INSTALLED BUILDING PRODUCTS
ANNUAL REPORT
2021
To Our Stockholders
Since IBP was founded in the 1970s with a single branch in Columbus, Ohio, our culture has been built around a
core business tenet of treating others as you would like to be treated. We believe showing compassion, respect,
and support for our employees, communities, customers, vendors, and shareholders is an important component of
our past and future success. We are committed to the values that have allowed us to succeed thus far, but we are
equally as committed to growing and evolving as a national organization with local expertise.
EIGHT YEARS OF GROWTH AND DIVERSIFICATION
For 2021, revenue increased 19.1% to a record $1.97 billion and
earnings increased 22.6% to a record $4.01 per diluted share. 2021
was the eighth consecutive year of record revenue and earnings as
a public company. Since our IPO in 2014, revenue and net income
from continuing operations have grown at compound annual growth
rates of 21% and 36%, respectively.
As IBP has grown, we have also diversified our mix of revenue from
core end markets. We reduced our concentration of new single-
family revenue to 64% of our total revenue in 2021 from 74% in 2013,
increasing our exposure to commercial and multi-family markets. We
have also strategically diversified our product mix with less revenue
generated by insulation installation and a higher contribution from
the installation of complementary building products. Notably,
through nearly 90 completed acquisitions as a public company, we
have been able to accelerate our revenue diversification.
AN HISTORIC YEAR FOR ACQUISITION GROWTH
During 2021, we continued to prioritize profitable growth by
completing 12 acquisitions of well-run installation and distribution
companies generating total annual revenue of approximately $211
million. The revenue we acquired in 2021 was an historic result and
the second consecutive year IBP has exceeded our $100 million
acquired revenue target. We expect to acquire at least $100 million of
revenue again in 2022.
Our 2021 acquisitions spanned the country from Pennsylvania
to Oregon, serving residential, commercial, and multi-family
customers with diverse products including, insulation, glass and
mirrors, drywall, framing, ceiling tiles, and firestopping insulation.
IBP’s current geographic footprint provides us with access to
approximately 65% of total residential permits, compared to
approximately 50% seven years ago. In December 2021, we acquired
AMD Distribution, one of the largest acquisitions in our history and
the first major acquisition of a distribution business. AMD generated
revenue of approximately $71 million for the twelve months ended
September 2021. Over the long-term, we expect AMD will bring cost
efficiencies and additional flexibility to our supply chain.
NAVIGATING A DYNAMIC MATERIAL AND LABOR ENVIRONMENT
WHILE THE BACKLOG BUILDS
The impacts of the COVID-19 pandemic persisted throughout 2021
and we worked diligently to overcome unprecedented supply chain
challenges, material shortages, and construction labor uncertainty.
Effective management of our labor and supply chain will remain
a priority throughout 2022 as we efficiently start new projects and
work through the industry backlog, which continued to increase
throughout 2021.
The number of total housing units authorized for construction
but not started in the U.S. grew 43% in 2021 to the highest level
since 1974, according to the U.S. Census Bureau. We believe these
permitted homes represent our potential revenue backlog and will
extend the housing construction cycle, supporting demand for our
installation and distribution services. While we view this dynamic
favorably, challenges relating to limited construction trade labor
and material shortages contributed to the 50-year high in units
authorized but not started.
Despite national labor shortages throughout most industries,
including construction, our employee turnover remained well below
industry averages, which we believe is the result of our continued
investment in employee programs.
As the demand for new housing outpaces industry capacity, we
have needed to supplement our insulation material supply with
purchases through non-traditional retail and distribution channels.
All of our products and materials experienced meaningful price
increases in 2021 and we expect this trend to continue to 2022. Still,
insulation and non-insulation products represent a small portion of
the total hard cost to build a home, which we believe allows us to
prudently increase prices. With our robust cash position and strong
industry relationships, we believe we are in a better position to
manage the current environment than ever in our history.
2
2021 ANNUAL REPORT
APRIL
20
22
OUR STRONG BALANCE SHEET GETS STRONGER
EVOLVING AS A COMPANY AND GLOBAL CITIZEN WITH ESG
During 2021, we added flexibility to our balance sheet by
successfully closing a new 7-year $500 million Term Loan. In
addition, we recently increased and extended our asset-based
lending credit facility to $250 million. When combining the
borrowing capacity under our asset-based lending credit facility
with over $330 million in cash and cash equivalents as of December
31, 2021, we have more than $500 million in liquidity to continue
to make accretive acquisitions and pursue our long-term growth
strategy. In addition, we have limited our interest rate exposure
and there are no significant debt maturities until 2028. We finished
2021 with a net debt leverage ratio of 1.9 times, meeting our goal of
below 2.0 times.
GROWING DIVIDENDS AND EXPANDING SHARE BUYBACK
POTENTIAL
In February 2021, our Board of Directors approved the initiation
of a regular quarterly dividend at $0.30 per share. We believe
the dividend portion of our capital allocation strategy rewards
shareholders throughout the housing cycle and opens IBP shares
up to a new investor base.
In February 2022, the Board approved a 5% increase to our
regular quarterly cash dividend to $0.315 per share and our
first annual variable dividend at $0.90 per share. The variable
dividend was based on the cash flow generated by our operations,
with consideration for planned and expected cash obligations,
acquisitions, and other factors as determined by the Board.
Concurrent with the annual variable dividend declaration, the
Board approved an extension of the current stock repurchase plan
to March 2023 and an increase of the total authorization to $200
million. From 2018 to 2020, we repurchased over 2.7 million shares
of our common stock at an average price of approximately $45 per
share and we intend to continue to opportunistically repurchase
shares through the expanded authorization.
I am proud to announce that we issued our inaugural Environmental,
Social & Governance (“ESG”) report in October 2021. Our primary
installation services are a critical component to improve energy
efficiency in residential and commercial structures. Within our
report, we highlighted the environmental benefits of insulation as
well as our internal initiatives on topics such as health and safety,
greenhouse gas emissions, and diversity, equity, and inclusion. We
are dedicated to building for the future by implementing critical
ESG initiatives. As our ESG program expands, I’m excited by the
opportunities we have creating additional value for our employees,
communities, customers, vendors, and shareholders.
REFLECTING ON THE PAST AND FOCUSING ON THE FUTURE
2021 was another record year of profitable growth and value creation
at IBP. Our strong track record of growth reflects our core values, the
experience of our leadership team, and the hard work of employees
across the nation. We have established a powerful foundation for our
future growth and success in 2022 and beyond.
We will continue to use our expertise to manage the ever-changing
construction landscape and remain resilient in the face of a
continuation of material shortages and supply chain challenges. We
believe that our revenue diversification through accretive acquisitions
and organic growth in key markets will support our long-term growth
strategy and our commitment to return capital to shareholders.
I am proud of our performance throughout 2021 and IBP’s future
opportunities to create value for our shareholders. We are off to a
strong start and we expect 2022 to be another successful year for IBP.
On behalf of everyone at IBP, thank you for your investment in us.
JEFFREY W. EDWARDS
CHAIRMAN, PRESIDENT AND CEO
INSTALLEDBUILDINGPRODUCTS.COM
3
ESG
Report
IBP ENVIRONMENTAL TARGETS
• REDUCE BY 50% OUR CARBON PRODUCING
ELECTRICITY USAGE FROM 2020 BASELINE
MEASURED AS KWH/AVERAGE SQUARE FOOT,
BY 2030
• REDUCE BY 50% MOBILE COMBUSTION
EMISSIONS FROM 2020 BASELINE, MEASURED
AS CO2E METRIC TON EMISSIONS PER AVERAGE
VEHICLE, BY 2030
• REDUCE BY 50% THE HFC BLOWING AGENT
USED FROM 2020 BASELINE, MEASURED
AS CO2E METRIC TONS PER $1 MILLION
OF REVENUE, AS STATES ADOPT HFO
ALTERNATIVE, BY 2030
• IBP RECENTLY ENTERED A NATIONAL WASTE
MANAGEMENT AND RECYCLING PROGRAM,
TO MEASURE AND REDUCE THE AMOUNT
OF LANDFILL WASTE THROUGH INCREASED
RECYCLING PROGRAMS
40–80% recycled
75–85%
recycled
FIBERGLASS INSULATION
CELLULOSE INSULATION
Fiberglass is comprised of 40–80% recycled
material
Cellulose insulation is comprised of 75–85%
recycled waste paper
• Made of fibrous glass held together by a
• Made of paper and cardboard, has a very high
thermoset resin
recycled content
• Contains average of 50% recycled content
• Available as blankets or loosefill
• Most widely used residential insulation
material
• 83% of IBP insulation sales in 2021
ENERGY EFFICIENCY
• Only available in loosefill form and is blown into
the structure with specialized equipment
• 2% of IBP insulation sales in 2021
Our customers are creating homes in the houses we build with them, and that includes keeping their families safe
and warm while also saving energy. We provide reliable insulation that homeowners can be proud of.
RESPONSIBLE MATERIALS
Responsible material usage is something we consider in every insulation job. The most common type of insulation
we install—over 80% of our insulation sales—is fiberglass, which is comprised of up to 80% recycled material. We
also install cellulose insulation, which is comprised of at least 75% recycled waste paper.
4
2021 ANNUAL REPORT
INSTALLED BUILDING PRODUCTS
Financial Highlights
NET REVENUE
OPERATING INCOME
NET INCOME
2017
2018
2019
2020
2021
$1,132,927
$1,336,432
$1,511,629
$1,653,225
$1,968,650
$74,266
$93,217
$121,160
$161,867
$41,140
$54,748
$68,159
$97,239
NET INCOME PER DILUTED SHARE
$1.30
$1.75
$2.28
$3.27
CASH
$62,510
$90,442
$177,889
$231,520
SHORT-TERM INVESTMENTS
$30,053
$10,060
$37,961
—
CURRENT ASSETS
CURRENT LIABILITIES
TOTAL DEBT
NET DEBT
WORKING CAPITAL
(Excluding Cash and Short-Term Investments)
2021 REVENUE
$354,942
$411,545
$581,949
$623,943
$159,806
$181,686
$214,149
$236,475
$359,722
$463,454
$575,539
$569,815
$267,159
$362,952
$359,689
$338,295
$102,573
$129,357
$151,950
$155,948
$187,880
$118,763
$4.01
$333,485
—
$859,316
$307,569
$868,076
$534,591
$218,262
Revenue By End Product
Revenue By End Market
Completed Acquisitions
64%
7%
INSULATION
WATERPROOFING
7%
SHOWER DOORS,
SHELVING & MIRRORS
5%
GARAGE DOORS
4%
3%
RAIN GUTTERS
FIREPROOFING/
FIRE-STOPPING
3%
64%
12%
SINGLE FAMILY
NEW MULTI-FAMILY
7%
WINDOW BLINDS
REPAIR & REMODEL
7%
OTHER BUILDING
PRODUCTS
17%
COMMERCIAL
88
5
2011–PRESENT
2008–2010
54
2003–2007
22
PRIOR TO 2003
We have a
successful
acquisition
strategy
with proven
integration.
STRONG REVENUE GROWTH (in thousands)
NET INCOME (LOSS) PER DILUTED SHARE
2021
2020
2019
2018
2017
2016
2015
2014
2013
$1,968,650
$1,653,225
$1,511,629
$1,336,432
$1,132,927
356%
Increase
2021
2020
2019
2018
2017
2016
2015
$2.28
$1.75
$1.30
$1.23
$0.85
2014
$(0.20)
2013
$(0.01)
$862,980
$662,719
$518,020
$431,929
$4.01
$3.27
INSTALLEDBUILDINGPRODUCTS.COM
5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-K
___________________________
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
OR
RR
☐ TRANSIT
ION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From
To
Commission File Number: 001-36307
___________________________
Installed Building Products, Inc.
(Exact name of registrant as specified in its charter)
___________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
495 South High Street, Suite 50
Columbus, Ohio
(Address of principal executive offices)
45-3707650
(I.R.S. Employer
Identification No.)
43215
(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
Common Stock, $0.01 par value per share
Trading Symbol(s)
IBP
Name of each exchange on which registered
The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
___________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in RuleRR
No ¨
405 of the Securities Act. Yes x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨
No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filff ed 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 filff e such reports),
and (2) has been subject to such filff ing requirements for the past 90 days. Yes x
No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
No ¨
registrant was required to submit such filff es). Yes x
Indicate by check mark whether the registrant is a large accelerated filff er, an accelerated filer, a non-accelerated filff er, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filff er
Non-accelerated filff er
☒
☐
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. ¨
registrant hhas fililff ded a report on
Indicat be byy chheckk markk wh hhether thhe regi
di
of iit
(b)
ontrol over fifinanciiall rep
l
ppublic accounti gng firm that prepared or issued its audit report. ☒
dunder Se iction
is internall c
iorti gng
dand attestatiion to iits man gagement’s assessment of hthe effectiiveness
404(b) of hthe Sarbbane
r
s-Oxl yey Act ((15 U.S.C. 7
l
262(b)) byby hthe regi
registeredd
(b))
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨
No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold on June 30, 2021 was $2,891,660,953.
On February
bruary 17,
2022 the registrant had 33,271,659 shares of common stock, par value $0.01 per share, outstanding.
,
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2021.
1
11
29
30
30
30
31
32
32
45
46
82
82
83
83
86
86
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86
86
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90
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 5.
Item 6.
Item 7.
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9.
Controls and Procedures
Item 9A.
Item 9B. Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
ers and Corporate Governance
Directors, Executive Officff
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Item 16.
Exhibits and Financial Statement Schedule
Form 10-K Summary
SIGNATURES
PART IV
i
Information Regarding Forward-Looking Statements and Risk Factors Summary
a
rd-looking statements within the meaning of the federal
ast,” “may,” “could,” “would,” “should,” “expect,” “intends,” “plan,” and “will” or, in each case,
costs, demand for our services and product offerings, expansion of our national footprint and diversification,
This Annual Report on Form 10-K (“Form 10-K”) contains forwarr
securities laws, including with respect to the housing market and the commercial market, industry conditions, our financial and
business model, payment of dividends, the impact of COVID-19 on our business, end markets, and financial results, our efforts
to navigate the material pricing environment, our ability to increase selling prices, supply chain and material constraints, our
material and labor
our ability to grow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our
ability to improve sales and profitabila
ity and expectations for demand for our services and our earnings in 2022. Forward-
looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “estimate,” “project,”
ff
“predict,” “possible,” “forec
their negative, or other variations or comparam
historical facff
ff
ts. By their nature, forward-looki
depend on circumstances that may or may not occur in the futff ure.
any futuret
expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation, the
duration, effecff
t and severity of the COVID-19 crisis; any recurrence of COVID-19, including through any new variant strains
of the virus, and the related surges in positive COVID-19 cases; vaccination rates; the adverse impact of the COVID-19 crisis
on our business and financial results, our supply chain, the economy and the markets we serve, as well as the factors discussed
in the “Risk Factors” section of this Form 10-K, as the same may be updated from time to time in our subsequent filings with
the Securities and Exchange Commission ("SEC"). Any forward-looking statement made by the Company in this report speaks
only as of the date hereof. New risks and uncertainties arise fromff
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 fede
Any forward-looking statements that we make herein and in
performance, and actual results may differ materially from those
t
reports and statements are not guarantees of future
ng statements involve risks and uncertainties because they relate to events and
terminology. These forward-looking statements include all matters that are not
time to time and it is impossible for the Company to predict
ral securities laws.
blea
ff
ff
Important factors that could cause our results to vary from expectations include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our dependence on the economy, the housing market, the level of new residential and commercial construction activity
and the credit markets;
the cyclical and seasonal nature of our business;
declines in the economy or slowing of the housing market recovery that could lead to significant impairment charges;
the highly fragme
product shortages or the loss of key suppliers;
changes in the costs and availability of products;
our reliance on key personnel;
our ability to attract, train and retain qualified employees while controlling labor
nted and competitive nature of our industry;
costs;
a
ff
scrutiny and expectations from stakeholders regarding our environmental, social and governance ("ESG") practices;
the COVID-19 pandemic and its effect on our business;
our exposure to severe weather conditions;
ons in our information technology systems, including cybersecurity incidents;
rr
disrupti
inability to continue to successfully expand into new products or geographic markets;
inability to successfully acquire and integrate other businesses;
inability to successfully expand into the commercial construction market or other lines of business;
our exposure to claims arising from our operations;
changes in employment and/or immigration laws or failure to properly verify the employment eligibility of our
employees;
our exposure to product liabila
proceedings;
changes in, or failure to comply with, federal, state, local and other regulations;
our ability to implement and maintain effecff
our indebtedness and the restrictions imposed on us by its terms and our exposure to interest rate changes;
the reduction, suspension or elimination of dividend payments;
additional facff
Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K; and
r
other factors that the Company may not have currentl
tors discussed under Item 1, Business; Item 1A, Risk Factors; and Part II, Item 7, Management’s
ity, workmanship warranty, casualty, construction defect and other claims and legal
tive internal control over financial reporting;
y identified or quantified.
ii
PART I
Item 1.
Business
OUR COMPANY
Installed Building Products, Inc. (“IBP”) and its wholly-owned subsidiaries (collectively referred to as the “Company” and
“we,” “us” and “our”) primarily install insulation for residential and commercial builders located in the continental United
States. We are also a diversified installer of complementary building products including waterproofing, fire-stopping,
fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products.
We offer our portfolio of services from our national network of over 210 branch locations serving all 48 continental states and
the District of Columbia. The vast majoa rity of our sales are derived fromff
the service-based installation of various products in
the residential new construction, repair and remodel and commercial construction end markets. Each of our branches has the
a
capac
insulation installation in more than half of the markets in which we operate based on permits issued in those markets. We are
committed to delivering quality installation with a commitment to safety, corporate social responsibility and total customer
satisfaction.
ity to serve all of our end markets. We believe we have the number one or two market position for new single-family
ff
IBP was formed
as a Delaware corporation on October 28, 2011, however our business began in 1977 with one location in
Columbus, Ohio. In the late 1990s, we began our acquisition strategy with the goal of creating a national platform and have
grown to become one of the nation's largest installers of insulation in the residential new construction market. Since 1999, we
have successfully completed and integrated over 180 acquisitions, which has allowed us to generate significant scale and to
diversify our product offerings while expanding into some of the most attractive new construction markets in the United States.
We believe we are well positioned to continue to profitably grow our business due to our strong balance sheet, liquidity and
acquisition strategy. For a furthe
Management’s Discussion and Analysis of Financial Condition, "Key Factors Affecting our Operating Results" in this Form 10-
K.
r discussion of our industry and trends affecting our industry, please refer to Item 7,
ff
OUR OPERATRR IONS
We manage all aspects of the installation process for our customers, from our direct purchase and receipt of materials from
national manufacturers
critical phase in the construction process, as certain interior work cannot begin until the insulation phase passes inspection.
to our timely supply of materials to job sites and quality installation. Installation of insulation is a
t
Our business model is differentiated and creates value by streamlining the typical value chain. In a typical building products
value chain, manufacturers rely on multiple distributors to purchase product. Distributors serve multiple wholesale and retail
accounts who in turn sell to local contractors that perform the installation. We buy most of the products that we use in our
business direct fromff
manufacturers which are delivered to our local installation operations.
Insulation
Overview
iency solutions to our customers through our primary line of business of installing insulation.
We are a provider of energy efficff
Insulation installation comprised approximately 64% of our net revenue of $2.0 billion, $1.7 billion and $1.5 billion for the
years ended December 31, 2021, 2020 and 2019, respectively. We handle every stage of the installation process, including
material procurement, project scheduling and logistics, multi-phase professional installation, quality inspection, waste
management and recycling.
Insulation Materials
We offer a wide range of insulation materials consisting of:
•
Fiberglass and Cellulose Insulation – Fiberglass insulation is made of fibrous glass that is held together by a thermoset
resin creating insulating air pockets. It is typically comprised of an average of 50% recycled material, with some
products containing up to 80% recycled material. It is primarily availablea
batts (also referred to as
blankets) and loosefill (also referred to as blown in). Fiberglass is the most widely used residential insulation material
ff
in two forms:
1
in the United States. Cellulose insulation is made primarily of waste paper and cardboard and has a composition of at
least 75% recycled content. Cellulose is only available in loosefill formff
equipment. Fiberglass and cellulose insulation accounted forff
ended December 31, 2021.
and is blown into the structuret
approximately 85% of our insulation sales for the year
with specialized
•
Spray Foam Insulation – Spray foam insulation, which is generally a polyurethane foam, is applied at a job site by
mixing two chemical components together in specialized application equipment. While typically having the highest
insulating value per inch and sealing effectiveness of all insulation materials that we offer, spray foam is also typically
the most expensive on an installed basis. Spray foam insulation accounted for approximately 15% of our insulation
sales forff
the year ended December 31, 2021.
Insulation Installati
l
on Applications
Local building codes typically require the installation of insulation in multiple areas of a struct
t
ure.
frequently referred to as a phase of the insulation installation process and requires a separate trip to the job site by our installers
at different points in the construction of a structure. Building practice and the inspection process differ geographically and
require our involvement at different times during
We install insulation and sealant materials in many areas of a structure, including:
the construction process. We assist the builders with coordinating inspections.
Each of these areas is
d
rr
•
•
•
•
Basement and Crawl Space – These spaces often account for the second most energy loss in a residential structure.
Building Envelope – We insulate the exterior walls of both residential and commercial structures
insulation on the wall or between the studs.
t
by applying
Attic – We insulate the attics of new and existing residential structures.
may be lost in a home.
tt
The attic is the area where the most energy
Acoustical – Many builder or architect specifications call for acoustical insulation for sound reduction purposes in both
residential and commercial structures. This product is generally installed in the interior walls to minimize sound
transmission.
In each of these applications, we typically use fiberglass batts, except in attic installations where we typically install loosefill
fiberglass or cellulose. We also install a wide variety of advanced caulk and sealant products that control air infiltration in
residential and commercial buildings to enhance energy efficiency, improve comfort and meet increasingly stringent energy
code requirements.
Waterproofing
Some of our locations install waterproofing, caulking and moisture protection systems forff
commercial and industrial
construction projects. We offer a variety of waterproofing options, including, but not limited to, sheet and hot applied
waterproofing membranes, deck coating systems, bentonite systems and air & vapor systems. The installation and service of
waterproofing comprised approximately 7% of our net revenue for the year ended December 31, 2021.
Shower Doors, Closet Shelving and Mirrors
Some of our locations install a variety of shower enclosures, ranging from basic sliding door designs to complex custom
designs. We have the ability to meet our customers’ diverse needs by customizing shower enclosures by size and style
according to their specifications, including framing, hardware and glass options. We design and install closet shelving systems
in select markets utilizing some of the highest quality products available fromff
custom designed mirrors for our customers. Shower doors, closet shelving and mirror installations comprised approximately 7%
of our net revenue for the year ended December 31, 2021.
national brands. We also offer standard and
Garage Doors
Some of our locations install and service garage doors and openers for new residential construction builders, homeowners and
commercial customers. We offer a variety of options from some of the best-known garage door brands. We offer steel,
aluminum, wood and vinyl garage doors as well as opener systems. Unlike the other products we install, the garage door
mately one-quarter of the net revenue
business has an ongoing afteff
rmarket service component, which represented approxi
a
2
resulting from garage doors for the year ended December 31, 2021. The installation and service of garage doors comprised
approximately 5% of our net revenue for the year ended December 31, 2021.
Rain Gutters
Some of our locations install a wide range of rain gutters, which direct water fromff
foundation. Rain gutters are typically constructed fromff
in a wide variety of colors, shapes
and widths. They are generally assembled on the job site using specialized equipment. The installation of rain gutters comprised
approximately 4% of our net revenue for the year ended December 31, 2021.
aluminum or copper and are availablea
a home’s roof away fromff
ture and
a
the strucrr
Fire-stopping and Fireproofing
Some of our locations install firff e-stopping systems, including fire-rated joint assemblies, perimeter fire containment, and smoke
and fire containment systems. Fire-stopping is a passive fire protection approach that relies on compartmentalization of various
building components, including fire-rated walls, joints, and floors. The installation of these products collectively comprised
approximately 3% of our net revenue for the year ended December 31, 2021.
Window Blinds
Some of our locations install differe
of window blinds comprised
m
ff
nt types of window blinds, including cordless blinds, shades and shutters. The installation
approximately 3% of our net revenue for the year ended December 31, 2021.
Other Building Products
Some of our locations install other complementary building products, none of which is an individually significant percentage of
net revenue. Installation of other building products comprised approximately 7% of our net revenue for the year ended
December 31, 2021.
Sales and Marketing
We seek to attract and retain customers through exceptional customer service, superior installation quality, broad service
offerings and competm itive pricing. Our strategy is centered on building and maintaining strong customer relationships. We also
capita
benefit from more than one of our installation service offerings. By executing this strategy, we believe we can continue to
generate incremental sales volumes with new and existing customers.
existing customer relationships and identifying situations where customers may
alize on cross-selling opportunit
ies fromff
tt
Experienced sales and service professionals are important to our customer growth and increasing our profitability. Retaining
and motivating local employees has been an important component of our acquisition and operating strategies. As of
December 31, 2021, we employed approximately 700 sales professionals and our sales force
has spent an average of
approximately ten years with our operations. The local sales staff, which is generally led by the branch manager, is responsible
for maintaining relationships with our customers. These local teams work diligently to increase sales by supporting our existing
customers with excellent service and value while also pursuing new customers with competitive offerings. In addition to the
efforts of our sales staff, we market our product and service offerings on the internet, in the local yellow pages, on the radio and
through advertisements in trade journals. We primarily conduct our marketing using local trademarks and trade names.
ff
COMPETITIVE ADVANTAGES
We seek to differentiate ourselves in areas where we believe we have a competitive advantage, including:
tt
ith a s
National scale wll
trong local presence. Our national scale gives us access to the best products, training and innovation
available, while our local teams provide best in class training and installation services and outstanding customer service. Our
customers generally select their building products installer based on quality and timeliness of service, knowledge of local
building codes, product application expertise, pricing, relationships and reputation in the market. For these reasons, we
emphasize the importance of developing and maintaining strong customer relationships at the local level based on the
knowledge and experience of our branch management and staff.ff
3
tt
a
d product linell
s, end markets att
ies with our existing customers in markets where we install multiple
nd geographies. Diversifying our product line offerings provides us opportunity to
Diversifiei
increase sales to end customers and leverage our branch costs to improve profitability. We continue to generate revenue
synergies by taking advantage of cross-selling opportunit
products. We have successfully diversified our product offering from the year ended December 31, 2013, when insulation
installation comprised approxi
mately 74% of revenues, to the year ended December 31, 2021, where it comprised 64% of
revenues. We service the residential new construction and repair and remodel markets, both of which consist of single-family
and multi-family dwellings, as well as the commercial construction market. We have diversified our end customer demographic
from the year ended December 31, 2013, when revenue from the commercial end market comprised approxi
revenues, to the year ended December 31, 2021 where it comprised 17% of revenues. Our growing exposure to commercial end
markets diversifies our customer base and makes our business less dependent on residential new construction. Commercial
construction is also driven by longer term projects which tends to provide greater revenue visibility. In periods of declining
insulation installation volumes, our sales force
insulation sales by growing sales of complementary building products, further enhancing our ability to perform. Our national
a
geographic
footprint provides us a balanced business not concentrated in any single region.
is able to leverage our diversity of products and reduce the impact of lost
a
mately 11% of
a
ff
t
tt
m
m
y forff
ees. We offer competitive benefits to our employe
es to ensure an engaged workforce. In addition to offering
es, including medical insurance, 401k and paid time off benefits, we also offer longevity stock
ncial wellness training and savings matching in order to recruit and retain employees. Our retention efforts have
Engaged employm
certain benefits to most employe
awards, finaff
reduced our employee turnover to a level below industry averages. Opportunit
advancement are strongly encouraged. We focus on the well-being of our employees through our Positive Production Program.
This micro-video program is designed to help employees thrive in all aspects of life through learning and practicing research-
backed physical, intellectual
skilled and efficient, which drives profitability and encourages repeat business and customer loyalty. Higher employee retention
also benefits our business through lower recruitment and training expense. We also consider safety and risk management to be a
core business objective. Significant staffing, funding and other resources are allocated to our management systems that
enhances safetff y and quality for our employees and our customers. Our branch managers are held accountable forff
the safety of
employees and quality of workmanship at their locations. We provide our employees with ongoing training and development
programs necessary to improve safety pt
force have significant experience in the industry and have spent an average of more hthan 11 yyears
created the Installed Building Products Foundation in 2019 as a separate, not-for-profit organization to help support our
employees for their educad
erformance and work quality. Our regional managers, local branch managers and sales
iwi hth our operatiions. We also
and emotional skills. Engaged, long-tenured employees benefit our business by being highly
tion, financial and philanthropic needs.
professional growth, training and
ii
variable cll
ial strength,tt
ost structure and strong free cash flow. We believe that we are among the most financially
Financ
sound companies in our industry. We place an emphasis on having a strong balance sheet which allows us to focus on our
strategic initiatives and pursue growth opportunit
cost
structurett
and most of our iinstallllatiion em lpl yoyees are paidid byby co
generation of strong free cash flow.
a
lmplet ded jojob.b Our minimal capital expenditure requirements support the
with a significant portion of operating expenses directly linked to volume. Our largest expenses are materials and labor
ies, drive profitability and generate cash. We have a highly variablea
t
ll
.ee We believe that our ability to consistently complete our installations within a customer’s production
Execution excellence
schedule is recognized by our customers and is a key component of our high level of service. We have a proven track record of
customer satisfaction in managing all aspects of the installation process for our customers. Throughout the construction process,
our branch sales and supervisory staff and installation teams make freff quent site visits to ensure timely and proper installation
and to provide general service support. We believe a high level of service is valued by our customers and generates customer
loyalty.
tt
Broad and stable custome
r base.ee We benefit from a diverse customer base that includes production and custom homebuilders,
multi-family and commercial construction firms, homeowners and residential repair and remodeling contractors. We continue
to enhance our long-standing relationships with some of the largest builders in the country. While we serve many national and
regional builders across multiple markets, we compete forff
customer turnover is extremely low.
business at the local level. Given our emphasis on quality service,
ll
u
tt
d relationshi
psii with supplie
rs. We have strong long-standing relationships with many of the manufacturers
Well establishe
the materials we use in our business, including the largest manufacturers of fiberglass and spray foam. The fiberglass insulation
We buy significant volume
manufacturing market is highly consolidated and primarily served by four
from all four
manufacturers and have relationships with each company spanning more than two decades. Our national scale
allows us to purchase volumes that account for a meaningful portion of the production for these suppliers allowing them to
better plan their production schedules. Our relationships and purchasing power often allow us to negotiate preferred material
supply terms and to keep purchases through distribution and retail to a minimum, giving us an advantage over our competitors.
majora manufacturers.
of
ff
ff
tt
tt
4
Highlgg y ell
ienced and incii
ee
xper
Financial Officer and Chief Operating Officff
led us through multiple housing industry cycles, providing valuablea
and grow our business both organically and through acquisitions.
entivizeii d management team. Our senior management team (Chief Executive Officer, Chief
er) have been directing our strategy on average for over tw do decaddes T. his team has
continuity and a demonstrated abia lity to improve operations
BUSINESS STRATRR EGY
ff
We believe our geographic foot
tt
print
chain and proven track record of successful acquisitions provides us with opportunit
markets and expansion into new markets. We believe our continued emphasis on expanding our product offering, further
expansion into the commercial construction market and other lines of business, and targeting geographies where we look to
grow market share will reduce potential futff urett
, long-standing relationships with national insulation manufacturers, streamlined value
continued growth in our existing
t
cyclicality of our operations. Our current strategic objectives include:
ies forff
•
•
•
•
•
•
•
•
capitalize on the new residential and large commercial construction markets;
continue to strengthen our market share position by working with the best customers. We seek to work with the most
profitable and efficient builders and commercial general contractors in our markets;
, develop and retain an exceptional workforce by investing in our employees and our communities and
recruit
rr
promoting a famff
ily-oriented culture;
capitalize on our ability to cross-sell products through existing markets as well as new markets entered as a result of
organic expansion and acquisitions. In addition to insulation and air infiltration products, we install garage doors, rain
gutters, mirrors and shower doors, waterproofing, fireproofing and fire-stopping, window blinds and various other
products;
enhance profitabila
ity fromff
our operating leverage and national scale;
continue expansion in the multibillion-dollar commercial end market. This strategy includes acquiring more locations
to serve the large commercial market and increasing overall commercial sales at our existing new residential locations;
pursue value enhancing acquisitions in markets we currently serve as well as markets that are new to us by continuing
our disciplined approach to valuations and pricing. We will continue to be selective in identifying acquisition targets at
es with strong reputations and customer bases. As part
attractive multiples. We target profitablea markets and companim
of our acquisition strategy, we seek to maintain the management teams of the companies we acquire as well as retain
their local branding, which furthe
r reduces associated risk; and
ff
we integrate new acquisitions quickly and seamlessly into our corporate infrastructure,
employee systems. In addition, we utilize our internal software technology, jobCORE, to integrate most acquired
operations and provide in-depth branch-level operational and financial performance data. We realize near term margin
enhancement and revenue growth at acquired branches by applyi
a
relationships with large national homebuilders.
ng our national buying power and leveraging
including our accounting and
t
One of our key areas of focus
have accomplished this through organic growth as well as acquisitions. We believe the benefits of this diversification include:
has been diversifying our product and service offerings, customer base, and end markets. We
ff
• Margin enhancement by leveraging branch costs across multiple products
•
•
•
•
Diversifiedff
end-market exposure
A more diverse customer base
Stronger established local relationships
Reduced
d cyclicality
Product and end market diversification has been a primary strategic initiative throughout our history. In addition to acquisition
and local market share growth, we typically experience an increased rate of product and end market diversification during
periods of reduced demand growth rates in the residential end market. As such, our oldest and most establia
exhibit the greatest diversity of service and product offerings. This diversity in turnt
compared to branches in our newer, less developed markets.
contributes to enhanced profitability as
shed branches tend to
5
However, we can provide no assurance that the positive trends reflected in our recent financial and operating results will
continue in 2022.
TRENDS IN THE MARKETPLACE
imilllliion non-seas
lBlue hiChip Eco
Our business relies on various market factors, one of which is residential housing demand. Following the late 2000s recession
in the U.S. economy, housing starts dropped well below historical averages. Rates have since returned to early 2000s levels,
lonallyly dadjust
cordi gng to Wollters
just
with 1.6
lKluwer’s
nomic I dindicators Janua yry 2022 forecast. We expect to benefit from the recent growth in single-family
new residential construction. Commercial demand saw the least amount of growth of the end markets we serve due to impacts
from the COVID-19 pandemic ("COVID-19"). However, we expect this sector to recover in 2022 with building starts
forecasted to be above
pre-pandemic 2019 investment dollars, increasing 12% over 2020 according to Dodge Data & Analytics.
ded starts iin 2021, a dnd an hother 1.6
imilllliion starts forecasted fd forff
2022 ac
di
dd
a
i
t us by increasing the costs of materials, labor
ity. Inflation in the United States was 7% in 2021, the highest rate since 1982. While mortgage
Inflation can adversely affecff
impact on housing affordabila
rates were relatively steady throughout most of 2021, rates began to trend upward in December 2021 and have continued that
trend in 2022. Additionally, the Federal Reserve has signaled that it plans to begin raising the fedff
rate which in turn
will cause mortgage interest rates to rise further. Higher material costs contributed to a lower gross margin in the year ended
to determine how much of the impact was related to inflation due to the supply chain
December 31, 2021, but we are unablea
issues that persist.
and interest rates which in turn can have a negative
ff
eral funds
a
COVID-19 IMPACTS
In December 2019, a novel strain of coronavirus surfaced in Wuhan, China. Since then, the virus has spread globally, including
to the United States. In response, the World Health Organization declared the situat
ion a pandemic and the U.S. Secretary of
Health and Human Services declared a public health emergency. The COVID-19 pandemic has caused significant volatility,
uncertainty and economic disruption. Many public health organizations and international, federal, state and local governments
implemented measures to combat the spread of COVID-19 at various times since the beginning of the pandemic. Some of these
measures included quarantines, vaccine and/or masking requirements, “stay-at-home” orders and social distancing ordinances
and restricting or prohibiting outright some or all formff
uncertainty surrounding the duration and scope of the pandemic, as well as its continued impact on the economy. We cannot
predict if federal, state and local governments will implement additional restrictions, when restrictions currently in place will
expire or whether restrictions currently in place will become more limiting.
s of commercial and business activity. There is still significant
tt
While the COVID-19 pandemic and related events will likely have a negative effect on us in 2022, the full extent and scope of
the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous
evolving factors that we may not be able to accurately predict, including the duradd
tion 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, inflation, consumer spending and consumer confidence). The fasff
helped offset prolonged impacts of the pandemic already experienced. In the commercial sector, we have experienced delays in
ng declines.
the onset of certain large-scale infrastructurett
Commercial spending rose in 2021, but remains below 2019 levels. Commercial projects could decline in the future if consumer
behaviors change in the wake of COVID-19 disruptions to the economy and changes to our general ways of life. For examplem ,
reduced demand for office buildings and/or educad
tional facilities, decreased airport traffic, or decreased usage of sports arenas
or similar commercial structures
programs due to declining need for such structures and/or project fundi
could continue to impact our commercial end market.
t recovery in residential housing demand
ff
tt
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. We follow all masking
requirements imposed by authorities, most of which have had no adverse effecff
equipment in the process of completing our installation work is already a common practice in our industry. We have also taken
advantage of availablea
technologies which allow some employees the ability to work remotely from home. We comply with
regulations from federal, state and local government agencies. Certain protocols have evolved throughout 2021 as vaccines
have become available and guidelines from public health authorities such as the Centers for Disease Control are updated. We
are prepared to take additional actions if necessary as suggested or required by various health agencies.
ts on our business since wearing protective
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. We have experienced limited business disruptions to date and therefore have not needed to
implement significant continuity measures and have not incurred significant related expenditures.
Assuming a large number of
tt
6
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 futff ure.
t
Our corporate office has been full
controls over financial reporting and have confidence controls are operating as designed. We have enhanced our efforts to
mitigate cyber threats and phishing, given some employees are still working remotely. We are continually monitoring and
assessing the COVID-19 situation on our internal controls to minimize the impact of their design and operating effecff
y operational throughout the pandemic. As such, we have made no modifications to internal
tiveness.
ff
ff
ion in working capita
to continue in 2022, however
to enhanced risk of collectibility fromff
We expect some impact from the pandemic to our earnings, financial position and cash flows
there is much uncertainty surrounding the estimated magnitude of these impacm ts. We estimate limited impact to our
Consolidated Balance Sheets other than a potential reductdd
and net income. Trade accounts receivablea may also be reduced somewhat by lower net revenue and a higher allowance for
credit losses duedd
We anticipate revenue and net income may continue to be negatively impacted into 2022 due to supply constraints and/or
material price increases ultimately stemming from the effects of the pandemic, as well as other facff
tors such as high demand for
housing. While our cash from operations may decline over recent performance due to a decrease in expected net income driven
by lower net revenue, we do not anticipate any issues meeting debt obligations or making timely payments to vendors given our
strong liquidity and large cash reserves. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations, "Liquidity and Capia tal Resources" below for further information. Given the continued uncertainty
created by the COVID-19 pandemic and its potential effects, it is not possible to estimate the full, adverse impact to our futurett
2022 sales or other financial results at this time.
some customers, although we have not seen a significant impact to date.
al due to the possibility of reduced net revenue
SAFETY AND QUALITY CONTROL
Our quality control process starts with the initial proposal. Our sales staff and managers are knowledgeablea
offerings and scope of work. They are trained on manufacturers’ guidelines as well as state and local building codes. Our
quality control programs emphasiz
e onsite inspections, training by manufacturers and various certification programs.
about our service
m
We consider safety and risk management to be a core business objective and require our installers to wear personal protective
equipment in the process of completing their work. Each year, we allocate significant staffing, funding and resources to our
management systems that directly impact safety.t We have strong workplace safety measures, including Safety Wanted 365, an
es and other jobsite
initiative focused on creating a safer working environment to reduce job site injuries forff
f
for the safety ot
personnel through year-round educad
employees and quality of workmanship at their locations.
tion and training. Additionally, our branch managers are held accountablea
both our employe
m
We track all incidents that occur on our job sites that could result in injury,
aid or medical treatment. We use this incident information to continually refine and develop our safety t
new hires and the continual training and safety knowledge throughout employment at IBP. We believe these programs are
having a benefit on the safety and physical well-being of our employees. Although total hours worked increased 11% from
2019 to 2021, OSHA-defined incidents increased by only 4% during the same period, resulting in a decline in incident rate per
hours worked of 6%. We also reported a 15% drop in severe incidents and OSHA reportablea
incidents from 2019 to 2021, had
only 11 severe incidents in 2021 and the incident per hour worked dropped 23%. We had zero fatalities in 2019, 2020 and 2021,
and are continually findi
ng ways to improve our practices throughout the organization in order to improve the health and safety
of our workforce.
including minor incidents that may not require first
t
raining programs for
n
ff
CUSTOMERS
We serve a broad group of national, regional and local homebuilders, multi-family and commercial construction firms,
individual homeowners and repair and remodeling contractors. Our top ten customers, which are primarily a combination of
approximately 15% of net revenue for the year ended December 31, 2021. We
national and regional builders, accounted forff
install a variety of products in multiple markets for our largest customers, further diversifying our relationship with them. For
example, our largest customer is independently serviced by 70 differeff
approximately 5% of net revenue for the year ended December 31, 2021. While our largest customers are homebuilders, our
customer base is also diverse. We work on a range of commercial projects including office buildings, airports, sports
complexes, museums, hospitals, hotels and educad
ebuildlders
rem iainingning three represent commerciiall customers. We have long-term relationships with many of our customers and have served
each of our top ten customers for more than a decade.
tional facilities. Of our top 20 customers, 17 represent hhom b i
nt IBP branches nationwide despite representing
dand hthe
7
BACKLOG
For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method.
When this method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total
contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. The costs
of earned revenue include all direct material and labor
indirect labor, supplies, tools and repairs. Backlog represents the transaction price forff
performed and excludes unexercised contract options and potential modifications. Backlog is not a guarantee of future revenues
as contractual commitments may change. There can be no assurance that backlog will result in revenues within the expected
timeframe, if at all. We estimate backlog was $143.2 million as of December 31, 2021 and we estimated it to be $78.5 million
as of December 31, 2020.
costs and those indirect costs related to contract performance, such as
contracts forff which work has not been
a
SUPPLIERS
We have long-term relationships with many of our suppliers, and we purchase from manufacturers whenever possible to
streamline the typical supply chain. As one of the largest purchasers of insulation in the United States, we believe that we
maintain particularly strong relationships with the largest manufacturers of the products we use in our business. The proximity
of certain of our branch locations to insulation manufacturers’ facilities provides additional mutual benefits, including
opportunities for cost savings and joint planning regarding futurett
insulation manufacturers, our three largest suppli
ers in the aggregate accounted for approximately 33% of all material purchases
for the year ended December 31, 2021. We also believe that we maintain good relationships with suppliers of the non-insulation
products we install. We have found that using multiple suppliers ensures a stablea
terms as suppliers compete to gain and maintain our business. In addition, our national purchasing volumes provide leverage
u
with suppli
constraints forff
bottlenecks caused by manufacturing
Analysis of Financial Condition and Results of Operations, "Key Factors Affecting our Operating Results" for more
information.
ers as we pursue additional purchasing synergies. The industry is currently experiencing manufacturer supply
some of the materials we purchase due to an unanticipated increase in demand as well as global supply chain
curtailments due to COVID-19. See Part II, Item 7, Management's Discussion and
production. Due to the limited number of large fiberglass
source of materials and favorablea
purchasing
u
tt
SEASONALITY
d
the second half of the year as our homebuilder customers complem te construction of homes
We typically have higher sales during
placed under contract for sale in the traditionally stronger spring selling season. In addition, some of our larger branches operate
in states impacted by winter weather and, as such, experience a slowdown in construction activity during
the firff st quarter of the
calendar year. This winter slowdown contributes to traditionally lower sales and profitabila
ity in our first quarter. As a result of
the aforementioned material supply constraints, some jobs may be temporarily delayed, resulting in lower revenue in the firff st
and/or second quarters of 2022 than we would normally expect. While we anticipate this will not have a significant effecff
t on
our business, we cannot predict the full impact on our results of operations at this time.
d
The composition and level of our working capia tal typically change during periods of increasing sales as we carry more
inventory and receivables, although these changes are generally offset in part by higher trade payables to our suppliers.
Working capita
activity. Typically, the subsequent collection of receivablea
positively impacted cash flow.
facilities to cover short-term working capita
In the past, we have from time to time utilized our borrowing availability under our credit
al levels increase in the summer and fall seasons due to higher sales during
s and reduction in inventory levels during
the winter months has
the peak of residential construction
al needs.
d
dd
ff
COMPETITION
We believe that competition in our industry is based on quality and timeliness of service, knowledge of local building codes,
pricing, relationships and reputation in the market. The building products installation industry is highly fragmented. The
markets for our non-insulation installation services are even more fragmented than the markets forff
insulation installation
services. Our competitors include one other large national contractor, several large regional contractors and numerous local
contractors. We expect to continue to effecff
access to capital, tenure and quality of local staff, quality installation reputation and competitive pricing.
tively compete in our local markets given our long-standing customer relationships,
8
HUMAN CAPITAL RESOURCES
As of December 31, 2021, we had approximately 9,500 employees, consisting of approximately 6,700 installers, approximately
700 sales professionals, approximately 600 production personnel and approximately 1,500 administrative and management
personnel. Less than 4% of our employees are covered under collective bargaining agreements. We have never experienced a
work stoppage or strike, and we believe that we have good relationships with our employees.
Our employees are critical to our continued success and are our most important resource. We focus
talented and experienced individuals to manage and support our operations. We consider retaining skilled employees to be a
competitive advantage and employ various strategies to improve turnover metrics. In addition, we offer many benefits and
resources to most employees, some of which are above and beyond what others in our industry offer. See "Competitive
Advantages, Engaged employees” above for further details on turnover metrics and the benefits we offer.
on attracting and retaining
ff
Our management team supports the development of our existing workforce by establishing a culture of employee engagement,
employee apprec
promotion from within forff many leadership positions. We believe this provides
increased retention and promotes a long-term focus to our operations.
iation and the opportunit
y forff
a
t
or any other statustt
protected by law. We are proud of our strong and diverse workforce. Our Hispanic/Latino diversityt
from discrimination and harassment on the basis of race, color, age,
veteran
We respect and support the diversity of all people within our workforce. We are committed to diversity, equity and inclusion
("DE&I") practices and maintaining workplaces freeff
religion, sex, national origin, ancestry, gender, sexual orientation, gender identification, disability, military status,
status,
tt
outpaces the construction industry average, according to the Bureau of Labor Statistics, and our workforce as a whole is
comprised of over 50% ethnic minorities. In addition, based on gender, racial, ethnic and orientation diversity, 50% of our
board of directors is diverse, which helps drive our strategies for an inclusive workplace. We are committed in policy and
a
practice to providing equal employment opportunities for all appli
and overall qualifications. Employe
committees to determine the standards for how employees should interact with one another and their communities. We do not
a
tolerate inappropria
es across all our branches are invited to participate in our regional and national DE&I
cants and employees based uponu
te behavior or harassment.
their training, experience,
m
tt
icable
nd health laws and regulations. In response to the COVID-19 pandemic, we implemented enhanced safety protocols to
The health and safety of our employees is of primary importance. See “Safety and Quality Control” above
policies and practices. Our policy is designed to protect against accidents, injuries, and illnesses, in complim ance with appl
safety at
protect our employees’ health and well-being, and to comply with regulations from federal, state and local government
agencies. Certain protocols evolved throughout 2021 as vaccines became available and guidelines from public health authorities
such as the Centers for Disease Control were updated. See “COVID-19 Impacts” above for more information.
for details on our
a
a
INFORMATION TECHNOLOGY
d internal software technology used by the majori
JobCORE is our web-enablea
operate our business in a highly efficff
time job-level operational and financial performance data fromff
each branch to the corporate office. JobCORE provides us, our
branch managers and our sales personnel with an important operational tool for monitoring branch level performance. It assists
management in assessing important business questions, including customer analysis, sales staff analysis, branch analysis and
other operating activities.
ient manner and manage our operations. The jobCORE software provides in-depth real-
ty of our branches. The system is designed to
a
INTELLECTUAL PROPERTY
We possess intellectual property rights, including trademarks, trade names and know-how and other proprietary rights that are
important to our business. In particular, we maintain registered trademarks and trade names, some of which are the trademarks
and trade names under which many of our local branches operate and we own or have licensed rights to use jobCORE and other
software used in the operation of our business. While we do not believe our business is dependent on any one of our trademarks
or trade names, we believe that our trademarks and trade names are important to the development and conduct of our business
as well as to the local marketing of our services. We also maintain domain name registrations for each of our local branch
websites. We make efforts to protect our intellectual property rights, although the actions we take may be inadequate to prevent
others from using similar intellectual
property and we may be unablea
property. In addition, third parties may assert claims against our use of intellectual
tt
to successfully resolve such claims.
9
ENVIRONMENTAL, SOCIAL AND REGULATORY MRR
ATTERS
As part of our commitment to socially responsible corporate practices, we expanded our Environmental, Social, and
Governance ("ESG") efforts
and objectives and can be found
ff
of our website are not incorporated by reference in, or otherwise made a part of, this Form 10-K or in any other report or
document we file with the SEC, and any references to our website are intended to be inactive textual
by releasing our inaugural ESG report in 2021. This ESG report outlines our sustainability targets
//installedbuildingproducts.com/sustainability. The contents
on our corporate website at https:
references only.
ff
t
t
Insulation is a critical component in reducing energy usage and greenhouse gas emissions. The Department of Energy, or DOE,
states that over half of the energy used in the average American home is forff
heating and cooling due to many homes not having
proper insulation. Per an insulation fact sheet provided by the DOE, inadequate insulation and air leakage are leading causes of
energy waste in most homes. Through insulating homes and commercial structures, our industry promotes energy efficiency.
Our loose-fill cellulose insulation is manufactured fromff
.
recycled glass which helps reuse resources and reduce our global carbon footprint
recycled waste paper and our fiberglass insulation is made from
tt
We are committed to socially responsible corporate practices. Through the Installed Building Products Foundation and other
volunteer opportunities, we give back to the communities we serve. We also provide longevity stock awards and finaff
ncial
wellness training to our employees. We are subject to various federal, state and local laws and regulations applicable in the
jurisdictions in which we operate, including laws and regulations relating to our relationships with our employees, public health
and safety, workplace safety,t
codes and regulations.
codes. We strive to operate in accordance with appl
transportation, zoning and fireff
icable laws,
a
eral, state and local regulations covering building codes, complim ance with
We are responsible for adhering to several fedff
COVID-19 restrictions, labor-related regulations covering minimum wage and employee safety, and transportation procedures.
Our transportation operations are subjeu
which has broad administrative powers. We are also subject to safety requirements governing interstate operations prescribed
by the DOT. In addition, vehicle dimension and weight and driver hours of service are subject to both fede
regulation. Our operations are also subject to the regulatory jurisdiction of the U.S. Department of Labor’s
and Health Administration, or OSHA, which has broad administrative powers regarding workplace and jobsite safety.
ct to the regulatory jurisdiction of the U.S. Department of Transportation, or DOT,
ral and state
Occupational Safetyt
a
ff
ff
ral, state and local laws and regulations relating to the use, storage, handling,
Our operations and properties are subject to fede
generation, transportation, treatment, emission, release, discharge and disposal of hazardous or toxic materials, substances,
waste and petroleum products and the investigation, remediation, removal and monitoring of the presence or release of such
materials, substances, waste and petroleum products, including at currently or forme
rly owned or occupied premises and off-
site disposal locations. We have not previously incurred material costs to comply with environmental laws and regulations.
However, we could be subject to material costs, liabilities or claims relating to environmental compliance in the future,
especially in the event of changes in existing laws and regulations or in their interpretation or enforcement.
ff
of our business involves the use or handling of certain potentially hazardous or toxic substances, including spray
As the naturet
foam applications and lead-based paint, we may be held liable for claims alleging injury
or damage resulting from the release of
or exposure to such substances, as well as claims relating to the presence of mold, fungal growth and moisture intrusion alleged
for, among
in connection with our business activities. In addition, as owners and lessees of real property, we may be held liablea
other things, releases of hazardous or toxic substances or petroleum products on, at, under or emanating from currently or
formerly owned or operated properties, or any off-site disposal locations, or for any known or newly discovered environmental
conditions at or relating to any of our properties, including those arising from activities conducted by previous occupants or at
ning properties, without regard to whether we knew of or were responsible for such release. We may be required to
adjoid
investigate, remove, remediate or monitor the presence or release of such hazardous or toxic substances or petroleum products
and may be held liablea
damages, including for bodily
by a governmental entity for fines and penalties or to any third parties forff
injury, property damage and natural resource damage in connection with the presence or release of hazardous or toxic
substances or petroleum products.
n
To date, costs to comply with applicablea
the environment and natural
we do not anticipate incurring material expenditures
t
tt
laws and regulations relating to pollution or the protection of human health and safety,
resources have not had a material adverse effect on our financial condition or operating results, and
to comply with such laws and regulations in the current fiscal year.
In conjunction with our lease agreements and other transactions, we often provide reasonable and customary indemnities
relating to various matters, including environmental issues. To date, we have not had to pay a material amount pursuant to any
such indemnification obligations.
10
In addition, our suppliers are subjecb
purchase of a cellulose manufacturer in November 2018, we are subjecb
suppliers.
t to various laws and regulations, including environmental laws and regulations. With our
t to similar laws and regulations that apply
a
to our
CORPORATE AND AVAILABLE INFORMATION
Installed Building Products, Inc. is a holding company that derives all of its operating income fromff
principal executive offices are located at 495 South High Street, Suite 50, Columbus, Ohio 43215. Our main telephone number
is (614) 221-3399. Our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “IBP.”
its subsidiaries. Our
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and file
annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the
/www.se
c.gov. Our corporate website is located at http://
public on the SEC’s website at http:/
//
www.installedbuildingproducts.com, or http:/
//
/www.i
investors.installedbuildingproducts.com. Copies of our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, and amendments to these reports fileff d or furnished
free of charge, on our investor relations website as soon as reasonably practicablea
electronically to the SEC.
pursuant to Section 13(a) or 15(d) of the Exchange Act are available,
it
bp.com, and our investor relations website is located at http://
after we file such material with or furnish
ff
ff
t
t
We webcast our earnings calls and post the materials used in meetings with members of the investment community on our
investor relations website. Additionally, we provide notifications of news or announcements regarding our financial
performance, including SEC filings, investor events and press and earnings releases on our investor relations website. We have
used, and intend to continue to use, our investor relations website as a means of disclosing material non-public information and
for complying with disclosure obligations under Regulation FD. Further corporate governance information, including our
certificate of incorporation, bylaws, governance guidelines, board committee charters and code of business conduct and ethics,
is also availablea
on our investor relations website under the heading “Corporate Governance.” The contents of our website are
not incorporated by reference in, or otherwise made a part of, this Form 10-K or in any other report or document we file with
the SEC, and any references to our website are intended to be inactive textual
references only.
t
Item 1A.
Risk Factors
There are a number of business risks and uncertainties that affect our business. These risks and uncertainties could cause our
actual results to differ from past performance or expected results. We consider the following risks and uncertainties to be most
relevant to our business activities. Additional risks and uncertainties not presently known to us, or that we currently believe to
be immaterial, may also adversely impact our business, financial condition and results of operations. We urge investors to
consider carefully the risk fact
ors described below in evaluating the information contained in this report.
ff
For a summary of the following risks, please see "Information Regarding Forward-Looking Statements and Risk Factors
Summary" which appears immediately prior to Item 1, Business, of this Form 10-K.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Our business and the industry in which we operate are highly dependent on general and local economic conditions, the
housing market, the level of new residential and commercial construction activity and other important factors, all of
which are beyond our control.
Our business is cyclical, seasonal and highly sensitive to economic and housing market conditions over which we have no
control, including:
•
•
•
•
•
•
the number of new home and commercial building construction starts;
short- and long-term interest rates;
inflation;
employment levels and job and personal income growth;
housing demand from population growth, household formation and other demographic changes;
housing affordability;
11
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
rental housing demand;
availabila
ity and cost of labor;
a
availabila
ity and cost of land;
changes in material prices;
local zoning and permitting processes, including the length of building cycles fromff
local economic or environmental factors;
permit to completion, based on
fedff
eral, state and local energy efficiency programs, regulations, codes and standards;
ity and pricing of mortgage financing for homebuyers and commercial finff ancing for developers of multi-
availabila
family homes and commercial projects;
ff
forec
losure rates;
consumer confidence generally and the confidence of potential homebuyers in particular;
U.S. and global finff ancial system and credit market stabia lity;
fedff
eral government economic, trade, and spending laws and policies;
private party and government mortgage loan programs and federal and state regulation, oversight and legal action
regarding lending, appraisal, forec
losure and short sale practices;
ff
eral and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan
fedff
interest payments, state and local income and real estate taxes and other expenses;
general economic conditions, including in the markets in which we competm e; and
pandemics, natural disasters, war, acts of terrorism and response to these events.
Unfavorable changes in any of the above
homes and adversely affecff
operate. Any deterioration in economic or housing market conditions or continuation of uncertain economic or housing market
conditions could have a material adverse effecff
t our business generally or be more prevalent or concentrated in particular markets in which we
t on our business, financial condition, results of operations and prospects.
t consumer spending, result in decreased demand for
conditions could adversely affecff
a
A downturn in the housing market could materially and adversely affect our business and financial results.
In 2021, the U.S. Census Bureau reported an estimated 1.6 million non-seasonally adjusted total housing starts, up from 1.4
million starts in 2020. Despite the increase, any future
may materially adversely affecff
mortgage interest rates and rising home prices, along with other economic factors, may lead to a decline in the home
construction market. The demand for residential construction could be negatively impacted if the number of renting households
increases, as we have seen in the recent past, or by a shortage in the supply of affordabl
home ownership rates. Demand can also be negatively impacted by changing consumer tastes and demographic changes.
t our business, financial condition, results of operations and cash flows. In particular, increases in
decline in new home construction and resulting product demand levels
e housing which could result in lower
ff
ff
Other factors that might impact growth in the homebuilding industry include: uncertainty in finff ancial, credit and consumer
lending markets amid slow growth or recessionary conditions; levels of mortgage repayment; limited credit availability; federal
and state personal income tax rates and changes to the deductibility of certain state and local taxes; Federal Reserve policy
changes; shortages of suitablea
markets; and rising materials prices. Given these factors, we can provide no assurance that present growth trends will continue,
whether overall or in our markets. The economic downturn in 2007-2010 severely affecff
ted our business. Another reduction in
housing demand in the future could have a similar effecff
building lots in many regions; shortages of experienced labor; soft housing demand in certain
t on our business.
Our business relies on commercial construction activity, which has faced significant challenges and is dependent on
business investment.
A portion of the products we sell are for the commercial construction market. If this market does not grow in the future, the
growth potential of our business, and our financial condition, results of operations and cash flows could be adversely affecff
The commercial construction market, as measured by investment dollars, increased 8% in 2021 from 2020. However, this
market has not rebounded from the pandemic as quickly as the new residential market as investment dollars in 2021 were below
2019 levels.
ted.
12
According to Dodge Data & Analytics, commercial building starts in 2022, measured by investment dollars, are expected to
increase 12% from 2021 while instituti
participate) are expected to increase 6% from 2021.
onal building starts (a subset of the nonresidential construction market in which we
t
The strength of the commercial construction market depends on business investment which is a funct
regional and local economic conditions beyond our control, including capia tal and credit availability for commercial construction
projects, material costs, interest rates, employm
employment practices, vacancy rates, labor and healthcare costs, fuel
the real estate industry. Adverse changes or continued uncertainty regarding these and other economic conditions could result in
a decline or postponement in spending on commercial construction projects, which could adversely affect our financial
condition, results of operations and cash flows.
ent rates, demand for office space due to COVID-19-related changes in
and other energy costs and changes in tax laws affecff
ion of many national,
ting
m
ff
ff
Weakness in the commercial construction market would have a material adverse effect on our business, financial condition and
operating results. Continued uncertainty about current economic conditions will continue to pose a risk to our businesses that
serve the non-residential markets. If participants in these industries postpone spending in response to tighter credit, negative
news surrounding the COVID-19
financial news and declines in income or asset values or other factors such as unfavorablea
pandemic, this could have a material negative effecff
condition and results of operations.
t on the demand for our products and services and on our business, financial
A decline in the economy and/or a deterioration in expectations regarding the housing market or the commercial
construction market could cause us to record significant non-cash impairment charges, which could negatively affect
our earnings and reduce stockholders’ equity.
We review our goodwill for impairment annually during the fourth quarter. We also review our goodwill and other intangible
assets when events or changes in circumstances indicate the carrying value may not be recoverable. In doing so, we either
assess qualitative factors or perform a detailed analysis to determine if it is more likely than not that the fair value of a reporting
unit is less than its carrying amount. We did not record any goodwill impairment charges in 2021, 2020, or 2019; however, a
decline in the expectation of our futuret
regarding the general economy and/or the timing and the extent of new home construction, home improvement and commercial
construction activity may cause us to recognize non-cash, pre-tax impairment charges for goodwill or other long-lived assets,
which are not determinablea
incur impairment charges in connection with prior and future
impaired, our earnings and stockholders’ equity would be adversely affecff
other intangible assets in an aggregate amount of $586.9 million, or approximately 36% of our total assets, which is in excess of
our stockholders’ equity.
at this time. In addition, as a result of our acquisition strategy, we have recorded goodwill and may
acquisitions. If the value of goodwill or other intangible assets is
ted. As of December 31, 2021, we had goodwill and
performance, a decline in our market capitalization, deterioration in expectations
ff
Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our
business, financial condition, results of operations and cash flows.
ff
The building products installation industry is highly fragmff
national, regional and local companies. Any of these competitors may: (i) foresee
accurately than we do; (ii) offer services that are deemed superior to ours; (iii) sell building products and services at a lower
cost; (iv) develop stronger relationships with homebuilders and suppliers; (v) adapta more quickly to new technologies, new
installation techniques or evolving customer requirements; or (vi) have access to financing on more favorablea
obtain in the market. As a result, we may not be able to compete successfully with them. If we are unablea
effectively, our business, financial condition, results of operations and cash flows may be adversely affecff
ented and competitive. We facff e significant competition from other
the course of market development more
to compete
ted.
ff
terms than we can
In the event that increased demand leads to higher prices for the products we use in our business, we may have limited, if any,
ability to pass on price increases in a timely manner or at all dued
Residential homebuilders have, in the past, placed pressure on their suppliers to keep prices low, also contributing to the
possibility of not being able to pass on price increases.
to the fragmented and competitive naturet
of our industry.
Product shortages or the loss of key suppliers could affect our business, financial condition, results of operations and
cash flows.
Our ability to offer a wide variety of products to our customers depends on our ability to obtain adequate product supply from
manufacturers. We do not typically enter into long-term agreements with our suppliers but have done so from time to time,
including in 2018 when we entered into a contract to provide a portion of the insulation materials we utilize across our
13
t
d
certain vendors,
circumstances. Generally, our products are availablea
from various sources and in sufficient quantities
ers or
some of the materials we use in our business due to an unanticipated increase in demand as well as global supply
2019, 2020 and 2021. At this time, we do not have any agreements that exceed a one-year commitment in
ilities duedd
city and production. The industry is currently experiencing manufacturer supply
businesses during
2022. We have certain agreements that do not qualify as supply agreements due to a lack of a fixed price and/or lack of a fixff ed
and determinable purchase quantity, but nonetheless may require us to purchase certain of our products fromff
depending on the specificff
to meet our operating needs. However, the loss of, or a substantial decrease in the availability of, products from our suppli
the loss of key supplier arrangements could adversely impact our business, financial condition, results of operations and cash
flows. Historically, unexpected events, such as incapacitation of supplier facff
temporarily reduced manufacturing
capaa
constraints forff
chain bottlenecks caused by manufacturing curtailments dued
Analysis of Financial Condition and Results of Operations, "Key Factors Affecting our Operating Results" for more
information. In addition, during prior economic downturns in the housing industry, manufacturers
have reduced capaa
closing plants and production lines within plants. Even if such capaa
manufacturers’ ability to increase capaa
suppliers exceeds the available supply, we may be unable to source additional products in sufficient quantity or quality in a
timely manner and the prices forff
the products that we use in our business could rise. These developments could affecff
ability to take advantage of market opportunities and limit our growth prospects. We continually evaluate our supplier
relationships and at any given time may move some or all of our purchases from one or more of our suppliers. There can be no
assurance that any such action would have its intended effecff
to COVID-19. See Part II, Item 7, Management's Discussion and
city reductions are not permanent, there may be a delay in
city in times of rising demand. If the demand forff
to extreme weather or fire, have
manufacturers and other
products fromff
city by
t our
t.
u
tt
Failure by our suppliers to continue to provide us with products on commercially favorablea
material adverse effect on our operating margins, financial condition, operating results and/or cash flows. Our inabila
source materials in a timely manner could also damage our relationships with our customers.
terms, or at all, could have a
ity to
Changes in the costs of the products we use in our business, an inability to increase our selling prices or a delay in the
timing of such increases can decrease our profit margins.
The principal building products we use in our business have been subject to price changes in the past, some of which have been
significant. For example, the industry supply of a portion of the insulation materials we install was disrupted due to historic
winter storms in the southern United States during the firff st quarter of 2021. This event, coupled with other industry impacm ts
such as sudden increased demand, resulted in insulation material allocation throughout the industry and, as a result, increased
market pricing which impacted our results of operations in 2021 and will likely impact 2022 as well. Increased market pricing,
regardless of the catalyst, could impact our results of operations in the future to the extent that price increases cannot be passed
on to our customers. While we continue to work with our customers to adjust selling prices to offset the aforemff
entioned higher
costs, there can be no assurance that any such action would have its intended effecff
individual quarterly periods can be, and have been, adversely affecff
are implemented and when we are ablea
often depend on volume requirements. If we do not meet these volume requirements, our costs could increase and our margins
may be adversely affected. In addition, while we have been ablea
relationships with suppli
business, which could have a material adverse effecff
ers, we may not be able to continue to receive advantageous pricing for the products that we use in our
t on our financial condition, results of operations and cash flows.
our products and services, if at all. Our supplier purchase prices
ted by a delay between when building product cost increases
to achieve cost savings through volume purchasing and our
t. In addition, our results of operations for
to increase prices forff
u
Our success depends on our key personnel.
the continued contributions of our senior management team. We do not have
Our business results depend largely uponu
employment agreements with any of our executive officers other than Jeff Edwards, our Chief Executive Officer and President.
Although Mr. Edwards’ employment agreement requires him to devote the amount of time necessary to conduct our business
and affairs
ff
interfere with his service to us, including non-competitive operational activities for his real estate development business. If we
lose members of our management team, our business, financial condition and results of operations, as well as the market price
of our securities, could be adversely affect
, he is also permitted to engage in other business activities that do not create a conflict of interest or substantially
ed.
ff
Our business results also depend upon our branch managers and sales personnel, including those of companies recently
acquired. While we customarily sign non-competm ition agreements, which typically continue for two years following the
termination of employment, with our branch managers and sales personnel in order to maintain key customer relationships in
our markets, such agreements do not protect us fully against competm ition from former employees.
14
We are dependent on attracting, training and retaining qualified employees while controlling labor costs.
market for the construction industry is competitive, including within the sector in which we operate. We must attract,
a
The labor
train and retain a large number of qualified employees to install our products while controlling related labor costs. We face
significant competition for these employe
it even more difficult forff
control labor
benefit costs. A significant increase in competition, minimum wage or overtime rates in localities where we have employees
could have a significant impact on our operating costs and may require that we take steps to mitigate such increases, all of
which may cause us to incur additional costs, expend resources responding to such increases and lower our margins.
costs is subject to numerous external factors, including competitive wage rates and health and other insurance and
es from our industry as well as from other industries. Tighter labor
costs. Our ability to attract qualified employees and
us to hire and retain installers and control labor
markets may make
m
a
a
a
Higher labor and health care costs could adversely affect our business.
Our labor costs have increased in recent years and may continue to increase as a result of competition, health and other
ff
insurance and benefit costs. In addition, health care coverage requirements, changes in workplace regulations and any future
legislation could cause us to experience higher health care and labor
health care and
insurance costs could have an adverse effect on our business, financial condition and results of operations.
costs in the futff ure.
Increased labor,
a
a
tt
Variability in self-insurance liability estimates could adversely impact our results of operations.
risks including, but not limited to, workers’ compensation, general liability, vehicle liability, property
We carry insurance forff
and our obligation for employee-related health care benefits. In most cases, these risks are insured under high deductible and/or
high-retention programs that require us to carry highly subjective liability reserves on our balance sheet. We estimate these
insurance liabila
ities by considering historical claims experience, including frequency, severity, demographic
actuarial assumptions, and periodically analyzing our historical trends with the assistance of external actuarial consultants. Our
accruals for insurance reserves reflect these estimates and other management judgments, which are subject to variabila
ity. If our
claim experience differs
reserves, our financial condition and results of operations could be adversely affected.
historical trends and actuarial assumptions and we then need to increase our
significantly fromff
factors and other
a
ff
Increases in union organizing activity and/or work stoppages could delay or reduce availability of products that we use
in our business and increase our costs.
Currently,ly, lless htha 4n % percent of our em lpl yoyees are covered bd byy c lolllectiive barga
However, if a larger number of our employees were to unionize, including in the wake of any futurett
easier forff
negatively affected. Any inabia lity by us to negotiate collective bargaining arrangements could cause strikes or other work
stoppages, and new contracts could result in increased operating costs. If any such strikes or other work stoppages occur, or if
other employees become represented by a union, we could experience a disruption of our operations and higher labor
employees to unionize, or if we acquire an entity with a unionized workforce in the future, our business could be
bargai iini gng or other similar labor agreements.
legislation that makes it
costs.
a
We participate in various multiemployer pension plans under collective bargaining agreements in Washington, Oregon,
California and Illinois with other companies in the construction industry. We also participate in various multiemployer health
and welfareff
plans that cover both active and retired participants. These plans cover most of our union-represented employees. If
a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may be borne by the
remaining participating employers. In addition, if a participating employer chooses to stop participating in these multiemployer
plans, the employer may be required to pay those plans a withdrawal liability based upon the underfunded status of the plan.
In addition, certain of our suppliers have unionized workforces and certain of our products are transported by unionized
truckers. Strikes or work stoppages could result in slowdowns or closures of facilities where the products that we use in our
t the ability of our suppliers to deliver such products to us. Any interruption in the
business are manufactured
production or delivery of these products could delay or reduce availability of these products and increase our costs.
or could affecff
tt
Increases in fuel costs could adversely affect our results of operations.
tt
The price of oil has fluctuat
ed over the last few years, creating volatility in our fuel costs. We do not currently hedge our fuel
costs. Increases in fuel costs can negatively impact our cost to deliver our products to our customers and thus increase our cost
of sales. If we are unable to increase the selling price of our products to our customers to cover any increases in fuel costs, net
income may be adversely affected.
15
Because we operate our business through highly dispersed locations across the United States, our operations may be
materially adversely affected by inconsistent practices and the operating results of individual branches may vary.
We operate our business through a network of highly dispersed locations throughout the United States, supported
and services at our corporate office, with local branch management retaining responsibility for day-to-day operations and
adherence to appl
us to coordinate procedures across our
operations in a timely manner or at all. In addition, our branches may require significant oversight and coordination from our
corporate office to support their growth. Inconsistent implementation of corporate strategy and policies at the local level could
materially and adversely affect our overall profitability, business, results of operations, financial condition and prospects.
icable local laws. Our operating structuret
can make it difficult forff
by executives
u
a
In addition, the operating results of an individual branch may differ
including market size, management practices, competm itive landscape, regulatory requirements, state and local taxes and local
economic conditions. As a result, certain of our branches may experience higher or lower levels of growth than other branches.
Therefore, our overall financial performance and results of operations may not be indicative of the performance and results of
operations of any individual branch.
from those of another branch forff
a variety of reasons,
ff
In the ordinary course of business, we are required to obtain performance bonds and licensing bonds, the unavailability
of which could adversely affect our business, financial condition, results of operations and/or cash flows.
We are often required to obtain performance bonds and licensing bonds to secure our performance under certain contracts and
other arrangements. In addition, the commercial construction end market also requires higher levels of performance bonding.
al, past performance, management expertise and certain external factors, including the overall capac
Our ability to obtain performance bonds and licensing bonds primarily depends on our credit rating, capia talization, working
capita
and the underwriting practices of surety bond issuers. The ability to obtain performance bonds and licensing bonds can also be
impacted by the willingness of insurance companies to issue performance bonds and licensing bonds. If we are unable to obtain
performance bonds and licensing bonds when required, our business, financial condition, results of operations and/or cash flows
could be adversely impacted.
ity of the surety market
a
Increasing scrutiny and changing expectations from stakeholders regarding our environmental, social and governance
("ESG") practices may impose additional costs on us or expose us to new or additional risks.
tt
onal investors, investment funds, lenders and other market participants, shareholders,
Investor advocacy groups, certain instituti
and customers have focused increasingly on the ESG or “sustainability” practices of companies and have placed increasing
importance on the social cost of their investments. If our ESG practices do not meet investor, lender, or other industry
stakeholder expectations and standards, which continue to evolve, our access to capita
assessment of our ESG practices. These limitations, in both the debt and equity markets, may negatively affect our ability to
manage our liquidity, our ability to refinaff
operations, and the price of our common stock.
nce existing debt, grow our businesses, implement our strategies, our results of
al may be negatively impacted based on an
We released our inaugural ESG report in 2021. The report includes our policies and practices on a variety of social and
environmental matters, including, diversity and inclusion initiatives, training and development programs, and employe
and safety practices as well as other sustainable business practices and environmental targets. It is possible that stakeholders
may not be satisfied with our ESG practices or the speed of their adoption. We could also incur additional costs and require
additional resources to monitor, report, and comply with various ESG practices. Also, our failure, or perceived faiff
the standards or targets set fort
retention, and the willingness of our customers and suppliers to do business with us.
h in the sustainability report could negatively impact our reputation and stock price, employee
m
ff
lure, to meet
e health
RISKS TO OUR BUSINESS FROM EXTERNAL THREATS
The COVID-19 pandemic could continue to adversely impact the U.S. economy as well as our business, financial
condition, operating results and cash flows.
According to the World Health Organization (“WHO”), in December 2019 China reported a cluster of cases of pneumonia in
Wuhan, Hubei Province later identified as a novel strain of coronavirus. In response, the WHO declared the situation a
pandemic and the U.S. Secretary of Health and Human Services declared a public health emergency. The COVID-19 pandemic
has caused significant volatility, uncertainty and economic disruption. Many public health organizations and international,
federal, state and local governments implemented measures to combat the spread of COVID-19 during 2020 and 2021. Some of
16
these measures included restrictions on movement such as quarantines, vaccine and/or masking requirements, “stay-at-home”
orders and social distancing ordinances and restricting or prohibiting outright some or all formff
activity. There is still significant uncertainty surrounding the duration and scope of the pandemic as well as its continued impact
on the economy. We cannot predict if federal, state and local governments will implement additional restrictions, when
restrictions currently in place will expire or whether restrictions currently in place will become more restrictive.
s of commercial and business
COVID-19 adversely affected many industries as well as the economies and financial markets of many countries, including the
United States, causing a significant deceleration of economic activity during a portion of 2020. This slowdown reduced
production, decreased the level of trade, and led to widespread corporate downsizing, causing a sharp increase in
unemployment in 2020 from which the economy is still recovering. The continued impact of this pandemic on the U.S. and
world economies is uncertain and these adverse impacm ts could worsen, impacting all segments of the global economy, and
result in a significant recession or worse.
dd
Our business has been adversely affected by the COVID-19 pandemic and the global response. The Company and its
customers’ businesses were classified as “essential” businesses in most of the jurisdictions in which we operate, permitting us
2020. However, there can be
to continue operations in most of our markets when COVID-19-related shutdowns occurred during
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
10% of our net revenue during the year ended December 31, 2019.
Bay Area of California, which collectively accounted forff
The reduced activity in these areas was attributable to construction being temporarily deemed non-essential during that time
period. While operations have resumed to normal levels in all of these areas, future mandatory shutdowns or reductions in
operations could have a material adverse effecff
t on our business. During 2020, we laid off or furloughed approximately 600
employees in areas where construction was not deemed “essential.” We have since rehired or brought back substantially all of
m
Any employe
those employees, but we may need to layoff or furlough other employees in the futff ure.
associated with futurett
but could result in long-term labor
shortages in certain markets if we cannot rehire these employees once operations resume. During the second half of 2021, new
variants of COVID-19 emerged that were more contagious than previous variants and caused some of our local branches to be
shut down or operations to be limited. We continue to assess this evolving situat
ion and may adjust our policies and processes
to continue to operate effectively.
branch closures or slowdowns are assumed to be temporary in naturet
e layoffs or furloughs
a
tt
t
the initial onset of the pandemic in 2020, the COVID-19 pandemic
ff
While the U.S. housing industry quickly rebounded fromff
may have a material adverse impacm t on our customers and the homebuilding industry in the future
stabilized, but inflation has been rising which could raise interest rates and may adversely affect consumer spending or
consumer confidence, both of which would typically decrease demand for homes. In the commercial sector, we have
experienced delays in the onset of certain large-scale infrastructure programs due to declining need for such structures and/or
project funding declines. Commercial spending rose in 2021, but remains below 2019 levels. Commercial projects could
decline in the future if consumer behaviors change in the wake of COVID-19 disruptions to the economy and changes to our
general ways of life. For example, reduced demand for office buildings, decreased airport traffic or decreased usage of sports
arenas could continue to impact our commercial end market.
. Unemployment levels have
The industry is currently experiencing manufacturer supply constraints forff many of the materials we use in our business due to
an unanticipated increase in demand as well as global supply chain bottlenecks as a result of manufacturing curtailments due to
COVID-19. These factors affecff
ted our ability to complete installation work for certain customers during 2021 and also required
us to source many of the materials we install fromff
For example, we estimate our cost of sales forff
adverse impact on our financial condition, operating results and cash flows.
year ended December 31, 2021 were approximately $8.8 million higher than they would have been if we purchased these
materials through regular channels. We anticipate this trend of higher materials costs as a result of disruptions caused by the
COVID-19 pandemic to continue into 2022.
distributors and retail outlets at a premium. These higher costs had an
the
ff
Our management is focused on mitigating the impact of COVID-19 on our business and the risk to our employees, which has
partially diverted management’s attention away from normal business operations. Additionally, we have taken a number of
precautionary measures intended to mitigate the impact of COVID-19 on our business and the risk to our employees, including
increasing the freff quency of regular cleaning and disinfecting processes at our facilities, adhering to social distancing and mask
protocols, limiting the number of workers in a branch or warehouse at any given time and periodically allowing employees to
work remotely when possible, which could adversely affect
personnel and/or a portion of our installer base could be unable to work due to sickness or the need to quarantine, or become
temporarily or permanently incapacitated by COVID-19 or related complications. This could result in a material adverse impact
While these and other measures we may take are believed
ff
on our business, financial condition, operating results and cash flows.
our business. Despite these measures, our key management
ff
17
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 affecff
cybersecurity risks.
t our business, including, but not limited to, internal controls and
Considerablea
uncertainty still surrounds COVID-19 and its duration and potential effects, as well as the extent of, and
effectiveness of, any responses taken on a local, national and global level. To date, vaccines have been developed and
treatments have improved, but it is too soon to know if they will protect against a worsening of the pandemic due to new
variants of the virus or other factors, or to prevent COVID-19 from becoming endemic. While we expect the COVID-19
pandemic and related events may have a negative effecff
l 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 affecff
business, financial condition, operating results and cash flows.
ted, any of which could have a material adverse impacm t on our
t on us in the future,
the fulff
tt
Our business is seasonal and may be affected by adverse weather conditions, natural disasters or other catastrophic
events.
We tend to have higher sales during the second half of the year as our homebuilder customers complete construction of homes
placed under contract for sale in the traditionally stronger spring selling season. In addition, some of our larger branches operate
in states impacted by winter weather and, as such, experience a slowdown in construction activity during
This winter slowdown contributes to traditionally lower sales and profitabila
ity in our first quarter.
inclement months.
d
In addition, climate change and/or adverse weather conditions, such as unusually prolonged cold conditions, rain, blizzards,
hurricanes, earthquakes, fires, other natural
disasters, epidemics or other catastrophic events could accelerate, delay or halt
construction or installation activity or impact our suppliers. For examplem , the February 2021 winter storms in the southern
United States significantly impacted our operations across the entire state of Texas. The impact of these types of events on our
business may adversely impact quarterly or annual net revenue, cash flows fromff
operations and results of operations. Weather
is one of the main reasons for annual seasonality cycles of our business, and any adverse weather conditions can enhance this
seasonality.
tt
We may be adversely affected by disruptions in our information technology systems.
individual
such information technology systems to manage customer orders on a
Our operations are dependent upon our information technology systems, including our web-enabled internal software
technology, jobCORE. The jobCORE software provides in-depth operational and financial performance data fromff
branch locations to the corporate office. We rely uponu
timely basis, coordinate our sales and installation activities across locations and manage invoicing. As a result, the proper
functioning of our information technology systems is critical to the successful operation of our business. Although our
information technology systems are protected through physical and software safeguards, our information technology systems
ity
are still vulnerablea
limits from unexpected increases in our volume of business, telecommunication faiff
A substantial disruption in our information technology systems forff
inventory and supplies or installing our products on a timely basis for our customers, which could adversely affect our
reputation and customer relationships.
to natural disasters, power losses, unauthorized access, delays and outages in our service, system capac
any prolonged time period could result in delays in receiving
r viruses and other problems.
lures, computem
a
18
In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional
costs, become subject to legal or regulatory proceedings or suffer damage to our reputation.
In addition to the disruptions that may occur in our information technology systems, cybersecurity threats and sophisticated and
targeted cyberattacks pose a risk to our information technology systems. We have established security policies, processes and
defenses designed to help identify and protect against intentional and unintentional misappropria
information technology systems and information and disruption of our operations. Despite these efforts
technology systems, including but not limited to jobCORE, finaff
management software, and risk management systems may be damaged, disrupted or shut down dued
access, malicious softwa
circumstances our disaster recovery plans may be ineffective or inadequate. These breaches or intrusions could lead to business
interruption, exposure of proprietary or confidential information, data corruption, damage to our reputation, exposure to legal
and regulatory proceedings and other costs. Such events could have a material adverse impacm t on our financial condition, results
of operations and cash flows. In addition, we could be adversely affecff
experiences any similar events that disrupt their business operations or damage their reputation.
re, computer viruses, undetected intrusion, hardware failures or other events, and in these
ncial systems, Human Resource and payroll systems, fleet
tion or corruption of our
, our information
ted if any of our significant customers or suppliers
to attacks by unauthorized
a
ff
ff
As cyberattacks become more sophisticated generally, we may be required to incur significant costs to strengthen our systems
to protect against outside intrusions and/or continue to maintain insurance coverage related to the threat of such attacks. While
we have invested in industry appropriate protections and monitoring practices of our data and information technology to reduce
these risks and test our systems on an ongoing basis for any current or potential threats, there can be no assurance that our
efforts will prevent breakdowns or breaches of our or our third-party providers’ databases
our business.
t
or systems that could adversely affecff
a
We carry cybersecurity insurance to help mitigate the financial exposure and related notification procedures in the event of
intentional intrusion. The measures that we implem ment to reduce and mitigate these risks may not be effecff
tive. While to date
these threats have not had a material impact on our business or operations, if such an event occurred, it could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
Terrorist attacks or acts of war against the United States or increased domestic or international instability could have
an adverse effecff
t on our operations.
Adverse developments in the war on terrorism, terrorist attacks against the United States or any outbreak or escalation of
gn power may cause disruption to the economy. Since our business is
hostilities between the United States and any forei
dependent on the housing and construction industries, such adverse effects on the economy could negatively affect these
industries and, therefore, our business, our employees and our customers, which could negatively impact our financial condition
and results of operations.
ff
RISKS ASSOCIATED WITH OUR GROWTH STRATRR EGY
We may not be able to continue to successfully expand into new products or geographic markets and further diversify
our business, which could negatively impact our future sales and results of operations.
Generally, we seek to acquire businesses that will complement, enhance, or expand our current business or product offerings, or
that might otherwise offer us growth opportunities into new or existing lines of business, including the expansion of our
national foot
and end markets. Our business depends in part on our ability to diversify and grow our businesses and also
t
print
expand the types of complementary building products that we install and sell. Our product and geographic expansion may not
be successful and may not deliver expected results, which could negatively impact our future sales and results of operations.
ff
Our expansion into new geographic markets may present competitive, local market and other challenges that differ
ones. We may be less familiar with the target customers and may facff e different or additional risks, as well as increased or
unexpected costs, compared to existing operations. Expansion into new geographic
markets may also bring us into direct
competition with companies with whom we have little or no past experience as competitors. To the extent we rely upon
expansion into new geographic markets for growth and do not meet the new challenges posed by such expansion, our future
sales growth could be negatively impacted, our operating costs could increase, and our business operations and financial results
could be adversely affecff
from current
ted.
a
ff
19
We may be unable to successfulff
acquisitions.
ly acquire and integrate other businesses and realize the anticipated benefits of
Acquisitions are a core part of our strategy and we may be unablea
to continue to grow our business through acquisitions. In
addition, acquired businesses may not perform in accordance with expectations, and our business judgments concerning the
value, strengths and weaknesses of acquired businesses may not prove to be correct. We may also be unable to achieve
expected improvements or achievements in businesses that we acquire. The value of our common stock foll
completion of an acquisition could be adversely affecff
on a timely basis or at all. Futuret
goodwill impairments, increased interest expense and amortization expense and significant integration costs. In addition, future
acquisitions could result in dilution of existing stockholders if we issue shares of common stock as consideration.
acquisitions may result in the incurrence of debt and contingent liabilities, legal liabilities,
to realize the expected benefits fromff
ted if we are unablea
the acquisition
owing the
ff
Acquisitions involve a number of special risks, including:
•
•
•
•
•
•
•
•
•
•
•
•
our inabila
ity to manage acquired businesses or control integration costs and other costs relating to acquisitions;
potential adverse short-term effecff
ts on operating results fromff
increased costs, business disruption or otherwise;
diversion of management’s attention;
loss of suppliers, customers or other significant business partners of the acquired business;
failuff
re to retain existing key personnel of the acquired business and recruit qualified new employees at the location;
failuff
re to successfully implement infrastructure, logistics and systems integration;
potential impairment of goodwill and other intangible assets;
risks associated with new lines of business and business models;
risks associated with the internal controls of acquired businesses;
exposure to legal claims forff
indemnification claims, including with respect to environmental and immigration claims;
activities of the acquired business prior to acquisition and inabila
ity to realize on any
the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabila
and
ities;
our inabila
ity to obtain finaff
ncing necessary to complete acquisitions on attractive terms or at all.
Our strategy could be impeded if we do not identify, or face increased competition for, suitablea
business, financial condition, results of operations and cash flows could be adversely affecff
were to occur.
acquisition candidates and our
ted if any of the foregoing factors
Our continued expansion into the commercial construction end market and other new lines of business could affect our
revenue, margins, financial condition, operating results and cash flows.
ff
nt business model than our traditional installation business. See Note
In December 2021, we acquired a new entity with a differe
19, Subsequent Events in the notes to our financial statements for additional information. This new line of business, our
commercial construction end market business and any other futurett
competitive, operational, finaff
installation business. For examplem , the typical contractual
construction end market are different than the residential new construction end market. In addition, our expansion into these
businesses may include opening new branches that have higher start-up costs compared to our acquired branches. These facff
and any other challenges we encounter could adversely affecff
tors
t our margins, financial condition, operating results and cash flows.
ncial and accounting challenges and other risks that differ fromff
our traditional residential
the commercial
lines of business we may enter or acquire involve
terms and arrangements and billing cycle forff
t
As of December 31, 2021, our estimated backlog associated with the commercial end market was approximately $143.2
million. In accordance with industry practice, many of our contracts are subjeu
ct to cancellation, reduction, termination or
suspension at the discretion of the customer in respect of work that has not yet been performed. In the event of a project
cancellation, we would generally have no contractual right to the total revenue reflected in our backlog but instead would
collect revenues in respect of all work performed at the time of cancellation as well as all other costs and expenses incurred by
us through such date. Projects can remain in backlog for extended periods of time because of the naturet
of the project, delays in
execution of the project and the timing of the particular services required by the project. Additionally, the risk of contracts in
backlog being canceled, terminated or suspended generally increases at times, including as a result of periods of widespread
ors impacting our business. Many of
macroeconomic and industry slowdown, weather, seasonality and many of the other fact
ff
20
the contracts in our backlog are subject to changes in the scope of services to be provided as well as adjustments to the costs
relating to the contracts. The revenue for certain contracts included in backlog are based on estimates. Therefore, the timing of
performance on our individual contracts can affect our margins and future profitability. There can be no assurance that backlog
will result in revenues within the expected timeframe, if at all.
Our customers could purchase materials directly fromff
manufacturers or other sources.
We do not have any exclusivity agreements with the manufacturers
acquire products fromff
building distribution centers. Our ability to grow our business would be impacted and it could negatively affect future net sales
and earnings. Additionally, if we are unable to secure favorablea
may not be able to offer competitive pricing to our customers.
could decide to invest more resources in selling their own products such as hiring salespeople and
arrangements on the products we sell from our suppliers, we
of the products that we sell. The manufacturers that we
tt
We may be subject to claims arising from the operations of our various businesses forff
acquired them.
periods prior to the dates we
ities arising from the
We have consummated over 180 acquisitions. From time to time we are subject to claims or liabila
ownership or operation of acquired businesses for the periods prior to our acquisition of them, including environmental,
employee-related and other liabilities and claims not covered by insurance. Any future claims or liabilities could be significant.
Our ability to seek indemnification from the former owners of our acquired businesses forff
ities may be
limited by various factors, including the specific time, monetary or other limitations contained in the respective acquisition
agreements and the financial ability of the formff
companies may be unwilling to cover claims that have arisen from acquired businesses or locations, or claims may exceed the
coverage limits that our acquired businesses had in effecff
insurance coverage of third-party claims or enforce our indemnification rights against the formff
owners are unablea
liable forff
and results of operations.
to satisfy their obligations for any reason, including because of their financial position, we could be held
er owners to satisfy our indemnification claims. In addition, insurance
the costs or obligations associated with such claims or liabila
ities, which could adversely affect our financial condition
t prior to the date of acquisition. If we are unablea
er owners, or if the former
these claims or liabila
to successfully obtain
LEGAL AND REGULATORY RR
ISKS
Changes in employment laws may adversely affect our business.
Various federal and state labor
a
laws govern the relationship with our employees and impact operating costs. These laws include:
•
•
•
employee classification as exemptm or non-exempt for overtime and other purposes;
workers’ compensat
m
ion rates;
immigration status;
tt
• mandatory health benefits;
•
•
tax reporting; and
other wage and benefit requirements.
We have significant exposure to changes in laws governing our relationships with our employees, including wage and hour
laws and regulations, fair labor standards, minimum wage requirements, overtime pay, unemployment tax rates, workers’
compensation rates, citizenship requirements and payroll taxes, which likely would have a direct impact on our operating costs.
Significant additional government-imposed increases in the preceding areas could have a material adverse effecff
business, financial condition and results of operations.
t on our
Our business could be adversely affected by changes in immigration laws or fail
eligibility of our employees.
ff ure to properly verify the employment
Some states in which we operate are considering or have already adopted new immigration laws or enforcement programs, and
the federal government from time to time considers and implem ments changes to federal immigration laws, regulations or
enforcement programs. These changes may increase our compliance and oversight obligations, which could subject us to
21
ity of potential employees. Although we
additional costs and make our hiring process more cumbersome, or reduce the availabila
verify the employment eligibility status of all our employees, including through participation in the “E-Verify” program in the
states that require it, some of our employees may, without our knowledge, be unauthorized workers. In addition, use of the “E-
Verify” program does not guarantee that we will properly identify all appl
Unauthorized workers are subjecb
be unauthorized, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to
hire and retain qualified employees. Termination of a significant number of employees duedd
regulatory issues may disrupt our operations, cause temporary increases in our labor
in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did
not fully comply with all recordkeeping obligations of federal and state immigration laws. These factors could have a material
adverse effect on our reputation, business, financial condition and results of operations.
t to deportation and may subject us to fines or penalties and, if any of our workers are found to
to work authorization or other
costs as we train new employees and result
icants who are ineligible for employment.
a
a
political focff us in recent years, and the U.S. Congress,
Furthermore, immigration laws have been an area of considerablea
Department of Homeland Security and the Executive Branch of the U.S. government from time to time consider or implement
changes to federal immigration laws, regulations or enforcement programs. Changes in immigration or work authorization laws
may increase our obligations for complim ance and oversight, which could subject us to additional costs and potential liabila
ity and
make our hiring process more cumbersome, or reduce the availability of potential employees. We are subject to regulations of
U.S. Immigration and Customs Enforcement, or ICE, and Department of Labor,
time to time by these
parties forff
regulations, if we are found
actions.
compliance with work authentication requirements. While we believe we are in compliance with appl
not to be in compliance as a result of any audits, we may be subject to fines or other remedial
and we are audited fromff
icable laws and
a
a
ff
Our results of operations, financial condition and cash flows could be adversely affected if pending or future legal claims
against us are not resolved in our favor.
We are subject to various claims and lawsuits arising in the ordinary course of business, including wage and hour lawsuits. The
ultimate resolution of these matters is subject to inherent uncertainties. It is possible that the costs to resolve these matters could
have a material adverse effect on our results of operations, financial condition or cash flows for the periods in which the matters
are resolved. Similarly, if additional claims are filed against us in the future, the negative outcome of one or more of such
matters could have a material adverse effect on our results, financial condition and cash flows.
ff
The nature of our business exposes us to product liability, workmanship warranty, casualty, negligence, construction
defect, breach of contract and other claims and legal proceedings.
We are subject to product liability, workmanship warranty, casualty,t negligence, construction defect, breach of contract and
other claims and legal proceedings relating to the products we install or manufacture that, if adversely determined, could
adversely affecff
and other suppliers to
t our financial condition, results of operations and cash flows. We rely on manufacturers
provide us with most of the products we use in our business. Other than for our manufacturer of cellulose insulation, we do not
have direct control over the quality of such products manufactured
exposed to risks relating to the quality of such products.
or supplied by such third-party suppliers. As such, we are
t
tt
In addition, we are exposed to potential claims arising from the conduct of our employees, homebuilders and other
subcontractors, for which we may be contractually liabla e. We have in the past been, and may in the future
penalties and other liabia lities in connection with injury
The naturet
to persons and property that, if realized, could be material. Although we currentl
adequate insurance, we may be unablea
to maintain such insurance on acceptablea
adequate protection against potential liabilities. In addition, some liabilities may not be covered by our insurance.
s,
or damage incurred in conjunction with the installation of our products.
and extent to which we use hazardous or flammablea materials in our manufacturing processes creates risk of damage
y maintain what we believe to be suitablea
terms or such insurance may not provide
be, subject to fineff
and
n
ff
r
r
casualty, negligence, construction defect, breach of contract and other claims and
significant
Product liability, workmanship warranty,
legal proceedings can be expensive to defend and can divert the attention of management and other personnel forff
periods of time, regardless of the ultimate outcome. In addition, lawsuits relating to construction defects typically have statutes
of limitations that can run as long as ten years. Claims of this nature could also have a negative impacm t on customer confidence
in us and our services. Current or futuret
condition and results of operations. For additional information, see Note 16, Commitments and Contingencies, to our audited
consolidated finaff
claims could have a material adverse effect on our reputation, business, financial
ncial statements included in this Form 10-K.
22
Federal, state, local and other laws and regulations could impose substantial costs and/or restrictions on our operations
and could adversely affect our business.
t
egulations promulgated by the OSHA, employment regulations promulgated by the U.S. Equal
ommission and tax regulations promulgated by the Internal Revenue Service and various other state
We are subject to various federal, state, local and other laws and regulations, including, among other things, worker and
workplace health and safety r
Employment Opportunity Ct
and local tax authorities. Our primary manufacturing facility is also subject to additional laws and regulations which may
increase our exposure to health and safety liabilities. In addition, we are subject to increased regulation of data privacy and
information security, including the adoption of more stringent state laws, such as the California Consumer Privacy Act and the
California Privacy Rights Act, which goes into effect in January 2023. These types of data privacy and security laws, which
non-compliance.
continue to evolve, create a range of new complim ance obligations for us and increase financial penalties forff
Additional or more burdensome regulatory requirements in these or other areas may increase our expenses, reduce demand for
our services or restrict our ability to offer services in certain geographies, all of which could adversely affecff
financial condition, results of operations and cash flows. Moreover, our failure to comply with any of the regulatory
requirements appli
business, financial condition, results of operations and cash flows.
to our business could subject us to substantial finff es and penalties that could adversely affect our
t our business,
cablea
a
Our transportation operations, which we depend on to transport materials from our locations to job sites or customers, are
subject to the regulatory jurisdiction of the DOT. The DOT has broad administrative powers with respect to our transportation
operations. More restrictive limitations on vehicle weight and size, trailer length and configuration or driver hours of service
would increase our costs, which may increase our expenses and adversely affect our financial condition, operating results and/
or cash flows. If we fail to comply with DOT regulations or the regulations become more stringent, we could experience
increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our
operations, and we could be subject to increased audit and compliance costs. We organize our transportation operations as a
separate legal entity in certain states, including Ohio and Indiana, to take advantage of sales tax exemptions relating to vehicle
operating costs. If legislation is enacted that modifies or eliminates these exemptions, our costs may increase. If any of these
events were to occur, our financial condition, results of operations and cash flows may be adversely affecff
ted.
ct to various federal, state and local
In addition, the residential construction and commercial construction industries are subjeu
statutett
s, ordinances, rules and regulations concerning zoning, building design and safety, construction, contractors’ licensing,
energy conservation and similar matters, including regulations that impose restrictive zoning and density requirements on the
residential new construction industry or that limit the number of homes that can be built within the boundaries of a particular
area. Regulatory restrictions and industry standards may require us to alter our installation processes and our sourcing, increase
our operating expenses and limit the availabila
affect our business, financial condition and results of operations.
building lots for our customers, any of which could negatively
ity of suitablea
We are subject to environmental regulation and potential exposure to environmental liabilities.
ct to various federal, state and local environmental laws and regulations. Although we believe that we operate our
icable laws and regulations and maintain all material permits
We are subjeu
business, including each of our locations, in complim ance with appl
required under such laws and regulations to operate our business, we may be held liablea
with such requirements. In addition, environmental laws and regulations, including those related to energy use and climate
change, may become more stringent over time, and any future laws and regulations could have a material impact on our
operations or require us to incur material additional expenses to comply with any such future laws and regulations.
or incur fines or penalties in connection
a
ities. Despite providing a benefit to the environment by making structures more energy efficient, certain
Our primary manufacturing facility is also subject to additional laws and regulations which may increase our exposure to
environmental liabila
types of insulation, particularly spray foamff
substances. While our employees who handle these and other potentially hazardous or toxic materials, including lead-based
paint, receive specialized training and wear protective clothing, there is still a risk that they, or others, may be exposed to these
substances. Exposure to these substances could result in significant injury
occupants, and damage to our property or the property of others, including natural resource damage. Our personnel and others
at our work sites are also at risk forff
applications, require our employees to handle potentially hazardous or toxic
other workplace-related injuries, including slips and falls.
to our employees and others, including site
n
In addition, as owners and lessees of real property, we may be held liablea
substances, including asbestos or petroleum products on, at, under or emanating from currently or formerly owned or operated
properties, or any off-site disposal locations, or for any known or newly discovered environmental conditions at or relating to
any of our properties, including those arising from activities conducted by previous occupants or at adjoid
ning properties,
without regard to whether we knew of or were responsible for such release. We may be required to investigate, remove,
for, among other things, hazardous or toxic
23
remediate or monitor the presence or release of such hazardous or toxic substances or petroleum products. We may also be held
fines, penalties or damages, including for bodily injury, property damage and natural resource damage in connection
liable forff
with the presence or release of hazardous or toxic substances or petroleum products. In addition, expenditures may be required
in the futff uret
currently unknown environmental conditions or changes in environmental laws and regulations or their interpretation or
enforcement and, in certain instances, such expenditures
as a result of releases of, or exposure to, hazardous or toxic substances or petroleum products, the discovery of
may be material.
tt
RISKS RELATED TO OUR INDEBTEDNESS
We have debt principal and interest payment requirements that may restrict our future operations and impair our
ability to meet our obligations.
Our degree of leverage and level of interest expense may have important consequences, including:
•
•
•
our leverage may place us at a competitive disadvantage as compared with our less leveraged competitors and make us
more vulnerable in the event of a downturn in general economic conditions or in any of our businesses;
our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate may be
limited;
a substantial portion of our cash flow from operations will be dedicated to the payment of interest and principal on our
indebtedness, thereby reducing the funds available to us forff
al expenditures, acquisitions, future
business opportunities or obligations to pay rent in respect of our operating leases; and
operations, capita
Our ability to service our debt and other obligations will depend on our future operating performance, which will be affecff
prevailing economic conditions and financial, business and other facff
may not generate sufficient cash flow, and future
these obligations or to successfully execute our business strategies. See Part II, Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations, "Liquidity and Capia tal Resources, Credit Facilities."
tors, many of which are beyond our control. Our business
to provide sufficient net proceeds, to meet
financings may not be availablea
ted by
ff
Restrictions in our existing credit facilities, senior notes, and any future facff
incur in the future, limit our ability to take certain actions and could adversely affect our business, financial condition,
results of operations, and the value of our common stock.
ilities or any other indebtedness we may
ilities, or any futuret
Our credit facff
we may incur, impose certain restrictions and obligations on us. Under certain of these instruments, we must comply with
defined covenants that limit our ability to, among other things:
facilities we may enter into, the indenturett
governing our senior notes, or other indebtedness
•
incur or guarantee additional debt and issue preferred stock;
• make distributions or dividends on or redeem or repurchase shares of common stock;
• make certain investments and acquisitions;
• make capital expenditures;
•
•
•
•
incur certain liens or permit them to exist;
enter into certain types of transactions with affilff
iates;
acquire, merge or consolidate with another company; or
transfer, sell or otherwise dispose of all or substantially all of our assets.
ilities contain, and any future
facilities or other debt instruments we may enter into may contain, covenants
ff
ncial ratios and meet certain tests, such as an excess cash flow test, fixed charge coverage
Our credit facff
requiring us to maintain certain finaff
ratio, leverage ratio or debt to earnings ratio. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition
and Results of Operations, "Liquidity and Capia tal Resources, Credit Facilities." Our ability to comply with those financial ratios
and tests can be affected by events beyond our control, and we may not be able to comply with those ratios and tests when
required to do so under the applicable debt instruments.
The provisions of our credit facilities, or other debt instruments, may affect our ability to obtain futurett
attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. In addition,
financing and pursue
24
ff ure to comply with the provisions of our credit facilities, any future credit facility, the indenture governing our senior
a fail
notes, or other debt instruments could result in a default or an event of default that could enable our lenders or other debt
holders to declare the outstanding principal of that debt, together with accruedrr
payablea
could experience a partial or total loss of their investment.
. If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and our stockholders
and unpaid interest, to be immediately due and
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.
in existence at the time of this Form 10-K as a cash flowff
(“ASC”) 815, Derivatives and Hedging. However, in the future, we may fail to qualify for hedge accounting
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 interest
rate swapsa
Codification
ff
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 instruments are not highly effective. If we faiff
accounting treatment, losses on the swaps caused by the change in its faiff
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.
r value would be recognized as part of net income,
hedge in accordance with Accounting Standards
l to qualify for hedge
Interest rate derivative instruments can be expensive and we could incur significant costs associated with the settlement or early
termination of the agreements. In addition, our hedging transactions may expose us to certain risks and finaff
including, among other things:
ncial losses,
•
•
•
•
•
the risk that the other parties to the agreements would not perform;
the risk that the duration or amount of the hedges 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 fromff
changes in fair values including downward adjustments which would affecff
time to time in accordance with accounting rules to reflect
t 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.
If we default on our obligations under the instruments governing our indebtedness, we may not be able to make
payments on our debt and our business and financial condition could be adversely affected.
ff ure by us to comply with the agreements governing our indebtedness, including, without limitation, our existing credit
A fail
facilities or any future facilities, the indenturett
restrictive, finaff
d costs or to post collateral
under
(including under hedging arrangements) could result in a variety of material adverse consequences, including a default
our indebtedness and the exercise of remedies by our creditors, lessors and other contracting parties, and such defaults could
trigger additional defaul
ncial and other covenants included therein), to pay our indebtedness and fixeff
governing our senior notes and our other contractual obligations (including
ts under other indebtedness or agreements.
ff
ff
Any such default under the agreements governing our existing or futurett
such indebtedness could make us unable to make payments to pay principal of, or premium, if any, and interest on the senior
notes, substantially decrease the market value of the senior notes and result in a cross-default under the senior notes. In the
event of a default under our existing credit facff
such indebtedness may be ablea
terminate outstanding credit commitments and/or may be ablea
declare all of the funds borrowed under the appli
unpaid interest, and we could be forced into bankruptcy or liquidation.
to
to cease making loans to us and, in any event, could elect to
agreement to be immediately due and payable, together with accruedrr
ilities or any future facilities or in respect of other indebtedness, the holders of
cash flow to be used to pay such indebtedness, may be ablea
indebtedness and the remedies sought by the holders of
to cause all of our availablea
cablea
and
a
If our operating performance declines, we may need to seek waivers from the holders of our indebtedness to avoid being in
default under the instruments governing such indebtedness. If we breach our covenants under our indebtedness, we may not be
25
able to obtain a waiver fromff
default under such indebtedness, the holders of such indebtedness and other lenders could exercise their rights as described
above, and we could be forced into bankruptcy or liquidation.
the holders of such indebtedness on terms acceptable to us or at all. If this occurs, we would be in
Adverse credit ratings could increase our costs of borrowing money and limit our access to capital markets and
commercial credit.
Moody’s Investor Service and Standard & Poor’s routinely evaluate our credit profile on an ongoing basis and have assigned
ratings for our long-term debt. If these rating agencies downgrade any of our current credit ratings, our borrowing costs could
increase and our access to the capita
agencies have started to incorporate ESG factors into their credit ratings. Unfavorable ESG ratings could have a negative impact
on our access to and costs of capia tal.
al and commercial credit markets could be adversely affected. Additionally, some rating
Our indebtedness exposes us to interest expense increases if interest rates increase.
If interest rates increase, our debt service obligations on our variablea
would increase even though the amount borrowed would remain the same, and our net income and cash flows would
correspondingly decrease. Specifically, we had no outstanding borrowings on our Revolver, as hereinafter defined, as of
December 31, 2021, but should we have a balance in the future, we would incur interest based on a rate that varies per the
conditions set fort
rate indebtedness, if any exists at the balance sheet date,
h in our agreement.
ff
t
a
mated the prime rate) plus a margin based on the type of rate applied and leverage
In addition, advances under our credit facilities generally bear interest based on, at our election, either the Eurodollar rate
(“LIBOR”) or the base rate (which approxi
ratio. On July 27, 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. The Intercontinental Exchange
Benchmark Administration, the administrator of LIBOR, announced in November 2020 a consultation regarding its intention to
extend the publication of certain LIBOR settings, including the setting we use as a reference rate, to June 2023. On Mar hch 5,
2021, hthe FCA announcedd thhat thhe overnight
contiinue to bbe
publi
publica ition of non-representa itive ysyn hth ietic rates forff
Bothh o rur Term Loan Agreement, and our ABL Credit Agreement, as hereinafter defined, include a provision related to the
potential discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate ("SOFR") values or
another alternate benchmark rate. However, if LIBOR ceases to exist after June 2023, the SOFR rates or other interest rates
under the alternative rate could be higher than LIBOR. To the extent that these interest rates are higher, our interest expense
will increase, which could adversely affect our financial condition, operating results and cash flows.
publi hshedd u intill June 30, 2023. hThe FC iA is curre lntlyy considideringring hwhe hther to use iits powers to com lpel hthe
one- monthh, hthree-m honth andd siix-monthh USD LIBOR beyond
isix-m honth andd 12-monthh USD LIBOR rates
rnight, one-m honth, hthree-monthh,
beyond June 2023.
lwouldd
bli
Our term loan bears interest at a variable rate, however interest rate hedges in place mitigate the risk of interest rate flucff
associated with a portion of the outstanding debt balance. These derivative instruments are indexed to LIBOR, the value of
which could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an
alternative reference rate may be challenging, especially if we cannot agree with the respective counterparty about how to make
the transition. If a contract is not transitioned to an alternative reference rate and LIBOR is discontinued, the impact on our
contracts is likely to vary brr
y contract. If LIBOR is discontinued or if the methods of calculating LIBOR change from their
current form, interest rates on our current or futurett
ted. While we currently expect LIBOR
to be available to us as a reference rate in substantially its current form until June 2023, it is possible that LIBOR will become
unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR
administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and
magnified.
indebtedness may be adversely affecff
tuations
We may require additional capital in the future, which may not be available on favorable terms or at all.
ff
business combinations and expansion of our existing operations. We anticipate that we may need
in order to grow our business and implement our business strategy. We anticipate that any such
Our future capia tal requirements will depend on many factors, including industry and market conditions, our ability to
successfully complete futff urett
to raise additional funds
additional funds may be raised through equity or debt financings. Any equity or debt financing, if availablea
terms that are not favorablea
we are able to raise capita
stockholders in our company may be diluted, and the securities we issue may have rights, preferences and privileges that are
t the holdings or rights of our existing
senior to those of our common stock or may otherwise materially and adversely affecff
al through equity or debt financings, as to which there can be no assurance, the interest of existing
at all, may be on
al markets environment. Even if
to us and will be subject to changes in interest rates and the capita
26
stockholders. If we cannot obtain adequate capital, we may not be able to full
business, results of operations and financial condition could be adversely affected.
ff
y implement our business strategy and our
RISKS RELATED TO OUR SECURITIES
The price of our common stock may fluctuate substantially and your investment may decline in value.
The market price of our common stock may be significantly affected by factors, such as:
• market conditions affecting the residential construction, commercial construction and building products industries;
•
•
•
•
•
•
•
•
•
•
•
•
•
quarterly variations in our results of operations;
changes in government regulations;
the announcement of acquisitions by us or our competitors;
changes in general economic and political conditions;
volatility in the financial markets;
results of our operations and the operations of others in our industry;
changes in interest rates;
the reduction, suspension or elimination of dividend payments;
threatened or actual litigation and government investigations;
the addition or departurett
of key personnel;
actions taken by our stockholders, including the sale or disposition of their shares of our common stock;
the extent of short-selling of shares of our common stock and the stock of our competitors; and
rences between our actual finff ancial and operating results and those expected by investors and analysts and
diffeff
changes in analysts’ recommendations or projections.
These and other factors may lower the market price of our common stock, regardless of our actual operating performance.
Furthermore, in recent years the stock market and the price of our common stock has experienced significant price and volume
fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including
ar to occur without regard to the operating performance of the affected
companies in our industry. The changes frequently appe
companies. Hence, the price of our common stock could fluctuat
and these fluctuat
investment.
ions could materially reduce the price of our common stock and materially affecff
e based upon factors that have little or nothing to do with us,
t the value of your
a
tt
t
Our internal controls over financial reporting may not be effective, which could have a significant and adverse effecff
our business and reputation.
t on
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-
Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide
an annual management report on the effectiveness of controls over financial reporting.
To comply with the requirements of being a public company, we may undertake various actions, such as implementing
additional internal controls and procedures and hiring additional accounting or internal audit staff.
Testing and maintaining internal controls can divert our management’s attention from other matters that are important to the
operation of our business. If we identify material weaknesses in our internal controls over financial reporting or are unablea
to
comply with the requirements of Section 404 or are unablea
effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our
common stock could be negatively affecff
authorities, which could require additional financial and management resources.
ted, and we could become subject to investigations by the SEC or other regulatory
to assert that our internal controls over financial reporting are
27
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our
stock price.
The market price of our common stock could decline significantly as a result of sales of a large number of shares of our
common stock. These sales, or the perception that these sales might occur, could depress the market price of our common stock
or make it more difficult for us to sell equity securities in the futff urett
at a time and at a price that we deem appropria
te.
a
iates, the sale of which will be restricted under the Securities Act of 1933, as amended. As of
We have approximately 29.7 million shares of common stock outstanding as of December 31, 2021. The shares of common
stock are freff ely tradable, except for any shares of common stock that may be held or acquired by our directors, executive
officers and other affilff
December 31, 2021, approximately 1.8 million of the 3.0 million shares of common stock authorized forff
2014 Omnibus Incentive Plan were availablea
future, subject to certain legal and contractual limitations. If our existing stockholders sell substantial amounts of our common
stock in the public market, or if the public perceives that such sales could occur, this could have an adverse impact on the
market price of our common stock, even if there is no relationship between such sales and the performance of our business.
for issuance. These shares will become eligible for sale in the public market in the
issuance under the
Jeff Edwards has significant ownership of our common stock and may have interests that conflict with those of our
other stockholders.
As of December 31, 2021, Jeff Edwards beneficially owned approximately 17.8% of our outstanding common stock. As a result
of his beneficial ownership of our common stock, he has sufficient voting power to significantly influence all matters requiring
stockholder approval, including the election of directors, amendment of our amended and restated certificate of incorporation
and approval of significant corporate transactions, and he has significant influence over our management and policies. This
t of delaying or preventing a change in control of us or discouraging others
concentration of voting power may have the effecff
from making tender offers for our shares of common stock, which could prevent stockholders from receiving a premium for
their shares of common stock. These actions may be taken even if other stockholders oppose them. The interests of Jeff
Edwards may not always coincide with the interests of other stockholders, and he may act in a manner that advances his best
interests and not necessarily those of our other stockholders. In addition, under our amended and restated certificate of
incorporation, Jeff Edwards is permitted to pursue corporate opportunities for himself, rather than forff
us.
Provisions of our charter documents and Delaware law could delay, discourage or prevent an acquisition of us, even if
the acquisition would be beneficial to our stockholders, and could make it more difficult for our stockholders to change
our management.
ff
Our amended and restated certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or
blea
other change in control that stockholders may consider favora
receive a premium for their shares of our common stock. In addition, these provisions may frustra
our stockholders to replace or remove our current management by making it more difficult to replace or remove members of our
board of directors. These provisions include a classified board of directors with three-year staggered terms; no cumulative
voting in director elections; the exclusive right of our board of directors to fill vacancies on our board; the ability of our board
to authorize the issuance of shares of preferred stock and to determine the price and other terms without stockholder approval; a
prohibition on stockholder action by written consent; a requirement that a special meeting of stockholders be called only by a
resolution duly adopted by our board; and advance notice procedures that stockholders must comply with in order to nominate
candidates to our board of directors or to propose matters to be acted upon
, including transactions in which stockholders might otherwise
te or prevent any attempt by
at a stockholders’ meeting.
u
ff
rr
on Law, which prohibits a person who owns 15% or more of our outstanding voting stock fromff
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General
Corporati
with us for a period of three years afteff
voting stock, unless the merger or combination is approved in a prescribed manner. Any delay or prevention of a change of
control transaction or changes in our board of directors and management could deter potential acquirers or prevent the
completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price
for their shares of our common stock.
merging or combining
r the date of the transaction in which the person acquired 15% or more of our outstanding
We pay dividends to holders of our common stock, but may reduce, suspend, or eliminate dividend payments in the
future.
Our board of directors approved the initiation of a quarterly cash dividend program in 2021. We also announced that our board
on March 31, 2022 at a rate of 90 cents per common share.
of directors has approved our first annual variable dividend, payablea
28
However, part of our business strategy includes retaining our futuret
growth of our business, including our continued growth by acquisition strategy, and, therefore, we may reduce, suspend or
eliminate dividend payments in the futff ure.
directors and will depend on our financial condition, results of operations, capita
of our credit facilities, or any then-existing debt instruments, and such other factors as our board of directors deems relevant.
Accordingly, investors in our common stock may need to sell their shares to realize a returnt
them.
stock, and investors may not be able to sell their shares at or above the prices paid forff
Any future determination to pay dividends will be at the discretion of our board of
earnings, if any, in order to reinvest in the development and
al requirements, the limits imposed by the terms
on their investment in our common
tt
If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable
commentary, the price of our common stock could decline.
The trading price for our common stock depends in part on the research and reports about
the financial industry. Analysts could issue negative commentary about us or our industry, or they could downgrade our
common stock. We may also not receive sufficient research coverage or visibility in the market. Any of these facff
result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of
their investment.
us that are published by analysts in
tors could
a
Item 1B.
Unresolved Staff Comments
None.
29
Item 2.
Properties
Real Property
We lease office and warehouse space in 38 states, including our corporate office in Columbus, Ohio. Our leases are typically
short in duration with customary extensions at our option. We believe suitable alternative space is availablea
markets. We also own our cellulose manufacturing facility in Bucyrus, Ohio. We believe that our facilities are suitable and
adequate forff
summarizes our locations as of December 31, 2021.
ity in such facilities is substantially being utilized. The tablea
present purposes, and that the productive capac
in all of our
a
below
Number of
Locations
3
2
24
13
2
4
26
14
3
6
13
1
4
2
3
4
4
3
8
Approximate
Total Square
Footage
State
29,150
26,159
231,269
124,621
31,292
37,175
234,133
220,471
43,000
80,118
237,676
14,206
46,330
19,535
38,750
59,710
45,303
41,800 Washington
Nebraska
Nevada
New Hampshire
New Jersey
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
231,885 Wisconsin
Number of
Locations
2
1
8
4
8
13
10
3
2
3
7
2
7
18
7
1
6
12
9
Approximate
Total Square
Footage
23,241
15,350
76,920
41,100
101,630
155,765
443,995
35,543
32,928
41,894
103,475
50,000
111,482
349,982
115,523
31,020
73,941
147,770
187,131
State
Alabama
Arizona
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Our Fleet
As of December 31, 2021, our fleet consisted of approximately 5,300 total vehicles that we either leased or owned, including
approximately 5,100 installation vehicles that our installers use to deliver and install products from our locations to job sites,
and approximately 200 other vehicles that are utilized for various purposes, primarily by our sales staff, bff
ranch managers and
various senior management personnel. For additional information, see Note 8, Long-Term Debt, and Note 16, Commitments
and Contingencies, to our audited consolidated financial statements included in this Form 10-K.
Item 3.
Legal Proceedings
We are involved in various claims and lawsuits incidental to the conduct of our business in the ordinary course, including wage
and hour lawsuits. We carry insurance coverage that we believe to be reasonable under the circumstances, although insurance
may or may not cover any or all of our liabilities in respect to claims and lawsuits. While management currently believes that
the ultimate resolution of these matters, individually or in the aggregate, will not have a material adverse effecff
consolidated financial position, results of operations or cash flows,
16, Commitments and Contingencies, within Part II, Item 8, Financial Statements and Supple
for additional information on significant legal proceedings.
such matters are subject to inherent uncertainties. See Note
mentary Data, of this Form 10-K
t on our
u
ff
Item 4.
Mine Safety Disclosures
Not applicable.
30
Item 5.
Market forff Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
PART II
Market Information for Common Stock
Our common stock is traded on the NYSE under the symbol “IBP.”
Holders of Record
bruary 17,
As of February
holder of shares held through the Depository Trust Company.
,
2022 there were 939 holders of record of our common stock, one of which was Cede & Co., which is the
Dividend Policy
Our board of directors approved the initiation of a quarterly cash dividend program in 2021, payable to stockholders of record
on specific dates each quarter. In addition to the quarterly cash dividend, our board of directors has approved our first annual
variable dividend, payablea
dividends on our common stock during the years ended December 2020 or 2019. Future determinations relating to payments of
dividends will be made at the discretion of our board of directors and will depend on a number of factors, including our futuret
earnings, capita
factors our board of directors may deem relevant.
on March 31, 2022 at a rate of 90 cents per common share. We did not declare or pay any cash
al requirements, financial condition, futurett
restrictions, legal requirements and other
prospects, contractual
tt
ff
Stock Performance
Graph
below compares the cumulative total shareholder return on our common stock with the cumulative total returnt
The tablea
the Russell 2000 Index (“Russell 2000”), (ii) the Standard & Poor’s Industrials Index (“S&P 500 Industrials”) and (iii) the S&P
Smallcap 600 Index (“S&P Smallcap 600”). The graph assumes investments of $100 in our common stock and in each of the
three indices and the reinvestment of dividends for the last five fiscal years through December 31, 2021.
of (i)
s
n
r
u
t
e
R
e
c
i
r
P
$
400
300
200
100
0
12/31/2016
12/29/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
IBP
Russell 2000
S&P 500 Industrials
S&P Smallcap 600
IBP
Russell 2000
S&P 500 Industrials
S&P Smallcap 600
12/31/2016
12/29/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
100
100
100
100
184
115
121
113
82
102
105
104
167
128
136
127
247
153
151
141
342
176
182
179
31
Purchases of Equity Securities by the Issuer
The following tabla e shows the stock repurchase activity for the three months ended December 31, 2021:
October 1 - 31, 2021
November 1 - 30, 2021
December 1 - 31, 2021
Total Number of
Shares Purchased
101
Average Price Paid
Per Share
$
106.82
—
—
—
—
Total Number of
Shares Purchased
as Part of Publiu
cly
Announced Plans
or Programs
—
—
—
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
under the Plans or
Programs (1)
—
—
—
101
$
106.82
— $
100.0 million
(1) In February 2018, our board of directors authorized a $50.0 million stock repurchase program, and in October 2018, they
increased the program by an additional $100.0 million. In February
2020, our board of directors approved an extension of
the existing stock repurchase program to March 1, 2021 and in February 2021, they extended the share repurchase plan to
March 1, 2022 while simultaneously approving us to purchase up to $100.0 million of our outstanding common stock.
During the year ended December 31, 2021, we did not repurchase any shares of our common stock under our stock
repurchase program. On February 24, 2022, we announced that our board of directors authorized an extension of our stock
repurchase program through March 1, 2023 and concurrently authorized an increase in the total amount of our outstanding
common stock we can purchase up to $200.0 million. For more information about our stock repurchase program, see Note
12, Stockholders' Equity within Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
rr
Recent Sales of Unregistered Securities
During 2021, we did not issue or sell any unregistered equity securities.
Item 6.
[Reserved]
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ial Statements att
nd related notes thereto included in
You should read the following in conjunction with the consolidated finff ancial statements att
Item 8, Financ
ooking
on contains forward-l
ii
discussi
FF
statements reflecting current expex
materially from those contained in these
the section captia
nd uncertainties. Actual results and the timing of events may diffeff r
forward-looking statements due to a number of fac
nd Supplemental Data, of Part II of this Fii
tors, including those discussed in
oned “Riskii Factors” and elsewll
ctations that involve risks akk
here in this Fii
10-K. TKK hisTT
10-K.KK
ormFF
ormFF
rr
tt
ff
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 fireff
gutters, window blinds, shower doors, closet shelving, mirrors and other products throughout the United States. We offer our
portfolio of services forff
continental states and the District of Columbia from our national network of over 210 branch locations. The vast majoa rity of our
net revenue comes fromff
service-based installation of these products in the residential new construction, repair and remodel and
grow due to our
commercial construction end markets. We believe our business is well positioned to continue to profitablya
strong balance sheet, liquidity and our continuing acquisition strategy. See “Key Factors Affecting Our Operating Results,
COVID-19 Impacts” below for a discussion of short-term impacts to our business from the pandemic.
new and existing single-family and multi-family residential and commercial building projects in all 48
proofing, garage doors, rain
tors, including demographic
A large portion of our net revenue comes fromff
economic facff
levels, foreclosure rates, the health of the economy and availability of mortgage financing. Our strategic acquisitions over the
last several years contributed meaningfully to our 19.1% increase in net revenue during the year ended December 31, 2021
compared to 2020.
trends, interest rates, consumer confidence, employment rates, housing inventory
the U.S. residential new construction market, which depends upon a number of
a
32
We have omitted discussion of 2019 results in the sections that folff
included in Part II, Item 7, of our Form 10-K for the year ended December 31, 2020.
low where it would be redundant
d
to the discussion previously
2021 Highlights
i
Net revenues increased 19.1%, or $315.4 million, while gross profit increased 15.6% to $589.5 million during the year ended
December 31, 2021 compared to 2020. We also generated approximately $138.3 million of cash from operating activities. The
increase in net revenue and gross profit was primarily driven by the contribution of our recent acquisitions, selling price and
product mix improvements as evidenced by the 3.2% increase in our price/mix metric and increased sales volume of 7.7% on a
same branch basis. Gross profit grew slower than revenue primarily dued
supply chain constraints, higher fuel
challenges fromff
materials, particularly spray foam, gutters, and other complementary installed products, continued to be difficult to source near
volume and pricing levels secured in prior periods.
costs and reduced efficiencies within the large commercial construction market dued
the COVID-19 pandemic. Inflationary pressure contributed to the year-over-year margin compression as
to higher material costs caused by pandemic-related
to
ff
to take advantage of favorablea market conditions, entering into a new term loan credit agreement which provided forff
As of December 31, 2021, we had $333.5 million of cash and cash equivalents. In December 2021, we modified our debt
structurett
a
seven-year $500 million term loan facility. A portion of the proceeds from the term loan were used to repay, in full, all amounts
outstanding under the previous term loan agreement. We had not drawn on our $200.0 million revolving line of credit existing
at December 31, 2021, which was increased to $250.0 million in February of 2022. Additionally, we paid our first quarterly
dividends as a public company in 2021.
During the year ended December 31, 2021, we experienced overall sales growth in all of our end markets and we achieved
9.7% year-over-year same branch sales growth, with acquisitions contributing the remaining portion of our total sales growth.
Our largest end market, the single-family subset of the residential new construction market, grew revenue 21.9% over the same
period in 2020. Our commercial end market experienced sales growth of 10.2% during the year ended December 31, 2021
primarily through acquisitions, but we experienced project delays dued
resulting in a decline in same branch sales within this market. These fluctuat
Measures of Performance" section below, and impacts fromff
to macroeconomic concerns surrounding the pandemic,
ions are shown in further detail in the "Key
r in the sections that follow.
COVID-19 are discussed furthe
ff
t
We b lbeliieve hthere are severall t
periperi dods of lslowed gd growthh. hThese long-t
renewedd p iositiive at iti dtudes abbout
long-t
long-term hihist
opera iti gng iincome
ioric ave grages forff
a
l
drends hthat sh
hould dd d irive long-t
long-term tre dnds iincl dlude an gaginging h
hhome ownershihip, hhouseh ldhold formatiion ggrow hth andd thhe fact thhat housing
long-term ggrowth ih in thhe hhousinging ma krket, even ifif hthere are tem
popula ition ggrowthh, ddemographi
housi gng stockk,
l
i
y
porary
hanges,
ographic change
housing starts remaiined bd b lelow
lowi gng hthe 2008 reces ision. We expect thhat our net revenue, ggross p fi
l
over da dec dade f lolff
illwill bbenefifit from hthiis ggrow hth.
i
rofit andd
2020 Highlightstt
Net revenues increased 9.4%, or $141.6 million, while gross profit increased 17.3% to $510.0 million during the year ended
December 31, 2020 compared to 2019. We also generated approxi
at December 31, 2020 we had $231.5 million of cash and cash equivalents. We did not draw on our existing $200 million
revolving line of credit. The increase in net revenue and gross profit was primarily driven by selling price increases, the
contribution of our recent acquisitions, lower fuel
experienced sales growth year-over-year as reflected in the sales and relative performance metrics detailed below.
costs and increased sales volume of complementary products. We
mately $180.8 million of cash fromff
operating activities, and
a
ff
ts of temporary business interruptions early in 2020 due to federal, state and local requirements in
The highest level of growth occurred in our multi-family end market which grew by 37.5% for the year ended December 31,
2020 compared to 2019. We grew our largest end market, the single famff
ily subset of the residential new construction market,
by 5.0% despite the effecff
response to COVID-19. All of our locations serving the residential new construction end market were operating at
December 31, 2020, although some continued to experience limitations depending on their local market. The large commercial
end market experienced sales growth of 15.3% during the year ended December 31, 2020 primarily through acquisitions as
same branch sales growth lagged resulting from certain production inefficiencies dued
requirements as well as project delays due to macroeconomic concerns surrounding the pandemic. These fluctuat
in further detail in the "Key Measures of Performance" section below, and impacts fromff
sections that folff
COVID-19 are discussed furthe
to COVID-19 social distancing
ions are shown
r in the
low.
ff
tt
33
Key Measures of Po
erformr
ance
The following tablea
shows additional key measures of performance we utilize to evaluate our results:
Period-over-Period Growth
Sales Growth
Same Branch Sales Growth (1)
Single-Family Sales Growth (2)
Single-Family Same Branch Sales Growth (1)(2)
Multi-Family Sales Growth (3)
Multi-Family Same Branch Sales Growth (1)(3)
Residential Sales Growth (4)
Residential Same Branch Sales Growth (1)(4)
Commercial Sales Growth (5)
Commercial Same Branch Sales Growth (1)(5)
Same Branch Sales Growth(6)( )
Volume Growth (1)(7)
Price/Mix Growth (1)(8)
Large Commercial Same Branch Sales Growth (1)(9)
(10)
U.S. Housing Market
g
Total Completions Growth
Single-Family Completions Growth (2)
Multi-Family Completions Growth (3)
Years ended December 31,
2020
2019
2021
19.1 %
9.7 %
21.9 %
14.0 %
14.7 %
6.7 %
20.7 %
12.8 %
10.2 %
(8.0)%
7.7 %
3.2 %
(3.8)%
4.0 %
6.1 %
(0.3)%
9.4 %
4.5 %
5.0 %
0.4 %
37.5 %
33.2 %
9.2 %
4.7 %
10.4 %
3.6 %
1.9 %
2.8 %
2.8 %
2.5 %
0.9 %
6.3 %
13.1 %
8.6 %
10.5 %
4.8 %
13.5 %
13.2 %
10.9 %
5.9 %
24.7 %
21.5 %
2.6 %
5.4 %
14.3 %
5.9 %
7.5 %
2.2 %
(1) Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial
ff
statement date.
(2) Calculated based on period-over-period growth in the single-family subset of the residential new construction end market.
(3) Calculated based on period-over-period growth in the multi-family subset of the residential new construction end market.
(4) Calculated based on period-over-period growth in the residential new construction end market.
(5) Calculated based on period-over-period growth in the total commercial end market. Our commercial end market consists of large and
light commercial projects.
(6) During the year ended December 31, 2021, we changed the classification of one of our branches to the large commercial subset of the
commercial end market, based on the type of work this branch performs. While this change is immaterial to the sales growth
calculations, it affects comparability to the corresponding prior year metrics as the change was made prospectively beginning January
1, 2021. We continually evaluate the branch classifications utilized in our sales growth metrics based on changes in our business and
operations over time and future changes may occur to these classifications.
(7) Excludes the large commercial end market; calculated as period-over-period change in the number of completed same-branch
residential new construction and repair and remodel jobs.
(8) Excludes the large commercial end market; defined as change in the mix of products sold and related pricing changes and calculated as
the change in period-over-period average selling price per same-branch residential new construction and repair and remodel jobs
multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job.
(9) The large commercial end market, as a subset of our total commercial end market, comprises certain of our branches working on
projects constructed primarily out of steel and concrete, which are much larger than our average residential job. This market in
excluded from the above same branch price/mix and volume growth metrics as to not skew the rates given the much larger per-job
revenue compared to our average job.
(10) U.S. Census Bureau data, as revised.
We believe the revenue growth measures are important indicators of how our business is performing, however, we may rely on
different metrics in the future. We also utilize gross profit percentage as shown in the following section to monitor our most
efficiency and success at passing increasing costs of materials to customers.
significant variable costs and to evaluate labor
a
34
Net revenue, cost of sales and gross profitff
The components of gross profit for 2021, 2020 and 2019 were as follows (dollars in thousands):
Net revenue
Cost of sales
Gross profit
Gross profit percentage
2021
Change
2020
Change
2019
$ 1,968,650
1,379,131
589,519
$
19.1 % $ 1,653,225
9.4% $ 1,511,629
20.6 %
15.6 % $
1,143,251
509,974
6.2%
17.3% $
1,076,809
434,820
29.9%
30.8%
28.8%
The year-over-year growth in our residential end market was the primary driver of the increase in net revenue during the year
ended December 31, 2021 compared to the year ended December 31, 2020 as shown in the Key Measures of Performa
section above. Growth in our residential end market was primarily due to selling price increases, higher volume and the
continued success of our acquisition strategy. In our commercial end market, challenges associated with the COVID-19
pandemic had an impact as evidenced by the 8.0% decline in same branch sales within this end market. See “Key Factors
Affecting Our Operating Results, COVID-19 Impacts” below for further information. Our price/mix metric was positively
impacted during
the year ended December 31, 2021 as we were able to pass along selling price increases to partially offset
rising material costs, especially in the second half of 2021. However, our price/mix improvement was partially offset by a
higher volume of insulation sales to production builders. This shift within the single-family end market impacted price/mix as
the average insulation selling price for entry level production builder jobs is typically lower than a move-up or custom home
builder.
nce
d
ff
As a percentage of net revenue, gross profit decreased during the year ended December 31, 2021 compared to the year ended
December 31, 2020. The building products supply chain has experienced significant disruptions in 2021 due in part to effecff
the COVID-19 pandemic. Industry wide supply chain issues continue to impact our operating efficff
higher. In order to meet customer demand during the year, we purchased materials fromff
premium to what we typically would purchase directly from manufacturers. As a result, during
2021, we estimate these purchases increased materials expense by approxim
ately $8.8 million, therefore reducing gross profit.
While we expect new housing construction will remain supportive of our business in 2022, inflation and material supply chain
issues are likely to persist throughout the year. Gross profit in 2021 was also impacm ted by higher year-over-year fuel and union
costs, reducing gross profit by approxim
December 31, 2021. In addition, the impact of the February 2021 winter storms had a lingering effect on portions of 2021 as it
disrupted our ability to source certain materials needed for spray foam appli
cations. These materials were in short supply after
the storms as chemical processing facilities went offline.
iency, driving our costs
distributors and home centers at a
d
ately 50 basis points as a percentage of net revenue during the year ended
the year ended December 31,
a
a
a
ts of
Operating Expex nses
Operating expenses for 2021, 2020 and 2019 were as follows (dollars in thousands):
Selling
2021
93,204
$
Change
14.2% $
Percentage of total net revenue
4.7%
2020
81,613
4.9%
Change
8.8% $
2019
75,016
5.0%
Administrative
$ 271,356
14.0% $ 237,959
11.1% $ 214,134
Percentage of total net revenue
13.8%
14.4%
14.2%
Amortization
$
37,079
29.9% $
28,535
16.4% $
24,510
Percentage of total net revenue
1.9%
1.7%
1.6%
Sellingg
The dollar increase in selling expenses in 2021 was primarily driven by a year-over-year increase in selling wages, benefits and
commissions of $13.0 million, or
percentage of sales primarily dued
18.0% which supported our increased net revenue of 19.1%. Selling expense decreased as a
to a lower current period provision for credit losses in 2021 comparem
d to 2020.
,
35
Administrative
The dollar increase in administrative expenses in 2021 was primarily duedd
$20.2 million, which was attributable to both acquisitions and organic growth as well as favorablea
During 2021, we saw our administrative costs decrease as a percentage of sales primarily due to the leverage gained on these
administrative wages.
to an increase in wages and benefits in the amount of
company performance.
Amortization
Our intangible assets include non-competes, customer relationships, trade names and backlog. Amortization of intangibles
attributablea
acquisitions. See Note 17, Business Combinations, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K
for information on our acquisitions.
to acquisitions increased by $8.5 million in 2021 resulting from the increase in new intangible assets from
x
Other Expense,
net
Other expense, net forff
2021, 2020 and 2019 was as follows (dollars in thousands):
2021
Change
2020
Change
2019
Interest expense, net
Other
Total other expense, net
$
$
32,842
(437)
32,405
8.4% $
-209.5%
5.6% $
30,291
399
30,690
7.8% $
-11.5%
7.5% $
28,104
451
28,555
The year-over-year increase in other expense, net during 2021 was primarily a result of increased debt levels associated with
our debt-related financing transactions. Interest expense, net also increased during 2021 due to amortizing our terminated
interest rate swap da
10-K for further information regarding debt balances and derivatives, respectively.
erivatives. See Note 8 and Note 11 to our audited consolidated finaff
ncial statements included in this Form
Income Tax Paa
rovision
Income tax provision and effecff
tive tax rates for 2021, 2020 and 2019 were as follows (dollars in thousands):
Income tax provision
Effective tax rate
2021
2020
2019
$
$
36,712
23.6%
$
33,938
25.9%
24,446
26.4%
During the year ended December 31, 2021, our tax rate was favorablya
impacted by the release of a valuation allowance for a tax
filing entity, excess tax benefits from share-based compensation arrangements and statute of limitation expirations of uncertain
tax positions.
During the year ended December 31, 2020, our tax rate was favorablya
filing entity. This favorabila
recognized due to a full
ff
ity was offset by the tax effect of losses incurred by separate companies to which no benefit can be
valuation allowance against the losses as well as a tax shortfall from equity vesting.
impacted by the release of a valuation allowance for a tax
Other comprehensive gain (loss),
((
net of to ax
Other comprehensive gain (loss), net of tax for 2021, 2020 and 2019 were as follows (in thousands):
Unrealized gain (loss) on cash flow hedge, net of taxes
$
8,536
$
(1,620) $
(6,712)
2021
2020
2019
During the year ended December 31, 2021, we recorded an unrealized gain, net of taxes, of $6.4 million on our cash flow
hedges primarily due to the market's expectations for interest rates in the futff uret
amortized $3.2 million of the unrealized loss on our terminated cash flowff
December 31, 2021, not including tax effects of $1.1 million.
relative to our July 2021 swap.a We also
hedges to interest expense, net duridd
ng the year ended
36
During the year ended December 31, 2020, we recorded an unrealized loss, net of taxes on our now-terminated cash flowff
hedges primarily due to interest rate declines and market responses to the COVID-19 pandemic of $6.3 million. This loss was
offset by an unrealized gain, net of taxes of $3.4 million on our remaining cash flow hedge due to favorable market conditions.
We also amortized $1.3 million of the unrealized loss on our terminated cash flow hedges to interest expense, net durid
year ended December 31, 2020.
ng the
We amortize the unrealized loss on our terminated cash flow hedges at the time of termination over the course of the originally
scheduled settlement dates of the terminated swaps. For more information on our cash flow hedges, see "Liquidity and Capital
Resources, Derivative Instruments" below.
KEY FACTORS AFFECTING OUR OPERATRR ING RESULTS
Trends in the Constr
CC
uction Industry
Our operating results may vary based on our product mix and the mix of our end markets among new single-family, multi-
family and commercial builders and owners of existing homes. We expect to benefit fromff
new residential construction as housing has returned
interest rates, the underproduction of new homes during
demographic changes. We maintain a mix of business among all types of homebuilders ranging from small custom builders to
large regional and national homebuilders as well as a wide range of commercial builders. Net revenue derived from our ten
largest homebuilder customers in the United States was approximately 15% for the year ended December 31, 2021. The
residential new construction and repair and remodel markets represented approxi
mately 83% of our total net revenue for the
year ended December 31, 2021, compared to 82% in the same period in 2020. The remaining portion was attributable to the
commercial construction end market.
the housing recovery, low inventory of existing homes for sale and
ized levels due to a number of factors, including low
to historic stabila
the continued growth in single-family
d
a
tt
tt
supply constraints for most of the materials we installed during 2021 due to an
The industry experienced manufacturer
unanticipated increase in demand as well as manufacturing curtailments duedd
to COVID-19. We anticipate these shortages will
continue into 2022. Our results of operations in 2022 are likely to be impacted by the current supply constraints as we may be
unable to complete jobs at our preferred pace, but we will continue to respond to the strong demand by continuing to
proactively work with our suppliers and customers to offset any potential impact on our operations and profitabila
outlook may change depending on continued increased housing demand and the ability of manufacturers
supply.
to produce adequate
ity. This
tt
Cost and Availabil
l
ity ott
f Mo
ateMM rials
We typically purchase the materials we use in our business directly fromff
is currently experiencing supply shortages dued
currently allocating materials across the industry which affecff
31, 2021. In order to meet customer demand during the year, we purchased materials fromff
premium to what we typically would purchase directly from manufacturers, therefore reducing gross profit.
manufacturers.
of these materials
ts from the COVID-19 pandemic. Manufacturers are
ted the pricing of those materials during the year ended December
distributors and home centers at a
to strong demand and effecff
The industry supply
u
t
In addition, we experience price increases from our suppliers from time to time, including multiple increases over the last two
years caused by supply shortages and general economic inflationary pressures. We also experienced unprecedented increased
pricing for fiberglass and foamff
Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2022, to the
extent that price increases cannot be passed on to our customers. Despite our efforts to raise prices, our selling price increases
lagged material cost increases in 2021 until we began to see improvement in our selling prices in the second half of 2021. We
will continue to work with our customers to adjust selling prices to offset higher costs as they occur. See “COVID-19 Impacts”
below for a discussion of the short-term impacts of the current economic climate on the availability of the materials we install.
insulation materials in 2021 and expect manufacturers to seek additional price increases in 2022.
Cost of Labor
Our business is labor intensive. As of December 31, 2021, we had approximately 9,500 employees, most of whom work as
installers on local construction sites. We expect to spend more to hire, train and retain installers to support our growing business
in 2022, as tight labor
ity continues within the construction industry. We offer a comprehensive benefits package,
which many of our local competitors are not able to provide, which will increase costs as we hire additional personnel. Our
workers’ compensation costs also continue to increase as we increase our coverage for additional personnel.
availabila
a
37
We experienced strong employee retention, turnover and labor efficiency rates in the year ended December 31, 2021. We
believe this is partially a result of various programs meant to benefit our employees, including our financial wellness plan,
longevity stock compensation plan for employees and assistance fromff
the Installed Building Products Foundation meant to
benefit our employees, their families and their communities. While improved retention drives lower costs to recruit and train
new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of
these incentives. See “COVID-19 Impacts” below for a discussion of the short-term impacts of the current economic climate on
our workforce.
COVID-19 Impacts
In December 2019, a novel strain of coronavirus surfaced in Wuhan, China. Since then, the virusrr
to the United States. In response, the World Health Organization declared the situation a pandemic and the U.S. Secretary of
Health and Human Services declared a public health emergency. The COVID-19 pandemic has caused significant volatility,
uncertainty and economic disruption. Many public health organizations and international, fede
implemented measures to combat the spread of COVID-19 at various times since the beginning of the pandemic. Some of these
measures include restrictions on movement such as quarantines, vaccine and/or masking requirements, “stay-at-home” orders
and social distancing ordinances and restricting or prohibiting outright some or all forms
of commercial and business activity.
There is still significant uncertainty surrounding the duration and scope of the pandemic, as well as its continued impact on the
economy. We cannot predict if federal, state and local governments will implement additional restrictions, when restrictions
currently in place will expire or whether restrictions currently in place will become more limiting.
ral, state and local governments
has spread globally, including
ff
ff
While the COVID-19 pandemic and related events will likely have a negative effect on us in 2022, the full extent and scope of
the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous
tion and scope of the pandemic, additional
evolving factors that we may not be able to accurately predict, including the duradd
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 fast recovery in residential housing demand helped
offset prolonged impacts of the pandemic already experienced. In the commercial sector, we have experienced delays in the
onset of certain large-scale infrastructurett
ng declines.
Commercial spending rose in 2021, but remains below 2019 levels. Commercial projects could decline in the future if consumer
behaviors change in the wake of COVID-19 disruptions to the economy and changes to our general ways of life. For examplem ,
reduced demand for office buildings and/or educad
tional facilities, decreased airport traffic, or decreased usage of sports arenas
or similar commercial structures
programs due to the declining need for such structures and/or project fundi
could continue to impact our commercial end market.
ff
tt
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. We follow all masking
requirements imposed by authorities, most of which have had no adverse effecff
equipment in the process of completing our installation work is already a common practice in our industry. We have also taken
technologies which allow some employees the ability to work remotely from home. We comply with
advantage of availablea
regulations from federal, state and local government agencies. Certain protocols have evolved throughout 2021 as vaccines
have become available and guidelines from public health authorities such as the Centers for Disease Control are updated. We
are prepared to take additional actions if necessary as suggested or required by various health agencies.
ts on our business since wearing protective
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. We have experienced limited business disruptions to date and therefore have not needed to
implement significant continuity measures and have not incurred significant related expenditures.
Assuming a large number of
additional states or markets in which we operate do not reverse their current positions about construction being an “essential”
business, we do not anticipate having to implement any additional measures in the future.
tt
Our corporate office remains fully operational. As such, we have made no modifications to internal controls over financial
reporting and have confidence controls are operating as designed. We have enhanced our efforts to mitigate cyber threats and
phishing, given some employees are still working remotely. We are continually monitoring and assessing the COVID-19
situation on our internal controls to minimize the impacm t of their design and operating effectiveness.
r
the pandemic to our earnings,
tt
ion in working capita
We expect some impact fromff
there is much uncertainty surrounding the estimated magnitude
Consolidated Balance Sheets other than a potential reductdd
and net income. Trade accounts receivablea may also be reduced somewhat by lower net revenue and a higher allowance forff
credit losses due to enhanced risk of collectibility fromff
We anticipate revenue and net income may continue to be negatively impacted into 2022 due to supply
material price increases ultimately stemming from the effects of the pandemic, as well as other factors such as high demand for
some customers, although we have not seen a significant impact to date.
financial position and cash flows to continue in 2022, however
of these impacm ts. We estimate limited impact to our
al due to the possibility of reduced net revenue
constraints and/or
u
38
housing. While our cash from operations may decline over recent performance due to a decrease in expected net income driven
by lower net revenue, we do not anticipate any issues meeting debt obligations or making timely payments to vendors given our
strong liquidity and large cash reserves. See "Liquidity and Capital Resources" below for further information. Given the
continued uncertainty created by the COVID-19 pandemic and its potential effects, it is not possible to estimate the full, adverse
impact to our future 2022 sales or other financial results at this time.
Environmental, Sl ociSS
al and Governance, Climate Change and Other FactFF ors
t
iency & Renewable Energy, over $400 billion is spent each year to power homes and
According to the Office of Energy Efficff
commercial structures
that consume 75% of all electricity used in the United States and 40% of the nation’s total energy. As a
result, U.S. buildings account for 35% of the U.S. carbon dioxide emissions that drive the climate crisis. Insulation is a critical
component in the construction of homes and commercial structures. Installing insulation also helps increase energy
conservation because it is the best way to prevent energy waste in most homes and commercial structures. Beyond our service
offerings, we also recognize that as a good corporate citizen, we have a responsibility to support our communities and be
stewards of the environment. Recently, we have transitioned a large portion of our electricity supply to a carbon-free energy
source and entered a national waste management program to increase recycling at our facilities, reducing landfill waste.
We are not aware of pending climate-related regulations that would materially affect our business. However, certain effects of
climate change that may cause more severe weather events could have a material effect on our operations. For examplem ,
whether caused by climate change or not, February 2021 winter storms in the southern United States significantly impacted our
operations across the entire state of Texas and disrupted our ability to source certain materials needed forff
applications.
spray foam
Lastly, we expect our selling and administrative expenses to continue to increase as our business grows, which could impact our
future operating profitability.
SEASONALITY
We tend to have higher sales during the second half of the year as our homebuilder customers complete construction of homes
placed under contract for sale in the traditionally stronger spring selling season. In addition, some of our larger branches operate
in states impacted by winter weather and as such experience a slowdown in construction activity during
calendar year. This winter slowdown contributes to traditionally lower sales and profitabila
Item 1, Business, for further information.
ity in our first quarter. See Part I,
the firff st quarter of the
d
LIQUIDITY AND CAPITAL RESOURCES
Our capital resources primarily consist of cash from operations and borrowings under our various debt agreements and capia tal
equipment leases and loans. As of December 31, 2021, we had cash and cash equivalents of $333.5 million as well as access to
$200.0 million under our asset-based lending credit facff
andi gng lletters of
credit, resulting in total liquidity of $489.2 million. Our total liquidity is reducd ed by $5.3 million within our cash and cash
ity
equivalents duedd
policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability of our asset-based
lending facility (as defined below). Liquidity may also be limited in the futuret
asset-based credit facility (as defined below), depending on the status of our borrowing base availabila
by certain cash collateral limitations under our
ity.
to a deposit into a trust to serve as additional collateral forff
ility (as defined below), less $44.3 million of outst di
our workers' compensation and general liabila
We experienced unprecedented increases in pricing for fiberglass and foamff
manufacturers to seek additional price increases in 2022. Increased market pricing on the materials we purchase has and could
continue to impact our results of operations in 2022 due to the higher prices we must pay forff materials. See Part I, Item 1A,
Risk Factors, for information on the potential and currently known impacm ts on our business and liquidity from the COVID-19
pandemic.
insulation materials in 2021 and expect
Short-Term Material Cash Requirements
For at least the next twelve months, our primary capia tal requirements are to fund working capia tal needs, operating expenses,
acquisitions and capia tal expenditures and to meet principal and interest obligations and make required income tax payments.
We may also use our resources to fund
2022, we anticipate discretionary spending for capita
approximately $37.0 million and $35.0 million, respectively, as well as approximately $27.0 million forff
variable dividend to be paid March 31, 2022. In addition, we expect to spend cash and cash equivalents to acquire various
our optional stock repurchase program and pay quarterly and annual dividends. During
al improvements and quarterly dividends to approximate 2021 levels of
our first annual
ff
39
companies with at least $100.0 million in aggregate net revenue. The amount of cash paid forff
various factors, including the size and determined value of the business being acquired.
an acquisition is dependent on
Firm commitments for funds include $64.8 million in interest and principals payments on long-term debt obligations including
our Senior Notes, Term Loan, 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. Additionally, we maintain certain
which will require $2.0 million in interest and principal payments under
production vehicles under a finff ance lease structuret
current agreements in 2022. We lease certain locations, vehicles and equipment under operating lease agreements that will
require $25.2 million in funds
that requires us to purchase a minimum of $46.2 million of inventory in 2022. Payments forff
at this time.
over the next twelve months. Finally, we have a product supply agreement with a certain vendor
income taxes cannot be estimated
ff
We expect to meet our short-term liquidity requirements primarily through net cash flows from operations, our cash and cash
equivalents on hand and borrowings from banks under the Master Loan and Security Agreement, the Master Equipment
Agreement and the Master Loan Agreements. Additional sources of funds, should we need them, include borrowing capaa
under our asset-based lending credit facff
ility (as defined below).
city
Despite the current known impacm ts of the COVID-19 pandemic, we believe that our cash flows from operations, combined with
our current cash levels and available borrowing capaa
business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash
flows from operations for the years ended December 31, 2021, 2020 and 2019. We believe that we have access to additional
funds, if needed, through the capita
guarantee that such financing will be availablea
al markets to obtain further debt financing under the current market conditions, but we cannot
city, will be adequate to support our ongoing operations and to fund our
terms, or at all.
on favorablea
Long-Term Material Cash Requirements
al needs and operating expenses,
Beyond the next twelve months, our principal demands for funds will be to fund working capita
or mature, and to make
to meet principal and interest obligations on our long-term debts and finance leases as they become dued
required income tax payments. Additional funds may be spent on acquisitions, capital improvements and dividend payments, at
our discretion.
Known obligations beyond the next twelve months include $1,028.1 million in interest and principals payments on long-term
debt obligations noted above
through 2028, as follows (amounts in thousands):
a
2023
2024
2025
2026
$57,945
51,568
49,442
39,868
Thereafter
829,246
In addition, our finance leases will require $3.5 million in interest and principal payments under current agreements through
2026. Operating lease obligations will require $49.7 million in payments beyond the next twelve months.
Sources and Uses of Cash and Related Trends
Working Capita
al
We carefully manage our working capia tal and operating expenses. As of December 31, 2021 and 2020, our working capia tal,
including cash and cash equivalents, was $551.7 million, or 28.0% of net revenue, and $387.5 million, or 23.4% of net revenue,
respectively. The increase in working capia tal year-over-year was driven primarily by a $102.0 million increase in cash and cash
equivalents resulting from the increase in Term Loan debt and positive operating cash flows. Additionally, accounts receivable
increased $46.2 million resulting from our increased net revenue, and inventories increased by $65.8 million dued
price inflation, increased selling activity and acquisitions. These increases were partially offset by an increase of $31.2 million
in accounts payablea
primarily due material price inflation and increased sales volume. We continue to look for opportunities to
reduce our working capita
al as a percentage of net revenue.
to material
40
The folff
lowing tablea
presents our cash flows
ff
(in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Cash FloFF ws from Operating Activities
Years ended December 31,
2020
2019
2021
$
$
$
138,314 $
(278,439) $
242,090 $
180,789 $
(77,794) $
(49,364) $
123,067
(131,733)
96,113
Our primary source of cash provided by operations are revenues generated from installing building products and the resulting
operating income generated by these revenues. Operating incomes are adjusted for certain non-cash items, and our cash flows
from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. The
COVID-19 pandemic has not had a material impact to our cash collections to date.
Our primary uses of cash fromff
income taxes and other general corporate expenditures included in net income.
operating activities include payments for installation materials, compensat
m
ion costs, leases,
Net cash provided by operating activities decreased from 2020 to 2021 primarily dued
to changes in working capia tal dued
higher volume of inventory purchases to support our growth and increased pricing on inventory due to price inflation on
materials. During the year ended Dece bmber 31,
2020 we saw a significant increase in cash from operations due to payroll tax
deferrals under the CARES Act. This negatively impacted the cash from operations during the year ended December 31, 2021
when we paid a portion of this deferral.
to
,
Cash FlowFF
s fww romff
Investing Activities
Sources of cash from investing activities consists primarily of proceeds from the sales of property and equipment and,
periodically, maturities fromff
property and equipment, payments forff
short term investments. Cash used in investing activities consists primarily of purchases of
acquisitions and, periodically, purchases of short term investments.
Net cash used by investing activities increased from 2020 to 2021 primarily due to the increase in payments forff
We completed 2 additional acquisitions in 2021 compared to 2020, and the size of the acquisitions were generally larger in the
year ended December 31, 2021. The amount of cash paid is dependent on various factors, including the size and determined
value of the business being acquired. See Note 17, Business Combinations, to our audited consolidated finaff
ncial statements
included in this Form 10-K for more information regarding our business acquisitions in 2021, 2020 and 2019.
acquisitions.
Additionally, total cash used forff
in futurett
reimbursed via various vehicle and equipment notes payablea
activities.
net revenue through further capia tal expenditures. A majority of these capita
al expenditures
, with related cash inflows shown in cash flows from financing
were subsequently
t
property and equipment increased in 2021, and we expect to continue to support any increases
Cash FloFF ws from Financing Activities
i
. Cashh used id in fiinff ancinging ac iti ivi ities co insists
fifinancinging ac iti ivi ities
Our source of cash fh fromff
payapayablblea
stockk repurchhases.
consists of proce deds from thhe iissuances of df d bebt a dnd
iprima ilrilyy of df d bebt repayyments, ac
hivehi lcle a dnd
iqui isitiion-rellatedd oblibliggatiions, di idivid ddends
equipment notes
i
dand
id
rovided bd byy fiinaff
inci gng ac iti ivitiie is increa dsed fro
NNet cashh p
was partially offset by the repayment of our previous term loan agreement. We lplan to use hthe proce deds of hthe Term Loan to
yany hshares
support our opera itions,
inci gng ac iti ivitiies was
dunder our stockk repurchhase plla dn d iuridd
furthher offse dt d iuridd
y
com ypany and hd highe
2m 020 to 2021 primarily due to proceeds on our new Term Loan, which
gng hthe yyear e dndedd Dece bmber 31, 2021. Our net ca hsh
ypayment of hthe fifirst quarterlyrly didi idvide dnds iin our hihi
gng hthe yyear e dndedd Dece bmber 31, 2021 byby hthe
on-relat ded blobligaiga itions ddue to iincreas ded ac
iqui isitiion strat gyegy. We lalso dididd not re
ypay d bdebt iissuance costs
dand co intinue our ac
iqui isitiion ac iti ivi yty.
provided bd byy fiinaff
igher acq i iuisi iti
story as a p blubliic
purchase
h
id
l
41
Debt
5.75% Senior Notes due 2028
In September 2019, we issued $300.0 million in aggregate principal amount of 5.75% senior unsecured notes (the “Senior
Notes”). The Senior Notes will mature on February 1, 2028 and interest will be payablea
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 afteff
r debt issuance costs.
The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the
Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock;
(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capita
l
alization per fisca
icable restricted payment baskets; (iii) prepay subordinated debt; (iv)
year, or in an aggregate amount exceeding certain appl
create liens; (v) make specified types of investments; (vi) appl
y net proceeds from certain asset sales; (vii) engage in
transactions with affilff
distributions from subsidiaries.
iates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other
a
a
ff
Credit Facilities
ility dued December 2028 (the “Term Loan”) under
In December 2021, we entered into a $500 million, seven-year term loan facff
our credit agreement (the “Term Loan Agreement”), dated as of December 14, 2021 with Royal Bank of Canada as the
administrative agent and collateral agent thereunder. The Term Loan amortizes in quarterly principal payments of $1.25 million
starting on March 31, 2022, with any remaining unpaid balances dued
Loan bears interest at either the base rate (which approxi
1.25% in the case of base rate loans or (B) 2.25% in the case of Eurodollar rate loans. Proceeds from the Term Loan were used
to refinance and repay in full all amounts outstanding under our previous term loan agreement. We intend to use the remaining
funds to pay for certain feeff
including acquisitions and other growth initiatives. As of December 31, 2021, we had $493.3 million, net of unamortized debt
issuance costs, dued
s and expenses associated with the closing of the Term Loan and for general corporate purposes,
mated the prime rate) or the Eurodollar rate, plus a margin of (A)
on the maturity date of December 14, 2028. The Term
on our Term Loan.
a
Subject to certain exceptions, the Term Loan will be subject to mandatory prepayments of (i) 100% of the net cash proceeds
from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain
permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on
achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the
Company or any of its restricted subsidiaries in excess of a certain amount and subject to reinvestment provision and certain
other exception; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of
excess cash flow of the Company and its restricted subsidiaries in excess of $15 million, subject to certain exceptions and
limitations.
an asset-based lending credit facff
In September 2019, we entered into an asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit
-year
Agreement provides forff
maturity. 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. In connection with the Term Loan Agreement, we
entered into a Third Amendment (the “Third Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of
America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Royal Bank of Canada as collateral agent
under the Term Loan Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as
of December 31, 2021 was $155.7 million. In February 2022, we amended and extended our ABL Credit Agreement. See Note
19, Subsequent Events, forff
ility (the “ABL Revolver”) of up tu
o $200.0 million with a fiveff
additional information.
All of the obligations under the Term Loan and ABL Revolver are guaranteed by all of the Company’s existing restricted
subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the
Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the
Company and the guarantors, subject to certain exceptions and permitted liens, including a firff st-priority security interest in such
assets that constitutett
in such assets that constitutet
ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second- priority security interest
Term Loan Priority Collateral, as defined in the Term Loan Agreement.
The ABL Revolver bears interest at either the Eurodollar rate or the base rate (which approxi
mated 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
a
42
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 tu
conditions of any incremental revolving credit facff
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.
o $50.0 million. The terms and
than the terms of the ABL
ility commitments must be no more favorablea
i
iactio
fff
requiringring hthe s iati fsf
The ABL Credit Agreement contains a finff ancial covenant
of 1.0 ix in thhe event hthat w de do not meet a mi iinimum measure of av iaillabilbila
Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the
Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock;
(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capita
l
alization per fisca
icable restricted payment baskets; (iii) prepay subordinated debt; (iv)
year, or in an aggregate amount exceeding certain appl
create liens; (v) make specified types of investments; (vi) appl
y net proceeds from certain asset sales; (vii) engage in
transactions with affilff
distributions from subsidiaries. At December 31, 2021, we were in compliance with all applicablea
Loan Agreement, ABL Credit Agreement and the Senior Notes.
iates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other
iityy u dnder hthe ABL Rev lolver T. he ABL Credit
imi inimum fifi dxed hch garge cove grage ratiio
covenants under the Term
n off a
a
a
ff
Derivative Instr
II
uments
As of December 31, 2021, we had three interest rate swaps.a One interest rate swap ba
amount of $200.0 million, a fixff ed rate of 0.51% and a maturi
began December 31, 2021, each with a fixff ed notional amount of $100.0 million, a fixeff
December 15, 2028. Together, these three swapsa
Term Loan through maturity. The assets and liabilities associated with the forward
current assets and other current liabilities on the Consolidated Balance Sheets at their fair value amounts as described in Note
10, Fair Value Measurements.
ty date of April 15, 2030. We also had two interest rate swapsa
serve to hedge $400.0 million of the variablea
egan July 30, 2021 and has a fixeff
d rate of 1.37%, and a maturit
cash flows on our variablea
y date of
rate
interest rate swap aa
re included in other non-
d notional
that
ff
tt
t
LIBOR is used as a refereff
interest rate exposure. For more information on the discontinuance of LIBOR, see Item 7A. Quantitative and Qualitative
Disclosures about Market Risk below.
our Term Loan, ABL Revolver and our interest rate swap aa
nce rate forff
greements we use to hedge our
Vehicle and Equipment
i
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 forff
a
note for a period of typically 60 consecutive months after the incurrence of the obligation.
to such financing arrangement. Regular payments are due under each
the note appli
cablea
Total gross assets and respective outstanding loan balances relating to our master loan and equipment agreements were $134.5
million and $69.2 million as of December 31, 2021, respectively, and $132.2 million and $67.5 million as of December 31,
2020, respectively. See Note 8 to our audited consolidated finaff
information regarding our Master Loan and Security Agreement, Master Equipment Lease Agreement and Master Loan
Agreements.
ncial statements included in this Form 10-K for more
Letters of Credit and Bonds
We may use performance bonds to ensure complem tion of our work on certain larger customer contracts that can span multiple
the bonds as
accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released fromff
the contractual performance is completed. In addition, we occasionally use letters of credit and cash to secure our performance
under our general liabila
one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.
ity and workers’ compensation insurance programs. Permit and license bonds are typically issued forff
43
The folff
lowing tablea
summarizes our outstanding bonds, letters of credit and cash-collateral (in thousands):
Performance bonds
Insurance letters of credit and cash collateral
Permit and license bonds
Total bonds and letters of credit
As of December 31, 2021
66,838
$
51,393
7,002
125,233
$
In 2020, we posted $5.3 million into a trust to serve as additional collateral for our workers’ compensation and general liabila
policies. This collateral can be converted to a letter of credit at our discretion and is therefore not considered to be restricted
cash.
ity
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations is based uponu
our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United
States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Certain
accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially
different amounts could have been reported using different assumptions or under different conditions. We evaluate our
estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptim ons that
are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ fromff
estimates and assumptions used in preparation of our consolidated financial statements. We believe the folff
accounting estimate requires judgement and estimation in the preparation of our consolidated finaff
fundamental to our results of operations. See Note 2, Significant Accounting Policies included in Item 8 of the Form 10-K for a
summary of all of our significant accounting policies and their effecff
t on our financial statements.
ncial statements and to be
lowing critical
these
Revenue recognition
a
ty of our revenues are recognized when we complete our contracts with customers to install building products and
The majori
the control of the promised good or service 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. For contracts that are not complete at the reporting date, we
recognize revenue over time utilizing a cost-to-cost input method as we believe this represents the best measure of when goods
and services are transferred to the customer. When this method is used, we estimate the costs to complete individual contracts
and record as revenue that portion of the total contract price that is considered complete based on the relationship of costs
incurred to date to total anticipated costs. Under the cost-to-cost method, the use of estimated costs to complete each contract is
a significant variable in the process of determining recognized revenue and can change throughout the duration of a contract
due to contract modifications and other fact
knowledge, significant experience and judgement of project management, finance professionals and operational management to
assess a variety of fact
ors include historical performance, costs of
ff
materials and labor,
for each uncompleted contract at least quarterly to reflect the latest reliable information available. Changes in these estimates
ff
could favorabl
of the work to be performed. We generally review and reassess our estimates
ors impacting job completion. Our cost estimation process is based on the
ors to determine revenues on uncomplem ted contracts. Such fact
y or unfavorable impact revenues and their related profits.
change orders and the naturett
a
ff
ff
Business combinations
We have recorded a significant amount of finite lived intangible assets associated with the acquisitions of businesses through
our growth strategy. These intangible assets consist of customer relationships, backlog, non-competition agreements and
business trademarks and trade names. Fair values and estimated useful lives are assigned to the identified intangible assets at
the date of acquisition by financial professionals using either the income approach or the market approach along with certain
industry information, professional experience and knowledge. In some instances, the process of assigning values and useful
lives requires using judgment and other financial professionals may come to different conclusions. We review intangible assets
whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverablea
impairment loss is recognized when estimated future cash flows expected to result from the use of an asset and its eventual
disposition are less than its carrying amount. When impairment is identified, the carrying amount of the asset is reduced to its
estimated fair value. Impairment losses would negatively affect
earnings.
. An
ff
44
Insurance risks
a number of risks, including, but not limited to, workers’ compensation, general liabila
We carry insurance policies forff
vehicle liabila
an element forff which we assume a portion of the risk by having high deductibles or a large cap oa
our different insurance programs, see Note 2, Significant Accounting Policies in Item 8, Financial Statements and
Supplementary Data in this Form 10-K.
ity, property and our obligation for employee-related health care benefits. Most of our insurance policies contain
n claims. For a description of
ity,
Our largest healthcare plan is partially self-funded with an insurance company paying benefits in excess of stop loss limits per
individual/family. An accrual
for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued
compensation on the Consolidated Balance Sheets and was $3.3 million and $3.1 million as of December 31, 2021 and 2020,
respectively.
rr
a
the deductd
ible amount on a per claim basis. We accruerr
We participate in multiple workers’ compensation plans covering a significant portion of our business. Under these plans, we
use a high deductible program to cover losses above
for the estimated
losses occurring from both asserted and unasserted claims. Insurance claims and reserves include accruals of estimated
settlements for known claims, as well as accruals of actuarial estimates of IBNR claims. In estimating these reserves, historical
loss experience and judgments about
based on actuarial estimates of the undiscounted claims, including IBNR. We believe the use of actuarial methods to account
for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. As of December 31,
2021 and 2020, we estimated total short-term and long-term known and IBNR claims for workers' compensation to be $21.4
million and $19.7 million, respectively. As of December 31, 2021 and 2020, offsets of these liabila
ities were $2.1 million and
$1.9 million, respectively, with insurance receivablea
claims that exceeded the stop loss limit.
the expected levels of costs per claim are considered. These claims are accounted for
s and indemnification assets for claims under fully insured policies or
a
We also participate in a high retention general liabila
December 31, 2021 and 2020, general liabila
were $21.9 million and $21.5 million, respectively. As of December 31, 2021 and 2020, offsets of these liabila
million and $4.7 million, respectively, with insurance receivablea
policies or claims that exceeded the stop loss limit.
ity and auto insurance reserves included in other current and long-term liabilities
ities were $3.9
ity insurance program and a high deductible auto insurance program. As of
s and indemnification assets for claims under fully insured
Liabilities relating to claims associated with these risks are estimated by considering historical claims experience, including
frequency, severity, demographic facff
periodically analyze our historical trends, including loss development, and appl
incurred costs associated with the claims with the assistance of external actuarial consultants. While we do not expect the
amounts ultimately paid to differ
ff
future claim experience differs
significantly from our estimates, our reserves and corresponding expenses could be affected if
rial assumptions. In estimating our liability forff
historical trends and actuarial assumptions.
ate loss development factors to the
tors and other actuat
significantly fromff
such claims, we
y appropri
a
a
ff
We have not made any material changes in our methodology used to establia
December 31, 2021 and 2020, and none of the adjustments to our estimates have been material.
sh our insurance reserves during
d
the years ended
Recent Accounting Pronouncements
For a description of recently issued and/or adopted accounting pronouncements, see Note 2, Significant Accounting Policies, to
our audited consolidated financial statements included in this Form 10-K.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
tt
ions in interest rates on our outstanding variable rate debt. As of
We are exposed to market risks related to fluff ctuat
December 31, 2021, we had $493.3 million outstanding on the Term Loan, net of unamortized debt issuance costs, no
outstanding borrowings on the ABL Revolver and no outstanding borrowings under finance leases subject to variable interest
rates. We had three interest rate swapsa which, when combined, serve to hedge $400.0 million of the variable cash flows on our
Term Loan until its maturit
market risks as of December 31, 2021. A hypothetical one percentage point increase (decrease) in interest rates on our variablea
rate debt would increase (decrease) our annual interest expense by approximately $1.0 million. Our Senior Notes accrued
interest at a fixeff
y as of December 31, 2021. As a result, total variable rate debt of $100.0 million was exposed to
d rate of 5.75%.
t
For variablea
earnings and cash flows,
derivatives for trading or speculative purposes.
ff
rate debt, interest rate changes generally do not affect
ff
the fair value of the debt instrument, but do impact future
assuming other factors are held constant. We have not entered into and currently do not hold
45
nce rate forff
nce rate, to June 2023 O. ur Term Loan Agreement, interest rate swap agreements and ABL Credit Agreement
LIBOR is used as a refereff
our Term Loan, ABL Revolver 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. The Intercontinental Exchange Benchmark Administration, the administrator
of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the setting we
use as a refereff
include a provision related to the discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate
("SOFR") values or another alternative benchmark rate. However, when LIBOR ceases to exist after June
rates under the alternative rate could be higher than LIBOR. During the year ended December 31, 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 forff
apply the hedge accounting expedients related to probabila
cash flows to assume that the index uponu
corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past
presentation.
impacted areas as it relates to impending reference rate reform. We elected to
ity and the assessments of effectiveness for future LIBOR-indexed
hedged transactions will be based matches the index on the
2023 the interest
ff
which future
,
Item 8.
Financial Statements and Supplementary Data
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Installed Building Products, Inc.
Opinion on the Financial Statements
ff
We have audited the accompanying consolidated balance sheets of Installed Building Products, Inc. (the “Company”) as of
December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’
equity, and cash flows,
referred to as the “financial statements”). In our opinion, the finff ancial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows
each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in
the United States of America.
for each of the three years in the period ended December 31, 2021, and the related notes (collectively
for
ff
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over finaff
ncial reporting as of December 31, 2021, based on criteria established in
Internal Control — InteII
e
grated
Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company’s internal control over
financial reporting.
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether dued
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether dued
examining, on a test basis, evidence regarding the amounts and disclosures in the finff ancial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the finff ancial statements. We believe that our audits provide a reasonable basis for our opinion.
to error or fraud, and performing procedures that respond to those risks. Such procedures included
to
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjeu
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the
accounts or disclosures to which they relate.
ctive, or complex judgments. The
Revenue on certain cii
tt
ontracts
recognized over timeii
– Refer to Ntt
otNN estt
2 and 3 to t
tt hett
ii
financ
ial statements
Critical Audit MatMM ter Description
The Company recognizes revenue from the majority of its installation contracts when control of the promised goods or services
is transferred to customers, in an amount that refleff cts the consideration the Company expects to be entitled to in exchange for
those goods or services. For contracts that are not complete at the reporting date (“uncompleted contracts”), the Company
recognizes revenue over time utilizing a cost-to-cost input method, as the Company believes this represents the best measure of
when goods and services are transferred to the customer. When this method is used, the Company estimates the costs to
complete individual contracts and records as revenue that portion of the total contract price that is considered complete based on
the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method, the estimated cost to complete
each contract requires judgment and can change throughout the duration of a contract due to contract modifications and other
factors impacm ting job completion. The costs related to earned revenue include all direct material and labor
indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs.
costs and those
a
47
The Company’s estimation process for determining revenues forff
method is based uponu
operational and financial professionals, and an assessment of the key underlying factors, such as the value of executed
contracts, change orders, and related contract costs, that may impact the revenues and costs of uncompleted contracts.
historical experience, the professional judgment and knowledge of the Company’s project management,
uncompleted contracts accounted forff
under the cost-to-cost
Given the judgments necessary to estimate the relationship between executed contract value and contract costs, auditing the
amount of revenue recognized for uncompleted contracts involves a high degree of auditor judgment.
How the Critical Audit MatMM ter WasWW Addressed in thett Audit
Our audit procedures related to estimated revenue recognized on uncompleted contracts included the following, among others:
• We tested the effecff
tiveness of the Company’s controls over the determination of uncompleted contract revenue, including
those over estimated total costs and revenues recognized through performance obligations.
• We inquired of project managers and evaluated the reasonableness of management’s ability to accurately estimate costs by
comparing incurred contract costs on uncompleted contracts to management’s projections.
• We compared accounting records to executed contracts and change orders to verify accuracy of contract values in the
Company’s estimates.
• We considered the impact of change orders and other related contract costs that may impact the determination of revenue
and estimated costs to completion.
• We tested the mathematical accuracy of the Company’s calculation of revenue recognized over time.
• We selected a sample of contract costs incurred as of December 31, 2021, agreed the costs to supplier invoices or other
supporting documents, and evaluated whether the costs were properly allocated to the contracts included in management’s
calculation of revenue recognized over time.
• We developed an expectation of revenue for uncompleted contracts with remaining performance obligations as of
December 31, 2021 based on (1) consideration of incurred contract costs and (2) results realized by the Company on
completed contracts. We compared this expectation to the Company’s revenue recognized on uncompleted contracts at
December 31, 2021.
/s/ Deloitte & Touche
TT
LLP
Columbus, Ohio
February 24, 2022
We have served as the Company’s auditor since 2013.
48
INSTALLED BUILDING PRODUCTS, INC.
CONSOLIDATED BALANCAA E SHEETS
(in thousands, except share and per share amounts)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable (less allowance for credit losses of $8,717 and $8,789 at
$
333,485
$
231,520
As of December 31,
2020
2021
December 31, 2021 and 2020, respectively)
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Customer relationships, net
Other intangibles, net
Other non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt
Current maturities of operating lease obligations
Current maturities of finaff
Accounts payable
Accrued compensation
Other current liabilities
nce lease obligations
Total current liabilities
Long-term debt
Operating lease obligations
Finance lease obligations
Deferred income taxes
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 16)
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and
outstanding at December 31, 2021 and 2020, respectively
Common stock; $0.01 par value: 100,000,000 authorized, 33,271,659 and 33,141,879
issued and 29,706,401 and 29,623,272 shares outstanding at December 31, 2021 and
2020, respectively
Additional paid in capital
Retained earnings
Treasury stock; at cost: 3,565,258 and 3,518,607 shares at December 31, 2021 and 2020,
respectively
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements
49
$
$
$
$
312,767
143,039
70,025
859,316
105,933
69,871
322,517
178,264
86,157
31,144
1,653,202
30,839
23,224
1,747
132,705
50,964
68,090
307,569
832,193
46,075
3,297
4,819
42,409
1,236,362
266,566
77,179
48,678
623,943
104,022
53,766
216,870
108,504
62,889
17,682
1,187,676
23,355
18,758
2,073
101,462
45,876
44,951
236,475
541,957
34,413
2,430
35
53,184
868,494
—
—
333
211,430
352,543
331
199,847
269,420
(147,239)
(227)
416,840
1,653,202
$
(141,653)
(8,763)
319,182
1,187,676
$
INSTALLED BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except share and per share amounts)
Net revenue
Cost of sales
Gross profit
Operating expenses
Selling
Administrative
Amortization
Operating income
Other expense
Interest expense, net
Other (income) expense
Income beforeff
Income tax provision
Net income
Other comprehensive gain (loss), net of tax:
income taxes
Net change on cash flow hedges, net of tax (provision) benefit of
$(2,773), $550 and $2,225 for the twelve months ended December 31,
2021, 2020 and 2019, respectively
Comprehensive income
Earnings Per Share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Cash dividends declared per share
Years ended December 31,
2020
1,653,225 $
1,143,251
509,974
2021
1,968,650 $
1,379,131
589,519
2019
1,511,629
1,076,809
434,820
93,204
271,356
37,079
187,880
81,613
237,959
28,535
161,867
32,842
(437)
155,475
36,712
118,763 $
30,291
399
131,177
33,938
97,239 $
75,016
214,134
24,510
121,160
28,104
451
92,605
24,446
68,159
8,536
127,299 $
(1,620)
95,619 $
(6,712)
61,447
4.04 $
4.01 $
3.30 $
3.27 $
2.29
2.28
29,367,676
29,628,527
29,504,115
29,717,609
29,752,644
29,873,106
1.20 $
— $
—
$
$
$
$
$
$
See accompanying notes to consolidated financial statements
50
INSTALLED BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
Common Stock
Shares
Amount
Additional
Paid In
Capital
Retained
Earnings
Treasury Stock
Shares
Amount
Accumulated
Other
Comprehensive
Loss
Stockholders’
Equity
32,723,972
$
327
$ 181,815
$105,212
(2,808,361) $(104,425) $
(431) $
182,498
68,159
(46,803)
(2,331)
139,862
2
(2)
8,057
360
7,670
68,159
—
(2,331)
8,057
360
(6,712)
(6,712)
32,871,504
$
329
$ 190,230
$173,371
97,239
(1,190)
(2,855,164) $(106,756) $
(7,143) $
264,004
2
(2)
9,286
333
6,371
(30,223)
(973)
(633,220)
(33,924)
250,031
97,239
(1,190)
—
(973)
9,286
333
(33,924)
(1,620)
(1,620)
33,141,879
$
331
$ 199,847
$269,420
118,763
(3,518,607) $(141,653) $
(8,763) $
125,550
2
(2)
(46,651)
(5,586)
4,230
11,118
467
(35,640)
319,182
118,763
—
(5,586)
11,118
467
(35,640)
33,271,659
$
333
$ 211,430
$352,543
(3,565,258) $(147,239) $
(227) $
416,840
8,536
8,536
See accompanying notes to consolidated financial statements
BALANCE—January 1,
2019
Net income
Issuance of common
stock awards to
employees
Surrender of common
stock awards
Share-based
compensation expense
Share-based
compensation issued to
directors
Net change in cash flow
hedges, net of tax
BALANCE—January 1,
2020
Net income
Cumulative effeff ct of
accounting change
Issuance of common
stock awards to
employees
Surrender of common
stock awards
Share-based
compensation expense
Share-based
compensation issued to
directors
Common stock
repurchase
Net change in cash flow
hedges, net of tax
BALANCE—January 1,
2021
Net income
Issuance of common
stock awards to
employees
Surrender of common
stock awards
Share-based
compensation expense
Share-based
compensation issued to
directors
Dividends Declared
($1.20 per share)
Net change in cash flow
hedges, net of tax
BALANCE—December
31, 2021
51
INSTALLED BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Years ended December 31,
2020
2019
2021
$
118,763
$
97,239
$
68,159
Depreciation and amortization of property and equipment
Amortization of operating lease right-of-use assets
Amortization of intangibles
Amortization of deferred finff ancing costs and debt discount
Provision for credit losses
Write-off of debt issuance costs
Gain on sale of property and equipment
Noncash stock compensation
Deferred income taxes
Amortization of terminated interest rate swap
Changes in assets and liabilities, excluding effects
ff
of acquisitions
Accounts receivable
Inventories
Other assets
Accounts payable
Income taxes receivable/payable
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchases of investments
Maturities of short term investments
Purchases of property and equipment
Acquisitions of businesses, net of cash acquired of $1,707, $0 and $334 in 2021, 2020 and 2019,
respectively
Proceeds from sale of property and equipment
Other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from senior notes (Note 8)
Proceeds from term loan (Note 8)
Payments on term loan (Note 8)
Proceeds from vehicle and equipment notes payable
Debt issuance costs
Principal payments on long-term debt
Principal payments on finance lease obligations
Acquisition-related obligations
Dividends paid
Repurchase of common stock
Surrerr nder of common stock awards by employees
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest
Income taxes, net of refunds
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations
Release of indemnification of acquisition-related debt
Termination of operating lease obligations and right-of-use assets
Property and equipment obtained in exchange for finance lease obligations
Seller obligations in connection with acquisition of businesses
Unpaid purchases of property and equipment included in accounts payable
43,562
22,258
37,079
1,354
2,227
1,767
(1,840)
13,752
(438)
3,223
(16,775)
(54,003)
(19,885)
26,424
(4,403)
(34,751)
138,314
—
—
(36,979)
(241,308)
2,694
(2,846)
(278,439)
—
500,000
(200,000)
27,834
(7,520)
(26,301)
(2,125)
(8,918)
(35,294)
—
(5,586)
242,090
101,965
231,520
333,485
25,976
39,241
38,084
2,036
—
2,735
29,169
441
$
$
41,339
18,122
28,535
1,332
4,444
—
(786)
10,826
(8,475)
1,326
(10,489)
187
(870)
(203)
4,296
(6,034)
180,789
(776)
38,693
(33,587)
(76,446)
1,187
(6,865)
(77,794)
—
—
—
21,290
(157)
(26,685)
(2,632)
(6,283)
—
(33,924)
(973)
(49,364)
53,631
177,889
231,520
26,324
37,072
26,001
—
—
1,000
14,086
1,013
$
$
38,862
15,691
24,510
1,184
4,312
3,725
(140)
8,727
5,341
—
(29,582)
(10,597)
(16,959)
947
(3,944)
12,831
123,067
(52,795)
25,061
(50,167)
(51,706)
761
(2,887)
(131,733)
300,000
—
(195,750)
33,090
(6,691)
(21,316)
(4,157)
(6,732)
—
—
(2,331)
96,113
87,447
90,442
177,889
20,943
22,633
18,907
—
(2,946)
2,809
7,543
1,903
$
$
See accompanying notes to consolidated financial statements
52
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 210 locations and
its corporate office is located in Columbus, Ohio.
We have one operating segment and a single reportable segment. The vast majoa rity of our sales are derived fromff
based installation of various products in the residential new construction, repair and remodel and commercial construction end
markets fromff
our national network of branch locations.
the service-
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.
ff
ral, state and local governments implemented measures to combat the spread of COVID-19
The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption. Many public health
organizations and international, fede
at various times since the beginning of the pandemic with some of these restrictions still in place as of the date of filff ing of this
Annual Report on Form 10-K ("Form 10-K"). Some of these measures included quarantines, vaccine and/or masking
requirements, “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 significantly impacted our business
during the year ended December 31, 2021. However, COVID-19 has caused disruptions in the building products supply chain,
impacting our ability to purchase certain materials through our typical channels.
ff
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
p
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”). The accompanying consolidated financial statements include all of our wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates
Preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates,
judgements and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes.
Management believes the accounting estimates are appropriate and reasonably determined; however, due to the inherent
uncertainties in making these estimates, actual amounts could differ from such estimates.
Cash and Cash Equivalents
q
We consider all highly-liquid investments purchased with original term to maturity of three months or less to be cash
equivalents. Substantially all cash is held in banks providing FDIC coverage of $0.25 million per depositor.
Revenue and Cost Recognition
g
Revenue is measured according to Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with
Customers.” 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 collectabila
portion of our sales, primarily retail and distribution sales, is accounted for on a point-in-time basis when the sale occurs and
the risk of loss transfers to the customer, adjusted accordingly forff
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.
any return provisions and net of any sales taxes. We do offer
ity of consideration is probable. An insignificant
53
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method as
we believe this represents the best measure of when goods and services are transferred to the customer. When this method is
used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price that is
considered complete based on the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method,
the use of estimated costs to complete each contract is a significant variablea
requires judgment and can change throughout the duration of a contract dued
impacting job completion. The costs of earned revenue include all direct material and labor
to contract performance, such as indirect labor,
contracts are made in the period in which such losses are determined.
in the process of determining recognized revenue,
to contract modifications and other factors
supplies, tools and repairs. Provisions for estimated losses on uncompleted
costs and those indirect costs related
a
a
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, enforceablea
and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract duedd
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 reductd
ion of revenue) on a
cumulative catch-up basis.
rights
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 contractual
contracts occurs primarily on a monthly basis throughout the contract period whereby we submit invoices forff
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 afteff
completion of each installation project. This amount is referred to as retainage and is common practice in the construction
s
industry, as it allows for customers to ensure the quality of the service performed prior to full payment. Retainage receivablea
are classified as current or long-term assets based on the expected time to project completion. See "Accounts Receivablea
" below
for further discussion of our retainage receivables.
ly or as work is performed. Billing on our long-term
customer payment
r satisfactory
t
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 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.
Derivative Instruments and Hedging Activities
g g
We record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends
on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply
hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.
Derivatives designated and qualifying as a hedge of the exposure to variability in expected futuret
cash flows, or other types of
forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing
of gain or loss recognition on the hedging instrument with the recognition of the earnings effect of the hedged forec
transactions in a cash flowff
risks, even though hedge accounting does not apply or we elect not to apply hedge accounting. See Note 11, Derivatives and
Hedging Activities, for additional information on our accounting policy for derivative instruments and hedging activities.
hedge. We may enter into derivative contracts that are intended to economically hedge certain of our
asted
ff
Business Combinations
business combinations is allocated to the estimated faiff
The purchase price forff
including goodwill and assumed liabilities, where applicablea
and trade names, backlog and non-competition agreements as identifiablea
value as of the transaction date. The faiff
approach using current industry information which involves significant unobservablea
include projected sales, margin and tax rate.
r values of acquired tangible and intangible assets,
. Additionally, we recognize customer relationships, trademarks
intangible assets. These assets are recorded at fair
r value of these intangibles is determined using either the income approac
a
h or the market
inputs (Level 3 inputs). These inputs
54
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At times, the total purchase price forff
and intangible assets. In these cases, we record a gain on bargain purchase within other expenses in the Consolidated
Statements of Operations and Comprehensive Income rather than goodwill in accordance with U.S. GAAP.
a business combination could be less than the estimated faiff
r values of acquired tangible
Accounts Receivabla e
We account for trade receivablea
contractual terms. We do not accrue interest on any of our trade receivablea
s based on amounts billed to customers. Past due receivables are determined based on
s.
tory completion of each installation project. Management regularly reviews aging of retainage receivablea
Retainage receivables represent the amount retained by our customers to ensure the quality of the installation and is received
after satisfacff
changes in payment trends and records an allowance when collection of amounts dued
by project owners under construction contracts and included in accounts receivablea
December 31, 2021 and 2020, respectively. In addition, as of December 31, 2021, $0.5 million of retainage receivablea
recorded in other non-current assets.
are considered at risk. Amounts retained
were $40.5 million and $41.7 million as of
s were
s and
Credit losses are measured according to ASC 326, “Financial Instruments – Credit Losses: Measurement of Credit Losses on
financial instruments,
Financial Instruments.” We consider forwa
including trade receivablea
rd-looking information to estimate expected credit losses forff
ff
s, retainage receivablea
s and contract assets (unbilled receivables).
Our expected loss allowance methodology for accounts receivablea
conditions and future market forecasts. We also perform ongoing evaluations of our existing and potential customer’s
creditworthiness. To date, the COVID-19 pandemic has not yet had a material impact on the collectabila
receivables. See Note 4, Credit Losses, for additional information.
is developed using historical losses, current economic
ity of our existing trade
Concentration of Credit Risk
Credit risk is our risk of financial loss from the non-performance of a contractual
Such risk arises principally fromff
our receivablea
accounts receivablea
are from entities engaged in residential and commercial construction. We perform periodic credit
evaluations of our customers’ financial condition. The general credit risk of our counterparties is not considered to be
significant. In addition, no individual customer made up more than 3% of accounts receiivablblea
years ended December 31, 2021, 2020 and 2019.
obligation on the part of our counterparty.
customers and cash and bank balances. Substantially all of our trade
or 5% of net revenue for the
s fromff
tt
Inventories
Inventories consist of insulation, waterproofing materials, fireproofing and fire-stopping materials, garage doors, rain gutters,
window blinds, shower doors, mirrors, closet shelving and other products. We value inventory at each balance sheet date to
ensure that it is carried at the lower of cost or net realizablea
value with cost determined using the firff st-in, first-out (“FIFO”)
method. Net realizablea
completion, disposal and transportation. As of December 31, 2021 and 2020, substantially all inventory was finis
Inventory provisions are recorded to reduce inventory to the lower of cost or net realizable value for obsolete or slow moving
inventory based on assumptions about futurett
ity of products, the impact of new product introductions,
inventory levels and turns, product spoilage, and specific identification of items such as product discontinuance, engineering/
material changes, or regulatory-related changes.
value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of
demand and marketabila
hed goods.
ff
Property and Equipment
q p
y
p
Property and equipment are stated at cost, less accumulated depreciation. We provide for depreciation and amortization of
property and equipment using the straight-line method over the expected useful lives of the assets. Expected useful lives of
property and equipment vary but generally are the shorter of lease life or five years for vehicles and leasehold improvements,
and equipment and 30 years for buildings.
three to fiveff
tt
years for furniture, fixt
ures
ff
Major renewals and improvem
ents are capia talized. Maintenance, repairs and minor renewals are expensed as incurred. When
assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and
any resulting gain or loss is recorded.
m
55
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
business combinations and represents the excess of the purchase price over the faiff
Goodwill results fromff
tangible assets and liabia lities and identifiable intangible assets. Annually, on October 1, or if conditions indicate an earlier
review is necessary, we perform a one-step quantitative test to determine if it is more likely than not that the fair value of the
reporting unit is less than its carrying amount. The estimate of the reporting unit’s fair value is determined by weighting a
discounted cash flow model and a market-related model using current industry information that involve significant
unobservable inputs (Level 3 inputs). In determining the estimated futuret
and judgments, including current and projected futuret
the
prospects, market and economic conditions and market-participant considerations. An impairment charge is recognized forff
amount by which the carrying value exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated
to the reporting unit.
levels of income based on management’s plans, business trends,
cash flow, we consider and apply certain estimates
r value of acquired
g
Impairment of Other Intangible and Long-Lived Assets
p
g
Other intangible assets consist of customer relationships, backlog, non-competition agreements and business trademarks and
trade names. Amortization of finite lived intangible assets is recorded to refleff ct the pattern of economic benefits based on
projected revenues over their respective estimated useful lives (customer relationships – eight to 15 years, backlog – 18 to 36
months, non-competition agreements – one to five years and business trademarks and trade names – two to 15 years). We do
not have any indefinite-lived intangible assets other than goodwill.
We review long-lived assets and intangible assets whenever events or changes in circumstances indicate that the carrying value
cash flows expected to result from
of an asset may not be recoverable. An impairment loss is recognized when estimated future
the use of an asset and its eventual
amount of the asset is reduced to its estimated faiff
fair net realizablea
for the years ended December 31, 2021, 2020, and 2019.
value less cost to sell at the date management commits to a plan of disposal. There was no impairment loss
disposition are less than its carrying amount. When impairment is identified, the carrying
r value. Assets to be disposed of are recorded at the lower of net book value or
ff
tt
Other Liabilities
Our workers’ compensation insurance program, for a significant portion of our business, is considered a high deductible
program whereby we are responsible for the cost of claims under approximately $0.8 million. Our general liabila
ity insurance
program is considered a high retention program whereby we are responsible for the cost of claims up to approximately $5.0
million, subject to an aggregate cap of $10.0 million. Our vehicle liability insurance program is considered a high deductible
program whereby we are responsible for the cost of claims under approximately $1.0 million. In each case, if we do not pay
these claims, our insurance carriers are required to make these payments to the claimants on our behalf. The liabilities represent
our best estimate of our costs, using generally accepted actuarial reserving methods, of the ultimate obligations for reported
claims plus those incurred but not reported for all claims incurred through December 31, 2021 and 2020. We establish case
reserves forff
reported claims using case-basis evaluation of the underlying claims data and we update as information becomes
known. We regularly monitor the potential for changes in estimates, evaluate our insurance accruals and adjust our recorded
provisions.
The assumptim ons underlying the ultimate costs of existing claim losses are subjeu
can affect the liability recorded forff
workers’ compensation claims can affect the ultimate costs. Similarly, changes in legal trends and interpretations, as well as a
change in the naturett
anticipate significant changes in historical trends for these variables and any changes could have a considerablea
claim costs and currently recorded liabilities.
and method of how claims are settled, can affect ultimate costs. Our estimates of liabilities incurred do not
effect on future
such claims. For example, variability in inflation rates of health care costs inherent in
ct to a high degree of unpredictability, which
a number of risks, including, but not limited to, workers’ compensation, general liability, vehicle
We carry insurance forff
liability, property and our obligation for employee-related health care benefits. Liabila
these risks are estimated by considering historical claims experience, including frequency, severity, demographic
other actuat
loss development, and appl
ate loss development factors to the incurred costs associated with the claims with the
assistance of external actuarial consultants. While we do not expect the amounts ultimately paid to differ significantly fromff
estimates, our reserves and corresponding expenses could be affected if futff uret
historical trends and actuarial assumptim ons.
rial assumptions. In estimating our liability forff
claim experience differs significantly fromff
such claims, we periodically analyze our historical trends, including
ities relating to claims associated with
factors and
y appropri
a
a
a
our
56
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Advertising Costs
g
Advertising costs are generally expensed as incurred. Advertising expense was approxim
December 31, 2021, and $3.9 million forff
selling expense on the Consolidated Statements of Operations and Comprehensive Income.
ately $4.6 million for the year ended
both the years ended December 31, 2020 and 2019, respectively, and is included in
a
Deferred Financing Costs
g
ncing costs and debt issuance costs combined, totaling $11.4 million and $7.0 million, net of accumulated
Deferred finaff
amortization as of December 31, 2021 and 2020, respectively, are amortized over the term of the related debt on a straight-line
basis which approximates the effective interest method. The deferre
ff
while the debt issuance costs are included in long-term debt on the Consolidated Balance Sheets as of December 31, 2021 and
2020, respectively. The related amortization expense of these costs combined was $1.4 million, $1.3 million and $1.2 million
and is included in interest expense, net on the Consolidated Statements of Operations and Comprehensive Income forff
ended December 31, 2021, 2020 and 2019, respectively.
ncing costs are included in other non-current assets
the years
d finaff
alization. We had no such write offs or expenses during the year ended December 31, 2020. These amounts are included in
We wrote off $0.2 million and $3.3 million in previously capia talized loan costs during the years ended December 31, 2021 and
2019, respectively. In addition, we expensed loan costs of approximately $1.6 million and $0.4 million forff
December 31, 2021 and 2019, respectively, associated with our credit facff
capita
interest expense, net on the Consolidated Statements of Operations and Comprehensive Income. We also had $7.5 million in
new costs associated with the debt-related finaff
deferred financing costs are included in other non-current assets while the debt issuance costs are included in long-term debt on
the Consolidated Balance Sheets. These costs are amortized over the term of the related debt on a straight-line basis which
approximates the effecff
ncing transactions incurred during the year ended December 31, 2021. The
ilities because they did not meet the requirements for
tive interest method.
the years ended
For additional information on our debt instruments, see Note 8, Long-Term Debt.
Leases
Leases are measure according to ASC 842, “Leases,” which requires substantially all leases, with the exception of leases with a
term of one year or less, to be recorded as a lease liability measured as the present value of the futff uret
corresponding right-of-use asset. ASC 842 also requires disclosures designed to give financial statement users information on
the amount, timing and uncertainty of cash flows.
lease payments with a
ff
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 availablea
future payments. 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. We elect to not separate lease component
non-lease
components forff
obligations.
all fixed payments, and we exclude variable lease payments in the measurement of right-of-use assets and lease
at the commencement date to determine the present value of
s fromff
m
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 fromff
liabilities. Certain leases also include options to purchase the leased property.t 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 liabia lity.
right-of-use assets and related lease
Share-Based Compensation
p
Our share-based compensation program is designed to attract and retain employees while also aligning employees’ interests
with the interests of our stockholders. Restricted stock awards are periodically granted to certain employees, officers and non-
employee members of our board of directors under the stockholder-approved 2014 Omnibus Incentive Plan.
Certain of our stock awards are deemed to be equity-based with a service condition and do not contain a market or performance
condition with the exception of performance-based awards granted to certain officers and performance-based stock units. Fair
value of the non-performance-based awards to employees and officers is measured at the grant date and amortized to expense
57
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ff
value is reduced by assumed forfeitures and adjusted forff
over the vesting period of the awards using the straight-line attribution method for all service-based awards with a graded
vesting feature. This fair
performance-based stock awards to certain officers under our 2014 Omnibus Incentive Plan. The performance-based
compensation expense is recorded over the requisite service period using the graded-vesting method for the entire award.
Performance-based stock awards are accounted for at fair value at date of grant. We also periodically grant performance-based
stock units to certain employees under the stockholder-approved 2014 Omnibus Incentive Plan. These units convert to shares
upon meeting time- and performance-based requirements.
until vesting. We also issue
actual forfe
tt
itures
ff
performance-based stock units is recorded based on an assessment each reporting period of the
Compensation expense forff
probability that certain performance goals will be met during the contingent vesting period. If performance goals are not
probable to occur, no compensation expense will be recognized. If performance goals that were previously deemed probable are
not or are not expected to be met, the previously recognized compensation cost related to such performance goals will be
reversed. Employees and officers are subjecb
the grant date if an election is made.
t to tax at the vesting date based on the market price of the shares on that date, or on
Income Taxes
We account for income taxes using the asset and liability method. Under this method, the amount of taxes currently payablea
refundablea
temporary differences that currently exist between the tax basis and finaff
tax consequences of
ncial reporting basis of our assets and liabilities.
are accrued and deferred tax assets and liabia lities are recognized for the estimated futurett
or
shed against deferred tax assets when it is more likely than not that the realization of those
Valuation allowances are establia
deferred tax assets will not occur. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which
they arise, we consider all availablea
positive and negative evidence, including scheduled reversals of deferred tax liabilities, the
ability to produce future taxable income, prudent and feaff
projecting futuret
including the amount of futurett
implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the
forecasts of future taxable income and are consistent with the plans and estimates we use to manage the underlying businesses.
federal and state pretax operating income, the reversal of temporary differences and the
tor in historical results and changes in accounting policies and incorporate assumptions,
sible tax planning strategies and recent financial operations. In
income, we facff
taxablea
Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary
differences are expected to reverse. The effect on deferred taxes fromff
the period that includes the enactment date of the change. Changes in tax laws and rates could also affect recorded deferred tax
assets and liabilities in the future.
a change in tax rate is recognized through operations in
A tax benefit fromff
sustained upon examination, including resolutions of any related appe
Income tax positions must meet a more likely than not recognition threshold to be recognized.
an uncertain tax position may be recognized when it is more likely than not that the position will be
als or litigation processes, based on the technical merits.
a
uncertain tax positions and adjust these liabilities when our judgment changes as a result of the
We recognize tax liabilities forff
evaluation of new information not previously available. Liabilities related to uncertain tax positions are recorded in other long-
term liabilities on the Consolidated Balance Sheets. Due to the complexity of some of these uncertainties, the ultimate
resolution may result in a payment that is materially different from the current estimate of the tax liabia lities. These differences
will be reflected as increases or decreases to income tax expense and the effective tax rate in the period in which the new
information becomes available. Interest and penalties related to unrecognized tax benefits are recognized within income tax
expense in the Consolidated Statements of Operations and Comprehensive Income. Accrued interest and penalties are
recognized in other current liabilities on the Consolidated Balance Sheets.
unrecognized tax benefits reflect management’s best
Our income tax expense, deferred tax assets and liabilities and reserves forff
assessment of estimated future
taxes to be paid. We are subject to income taxes in the United States, which includes numerous
state and local jurisdictions. Significant judgments and estimates are required in determining the income tax expense, deferred
tax assets and liabilities and the reserve for unrecognized tax benefits.
ff
ff
Estimated Fair Value of Financial Instruments
See Note 10, Fair Value Measurements, for related accounting policies.
58
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently Adopted Accounting Pronouncements
p
g
y
Standard
ASU 2021-01,
Reference Rate Reform
(Topic 848): Scope
Effective Date
Effective upon
issuance
January 1, 2021
ASU 2019-12, Income
Taxes (Topic 740),
Simplifying the
Accounting for Income
Taxes
Adoption
a
ication of ASU 2020-04,
This pronouncement clarifies the scope and appl
"Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform
on Financial Reporting (Topic 848)." We continue to evaluate the impact of
Topic 848 and may apply other elections as applicablea
the market occur.
This pronouncement simplifies the accounting for income taxes by removing
certain exceptions to the general principles of Topic 740 and improves the
consistent application of GAAP by clarifying and amending existing guidance.
The adoption of this standard did not impact our financial statements or have a
material effect on our disclosures.
as additional changes in
Recently Issued Accounting Pronouncements Not Yet Adopted
p
y
g
We are currently evaluating the impact of certain ASUs on our Consolidated Financial Statements or Notes to Consolidated
Financial Statements, which are described below:
Standard
ASU 2021-08, Business
Combinations (Topic 805):
Accounting for contract
assets and contract liabila
from contracts with
customers
ities
Description
This pronouncement amends
Topic 805 to require an
acquirer to account for
revenue contracts in a
business combination in
accordance with Topic 606 as
if the acquirer had originated
the contracts.
NOTE 3 – REVENUE RECOGNITION
Effective Date
Annual periods beginning
after December 15, 2022,
including interim periods
therein. Early adoption is
permitted.
Effect on the financial statements or
other significant matters
We are currently assessing
the impact of the adoption on
our consolidated financial
statements.
We disaggregate our revenue from contracts with customers by end market and product, as we believe it best depicts how the
nature,
tors. The following tabla es
amount, timing and uncertainty of our revenue and cash flows are affecff
t
present our revenues disaggregated by end market and product (in thousands):
ted by economic facff
Residential new construction
Repair and remodel
Commercial
Net revenues
Insulation
Shower doors, shelving and mirrors
Waterproofing
rr
Garage doors
Rain gutters
Fireproofing/firestopping
Window blinds
Other building products
Net revenues
Years ended December 31,
2021
1,500,750
133,986
333,914
1,968,650
76 % $
7 %
17 %
100 % $
2020
1,243,498
106,784
302,943
1,653,225
75 % $
7 %
18 %
100 % $
2019
1,138,475
98,771
274,383
1,511,629
75 %
7 %
18 %
100 %
2021
1,262,628
138,797
130,924
108,675
86,406
59,381
50,255
131,584
1,968,650
Years ended December 31,
64 % $
7 %
7 %
5 %
4 %
3 %
3 %
7 %
100 % $
2020
1,058,316
117,131
122,962
93,516
62,672
49,648
46,984
101,996
1,653,225
64 % $
7 %
7 %
6 %
4 %
3 %
3 %
6 %
100 % $
2019
970,070
105,745
112,075
89,959
49,788
41,845
41,641
100,506
1,511,629
64 %
7 %
7 %
6 %
3 %
3 %
3 %
7 %
100 %
$
$
$
$
59
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contract Assets and Liabia lities
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 Consolidated Balance Sheets. Our contract liabila
ities consist of
customer deposits and billings in excess of revenue recognized, based on costs incurred and are included in other current
liabilities in our Consolidated Balance Sheets.
Contract assets and liabia lities related to our uncompleted contracts and customer deposits were as follow
ff
s (in thousands):
Contract assets
Contract liabila
ities
Uncompleted contracts were as foll
ff
ows (in thousands):
Costs incurred on uncompleted contracts
Estimated earnings
Total
Less: Billings to date
Net under billings
Net under billings were as follows (in thousands):
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)
Billings in excess of costs and estimated earnings on uncomplem ted contracts (contract liabila
ities)
Net under billings
As of December 31,
2020
2021
32,679
(14,153)
$
24,334
(8,965)
$
As of December 31,
2020
2021
169,544
206,050
90,737
106,163
260,281
312,213
240,665
285,978
19,616
26,235
$
As of December 31,
2020
2021
32,679
(6,444)
26,235
$
$
24,334
(4,718)
19,616
$
$
$
$
$
The difference between contract assets and contract liabila
primarily the result of timing differences between our performance of obligations under contracts and customer payments and
billings. During the year ended December 31, 2021, we recognized $8.7 million of revenue that was included in the contract
liability balance at December 31, 2020. We did not recognize any impairment losses on our receivablea
during the years ended December 31, 2021 and 2020.
ities as of December 31, 2021 compared to December 31, 2020 is
s and contract assets
Remaining performance obligations represent the transaction price of contracts forff which work has not been performed and
excludes unexercised contract options and potential modifications. As of December 31, 2021, the aggregate amount of the
transaction price allocated to remaining uncompleted contracts was $143.2 million. We expect to satisfy remaining performance
obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.
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 forff
receivables and contract assets (unbilled receivables). Results forff
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 forff
s that are current
or not yet dued , which were not considered under the previous accounting guidance.
reporting periods beginning after January 1, 2020 are
financial instruments, including trade receivablea
s, retainage
receivablea
60
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Upon adoption of ASC 326, we recorded a cumulative effecff
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 fromff
or used in operating, financing or investing activities on our consolidated cash flowff
t adjustment to retained earnings of $1.2 million, net of $0.4 million
statements.
Changes in our allowance forff
credit losses were as follow
ff
s (in thousands):
January 1, 2019
Current period provision
Recoveries collected and additions
Amounts written off
December 31, 2019
Cumulative effect of change in accounting principle
Current period provision
Recoveries collected and additions
Amounts written off
December 31, 2020
Current period provision
Recoveries collected and additions
Amounts written off
December 31, 2021
$
$
$
$
5,085
4,312
1,269
(3,788)
6,878
1,600
4,444
503
(4,636)
8,789
2,227
574
(2,873)
8,717
NOTE 5 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid instruments with insignificant interest rate risk and original or remaining
maturities of three months or less at the time of purchase. These instruments amounted to $258.1 million and $170.4 million as
of December 31, 2021 and 2020, respectively. See Note 10, Fair Value Measurements, for additional information.
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the folff
lowing (in thousands):
Land
Buildings
Leasehold improvements
tt
ures
ff
Furniture, fixt
Vehicles and equipment
and equipment
Less: accumulated depreciation and amortization
As of December 31,
2020
2021
108
3,901
10,935
64,556
248,848
328,348
(222,415)
105,933
$
$
108
3,901
10,288
55,780
223,003
293,080
(189,058)
104,022
$
$
We recorded the folff
category (in thousands):
lowing depreciation and amortization expense on our property and equipment, by income statement
Cost of sales
Administrative
Years ended December 31,
2020
2019
2021
$
$
40,938
2,623
39,011 $
2,328
36,922
1,939
Property and equipment as of December 31, 2021 and 2020 of $123.3 million and $98.0 million, respectively, were fully
depreciated but still being utilized in our business.
61
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – GOODWILL AND INTANGIBLES
the immediate effects of the COVID-19 pandemic but continues to be
The homebuilding industry quickly rebounded fromff
affected by other pandemic-related factors that could have long-term impacts, such as reduced
rising interest rates, and reduced consumer spending and consumer confidence, any of which could decrease demand for homes
and adversely affect our business. As such, we considered whether impairment indicators arose through the date of filff ing of this
Form 10-K for our goodwill, long-lived assets and other intangible assets and concluded that no facff
tors caused us to impair any
asset group during the year ended December 31, 2021. While we ultimately concluded that our goodwill, long-lived assets and
other intangibles assets were not impaired as of December 31, 2021, we will continue to assess impairment indicators related to
the impact of the COVID-19 pandemic on our business.
d employment levels, inflation,
Goodwill
The change in carrying amount of goodwill was as foll
ff
ows (in thousands):
January 1, 2020
Business combinations
Other
December 31, 2020
Business combinations
Other
December 31, 2021
Goodwill
(Gross)
Accumulated
Impairment
Losses
Goodwill
(Net)
$
$
265,656
21,305
(87)
286,874
105,617
30
392,521
$
$
(70,004) $
—
—
(70,004)
—
—
(70,004) $
195,652
21,305
(87)
216,870
105,617
30
322,517
Other changes included in the above tabla e primarily include minor adjustments forff
under measurement for the years ended December 31, 2021 and 2020. For additional information regarding changes to goodwill
resulting from acquisitions, see Note 17, Business Combinations.
the allocation of certain acquisitions still
,
2021 our measurement date, we tested goodwill forff
At October 1,
in conformity with generally accepted accounting principles and determined that no impairment of goodwill was required. As
such, no impaim rment of goodwill was recognized for the year ended December 31, 2021. In addition, no impairment of goodwill
was recognized forff
tablea
31, 2010.
the years ended December 31, 2020 or 2019. Accumulated impairment losses included within the above
the year ended December
were incurred over multiple periods, with the latest impairment charge being recorded during
impairment by performing a one-step qualitative assessment
d
Intangibles, net
g
,
The following tablea
intangibles (in thousands):
provides the gross carrying amount, accumulated amortization and net book value for each majora
class of
Gross
Carrying
Amount
2021
Accumulated
Amortization
As of December 31,
Net
Book
Value
Gross
Carrying
Amount
2020
Accumulated
Amortization
Net
Book
Value
Amortized intangibles:
Customer relationships
Covenants not-to-compete
Trademarks and tradenames
Backlog
$
$
292,113
27,717
103,007
23,724
446,561
$
$
113,849
16,471
32,623
19,197
182,140
$
$
178,264
11,246
70,384
4,527
264,421
$
$
197,641
20,309
79,657
18,847
316,454
$
$
89,137
13,436
27,245
15,243
145,061
$
$
108,504
6,873
52,412
3,604
171,393
There was no intangible asset impairment loss for the years ended December 31, 2021, 2020 and 2019.
62
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The gross carrying amount of intangibles increased approximately $130.1 million and $46.4 million during the years ended
December 31, 2021 and 2020, respectively. Intangibles associated with business combinations accounted for approximately
$130.0 million and $46.2 million of the increases during the years ended December 31, 2021 and 2020, respectively. For more
information, see Note 17, Business Combinations. Amortization expense on intangible assets totaled approxi
mately $37.1
million, $28.5 million, and $24.5 million during the years ended December 31, 2021, 2020 and 2019, respectively. Remaining
estimated aggregate annual amortization expense is as follows (in thousands):
a
2022
2023
2024
2025
2026
Thereafter
$41,780
37,458
33,762
27,440
23,489
100,492
NOTE 8 – LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
2028, net of unamortized debt issuance costs of $3,633 and $4,230,
Senior Notes dued
respectively
Term loan, net of unamortized debt issuance costs of $6,735 and $1,343, respectively
Vehicle and equipment notes, maturing
installments, including interest rates ranging from 1.9% to 4.8%
Various notes payable, maturing through March 2025; payablea
installments, including interest rates ranging from 1.0% to 5.0%
in various monthly
tt
through December 2026; payable in various monthly
Less: current maturities
Long-term debt, less current maturities
As of December 31,
2020
2021
$
$
296,367
493,265
$
295,770
198,657
69,228
67,493
4,172
863,032
(30,839)
832,193
$
3,392
565,312
(23,355)
541,957
Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of December 31, 2021 are as
follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
$30,839
24,850
19,098
15,600
8,013
775,000
5.75% Senior Notes due 2028
In September 2019, we issued $300.0 million in aggregate principal amount of 5.75% senior unsecured notes (the “Senior
Notes”). The Senior Notes will mature on February 1, 2028 and interest is payable semi-annually in cash in arrears on February
1 and August 1, commencing on February 1, 2020. The net proceeds from the Senior Notes offering were $295.0 million afteff
r
debt issuance costs.
The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the
Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock;
(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capita
l
alization per fisca
icable restricted payment baskets; (iii) prepay subordinated debt; (iv)
year, or in an aggregate amount exceeding certain appl
y net proceeds from certain asset sales; (vii) engage in
create liens; (v) make specified types of investments; (vi) appl
a
a
ff
63
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
transactions with affilff
u
distributions from subsidi
aries.
iates; (viii) merge, consolidate or sell subsu tantially all of our assets; and (ix) pay dividends and make other
Credit Facilities
In December 2021, we entered into a new $500 million, seven-year term loan facff
ility dued December 2028 (the “Term Loan”)
under our credit agreement (the “Term Loan Agreement”), dated as of December 14, 2021 with Royal Bank of Canada as the
administrative agent and collateral agent thereunder. The Term Loan amortizes in quarterly principal payments of $1.25 million
starting on March 31, 2022, with any remaining unpaid balances due on the maturit
Loan bears interest at either the base rate (which approximates the prime rate) or the Eurodollar rate, plus a margin of (A)
1.25% in the case of base rate loans or (B) 2.25% in the case of Eurodollar rate loans. Proceeds from the Term Loan were used
to refinance and repay in full all amounts outstanding under our previous term loan agreement. We intend to use the remaining
funds to pay for certain feeff
including acquisitions and other growth initiatives. As of December 31, 2021, we had $493.3 million, net of unamortized debt
issuance costs, dued
s and expenses associated with the closing of the Term Loan and for general corporate purposes,
y date of December 14, 2028. The Term
on our Term Loan.
tt
Subject to certain exceptions, the Term Loan will be subject to mandatory prepayments of (i) 100% of the net cash proceeds
from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain
permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on
achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the
Company or any of its restricted subsidiaries in excess of a certain amount and subject to reinvestment provision and certain
other exception; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of
excess cash flow of the Company and its restricted subsidiaries in excess of $15 million, subject to certain exceptions and
limitations.
an asset-based lending credit facff
In September 2019, we entered into an asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit
-year
Agreement provides forff
maturity. 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. In connection with the Term Loan Agreement, we
entered into a Third Amendment (the “Third Amendment”) to the Third ABL/Term Loan Intercreditor Agreement with Bank of
America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Royal Bank of Canada as collateral agent
under the Term Loan Agreement. Including outstanding letters of credit, our remaining availabila
ity under the ABL Revolver as
of December 31, 2021 was $155.7 million. In February 2022, we amended and extended our ABL Credit Agreement. See Note
19, Subsequent Events, for additional information.
ility (the “ABL Revolver”) of up tu
o $200.0 million with a fiveff
All of the obligations under the Term Loan and ABL Revolver are guaranteed by all of the Company’s existing restricted
subsidiaries and will be guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the
Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the
Company and the guarantors, subject to certain exceptions and permitted liens, including a firff st-priority security interest in such
assets that constitutett
in such assets that constitutet
ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second- priority security interest
Term Loan Priority Collateral, as defined in the Term Loan Agreement.
The ABL Revolver bears interest at either the Eurodollar rate or the base rate (which approxi
mated 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
availabila
ity under the ABL Credit Agreement).
a
The ABL Revolver also provides incremental revolving credit facff
conditions of any incremental revolving credit facility commitments must be no more favorablea
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.
ility commitments of up to $50.0 million. The terms and
than the terms of the ABL
ncial covenant
The ABL Credit Agreement contains a finaff
of 1.0 ix in thhe event hthat w de do not meet a mi iinimum measure of av iaillabilbila
Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the
Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock;
(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capita
l
alization per fisca
icable restricted payment baskets; (iii) prepay subordinated debt; (iv)
year, or in an aggregate amount exceeding certain appl
iityy u dnder hthe ABL Rev lolver T. he ABL Credit
imi inimum fifi dxed hch garge cove grage ratiio
ff
requiringring hthe s iatisf
n of a
iactio
a
ff
i
64
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
types of investments; (vi) appl
a
y net proceeds from certain asset sales; (vii) engage in
iates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other
create liens; (v) make specifiedff
transactions with affilff
distributions from subsidiaries.
Vehicle and Equipment Notes
q p
We are party to a Master Loan and Security Agreement (“Master Loan and Security Agreement”), a Master Equipment Lease
Agreement (“Master Equipment Agreement”) and one or more Master Loan Agreements (“Master Loan Agreements” and
together with the Master Loan and Security Agreement and Master Equipment Agreement the “Master Loan Equipment
Agreements”) with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in
the normal course of business. Each finaff
Vehicles and equipment purchased or leased under each financing arrangement serve as collateral forff
such financing arrangement. Regular payments are due under each note forff
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.
ncing arrangement under these agreements constitutes a separate note and obligation.
a period of typically 60 consecutive months after the
the note appli
cablea
to
a
Total gross assets relating to our Master Loan and Equipment Agreements were $134.5 million and $132.2 million as of
December 31, 2021 and 2020, respectively. The net book value of assets under these agreements was $65.3 million and $65.7
million as of December 31, 2021 and 2020, respectively. Depreciation of assets held under these agreements is included within
cost of sales on the Consolidated Statements of Operations and Comprehensive Income.
NOTE 9 – LEASES
We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging
activities forff
and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office
equipment.
certain products we install; various office spaces for selling and administrative activities to support our business;
The tablea
below presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheet:
Classification
As of December 31,
2021
2020
(in thousands)
Assets
Non-Current
Operating
Finance
Total lease assets
Liabilities
Current
Operating
Financing
Non-Current
Operating
Financing
Operating lease right-of-use assets
Property and equipment, net
Current maturities of operating lease obligations
Current maturities of finance lease obligations
Operating lease obligations
Finance lease obligations
Total lease liabilities
Weighted-average remaining lease term
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
65
$
$
$
$
69,871
5,266
75,137
23,224
1,747
46,075
3,297
74,343
$
$
$
$
53,766
4,946
58,712
18,758
2,073
34,413
2,430
57,674
4.3 years
3.3 years
3.38 %
4.96 %
4.1 years
2.6 years
3.67 %
5.08 %
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lease Costs
The tablea
2019:
below presents certain information related to the lease costs for finance and operating leases during 2021, 2020 and
(in thousands)
Operating lease cost (1)
Finance lease cost
Amortization of leased assets (2)
Interest on finance lease obligations
Total lease costs
Classification
Years ended December 31,
2020
2019
2021
Administrative
$
27,357 $
23,454 $
21,024
Cost of sales
Interest expense, net
3,083
218
30,658 $
3,645
268
27,367 $
4,942
341
26,307
$
(1)
(2)
Includes variable lease costs of $3.0 million, $2.9 million and $2.5 million forff
and 2019, respectively, and short-term lease costs of $1.1 million, $0.8 million and $0.9 million forff
December 31, 2021, 2020 and 2019, respectively.
Includes variable lease costs of $0.7 million, $0.7 million and $0.9 million forff
and 2019, respectively.
the years ended December 31, 2021, 2020
the years ended
the years ended December 31, 2021, 2020
Other Information
The tablea
below presents supplemental cash flowff
information related to leases during
d
2021, 2020 and 2019:
(in thousands)
Cash paid for amounts included in the measurement of lease liabila
ities:
Operating cash flows forff
Operating cash flows for finance leases
Financing cash flows for finance leases
operating leases
Undiscounted Cash Flows
Years ended December 31,
2020
2021
2019
$
22,930 $
218
2,125
19,668 $
268
2,632
17,521
341
4,157
The tablea
finance lease obligations and operating lease obligations recorded on the Consolidated Balance Sheet as of December 31, 2021:
each of the first fivff e years and total of the remaining years for the
below reconciles the undiscounted cash flowff
s forff
(in thousands)
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
Less: Amounts representing executory costs
Less: Amounts representing interest
Present value of future minimum lease payments
Less: Current obligation under leases
Long-term lease obligations
Related Party
1,347
$
906
645
519
—
—
3,417
$
Operating Leases
Other
$
$
23,832
18,139
11,006
6,502
4,701
7,283
71,463
Total Operating
25,179
$
19,045
11,651
7,021
4,701
7,283
74,880
—
(5,581)
69,299
(23,224)
46,075
$
Finance Leases
$
$
2,001
1,452
1,043
674
343
—
5,513
(29)
(440)
5,044
(1,747)
3,297
66
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – FAIR VALUE MEASUREMENTS
Fair Values
Fair value is the price that would be received forff
advantageous market for the asset or liabila
an asset or paid to transfer a liabila
ity (an exit price) in the principal or most
ity in an orderly transaction between market participants on the measurement date.
ASC 820, “Fair Value Measurement,” establia
observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels
of inputs that may be used to measure fair value:
shes a fair value hierarchy that requires an entity to maximize the use of
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to
access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data.
Level 3: Significant unobservable inputs that refleff ct a reporting entity’s own assumptions about the assumptions that
ity.
market participants would use in pricing an asset or liabila
Assets and Liabilities Measured at Fair Value on a Recurring Basis
g
In many cases, a valuation technique used to measure fair value includes inputs fromff
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 faiff
r value hierarchical levels.
Assets Measured at Fair Value on a Nonrecurring Basis
g
ff
other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods
Certain assets, specifically
subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of December 31, 2021 and 2020 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 faiff
Undiscounted cash flows, a Level 3 input, are utilized in determining estimated faiff
December 31, 2021, 2020 and 2019, we did not record any impairments on these assets required to be measured at fair value on
a nonrecurring basis.
r values. During each of the years ended
r value.
Estimated Fair Value of Financial Instruments
, accounts payable and accrued liabia lities as of December 31, 2021 and 2020 approximate faiff
Accounts receivablea
the short-term maturities of these finff ancial instruments. The carrying amounts of certain long-term debt, including the Term
Loan and ABL Revolver as of December 31, 2021 and 2020, approximate faiff
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 December 31, 2021 and 2020. All
debt classifications represent Level 2 faiff
r value due to the variable rate naturet
r value measurements.
of the
r value due to
Derivative financial instruments are measured at fair value based on observablea market information and appropri
methods. Contingent consideration liabilities arise fromff
acquisitions and are based on predetermined calculations of certain futuret
considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair
value by discounting estimated future
payments, calculated based on a weighted average of various future forecast scenarios, to
their net present value.
future earnout payments to the sellers associated with certain
results. These future payments are estimated by
ate valuation
a
ff
67
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
values of financial assets and liabia lities that are recorded at faiff
ff
The fair
described above were as follows (in thousands):
r value in the Consolidated Balance Sheets and not
As of December 31, 2021
As of December 31, 2020
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Financial assets:
Cash equivalents
Derivative financial instruments
$258,055 $258,055 $
— $
14,830
— 14,830
Total financial assets
Financial liabilities:
$272,885 $258,055 $ 14,830 $
— $ —
— $170,398 $170,398 $
—
—
—
— $175,528 $170,398 $ 5,130 $ —
5,130
5,130
Contingent consideration
Derivative financial instruments
Total financial liabilities
$ 11,170 $
1,937
$ 13,107 $
— $ 11,170 $ 4,004 $
— $
—
— $ 1,937 $ 11,170 $ 4,328 $
1,937
324
—
— $
—
— $
— $ 4,004
—
324
324 $ 4,004
See Note 5, Cash and Cash Equivalents, for more information on cash equivalents included in the tablea
11, Derivatives and Hedging Activities, for more information on derivative financial instruments.
above. Also see Note
The change in fair value of the contingent consideration (a Level 3 input) was as follows (in thousands):
Contingent consideration liability—January 1, 2021
Preliminary purchase price
Fair value adjustments
Accretion in value
Amounts cancelled
Amounts paid to sellers
Contingent consideration liability—December 31, 2021
$
$
4,004
8,400
(413)
1,154
(1,035)
(940)
11,170
The accretion in value of contingent consideration liabilities is included within administrative expenses on the Consolidated
Statements of Operations and Comprehensive Income.
The carrying values and associated faiff
Consolidated Balance Sheets and not described above include our Senior Notes. To estimate faiff
utilized third-party quotes which are derived all or in part from model prices, external sources or market prices. The Senior
Notes represent a Level 2 faiff
r values of financial assets and liabia lities that are not recorded at fair value in the
r value measurement and are as follows (in thousands):
r value of our Senior Notes, we
As of December 31, 2021
As of December 31, 2020
Carrying Value
Fair Value
Carrying Value
Fair Value
Senior Notes (1)
$
300,000
$
311,028
$
300,000
$
320,013
(1)
Excludes the impact of unamortized debt issuance costs.
Also see Note 8, Long-Term Debt, for more information on our Senior Notes.
NOTE 11 – DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
g
g
j
We are exposed to certain risks arising from both our business operations and economic conditions. We manage exposure to a
wide variety of business and operational risks through our core business activities. We manage economic risks, including
interest rate, liquidity and credit risk primarily by overseeing the amount, sources and duration of debt funding and the use of
derivative financial instruments. Specifically,
interest rate movements that result in the receipt or payment of future known and uncertain cash amounts, the value of which
we have entered into derivative financial instruments to manage exposure to
ff
68
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing
and duration of our known or expected cash receipts and known or expected cash payments principally related to our
investments and borrowings.
Cash Flow Hedges of Interest Rate Risk
g
Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate
to hedge the variable cash flows associated
movements. During the year ended December 31, 2021, we used interest rate swapsa
amounts from
designated as cash flowff
with existing variable-rate debt. Interest rate swapsa
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 forff
that are not designated as hedges. As of December 31, 2021, we have not posted any collateral related to these agreements.
trading or speculative purposes and we currently do not have any derivatives
hedges involve the receipt of variablea
As of December 31, 2021, we had three interest rate swaps.a One interest rate swap ba
amount of $200.0 million, a fixff ed rate of 0.51% and a maturi
began December 31, 2021, each with a fixff ed notional amount of $100.0 million, a fixeff
December 15, 2028. Together, these three swapsa
serve to hedge $400.0 million of the variablea
Term Loan through maturity. The assets and liabilities associated with these interest rate swapsa
current assets and other current liabilities on the Consolidated Balance Sheets at their fair value amounts as described in Note
10, Fair Value Measurements.
ty date of April 15, 2030. We also had two interest rate swapsa
cash flows on our variablea
are included in other non-
egan July 30, 2021 and has a fixeff
d rate of 1.37%, and a maturit
y date of
rate
d notional
that
tt
t
ff
During the year ended December 31, 2020, we terminated two then-existing interest rate swapsa
interest rate swap.a We settled the terminated swapsa
within cash flows
2020. The unrealized loss included in accumulated other comprehensive loss associated with the terminated swapsa
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.a During the years ended December 31, 2021 and 2020, we amortized $3.2 million and $1.3
million, respectively, of the unrealized loss to interest expense, net.
from operating activities within the Consolidated Statements of Cash Flows for the year ended December 31,
by making a cash payment of $17.8 million. This payment is classified
and one then-existing forward
of $17.8
r value of derivatives designated and that qualify as cash flow hedges are recorded in other
The changes in the faiff
comprehensive income, net of tax on the Consolidated Statements of Operations and Comprehensive Income and in
accumulated other comprehensive income on the Consolidated Balance Sheets and subsequent
period that the hedged forecasted transaction affects earnings. We had no such changes during the years ended December 31,
2021 or 2020.
ly reclassified into earnings in the
u
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. Over the next twelve months, we estimate that an additional $5.7
million will be reclassified as an increase to interest expense, net.
nce rate forff
our interest rate swap aa
on Financial Reporting (Topic 848). The purpose of this guidance is to provide relief for impacted areas as it
LIBOR is used as a refereff
year ended December 31, 2020, we adopted ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference
Rate Reformff
relates to impending reference rate reform. We elected to appl
assessments of effectiveness for futurett
transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the
presentation of derivatives consistent with past presentation.
LIBOR-indexed cash flows to assume that the index upon
y the hedge accounting expedients related to probabila
greements we use to hedge our interest rate exposure. During the
ff
which future
ity and the
hedged
u
a
NOTE 12 – STOCKHOLDERS’ EQUITY
As of December 31, 2021 and 2020, we had losses of $0.2 million and $8.8 million, respectively, in accumulated other
comprehensive loss on our Consolidated Balance Sheets. The loss as of Decemberm 31, 2021 represented the unrealized loss on
our terminated interest rate swapsa
ion net of taxes, less the effective portion of the unrealized gain on our interest
imillllion,
rate swaps of $$9.7
interest rate swaps of $$12.2
of $$3.4
ion net of taxes. The loss as of December 31, 2020 represented the unrealized loss on our terminated
imilllliion, net of ta .x For additional information, see Note 11, Derivatives and Hedging Activities.
imilllliion, net of tax, less the effective portion of the unrealized gain on our forward interest rate swapa
imillllion,
of $$9.9
Our board of directors approved a stock repurchase program whereby we are authorized to purchase shares of our outstanding
common stock. As of December 31, 2021, we had $100.0 million remaining under this repurchase program. On February 24,
69
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022, we announced that our board of directors extended the program end date fromff
authorized an increase in the total amount of our outstanding common stock we can purchase up to $200.0 million. During the
year ended December 31, 2020, we repurchased 633 thousand shares of our outstanding common stock with an aggregate price
of approximately $33.9 million, or $53.57 average price per share. We did not repurchase any shares during
December 31, 2021. The effect of these treasury shares reducing the number of common shares outstanding is reflected in our
earnings per share calculation. In response to COVID-19, we temporarily suspended our share repurchase program fromff
2020 until it was reinstated in November 2020.
March 1, 2022 through March 1, 2023 and
the year ended
March
d
Dividends
During the year ended December 31, 2021, we declared and paid the following cash dividends (amount declared and amount
paid in thousands):
Declaration Date
Record Date
Payment Date
2/23/2021
5/5/2021
8/5/2021
11/4/2021
3/15/2021
6/15/2021
9/15/2021
12/15/2021
3/31/2021
6/30/2021
9/30/2021
12/31/2021
Dividend Per Share Amount Declared
0.30 $
$
0.30
0.30
0.30
8,907
8,910
8,912
8,911
$
Amount Paid
8,786
8,821
8,821
8,866
The amount of dividends declared may vary from the amount of dividends paid in a period due to the vesting of restricted stock
awards and performance share awards, which accruerr
payment of future dividends will be at the discretion of our board of directors and will depend on our future earnings, capita
requirements, financial condition, futurett
prospects, results of operations, contractual
factors deemed relevant by our board of directors. We did not declare or pay any cash dividends on our capital stock during
year ended December 31, 2020.
restrictions, legal requirements, and other
the
dividend equivalent rights that are paid when the award vests. The
al
d
tt
Our credit facff
Note 8, Long-Term Debt, forff more information.
ilities place restrictions on the amount of dividends and stock repurchases we can make durid
ng a fisff cal year. See
NOTE 13 – EMPLOYEE BENEFITS
Healthcare
We participate in multiple healthcare plans, the largest of which is partially self-funded with an insurance company paying
benefits in excess of stop loss limits per individual/family. Our healthcare benefit expense (net of employee contributions) was
approximately $28.4 million, $24.1 million and $21.9 million for the years ended December 31, 2021, 2020 and 2019,
respectively, for all plans. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within
accrued compensation on the Consolidated Balance Sheets and was $3.3 million and $3.1 million as of December 31, 2021 and
2020, respectively.
Workers’ Compensation
p
We participate in multiple workers’ compensation plans. Under these plans, for a significant portion of our business, we use a
high deductible program to cover losses above the deductible amount on a per claim basis. We accruerr
for the estimated losses
premiums is included in other current
occurring from both asserted and unasserted claims. Workers’ compensation liability forff
liabilities on the Consolidated Balance Sheets. Insurance claims and reserves include accrual
s of estimated settlements forff
rr
known claims, as well as accruals of actuarial estimates of IBNR claims. In estimating these reserves, historical loss experience
based on actuarial
and judgments about the expected levels of costs per claim are considered. These claims are accounted forff
estimates of the undiscounted claims, including IBNR. We believe the use of actuarial methods to account for these liabilities
provides a consistent and effective way to measure these highly judgmental accruals.
Workers’ compensation expense totaled $17.6 million, $15.7 million and $15.4 million for the years ended December 31, 2021,
2020 and 2019, respectively, and is included in cost of sales on the Consolidated Statements of Operations and Comprehensive
Income.
70
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Workers’ compensation known claims and IBNR reserves included on the Consolidated Balance Sheets were as follows
thousands):
ff
(in
Included in other current liabilities
Included in other long-term liabilities
As of December 31,
2020
2021
$
$
8,048
13,397
21,445
$
$
7,703
11,986
19,689
We also had an insurance receivable forff
Consolidated Balance Sheets. This receivable offsets an equal liabila
was as follows (in thousands):
claims that exceeded the stop loss limit for fully insured policies included on the
ity included within the reserve amounts noted above
a
and
Included in other non-current assets
$
2,137
$
1,854
As of December 31,
2020
2021
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 substant
ially all our eligible employees. During the years ended December 31, 2021, 2020 and 2019, we recognized
401(k) plan expenses of $2.5 million, $2.2 million and $2.0 million, respectively, which is included in administrative expenses
on the accompanying Consolidated Statements of Operations and Comprehensive Income.
u
Multiemployer Pension Plans
p y
We participate in various multiemployer pension plans under collective bargaining agreements in Washington, Oregon,
California and Illinois with other companies in the construction industry. These plans cover our union-represented employees
and contributions to these plans are expensed as incurred. These plans generally provide for retirement, death and/or
termination benefits for eligible employees within the applicable collective bargaining units, based on specificff
participation requirements, vesting periods and benefit formulas. We do not participate in any multiemployer pension plans that
are considered to be individually significant.
eligibility/
The risks of participating in these multiemployer pension plans are different from single-employer pension plans. For examplem :
•
•
•
Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other
participating employers.
If a participating employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may be
borne by the remaining participating employers.
If a participating employer chooses to stop participating in these multiemployer plans, the employer may be required to
pay those plans a withdrawal liability based upon the underfunded status of the plan.
We also participate in various multiemployer health and welfare plans that cover both active and retired participants. Health
care benefits are provided to participants who meet certain eligibility requirements under the applicable collective bargaining
unit.
71
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our contributions to multiemployer pension and health and welfareff
benefit plans were as follows (in thousands):
Years ended December 31,
2020
2019
2021
Pension plans
Health & welfare plans
Total contributions
$
$
2,783
2,893
5,676
$
$
1,128 $
952
2,080 $
809
674
1,483
The increase in contributions for the year ended December 31, 2021 was driven by the acquisition of Alert Insulation in 2021
and a full
year of operations for 2020 acquisitions Insulation Contractors/Magellan Insulation and Norkote, Inc. See Note 17,
Business Combinations for more information.
ff
Share-Based Compensation
p
Common Stock Awards
We periodically grant shares of our common stock under our 2014 Omnibus Incentive Plan to non-employee members of our
board of directors and our employees. During the years ended December 31, 2021, 2020 and 2019, we granted approximately
four thousand, six thousand and eight thousand shares of restricted stock, respectively, to non-employee members of our board
of directors. Substantially all of the stock will vest over a one-year service period.
In addition, we granted approximately 0.1 million, 0.2 million and 0.1 million shares of our common stock to employees in
each of the years ended December 31, 2021, 2020 and 2019, respectively. Substantially all of the stock will vest in three equal
installments (rounded to the nearest whole share) annually over a three-year service period.
Performance-Based Stock Awards
We periodically grant nonvested stock awards subject to performance-based vesting conditions to certain officers. During the
year ended December 31, 2021, we issued approxi
installments on each of April 20, 2022 and April 20, 2023. In addition, during the year ended December 31, 2021, we
establia
issued to certain officers in 2022 contingent upon achievement of these targets.
shed, and our board of directors approved, performance-based targets in connection with common stock awards to be
mately 0.1 million shares of our common stock which vest in two equal
a
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 liabila
since they represent a predominantly-fixed monetary amount that will be settled with a variablea
number of common shares and
as such are included in other current liabilities on the Consolidated Balance Sheets. During the years ended December 31, 2021,
2020 and 2019 we granted approxi
respectively, all of which will vest in 2022.
mately five thousand, seven thousand and 11 thousand shares of our common stock,
ity-based awards
a
Performance-Based Restricted Stock Units
shed, and our board of directors approved, performance-based restricted stock units in connection with
During 2020, we establia
common stock awards which were issued to certain employees in 2021 based upon achievement of a performance target. In
addition, during the year ended December 31, 2021, we established, and our board of directors approved, performance-based
restricted stock units in connection with common stock awards to be issued to certain employees in 2022 based upon
achievement of a performance target. These units will be accounted forff
number of common shares. During the years ended December 31, 2021, 2020 and 2019 we granted approximately
eight thousand, 14 thousand and 14 thousand units, respectively, each of which will vest over a one-year service period.
d
as equity-based awards that will be settled with a fixeff
72
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Share-Based Compensation Summary
Amounts and changes for each category of equity-based award were as follow
ff
s:
Common Stock
Awards
Performance-Based
Stock Awards
Performance-Based
Restricted Stock
Units
Weighted
Average
Grant
Date Fair
Value Per
Share
$
$
48.05
124.88
48.87
62.36
68.99
Awards
231,280
55,815
(84,641)
(3,101)
199,353
Weighted
Average
Grant
Date Fair
Value Per
Share
$
$
59.97
123.32
52.79
123.26
81.30
Weighted
Average
Grant
Date Fair
Value Per
Share
$
36.51
126.89
36.51
73.06
$ 126.89
Units
13,273
8,470
(12,952)
(539)
8,252
Awards
166,961
42,449
(64,525)
(1,484)
143,401
Nonvested awards/units at December 31, 2020
Granted
Vested
Forfeited/Cancelled
Nonvested awards/units at December 31, 2021
The following tablea
thousands):
summarizes the share-based compensation expense recognized under our 2014 Omnibus Incentive Plan (in
Common Stock Awards
Non-Employee Common Stock Awards
Performance-Based Stock Awards
Liability Performance-Based Stock Awards
Performance-Based Restricted Stock Units
Years ended December 31,
2020
2021
2019
$
$
5,285 $
465
4,528
2,612
862
13,752 $
4,116 $
333
3,869
1,969
539
10,826 $
4,242
359
3,034
432
660
8,727
We recorded the folff
lowing stock compensation expense, by income statement category (in thousands):
Cost of sales
Selling
Administrative
Years ended December 31,
2020
2019
2021
$
$
448 $
204
13,100
13,752 $
284 $
202
10,340
10,826 $
374
194
8,159
8,727
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. We recognized windfall tax benefits of $1.7 million and $0.3 million forff
the years ended December 31, 2021 and
2019, and we recognized a tax shortfall of $0.3 million for the year ended December 31, 2020, respectively, within the income
tax provision in the Consolidated Statements of Operations and Comprehensive Income.
73
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unrecognized share-based compensation expense related to unvested awards was as foll
ff
ows (in thousands):
Common Stock Awards
Performance-Based Stock Awards
Performance-Based Restricted Stock Units
Total unrecognized compensation expense related to unvested awards
As of December 31, 2021
Unrecognized
Compensation
Expense
on Unvested Awards
7,518
$
4,832
301
12,651
$
Weighted Average
Remaining
Vesting Period
1.7
1.6
0.3
Total unrecognized compensation expense is subjecb
recognized over the remaining weighted-average period shown above on a straight-line basis except for the Performance-Based
Stock Awards which uses the graded-vesting method. Shares forfeited are returned
issuances.
d ments for forfeitures. This expense is expected to be
adjust
as treasury shares and availablea
t to futff urett
for future
t
During the years ended December 31, 2021, 2020 and 2019, our employees surrendered approxi
thousand and 45 thousand shares of our common stock under all plans, respectively, to satisfy tax withholding obligations
arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan.
mately 44 thousand, 25
a
As of December 31, 2021, approximately 1.8 million of the 3.0 million shares of common stock authorized forff
available forff
issuance under the 2014 Omnibus Incentive Plan.
issuance were
NOTE 14 – INCOME TAXES
The provision for income taxes is comprised of (in thousands):
Current:
Federal
State
Deferred:
Federal
State
Total tax expense
Years ended December 31,
2020
2021
2019
$
$
27,011
10,139
37,150
(437)
(1)
(438)
36,712
$
$
33,495
8,918
42,413
(7,177)
(1,298)
(8,475)
33,938
$
$
14,850
4,127
18,977
4,585
884
5,469
24,446
The reconciliation between our effecff
thousands):
tive tax rate on net income and the fedff
eral statutory rate is as follows (dollars in
Income tax at federal statutory rate
Stock compensation
Other permanent items
Change in valuation allowance
Change in uncertain tax positions
State income taxes, net of fedff
Total tax expense
eral benefit
2021
Years ended December 31,
2020
2019
$ 32,650
(1,567)
1,274
(922)
(2,867)
8,144
$ 36,712
21.0 % $ 27,547
331
(1.0)%
424
0.8 %
(207)
(0.6)%
65
(1.8)%
5,778
5.2 %
23.6 % $ 33,938
21.0 % $ 19,447
(255)
0.3 %
737
0.3 %
276
(0.2)%
67
0.1 %
4.4 %
4,174
25.9 % $ 24,446
21.0 %
(0.3)%
0.8 %
0.3 %
0.1 %
4.5 %
26.4 %
74
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Components of the net deferre
ff
d tax asset or liabila
ity are as follows (in thousands):
Deferred Tax Assets
Long-term
Accrued liabia lities and allowances
Allowance for doubtful accounts
Inventories
Property and equipment
Intangibles
Net operating loss carryforwards
Other
Long-term deferred tax assets
Less: Valuation allowance
Net deferre
Deferred Tax Liabilities
ff
d tax assets
Long-term
Accrued liabia lities and allowances
Property and equipment
Intangibles
Investment in partnership
Other
Long-term deferred tax liabila
ities
Net deferre
ff
d tax (liabilities) assets
The above amounts are included in our Consolidated
s:
Balance Sheets as follow
ff
Other non-current assets
Long-term deferred income tax liabilities
Net deferre
ff
d tax (liabilities) assets
As of December 31,
2020
2021
$
$
10,200
979
900
333
7,042
1,049
14
20,517
(216)
20,301
(669)
(7,629)
(6,783)
(8,271)
(793)
(24,145)
$
(3,844) $
9,106
987
402
280
6,582
1,206
16
18,579
(1,263)
17,316
(151)
(4,587)
(4,810)
(6,660)
(650)
(16,858)
458
975
(4,819)
(3,844) $
$
493
(35)
458
As of December 31, 2021, we had a deferred tax asset balance of $1.0 million reflecting the benefit of $4.8 million in fedff
and state income tax net operating loss (NOL) carryforwards, the earliest of which expires in 2030.
eral
Valuation Allowance
positive and negative evidence to estimate if sufficient future taxable income will be generated to
We assess the availablea
utilize the existing deferred tax assets on a jurisdiction and by tax filff ing entity basis. A significant piece of objective
negative evidence evaluated is cumulative losses incurred over the most recent three-year period. Such objective evidence
limits our ability to consider other subjective positive evidence such as our projections for future growth.
Based on this evaluation, a valuation allowance has been recorded as of December 31, 2021 and 2020 for the net deferred tax
assets recorded on certain of our wholly owned subsidiaries. Such deferred tax assets relate primarily to net operating losses
that are not more likely than not realizable. However, the amount of the deferred tax asset considered realizablea
adjusted if our estimate of future taxable income durid
the form of cumulative losses is no longer present. Additional weight may be given to subjective evidence such as our
projections for growth in this situation.
ng the carryforward period changes, or if objective negative evidence in
could be
75
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Uncertain Tax Positions
We are subject to taxation in the United States and various state jurisdictions. As of December 31, 2021, our tax years for 2018
through 2020 are subject to examination by the tax authorities. A rollforward of the gross unrecognized tax benefits is as
follows (in thousands):
Unrecognized tax benefit, January 1, 2019
Increase as a result of tax positions taken during
Decrease as a result of tax positions taken during
Decrease as a result of expiring statutes
Unrecognized tax benefit, December 31, 2019
dd
d
the period
the period
Increase as a result of tax positions taken during the period
the period
Decrease as a result of tax positions taken during
Increase as a result of expiring statutes
Unrecognized tax benefit, December 31, 2020
d
Increase as a result of tax positions taken during the period
Decrease as a result of tax positions taken during
the period
Decrease as a result of expiring statutet
s
Unrecognized tax benefit, December 31, 2021
d
$
$
$
$
5,349
2,866
(2,482)
(16)
5,717
3,822
(2,873)
10
6,676
4,482
(3,999)
(2,857)
4,302
No unrecognized tax positions would affecff
related to uncertain tax positions as of December 31, 2021 are $0.5 million.
t the effecff
tive tax rate at December 31, 2021. Interest expense and penalties accrued
We expect a decrease to the amount of unrecognized tax benefits (exclusive of penalties and interest) within the next twelve
months of zero to $2.4 million.
Determining uncertain tax positions and the related estimated amounts requires judgment and carry estimation risk. If future tax
law changes or interpretations should come to light, or additional information should become known, our conclusions regarding
unrecognized tax benefits may change.
NOTE 15 – RELATED PARTY TRANSACTIONS
We sell installation services to other companies related to us through common or affilff
directors and/or management relationships. We also purchase services and materials and pay rent to companies with
common or related ownership.
iated ownership and/or board of
We lease our headquarters and certain other facilities from related parties. See Note 9, Leases, forff
payments to be paid to these related parties.
future minimum lease
The amount of sales to common or related parties as well as the purchases from and rent expense paid to common or related
parties were as follow
s (in thousands):
ff
Sales
Purchases
Rent
Years ended December 31,
2020
2021
2019
$
$
1,452
1,544
1,322
$
3,987
1,841
1,125
13,488
1,810
1,040
At December 31, 2021 and 2020, we had related party balances of approxim
included in accounts receivable on our Consolidated Balance Sheets. These balances primarily represent trade accounts
receivable arising during the normal course of business with various related parties. M/I Homes, Inc., a customer whose
Chairman, President and Chief Executive Officer was a member of our board of directors until his resignation from our board
effective March 18, 2020, accounted forff
December 31, 2020 as well as the year ended December 31, 2019 while it was classified as a related party to the Company.
a significant portion of our related party sales during the firff st quarter of the year ended
ately $0.9 million and $0.7 million, respectively,
a
76
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Accrued General Liabila
ity and Auto Insurances
y
Accrued general liability and auto insurance reserves included on the Consolidated Balance Sheets were as follows
thousands):
ff
(in
Included in other current liabilities
Included in other long-term liabilities
As of December 31,
2020
2021
$
$
5,889
16,050
21,939
$
$
5,102
16,440
21,542
We also had insurance receivablea
aggregate, offset equal liabila
thousands):
s and indemnification assets included on the Consolidated Balance Sheets that, in
ities included within the reserve amounts noted above
a
. The amounts were as follows
ff
(in
Insurance receivables and indemnification assets for claims under fully insured policies
Insurance receivables for claims that exceeded the stop loss limit
$
Total insurance receivables and indemnification assets included in other non-current assets $
3,578 $
278
3,856 $
4,400
328
4,728
As of December 31,
2020
2021
Leases
See Note 9, Leases, forff
further information on our lease commitments.
Other Commitments and Contingencies
g
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 probablea
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.
ity has been incurred and when the amount of loss can be reasonably estimated. As
that such a liabila
t
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 was effecff
tive January 1, 2019 through December 31, 2021
with a purchase obligation of $15.0 million forff
2021, which we exceeded.
NOTE 17 – BUSINESS COMBINATIONS
a
dend ma krkets, we co
lallyly and id increase ma krket hshare iin certaiin ma krkets, as wellll as didiversify
rsify
inine
ongoi gng strat gyegy to expa dnd g ggeogra hiphic
lmplet ded leleven,
lvelyy, as wellll as several il insigni
ivoti gng
As part of our ongoi
our
dproducts a dnd
dand 2019, respec iti
2021, 2020
2019 i, in whihichh we acq iuiredd 100% of hthe
$$2.8
iincl dluded id in Addmi iinistra itive expenses on hthe Cons lioliddat ded Statements of Operatiions andd Com hprehe insive Income. hTh ge g
recogniz
amount assigned
as a res lult of 2021 ac
combinatiions dduringing hth ye years
isti gng opera itions iin
iqui isitiions me grged id into e ixi
on-relat ded costs amountedd to
l
lvelyy,
iqui dred and ld liiabibia lili ities assumedd. We expect to ddedduct $100.5 million of goodwi
equi yty iinterests iin ea hch ac
d d
dand isix b ibusiness
nsignifificant tuck ik-in ac
combinatiions represents thhe excess cost of hthe ac
quisi iti
i i
dand 2019, respec iti
ended Dece bmber 31, 2021, 2020
conjunctiion iwi hth hthes be busiiness
goodwillll for tax purposes
iquiredd entiityy over hthe net
imilllliion for hthe yyears
signed to assets ac
iqui dred en iti yty. Ac
ogniz ded iin conj
dendedd Dece bmber 31,
imilllliion, $$2.8
quisi itions.
dand $$2.1
doodwililll
dand are
imilllliion
i i
bi
bi
i
Bellow iis a summ yary of ea hch signi
hshown for hthe yyear of ac
signifificant ac
quisi ition byby yyear, iincl di
i i
iqui isitiion. hTh le l gargest of our 2021 ac
ludi gng revenue andd net iincome (l(loss)) siince ddate of a
quisi itions were I.W. International Insulation, Inc., dba
i i
cqui i isition,
i
77
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intermountain West Insulation (“IWI”) in March 2021, Alert Insulation ("Alert") and Alpine Construction Services ("Alpine")
in April 2021, General Ceiling & Partitions, Inc. ("GCP") in June 2021, Five Star Building Products, LLC and Five Star
Building Products of Southern Utah, LLC (collectively "Five Star") in September 2021, Denison Glass and Mirror, Inc.
("DGM") and CFI Insulation ("CFI") in November 2021, and AMD Distribution ("AMD") in December 2021. In eachh t blable,
“O hther” represents a
am iortiza ition, taxes
cqui isitiions hthat were iindi idivid lduallyly iimmate iri lal iin hthat yyear. Ne it incom (e (llo )ss), as
ate.
i
a
dand iinterest alllloca itions hwhen a
ppropri
noted bbellow, iincl dludes
d
i
For the year ended December 31, 2021 (in thousands):
2021 Acquisitions
IWI
Alert
Alpine
GCP
Five Star
DGM
CFI
AMD
Other
Total
Date
03/01/2021
4/13/2021
4/19/2021
6/7/2021
9/13/2021
11/1/2021
11/22/2021
12/13/2021
Various
Acquisition
Type
Share
Asset
Asset
Asset
Share
Asset
Share
Asset
Asset
Cash Paid
$ 42,098
5,850
7,945
9,700
26,308
11,634
13,450
119,490
6,540
$ 243,015
Seller
Obligations
5,959
$
2,980
2,208
1,427
5,466
2,069
1,145
6,631
1,284
$ 29,169
For the year ended December 31, 2020 (in thousands):
2020 Acquisitions
Royals
Energy One
Storm Master
ICON
Norkote
WeatherSeal
Other
Total
Date
2/29/2020
8/10/2020
8/31/2020
10/13/2020
10/26/2020
11/16/2020
Various
Acquisition
Type
Asset
Asset
Asset
Asset
Asset
Asset
Asset
Cash Paid
7,590
$
13,200
13,000
16,900
8,725
9,500
7,531
$ 76,446
Seller
Obligations
2,500
$
1,591
1,336
3,598
2,426
922
1,713
$ 14,086
Total
Purchase
Price
$ 48,057
8,830
10,153
11,127
31,774
13,703
14,595
126,121
7,824
$ 272,184
Total
Purchase
Price
$ 10,090
14,791
14,336
20,498
11,151
10,422
9,244
$ 90,532
Net
Income
(Loss)
3,373
(151)
189
83
(119)
(462)
53
(225)
(102)
2,639
Net
Income
(Loss)
1,332
(558)
619
449
417
(23)
(344)
1,892
$
$
$
$
Revenue
$ 36,259
13,494
8,267
7,125
6,861
2,198
1,289
3,707
3,231
$ 82,431
Revenue
$ 11,095
7,454
8,131
4,798
2,702
766
5,548
$ 40,494
For the year ended December 31, 2019 (in thousands):
2019 Acquisitions
1st State Insulation
Expert Insulation
Premier
Other
Total
Date
3/18/2019
6/24/2019
11/18/2019
Various
Acquisition
Type
Asset
Asset
Share
Asset
Seller
Obligations
1,355
$
1,993
2,765
1,430
7,543
$
Total
Purchase
Price
$
6,480
18,158
27,765
7,180
$ 59,583
Cash Paid
5,125
$
16,165
25,000
5,750
$ 52,040
$
Revenue
9,828
6,484
2,161
3,339
$ 21,812
Net Income
(Loss)
$
$
476
155
(62)
23
592
78
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Purchase Price Allocations
The estimated faiff
and cash paid, approximated the following (in thousands):
r values of the assets acquired and liabia lities assumed forff
the acquisitions, as well as total purchase prices
Estimated fair values:
Cash
Accounts receivable
Inventories
Other current assets
Property and
equipment
Intangibles
Goodwill
Other non-current
assets
Accounts payable
and other current
liabilities
Deferred income tax
liabilities
Other long-term
liabilities
Fair value of assets
acquired and
purchase price
Less seller
obligations
Cash paid
Estimated fair values:
Accounts receivable
Inventories
Other current assets
Property and
equipment
Intangibles
Goodwill
Other non-current
assets
Accounts payable
and other current
liabilities
Other long-term
liabilities
Fair value of assets
acquired and
purchase price
Less seller
obligations
Cash paid
IWI
Alert
Alpine
GCP
Five Star
DGM
CFI
AMD
Other
Total
2021
$
168
5,122
1,157
3,014
796
25,200
23,282
$
— $
4,710
765
738
693
2,770
940
— $
—
359
—
— $ 1,472
4,597
1,399
330
3,067
—
—
726
5,543
3,582
206
5,670
2,695
1,161
17,400
6,482
$
— $
4,007
6
1,016
853
8,800
3,447
67
1,318
311
26
714
7,699
6,799
$
— $
— $
8,393
7,540
—
1,133
52,800
56,327
446
345
74
932
4,072
2,063
1,707
31,660
11,882
5,198
7,214
129,954
105,617
264
132
—
—
—
213
—
—
18
627
(8,416)
(1,184)
(57)
(493)
(1,040)
(4,625)
(242)
(23)
(123)
(16,203)
—
—
(2,530)
(734)
—
—
—
—
—
(2,089)
—
—
(2,089)
(18)
(27)
(14)
(8)
(49)
(3)
(3,383)
48,057
8,830
10,153
11,127
31,774
13,703
14,595
126,121
7,824
272,184
5,959
$ 42,098
2,980
$ 5,850
2,208
$ 7,945
1,427
$ 9,700
5,466
$ 26,308
2,069
$ 11,634
1,145
$ 13,450
6,631
1,284
$119,490 $ 6,540
29,169
$ 243,015
Royals
Energy One
Storm
Master
ICON
Norkote WeatherSeal
Other
Total
2020
$
$
2,848
305
430
598
3,930
3,015
58
$
3,357
838
12
2,319
6,500
3,253
—
2,362
175
—
798
8,720
3,631
$
$
4,828
243
675
380
11,830
2,870
—
145
(1,059)
(1,469)
(1,336)
(35)
(19)
(14)
(445)
(28)
1,926
444
178
584
5,310
2,841
—
(86)
(46)
$
$
865
156
14
520
5,450
3,472
—
(50)
(5)
$
1,419
600
145
663
4,483
2,223
17,605
2,761
1,454
5,862
46,223
21,305
38
241
(196)
(4,641)
(131)
(278)
10,090
14,791
14,336
20,498
11,151
10,422
9,244
90,532
2,500
7,590
$
1,591
13,200
$
1,336
13,000
$
3,598
16,900
$
2,426
8,725
$
$
922
9,500
$
1,713
7,531
$
14,086
76,446
79
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Estimated fair values:
Cash
Accounts receivable
Inventories
Other current assets
Property and equipment
Intangibles
Goodwill
Other non-current assets
Accounts payablea
Fair value of assets acquired and purchase price
Less seller obligations
Cash paid
and other current liabilities
1st State
Expert
2019
Premier
Other
Total
$
$
— $
—
291
—
989
3,382
1,857
—
(39)
6,480
1,355
5,125
$
— $
1,796
723
—
235
6,740
8,545
161
(42)
18,158
1,993
16,165
$
334
2,929
1,242
—
876
14,300
10,151
329
(2,396)
27,765
2,765
25,000
$
— $
479
410
3
887
3,619
1,765
41
(24)
7,180
1,430
5,750
$
$
334
5,204
2,666
3
2,987
28,041
22,318
531
(2,501)
59,583
7,543
52,040
Contingent consideration is included as “seller obligations” in the above
subsequently paid during the period presented. These contingent payments consist primarily of earnouts based on performance
that are recorded at faiff
r value at the time of acquisition, and/or non-compete agreements and amounts based on working capia tal
calculations. When these payments are expected to be made over one year fromff
consideration is discounted to net present value of future payments based on a weighted average of various future forecast
scenarios.
the acquisition date, the contingent
r value of assets acquired” if
tabla e or within “faiff
a
ents to the allocation for each acquisition still under its measurement period are expected as third-party or
Further adjustmd
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 attributablea
combination. As a result, insignificant adjustments to the faiff
have been made to certain business combinations since the date of acquisition and futuret
end of each measurement period. Goodwill and intangibles per the above
these assets as shown in Note 7, Goodwill and Intangibles, during the years ended Dece bmber 31, 2021, 2020 and 2019 due to
minor adjustments to goodwill forff
intangible assets added during
ended December 31, 2019 due to various small acquisitions merged into existing operations that do not appear in the above
tablea
the allocation of certain acquisitions still under measurement as well as other immaterial
the ordinary course of business. In addition, goodwill and intangibles increased during the year
r value of assets acquired, and in some cases total purchase price,
adjustmd
tabla e may not agree to the total gross increases of
to each individual business
ents may be made through the
s.
d
a
Estimates of acquired intangible assets related to the acquisitions are as follows (dollars in thousands):
2021
2020
2019
Acquired intangibles assets
Customer relationships
Trademarks and trade names
Non-competition agreements
Backlog
Estimated
Fair Value
94,473
$
23,349
7,254
4,878
)
Pro Forma Information (unaudited)
(
Weighted
Average
Estimated
Useful Life
(yrs)
Estimated
Fair Value
28,307
9,834
3,315
4,767
12 $
15
5
2.5
Weighted
Average
Estimated
Useful Life
(yrs)
Estimated
Fair Value
20,659
5,286
2,096
—
8 $
15
5
1.5
Weighted
Average
Estimated
Useful Life
(yrs)
8
15
5
—
The unaudited pro forma information has been prepared as if the 2021 acquisitions had taken place on January 1, 2020, the
2020 acquisitions had taken place on January 1, 2019 and the 2019 acquisitions had taken place on January 1, 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, 2020, 2019 and 2018 and the unaudited pro forma information does not purport to be
indicative of futuret
financial operating results (in thousands, except for per share data).
80
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net revenue
Net income
Basic net income per share
Diluted net income per share
$
2021
2,105,295
129,825
4.42
4.38
$
December 31,
2020
1,922,327
107,791
3.65
3.63
$
2019
1,660,326
76,474
2.57
2.56
Unaudited pro forma net income refleff cts additional intangible asset amortization expense of $8.2 million, $18.2 million and
$10.2 million for the years ended December 31, 2021, 2020 and 2019, respectively, additional interest expense of $4.1 million
and $4.3 million forff
$3.9 million, $3.7 million and $3.0 million forff
the years ended December 31, 2021 and 2020, respectively, as well as additional income tax expense of
the years ended December 31, 2021, 2020 and 2019, respectively.
NOTE 18 – 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 effect of outstanding restricted stock
awards after application of the treasury stock method as of December 31, 2021, 2020 and 2019, was 261 thousand, 213
thousand and 120 thousand, respectively.
NOTE 19 – SUBSEQUENT EVENTS
During the first quarter of 2022, our Chief Executive Officer, who is also our chief operating decision maker, changed the
manner in which he reviews financial information for purposes of assessing business performance and allocating resources. In
response, we are in the process of modifying our internal reporting and supporting systems to reflect these changes and are
evaluating the future impact on our reporting of segments.
In February 2022, we amended and extended our ABL Credit Agreement. The ABL Amendment increased the commitment
amount under the ABL Revolver to $250.0 million from $200.0 million and extended the maturity to February 17, 2027 from
September 26, 2024, and permits us to further increase the commitment amount to up to $300 million. The ABL Amendment
provides that the ABL Revolver will bear interest at either the base rate or term Secured Overnight Financing Rate (“Term
SOFR”), at our election, plus a margin of 0.25% or 0.50% for base rate advances or 1.25% or 1.50% for Term SOFR advances
(in each case based on a measure of availabila
ity under the ABL Credit Agreement). The amendment also provides us with the
ability to reduce drawn and unused feeff
modifications to the ABL Credit Agreement.
s based on sustainability-linked key performance indicator targets and makes other
On February 24, 2022, we announced that our board of directors approved a special annual dividend, payablea
2022 to stockholders of record on March 15, 2022 at a rate of 90 cents per share. In addition, we recently announced that our
board of directors declared a quarterly dividend, payable on March 31, 2022 to stockholders of record on March 15, 2022 at a
rate of 31.5 cents per share.
on March 31,
On February 24, 2022, we announced that our board of directors authorized an extension of our stock repurchase program
through March 1, 2023 and concurrently authorized an increase in the total amount of our outstanding common stock we can
purchase up to $200.0 million. For more information about our stock repurchase program, see Note 12, Stockholders' Equity.
81
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
as of December 31, 2021 with the participation of the Company’s principal executive officer and principal finff ancial officer as
required by Exchange Act RulRR e 13a-15(b). Based on that evaluation, the Company’s principal executive officer and principal
financial officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports that we filff e or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms, and includes, without limitation,
controls and procedures designed to ensure that information required to be disclosed by us in the reports we filff e or submit under
the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our
principal finff ancial officer, or persons performing similar funct
disclosure.
ions, as appropriate to allow timely decisions regarding required
ff
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establia
in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliabia lity of financial reporting and the preparation of financial statements forff
purposes in accordance with accounting principles generally accepted in the United States of America.
shing and maintaining adequate internal control over finaff
ncial reporting (as defined
external
Management, under the supervision of the principal executive officer and the principal finff ancial officer, assessed the
effectiveness of our internal control over finaff
subsidiaries listed below that we acquired during
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – IntII egrated Frame
scope of management’s assessment of the effectiveness of internal control over finaff
includes all of the Company’s subsidiaries except the subsidiaries listed below, which were acquired during
financial statements constitutet
statements of the Company as of and for the year ended December 31, 2021:
the percentages of total assets and net revenue listed below of the consolidated financial
ncial reporting, excluding the internal control over finaff
ncial reporting as of December 31, 2021
2021 and whose
2021 as of December 31, 2021 using the criteria set forth by the Committee of
ncial reporting at the
work (2013). The
FF
d
dd
Subsidiary
Intermountain West
Alert
Alpine Construction
Reliabla e
GCP
MT Insulation
5 Star
Mr. Insulation
DGM
CFI
AMD
Acquisition Date
March 1, 2021
April 13, 2021
April 19, 2021
May 11, 2021
June 7, 2021
August 23, 2021
September 13, 2021
October 4, 2021
November 1, 2021
November 22, 2021
December 13, 2021
Percentage
of Total
Assets
3.6%
0.7%
0.6%
0.2%
0.7%
0.2%
2.0%
0.2%
1.1%
1.0%
7.6%
Percent
of Net
Revenue
1.8%
0.7%
0.4%
0.1%
0.4%
0.1%
0.3%
0.0%
0.1%
0.1%
0.2%
Management excluded the internal control over finaff
the guidance of the staff of the SEC that an assessment of a recently acquired business may be omitted from the scope of
management’s assessment of internal control over financial reporting for one year following the acquisition.
ncial reporting at these subsidiaries from its assessment in accordance with
Based on this assessment, management has determined that our internal control over financial reporting was effective as of
December 31, 2021. We have not experienced any material impact to our internal controls over finaff
ncial reporting due to the
82
COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation to identify potential limitations on
our current internal controls that would adversely impact the design and operating effectiveness of internal controls over
financial reporting.
The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their report, which foll
ows below.
ff
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules
13a-15(d) or 15d-15(d) of the Exchange Act during
reasonablya
the quarter ended December 31, 2021 that has materially affected, or are
likely to materially affect, our internal control over financial reporting.
dd
Item 9B.
Other Information
On February 24, 2022, we announced that the Board of Directors of Installed Building Products, Inc. (the “Company”)
approved the appointment of Jason R. Niswonger, 49, as its Chief Administrative and Sustainability Officer, effective March 1,
2022. Mr. Niswonger was formerly the Company’s Senior Vice President, Finance and Investor Relations since March 2015.
Additional biographical information is availablea
("2021 Proxy Statement").
on page 34 of our 2021 Definitive Proxy Statement filed on April 16, 2021
There are no arrangements or understandings between Mr. Niswonger and any other persons pursuant to which he was selected
as Chief Administrative and Sustainabila
ily relationships between Mr. Niswonger and any director
or executive officer of the Company and he has no direct or indirect material interest in any transaction required to be disclosed
pursuant to Item 404(a) of Regulation S-K.
ity Officer. There are no famff
Mr. Niswonger is an at-will employee of the Company, and does not have a written employment agreement. Mr. Niswonger is
eligible to participate in certain benefit and incentive programs and plans of the Company, as described in our 2021 Proxy
Statement.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
83
REPORT OF INDEPENDENT REG SGISTERED PUBLICC ACCCCOUNT GING FIRM
To the stockholders and the Board of Directors of Installed Building Products, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Installed Building Products, Inc. (the “Company”) as of
December 31, 2021, based on criteria establia
e
shed in Internal Control — InteII
grate
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effecff
tive internal control over finaff
shed in Internal
e
grate
tt — InteII
Control
ncial reporting as of December 31, 2021, based on criteria establia
ework (2013) issued by the Committee
issued by COSO.
d Frame
d FramFF
((
work (rr
2013)
FF
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our
report dated February 24, 2022, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded fromff
the internal control over financial reporting at the subsidiaries listed below, which were acquired during
financial statements constitutet
of the Company as of and for the year ended December 31, 2021.
the percentages of total revenues and assets listed below of the consolidated financial statements
2021 and whose
its assessment
d
Subsidiaryy
Intermountain West
Alert
Alpine Construction
Reliablea
GCP
MT Insulation
5 Star
Mr. Insulation
DGM
CFI
AMD
Acquisition Date
March 1, 2021
April 13, 2021
April 19, 2021
May 11, 2021
June 7, 2021
August 23, 2021
September 13, 2021
October 4, 2021
November 1, 2021
November 22, 2021
December 13, 2021
Percentage
of Total
Assets
3.6%
0.7%
0.6%
0.2%
0.7%
0.2%
2.0%
0.2%
1.1%
1.0%
7.6%
Percent
of Net
Revenue
1.8%
0.7%
0.4%
0.1%
0.4%
0.1%
0.3%
0.0%
0.1%
0.1%
0.2%
.
Accordingly, our audit did not include the internal control over financial reporting of the subsidiaries listed above
a
Basis for Opinion
The Company’s management is responsible for maintaining effecff
assessment of the effectiveness of internal control over finaff
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rulrr es and
regulations of the Securities and Exchange Commission and the PCAOB.
ncial reporting, included in the accompanying Management’s Report
tive internal control over finaff
ncial reporting and forff
its
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
84
Definition and Limitations of Internal Control over Financial Reporting
control over finaff
ncial reporting is a process designed to provide reasonablea
r
ncial reporting and the preparation of financial statements forff
A company’s internal
reliabila
purposes in accordance with generally
ity of finaff
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonablea
dispositions of the assets of the company; (2) provide reasonablea
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
detail, accurately and fairly reflect the transactions and
assurance that transactions are recorded as necessary to permit
of the company are being made only in accordance with authorizations of management and directors of the
assurance regarding the
r
external
tt
Because of its inherent limitations, internal control over finaff
projections of any evaluation of effecff
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ncial reporting may not prevent or detect misstatements. Also,
ct to the risk that controls may become inadequate
tiveness to future periods are subjeu
/s/ Deloitte & Touche
TT
LLP
Columbus, Ohio
February 24, 2022
85
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item will be set forth under the headings “Election of Directors,” “Executive Officers and
Certain Significant Employees,” “Corporate Governance” and “Delinquent Section 16(a) Reports” in our definitive proxy
statement for the 2022 Annual Meeting of Stockholders (“2022 Proxy Statement”) to be filff ed with the SEC within 120 days of
the fiscal year ended December 31, 2021 and is incorporated herein by reference.
Our board of directors has adopted a code of business conduct and ethics that appli
directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The
full text of our code of business conduct and ethics is posted on the investor relations page on our website which is located at
http:/
tt
waivers of its requirements, on our website.
/i// nvestors.installedbuildingproducts.com. We will post any amendments to our code of business conduct and ethics, or
es to all of our employees, officers and
a
Item 11.
Executive Compensation
The information required by this item will be set forth under the headings “Executive Compensation,” “Chief Executive Pay
Ratio” and “Compensation Committee Interlocks and Insider Participation” in our 2022 Proxy Statement and is incorporated
herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership of certain beneficial owners and management and related stockholder matters, as well
as equity compensation plan information, will be presented in our Proxy Statement for our 2022 Annual Meeting of
Stockholders, to be filed on or before
iAprill 16, 2022 a, nd such information is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth under the headings “Certain Relationships and Related-Party
Transactions” and “Corporate Governance” in our 2022 Proxy Statement and is incorporated herein by reference.
Item 14.
Principal Accounting Fees and Services
The information required by this item will be set forth under the heading “Fees Paid to Deloitte" and "Pre-Approval of
Services” in our 2022 Proxy Statement and is incorporated herein by reference.
86
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a) The following documents are filed as a part of this Form 10-K:
1. Financial Statements: The Consolidated Financial Statements, the Notes to Consolidated Financial
Statements and the Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) for
Installed Building Products, Inc. are presented in Item 8, Financial Statements and Supplementary Data,
of Part II of this Form 10-K.
2. Financial Schedules: All finff ancial statement schedules have been omitted because they are inapplicable,
not required, or shown in the consolidated financial statements and notes in Item 8, Financial Statements
and Supplementary Data, of Part II of this Form10-K.
(b) Exhibits.
Exhibit
Number
2.1
3.1
3.2
4.1
4.2
4.3
10.1#
10.2#
10.3#
10.4#
10.5
10.6
10.7
dated September 26, 2019, among Installed Building Products, Inc., the guarantors named therein
Descriptionp
Share Purchase Agreement, dated as of October 29, 2016, among EMPER Holdings, LLC; PREEM Holdings
I, LLC; PREEM Holdings II, LLC; Vikas Verma; Henry Schmueckle; Vikas Verma in his capacity as the
equityholders’ representative; and Installed Building Products, Inc., incorporated by reference to Exhibit 2.1 to
the Company’s Current Report on Form 8-K filed on October 31, 2016.
Second Amended and Restated Certificate of Incorporation of Installed Building Products, Inc., incorporated
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 25, 2014.
Amended and Restated Bylaws of Installed Building Products, Inc., incorporated by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-K filed on February 28, 2018.
Form of Common Stock Certificate of Installed Building Products, Inc., incorporated by reference to Exhibit
4.1 to the Company’s Registration Statement on Form S-1/A fileff d on January 27, 2014.
Indenture,
tt
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.
Description of Installed Building Product, Inc.’s Securities Registered Pursuant to Section 12 of the Exchange
Act, incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K filed on February
27, 2020.
Form of Amended and Restated Indemnification Agreement for directors and officers, incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 7, 2021.
Amended and Restated Employment Agreement, dated as of April 15, 2021, by and between Installed Building
Products, Inc. and Jeffrey W. Edwards, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on May 7, 2021.
Installed Building Products, Inc. 2014 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.21 to
the Company’s Registration Statement on Form S-1/A filed on January 27, 2014.
Amendment, dated as of February 24, 2017, to the Installed Building Products, Inc. 2014 Omnibus Incentive
Plan, incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed on
February 28, 2017.
Term Loan Credit Agreement, dated April 13, 2017, by and among Installed Building Products, Inc., the
lenders party t
Markets, UBS Securities LLC and Jefferies Finance LLC as joint lead arrangers and joint bookrunners,
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 17,
2017.
Credit Agreement, dated April 13, 2017, by and among Installed Building Products, Inc., the subsidiary
guarantors from time to time party thereto, the financial institutions from time to time party thereto, and
SunTrust Bank, as issuing bank, swing bank and administrative agent, with SunTrust Robinson Humphrey,
Inc. as left lead arranger and bookrunner, incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on April 17, 2017.
ABL/Term Loan Intercreditor Agreement, dated April 13, 2017, by and among Installed Building Products,
Inc., SunTrust Bank, as ABL agent, Royal Bank of Canada, as term loan agent, and each of the agents and
certain of the Company’s subsidiaries fromff
time to time party thereto, incorporated by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K filed on April 17, 2017.
time to time, Royal Bank of Canada, as term administrative agent, and RBC Capia tal
hereto fromff
t
87
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
t
Term Collateral Agreement, dated April 13, 2017, among Installed Building Products, Inc., certain of its
subsidiaries and Royal Bank of Canada, as term collateral agent, incorporated by reference to Exhibit 10.4 to
the Company’s Current Report on Form 8-K filed on April 17, 2017.
Security Agreement, dated April 13, 2017, among Installed Building Products, Inc., certain of its subsidiaries
and SunTrust Bank, as administrative agent, incorporated by reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K filed on April 17, 2017.
Term Guarantee Agreement, dated April 13, 2017, among certain of Installed Building Products, Inc.’s
subsidiaries and Royal Bank of Canada, as term collateral agent, incorporated by reference to Exhibit 10.6 to
the Company’s Current Report on Form 8-K filed on April 17, 2017.
Amendment No. 1, dated October 26, 2017, to Term Loan Credit Agreement by and among Installed Building
Products, Inc., the other loan parties party t
hereto, the participating lenders and fronting bank party thereto,
Royal Bank of Canada, as administrative agent, and RBC Capital Markets, as lead arranger and bookrunner,
incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K filed on
February 28, 2018.
First Amendment, dated November 30, 2017, to Term Loan Credit Agreement, by and among Installed
Building Products, Inc., the other loan parties party thereto, the participating lenders and fronting bank party
thereto, Royal Bank of Canada, as administrative agent, and RBC Capital Markets, as lead arranger and
bookrunner, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
December 1, 2017.
First Amendment, dated October 26, 2017, to the Credit Agreement among Installed Building Products, Inc.,
certain of its subsidiaries and SunTrust Bank, as administrative agent, incorporated by reference to Exhibit
10.33 to the Company’s Annual Report on Form 10-K filed on February 28, 2018.
Second Amendment, dated December 26, 2017, to the Credit Agreement among Installed Building Products,
Inc., certain of its subsidiaries and SunTrust Bank, as administrative agent, incorporated by reference to
Exhibit 10.34 to the Company’s Annual Report on Form 10-K filed on February 28, 2018.
Second Amendment to Term Loan Credit Agreement, dated as of June 19, 2018, by and among Installed
Building Products, Inc., the other loan parties party thereto, the participating lenders and fronting bank party
thereto, Royal Bank of Canada, as administrative agent, and RBC Capital Markets, as joint lead arranger and
joint bookrunner, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on June 19, 2018.
Third Amendment to Credit Agreement, dated as of June 19, 2018, by and among Installed Building Products,
Inc., the lenders party thereto, and SunTrust Bank, as administrative agent, incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 19, 2018.
Restatement Agreement, dated as of December 17, 2019, among Installed Building Products, Inc., as
Borrower, the Lenders party thereto and Bank of America, N.A., as Administrative Agent, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 18, 2019.
First Amendment to ABL/Term Loan Intercreditor Agreement, dated as of June 19, 2018, by and among
Installed Building Products, Inc., SunTrust Bank, as ABL agent, and Royal Bank of Canada, as term loan
agent, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
June 19, 2018.
Second Amendment to ABL/Term Loan Intercreditor Agreement, dated as of December 17, 2019, by and
among Installed Building Products, Inc., as Borrower, Bank of America, N.A., as ABL Agent, and Bank of
America, N.A., as Term Loan Agent, incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on December 18, 2019.
Purchase Agreement, dated as of September 16, 2019, by and among Installed Building Products, Inc., as
issuer, the subsidiary guarantors party t
hereto, 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.
Credit Agreement, dated September 26, 2019, among Installed Building Products, Inc., the guarantors partyt
thereto, the lenders party t
hereto 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 10.1 to the Company’s Current Report on Form 8-K filed on September 27, 2019.
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 10.2 to
the Company’s Current Report on Form 8-K filed on September 27, 2019.
Term Loan Credit Agreement, dated December 14, 2021, by and among Installed Building Products, Inc., the
hereto fromff
lenders party t
agent, and RBC Capia tal Markets, BofA Sff
and joint bookrunners and Loop Capia tal Markets LLC, US Bank National Associations, KeyBank Capital
Markets Inc. and PNC Capita
Company's Current Report on Form 8-K filed on December 14, 2021.
ecurities, Inc. and Goldman Sachs Bank USA as joint lead arrangers
al Markets LLC as Co-managers, incorporate
d by reference to Exhibit 10.1 to the
time to time, Royal Bank to Canada, as term administrative agent and term collateral
rr
t
t
t
88
10.24
10.25
10.26
10.27
10.28
10.29#
10.30
10.31#
10.32#
10.33#
10.34#
10.35#
10.36#
10.37#
21.1*
23.1*
31.1*
31.2*
32.1*
32.2*
101**
104**
hereto and Bank of America N.A., as administrative
Third Amendment to ABL/Term Loan Intercreditor Agreement, dated December 14, 2021, by and among
Installed Building Products, Inc., Bank of America, N.A., as ABL agent, Royal Bank of Canada, as collateral
agent and certain of the Company's subsidiaries fromff
time to time party thereto, incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 14, 2021.
Lien Sharing and Priority Confirmation Joinder, dated, December 14, 2021, among Installed Building
Products, Inc., the guarantors named therein, Bank of America, N.A., as ABL agent, and Royal Bank of
Canada, as collateral agent under the Term Loan Agreement, incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K filed on December 14, 2021.
Term Collateral Agreement, dated December 14, 2021, among Installed Building Products, Inc., certain of its
subsidiaries and Royal Bank of Canada, as term collateral agent, incorporated by reference to Exhibit 10.5 to
the Company’s Current Report on Form 8-K filed on December 14, 2021.
Term Guarantee Agreement, dated December 14, 2021 among certain of Installed Building Products, Inc.'s
subsidiaries and Royal of Canada, as term collateral agent, incorporated by reference to Exhibit 10.6 to the
Company’s Current Report on Form 8-K filed on December 14, 2021.
Consent and Amendment No. 2 to Credit Agreement, dated December 14, 2021, by and among Installed
t
Building Products, Inc., the financial institutions party t
agent, incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on
December 14, 2021.
Retirement and General Release Agreement, dated as of July 31, 2018, by and among Installed Building
Products, Inc., Installed Building Products, LLC, TCI Contracting, LLC and J. Michael Nixon, incorporated by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 3, 2018.
Share Repurchase Agreement, dated November 5, 2018, by and between Installed Building Products, Inc. and
PJAM IBP Holdings, Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on November 5, 2018.
Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on May 14, 2014.
Form of Performance Share Award Agreement, incorporated by reference to Exhibit 10.4 to the Company’s
Quarterly Report on Form 10-Q filed on August 13, 2014.
Form of Restricted Stock Agreement for Employees, incorporated by reference to Exhibit 10.22 to the
Company’s Annual Report on Form 10-K filed on March 13, 2015.
Form of Restricted Stock Agreement for awards made on or afteff
Exhibit 10.35 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2017.
Form of Performance Share Agreement for awards made on or after April 19, 2017, incorporated by reference
to Exhibit 10.36 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2017.
Form of Stock Award Agreement, incorporated by reference to Exhibit 10.37 to the Company’s Quarterly
Report on Form 10-Q filed on May 8, 2017.
Form of Performance-Based Cash Award Agreement, incorporated by reference to Exhibit 10.38 to the
Company’s Quarterly Report on Form 10-Q filed on May 8, 2017.
List of Subsidiaries of Installed Building Products, Inc.
Consent of Deloitte & Touche LLP.
CEO Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
CFO Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
The following financial statements fromff
the Company's Annual Report on Form 10-K for the period ended
December 31, 2021, formatted in inline XBRL, include: (i) Consolidated Balance Sheets, (ii) Consolidated
Statements of Operations and Comprehensive Income, (iii) Consolidated Statements of Stockholders' Equity,
(iv) Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
r April 19, 2017, incorporated by reference to
___________
*
**
#
Filed herewith
Submitted electronically with the report.
Indicates management contract or compensatory plan.
Item 16.
Form 10-K Summary
None
89
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulydd
report to be signed on its behalf by the undersigned, thereunto dulydd
authorized.
caused this
Date: February 24, 2022
INSTALLED BUILDING PRODUCTS, INC.
/s/ Jeffrey W. Edwards
Jeffrey W. Edwards
By:
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capaa
cities and on the dates indicated.
Signature
g
/s/ Jeffrey W. Edwards
Jeffrey W. Edwards
/s/ Michael T. Miller
Michael T. Miller
/s/ Todd R. Fry
Todd R. Fry
/s/ Margot L. Carter
Margot L. Carter
/s/ Lawrence A. Hilsheimer
Lawrence A. Hilsheimer
/s/ Janet E. Jackson
Janet E. Jackson
/s/ David R. Meuse
David R. Meuse
/s/ Michael H. Thomas
Michael H. Thomas
/s/ Vikas Verma
Vikas Verma
Title
Date
President, Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
February 24, 2022
Executive Vice President, Chief Financial
Officer and Director
(Principal Financial Officer)
February 24, 2022
Chief Accounting Officer and Treasurer
(Principal Accounting Officer)
February 24, 2022
Director
Director
Director
Director
Director
Director
February 24, 2022
rr
February
24, 2022
rr
February
24, 2022
rr
February
24, 2022
February 24, 2022
February 24, 2022
90
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Board of Directors
MARGOT L. CARTER
President and Founder
Living Mountain Capital L.L.C.
DAVID R. MEUSE
Senior Advisor of
Stonehenge Partners, Inc.
JEFFREY W. EDWARDS
Chairman, President and
Chief Executive Officer
Installed Building Products, Inc.
LAWRENCE A. HILSHEIMER
Executive Vice President and
Chief Financial Officer
Greif, Inc.
JANET E. JACKSON
President and Chief Executive Officer
(Retired 2017)
United Way of Central Ohio
Executive Officers
MICHAEL T. MILLER
Executive Vice President and
Chief Financial Officer
Installed Building Products, Inc.
MICHAEL H. THOMAS
Partner (Retired 2014)
Stonehenge Partners
VIKAS VERMA
President of Commercial
Development
Installed Building Products, Inc.
JEFFREY W. EDWARDS
Chairman, President and
Chief Executive Officer
JAY P. ELLIOTT
Chief Operating Officer
TODD R. FRY
Chief Accounting Officer
and Treasurer
W. JEFFREY HIRE
President, External Affairs
MICHAEL T. MILLER
Executive Vice President and
Chief Financial Officer
JASON R. NISWONGER
Chief Administrative and
Sustainability Officer
INVESTOR
Information
STOCK INFORMATION
Ticker Symbol: IBP
Exchange: NYSE
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Columbus, Ohio
TRANSFER AGENT
AND REGISTRAR
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Shareholder Services Number – (800) 736-3001
www.computershare.com/investor
ANNUAL MEETING OF STOCKHOLDERS
May 26, 2022 at 10:00 a.m. ET
http://www.meetnow.global/MYPCSXQ
ADDITIONAL INFORMATION
Additional information about the Company and
copies of this Annual Report, along with our
periodic filings with the Securities and Exchange
Commission, are available on our website at
installedbuildingproducts.com. Printed copies
are also available upon request, free of charge,
by contacting:
INVESTOR RELATIONS
Installed Building Products, Inc.
495 South High Street, Suite 50
Columbus, Ohio 43215
(614) 221-9944
This document contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be
identified by the use of words such as “anticipate,” “believe,” “expect,” “intends,” “plan,” “target,” and “will” or, in each case, their negative, or other variations
or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking
statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially
from those expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation, the adverse impact of
the COVID-19 crisis on our business and financial results, our supply chain, the economy and the markets we serve; general economic and industry conditions;
the material price and supply environment; the timing of increases in our selling prices and the factors discussed in the “Risk Factors” section of the enclosed
Annual Report on Form 10-K for the year ended December 31, 2021, as the same may be updated from time to time in our subsequent filings with the
Securities and Exchange Commission. Any forward-looking statement made by the Company in this document 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.
Creating spaces in which people thrive is what we do. From improving homes, to lifting
up communities, to creating a rewarding workplace, we take immense pride in laying the
groundwork for a brighter future.
INSTALLED BUILDING PRODUCTS | 495 South High Street, Suite 50 | Columbus, OH 43215 | (614) 221-3399