of the residential new construction market, grew revenueFor 1.6% over the three monthssame period ended September 30, 2017,March 31, 2022. The remaining overall growth in net revenue increased $69.8 million, or 31.0%, to $295.2 million from $225.4 million for the three months ended September 30, 2016. The increase in net revenue included revenue from acquisitions of approximately $48.7 million. Approximately $8.3 million was predominantlyMarch 31, 2023 is attributable to the acquisition of Central Aluminum which, combined with AMD Distribution, form our Distribution operating segment. This operating segment, combined with our Manufacturing operating segment, experienced 12.9% organic growth, inor 45.3% including the volume of completed jobs in all of our end markets. The remaining increase in net revenue of $12.8 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 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 during the three months ended September 30, 2017.Cost of salesFor the three months ended September 30, 2017, cost of sales increased $51.5 million, or 32.6%, to $209.6 million from $158.1 millionCentral Aluminum acquisition, 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 organic growth in the volume of completed jobs in the residential new construction end market. Additionally, cost of sales increased $11.2 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 three months ended September 30, 2017, gross profit increased $18.3 million to $85.6 million from $67.3 million for the three months ended September 30, 2016. March 31, 2023.decreasedimproved during the three months ended March 31, 2023 compared to 29.0%the corresponding prior year period primarily on the strength of price/mix growth and resulting leverage gained on labor and other costs of sales. We continued to focus on profitability over volume gains, and this had a noticeable impact on gross profit this quarter. While inflation and material supply chain issues that affected our business and industry in recent years are likely to persist through 2023, we have seen inflation moderate since the end of 2022 and signs that the supply chain is improving. We will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments. Three months ended March 31, 2023 Change 2022 Selling $ 32,607 29.4 % $ 25,192 Percentage of total net revenue 4.9 % 4.3 % Administrative $ 89,504 13.1 % $ 79,144 Percentage of total net revenue 13.6 % 13.5 % Amortization $ 11,435 3.0 % $ 11,097 Percentage of total net revenue 1.7 % 1.9 % September 30, 2017 from 29.8%March 31, 2023 was primarily driven by an increase in selling wages and commissions to support our increased net revenue of 12.2% and higher credit loss provisions due to increased sales. Selling expense as a percentage of sales increased for the three months ended September 30, 2016March 31, 2023 compared to 2022 primarily due to the factors discussed above.Operatingincreased commissions from changes in product mix and more profitable completed jobs.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, 2023 was primarily due to higheran increase in wages benefits and commissions which supported bothfacility costs from acquisitions and to support organic and acquisition-related growth.For the three months ended September 30, 2017, administrative expenses slightly increased $10.2 million, or 32.2%, to $41.7 million from $31.5 millionas a percentage of sales for the three months ended September 30, 2016. March 31, 2023 compared to 2022 primarily due to inflationary pressures and increased number of employees leading to higher wages and benefits.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, 2023 was attributable to the additionalincrease in finite-lived intangible assets recorded as a result of acquisitions.For net was as follows (in thousands):Three months ended March 31, 2023 Change 2022 Interest expense, net $ 9,670 (8.8) % $ 10,600 Other (income) expense (153) (205.5) % 145 Total other expense, net $ 9,517 $ 10,745 September 30, 2017, otherMarch 31, 2023 compared to 2022 was primarily due to increased interest income due to higher yields on cash deposits offsetting the expense, partially offset by increased $2.9 million to $4.5 million from $1.6 million forinterest expense on variable rate debt.Three months ended March 31, 2023 2022 Income tax provision $ 18,085 $ 12,403 Effective tax rate 26.8 % 26.8 % September 30, 2016 due to increased interest expense onMarch 31, 2023 and 2022, our new Term Loan to support our growth related to acquisitions.provisionThree months ended March 31, 2023 2022 Net change on cash flow hedges, net of taxes $ (6,309) $ 18,111 September 30, 2017,March 31, 2023, we recorded an income tax provisionunrealized losses of $5.7$7.1 million, net of taxes, respectively, on our income before income taxes of $17.7 million, or an effective tax rate of 32.3%. 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 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 recognizedcash flow hedges due to a full valuation allowance against the losses.September 30, 2016,March 31, 2022, we recorded an incomeunrealized gain of $17.5 million, net of tax, provisionand amortized $0.8 million of $6.7 millionour remaining unrealized loss on our income before income taxesterminated cash flow hedges, not including the offsetting tax effect of $18.3 million, or an effective tax$0.2 million.36.8%. This rate was favorably2021. Rising interest rates began to curtail housing demand in the second half of 2022 and first quarter of 2023, reducing mortgage financing affordability. As a result, the single family homebuilding market began showing signs of weakening in late 2022 and early 2023 and housing starts and permits are forecasted to decline in 2023.deductions related to domestic production activitiesthese economic headwinds in 2023. However, we believe the large residential construction backlog of both units under construction and the release of a valuation allowance due to utilization of net operating losses. The favorable impact wasunits not started will partially offset by separate tax filing entitiesthese challenges. Additionally, there are housing shortages in a loss position for which a full valuation allowancesome of the markets we serve and we expect the backlog in our growing multi-family business will be accounted for againsthelp to offset any declines we may face in the losses, causing no tax benefitresidential homebuilding market. Also, many existing homeowners are locked into low interest mortgages, and an aging housing stock exists in many areas of the United States. We expect these factors, combined with incentives from the Inflation Reduction Act of 2022, to be recognized on the losses.Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016Net revenueFor the nine months ended September 30, 2017, net revenue increased $204.1 million, or 32.4%, to $833.1 million from $629.0 million for the nine months ended September 30, 2016. The increase in net revenue included revenue from acquisitions of approximately $141.8 million. Approximately $35.8 million was predominantly attributable to organicdrive growth in the volumerepair and remodel markets we service.completed jobsMaterialsall2022 due to strong demand and effects from the COVID-19 pandemic. The higher demand for materials coupled with supply chain issues including raw material shortages, supplier labor shortages, bottlenecks and shipping constraints showed signs of easing during the three months ended March 31, 2023. However, we expect the supply chain disruptions affecting some of the materials used throughout our installation work to continue throughout 2023. We will continue to prioritize the effective management of our end markets. The remaining increasesupply chain by our purchasing, logistics and warehousing teams.net revenue of $26.5 million resulted from a variety of factors, including customer and product mix,2023. Increased market pricing, variationsregardless of the catalyst, has and insulation volumes driven by building code requirements. Nonecould continue to impact our results of these additional factors wasoperations throughout the remainder of 2023, to the extent that price increases cannot be passed on to our customers. Our selling price increases were able to support most material cost increases in 2022 but we may have more significant than any other. Partially offsettingdifficulty raising prices in 2023 if housing demand slows. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. See “COVID-19 Impacts” below for a discussion of the increase in revenue wereshort-term impacts of the effectscurrent economic climate on the availability of Hurricanes Harvey and Irma that negatively impacted our productivity during the nine months ended September 30, 2017.salesForLabornine 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 certainmajority of our installers. None of these additional factors wasemployees work as installers on local construction sites. We expect to spend 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, 2016 due to the factors discussed above.Operating expensesSellingFor the nine months ended September 30, 2017, selling expenses increased $6.3 million, or 17.4%, 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% during the nine months ended September 30, 2017 from 5.8% during the nine months ended September 30, 2016. On a dollar basis, the increase in selling expenses was primarily due to higher wages, benefitshire, 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 2023, as tight labor availability continues within the nineconstruction industry. We offer a comprehensive benefits package unlike many of our local competitors, which will increase costs as we hire additional personnel. Our workers’ compensation costs may continue to rise as we increase our coverage for additional personnel. We obtained leverage on our labor costs in the three months ended September 30, 2017, administrative expenses increased $30.0 million, or 32.4%,March 31, 2023 compared to $122.7 million from $92.7 million for the nine months ended September 30, 2016. The increase in 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 $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 costs2022 due to claims developmentincreased selling prices per job. However, inflation and to support growthmarket competition could increase these costs in the near-term.$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 aslabor efficiency rates that exceed industry standards. We believe this is partially 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 tax effectadditional costs of losses incurred by separate companiesthese incentives.no benefit cancould continue throughout 2023.recognized dueat risk if the need for such structures decline, project funding declines or as consumer behaviors change in the wake of COVID-19 disruptions to a full valuation allowance on the losses.Duringeconomy and changes to our general ways of life. For example, reduced demand for office buildings and/or educational facilities, decreased airport traffic, or decreased usage of sports arenas or similar commercial structures could impact our commercial end market. As discussed in the ninesections above, our commercial business experienced strong sales growth during the three months ended September 30, 2016,March 31, 2023, signaling a potential improvement in this market. However, we recorded an income tax provisioncontinue to evaluate the nature and extent of approximately $14.8 millionthe COVID-19 pandemic’s impact on our income before income taxesfinancial condition, results of approximately $42.1operations and cash flows of the commercial business.or an effective tax rateas well as access to $250.0 million under our asset-based lending credit facility (as defined below), less $5.8 million of 35.1%.outstanding letters of credit, resulting in total liquidity of $462.9 million. This ratetotal liquidity was favorably impactedreduced by deductions related to domestic production activities, the early adoption of ASU2016-09 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, causing no tax benefit to be recognized on the losses.Liquidity and Capital ResourcesOur primary sources of liquidity are$1.6 million within our cash and cash equivalents due to a deposit into a trust to serve as additional collateral for our marketable securitiesworkers' compensation and general liability policies. This amount can be converted to a letter of credit at our discretion and would reduce the cash generated by our operations. As of September 30, 2017 and December 31, 2016, we had $92.1 million and $14.5 million, respectively, in cash, cash equivalents and marketable securities. Our marketable securities consist primarily of commercial paper, corporate bonds 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%availability of our total investment portfolio.andto meet required principal and interest obligations and to make required income tax payments. Our capitalWe may also use our resources primarily consistto fund our optional stock repurchase program and pay quarterly and annual dividends. In addition, we expect to spend cash and cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue each fiscal year. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.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 by our cash from operations and 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 funded by drawing on our previous credit facility. As of September 30, 2017, we had no outstanding borrowings under our ABL Revolver and our borrowing availability was $82.1 million after being reduced by outstanding letters of credit of $17.9 million.debt service requirements, capital expendituresbusiness needs, commitments and working capitalcontractual obligations for at least the next 12 months.Three months ended March 31, 2023 2022 Net cash provided by operating activities $ 73,833 $ 48,225 Net cash used in investing activities (47,614) (68,718) Net cash used in financing activities (37,156) (95,558) Secured Credit AgreementsOur Term Loan Agreement provides for a seven-yearNotes due 2028Term Loan. Our ABL Credit Agreement provides forin aggregate principal amount of 5.75% senior unsecured notes (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest is payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020. The net proceeds from the ABL Revolver of up to approximately $100.0Senior Notes offering were $295.0 million with a sublimit up to $50.0 million forafter debt issuance costs.issuance of letters of credit, which may be reduced or increased pursuant toSenior Notes contains restrictive covenants that, among other things, limit the ABL Credit Agreement. The borrowing base for the ABL Revolver, which determines availability under the facility, is based on a percentage of the value of certain assets securing the obligationsability of the Company and the subsidiary guarantors under the ABL Credit Agreement.Proceedscertain 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 the Senior Secured 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. were used to repay in full all amounts outstandingCreditadministrative agent and Security Agreement.approximately $0.8$1.25 million starting on September 30, 2017,March 31, 2022, with any remaining unpaid balances due on April 15, 2024, which is the maturity date. Loans incurreddate of December 14, 2028. The Term Loan bears interest at either the base rate (which approximates the prime rate) or the Eurodollar rate, plus a margin of (A) 1.25% in the case of base rate loans or (B) 2.25% in the case of Eurodollar rate loans. See Note 19, Subsequent Events, for information on a change regarding the reference rate for our Term Loan. Proceeds from the Term Loan were used to refinance and repay in full all amounts outstanding under our previous term loan agreement. We intend to use the ABL Revolver will have a final maturityremaining funds to pay for certain fees and expenses associated with the closing of April 13, 2022.pre-payments equal to prepayments of (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to customary reinvestment provisionsprovision and certain other expenses;exception; 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$15.0 million, subject to customarycertain exceptions and limitations.LoansSenior Secured Credit Facilities bearasset-based lending credit facility (the “ABL Revolver”) to $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest based on, at the Company’s election, either the base rate or the Eurodollar rateSecured Overnight Financing Rate ("Term SOFR"), at our election, plus in each case, the Applicable Margin. The Applicable Margin in respecta margin of loans under (i) the Term Loan Agreement will be (A) 3.00% in the case of Eurodollar rate loans and (B) 2.00%0.25% or 0.50% in the case of base rate loans and (ii) the ABL Facility will be (A)or 1.25%, or 1.50% or 1.75% in thefor Term SOFR advances (in each case of Eurodollar rate loans (basedbased on a measure of availability under the ABL Facility)Credit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. In connection with the Term Loan Agreement, we entered into a Third Amendment (the “Third Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and (B) 0.25%, 0.50% or 0.75% inRoyal Bank of Canada as collateral agent under the caseTerm Loan Agreement. Including outstanding letters of base rate loans (based on a measure ofcredit, our remaining availability under the ABL Facility).In addition, we will pay customary commitment fees and letterRevolver as of credit feesMarch 31, 2023 was $244.2 million.Credit Agreement. The commitment feesRevolver are guaranteed by all of the Company’s existing restricted subsidiaries and will vary based upon a measure of our utilizationbe guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the Term Loan and ABL Revolver.The Senior Secured Credit Agreements each containRevolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a number of customary affirmative and negativenon-financial covenants, andfirst-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second- priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.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 the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.September 30, 2017,March 31, 2023, 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 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.gross assetsoutstanding loan balances relating to our master loan and equipment agreements were $66.8 million and $48.7$74.1 million as of September 30, 2017March 31, 2023 and December 31, 2016, respectively, none of which were fully depreciated as of September 30, 2017 or December 31, 2016, respectively. The net book value of assets under these agreements was $47.3 million and $38.0$73.0 million as of September 30, 2017 and December 31, 2016,2022, 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, workers’ compensation and auto insurance programs. Permit and license bonds are typically issuedFinancial InstrumentsInterest Rate DerivativesAs of March 31, 2023 Performance bonds $ 104,126 Insurance letters of credit and cash collateral 68,485 Permit and license bonds 9,703 Total bonds and letters of credit $ 182,314 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 entered into two interest rate swaps with a notional amount$58.9 million included in our insurance letters of $100.0 million. During the second quarter of 2017, we began to receive variable rate interest payments based upon one month U.S. dollar LIBOR and in return were obligated to pay interest at a fixed rate of 1.9%. This effectively 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 portion of the unrealized gain or loss on these derivative instruments is reported as a component of other comprehensive income and reclassified into earningscredit in the same line item associated with the forecasted transactionsabove table that are unsecured and in the same period during which the hedged transactions affect earnings. Any ineffective portiontherefore do not reduce total liquidity. As 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 are considered level 2 inputs, which are based upon LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements.Historical cash flow informationCash flow from operating activitiesNet cash provided by operating activities of $53.3March 31, 2023, we have $1.6 million and $54.6 million for the nine months ended September 30, 2017 and 2016, respectively, consisted primarily of net income of $30.3 million 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 expense on our expanded base of property, plant 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 effects of acquisitions, most notably additional accounts receivable resulting from our growth and additional income tax receivables due to changes in estimated tax payments.Included in 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 to an increase in number of days in the pay cycle to accrue, a $4.7 million change in other assets due primarily to a reduction of various prepaid assets and other receivables and $3.9 million of additional accounts payable resulting 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.Cash flows from investing activitiesNet cash used in investing activities was $180.3 million and $55.1 million for the nine months ended September 30, 2017 and 2016, respectively. In 2017, we made cash payments, net of cash acquired, of $131.0 million on business combinations, $25.2 million on purchases of short-term investments and $22.9 million primarily to purchase fleet to support our growing business.In 2016, we made cash payments, net of cash acquired, of $36.4 million on business combinations and $19.2 million primarily to purchase fleet to support our growing business.Cash flows from financing activitiesNet cash provided by financing activities was $179.5 million and $12.7 million for the nine months ended September 30, 2017 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, respectively, and primarily related to purchases of vehicles and various equipment to support our operations and increased net revenue. We finance a significant portion of our capital expenditures under the Master Loan and Security Agreement, the Master Equipment Agreement or the Master Loan Agreement, which allow us to benefit 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 entereddeposited into a capped call agreement with the underwriters of the secondary offering oftrust to serve as additional collateral for our common stock completed on June 17, 2014.workers’ compensation and general liability policies. This agreement provided these stockholders with an option to call from the underwriters a total of approximately 1.0 million shares of our common stock at a capped price, with settlement required to be made in cash. During 2016, these stockholders exercised the call option with respect to approximately 0.7 million of the shares. In addition, in the fourth quarter of 2016, these stockholders simultaneously cancelled the remaining portion of the call option and purchased a new call option from the underwriters. This new capped call agreement 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 agreementcollateral 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 areabove and can be converted to a letter of credit at our discretion and is therefore not considered to be restricted cash.on management’supon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about these obligations, including their duration, the possibilitycarrying values of renewal, anticipated actions by third partiesour assets and liabilities that are not readily apparent from other factors. Becausesources. Actual results may differ from these estimates and assumptions are necessarily subjective,used in preparation of 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 Estimatesmaterialsignificant changes for the three months ended September 30, 2017 from theto our critical accounting policies and estimates as previously disclosed in our 2016 Form10-K and in our Form10-Q forduring the three months ended March 31, 2017 and June 30, 2017, except2023 from those disclosed in the area“Management’s Discussion and Analysis of share-based compensation as described below:Share-Based CompensationOur share-based compensation program is designed to attractFinancial Condition and retain employees while also aligning employees’ interests with the interestsResults of Operations” section of our stockholders. Restricted stock awards are periodically granted2022 Form 10-K.certain employees, officers andnon-employee members of our board of directors under the stockholder-approved 2014 Omnibus Incentive Plan.Equity-based awards: Certain ofaudited consolidated financial statements included in 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 price of the shares on that date, or on the grant date if an election is made.reportQuarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, our operations, economic and industry conditions, our financial and business model, payments of dividends, the impact of COVID-19 on our business and end markets, the demand for our services 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 and material constraints, the impact of COVID-19 on our financial results and expectations for future demand for our services.services and our earnings in 2023. 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 adverse impact of the ongoing COVID-19 pandemic on our business and financial results, our supply chain, the economy and the markets we serve; general economic and industry conditions; increases in mortgage interest rates and rising home prices; inflation and interest rates; the material price and supply environment; the timing of increases in our selling prices; the risk that the Company may reduce, suspend or eliminate dividend payments in the future; and the factors discussed in the “Risk Factors” section of our 20162022 Form10-K, as the same may be updated from time to time in our subsequent filings with the SEC. In
There have been no material changes to our exposurerisk since Decemberrisks related to fluctuations in interest rates on our outstanding variable rate debt. As of March 31, 2016.2023, we had $493.8 million outstanding on our Term Loan, gross of unamortized debt issuance costs, no outstanding borrowings on our ABL Revolver and no outstanding borrowings under finance leases subject to variable interest rates. As of March 31, 2023, we had three active and two forward interest rate swaps which, when combined, serve to hedge $400.0 million of the variable cash flows on our Term Loan until its maturity unless extended. As a result, total variable rate debt of $93.8 million was exposed to market risks as of March 31, 2023. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately $0.9 million. Our Senior Notes accrue interest at a fixed rate of 5.75%.
March 31, 2023.September 30, 2017.September 30, 2017March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
12,16, Commitments and Contingencies – Other Commitments and Contingencies, for information about existing legal proceedings.
Therefor the three months ended September 30, 2017 from the risk factors as disclosed in our 20162022 Form10-K.
None. Total Number
of Shares
PurchasedAverage
Price Paid
Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs 89 $ 87.76 — $ — February 1 - February 28, 2023 — — — — 94 114.03 — 200.0 million 183 $ 101.25 — $ 200.0 million
None.
Description ExhibitNumberDescription 31.131.1* 31.2 32.1 32.2101 (a)The following financial statements from the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2023, 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 4, 2023INSTALLED 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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