UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2019~~2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From

Commission File Number: 001-36307

Installed Building Products, Inc.

(Exact name of registrant as specified in its charter)


Delaware		45-3707650
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

495 South High Street, Suite 50 Columbus, Ohio		43215
(Address of principal executive offices)		(Zip Code)

(614)

221-3399

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	IBP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

~~Large accelerated~~ Non-accelerated filer	☒ ☐	~~Accelerated filer~~ Smaller reporting company	☐

~~Non-accelerated~~ ~~filer~~	☐	~~Smaller reporting company~~	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

~~12b~~

—

12b–2

of the Exchange Act). Yes

☐

☒

On October ~~25, 2019,~~28, 2020, the registrant had

~~30,016,749~~

29,800,535

shares of common stock, par value $0.01 per share,

outstanding.

Table of Contents

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION			1

Item 1. Financial Statements			1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36

~~Item 4. Controls and Procedures~~			3 7

~~PART II – OTHER INFORMATION~~			37
			40
Item ~~1. Legal Proceedings~~4. Controls and Procedures			37
			40
~~Item 1A. Risk Factors~~PART II – OTHER INFORMATION			37 41
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3 8
			43
Item 3. Defaults Upon Senior Securities			38

~~Item 4. Mine Safety Disclosures~~			38

~~Item 5. Other Information~~			38

~~Item 6. Exhibits~~			3 9

~~SIGNATURES~~			44
40 Item 4. Mine Safety Disclosures			44
Item 5. Other Information			44
Item 6. Exhibits			44
SIGNATURES			46

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

September 30,

December 31,

2019

2018

ASSETS

Current assets

Cash and cash equivalents
$
234,950
$
90,442

Investments

4,980

10,060

Accounts receivable (less allowance for doubtful accounts of $6,712 and $5,085 at September 30, 2019 and December 31, 2018, respectively)

242,065

214,121

Inventories

63,547

61,162

Other current assets

32,955

35,760

Total current assets

578,497

411,545

Property and equipment, net

102,148

90,117

Operating lease
right-of-use
assets

42,553

—

Goodwill

184,574

173,049

Intangibles, net

144,321

149,790

Other
non-current
assets

11,589

10,157

Total assets
$

1,063,682
$
834,658

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of long-term debt
$
22,734
$
22,642

Current maturities of operating lease obligations

15,032

—

Current maturities of finance lease obligations

3,133

4,806

Accounts payable

100,181

96,949

Accrued compensation

32,793

27,923

Other current liabilities

41,576

29,366

Total current liabilitie
s

215,449

181,686

Long-term debt

542,510

432,182

Operating lease obligations

27,129

—

Finance lease obligations

3,682

3,824

Deferred income taxes

3,833

6,695

Other long-term liabilities

43,565

27,773

Total liabilities

836,168

652,160

Commitments and contingencies

Stockholders’ equity

Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

—

—

Common stock; $0.01 par value: 100,000,000 authorized, 32,871,504 and 32,723,972 issued and 30,016,749 and 29,915,611 shares outstanding at September 30, 2019 and December 31, 2018, respectively

329

327

Additional paid in capital

188,216

181,815

Retained earnings

154,177

105,212

Treasury stock; at cost: 2,854,755 and 2,808,361 shares at September 30, 2019 and December 31, 2018, respectively

(106,756
)
(104,425
)
Accumulated other comprehensive loss

(8,452
)
(431
)

Total stockholders’ equity

227,514

182,498

Total liabilities and stockholders’ equity
$
1,063,682
$
834,658


	September 30,			December 31,
	2020			2019
ASSETS
Current assets
Cash and cash equivalents	$	267,471		$	177,889
Investments		1,220			37,961
Accounts receivable (less allowance for credit losses of $9,366 and $6,878 at September 30, 2020 and December 31, 2019, respectively)		258,940			244,519
Inventories		70,218			74,606
Other current assets		37,607			46,974

Total current assets		635,456			581,949
Property and equipment, net		104,900			106,410
Operating lease right-of-use assets		50,873			45,691
Goodwill		206,782			195,652
Intangibles, net		155,398			153,562
Other non-current assets		12,036			16,215

Total assets	$	1,165,445		$	1,099,479

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	24,156		$	24,164
Current maturities of operating lease obligations		17,875			15,459
Current maturities of finance lease obligations		2,268			2,747
Accounts payable		86,898			98,871
Accrued compensation		43,310			33,636
Other current liabilities		47,734			39,272

Total current liabilities		222,241			214,149
Long-term debt		544,276			545,031
Operating lease obligations		32,431			29,785
Finance lease obligations		2,747			3,597
Deferred income taxes		3,704			9,175
Other long-term liabilities		55,859			47,711

Total liabilities		861,258			849,448
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		—			—
Common stock; $0.01 par value: 100,000,000 authorized, 33,127,310 and 32,871,504 issued and 29,800,535 and 30,016,340 shares outstanding at September 30, 2020 and December 31, 2019, respectively		331			329
Additional paid in capital		197,486			190,230
Retained earnings		241,583			173,371
Treasury stock; at cost: 3,326,775 and 2,855,164 shares at September 30, 2020 and December 31, 2019, respectively		(123,488	)		(106,756	)
Accumulated other comprehensive loss		(11,725	)		(7,143	)

Total stockholders’ equity		304,187			250,031

Total liabilities and stockholders’ equity	$	1,165,445		$	1,099,479

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

Three months ended
September 30,

Nine months ended
September 30,

2019

2018

2019

2018

Net revenue
$
396,449
$
348,999
$
1,110,398
$
983,311

Cost of sales

278,362

251,665

795,616

710,358

Gross profit

118,087

97,334

314,782

272,953

Operating expenses

Selling

19,398

17,434

54,431

49,300

Administrative

55,098

48,337

156,022

137,511

Amortization

6,156

5,228

18,065

19,678

Operating income

37,435

26,335

86,264

66,464

Other expense

Interest expense, net

8,458

5,282

19,783

15,013

Other

155

132

381

417

Income before income taxes

28,822

20,921

66,100

51,034

Income tax provision

7,610

5,358

17,135

12,762

Net income
$
21,212
$
15,563
$
48,965
$
38,272

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on cash flow hedge, net of tax benefit (provision) of $575 and ($278) for the three months ended September 30, 2019 and 2018, respectively, and $2,676 and ($822) for the nine months ended September 30, 2019 and 2018, respectively

(1,726
)
818

(8,021
)
2,453

Comprehensive income
$
19,486
$
16,381
$
40,944
$
40,725

Basic net income per share
$
0.71
$
0.50
$
1.65
$
1.22

Diluted net income per share
$
0.71
$
0.50
$
1.64
$
1.21

Weighted average shares outstanding:

Basic

29,785,548

31,229,086

29,741,555

31,373,871

Diluted

29,877,056

31,312,756

29,839,873

31,512,104


		Three months ended September 30,					Nine months ended September 30,
		2020		2019			2020			2019
Net revenue		$	420,486	$	396,449		$	1,211,756		$	1,110,398
Cost of sales			288,839		278,362			836,710			795,616

Gross profit			131,647		118,087			375,046			314,782
Operating expenses
Selling			20,843		19,398			60,209			54,431
Administrative			58,240		55,098			177,495			156,022
Amortization			6,974		6,156			20,378			18,065

Operating income			45,590		37,435			116,964			86,264
Other expense
Interest expense, net			7,564		8,458			22,679			19,783
Other			176		155			305			381

Income before income taxes			37,850		28,822			93,980			66,100
Income tax provision			9,773		7,610			24,578			17,135

Net income		$	28,077	$	21,212		$	69,402		$	48,965

Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on cash flow hedge, net of tax (provision) benefit of ($408) and $575 for the three months ended September 30, 2020 and 2019, respectively, and $1,582 and $2,676 for the nine months ended September 30, 2020 and 2019, respectively			1,176		(1,726	)		(4,582	)		(8,021	)

Comprehensive income		$	29,253	$	19,486		$	64,820		$	40,944

Basic net income per share		$	0.95	$	0.71		$	2.35		$	1.65

Diluted net income per share		$	0.95	$	0.71		$	2.33		$	1.64
	��
Weighted average shares outstanding:
Basic			29,478,816		29,785,548			29,549,460			29,741,555
Diluted			29,698,028		29,877,056			29,737,716			29,839,873

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2018~~2019 AND SEPTEMBER 30, ~~2019~~2020

(in thousands, except share amounts)

Additional

Accumulated Other

Common Stock

Paid In

Retained

Treasury Stock

Comprehensive

Stockholders’

Shares

Amount

Capital

Earnings

Shares

Amount

Income

Equity

BALANCE - July 1, 2018

32,723,972
$
327
$

178,266
$

73,919

(1,117,623
) $

(39,703
) $
2,254
$
215,063

Net income

15,563

15,563

Cumulative effect of accounting changes,
net of tax

(746
)
(746
)
Issuance of common stock awards to
employees

—

Surrender of common stock awards by
employees

(681
)
—

Share-based compensation expense

1,765

1,765

Share-based compensation issued to
directors

75

75

Common stock repurchase

(380,694
)
(18,187
)
(18,187
)
Other comprehensive income, net of tax

818

818

BALANCE - September 30, 2018

32,723,972
$
327
$
180,106
$
88,736

(1,498,998
) $
(57,890
) $
3,072
$
214,351

Additional

Accumulated Other

Common Stock

Paid In

Retained

Treasury Stock

Comprehensive

Stockholders’

Shares

Amount

Capital

Earnings

Shares

Amount

Loss

Equity

BALANCE - July 1, 2019

32,871,504
$
329
$
186,182
$
132,965

(2,854,496
) $
(106,748
) $
(6,726
) $
206,002

Net income

21,212

21,212

Issuance of common stock awards to
employees

—

Surrender of common stock awards by
employees

(259
)
(8
)
(8
)
Share-based compensation expense

1,933

1,933

Share-based compensation issued to
directors

101

101

Other comprehensive loss, net of tax

(1,726
)
(1,726
)

BALANCE - September 30, 2019

32,871,504
$
329
$
188,216
$
154,177

(2,854,755
) $
(106,756
) $
(8,452
) $
227,514


					Additional										Accumulated Other
	Common Stock				Paid In		Retained		Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings		Shares			Amount			Loss			Equity
BALANCE - July 1, 2019		32,871,504	$	329	$	186,182	$	132,965		(2,854,496	)	$	(106,748	)	$	(6,726	)	$	206,002

Net income								21,212											21,212
Surrender of common stock awards										(259	)		(8	)					(8	)
Share-based compensation expense						1,933													1,933
Share-based compensation issued to directors						101													101
Other comprehensive loss, net of tax																(1,726	)		(1,726	)

BALANCE - September 30, 2019		32,871,504	$	329	$	188,216	$	154,177		(2,854,755	)	$	(106,756	)	$	(8,452	)	$	227,514


					Additional										Accumulated Other
	Common Stock				Paid In		Retained		Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings		Shares			Amount			Loss			Equity
BALANCE - July 1, 2020		33,124,237	$	331	$	195,288	$	213,506		(3,325,049	)	$	(123,488	)	$	(12,901	)	$	272,736

Net income								28,077											28,077
Issuance of common stock awards to employees		3,073																	—
Surrender of common stock awards										(1,726	)								—
Share-based compensation expense						2,094													2,094
Share-based compensation issued to directors						104													104
Other comprehensive income, net of tax																1,176			1,176

BALANCE - September 30, 2020		33,127,310	$	331	$	197,486	$	241,583		(3,326,775	)	$	(123,488	)	$	(11,725	)	$	304,187

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2018~~2019 AND SEPTEMBER 30, ~~2019~~2020

(in thousands, except share amounts)

Additional

Accumulated Other

Common Stock

Paid In

Retained

Treasury Stock

Comprehensive

Stockholders’

Shares

Amount

Capital

Earnings

Shares

Amount

Income

Equity

BALANCE - January 1, 2018

32,524,934
$
325
$

174,043
$
48,434

(662,788
) $
(12,781
) $
507
$
210,528

Net income

38,272

38,272

Cumulative effect of accounting changes, net of tax

2,030

112

2,142

Issuance of common stock awards to employees

194,093

2

(2
)
—

Surrender of common stock awards by employees

(42,799
)
(2,282
)
(2,282
)
Share-based compensation expense

5,965

5,965

Share-based compensation issued to directors

4,945

100

100

Common stock repurchase

(793,411
)
(42,827
)
(42,827
)
Other comprehensive income, net of tax

2,453

2,453

BALANCE - September 30, 2018

32,723,972
$
327
$
180,106
$
88,736

(1,498,998
) $
(57,890
) $
3,072
$
214,351

Additional

Accumulated Other

Common Stock

Paid In

Retained

Treasury Stock

Comprehensive

Stockholders’

Shares

Amount

Capital

Earnings

Shares

Amount

Loss

Equity

BALANCE - January 1, 2019

32,723,972
$
327
$
181,815
$
105,212

(2,808,361
) $
(104,425
) $
(431
) $
182,498

Net income

48,965

48,965

Issuance of common stock awards to employees

139,862

2

(2
)
—

Surrender of common stock awards by employees

(46,394
)
(2,331
)
(2,331
)
Share-based compensation expense

6,144

6,144

Share-based compensation issued to directors

7,670

259

259

Other comprehensive loss, net of tax

(8,021
)
(8,021
)

BALANCE - September 30, 2019

32,871,504
$
329
$
188,216
$
154,177

(2,854,755
) $
(106,756
) $
(8,452
) $
227,514


					Additional												Accumulated Other
	Common Stock				Paid In			Retained			Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings			Shares			Amount			Loss			Equity
BALANCE - January 1, 2019		32,723,972	$	327	$	181,815		$	105,212			(2,808,361	)	$	(104,425	)	$	(431	)	$	182,498

Net income									48,965												48,965
Issuance of common stock awards to employees		139,862		2		(2	)														—
Surrender of common stock awards												(46,394	)		(2,331	)					(2,331	)
Share-based compensation expense						6,144															6,144
Share-based compensation issued to directors		7,670				259															259
Other comprehensive loss, net of tax																		(8,021	)		(8,021	)

BALANCE - September 30, 2019		32,871,504	$	329	$	188,216		$	154,177			(2,854,755	)	$	(106,756	)	$	(8,452	)	$	227,514


					Additional												Accumulated Other
	Common Stock				Paid In			Retained			Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings			Shares			Amount			Loss			Equity
BALANCE - January 1, 2020		32,871,504	$	329	$	190,230		$	173,371			(2,855,164	)	$	(106,756	)	$	(7,143	)	$	250,031

Net income									69,402												69,402
Cumulative effect of accounting changes, net of tax									(1,190	)											(1,190	)
Issuance of common stock awards to employees		249,435		2		(2	)														—
Surrender of common stock awards												(29,069	)		(973	)					(973	)
Share-based compensation expense						7,029															7,029
Share-based compensation issued to directors		6,371				229															229
Common stock repurchase												(442,542	)		(15,759	)					(15,759	)
Other comprehensive loss, net of tax																		(4,582	)		(4,582	)

BALANCE - September 30, 2020		33,127,310	$	331	$	197,486		$	241,583			(3,326,775	)	$	(123,488	)	$	(11,725	)	$	304,187

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Nine months ended September 30,

2019

2018

Cash flows from operating activities

Net income
$
48,965
$

38,272

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization of property and equipment

28,575

24,567

Amortization of operating lease
right-of-use
assets

11,597

—

Amortization of intangibles

18,065

19,678

Amortization of deferred financing costs and debt discount

845

883

Provision for doubtful accounts

3,173

2,219

Write-off
of debt issuance costs

2,774

1,164

Gain on sale of property and equipment

(69
)
(551
)
Noncash stock compensation

6,442

6,089

Changes in assets and liabilities, excluding effects of acquisitions

Accounts receivable

(29,144
)
(35,953
)
Inventories

(852
)
(6,799
)
Other assets

(4,845
)
(801
)
Accounts payable

2,535

7,523

Income taxes receivable/payable

13,487

10,542

Other liabilities

4,969

2,016

Net cash provided by operating activities

106,517

68,849

Cash flows from investing activities

Purchases of investments

(17,352
)
(22,818
)
Maturities of short term investments

22,560

37,500

Purchases of property and equipment

(37,267
)
(27,051
)
Acquisitions of businesses

(24,740
)
(34,682
)
Proceeds from sale of property and equipment

563

1,106

Other

(1,795
)
(1,590
)

Net cash used in investing activities

(58,031
)
(47,535
)

Cash flows from financing activities

Proceeds from senior notes (Note 6)

300,000

—

Proceeds from term loan (Note 6)

—

100,000

Payments on term loan (Note 6)

(195,750
)
(750
)
Proceeds from vehicle and equipment notes payable

23,767

20,657

Debt issuance costs

(5,191
)
(1,992
)
Principal payments on long-term debt

(15,278
)
(10,324
)
Principal payments on finance lease obligations

(3,398
)
(4,316
)
Acquisition-related obligations

(5,797
)
(2,901
)
Repurchase of common stock

—

(42,827
)
Surrender of common stock awards by employees

(2,331
)
(2,282
)

Net cash provided by financing activities

96,022

55,265

Net change in cash and cash equivalents

144,508

76,579

Cash and cash equivalents at beginning of period

90,442

62,510

Cash and cash equivalents at end of period
$
234,950
$
139,089

Supplemental disclosures of cash flow information

Net cash paid during the period for:

Interest
$
17,746
$
14,110

Income taxes, net of refunds

3,790

1,902

Supplemental disclosure of noncash activities

Right-of-use
assets obtained in exchange for operating lease obligations

11,593

—

Termination of operating lease obligations and
right-of-use
assets

(2,814
)
—

Property and equipment obtained in exchange for finance lease obligations

2,175

1,034

Seller obligations in connection with acquisition of businesses

4,322

5,420

Unpaid purchases of property and equipment included in accounts payable

1,527

615


	Nine months ended September 30,
	2020			2019
Cash flows from operating activities
Net income	$	69,402		$	48,965
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment		30,850			28,575
Amortization of operating lease right-of-use assets		13,281			11,597
Amortization of intangibles		20,378			18,065
Amortization of deferred financing costs and debt discount		1,000			845
Provision for credit losses		3,839			3,173
Write-off of debt issuance costs		—			2,774
Gain on sale of property and equipment		(592	)		(69	)
Noncash stock compensation		8,050			6,442
Deferred income taxes		(3,405	)		—
Amortization of terminated interest rate swap		508			—
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable		(9,624	)		(29,144	)
Inventories		5,983			(852	)
Other assets		9,027			(4,845	)
Accounts payable		(14,746	)		2,535
Income taxes receivable/payable		14,192			13,487
Other liabilities		(4,259	)		4,969

Net cash provided by operating activities		143,884			106,517

Cash flows from investing activities
Purchases of investments		(776	)		(17,352	)
Maturities of short term investments		37,473			22,560
Purchases of property and equipment		(25,515	)		(37,267	)
Acquisitions of businesses		(38,825	)		(24,740	)
Proceeds from sale of property and equipment		828			563
Other		(2,662	)		(1,795	)

Net cash used in investing activities		(29,477	)		(58,031	)

Cash flows from financing activities
Proceeds from senior notes		—			300,000
Payments on term loan		—			(195,750	)
Proceeds from vehicle and equipment notes payable		17,759			23,767
Debt issuance costs		(157	)		(5,191	)
Principal payments on long-term debt		(19,801	)		(15,278	)
Principal payments on finance lease obligations		(1,998	)		(3,398	)
Acquisition-related obligations		(3,896	)		(5,797	)
Repurchase of common stock		(15,759	)		—
Surrender of common stock awards by employees		(973	)		(2,331	)

Net cash (used in) provided by financing activities		(24,825	)		96,022

Net change in cash and cash equivalents		89,582			144,508
Cash and cash equivalents at beginning of period		177,889			90,442

Cash and cash equivalents at end of period	$	267,471		$	234,950

Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	24,130		$	17,746
Income taxes, net of refunds		13,798			3,790
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations		18,340			11,593
Termination of operating lease obligations and right-of-use assets		—			(2,814	)
Property and equipment obtained in exchange for finance lease obligations		853			2,175
Seller obligations in connection with acquisition of businesses		6,965			4,322
Unpaid purchases of property and equipment included in accounts payable		1,229			1,527

See accompanying notes to consolidated financial statements

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company operates in over ~~175~~180 locations and its corporate office is located in Columbus, Ohio.

We have 1 operating segment and a single reportable segment. ~~We offer~~Substantially all of our ~~portfolio~~sales are derived from the service-based installation of ~~services for~~various products in the residential new construction, repair and ~~existing single-family and multi-family residential~~remodel and commercial ~~building projects~~construction end markets from our national network of branch locations.

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

The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption. Many public health organizations and international, federal, state and local governments implemented measures to combat the spread of COVID-19 during portions of the first nine months of 2020 with some of these restrictions still in place as of the date of filing of this Quarterly Report on Form 10-Q. Some of these measures include restrictions on movement such as quarantines, “stay-at-home” orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity. We do not believe the various orders and restrictions or COVID-19 itself significantly impacted our business in the first nine months of 2020. However, the extent to which COVID-19 will impact our future operations, customers, suppliers, employees and financial results is uncertain. The future impact of COVID-19 on our financial results depends on numerous factors including government actions and the resulting impact on construction activity, the effect on our customers’ demand for our services, and the ability of our customers to pay for our services.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

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

The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) have been omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to prevent the information presented from being misleading when read in conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2018~~2019 (the ~~“2018~~“2019 Form

10-K”),

as filed with the SEC on February ~~28, 2019.~~27, 2020. The December 31, ~~2018~~2019 Condensed Consolidated Balance Sheet data herein was derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP.

Our interim operating results for the three and nine months ended September 30, ~~2019~~2020 are not necessarily indicative of the results to be expected in future operating quarters.

~~See Item 1A, Risk Factors, in our 2018 Form~~

~~10-K~~

~~for additional information regarding risk factors that may impact our results.~~

Note 2 to the audited consolidated financial statements in our ~~2018~~2019 Form

10-K

describes the significant accounting policies and estimates used in preparation of the audited consolidated financial statements. ~~There~~Other than the recently implemented accounting policies described below, there have been no changes to our significant accounting policies during the three or nine months ended September 30, ~~2019, except for the manner in which we account for leases as described in Note 7, Leases.~~

2020.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Adopted Accounting Pronouncements


Standard		~~Adoption~~
~~ASU~~ ~~2016-02,~~ ~~Leases~~ ~~(Topic 842)~~		This Accounting Standards Update (“ASU”) requires substantially all leases, with the exception of leases with a term of one year or less, to be recorded on the balance sheet as a lease liability measured as the present value of the future lease payments with a corresponding ~~right-of-use~~ asset. This ASU also requires disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows. See Note 7, Leases, for further information regarding our lease accounting policies.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

~~We are currently evaluating the impact of certain ASU’s on our Condensed Consolidated Financial Statements or Notes to Consolidated Financial Statements, which are described below:~~


~~Standard~~	~~Description~~	Effective Date	~~Effect on the financial statements~~ or other significant mattersAdoption
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)	January 1, 2020	This pronouncement and subsequently-issued amendments change the accounting for credit losses on available-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. See Note 4, Credit Losses, for further information.	~~Annual periods beginning after December 15, 2019, including interim periods therein. Early adoption is permitted.~~	Upon adoption of this pronouncement, we expect the accounts receivable balance and the contract assets balance included in other current assets on our Condensed Consolidated Balance Sheets to be affected, with an offsetting amount recorded to retained earnings in the period of adoption. We are currently assessing the quantitative impact the adoption will have on our financial statements.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	January 1, 2020	~~To address~~This ASU addresses concerns over the cost and complexity of the two-step goodwill impairment test ~~this pronouncement removes~~by removing the second step of the goodwill impairment test. Going forward, ~~an entity~~we will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.	~~Annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted.~~	~~We anticipate the adoption of this ASU will not have a material impact on our consolidated financial statements or disclosures.~~

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	January 1, 2020	This pronouncement amends ~~Topic~~ Accounting Standards Codification (“ASC”) 820 to eliminate, add and modify certain disclosure requirements for fair value measurements. The adoption of this standard did not impact our financial statements or have a material effect on our disclosures.

ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)	Effective upon issuance	This pronouncement contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The relief granted in ASC 848 is applicable only to legacy contracts if the amendments made to the agreements are solely for reference rate reform activities. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Issued Accounting Pronouncements Not Yet Adopted

We are currently evaluating the impact of certain ASU’s on our Condensed Consolidated Financial Statements or Notes to Condensed Consolidated Financial Statements, which are described below:


Standard	Description	Effective Date	Effect on the financial statements or other significant matters
ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes	This pronouncement simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and improves the consistent application of GAAP by clarifying and amending existing guidance.	Annual periods beginning after December 15, ~~2019,~~2020, including interim periods therein. Early adoption is permitted.	We are currently ~~evaluating the provisions of this ASU and~~assessing the impact ~~it will have~~of adoption on our ~~disclosures.~~consolidated financial statements.

NOTE 3 - REVENUE RECOGNITION

Our revenues are derived primarily through contracts with customers whereby we install insulation and other complementary building products and are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. ~~We recognize revenue using the~~

~~percentage-of-completion~~

~~method of accounting, utilizing a~~

~~cost-to-cost~~

~~input approach as we believe this represents the best measure of when control of goods and services are transferred to the customer.~~ An insignificant portion of our sales, primarily retail sales, is accounted for on a

point-in-time

basis when the sale occurs, adjusted accordingly for any return provisions. We do offer assurance-type warranties on certain of our installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

8For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a

cost-to-cost

~~Table~~input method as we believe this represents the best measure of ~~Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

when goods and services are transferred to the customer. When ~~the~~

~~percentage-of-completion~~

this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated ~~costs (the~~

~~cost-to-cost~~

~~approach).~~costs. Under the

cost-to-cost

~~approach,~~

method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

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

catch-up

basis.

~~Sales~~

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

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We disaggregate our revenue from contracts with customers by end market and product, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following tables present our revenues disaggregated by end market and product (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Residential new construction
$

297,003

75
% $

268,254

77
% $
840,806

76
% $

755,800

77
%
Repair and remodel

25,029

6
%
23,107

7
%
71,254

6
%
65,453

7
%
Commercial

74,417

19
%
57,638

16
%
198,338

18
%
162,058

16
%

Net revenues
$
396,449

100
% $
348,999

100
% $

1,110,398

100
% $
983,311

100
%

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Insulation
$

253,311

64
% $
225,503

65
% $
710,005

64
% $

646,270

66
%
Waterproofing

32,781

8
%
25,980

7
%
84,024

8
%
73,477

7
%
Shower doors, shelving and mirrors

27,011

7
%
23,190

7
%
77,828

7
%
66,222

7
%
Garage doors

22,336

6
%
21,781

6
%
65,790

6
%
56,574

6
%
Rain gutters

13,366

3
%
12,163

4
%
37,561

3
%
31,429

3
%
Window blinds

10,615

3
%
7,811

2
%
30,780

3
%
21,196

2
%
Other building products

37,029

9
%
32,571

9
%
104,410

9
%
88,143

9
%

Net revenues
$

396,449

100
% $

348,999

100
% $

1,110,398

100
% $
983,311

100
%


	Three months ended September 30,								Nine months ended September 30,
	2020				2019				2020				2019
Residential new construction	$	315,434	75	%	$	297,003	75	%	$	912,095	75	%	$	840,806	76	%
Repair and remodel		28,625	7	%		25,029	6	%		75,702	6	%		71,254	6	%
Commercial		76,427	18	%		74,417	19	%		223,959	19	%		198,338	18	%

Net revenues	$	420,486	100	%	$	396,449	100	%	$	1,211,756	100	%	$	1,110,398	100	%

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~


	Three months ended September 30,								Nine months ended September 30,
	2020				2019				2020				2019
Insulation	$	268,292	64	%	$	253,311	64	%	$	779,045	64	%	$	710,005	64	%
Waterproofing		33,272	8	%		32,781	8	%		89,855	7	%		84,024	8	%
Shower doors, shelving and mirrors		29,282	7	%		27,011	7	%		85,199	7	%		77,828	7	%
Garage doors		24,001	6	%		22,336	6	%		68,655	6	%		65,790	6	%
Rain gutters		17,295	4	%		13,366	3	%		41,942	4	%		37,561	3	%
Window blinds		12,166	3	%		10,615	3	%		34,651	3	%		30,780	3	%
Other building products		36,178	8	%		37,029	9	%		112,409	9	%		104,410	9	%

Net revenues	$	420,486	100	%	$	396,449	100	%	$	1,211,756	100	%	$	1,110,398	100	%

Contract Assets and Liabilities

Our contract assets consist of unbilled amounts typically resulting from sales under contracts when the

cost-to-cost

method of revenue recognition is utilized and revenue recognized, based on costs incurred, exceeds the amount billed to the customer. Our contract assets are recorded in other current assets in our Condensed Consolidated Balance Sheets. Our contract liabilities consist of customer deposits and billings in excess of revenue recognized, based on costs incurred and isare included in other current liabilities in our Condensed Consolidated Balance Sheets.

Contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows (in thousands):

September 30,

December 31,

2019

2018

Contract assets
$
22,278
$
15,092

Contract liabilities

(8,729
)
(7,468
)


	September 30,			December 31,
	2020			2019
Contract assets	$	22,328		$	22,138
Contract liabilities		(11,237	)		(8,888	)

Uncompleted contracts were as follows (in thousands):

September 30,

December 31,

2019

2018

Costs incurred on uncompleted contracts
$
120,905
$
114,826

Estimated earnings

64,436

58,952

Total

185,341

173,778

Less: Billings to date

168,587

163,112

Net under billings
$
16,754
$
10,666


	September 30,		December 31,
	2020		2019
Costs incurred on uncompleted contracts	$	136,522	$	110,818
Estimated earnings		75,338		61,185

Total		211,860		172,003
Less: Billings to date		196,640		155,599

Net under billings	$	15,220	$	16,404

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Net under billings were as follows (in thousands):

September 30,

December 31,

2019

2018

Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)
$
22,278
$
15,092

Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)

(5,524
)
(4,426
)

Net under billings
$
16,754
$
10,666


	September 30,			December 31,
	2020			2019
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	22,328		$	22,138
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)		(7,108	)		(5,734	)

Net under billings	$	15,220		$	16,404

The difference between contract assets and contract liabilities as of September 30, ~~2019~~2020 compared to December 31, ~~2018~~2019 is primarily the result of timing ~~~~differences between our performance of obligations under contracts and customer payments. During the three and nine months ended September 30, ~~2019,~~2020, we

recognized ~~$7.1~~$0.2 million

and $7.7 million of revenue, respectively, that was included in the contract liability balance at December 31, ~~2018.~~2019. We ~~did~~

~~t recognize any such revenue during the three months ended September 30, 2019. During the three and nine months ended September 30, 2019 or 2018, we~~ did 0t recognize any impairment losses on our receivables and contract ~~assets.~~

assets during the three and nine months ended September 30, 2020 or 2019.

Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of September 30, ~~2019,~~2020, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was ~~$83.5~~$71.3 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Practical Expedients and Exemptions

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

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

NOTE 4 - CREDIT LOSSES

On January 1, 2020 we adopted ASU

2016-13,

“Financial Instruments – Credit Losses (

ASC

326): Measurement of Credit Losses on Financial Instruments” under the modified retrospective approach.

ASC

326 replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables, retainage receivables and contract assets (unbilled receivables). Results for reporting periods beginning after January 1, 2020 are presented under

ASC

326, while prior period amounts are not adjusted. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance.

Upon adoption of ASC 326, we recorded a cumulative effect adjustment to retained earnings of $1.2 million, net of $0.4 million of income taxes, on the opening consolidated balance sheet as of January 1, 2020. The adoption of the credit loss standard had no impact to cash from or used in operating, financing or investing activities on our consolidated cash flow statements.

Our expected loss allowance methodology for accounts receivable is developed using historical losses, current economic conditions and future market forecasts. We also perform ongoing evaluations of our existing and potential customer’s creditworthiness. Our expected loss allowance methodology for

held-to-maturity

investments is developed using historical losses, investment grade ratings and liquidity and maturity assessments. Based on our assessment using these factors, we did not record any allowance for credit losses related to our

held-to-maturity

investments.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

To date, the

COVID-19

pandemic has not yet had a material impact on the collectability of our existing trade receivables.

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


Balance as of January 1, 2020	$	6,878
Cumulative effect of change in accounting principle		1,600
Current period provision		3,839
Recoveries collected and other		466
Amounts written off		(3,417	)

Balance as of September 30, 2020	$	9,366

NOTE 5 - INVESTMENTS

Cash and cash equivalents includes investments in money market funds that are valued based on the net asset value of the funds. The investments in these funds were ~~$107.5~~$170.3 million and ~~$69.8~~$99.2 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

All other investments are classified as

held-to-maturity

and typically consist of highly liquid instruments, ~~primarily~~ including corporate bonds and commercial paper. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the amortized cost of these investments equaled the net carrying value, which was ~~$5.0~~$1.2 million and ~~$10.1~~$38.0 million, respectively. All

held-to-maturity

securities as of September 30, ~~2019~~2020 mature in one year or less. See Note 8,9, Fair Value Measurements, for additional information.

NOTE 56 - GOODWILL AND INTANGIBLES

We anticipate that the

COVID-19

pandemic could continue to have an impact on the homebuilding industry in general, as it could result in further business interruptions (government-mandated or otherwise) and could affect, among other factors, employment levels, consumer spending and consumer confidence, which could decrease demand for homes, adversely affecting our business. As such, we considered whether impairment indicators arose through the date of filing of this Quarterly Report on Form

10-Q

for our goodwill, long-lived assets and other intangible assets and concluded that no such factors exist. While we ultimately concluded that our goodwill, long-lived assets and other intangibles assets were not impaired as of September 30, 2020, we will continue to assess impairment indicators related to the impact of the

COVID-19

pandemic on our business.

Goodwill

The change in carrying amount of goodwill was as follows (in thousands):


	Goodwill (Gross)			Accumulated Impairment Losses			Goodwill (Net)
January 1, 2020	$	265,656		$	(70,004	)	$	195,652
Business Combinations		11,250			0			11,250
Other		(120	)		0			(120	)

September 30, 2020	$	276,786		$	(70,004	)	$	206,782

Goodwill
(Gross)

Accumulated
Impairment
Losses

Goodwill
(Net)

January 1, 2019
$

243,053
$
(70,004
) $

173,049

Business Combinations

11,332

—

11,332

Other

193

—

193

September 30, 2019
$

254,578
$
(70,004
) $

184,574

Other changes included in the above table ~~represent~~include minor adjustments for the

purchase price

allocation of certain acquisitions still under ~~measurement and four immaterial~~measurement. For additional information regarding changes to goodwill resulting from acquisitions, ~~completed during the nine months ended September 30, 2019.~~ see Note 16, Business Combinations.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We test goodwill for impairment annually during the fourth quarter of our fiscal year or earlier if there is an impairment indicator. ~~NaN impairment was recognized during either of the nine month periods ended September 30, 2019 or 2018.~~ Accumulated impairment losses included within the above table were incurred over multiple periods, with the latest impairment charge being recorded during the year ended December 31, 2010.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Intangibles, net

The following table provides the gross carrying amount, accumulated amortization and net book value for each major class of intangibles (in thousands):

As of September 30, 2019

As of December 31, 2018

Gross

Net

Gross

Net

Carrying

Accumulated

Book

Carrying

Accumulated

Book

Amount

Amortization

Value

Amount

Amortization

Value

Amortized intangibles:

Customer relationships
$

157,242
$
64,884
$
92,358
$
148,635
$
52,514
$
96,121

Covenants
not-to-compete

16,035

9,857

6,178

14,682

7,572

7,110

Trademarks and trade names

67,048

21,489

45,559

64,432

18,256

46,176

Backlog

14,080

13,854

226

14,060

13,677

383

$
254,405
$
110,084
$

144,321
$

241,809
$
92,019
$

149,790


	As of September 30,						As of December 31,
	2020						2019
	Gross				Net		Gross				Net
	Carrying		Accumulated		Book		Carrying		Accumulated		Book
	Amount		Amortization		Value		Amount		Amortization		Value
Amortized intangibles:
Customer relationships	$	184,562	$	83,719	$	100,843	$	169,334	$	69,388	$	99,946
Covenants not-to-compete		18,944		12,761		6,183		16,959		10,617		6,342
Trademarks and tradenames		73,543		26,042		47,501		69,718		22,609		47,109
Backlog		15,256		14,385		871		14,080		13,915		165

	$	292,305	$	136,907	$	155,398	$	270,091	$	116,529	$	153,562

The gross carrying amount of intangibles increased approximately ~~$12.6~~$22.2 million during the nine months ended September 30, ~~2019~~2020 primarily due to business combinations. ~~See~~For more information, see Note ~~15,~~16, Business ~~Combinations, for more information.~~Combinations. Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):

Remainder of 2019
$
6,147

2020

23,867

2021

22,525

2022

21,604

2023

18,693

Thereafter

51,485


Remainder of 2020	$	7,069
2021		27,621
2022		26,037
2023		23,126
2024		19,611
Thereafter		51,934

NOTE 67 - LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

As of September 30,

As of December 31,

2019

2018

Senior Notes due 2028, net of unamortized debt issuance costs of $4,989 and $0, respectively
$
295,011
$
—

Term loan, net of unamortized debt issuance costs of $2,164 and $4,834, respectively

197,836

390,916

Vehicle and equipment notes, maturing through September 2024; payable in various monthly installments, including interest rates ranging from 2.5% to 4.8%

69,430

60,391

Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 4% to 6%

2,967

3,517

565,244

454,824

Less: current maturities

(22,734
)
(22,642
)

Long-term debt, less current maturities
$
542,510
$
432,182


	As of September 30,			As of December 31,
	2020			2019
Senior Notes due 2028, net of unamortized debt issuance costs of $4,380 and $4,823, respectively	$	295,620		$	295,177
Term loan, net of unamortized debt issuance costs of $1,426 and $1,662, respectively		198,574			198,338
Vehicle and equipment notes, maturing through September 2025; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8%		70,846			72,714
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 6.0%		3,392			2,966

		568,432			569,195
Less: current maturities		(24,156	)		(24,164	)

Long-term debt, less current maturities	$	544,276		$	545,031

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of September 30, 2020 are as follows (in thousands):


Remainder of 2020	$	6,757
2021		22,694
2022		18,962
2023		13,760
2024		7,839
Thereafter		504,226

5.75% Senior Notes due 2028

In September 2019, we issued $300.0 million in aggregate principal amount of 5.75%

~~enior~~

senior unsecured notes

~~(the~~ (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest will be payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020.

The net

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

proceeds from the Senior Notes offering were $295.0 million after debt issuance costs. We used some of the net proceeds to repay a portion of our outstanding obligations (including accrued and unpaid interest) under our term loan credit agreement (as defined below) and to pay fees and expenses related to the ~~Senior Notes offering and the~~ entry into a new revolving credit facility described ~~below~~

below.

The indenture covering the Senior Notes ~~contain~~

contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Credit Facilities

In December 2019, we amended and restated our $400 million, seven-year term loan facility due

April 2025

(the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of April 13, 2017 (as previously amended by the First Amendment thereto dated November 30, 2017 and by the Second Amendment thereto dated June 19, 2018). The amended Term Loan (i) effects a repricing of the interest rate applicable to the term loans thereunder from LIBOR plus 2.50% to LIBOR plus 2.25% and (ii) replaces Royal Bank of Canada with Bank of America, N.A. as the administrative agent and collateral agent thereunder. As of September 30, ~~2019,~~2020, we had ~~$197.8~~$198.6 million, net of unamortized debt issuance costs, due on our ~~$400 million,~~ ~~seven-year~~ ~~term loan facility (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”).~~Term Loan. The amended Term Loan ~~is due~~ ~~April 2025~~ ~~and~~also has a margin of ~~(A) 2.50% in the case of Eurodollar rate loans and (B) 1.50%~~1.25% in the case of base rate loans.

In September 2019, we ~~also~~ entered into a ne

new asset-based lending credit agreement ~~(the~~(the “ABL Credit Agreement”). The ABL Credit Agreement provides

for

an asset-based lending credit facility (the “ABL Revolver”) of up to $200.0 million with a ~~five-year~~five

-year maturity, which replaced the Company’s previous revolving credit facility. Borrowing availability under the ABL Revolver is based on a percentage of the value of certain assets securing the Company’s obligations and those of the subsidiary guarantors thereunder. AsIn connection with the Amended and Restated Term Loan, we entered into a Second Amendment (the “Second Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Bank of America, N.A., as Term Loan Agent for the lenders under the Amended and Restated Term Loan. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of September 30, ~~2019, there were 0 borrowings outstanding~~2020 was $161.3 million.

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

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver.

~~In connection~~

Vehicle and Equipment Notes

We are party to a Master Loan and Security Agreement (“Master Loan and Security Agreement”), a Master Equipment Lease Agreement (“Master Equipment Agreement”) and one or more Master Loan Agreements (“Master Loan Agreements” and together with the

~~eptember 2019~~

~~transactions, we wrote off $2.8 million~~ Master Loan and Security Agreement and Master Equipment Agreement the “Master Loan Equipment Agreements”) with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in ~~previously capitalized loan costs during~~ the ~~three~~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 ~~ended~~after the incurrence of the obligation. The specific terms of each note are based on specific criteria, including the type of vehicle or equipment and the market interest rates at the time. No termination date applies to these agreements. As of September 30, ~~2019. This amount~~2020, approximately $67.7 million of the various loan agreements was available for purchases of equipment.

Total gross assets relating to our Master Loan and Equipment Agreements were $134.4 million and $130.2 million as of September 30, 2020 and December 31, 2019, respectively. The net book value of assets under these agreements was $66.2 million and $68.2 million as of September 30, 2020 and December 31, 2019, respectively. Depreciation of assets held under these agreements is included ~~in interest expense, net~~within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income. We also had $9.0 million of capitalized deferred financing costs and debt issuance costs, net of accumulated amortization, as of September 30, 2019, which includes $6.2 million in new costs associated with the above transactions incurred during the three months ended September 30, 2019. The deferred financing costs are included in other

~~non-current~~

assets while the debt issuance costs are included in long-term debt on the Condensed Consolidated Balance Sheets. These costs are amortized over the term of the related debt on a straight-line basis which approximates the effective interest method.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

NOTE 78 - LEASES

On January 1, 2019, we adopted ASC 842, “Leases” which, among other changes, requires us to record liabilities classified as operating leases on our Condensed Consolidated Balance Sheets along with a corresponding

~~right-of-use~~

asset. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of whether contracts are or contain leases, lease classification tests and treatment of initial direct costs. We also elected to not separate lease components from

~~non-lease~~

~~components for all fixed payments, and we exclude variable lease payments in the measurement of~~

~~right-of-use~~

~~assets and lease obligations.~~

Upon adoption of ASC 842, we recorded a $44.9 million increase in other assets, a $1.4 million decrease to other current assets, a $1.0 million decrease to other current liabilities and a $44.5 million increase to operating lease obligations. These adjustments are the result of assigning a

~~right-of-use~~

asset and related lease liability to our operating leases. We did not record any cumulative effect adjustments to opening retained earnings, and adoption of the lease standard had no impact to cash from or used in operating, financing, or investing activities on our consolidated cash flow statements.

We determine if an arrangement is a lease at inception. Most of our operating leases do not provide an implicit rate so we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install; various office spaces for selling and administrative activities to support our business; ~~certain manufacturing facilities to produce insulation materials;~~ and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment. ~~Leases with an initial term of 12 months or less are not recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term.~~

Most lease agreements include one or more renewal options, all of which are at our sole discretion. Generally, future renewal options that have not been executed as of the balance sheet date are excluded from

~~right-of-use~~

assets and related lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Some of our vehicle lease agreements include provisions for residual value guarantees and any expected payment is included in our lease liability.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Lease Position as of September 30, 2019~~

The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheet:

(in thousands)

Classification

As of September 30,
2019

Assets

Non-Current

Operating

Operating lease
right-of-use
assets
$
42,553

Finance

Property and equipment, net

7,691

Total lease assets
$
50,244

Liabilities

Current

Operating

Current maturities of operating lease obligations
$
15,032

Financing

Current maturities of finance lease obligations

3,133

Non-Current

Operating

Operating lease obligations

27,129

Financing

Finance lease obligations

3,682

Total lease liabilities
$
48,976


~~Weighted-average remaining lease term~~
~~Operating leases~~	~~3.8 years~~
~~Finance leases~~	~~2.6 years~~
~~Weighted-average discount rate~~ ~~(1)~~
~~Operating leases~~	~~4.85~~	%
~~Finance leases~~	~~4.75~~	%

~~(1)~~

~~Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.~~


(in thousands)	Classification	As of September 30, 2020			As of December 31, 2019
Assets
Non-Current
Operating	Operating lease right-of-use assets	$	50,873		$	45,691
Finance	Property and equipment, net		5,598			7,148

Total lease assets		$	56,471		$	52,839

Liabilities
Current
Operating	Current maturities of operating lease obligations	$	17,875		$	15,459
Financing	Current maturities of finance lease obligations		2,268			2,747
Non-Current
Operating	Operating lease obligations		32,431			29,785
Financing	Finance lease obligations		2,747			3,597

Total lease liabilities		$	55,321		$	51,588

Weighted-average remaining lease term:
Operating leases			4.2 years
Finance leases			2.7 years
Weighted-average discount rate:
Operating leases			3.91	%
Finance leases			5.02	%

Lease Costs

The table below presents certain information related to the lease costs for finance and operating ~~leases during 2019:~~leases:


		Three months ended September 30,				Nine months ended September 30,
(in thousands)	Classification	2020		2019		2020		2019
Operating lease cost (1)	Administrative	$	5,760	$	5,225	$	16,972	$	15,266
Finance lease cost
Amortization of leased assets (2)	Cost of sales		856		1,144		2,762		3,955
Interest on finance lease obligations	Interest expense, net		64		84		207		268

Total lease costs		$	6,680	$	6,453	$	19,941	$	19,489

(in thousands)

Classification

Three months ended
September 30, 2019

Nine months ended
September 30, 2019

Operating lease cost

(1)

Administrative
$
5,225
$
15,266

Finance lease cost

Amortization of leased assets
(2)

Cost of sales

1,144

3,955

Interest on finance lease obligations

Interest expense, net

84

268

Total lease costs
$
6,453
$
19,489

(1)

Includes variable lease costs of $0.6 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $1.9 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively, and short-term lease costs of $0.2 million for each of the three months ended September 30, 2020 and 2019, respectively, and $0.6 million for each of the nine months ended September 30, 2020 and 2019, respectively.

(2)	Includes variable lease costs of $0.2 million for each of the three months ended September 30, 2020 and 2019, respectively, and $0.6 million and $0.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other Information

The table below presents supplemental cash flow information related to leases ~~during 2019~~ (in thousands):

Three months ended
September 30, 2019

Nine months ended
September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases
$
4,488
$
13,009

Operating cash flows for finance leases

84

268

Financing cash flows for finance leases

917

3,398


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	4,949	$	4,488	$	14,501	$	13,009
Operating cash flows for finance leases		64		84		207		268
Financing cash flows for finance leases		606		917		1,998		3,398

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of September 30, ~~2019~~2020 (in thousands):

Finance Leases

Operating Leases

Related Party

Other

Total Operating

Remainder of 2019
$
1,233
$
260
$
4,213
$
4,473

2020

2,854

1,055

14,490

15,545

2021

1,845

910

9,947

10,857

2022

911

836

5,708

6,544

2023

532

415

3,386

3,801

Thereafter

131

823

4,304

5,127

Total minimum lease payments

7,506
$
4,299
$
42,048

46,347

Less: Amounts representing executory costs

(195
)
—

Less: Amounts representing interest

(496
)
(4,186
)

Present value of future minimum lease payments

6,815

42,161

Less: Current obligation under leases

(3,133
)
(15,032
)

Long-term lease obligations
$
3,682
$
27,129


	Finance Leases			Operating Leases
				Related Party		Other		Total Operating
Remainder of 2020	$	761		$	302	$	4,817	$	5,159
2021		2,203			1,061		17,319		18,340
2022		1,209			986		11,598		12,584
2023		848			534		6,467		7,001
2024		434			548		3,135		3,683
Thereafter		69			1,086		6,924		8,010

Total minimum lease payments		5,524		$	4,517	$	50,260		54,777

Less: Amounts representing executory costs		(103	)						—
Less: Amounts representing interest		(406	)						(4,471	)

Present value of future minimum lease payments		5,015							50,306
Less: Current obligation under leases		(2,268	)						(17,875	)

Long-term lease obligations	$	2,747						$	32,431

~~Disclosures Related to Periods Prior to Adoption of ASC 842 under ASU 2016-02~~

Lease amounts presented as of December 31, 2018 and for the nine months ended September 30, 2018 are in accordance with accounting guidance in effect prior to adoption of ASC 842, “Leases,” on January 1, 2019. Total assets relating to capital leases were approximately $58.7 million and a total of approximately $32.0 million were fully depreciated as of December 31, 2018. The net book value of assets under capital leases was approximately $9.5 million as of December 31, 2018. Amortization of assets held under capital leases is included within cost of sales on the Consolidated Statements of Operations and Comprehensive Income.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2018 were as follows (in thousands):

Capital Leases

Operating Leases

Related Party

Other

Total Operating

2019
$
5,207
$
1,159
$

14,418
$
15,577

2020

2,253

1,184

11,293

12,477

2021

1,339

1,058

7,014

8,072

2022

452

972

4,335

5,307

2023

93

51

2,613

2,664

Thereafter

—

—

4,695

4,695

9,344
$
4,424
$

44,368
$
48,792

Less: Amounts representing executory costs

(255
)
Less: Amounts representing interest

(459
)

Total obligation under capital leases

8,630

Less: Current portion of capital leases

(4,806
)

Long term capital lease obligation
$
3,824

NOTE 89 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets, specifically other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 are categorized based on the lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.

Estimated Fair Value of Financial Instruments

Accounts receivable, accounts payable and accrued liabilities as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of certain long-term debt, including the Term Loan and ABL Revolver as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of our operating lease

right-of-use

assets and the obligations associated with our operating and finance leases as well as our vehicle and equipment notes approximate fair value as of September 30, ~~2019~~2020 and December 31, ~~2018.~~2019. All debt classifications represent Level 2 fair value measurements.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods. Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments to their net present value using the appropriate weighted average cost of capital (WACC). The fair values of financial assets and liabilities that are recorded at fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):

As of September 30, 2019

As of December 31, 2018

Total

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Financial assets:

Cash equivalents
$
107,535
$
107,535
$
—
$
—
$
69,807
$
69,807
$
—
$
—

Derivative financial instruments

—

—

—

—

1,765

—

1,765

—

Total financial assets
$
107,535
$
107,535
$
—
$
—
$

71,572
$
69,807
$
1,765
$
—

Financial liabilities:

Derivative financial instruments
$
11,207
$
—
$
11,207
$
—
$
2,275
$
—
$
2,275
$
—

Contingent consideration

3,724

—

—

3,724

5,098

—

—

5,098

Total financial liabilities
$

14,931
$

—
$

11,207
$

3,724
$
7,373
$

—
$

2,275
$

5,098


	As of September 30, 2020								As of December 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents	$	170,307	$	170,307	$	—	$	—	$	99,242	$	99,242	$	—	$	—
Derivative financial instruments		1,759		—		1,759		—		—		—		—		—

Total financial assets	$	172,066	$	170,307	$	1,759	$	—	$	99,242	$	99,242	$	—	$	—

Financial liabilities:
Contingent consideration	$	3,363	$	—	$	—	$	3,363	$	3,854	$	—	$	—	$	3,854
Derivative financial instruments		129		—		129		—		9,446		—		9,446		—

Total financial liabilities	$	3,492	$	—	$	129	$	3,363	$	13,300	$	—	$	9,446	$	3,854

See Note 4,5, Investments, for more information on cash equivalents included in the table above. Also see Note 9,10, Derivatives and Hedging Activities, for more information on derivative financial instruments.

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

Contingent consideration liability - January 1, 2019
$
5,098

Preliminary purchase price

2,275

Fair value adjustments

(410
)
Accretion in value

434

Amounts paid to sellers

(371
)
Amounts cancelled

(3,302
)

Contingent consideration liability - September 30, 2019
$
3,724


Contingent consideration liability - January 1, 2020	$	3,854
Preliminary purchase price		2,000
Fair value adjustments		(360	)
Accretion in value		532
Amounts cancelled		(30	)
Amounts paid to sellers		(2,633	)

Contingent consideration liability - September 30, 2020	$	3,363

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

The carrying values and associated fair values of financial assets and liabilities that are not recorded at fair value in the Condensed Consolidated Balance Sheets and not described above include our Senior Notes and investments. To estimate fair values of these items, we utilized third-party quotes which are derived all or in part from model prices, external sources or market ~~prices, or the third-party’s internal records.~~prices. Both represent a Level 2 fair value measurement and are as follows (in thousands):

As of September 30, 2019

As of December 31, 2018

Carrying Value

Fair Value

Carrying Value

Fair Value

Investments
$
4,980
$
4,983
$
10,060
$

10,053

Senior Notes

(1)

300,000

309,000

—

—


	As of September 30, 2020				As of December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Investments	$	1,220	$	1,221	$	37,961	$	37,958
Senior Notes (1)		300,000		316,215		300,000		321,114

(1)

~~(1)~~

Excludes the impact of unamortized debt issuance costs.

Table of Contents

INSTALLED

BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

See Note 5, Investments, for more information on investments included in the table above. Also see Note 7, Debt, for more information on our Senior Notes.

NOTE 910 - DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges of Interest Rate Risk

Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. During the ~~first~~ nine months ~~of 2019, such derivatives were~~ended September 30, 2020, we used interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. ~~To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy.~~ Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of September 30, ~~2019,~~2020, we ~~had~~have not posted any collateral related to these agreements.

During the three months ended September 30, 2020, we terminated our 2 existing interest rate swaps ~~each~~and our forward interest rate swap and simultaneously entered into a new forward interest rate swap beginning July 30, 2021. We settled the terminated swaps by making a cash payment of $17.8 million.

This payment is classified within cash flows from operating activities within the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020, pursuant to company policy.

The unrealized loss included in accumulated other comprehensive loss associated with ~~an associated floor, with~~the terminated swaps of $17.8 million at the time of termination will be amortized to interest expense over the course of the originally scheduled settlement dates of the terminated swaps. During the three and nine months ended September 30, 2020, we amortized $0.6 million of the unrealized loss to interest expense, net. The new forward interest rate swap has a ~~total~~ beginning notional of $200.0 million, ~~1 that amortizes quarterly to $95.3 million at~~ a ~~maturity date~~fixed rate of ~~May 31, 2022~~0.51% and ~~1 that amortizes quarterly to $93.3 million at~~ a maturity date of April 15, ~~2025. We also had a~~2030. Upon commencement, this forward ~~interest rate~~ swap ~~with an associated floor beginning May 31, 2022 with a beginning notional of $100.0 million that amortizes quarterly to $97.0 million at a maturity date of April 15, 2025.~~

~~hese three swaps~~will serve to hedge

substantially all

of the variable cash flows on our Term Loan until ~~maturity.~~ its maturity

and

if extended.

The assets and liabilities associated with ~~these derivative instruments~~the forward interest rate swap are included in other ~~current~~long-term assets ~~other~~

~~non-current~~

~~assets, other current liabilities,~~ and other ~~long-term~~current liabilities on the Condensed Consolidated Balance Sheets at their fair value amounts as described in Note 8,9, Fair Value Measurements.

The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in other comprehensive income, net of tax on the Condensed Consolidated Statements of Operations and Comprehensive Income and in accumulated other comprehensive income on the Condensed Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We had 0 such changes during the nine months ended September 30, ~~2019~~2020 or ~~2018.~~2019.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense, net as interest payments are made on our variable-rate ~~debt.~~debt when the forward interest rate swap begins and as the unrealized loss on our terminated swaps is amortized. Over the next twelve months, we estimate that an additional ~~$1.5~~$3.4 million will be reclassified as an increase to interest expense, net.

~~Additionally,~~LIBOR is used as a reference rate for our interest rate swap agreements we ~~do not~~ use ~~derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of~~to hedge our interest rate exposure. During the nine months ended September 30, ~~2019,~~2020, we adopted ASU

2020-04,

Reference Rate Reform: Facilitation of the ~~Company has not posted any collateral~~Effects of Reference Rate Reform on Financial Reporting (Topic 848). The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these ~~agreements.~~

expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

NOTE 1011 - STOCKHOLDERS’ EQUITY

As of September 30, 2020 and December 31, 2019, we had ~~$8.5~~losses of $11.7 million and $7.1 million, respectively, in accumulated other

comprehensive

loss

on our Condensed Consolidated Balance ~~Sheet, which represents~~Sheets. The loss as of September 30, 2020 represented the unrealized loss on our terminated interest rate swaps of $12.9 million, net of taxes, less the effective portion of the unrealized gain on our forward interest rate swap of $1.2 million, net of taxes. The loss as of December 31, 2019 represented the effective portion of the unrealized loss on our

now-terminated

derivative instruments. For additional information, see Note 9,10, Derivatives and Hedging ~~Activities.~~

Activities

Table of Contents

INSTALLED BUILDING

PRODUCTS

, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the ~~three and~~ nine months ended September 30, ~~2018,~~2020, we repurchased approximately ~~380 thousand and 793~~443 thousand shares of our ~~outstanding~~ common stock ~~respectively. The~~with an aggregate ~~purchase~~ price of ~~our 2018 stock repurchases was $18.2 million and $42.8~~approximately $15.8 million, or ~~$47.75 and $53.96~~$35.59 average price per ~~share, for the three and nine months ended September 30, 2018, respectively.~~share. We did not repurchase any shares during the ~~three or~~ nine months ended September ~~30,~~

0, 2019. The stock repurchase plan is in effect through ~~February 28, 2020,~~March 1, 2021 unless extended by our board of directors. The effect of these treasury shares reducing the number of common shares outstanding is reflected in our earnings per share calculation. As of September 30, 2020, we have $44.9 million remaining on our current stock repurchase program. In response to

COVID-19,

temporarily

suspended our share repurchase program.

Given the current state of our business and our markets, effective November 9, 2020, our share repurchase program will be reinstated.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

NOTE 1112 - EMPLOYEE BENEFITS

Healthcare

We participate in multiple healthcare plans, the largest of which is partially self-funded with an insurance company paying benefits in excess of stop loss limits per individual/family. Our healthcare benefit expense (net of employee contributions) ~~for all plans~~ was approximately ~~$5.6~~$5.5 million and ~~$4.5~~$5.6 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$15.7~~$18.2 million and ~~$13.3~~$15.7 million for the nine months ended September 30, 2020 and 2019, ~~and 2018, respectively.~~respectively, for all plans. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Condensed Consolidated Balance Sheets and was ~~$2.9~~$3.2 million and ~~$2.3~~$2.6 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Workers’ Compensation

Workers’ compensation expense totaled ~~$4.0~~$4.1 million and ~~$4.4~~$4.0 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$11.8~~$11.4 million and ~~$9.7~~$11.8 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

Workers’ compensation ~~kno~~

nknown claims and IBNR reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):

September 30,
2019

December 31,
2018

Included in other current liabilities
$
5,768
$
5,795

Included in other long-term liabilities

11,813

9,447

$
17,581
$
15,242


	September 30,		December 31,
	2020		2019
Included in other current liabilities	$	6,341	$	6,777
Included in other long-term liabilities		12,575		10,874

	$	18,916	$	17,651

We also had an insurance receivable for claims that exceeded the stop loss limit for fully insured policies included on the Condensed Consolidated Balance Sheets. This receivable offsets an equal liability included within the reserve amounts noted above and was as follows (in thousands):

September 30,
2019

December 31,
2018

Included in other
non-current
assets
$
1,819
$
1,888


	September 30,		December 31,
	2020		2019
Included in other non-current assets	$	1,857	$	2,098

Retirement Plans

We participate in multiple 401(k) plans, whereby we provide a matching contribution of wages deferred by employees and can also make discretionary contributions to each plan. Certain plans allow for discretionary employer contributions only. These plans cover substantially all our eligible employees. We recognized 401(k) plan expenses of ~~$0.5~~$0.4 million and ~~$0.3~~$0.5 million during the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~we recognized~~$1.6 million and $1.5 million ~~and $1.2 million for~~during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. These expenses are included in administrative expenses on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

Table of Contents

INSTALLED

BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Share-Based Compensation

Common Stock Awards

We periodically grant shares of our common stock to

non-employee

members of our board of directors and our employees. During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we granted approximately 86 thousand and 58 thousand shares of our common stock, respectively, under our 2014 Omnibus Incentive Plan to

non-employee

members of our board of directors. ~~The~~Substantially all of the stock ~~issued~~ will vest over a one year service ~~term.~~period. Accordingly, we recorded $0.1 million and ~~$0.3~~$0.2 million ofin compensation expense during the three and nine months ended September 30, ~~2019 and $25 thousand~~2020, respectively and $0.1 million and $0.3 million for the three and nine months ended September

0, 2019, respectively.

In addition, we granted approximately 0.2 million and 0.1 million shares of our common stock to employees during the nine months ended September 30, 2020 and 2019, respectively. We recorded $1.0 million and $3.0 million of compensation expense associated with

non-performance-based

awards issued to employees during the three and nine months ended September 30, ~~2018.~~

~~In addition, we granted approximately 0.1 million shares of our common stock under our 2014 Omnibus Incentive Plan to employees during the nine months ended September 30, 2019~~2020, respectively, and ~~2018. The shares granted during the nine months ended September 30, 2019 and 2018 vest in 3 equal installments (rounded to the nearest whole share) annually on April 20 through 2022.~~

~~Share-based compensation expense associated with~~

~~non-performance~~

~~based awards issued to employees was~~ $1.0 million and $3.3 million for the three and nine months ended September ~~30,~~

0, 2019, ~~respectively, and $1.0 million and $2.9 million for~~respectively.

During the ~~three and~~ nine months ended September 30, ~~2018, respectively.~~2020 and 2019, our employees surrendered approximately 25 thousand and 45 thousand shares of our common stock, respectively, to satisfy tax withholding obligations arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan. We recognized a tax shortfall of $0.3 million for the nine months ended September 30, 2020 and we recognized windfall tax benefits of $0.3 million for the nine months ended September 30, 2019 within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income.

As of September 30, ~~2019,~~2020, we had ~~$5.9~~$7.1 million of unrecognized compensation expense related to these nonvested common stock awards issued to ~~the~~

non-employee

members of our board of directors and our employees. 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 ~~1.9~~2.0 years. Shares forfeited are returned as treasury shares and available for future issuances. See the table below for changes in shares and related weighted average grant date fair ~~market~~ value per share.

Employees – Performance-Based Stock Awards

During the nine months ended September 30, ~~2019,~~2020, we issued under our 2014 Omnibus Incentive Plan approximately ~~46 thousand~~0.1 million shares of our common stock to certain officers, which vest in 2 equal installments on each of April 20, ~~2020~~2021 and April 20, ~~2021.~~2022. In addition, during the nine months ended September 30, ~~2019,~~2020, we established, and our Board of Directors approved, performance-based targets in connection with common stock awards to be issued to certain officers in ~~2020~~2021 contingent upon achievement of these targets. Share-based compensation expense associated with these performance-based awards and prior performance-based grants was $0.9 million and $2.8 million for the three and nine months ended September 30, 2020, respectively, and $0.8 million and $2.3 million for the three and nine months ended September ~~30,~~

0, 2019, ~~respectively, and $0.6 million and $1.6 million for the three and nine months ended September 30, 2018,~~ respectively.

As of September 30, ~~2019,~~2020, we had ~~$4.2~~$5.0 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 1.8 years using the graded-vesting method. See the table below for changes in shares and related weighted average grant date fair ~~market~~ value per share.

In addition, there are long-term performance-based restricted stock awards to be issued to certain employees annually through 2022 contingent upon achievement of certain performance targets. These awards are accounted for as liability-based awards since they represent a predominantly-fixed monetary amount that will be settled with a variable number of common shares and as such are included in other long-term liabilities on the Consolidated Balance Sheets. During the three and nine months ended September 30, 2020, we recorded $0.5 million and $1.2 million in compensation expense, respectively, associated with these performance-based awards, and we recorded $0.1 million in compensation expense during the nine months ended September 30, 2019.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Employees – Performance-Based Restricted Stock Units

During ~~2018,~~2019, we established, and our board of directors approved, performance-based restricted stock units in connection with common stock awards which were issued to certain employees ~~during the nine months ended September 30, 2019~~in 2020 based upon achievement of a performance target. In addition, during the nine months ended September 30, ~~2019,~~2020, we established, and our board of directors approved, ~~performed-based~~performance-based restricted stock units in connection with common stock awards to be issued to certain employees in ~~2020~~2021 based upon achievement of a performance target. These units will be accounted for as equity-based awards that will be settled with a fixed number of common shares. We recorded ~~$0.2~~$0.1 million and ~~$0.5~~$0.4 million in compensation expense associated with these performance-based units during the three and nine months ended September 30, ~~2019,~~2020, respectively, and ~~$0.3~~$0.2 million and ~~$1.5~~$0.5 million for the three and nine months ended September ~~30, 2018,~~

0, 2019, respectively.

As of September 30, ~~2019,~~2020, we had ~~$0.4~~$0.3 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~~0.5 years. See the table below for changes in shares and related weighted average grant date fair ~~market~~ value per share.

Share-Based Compensation Summary

During the nine months ended September 30, 2019 and 2018, our employees surrendered approximately 45 thousand and 41 thousand shares of our common stock, respectively, to satisfy tax withholding obligations arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan. We recognized excess tax benefits of $0.3 million and $0.5 million for the nine months ended September 30, 2019 and 2018, respectively, within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Amounts and changes for each category of equity-based award ~~for employees~~ were as follows:

Common Stock Awards

Performance-Based Stock
Awards

Performance-Based
Restricted
Stock Units

Awards

Weighted
Average
Grant

Dat
e

Fair
Value

Per
Share

Awards

Weighted
Average
Grant

Dat
e

Fair
Value

Per
Share

Units

Weighted
Average
Grant

Dat
e

Fair
Value

Per
Share

Nonvested awards/units at December 31, 2018

173,189
$
47.40

115,698
$
52.25

13,248
$
56.05

Granted

88,529

50.94

82,692

45.65

13,933

51.62

Vested

(106,347
)
42.27

(31,404
)
41.00

(12,808
)
56.05

Forfeited/Cancelled

(1,767
)
52.25

(6,697
)
65.60

(840
)
53.94

Nonvested awards/units at September 30, 2019

153,604
$
52.93

160,289
$
50.49

13,533
$
51.62


	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, 2019		152,882		$	52.93		160,289		$	50.49		13,186		$	51.62
Granted		159,876			40.02		57,450			77.28		13,655			36.51
Vested		(90,870	)		49.69		(54,502	)		51.43		(13,077	)		51.50
Forfeited/Cancelled		(4,023	)		46.76		0			0		(491	)		42.94

Nonvested awards/units at September 30, 2020		217,865		$	44.93		163,237		$	59.57		13,273		$	36.51

We recorded the following stock compensation expense by income statement category (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Cost of sales
$

97
$

94
$

280
$

749

Selling

48

30

149

402

Administrative

1,954

1,769

6,012

4,938

$
2,099
$
1,893
$
6,441
$
6,089


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Cost of sales	$	60	$	97	$	221	$	280
Selling		45		48		154		149
Administrative		2,530		1,954		7,675		6,012

	$	2,635	$	2,099	$	8,050	$	6,441

Administrative stock compensation expense includes all stock compensation earned by our administrative personnel, while cost of sales and selling stock compensation represents all stock compensation earned by our installation and sales employees, respectively. The difference between the sum of the expenses described above and the amount in the table is comprised of expenses related to immaterial nonrecurring awards.

As of September 30, 2020, approximately 2.0 million of the 3.0 million shares of common stock authorized for issuance were available for issuance under the 2014 Omnibus Incentive Plan.

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1213 - INCOME TAXES

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

During the three and nine months ended September 30, ~~2019,~~2020, our effective tax rate was ~~26.4%~~25.8% and ~~25.9%~~26.2%, respectively. The ~~rate for the nine months ended September~~

~~0, 2019 was favorably impacted by excess tax benefits from share-based compensation arrangements. The~~ rates ~~for both periods~~ were unfavorably impacted by separate tax filing entities in a loss position for which a full valuation allowance is required, resulting in no tax benefit for recognized losses. The rate for the nine months ended September 30, 2020 was also impacted by recognition of a shortfall tax from equity vesting.

NOTE 1314 - RELATED PARTY TRANSACTIONS

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

We lease our headquarters and certain other facilities from related parties. See Note 7,8, Leases, for future minimum lease payments to be paid to these related parties.

The amount of sales to related parties as well as the purchases from and rent expense paid to related parties were as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Sales
$

3,736
$

3,259
$
9,658
$
9,361

Purchases

469

372

1,327

1,207

Rent

256

257

773

829


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Sales	$	373	$	3,736	$	3,761	$	9,658
Purchases		331		469		1,457		1,327
Rent		297		256		867		773

~~As of September 30, 2019 and December 31, 2018, we~~We had a related party ~~balances~~balance of approximately ~~$1.8~~$0.5 million and ~~$2.3~~$1.7 million ~~respectively,~~ included in accounts receivable on our Condensed Consolidated Balance ~~Sheets.~~Sheets as of September 30, 2020 and December 31, 2019, respectively. These balances primarily represent trade accounts receivable arising during the normal course of business with various related parties. M/I Homes, Inc., a customer whose Chairman, President and Chief Executive Officer iswas a member of our board of directors until his resignation from our board effective March 18, 2020, accounted for ~~$1.4 million and $1.2~~$1.3 million of ~~these balances~~the related party accounts receivable balance as of December 31, 2019. Additionally, M/I Homes, Inc. accounted for a significant portion of the related party sales during the nine months ended September 30, ~~2019 and December 31, 2018, respectively.~~2020, all of which occurred during the first quarter of the year.

NOTE 1415 - COMMITMENTS AND CONTINGENCIES

Accrued General Liability and Auto Insurance

Accrued general liability and auto insurance reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):

September 30,
2019

December 31,
2018

Included in other current liabilities
$
2,514
$
1,848

Included in other long-term liabilities

12,511

6,608

$
15,025
$
8,456


	September 30,		December 31,
	2020		2019
Included in other current liabilities	$	4,382	$	3,538
Included in other long-term liabilities		17,914		18,184

	$	22,296	$	21,722

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We also had insurance receivables and an indemnification ~~asset~~assets included on the Condensed Consolidated Balance Sheets that, in aggregate, offset an equal ~~liability~~liabilities included within the reserve amounts noted above. The amounts were as follows (in thousands):

September 30,
2019

December 31,
2018

Insurance receivable and indemnification asset for claims under a
fully insured policy
$
2,484
$
2,484

Insurance receivable for claims that exceeded the stop loss limit

2,738

53

Total insurance receivables included in other
non-current
assets
$
5,222
$
2,537


	September 30, 2020		December 31, 2019
Insurance receivables and indemnification assets for claims under fully insured policies	$	4,060	$	7,491
Insurance receivables for claims that exceeded the stop loss limit		328		2,321

Total insurance receivables and indemnification assets included in other non-current assets	$	4,388	$	9,812

Leases

See Note 7,8, Leases, for further information regarding our lease commitments.

Other Commitments and Contingencies

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

During the year ended December 31, 2018, we entered into an agreement with one of our suppliers to purchase a portion of the insulation materials we utilize across our business. This agreement is effective January 1, 2019 through December 31, 2021 with a purchase obligation of ~~$16.4 million for 2019, $21.4~~$22.6 million for 2020 and $15.0 million for 2021. For the nine months ended September 30, ~~2019,~~2020, we have satisfied ~~$7.2~~$9.1 million of our purchase obligation under this agreement. Additionally, we entered into an agreement with a chemical supplier with a purchase obligation of $0.6 million in 2019. Actual purchases made under this agreement for the nine months ended September 30, 2019 was $0.4 million.

NOTE 1516 - BUSINESS COMBINATIONS

As part of our ongoing strategy to expand geographically and increase market share in certain markets, we completed 5 business combinations during the nine months ended September 30, 2020 and 4 business combinations and 4four insignificant

tuck-in

acquisitions merged into existing operations during the nine months ended September ~~30,~~

0, 2019, ~~and 8 business combinations and 1 insignificant~~

~~tuck-in~~

~~acquisition merged into existing operations during the nine months ended September 30, 2018, respectively,~~ in which we acquired 100% of the ~~ownership~~voting equity interests in each.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The largest of these acquisitions were Royals Commercial Services, Inc. (“Royals”) in February 2020, Storm Master Gutters (“Storm Master”) in August 2020, Energy One America, LLC (“Energy One”) in August 2020, 1st State Insulation, LLC (“1st State Insulation”) in March 2019 ~~Expert Insulation, Inc.~~ and Expert Insulation of Brainerd, Inc. (collectively “Expert Insulation”) in June ~~2019 and Custom Overhead Door, LLC dba Custom Door & Gate (collectively, “CDG”) in March 2018. Net Income, as noted below, includes amortization, taxes and interest allocations when appropriate.~~

~~Belo~~

2019. Below is a summary of each significant acquisition by year, including revenue and net ~~income~~ income/(loss) since date of acquisition, shown for the year of ~~acquisition~~acquisition. Where noted, “Other” represents acquisitions that were individually immaterial in that year. Net income/(loss), as noted below, includes amortization, taxes and interest allocations when appropriate.

For the three and nine months ended September 30, 2020 (in thousands):

Total
Purchase
Price

Three months ended
September 30, 2019

Nine months ended
September 30, 2019

2019 Acquisitions

Date

Acquisition
Type

Cash Paid

Seller
Obligations

Revenue

Net Income

Revenue

Net Income

1st State Insulation

3/18/2019

Asset
$
5,125
$
1,355
$
6,480
$
3,156
$
174
$
6,586
$
374

Expert Insulation

6/24/2019

Asset

16,165

1,993

18,158

3,147

193

3,339

160

Other

Various

Asset

3,450

974

4,424

7,262

591

7,262

591

Total
$

24,740
$

4,322
$

29,062
$

13,565
$
958
$

17,187
$

1,125


												Three months ended September 30, 2020					Nine months ended September 30, 2020
2020 Acquisitions		Date		Acquisition Type		Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income (Loss)			Revenue		Net Income (Loss)
Royals			2/29/2020		Asset	$	7,590	$	2,500	$	10,090	$	2,843	$	279		$	6,650	$	628
Energy One			8/10/2020		Asset		13,200		1,591		14,791		2,853		(202	)		2,853		(202	)
Storm Master			8/31/2020		Asset		13,000		1,336		14,336		2,055		85			2,055		85
Other			Various		Asset		5,035		1,538		6,573		1,879		(252	)		2,643		(291	)

						$	38,825	$	6,965	$	45,790	$	9,630	$	(90	)	$	14,201	$	220
	��

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the three and nine months ended September

0, 2019 (in thousands):

Total
Purchase
Price

Three months ended
September 30, 2018

Nine months ended
September 30, 2018

2018 Acquisitions

Date

Acquisition
Type

Cash Paid

Seller
Obligations

Revenue

Net Income

Revenue

Net Income

CDG

3/19/2018

Asset
$
9,440
$
1,973
$
11,413
$
3,848
$
164
$
7,572
$
229

Other

Various

Shares/Asset

25,242

3,447

28,689

7,003

42

12,782

423

Total
$

34,682
$

5,420
$

40,102
$

10,851
$
206
$

20,354
$

652


											Three months ended September 30, 2019				Nine months ended September 30, 2019
2019 Acquisitions	Date		Acquisition Type		Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income		Revenue		Net Income
1st State Insulation		3/18/2019		Asset	$	5,125	$	1,355	$	6,480	$	3,156	$	174	$	6,586	$	374
Expert Insulation		6/24/2019		Asset		16,165		1,993		18,158		3,147		193		3,339		160
Other		Various		Asset		3,450		974		4,424		7,262		591		7,262		591

					$	24,740	$	4,322	$	29,062	$	13,565	$	958	$	17,187	$	1,125

Acquisition-related costs recorded within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income amounted to $0.8 million and $2.0 million for the three and nine months ended September 30, 2020 respectively, and $0.3 million and $1.3 million for the three and nine months ended September ~~30,~~

0, 2019, ~~respectively, and $0.7 million and $1.9 million for the three and nine months ended September 30, 2018,~~ respectively. The goodwill recognized in conjunction with these business combinations represents the excess cost of the acquired entity over the net amount assigned to assets acquired and liabilities assumed. We expect to deduct approximately ~~$9.6~~$11.3 million of goodwill for tax purposes as a result of ~~2019~~2020 acquisitions.

Purchase Price Allocations

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

As of September 30, 2019

As of September 30, 2018

1st State

Expert

Other

Total

CDG

Other

Total

Estimated fair values:

Accounts receivable
$
—
$
1,796
$
254
$
2,050
$
1,731
$
3,229
$
4,960

Inventories

291

723

338

1,352

514

1,027

1,541

Other current assets

—

—

3

3

28

879

907

Property and equipment

989

235

667

1,891

933

1,893

2,826

Intangibles

3,382

6,740

2,242

12,364

3,711

16,681

20,392

Goodwill

1,857

8,545

930

11,332

4,898

7,007

11,905

Other
non-current
assets

—

161

13

174

36

19

55

Accounts payable and other current liabilities

(39
)
(42
)
(23
)
(104
)
(438
)
(2,046
)
(2,484
)

Fair value of assets acquired and purchase price

6,480

18,158

4,424

29,062

11,413

28,689

40,102

Less seller obligations

1,355

1,993

974

4,322

1,973

3,447

5,420

Cash paid
$

5,125
$

16,165
$

3,450
$

24,740
$
9,440
$

25,242
$

34,682


	As of September 30, 2020															As of September 30, 2019
	Royals			Energy One			Storm Master			Other			Total			1st State			Expert			Other			Total
Estimated fair values:
Accounts receivable	$	2,848		$	3,657		$	2,362		$	1,370		$	10,237		$	—		$	1,796		$	254		$	2,050
Inventories		305			838			175			278			1,596			291			723			338			1,352
Other current assets		430			12			—			145			587			—			—			3			3
Property and equipment		598			2,319			798			350			4,065			989			235			667			1,891
Intangibles		3,930			6,500			8,720			2,996			22,146			3,382			6,740			2,242			12,364
Goodwill		3,015			2,859			3,631			1,745			11,250			1,857			8,545			930			11,332
Other non-current assets		58			—			—			16			74			—			161			13			174
Accounts payable and other current liabilities		(1,059	)		(1,375	)		(1,336	)		(196	)		(3,966	)		(39	)		(42	)		(23	)		(104	)
Deferred income tax liabilities		(35	)		—			—			—			(35	)		—			—			—			—
Other long-term liabilities		—			(19	)		(14	)		(131	)		(164	)		—			—			—			—

Fair value of assets acquired and purchase price		10,090			14,791			14,336			6,573			45,790			6,480			18,158			4,424			29,062
Less seller obligations		2,500			1,591			1,336			1,538			6,965			1,355			1,993			974			4,322

Cash paid	$	7,590		$	13,200		$	13,000		$	5,035		$	38,825		$	5,125		$	16,165		$	3,450		$	24,740

Contingent consideration is included as “seller obligations” in the above table or within “fair value of assets acquired” if subsequently paid during the period presented. These contingent payments consist primarily of earnouts based on performance that are recorded at fair value at the time of acquisition, and/or

non-complete

agreements and amounts based on working capital calculations. When these payments are expected to be made over one year from the acquisition date, the contingent consideration is discounted to net present value using our weighted average cost of capital (WACC), when appropriate.

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Further adjustments to the allocation for each acquisition still under its measurement period are expected as third-party ~~and~~or internal valuations are finalized, certain tax aspects of the transaction are completed, contingent consideration is settled and customary post-closing reviews are concluded during the measurement period attributable to each individual business combination. As a result, insignificant adjustments to the fair value of assets acquired, and in some cases total purchase price, have been made to certain business combinations since the date of

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

acquisition and future adjustments may be made through the end of each measurement period. Goodwill and intangibles per the above table domay not agree to the total gross increases of these assets as shown in Note 5,6, Goodwill and Intangibles, during each of the ~~three~~nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 due to minor adjustments to goodwill for the allocation of certain acquisitions still under measurement as well as other immaterial intangible assets added during the ordinary course of business. In addition, goodwill and intangibles increased during ~~each of~~ the nine months ended September ~~30,~~

0, 2019 ~~and 2018~~ due to small

tuck-in

acquisitions merged into existing operations that do not appear in the above table as discussed above.

Estimates of acquired intangible assets related to the acquisitions are as follows (in thousands):

For the nine months ended September 30,

2019

2018

Acquired intangibles assets

Estimated
Fair Value

Weighted
Average
Estimated
Useful
Life

(yrs.)

Estimated
Fair Value

Weighted
Average
Estimated
Useful
Life

(yrs.)

Customer relationships
$
8,566

8
$

14,480

8

Trademarks and trade names

2,615

15

3,920

14

Non-competition
agreements

1,183

5

1,530

5

Backlog

460

2


	For the nine months ended September 30,
	2020				2019
Acquired intangibles assets	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)		Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)
Customer relationships	$	14,528		8	$	8,566		8
Trademarks and trade names		3,796		15		2,615		15
Non-competition agreements		1,946		5		1,183		5
Backlog		1,876		1.5		—		—

Pro Forma Information

The unaudited pro forma information for the combined results of the Company has been prepared as if the 2020 acquisitions had taken place on January 1, 2019 and the 2019 acquisitions had taken place on January 1, ~~2018 and the 2018 acquisitions had taken place on January 1, 2017.~~2018. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transactions actually taken place on January 1, ~~2018~~2019 and ~~2017,~~2018, respectively, and the unaudited pro forma information does not purport to be indicative of future financial operating results (in thousands, except per share data):

Unaudited pro forma for the three
months ended September 30,

Unaudited pro forma for the nine
months ended September 30,

2019

2018

2019

2018

Net revenue
$
397,839
$
367,600
$

1,123,820
$

1,046,717

Net income

21,240

16,856

49,154

41,997

Basic net income per share

0.71

0.54

1.65

1.34

Diluted net income per share

0.71

0.54

1.65

1.33


	Unaudited pro forma for the three months ended September 30,				Unaudited pro forma for the nine months ended September 30,
	2020		2019		2020		2019
Net revenue	$	426,601	$	421,270	$	1,241,506	$	1,189,470
Net income		28,183		22,627		69,656		52,828
Basic net income per share		0.96		0.76		2.36		1.78
Diluted net income per share		0.95		0.76		2.34		1.77

Unaudited pro forma net income reflects additional intangible asset amortization expense of ~~$29 thousand~~$0.3 million and ~~$0.6~~$1.8 million for the three and nine months ended September 30, 2020, respectively, and $1.4 million and $4.8 million for the three and nine months ended September

0, 2019, respectively, as well as additional income tax expense of $38 thousand and ~~$1.1 million and $3.8~~$0.1 million for the three and nine months ended September 30, ~~2018, respectively, as well as additional income tax expense of $10 thousand and $66 thousand for the three and nine months ended September 30, 2019, respectively,~~2020 and $0.5 million and ~~$1.2~~$1.3 million for the three and nine months ended September ~~30, 2018,~~

0, 2019, respectively, that would have been recorded had the 2020 acquisitions taken place on January 1, 2019 and the 2019 acquisitions taken place on January 1, ~~2018 and the 2018 acquisitions taken place on January 1, 2017.~~

~~Table of Contents~~

~~INSTALLED BUILDING PRODUCTS, INC.~~2018.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

NOTE 1617 - INCOME PER COMMON SHARE

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

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

Table of Contents

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

effect of outstanding restricted stock awards after application of the treasury stock method was 92219 thousand and 98188 thousand shares for the three and nine months ended September 30, ~~2019,~~2020, respectively, and 8492 thousand and ~~138~~98 thousand ~~shares~~ for the three and nine months ended September

0, 2019, respectively. Approximately 500 shares of potential common stock was not included in the calculation of diluted net income per common share for the nine months ended September 30, ~~2018, respectively.~~2020 because the effect would have been anti-dilutive.

27NOTE 18 - SUBSEQUENT EVENT

On October 13, 2020, we acquired substantially all of the assets of Insulation Contractors/Magellan Insulation, known within its

local markets as Icon, for

total consideration of approximately $18.1 million and on October 26, 2020, we acquired substantially all of the assets of Norkote, Inc for total consideration of approximately $9.0 million. The initial accounting for the business combinations was not complete at the time the financial statements were issued due to the timing of the acquisitions and the filing of this Quarterly Report on Form

10-Q.

As a result, disclosures required under ASC

805-10-50,

Business Combinations cannot be made at this time.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes in “Item 1. Financial Statements” of this

Form

10-Q,

as well as our ~~2018~~2019 Form

10-K.

OVERVIEW

We are one of the nation’s largest insulation installers for the residential new construction market and are also a diversified installer of complementary building products, including waterproofing, fire-stopping and fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, mirrors and other products throughout the United States. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over ~~175~~180 branch locations. Substantially all of our net revenue comes from service-based installation of these products in the residential new construction, repair and remodel and commercial construction end markets. We believe our business is well positioned to continue to profitably grow over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy. See

“COVID-19

Impacts” within the Key Factors Affecting Our Operating Results section below for a discussion of short-term impacts to our business.

A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, consumer confidence, employment rates, housing inventory levels, foreclosure rates, the health of the economy and availability of mortgage financing. The strategic acquisitions of multiple companies over the last several years contributed meaningfully to our ~~consistent~~6.1% increase in net revenue during ~~that time.~~the three months ended September 30, 2020 compared to 2019.

~~2019~~2020 Third Quarter Highlights

Net revenue increased ~~13.6%~~6.1% to ~~$396.4~~$420.5 million while gross profit increased ~~21.3%~~11.5% to ~~$118.1~~$131.7 million during the three months ended September 30, ~~2019~~2020 compared to ~~2018. This~~2019. We also generated approximately $143.9 million of cash from operating activities, and at September 30, 2020 we had $268.7 million of cash and cash equivalents and investments. We have not drawn on our existing $200 million revolving line of credit. The increase in net revenue and gross profit was primarily driven by selling price increases, the ~~continued recovery of the housing markets, the~~ contribution of our recent acquisitions, higher volume in our multi-family end market, and ~~growth across our end markets and~~increased sales volume of complementary products. We experienced ~~strong~~ sales growth year-over-year ~~of approximately 11%~~as reflected in ~~our combined residential new construction~~the sales and ~~repair and remodel end markets and approximately 29% in our commercial~~

~~end-market.~~relative performance metrics detailed below.

During the three months ended September 30, ~~2019,~~2020, we ~~modified~~accomplished sales growth in each of our ~~debt structure~~end markets over the same period ended September 30, 2019. The highest level of growth occurred in ~~order to take advantage~~our multi-family end market, followed by our repair and remodel end market. We grew our largest end market, the single family subset of the current attractive bond market. We issued $300.0 million aggregate principal amount at maturity of senior unsecured notes (the “Senior Notes”) with interest payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020. The net proceeds fromresidential new construction market, by 1.8% which is an improvement over the Senior Notes offering were $295.0 million after debt issuance costs, a portion of which we used to partially repay our outstanding obligations (including accrued and unpaid interest) under our term loan credit agreement (the “Term Loan Agreement”) and pay fees and expenses relateddecline experienced last quarter attributable to the ~~Senior Notes offering~~effects of temporary business interruptions earlier in 2020 due to federal, state and ~~entry into~~local requirements in response to

COVID-19.

All of our locations serving the ABL Credit Agreement as defined below. As of September 30, 2019, we had $197.8 million, net of unamortized debt issuance costs, due on our $400 million, seven-year term loan facility (the “Term Loan”) under our Term Loan Agreement. We intend to use the remaining net proceeds for general corporate purposes. In addition,residential new construction end market were operating during the three months ended September 30, ~~2019,~~2020, and we ~~entered into~~achieved a ~~new asset-based lending credit agreement (the “ABL Credit Agreement”).~~2.2% volume growth in this end market during this period. The ~~ABL Credit Agreement provides for an asset-based lending credit facility (the “ABL Revolver”) of up~~commercial end market experienced sales growth during this period as well, but we experienced anticipated production inefficiencies due to ~~$200.0 million with a five-year maturity, which replaced our previous revolving credit facility of up~~

COVID-19

social distancing requirements as well as project delays due to ~~$150.0 million. As of September 30, 2019, we had no amounts outstanding on~~macroeconomic concerns surrounding the ~~ABL Revolver. See Liquidity~~pandemic. These fluctuations are shown in further detail in the table below and ~~Capital Resources section below for~~impacts from

COVID-19

are discussed further ~~information about our debt.~~in the sections that follow.

2827

Table of Contents

~~We were successful at realizing selling price increases during the last two quarters~~The following table shows key measures of performance we utilize to ~~offset previous material cost increases. While we continue to proactively work with customers and suppliers to mitigate these cost impacts, we will likely continue to experience inflation on~~evaluate our ~~materials in 2020.~~results:


	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Period-over-period Growth
Sales Growth		6.1	%		13.6	%		9.1	%		12.9	%
Same Branch Sales Growth (1)		1.7	%		9.3	%		5.1	%		8.2	%

Single-Family Sales Growth (2)		1.8	%		10.3	%		4.0	%		11.3	%
Single-Family Same Branch Sales Growth (1)(2)		-3.1	%		4.9	%		-0.5	%		5.3	%

Residential Sales Growth (3)		6.2	%		10.7	%		8.5	%		11.2	%
Residential Same Branch Sales Growth (1)(3)		1.6	%		6.0	%		4.4	%		6.0	%

Same Branch Sales Growth
Volume Growth (1)(4)		2.2	%		2.9	%		0.0	%		2.3	%
Price/Mix Growth (1)(5)		0.2	%		5.4	%		5.5	%		5.1	%
Large Commercial Sales Growth (1)		2.0	%		19.4	%		7.5	%		15.7	%

U.S. Housing Market (6)
Total Completions Growth		8.9	%		1.5	%		2.2	%		2.6	%
Single-Family Completions Growth (2)		2.6	%		3.7	%		1.7	%		4.8	%

(1)	Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date.

(2)	Calculated based on period-over-period growth in the single-family subset of the residential new construction end market.

(3)	Calculated based on period-over-period growth in the residential new construction end market.

(4)	Excludes the large commercial end market; calculated as period-over-period change in the number of completed same-branch residential new construction and repair and remodel jobs.

(5)

Excludes the large commercial end market; defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch residential new construction and repair and remodel jobs multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job.

(6)	U.S. Census Bureau data, as revised.

We believe ~~there~~the revenue growth measures are ~~several trends that should drive long-term growth~~important indicators of how our business is performing, however, we may rely on different metrics in the housing market, even if there are temporary periods of slower or declining growth. These long-term trends include an aging housing stock, population growth, household formation growth and the fact that housing starts are currently below long-term historic averages.future. We ~~expect that our net revenue,~~also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and ~~operating income will benefit from this growth.~~to evaluate labor efficiency and success at passing increasing costs of materials to customers.

Table of Contents

Net revenue, cost of sales and gross profit

The components of gross profit were as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

Change

2018

2019

Change

2018

Net revenues
$
  396,449

13.6
% $
  348,999
$
  1,110,398

12.9
% $
  983,311

Cost of sales

278,362

10.6
%
251,665

795,616

12.0
%
710,358

Gross profit
$
118,087

21.3
% $
97,334
$
314,782

15.3
% $
272,953

Gross profit percentage

29.8
%
27.9
%
28.3
%
27.8
%


	Three months ended September 30,									Nine months ended September 30,
	2020			Change			2019			2020			Change			2019
Net revenue	$	420,486			6.1	%	$	396,449		$	1,211,756			9.1	%	$	1,110,398
Cost of sales		288,839			3.8	%		278,362			836,710			5.2	%		795,616

Gross profit	$	131,647			11.5	%	$	118,087		$	375,046			19.1	%	$	314,782

Gross profit percentage		31.3	%					29.8	%		31.0	%					28.3	%

Net ~~revenues~~revenue increased during the three and nine months ending September 30, 2019 compared to 2018, primarily driven by acquisitions, organic growth from our existing branches and increased selling prices. For the three and nine months ended September 30, 2019, on a same branch basis, net revenue improved 9.3% and 8.2%, respectively, with approximately 5.4% and 5.1% of this increase attributable to price gains and more favorable customer and product mix with the remainder attributable to growth in the number of completed jobs. We also saw organic growth in our commercial construction end market of 29.1% and 22.4% during the three and nine months ended September 30, 2020 compared to 2019 ~~respectively, over 2018.~~due primarily to acquisitions, higher volume in our multi-family end market, increased sales volume of complimentary products, and increased selling prices. While our combined sales in all end markets, excluding the large commercial end market, were not significantly impacted by

COVID-19

during the three months ended September 30, 2020, we believe

year-to-date

net revenue was impacted by temporary branch closures caused by the pandemic. We estimate this impact to be a range of approximately $12.0 million to $14.5 million during the nine months ended September 30, 2020. As a percentage of net revenue, gross profit ~~improved from 27.9% to 29.8%~~increased during the three and nine months ended September 30, ~~2019~~2020 compared to ~~2018~~2019 attributable primarily to lower fuel costs and achieving higher selling prices on relatively stable material costs, as evidenced by our 0.2% and 5.5% improvement, respectively, in pricing and customer and product mix based on all our combined markets excluding the large commercial end market. Labor utilization improved, in part, as a result of lower installer turnover due to ~~selling price increases.~~investments in our financial wellness plan, our longevity stock compensation plan for installers and assistance from our Installed Building Products Foundation. However, restrictions limiting the number of laborers on a jobsite and our internal standards for social distancing practices impacted the number of completed jobs and operational efficiencies across our end markets during portions of the first nine months of 2020. See

“COVID-19

Impacts” within the Key Factors Affecting Our Operating Results section below for further information.

Operating expenses

Operating expenses were as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

Change

2018

2019

Change

2018

Selling
$
  19,398

11.3
% $
  17,434
$
54,431

10.4
% $
49,300

Percentage of total net revenue

4.9
%
5.0
%
4.9
%
5.0
%
Administrative
$
55,098

14.0
% $
48,337
$
  156,022

13.5
% $
  137,511

Percentage of total net revenue

13.9
%
13.9
%
14.1
%
14.0
%
Amortization
$
6,156

17.8
% $
5,228
$
18,065

-8.2
% $
19,678

Percentage of total net revenue

1.6
%
1.5
%
1.6
%
2.0
%


	Three months ended September 30,									Nine months ended September 30,
	2020			Change			2019			2020			Change			2019
Selling	$	20,843			7.4	%	$	19,398		$	60,209			10.6	%	$	54,431
Percentage of total net revenue		5.0	%					4.9	%		5.0	%					4.9	%
Administrative	$	58,240			5.7	%	$	55,098		$	177,495			13.8	%	$	156,022
Percentage of total net revenue		13.9	%					13.9	%		14.6	%					14.1	%
Amortization	$	6,974			13.3	%	$	6,156		$	20,378			12.8	%	$	18,065
Percentage of total net revenue		1.7	%					1.6	%		1.7	%					1.6	%

Selling

The dollar increases in selling expenses for the three and nine months ended September 30, ~~2019~~2020 were primarily driven by an increase in selling wages and commissions to support our increased net revenue of ~~13.6%~~6.1%. Selling expense as a percentage of sales slightly ~~decreased~~increased for the three and nine months ended September 30, ~~2019~~2020 compared to ~~2018~~2019 primarily due to ~~the leverage on~~variable employee expenses ~~gained through increased net revenue.~~

as a result of improved company performance.

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Administrative

The dollar increases in administrative expenses for the three and nine months ended September 30, ~~2019~~2020 were primarily due to an increase in wages, benefits and facility costs attributable to both acquisitions and organic growth. Administrative ~~expense remained flat~~expenses increased as a percentage of sales for the ~~three~~nine months ended September 30, ~~2019~~2020 compared to ~~2018~~2019 primarily due to increases to variable employee expenses as ~~expenses remained proportional~~a result of improved company performance, as well as higher insurance expenses.

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Amortization

The dollar increases in amortization for the three and nine months ended September 30, 2020 were attributable to the increase in ~~net revenue.~~finite-lived intangible assets recorded as a result of acquisitions.

Other expense, net

Other expense, net was as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

Change

2018

2019

Change

2018

Interest expense, net
$
  8,458

60.1
% $
  5,282
$
  19,783

31.8
% $
  15,013

Other

155

17.4
%
132

381

-8.6
%
417

Total other expense
$
8,613

59.1
% $
5,414
$
20,164

30.7
% $
15,430


	Three months ended September 30,							Nine months ended September 30,
	2020		Change			2019		2020		Change			2019
Interest expense, net	$	7,564		-10.6	%	$	8,458	$	22,679		14.6	%	$	19,783
Other		176		13.5	%		155		305		-19.9	%		381

Total other expense, net	$	7,740		-10.1	%	$	8,613	$	22,984		14.0	%	$	20,164

The ~~increase~~decrease in interest expense, net during the three ~~and nine~~ months ended September 30, ~~2019~~2020 compared to ~~2018~~2019 was primarily due to a $2.8 million dollar write off of previously capitalized loan costs associated with debt transactions completed during September 2019. The increase in interest expense, net during the nine months ended September 30, 2020 compared to 2019 was primarily due to the increased debt levels associated with the above-mentioned debt transactions.

Income tax provision

Income tax provision and effective tax rates were as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Income tax provision
$
  7,610
$
  5,358
$
  17,135
$
  12,762

Effective tax rate

26.4
%
25.6
%
25.9
%
25.0
%


	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Income tax provision	$	9,773		$	7,610		$	24,578		$	17,135
Effective tax rate		25.8	%		26.4	%		26.2	%		25.9	%

During the three and nine months ended September 30, ~~2019,~~2020, our effective tax ~~rate was 26.4%~~rates were 25.8% and ~~25.9%~~26.2%, respectively. ~~The rate for the nine months ended September 30, 2019 was favorably impacted by excess tax benefits from share-based compensation arrangements.~~ The rates for both periods were unfavorably impacted by separate tax filing entities in a loss position for which a full valuation allowance is required, resulting in no tax benefit for recognized losses. The rate for the nine months ended September 30, 2020 was also unfavorably impacted by a tax shortfall due to equity vesting.

Other comprehensive income (loss) ~~income,~~, net of tax

Other comprehensive income (loss) ~~income,~~, net of tax was as follows (in thousands):

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Unrealized (loss) gain on cash flow hedge, net of taxes
$
  (1,726
) $
  818
$
  (8,021
) $
  2,453


	Three months ended September 30,					Nine months ended September 30,
	2020		2019			2020			2019
Unrealized gain (loss) on cash flow hedge, net of taxes	$	1,176	$	(1,726	)	$	(4,582	)	$	(8,021	)

During the three months ended September 30, 2020, we recorded an unrealized gain on our new forward cash flow hedge due to favorable market conditions. During the nine months ended September 30, 2020 and the three and nine months ended ~~September 30,~~ 2019, we recorded an unrealized loss on our

now-terminated

cash flow hedges primarily due to interest rate declines. The unrealized losses recorded during 2020 were partially driven by market responses to the

COVID-19

pandemic. For more information on our cash flow ~~hedge position decreased primarily due to unexpected declines in interest rates.~~hedges, see “Derivative Instruments” within the Liquidity and Capital Resources section below.

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KEY FACTORS AFFECTING OUR OPERATING RESULTS

Cost of Materials

We purchase the materials that we install primarily direct from manufacturers. The industry supply of materials we install ~~was disrupted due~~has experienced disruptions in the past but has been stable since the beginning of 2019. However, the industry has recently experienced signs of manufacturer supply constraints for some of the insulation materials we install. We do not currently expect our future operations to be hindered by a ~~catastrophic failure at a manufacturer’s facility during the fourth quarter~~lack of ~~2017, resulting in insulation material allocation for certain insulation products and, as a result, contributed to~~product supply, but this could change depending on continued increased ~~market pricing throughout 2018.~~housing demand. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in ~~2019,~~2020, to the extent that price increases cannot be passed on to our customers. We began to see improvement in our selling prices in the second quarter of 2019, and this continued into ~~the third quarter~~2020 as evidenced by our ~~21.3%~~1.5% and 2.7% improvement in gross profit as a percentage of sales during the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, ~~compared to the three months ended September 20, 2018.~~respectively. 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 ~~aforementioned higher costs.~~

short-term impacts of the current economic climate on the availability of the materials we install.

Cost of Labor ~~Costs and Charitable Activities~~

Our business is labor ~~intensive. While~~intensive and the ~~availability~~majority of ~~labor in~~our employees work as installers on local construction sites. We offer a comprehensive benefits package, which many ~~markets continued~~of our local competitors are not able to ~~tighten~~provide, which will increase costs as we hire additional personnel. Our workers’ compensation costs also continue to increase as we employ additional personnel.

Despite temporary layoffs and furloughs driven by branch closures during portions of the ~~demand for employees, particularly installers, increases,~~ first and second quarters as a response to the effects of

COVID-19,

we experienced ~~improved~~strong employee retention, turnover and labor efficiency rates in the nine months ended September 30, ~~2019.~~2020. We believe this is partially a result of various programs meant to benefit our employees, including our financial wellness plan, ~~and~~ longevity stock compensation plan for ~~employees.~~employees and assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities. While improved retention drives lower costs to recruit and train new employees, ~~and improves~~resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives. See

“COVID-19

Impacts” below for a discussion of the short-term impacts of the current economic climate on our workforce.

COVID-19

Impacts

In December 2019, a novel strain of coronavirus

(COVID-19)

surfaced in Wuhan, China. Since then, the virus has spread globally, including to the United States. In response, the World Health Organization declared the situation a pandemic and the U.S. Secretary of Health and Human Services has declared a public health emergency. The

COVID-19

pandemic has caused significant volatility, uncertainty and economic disruption. Many public health organizations and international, federal, state and local governments implemented measures to combat the spread of

COVID-19

during portions of the first nine months of 2020 with some of these restrictions still in place as of the date of filing of this Quarterly Report on Form

10-Q.

Some of these measures include restrictions on movement such as quarantines,

“stay-at-home”

orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity. While portions of the economy have since reopened, there is still significant uncertainty surrounding the duration and scope of the pandemic, as well as its impact on the economy. We ~~expect~~cannot predict if federal, state and local governments will implement additional restrictions, when restrictions currently in place will expire or whether restrictions currently in place will become more limiting.

Due to ~~continue~~these limitations, we saw a temporary but significant reduction in activity during portions of March, April and May of 2020 in our branches located in seven states and the Bay Area of California, which collectively accounted for 10% of our net revenue during the year ended December 31, 2019. The reduced activity in these areas was attributable to ~~spend more to hire, train and retain installers to support our growing business in 2019, as tight labor availability continues within the~~ construction ~~industry. During~~being temporarily deemed

non-essential

during that time period. While we estimate net revenue for the nine months ended September 30, 2020 compared to the same period in 2019 was reduced as a result of these interruptions, we do not believe the various orders and restrictions, or

COVID-19

itself, significantly impacted our business in the first nine months of 2020 as construction was deemed “essential” in other states.

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While we expect the

COVID-19

pandemic and related events will have a negative effect on us in the fourth quarter of 2020 and beyond, the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic, additional government actions taken in response to the pandemic, the impact on construction activity and demand for homes (based on employment levels, consumer spending and consumer confidence). The U.S. housing market was robust in the latter months of 2019 and experienced a strong start in 2020. Despite a decline in year-over-year U.S. housing starts in the second quarter of 2020, housing starts increased 11.4% in the third quarter of 2020 compared to 2019. This is evidence of the quick recovery in housing demand that should serve to help offset prolonged impacts of the pandemic already experienced. In addition, we believe there remains a sizable industry backlog for the residential end market which we expect will provide us short-term relief from the volatility in industry housing starts experienced earlier in 2020. However, due to the normal lag between housing starts and completions, we expect to see an impact from this decline in housing starts, and other market disruptions that occurred in the early stages of the pandemic, during the fourth quarter of 2020 and into 2021, similar to what we experienced in the third quarter of 2020. Specifically, we anticipate revenue, net income and cash from operations

could be impacted

during these periods. Given the considerable uncertainty created by the

COVID-19

pandemic and its potential effects, it is not possible to estimate the full, adverse impact to our full year 2020 sales or other financial results at this time.

We expect any future branch closures, as well as any broader impacts to the housing industry that might occur, will negatively impact our business. Industry information has indicated that new home orders at some of the nation’s larger builders slowed dramatically during the second quarter of 2020 but have rebounded quickly. Most industry experts currently forecast 2020 housing starts will continue to improve throughout the year, with full year starts increasing at a mid single-digit percentage rate compared to 2019. In the commercial sector, our backlog remains strong but has declined slightly from June 30, 2020. We have experienced impacts to our large commercial business, mainly in the form of project start delays and inefficiencies due to social distancing requirements in some areas. In the future, certain large-scale infrastructure programs may be at risk if the need for such structures decline, project funding declines or as consumer behaviors change in the wake of

COVID-19

disruptions to the economy and changes to our general ways of life. For example, reduced demand for office buildings and/or educational facilities, decreased airport traffic, or decreased usage of sports arenas or similar large commercial structures could impact our commercial end market.

Our management remains focused on mitigating the impact of

COVID-19

on our business and the risk to our employees and customers. We have taken a number of precautionary measures intended to mitigate these risks, including implementing detailed cleaning and disinfecting processes at our facilities, adhering to social distancing protocols, limiting the number of workers on our jobsites, suspending

non-essential

air travel and encouraging employees to work remotely when possible. As is common practice in our industry, installers are required to wear protective equipment in the process of completing their work and this practice has been extended to employees at our facilities and within general office spaces. We are prepared to take additional actions if necessary as suggested or required by various health agencies.

We continue to evaluate the nature and extent of the

COVID-19

pandemic’s impact on our financial condition, results of operations and cash flows. Specific impacts of branch closures to date, as well as potential future impacts include, but are not limited to, the following:

Other than branches that serve states where construction was not deemed “essential” during portions of the first nine months of 2020, we have experienced limited business disruptions to date and therefore have not needed to implement significant continuity measures and have not incurred significant expenditures to do so. Assuming a significant number of additional states or markets in which we operate do not reverse their current positions about construction being an “essential” business, we do not anticipate having to implement any additional measures in the future.

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To date, we have not experienced a significant disruption in the supply of the various insulation products we install. All insulation manufacturers from which we purchase operate facilities in the continental U.S. and continue to timely ship material. We are monitoring suppliers of our other products and have had no issues to date acquiring the inventory we need to operate our business. We currently do not anticipate the pandemic to cause any significant issues with securing these other products in the future.

During the first half of 2020, we laid off or furloughed approximately 600 employees in areas where construction was not deemed “essential.” We are pleased to report we have rehired or brought back substantially all of those employees.

Our corporate office is fully operational, even though many employees are working remotely. As such, we have made no modifications to internal controls over financial reporting and have confidence controls are operating as designed. We have enhanced our efforts to mitigate cyber threats and phishing, given the number of employees working remotely. We are continually monitoring and assessing the

COVID-19

situation on our internal controls to minimize the impact of their design and operating effectiveness.

We continue to expect some impact to our earnings, financial position and cash flows in the remainder of 2020 and into 2021, however there is much uncertainty surrounding the estimated magnitude of these impacts. We estimate limited impact to our Condensed Consolidated Balance Sheets other than a potential reduction in working capital due to the possibility of reduced net revenue and net income, although this will be mitigated somewhat by actions taken by management to limit spending during 2020. Trade accounts receivable may also ~~launched~~be reduced somewhat by lower net revenue and a higher allowance for credit losses due to enhanced risk of uncollectibility from some customers, although we have not seen a significant impact to date. We anticipate revenue and net income will be negatively impacted in the ~~Installed Building Products Foundation meant~~remainder of 2020 and into 2021. While our cash from operations may decline over recent performance due to a decrease in expected net income driven by lower net revenue, we do not anticipate any issues meeting debt obligations or paying vendors timely given our strong liquidity and large cash reserves. See discussion of impacts to our liquidity within the Liquidity and Capital Resources section below.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES Act) was signed into law. The CARES Act provides numerous tax provision and other stimulus measures. We expect to benefit ~~IBP~~from the temporary suspension of certain payment requirements for the employer portion of Social Security taxes. We estimate that this will defer approximately $15 million to $20 million of payments, depending on the number of employees, ~~their families and their communities. We set a goal to donate more than $1.0 million to~~

~~not-for-profit~~

~~entities and individuals in 2019 through~~that would have been paid during 2020, such that under the ~~Foundation’s programs and as~~CARES Act, 50% of the ~~date~~amount will now be paid on December 31, 2021 and the remaining 50% will be paid on December 31, 2022. It is important to note that this does not impact the timing of ~~this filing,~~the expense, only the timing of the payment. We also expect to ~~meet~~benefit from the creation of certain refundable employee retention credits and the technical correction for qualified leasehold improvements, which provides for tax bonus depreciation.

In addition, we are adhering to the Families First Coronavirus Response Act (FFCRA) which requires employers to provide their employees with paid sick leave and extended family and medical leave for specified reasons related to

COVID-19.

Qualifying reasons for leave related to

COVID-19

include when an employee is quarantined, is experiencing

COVID-19

systems and is seeking a medical diagnosis, is being advised by a healthcare provider to self-quarantine, is caring for an individual subject to a quarantine order or ~~exceed this goal.~~self-quarantine situation, is caring for a child whose school or place of care is closed, or is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services. These provisions are in effect until December 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capital equipment leases and loans. Our primary capital requirements are to fund working capital needs, operating expenses, acquisitions and capital expenditures and to meet required principal and interest payments. WeAs discussed above, our cash reserves may also be used to fund payroll and other short-term requirements if our

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business is affected significantly by COVID-19. From time to time, we may also use our resources to fund our optional stock repurchase ~~program.~~ program in effect through March 1, 2021

. We temporarily

suspended our share repurchase program in response to COVID-19 and accordingly did not make any repurchases in the second or third quarter this year.

However, given the current state of our business and our markets, effective November 9, 2020, our program will be reinstated.

Our investments typically consist of highly liquid instruments, including corporate bonds and commercial paper. As of September 30, ~~2019,~~2020, we had no outstanding borrowings under our asset-based lending credit facility (as defined below).

We believe that our cash flows from operations, combined with our current cash levels, highly liquid investments and available borrowing capacity will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital for at least the next 12 months as evidenced by our net positive cash flows from operations for each of the nine months ended September 30, 2020 and 2019.

While the general economic environment within the United States and most markets around the world have been significantly impacted by the spread of

COVID-19,

prompting governmental and health agencies to issue unprecedented orders to close businesses not deemed “essential” during portions of the first nine months of 2020, we believe we have robust capital resources at our immediate disposal to meet our needs. We have cash reserves and short-term investments of $268.7 million as of September 30, 2020 as well as access to $200.0 million under our ABL Revolver, less $38.7 million of outstanding letters of credit. This amount available to us is based on eligible collateral, which may be reduced over time. While our cash from operations may decline later in the year and into 2021 due to factors described above, we believe it will remain at a level to fund our operations and not require us to draw on our ABL Revolver. However, as necessary or desirable, we may adjust or amend the terms of our credit facilities. With the uncertainty surrounding

COVID-19,

our ability to engage in such transactions may be constrained by volatile credit market conditions.

In response to

COVID-19,

we have taken a number of proactive steps to preserve cash and maximize our financial flexibility in order to efficiently manage through the

COVID-19

pandemic. These actions include:

temporarily suspending stock repurchases under our share repurchase program;

delaying acquisition closings during portions of the first and second quarters (activity resumed in late June 2020 after our industry stabilized);

temporarily suspending pay increases for our executive officers until the third quarter of 2020; and

eliminating

non-essential

travel.

See Part II, Item 1A, Risk Factors, for more information on the potential impacts from the

COVID-19

pandemic and resulting economic strain.

LIBOR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. In 2017, the Financial Conduct Authority (“FCA”), the authority that regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and it is unclear whether new methods of calculating LIBOR will be established. Our Term Loan Agreement, as hereinafter defined, was amended on November 30, 2017 to include a mechanism to establish an alternative Eurodollar rate if certain circumstances arise such that LIBOR may no longer be used. Additionally, our ABL Credit Agreement includes a provision related to the potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate (SOFR) values or another alternate benchmark rate. However, if LIBOR ceases to exist after 2021, the interest rates under the alternative rate could be higher than LIBOR. In addition, LIBOR is used as a reference rate for our interest rate swap agreements we use to hedge our interest rate exposure. During the nine months ended September 30, 2020, we adopted ASU

2020-04,

Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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The following table summarizes our liquidity (in thousands):


	As of September 30, 2020			As of December 31, 2019
Cash and cash equivalents	$	267,471		$	177,889
Short-term investments		1,220			37,961
ABL Revolver		200,000			200,000
Less: outstanding letters of credit		(38,672	)		(38,672	)

Total liquidity (1)	$	430,019		$	377,178

(1)

Total liquidity reflects full borrowing base capacity under our asset-based lending credit facility (as defined below) and may be limited by certain cash collateral limitations depending upon the status of our borrowing base availability. These potential deductions would lower our available cash and cash equivalents balance shown in the table above. As of September 30, 2020 and December 31, 2019, total liquidity would be reduced by $22.6 million and $31.9 million, respectively, due to these cash collateral limitations. In addition, total liquidity is further reduced by $10.0 million within cash and cash equivalents above which was deposited into a trust to serve as additional collateral for our workers’ compensation and general liability policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability on our asset-based lending credit facility (as defined below) included in the table above.

5.75% Senior Notes due 2028

In September 2019, we issued $300.0 million in aggregate principal amount of ~~Senior Notes.~~5.75% senior unsecured notes (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest will be payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020. The net proceeds from the Senior Notes offering were $295.0 million after debt issuance costs. We used some of the net proceeds to repay a portion of our outstanding obligations (including accrued and unpaid interest) under our ~~Term Loan Agreement~~term loan credit agreement (as defined below) and to pay fees and expenses related to the ~~Senior Notes offering and~~ entry into ~~the ABL Credit Agreement.~~a new revolving credit facility described below.

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The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Credit Facilities

In December 2019, we amended and restated our $400 million, seven-year term loan facility due April 2025 (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of April 13, 2017 (as previously amended by the First Amendment thereto dated November 30, 2017 and by the Second Amendment thereto dated June 19, 2018). The amended Term Loan (i) effects a repricing of the interest rate applicable to the term loans thereunder from LIBOR plus 2.50% to LIBOR plus 2.25% and (ii) replaces Royal Bank of Canada with Bank of America, N.A. as the administrative agent and collateral agent thereunder. As of September 30, ~~2019,~~2020, we had ~~$197.8~~$198.6 million, net of unamortized debt issuance costs, due on our ~~$400 million, seven-year~~ Term Loan. The amended Term Loan ~~is due April 2025 and~~also has a margin of ~~(A) 2.50% in the case of Eurodollar rate loans and (B) 1.50%~~1.25% in the case of base rate loans.

In September 2019, we ~~also~~ entered into ana new asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement ~~which~~ provides for an ~~ABL Revolver~~asset-based lending credit facility (the “ABL Revolver”) of up to $200.0 million with a five-year maturity, which replaced the Company’s previous revolving credit facility. Borrowing availability under the ABL Revolver is based on a percentage of the value of certain assets securing the Company’s

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obligations and those of the subsidiary guarantors thereunder. AsIn connection with the Amended and Restated Term Loan, we entered into a Second Amendment (the “Second Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Bank of America, N.A., as Term Loan Agent for the lenders under the Term Loan. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of September 30, ~~2019, there were no borrowings outstanding under the ABL Revolver.~~2020 was $161.3 million.

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of ~~1.0xin~~1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver.

In connection with the September 2019 transactions, we wrote off $2.8 million in previously capitalized loan costs during the three months ended September 30, 2019. This amount is included in interest expense, net on the Condensed Consolidated Statements of Operations and Comprehensive Income. We also had $9.0 million of capitalized deferred financing costs and debt issuance costs, net of accumulated amortization, as of September 30, 2019, which includes $6.2 million in new costs associated with the above transactions incurred during the three months ended September 30, 2019. The deferred financing costs are included in other

~~non-current~~

~~assets while the debt issuance costs are included in long-term debt on the Condensed Consolidated Balance Sheets. These costs are amortized over the term~~All of the ~~related debt on~~obligations under the Term Loan and ABL Revolver are guaranteed by all of the Company’s existing restricted subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a ~~straight-line basis which approximates~~first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ~~effective~~ABL Credit Agreement, and a second-priority security interest ~~method.~~in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.

At September 30, ~~2019,~~2020, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement and the Senior ~~Notes.~~Notes and we currently do not expect any covenant violations due to the impacts of

COVID-19.

Derivative Instruments

~~As of~~During the three months ended September 30, ~~2019,~~2020, we ~~had~~terminated our two existing interest rate swaps ~~each~~and our forward interest rate swap and simultaneously entered into a new forward interest rate swap beginning July 30, 2021. The purpose of terminating our then existing derivative contracts in favor of a new contract was to take advantage of better available market rates. We settled the terminated swaps by making a cash payment of $17.8 million. The unrealized loss included in accumulated other comprehensive loss associated with ~~an associated floor, with~~the terminated swaps of $17.8 million at the time of termination will be amortized to interest expense over the course of the originally scheduled settlement dates of the terminated swaps. During the three and nine months ended September 30, 2020, we amortized $0.6 million of the unrealized loss to interest expense, net. The new forward interest rate swap has a ~~total~~ beginning notional of $200.0 million, ~~one that amortizes quarterly to $95.3 million at~~ a ~~maturity date~~fixed rate of ~~May 31, 2022~~0.51% and ~~one that amortizes quarterly to $93.3 million at~~ a maturity date of April 15, ~~2025. These two swaps combined serve to hedge $196.5 million of the variable cash flows on our Term Loan as of September 30, 2019. We also had a~~2030. Upon commencement, this forward ~~interest rate~~ swap ~~with an associated floor beginning May 31, 2022 with a beginning notional of $100.0 million that amortizes quarterly to $97.0 million at a maturity date of April 15, 2025. These three swaps~~will serve to hedge substantially all of the variable cash flows on our Term Loan until ~~maturity.~~its maturity and if extended. The assets and liabilities associated with the forward interest rate swap are included in other long-term assets and other current liabilities on the Condensed Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.

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Vehicle and Equipment Notes

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

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Total ~~outstanding loan balances~~gross assets relating to our ~~master loan~~Master Loan and ~~equipment agreements~~Equipment Agreements were ~~$69.4~~$134.4 million and ~~$60.4~~$130.2 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The net book value of assets under these agreements was $66.2 million and $68.2 million as of September 30, 2020 and December 31, 2019, respectively. See Note 7, Long-term Debt, for more information regarding our Master Loan and Security Agreement, Master Equipment Lease Agreement and Master Loan Agreements.

Letters of Credit and Bonds

We may use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. In addition, we occasionally use letters of credit and cash to secure our performance under our general liability and workers’ compensation insurance programs. Permit and license bonds are typically issued for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions. The following table summarizes our outstanding bonds, letters of credit and cash-collateral (in thousands):

As of September 30,
2019

Performance bonds
$
52,264

Insurance letters of credit and cash-collateral
(1)

44,498

Permit and license bonds

6,964

Total bonds and letters of credit
$
103,726

~~(1)~~

~~Subsequent to September 30, 2019, we increased our outstanding letters of credit by a net amount of $7.0 million in conjunction with renewals of certain insurance programs.~~


		As of September 30, 2020
Performance bonds		$	30,754
Insurance letters of credit and cash collateral	��		49,104
Permit and license bonds			7,713

Total bonds and letters of credit		$	87,571

In January 2018, we posted $10.0 million into a trust to serve as additional collateral for our workers’ compensation and general liability policies. This ~~$10.0 million~~collateral can be converted to a letter of credit at our discretion and is therefore not considered to be restricted cash.

~~Summary~~

~~The following table summarizes our liquidity (in thousands):~~

As of September 30,
2019

As of December 31,
2018

Cash and cash equivalents
$
234,950
$
90,442

Short-term investments

4,980

10,060

ABL Revolver

200,000

150,000

Less: outstanding letters of credit and cash-collateral
(1)

(34,498
)
(28,887
)

Total liquidity
(2)
$
405,432
$
221,615

~~(1)~~

~~Subsequent to September 30, 2019, we increased our outstanding letters of credit by a net amount of $7.0 million in conjunction with renewals of certain insurance programs.~~

~~(2)~~

Total liquidity reflects full borrowing base capacity under our ABL Revolver and may be limited by certain cash collateral limitations depending upon the status of our borrowing base availability. These potential deductions would lower our available cash and cash equivalents balance shown in the table above. As of September 30, 2019, total liquidity would be reduced by $51.9 million due to these cash collateral limitations. In addition, total liquidity is further reduced by $10.0 million within cash and cash equivalents above which was deposited into a trust to serve as additional collateral for our workers’ compensation and general liability policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability on our ABL Revolver included in the table above.

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We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our debt service requirements, capital expenditures and working capital for at least the next 12 months as evidenced by our net positive cash flows from operations for each of the nine months ended September 30, 2019 and 2018.

Historical cash flow information

Cash flows from operating activities

Net cash provided by operating activities was ~~$106.5~~$143.9 million and ~~$68.8~~$106.5 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Generally, the primary driver of our cash flows from operating activities is operating income adjusted for certain noncash items, offset by cash payments for taxes and interest on our outstanding debt. Our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. ~~In addition,~~During the nine months ended September 30, 2020, we saw a significant increase in cash from operations primarily due to higher net income from improved results as described above, as well as payroll tax deferrals under the CARES Act. These increases during the nine months ended September 30, 2020 were offset by a $17.8 million cash payment to settle our previous cash flow hedges.

While

COVID-19

only minimally impacted our net revenue during portions of the first and second quarters of 2020, it has not impacted our cash collections to date. Historically, cash flows ~~are~~tend to be seasonally stronger in the third and fourth quarters as a result of increased construction activity. However, we may see a reduction in cash inflows in the fourth quarter or beyond, depending on continued pandemic impacts on housing starts and large commercial projects as well as potential future government-mandated branch closures. See

“COVID-19

Impacts” with the Key Factors Affecting our Operating Results section above for further information on short-term impacts to our cash from operations.

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Cash flows from investing activities

Business Combinations

During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we made cash payments of ~~$24.7~~$38.8 million and ~~$34.7~~$24.7 million, respectively, on various business combinations. The amount of cash paid is dependent on various factors, including the size and determined value of the business being acquired. Due to the potential impacts of

COVID-19,

we had temporarily delayed acquisition closings until June 2020 when we resumed our acquisition strategy. See Note 16, Business Combinations, for more information regarding our acquisitions in 2020 and 2019.

Capital Expenditures

Total cash paid for property and equipment was ~~$37.3~~$25.5 million and ~~$27.1~~$37.3 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and was primarily related to purchases of vehicles and various equipment to support our growing operations. We expect to continue to support any increases in future net revenue through further capital expenditures. A majority of these capital expenditures were subsequently reimbursed via various vehicle and equipment notes payable, with related cash inflows shown in cash flows from financing activities.

Other

. During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, we invested ~~$17.4~~$0.8 million and ~~$22.8~~$17.4 million, respectively, in short-term investments consisting primarily of corporate bonds and commercial paper and had ~~$22.6~~$37.5 million and ~~$37.5~~$22.6 million in short-term investments mature during the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

~~Table~~ We have recently slowed the rate of ~~Contents~~investment purchases due to the relatively low returns provided from current interest rates associated with traditional investments.

Cash flows from financing activities

We utilize our credit facilities ~~primarily~~and Senior Notes to support our operations and continuing acquisitions as well as fund ~~acquisitions and~~ our discretionary stock repurchase program. To support those initiatives, we received $300.0 million in proceeds from issuance of our Senior Notes, paid off $195.8 million of our Term Loan balance and paid $5.2 million in debt issuance costs during the nine months ended September 30, 2019, resulting in a net cash inflow of $99.0 million. We received $100.0 million in cash, reduced by $2.0 million in debt issuance costs, by amending our Term Loan during the nine months ended September 30, 2018. During the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ we ~~also~~ received proceeds of ~~$23.8~~$17.8 million and ~~$20.7~~$23.8 million, respectively, from our fixed asset loans which serve to offset a significant portion of the capital expenditures included in cash outflows from investing activities as described above. We made payments on these fixed asset loans and various other notes payable of ~~$15.3~~$19.8 million and ~~$10.3~~$15.3 million during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. We also made ~~$3.4~~$2.0 million and ~~$4.3~~$3.4 million in principal payments on our finance leases and paid ~~$5.8~~$3.9 million and ~~$2.9~~$5.8 million of acquisition-related obligations during the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Lastly, we ~~repurchased approximately 793~~paid $15.8 million to repurchase 443 thousand shares of our common stock ~~for $42.8 million~~ during the nine months ended September 30, ~~2018 as part of~~2020. In response to COVID-19, we temporarily suspended our share repurchase program and did not make any stock ~~repurchase plan.~~

~~Contractual Obligations~~

During the nine months ended September 30, 2019, our long-term debt obligations changed due to the issuance of our Senior Notes, the lowered aggregate principal of our Term Loan, and additional vehicle-related borrowings. The updated future expected payments are shownrepurchases in the ~~table below.~~second or third quarters of 2020. The repurchase program will be reinstated effective November 9, 2020. We also temporarily delayed closing acquisitions during portions of the first and second quarters until late June 2020 after our industry stabilized. During the nine months ended September 30, 2019 we received $300.0 million in proceeds from issuance of our Senior Notes, paid off $195.8 million of our Term Loan balance and paid $5.2 million in debt issuance costs resulting in a net cash inflow of $99.0 million.

Contractual Obligations

We had no significant changes to our obligations during the ~~other obligations disclosed in our 2018 Form~~

~~10-K.~~nine months ended September 30, 2020.

~~See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations within our 2018 Form~~

~~10-K~~

~~for additional information on these other contractual obligations.~~

Payments due by period

(in thousands)

Total

2019

2020

2021

2022

2023

Thereafter

Long-term debt obligations
(1)
$
  768,482
$
  9,821
$
  51,118
$
  45,329
$
  40,759
$
  34,864
$
  586,591

~~(1)~~

Long-term debt obligations include interest payments on our Senior Notes, Term Loan, 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 those fees are subject to change based on the factors described in the ABL Credit Agreement. Interest on seller obligations maturing through March 2025 is estimated using current market rates. For additional information, see Part II, Item 8 Financial Statements and Supplementary Data, Note 7, Long-Term Debt within our 2018 Form

~~10-K.~~

Critical Accounting Policies and Estimates

During the nine months ended September 30, ~~2019,~~2020, we changed our accounting policy regarding ~~leases upon adoption~~allowances for credit losses and the testing of ~~ASC 842.~~goodwill impairment. See Note ~~7, Leases,~~2, Significant Accounting Policies, for more information. There have been no other changes to our critical accounting policies and estimates from those previously disclosed in our ~~2018~~2019 Form

10-K.

3538

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Recently Adopted Accounting Pronouncements


Standard		Adoption
ASU ~~2016-02,~~2016-13, ~~Leases~~Financial Instruments-Credit Losses (Topic ~~842)~~ 326)		This pronouncement and subsequently-issued amendments change the accounting for credit losses on available-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. See Note 4, Credit Losses, for further information.

ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment		This ASU ~~requires substantially~~addresses concerns over the cost and complexity of the two-step goodwill impairment test; this pronouncement removes the second step of the goodwill impairment test. Going forward, an entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement		This pronouncement amends ASC 820 to eliminate, add and modify certain disclosure requirements for fair value measurements. The adoption of this standard did not impact our financial statements or have a material effect on our disclosures.

ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)		This pronouncement contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all ~~leases, with~~transactions other than derivatives, which may be applied at a hedging relationship level. The relief granted in ASC 848 is applicable only to legacy contracts if the ~~exception~~amendments made to the agreements are solely for reference rate reform activities. We elected to apply the hedge accounting expedients related to probability and the assessments of ~~leases with a term of one year or less,~~effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be ~~recorded~~based matches the index on the ~~balance sheet as a lease liability measured as~~corresponding derivatives. Application of these expedients preserves the ~~present value~~presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the ~~future lease payments with a corresponding~~ ~~right-of-use~~ ~~asset. This ASU also requires disclosures designed to give financial statement users information on~~guidance and may apply other elections as applicable as additional changes in the ~~amount, timing and uncertainty of cash flows. See Note 7, Leases, for further information regarding our lease accounting policies.~~market occur.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, industry conditions, our financial and business model, the impact of

COVID-19

on our business and the economy, our efforts to navigate the material pricing environment, our ability to increase selling prices, our material and labor costs, demand for our services and product offerings, expansion of our national footprint and diversification, our ability to ~~capitalize on the new home and commercial construction recovery, our ability to~~ grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our ability to improve sales and profitability, the impact of

COVID-19

on our financial results and expectations for demand for our services and our earnings in ~~2019.~~2020 and 2021. Forward-looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “estimate,” “project,” “predict,” “possible,” “forecast,” “may,” “could,” “would,” “should,” “expect,” “intends,” “plan,” and “will” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by

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such forward-looking statements as a result of various factors, including, without limitation, the duration, effect and severity of the

COVID-19

crisis; the adverse impact of the

COVID-19

crisis on our business and financial results, the economy and the markets we serve; general economic and industry ~~conditions,~~conditions; the material price ~~environment,~~environment; the timing of increases in our selling prices and the factors discussed in the “Risk Factors” section of our ~~2018~~2019 Annual Report on Form

10-K

and this Quarterly Report on Form

10-Q,

as the same may be updated from time to time in our subsequent filings with the SEC. Any forward-looking statement made by the Company in this report speaks only as of the date hereof. New risks and uncertainties arise from time to time and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate debt. ~~Upon the issuance of our Senior Notes during the three months ended September 30, 2019, we used a portion of the proceeds to lower our Term Loan aggregate principal amount to $200.0 million.~~ As of September 30, ~~2019,~~2020, we had ~~$197.8~~$198.6 million outstanding on the Term Loan, net of unamortized debt issuance costs, no outstanding borrowings on the ABL Revolver and ~~$0.1 million~~no outstanding borrowings under ~~various~~ finance leases subject to variable interest rates. Our ~~two~~ interest rate ~~swaps, each with an associated floor, combine to~~swap is a forward rate swap that begins July 30, 2021 and does not reduce exposure to market risks on our Term Loan ~~by $196.5 million~~ as of September 30, ~~2019.~~ 2020

through the effective date of the forward rate swap.

As a result, total variable rate debt of ~~$3.6~~$200.0 million was exposed to market risks as of September 30, ~~2019.~~2020. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately ~~$36 thousand.~~$2.0 million. Our Senior Notes accrued interest at a fixed rate of 5.75%.

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

LIBOR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. In 2017, the ~~Financial Conduct Authority (the authority that regulates LIBOR)~~FCA announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and it is unclear whether new methods of calculating LIBOR will be established. Our Term Loan Agreement was amended on November 30, 2017 to include a mechanism to establish an alternative Eurodollar rate if certain circumstances arise such that LIBOR may no longer be used. Additionally, our ABL Credit Agreement includes a provision related to the potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate (SOFR) values or another alternate benchmark rate. However, if LIBOR ceases to exist after 2021, the interest rates under the alternative rate could be higher than LIBOR. In addition, LIBOR is used as a reference rate for our interest rate swap agreements we use to hedge our interest rate exposure. During the nine months ended September 30, 2020, we adopted ASU

2020-04,

~~phase-out~~

~~will have on~~guidance and may apply other elections as applicable as additional changes in the ~~Company.~~market occur.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as required by Exchange Act Rules

13a-15(e)

and

15d-15(e).

Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, ~~2019.~~2020.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, ~~2019~~2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that many of the employees at our corporate office are working remotely due to the

COVID-19

pandemic. We are continually monitoring and assessing the

COVID-19

situation on our internal controls to minimize the impact on their design and operating effectiveness.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Item 1. Financial Statements, Note ~~14,~~15, Commitments and Contingencies – Other Commitments and Contingencies, for information about existing legal proceedings.

Item 1A. Risk Factors

~~There~~Except as set forth below and in our Quarterly Reports on Form

10-Q

for March 31, 2020 and June 30, 2020, as of the date of this report, there have been no material changes for the ~~three~~nine months ended September 30, ~~2019~~2020 from the risk factors as disclosed in our ~~2018~~2019 Form

10-K.

The

COVID-19

pandemic could have a material adverse effect on our business, financial condition, operating results and cash flows.

According to the World Health Organization (“WHO”), in December 2019 China reported a cluster of cases of pneumonia in Wuhan, Hubei Province later identified as a novel strain of coronavirus

(COVID-19).

In response, the WHO declared the situation a pandemic and the U.S. Secretary of Health and Human Services has declared a public health emergency. The

COVID-19

during portions of the first nine months of 2020 with some of these restrictions still in place as of the date of filing of this Quarterly Report on Form

10-Q.

Some of these measures included restrictions on movement such as quarantines,

“stay-at-home”

orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity. While portions of the economy have begun to reopen, there is still significant uncertainty surrounding the duration and scope of the pandemic, as well as its impact on the economy. We cannot predict if federal, state and local governments will implement additional restrictions, when restrictions currently in place will expire or whether restrictions currently in place will become more restrictive.

The continued spread of

COVID-19

has adversely affected many industries as well as the economies and financial markets of many countries, including the United States, causing a significant deceleration of economic activity. This slowdown has reduced production, decreased the level of trade, and led to widespread corporate downsizing, causing a sharp increase in unemployment. There has also been significant disruption of and extreme volatility in the global capital markets, which could increase the cost of, or entirely restrict access to, capital. The impact of this pandemic on the U.S. and world economies is uncertain and, unless the pandemic is contained, these adverse impacts could worsen, impacting all segments of the global economy, and result in a significant recession or worse.

Our business could be materially adversely affected by the

COVID-19

pandemic and the global response. The Company and its customers’ businesses have generally been classified as “essential” businesses in most of the jurisdictions in which we operate, permitting us to continue operations in most of our markets. However, there can be no assurance that our operations will continue to be classified as “essential” in the future, or that we will not voluntarily limit or cease operations in one or more of our markets if we believe it is in our best interest. For example, during portions of March, April and May of 2020, we saw a temporary but significant reduction in activity in our branches located in seven states and the Bay Area of California, which collectively accounted for 10% of our net revenue during the year ended December 31, 2019. The reduced activity in these areas was attributable to construction being temporarily deemed

non-essential

during that time period. While operations have resumed to

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normal levels in all of these areas as of the date of filing of this Quarterly Report on Form

10-Q,

future mandatory shutdowns or reductions in operations could have a material adverse effect on our business. During the first nine months of 2020, we laid off or furloughed approximately 600 employees in areas where construction was not deemed “essential.” We have since rehired or brought back substantially all of those employees, but we may need to layoff or furlough other employees in the future. Any employee layoffs or furloughs associated with future branch closures or slowdowns are assumed to be temporary in nature but could result in long-term labor shortages in certain markets if we cannot rehire these employees once operations resume.

Further, the

COVID-19

pandemic may have a material adverse impact on our customers and the homebuilding industry in general, as it has reduced employments levels and may adversely affect consumer spending or consumer confidence, which would decrease demand for homes. Based on the normal lag between starts and completions within the home building industry, we anticipate that a market decline could have an adverse impact on our business and financial results later this year and into 2021. In the commercial sector, certain large-scale infrastructure programs may be at risk if the need for such structures decline, project funding declines or as consumer behaviors change in the wake of

COVID-19

disruptions to the economy and changes to our general ways of life. For example, reduced demand for office buildings, decreased airport traffic or decreased usage of sports arenas could impact our commercial end market.

We are monitoring suppliers of our other products and have had no issues to date acquiring the inventory we need to operate our business. However, to the extent our suppliers are negatively impacted by the

COVID-19

pandemic, there could be disruptions in our supply chain.

Our management is focused on mitigating the impact of

COVID-19

on our business and the risk to our employees, which has partially diverted management’s attention away from normal business operations. Additionally, we have taken a number of precautionary measures intended to mitigate the impact of

COVID-19

on our business and the risk to our employees, including implementing detailed cleaning and disinfecting processes at our facilities, adhering to social distancing protocols, limiting the number of workers on jobsites, suspending

non-essential

air travel and encouraging employees to work remotely when possible, which could adversely affect our business. Despite these measures, our key management personnel and/or a portion of our installer base could become temporarily or permanently incapacitated by

COVID-19

or related complications. This could result in a material adverse impact on our business, financial condition, operating results and cash flows. While these and other measures we may take are believed to be temporary, they may continue until the pandemic is contained or indefinitely and could increase costs and amplify existing risks or introduce new risks that could adversely affect our business, including, but not limited to, internal controls and cybersecurity risks.

Considerable uncertainty still surrounds

COVID-19

and its potential effects, and the extent of and effectiveness of any responses taken on a local, national and global level. To date, no fully effective vaccines or treatments have been developed and effective vaccines or treatments may not be discovered soon enough to protect against a worsening of the pandemic or to prevent

COVID-19

from becoming endemic. While we expect the

COVID-19

pandemic and related events will have a negative effect on us, the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic, additional government actions taken in response to the pandemic, the impact on construction activity and demand for homes (based on employment levels, consumer spending and consumer confidence). Accordingly, our ability to conduct our business in the manner previously or currently expected could be materially and negatively affected, any of which could have a material adverse impact on our business, financial condition, operating results and cash flows.

Our use of interest rate hedging instruments could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations.

From time to time, we utilize interest rate derivatives to hedge the cash flows associated with existing variable-rate debt. The purpose of these instruments is to substantially reduce exposure to market risks on our Term Loan. We designated our forward interest rate swap in existence at the time of this Quarterly Report on Form

10-Q

as a cash

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flow hedge in accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging. However, in the future, we may fail to qualify for hedge accounting treatment under these standards for a number of reasons, including if we fail to satisfy hedge documentation and hedge effectiveness assessment requirements or if our derivative instrument is not highly effective. If we fail to qualify for hedge accounting treatment, losses on the swap caused by the change in its fair value would be recognized as part of net income, rather than being recognized as part of other comprehensive income. Any such adverse developments could result in material liabilities and expense and could have a material adverse effect on our business.

Interest rate derivative instruments can be expensive and we could incur significant costs associated with the settlement or early termination of the agreements. For example, on August 4, 2020, we terminated our existing three interest swaps for an aggregate cash payment of $17.8 million and simultaneously entered into a new forward interest rate swap. In addition, our hedging transactions may expose us to certain risks and financial losses, including, among other things:

the risk that the other parties to the agreements would not perform;

the risk that the duration or amount of the hedge may not match the duration or amount of the related liability;

the risk that the hedging instruments and the related liabilities do not transition to the same LIBOR replacement rate or that the timing or mechanics of such transition do not match between the hedging instruments and the related liabilities, in which case any such differences could decrease the effectiveness of the hedging instruments and increase our net liability;

the risk that hedging transactions may be adjusted from time to time in accordance with accounting rules to reflect changes in fair values including downward adjustments which would affect our stockholders’ equity; and

the risk that we may not be able to meet the terms and conditions of the hedging instruments, in which case we may be required to settle the instruments prior to maturity with cash payments that could significantly affect our liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows the stock repurchase activity for the three months ended September 30, ~~2019:~~2020:

Total
Number of
Shares
Purchased
(1)

Average
Price Paid
Per Share

Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs

Approximate
Dollar Value of
Shares that May
Yet Be
Purchased under
the Plans or
Programs
(2)

July 1 - 31, 2019

124
$
59.22

—

—

August 1 - 31, 2019

—

—

—

—

September 1 - 30, 2019

—

—

—

—

124
$
  59.22

—
$
60.6 million

Total Number
of Shares
Purchased

Average
Price Paid
Per Share

Total Number of
Shares Purchased
as Part of
Publicly
Announced
Plans or
Programs

Approximate Dollar
Value of Shares that
May Yet Be
Purchased under the
Plans or Programs

(1)

July 1 - 31, 2020

—

August 1 - 31, 2020

—

September 1 - 30, 2020

—

44.9 million

(1)	Represents shares surrendered to the Company by employees to satisfy tax withholding obligations arising in connection with the vesting of 403 shares of restricted stock awarded under our 2014 Omnibus Incentive Plan.

~~(2)~~

On February ~~28,~~26, 2018, our board of directors authorized a $50 million stock repurchase program effective March 2, 2018 ~~through February 28, 2019, unless extended by the board of directors. On~~and on October 31, 2018, our board of directors approved an additional stock repurchase program, effective November 5,6, 2018, pursuant to which we may purchase up to an additional $100 million of our outstanding common stock. ~~The program will remain in effect until~~On February ~~28,~~20, 2020, ~~unless extended by the~~our board of ~~directors.~~directors approved extending the current stock repurchase program to March 1, 2021. During the ~~three or~~ nine months ended September 30, ~~2019,~~2020, we repurchased approximately 443 thousand shares of our common stock with an aggregate price of approximately $15.8 million, or $35.59 average price per share. We did not repurchase any shares under our stock repurchase ~~program.~~program during the nine months ended September 30, 2019. In response to

COVID-19,

we temporarily suspended our share repurchase program and accordingly we did not repurchase any shares during the three months ended September 30, 2020. Given the current state of our business and our markets, effective November 9, 2020, our share repurchase program will be reinstated.

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Item 3. Defaults Upon Senior Securities

There have been no material defaults in senior securities.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~

On November 3, 2020, the Compensation Committee of the Board of Directors issued to W. Jeffrey Hire, President, External Affairs, an award consisting of 10,596 shares of restricted stock (the “Restricted Stock Award”) to recognize Mr. Hire’s strategic long-term contributions to the Company. The restricted stock is granted under the Company’s 2014 Omnibus Incentive Plan and a Restricted Stock Award Agreement with a grant date of November 3, 2020 and will vest 100% on April 20, 2023, subject to Mr. Hire’s continued employment with the Company through such vesting date and subject to accelerated vesting in the event of Mr. Hire’s death.

~~Table of Contents~~

Item 6. Exhibits

(a)(3) Exhibits

The following exhibits are being filed as part of this Quarterly Report on Form

10-Q:


Exhibit Number		Description
Exhibit Number
		Description
31.1*
	~~4.1~~		Indenture, dated September 26, 2019, among Installed Building Products, Inc., the guarantors named therein and U.S. Bank National Association, as Trustee (including the Form of Note). (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 27, 2019).

	~~10.1~~		Purchase Agreement, dated as of September 16, 2019, by and among Installed Building Products, Inc., as issuer, the subsidiary guarantors party thereto, and BofA Securities, Inc. for itself and on behalf of several initial purchasers. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 17, 2019).

	~~10.2~~		Credit Agreement, dated September 26, 2019, among Installed Building Products, Inc., the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as issuing bank, swing bank and administrative agent, with KeyBank National Association, as a syndication agent and U.S. Bank National Association, as a syndication agent, and Bank of America, N.A., as lead arranger and bookrunner. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 27, 2019).

	~~10.3~~		Security Agreement, dated September 26, 2019, among Installed Building Products, Inc., the other grantors party thereto and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 27, 2019).

	31.1*		CEO Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*
	31.2*		CFO Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*
	32.1*		CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*
	32.2*		CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**
	101.INS**		Inline XBRL Instance Document -– the instance document does not appear in the interactive ~~date~~data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH**
	101.SCH**		Inline XBRL Taxonomy Extension Schema Document

101. CAL**
	101. CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101. LAB**
	101. LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document

101. PRE**
	101. PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents



	101. DEF** Exhibit Number		Description

101. DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document

104**
	104**			Cover Page Interactive Data File (formatted in Inline ~~XBRL)~~ XBRL and contained in Exhibit 101)

*	Filed herewith.

**	Submitted electronically with the report.

Table of Contents

SIGNATURES

Pursuant to the requirements 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.

Date: November ~~1, 2019~~5, 2020


INSTALLED BUILDING PRODUCTS, INC.

By:		/s/ Jeffrey W. Edwards
		Jeffrey W. Edwards
		President and Chief Executive Officer

By:		/s/ Michael T. Miller
		Michael T. Miller
		Executive Vice President and Chief Financial Officer

4046


	Nine months ended September 30,
	2019			2018
Cash flows from operating activities
Net income	$	48,965		$	38,272
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment		28,575			24,567
Amortization of operating lease right-of-use assets		11,597			—
Amortization of intangibles		18,065			19,678
Amortization of deferred financing costs and debt discount		845			883
Provision for doubtful accounts		3,173			2,219
Write-off of debt issuance costs		2,774			1,164
Gain on sale of property and equipment		(69	)		(551	)
Noncash stock compensation		6,442			6,089
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable		(29,144	)		(35,953	)
Inventories		(852	)		(6,799	)
Other assets		(4,845	)		(801	)
Accounts payable		2,535			7,523
Income taxes receivable/payable		13,487			10,542
Other liabilities		4,969			2,016

Net cash provided by operating activities		106,517			68,849

Cash flows from investing activities
Purchases of investments		(17,352	)		(22,818	)
Maturities of short term investments		22,560			37,500
Purchases of property and equipment		(37,267	)		(27,051	)
Acquisitions of businesses		(24,740	)		(34,682	)
Proceeds from sale of property and equipment		563			1,106
Other		(1,795	)		(1,590	)

Net cash used in investing activities		(58,031	)		(47,535	)

Cash flows from financing activities
Proceeds from senior notes (Note 6)		300,000			—
Proceeds from term loan (Note 6)		—			100,000
Payments on term loan (Note 6)		(195,750	)		(750	)
Proceeds from vehicle and equipment notes payable		23,767			20,657
Debt issuance costs		(5,191	)		(1,992	)
Principal payments on long-term debt		(15,278	)		(10,324	)
Principal payments on finance lease obligations		(3,398	)		(4,316	)
Acquisition-related obligations		(5,797	)		(2,901	)
Repurchase of common stock		—			(42,827	)
Surrender of common stock awards by employees		(2,331	)		(2,282	)

Net cash provided by financing activities		96,022			55,265

Net change in cash and cash equivalents		144,508			76,579
Cash and cash equivalents at beginning of period		90,442			62,510

Cash and cash equivalents at end of period	$	234,950		$	139,089

Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	17,746		$	14,110
Income taxes, net of refunds		3,790			1,902
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations		11,593			—
Termination of operating lease obligations and right-of-use assets		(2,814	)		—
Property and equipment obtained in exchange for finance lease obligations		2,175			1,034
Seller obligations in connection with acquisition of businesses		4,322			5,420
Unpaid purchases of property and equipment included in accounts payable		1,527			615


	As of September 30, 2019						As of December 31, 2018
	Gross				Net		Gross				Net
	Carrying		Accumulated		Book		Carrying		Accumulated		Book
	Amount		Amortization		Value		Amount		Amortization		Value
Amortized intangibles:
Customer relationships	$	157,242	$	64,884	$	92,358	$	148,635	$	52,514	$	96,121
Covenants not-to-compete		16,035		9,857		6,178		14,682		7,572		7,110
Trademarks and trade names		67,048		21,489		45,559		64,432		18,256		46,176
Backlog		14,080		13,854		226		14,060		13,677		383

	$	254,405	$	110,084	$	144,321	$	241,809	$	92,019	$	149,790


Remainder of 2019	$	6,147
2020		23,867
2021		22,525
2022		21,604
2023		18,693
Thereafter		51,485


(in thousands)	Classification	As of September 30, 2019
Assets
Non-Current
Operating	Operating lease right-of-use assets	$	42,553
Finance	Property and equipment, net		7,691

Total lease assets		$	50,244
Liabilities
Current
Operating	Current maturities of operating lease obligations	$	15,032
Financing	Current maturities of finance lease obligations		3,133
Non-Current
Operating	Operating lease obligations		27,129
Financing	Finance lease obligations		3,682

Total lease liabilities		$	48,976


	Capital Leases			Operating Leases
				Related Party		Other		Total Operating
2019	$	5,207		$	1,159	$	14,418	$	15,577
2020		2,253			1,184		11,293		12,477
2021		1,339			1,058		7,014		8,072
2022		452			972		4,335		5,307
2023		93			51		2,613		2,664
Thereafter		—			—		4,695		4,695

		9,344		$	4,424	$	44,368	$	48,792

Less: Amounts representing executory costs		(255	)
Less: Amounts representing interest		(459	)

Total obligation under capital leases		8,630
Less: Current portion of capital leases		(4,806	)

Long term capital lease obligation	$	3,824


Contingent consideration liability - January 1, 2019	$	5,098
Preliminary purchase price		2,275
Fair value adjustments		(410	)
Accretion in value		434
Amounts paid to sellers		(371	)
Amounts cancelled		(3,302	)

Contingent consideration liability - September 30, 2019	$	3,724


	As of September 30, 2019				As of December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Investments	$	4,980	$	4,983	$	10,060	$	10,053
Senior Notes (1)		300,000		309,000		—		—


	September 30, 2019		December 31, 2018
Included in other current liabilities	$	5,768	$	5,795
Included in other long-term liabilities		11,813		9,447

	$	17,581	$	15,242


	Common Stock Awards					Performance-Based Stock Awards					Performance-Based Restricted Stock Units
	Awards			Weighted Average Grant Dat e Fair Value Per Share		Awards			Weighted Average Grant Dat e Fair Value Per Share		Units			Weighted Average Grant Dat e Fair Value Per Share
Nonvested awards/units at December 31, 2018		173,189		$	47.40		115,698		$	52.25		13,248		$	56.05
Granted		88,529			50.94		82,692			45.65		13,933			51.62
Vested		(106,347	)		42.27		(31,404	)		41.00		(12,808	)		56.05
Forfeited/Cancelled		(1,767	)		52.25		(6,697	)		65.60		(840	)		53.94

Nonvested awards/units at September 30, 2019		153,604		$	52.93		160,289		$	50.49		13,533		$	51.62


	September 30, 2019		December 31, 2018
Insurance receivable and indemnification asset for claims under a fully insured policy	$	2,484	$	2,484
Insurance receivable for claims that exceeded the stop loss limit		2,738		53

Total insurance receivables included in other non-current assets	$	5,222	$	2,537


									Total Purchase Price		Three months ended September 30, 2019				Nine months ended September 30, 2019
2019 Acquisitions	Date		Acquisition Type		Cash Paid		Seller Obligations				Revenue		Net Income		Revenue		Net Income
2019 Acquisitions	Date		Acquisition Type		Cash Paid		Seller Obligations				Revenue		Net Income		Revenue		Net Income
1st State Insulation		3/18/2019		Asset	$	5,125	$	1,355	$	6,480	$	3,156	$	174	$	6,586	$	374
Expert Insulation		6/24/2019		Asset		16,165		1,993		18,158		3,147		193		3,339		160
Other		Various		Asset		3,450		974		4,424		7,262		591		7,262		591

Total					$	24,740	$	4,322	$	29,062	$	13,565	$	958	$	17,187	$	1,125


									Total Purchase Price		Three months ended September 30, 2018				Nine months ended September 30, 2018
2018 Acquisitions	Date		Acquisition Type		Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income		Revenue		Net Income
CDG		3/19/2018		Asset	$	9,440	$	1,973	$	11,413	$	3,848	$	164	$	7,572	$	229
Other		Various		Shares/Asset		25,242		3,447		28,689		7,003		42		12,782		423

Total					$	34,682	$	5,420	$	40,102	$	10,851	$	206	$	20,354	$	652


	As of September 30, 2019												As of September 30, 2018
	1st State			Expert			Other			Total			CDG			Other			Total
Estimated fair values:
Accounts receivable	$	—		$	1,796		$	254		$	2,050		$	1,731		$	3,229		$	4,960
Inventories		291			723			338			1,352			514			1,027			1,541
Other current assets		—			—			3			3			28			879			907
Property and equipment		989			235			667			1,891			933			1,893			2,826
Intangibles		3,382			6,740			2,242			12,364			3,711			16,681			20,392
Goodwill		1,857			8,545			930			11,332			4,898			7,007			11,905
Other non-current assets		—			161			13			174			36			19			55
Accounts payable and other current liabilities		(39	)		(42	)		(23	)		(104	)		(438	)		(2,046	)		(2,484	)

Fair value of assets acquired and purchase price		6,480			18,158			4,424			29,062			11,413			28,689			40,102
Less seller obligations		1,355			1,993			974			4,322			1,973			3,447			5,420

Cash paid	$	5,125		$	16,165		$	3,450		$	24,740		$	9,440		$	25,242		$	34,682


	As of September 30, 2019
Performance bonds	$	52,264
Insurance letters of credit and cash-collateral (1)		44,498
Permit and license bonds		6,964

Total bonds and letters of credit	$	103,726


	As of September 30, 2019			As of December 31, 2018
Cash and cash equivalents	$	234,950		$	90,442
Short-term investments		4,980			10,060
ABL Revolver		200,000			150,000
Less: outstanding letters of credit and cash-collateral (1)		(34,498	)		(28,887	)

Total liquidity (2)	$	405,432		$	221,615


	Payments due by period
(in thousands)	Total		2019		2020		2021		2022		2023		Thereafter
Long-term debt obligations (1)	$	768,482	$	9,821	$	51,118	$	45,329	$	40,759	$	34,864	$	586,591


	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2)
July 1 - 31, 2019		124	$	59.22		—		—
August 1 - 31, 2019		—		—		—		—
September 1 - 30, 2019		—		—		—		—

		124	$	59.22		—	$	60.6 million