UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

OR

☐ TRANSITION 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	45-3707650
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
495 South High Street, Suite 50 Columbus, Ohio	43215
(Address of principal executive offices)	(Zip Code)

(614) 221-3399

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).    Yes  ☐    No  ☒

On August 1, 2019, the registrant had 30,017,008 shares of common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	34
PART II – OTHER INFORMATION	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	35
SIGNATURES	37

i

PART I – FINANCIAL ​​​​​​​INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands​​​​​​​, except share and per share amounts)

	June 30,			December 31,
	2019			2018
ASSETS
Current assets
Cash and cash equivalents	$	95,747		$	90,442
Investments		9,923			10,060
Accounts receivable (less allowance for doubtful accounts of $5,539 and $5,085 at June 30, 2019 and December 31, 2018, respectively)		232,111			214,121
Inventories		63,951			61,162
Other current assets		34,944			35,760
Total current assets		436,676			411,545
Property and equipment, net		92,655			90,117
Operating lease right-of-use assets		46,383			—
Goodwill		183,412			173,049
Intangibles, net		148,203			149,790
Other non-current assets		9,062			10,157
Total assets	$	916,391		$	834,658
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	25,252		$	22,642
Current maturities of operating lease obligations		15,028			—
Current maturities of finance lease obligations		3,738			4,806
Accounts payable		96,235			96,949
Accrued compensation		26,964			27,923
Other current liabilities		34,760			29,366
Total current liabilities		201,977			181,686
Long-term debt		431,988			432,182
Operating lease obligations		30,964			—
Finance lease obligations		3,943			3,824
Deferred income taxes		4,421			6,695
Other long-term liabilities		37,096			27,773
Total liabilities		710,389			652,160
Commitments and contingencies
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		—			—
Common stock; $0.01 par value: 100,000,000 authorized, 32,871,504 and 32,723,972 issued and 30,017,008 and 29,915,611 shares outstanding at June 30, 2019 and December 31, 2018, respectively		329			327
Additional paid in capital		186,182			181,815
Retained earnings		132,965			105,212
Treasury stock; at cost: 2,854,496 and 2,808,361 shares at June 30, 2019 and December 31, 2018, respectively		(106,748	)		(104,425	)
Accumulated other comprehensive loss		(6,726	)		(431	)
Total stockholders’ equity		206,002			182,498
Total liabilities and stockholders’ equity	$	916,391		$	834,658

1

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

INCOME (UNAUDITED)

(in thousands, except share and per share amounts) 

	Three months ended June 30,					Six months ended June 30,
	2019			2018		2019			2018
Net revenue	$	371,814		$	332,584	$	713,949		$	634,312
Cost of sales		264,557			236,941		517,254			458,693
Gross profit		107,257			95,643		196,695			175,619
Operating expenses
Selling		17,903			16,020		35,033			31,866
Administrative		52,493			44,971		100,924			89,174
Amortization		6,021			7,322		11,909			14,450
Operating income		30,840			27,330		48,829			40,129
Other expense
Interest expense, net		5,649			5,691		11,325			9,731
Other		101			163		226			285
Income before income taxes		25,090			21,476		37,278			30,113
Income tax provision		6,171			5,161		9,525			7,404
Net income	$	18,919		$	16,315	$	27,753		$	22,709
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on cash flow hedge, net of tax benefit (provision) of $1,180 and ($159) for the three months ended June 30, 2019 and 2018, respectively, and $2,101 and ($545) for the six months ended June 30, 2019 and 2018, respectively		(3,546	)		475		(6,295	)		1,635
Comprehensive income	$	15,373		$	16,790	$	21,458		$	24,344
Basic net income per share	$	0.64		$	0.52	$	0.93		$	0.72
Diluted net income per share	$	0.63		$	0.52	$	0.93		$	0.72
Weighted average shares outstanding:
Basic		29,758,071			31,345,390		29,719,194			31,447,067
Diluted		29,834,748			31,452,583		29,820,917			31,612,581

2

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED JUNE 30, 2018 AND JUNE 30, 2019

(in thousands, except share amounts)

					Additional											Accumulated Other
	Common Stock				Paid In			Retained		Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings		Shares			Amount			Income			Equity
BALANCE - April 1, 2018		32,595,324	$	326	$	176,349		$	57,604		(1,076,717	)	$	(37,477	)	$	1,779		$	198,581
Net income									16,315											16,315
Issuance of common stock awards to employees		123,703		1		(1	)													—
Surrender of common stock awards by employees											(40,906	)		(2,226	)					(2,226	)
Share-based compensation expense						1,893														1,893
Share-based compensation issued to directors		4,945				25														25
Other comprehensive income, net of tax																	475			475
BALANCE - June 30, 2018		32,723,972	$	327	$	178,266		$	73,919		(1,117,623	)	$	(39,703	)	$	2,254		$	215,063
					Additional											Accumulated Other
	Common Stock				Paid In			Retained		Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings		Shares			Amount			Loss			Equity
BALANCE - April 1, 2019		32,780,967	$	328	$	183,836		$	114,046		(2,809,004	)	$	(104,429	)	$	(3,180	)	$	190,601
Net income									18,919											18,919
Issuance of common stock awards to employees		82,867		1		(1	)													—
Surrender of common stock awards by employees											(45,492	)		(2,319	)					(2,319	)
Share-based compensation expense						2,263														2,263
Share-based compensation issued to directors		7,670				84														84
Other comprehensive loss, net of tax																	(3,546	)		(3,546	)
BALANCE - June 30, 2019		32,871,504	$	329	$	186,182		$	132,965		(2,854,496	)	$	(106,748	)	$	(6,726	)	$	206,002

3

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND JUNE 30, 2019

(in thousands, except share amounts)

					Additional											Accumulated Other
	Common Stock				Paid In			Retained		Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings		Shares			Amount			Income			Equity
BALANCE - January 1, 2018		32,524,934	$	325	$	174,043		$	48,434		(662,788	)	$	(12,781	)	$	507		$	210,528
Net income									22,709											22,709
Cumulative effect of accounting changes, net of tax									2,776								112			2,888
Issuance of common stock awards to employees		194,093		2		(2	)													—
Surrender of common stock awards by employees											(42,118	)		(2,282	)					(2,282	)
Share-based compensation expense						4,200														4,200
Share-based compensation issued to directors		4,945				25														25
Common stock repurchase											(412,717	)		(24,640	)					(24,640	)
Other comprehensive income, net of tax																	1,635			1,635
BALANCE - June 30, 2018		32,723,972	$	327	$	178,266		$	73,919		(1,117,623	)	$	(39,703	)	$	2,254		$	215,063
					Additional											Accumulated Other
	Common Stock				Paid In			Retained		Treasury Stock						Comprehensive			Stockholders’
	Shares		Amount		Capital			Earnings		Shares			Amount			Loss			Equity
BALANCE - January 1, 2019		32,723,972	$	327	$	181,815		$	105,212		(2,808,361	)	$	(104,425	)	$	(431	)	$	182,498
Net income									27,753											27,753
Issuance of common stock awards to employees		139,862		2		(2	)													—
Surrender of common stock awards by employees											(46,135	)		(2,323	)					(2,323	)
Share-based compensation expense						4,211														4,211
Share-based compensation issued to directors		7,670				158														158
Other comprehensive loss, net of tax																	(6,295	)		(6,295	)
BALANCE - June 30, 2019		32,871,504	$	329	$	186,182		$	132,965		(2,854,496	)	$	(106,748	)	$	(6,726	)	$	206,002

4

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands) 

	Six months ended June 30,
	2019			2018
Cash flows from operating activities
Net income	$	27,753		$	22,709
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment		18,614			16,231
Amortization of operating lease right-of-use assets		7,607			—
Amortization of intangibles		11,909			14,450
Amortization of deferred financing costs and debt discount		564			601
Provision for doubtful accounts		1,605			1,108
Write-off of debt issuance costs		—			1,114
Gain on sale of property and equipment		(156	)		(227	)
Noncash stock compensation		4,345			4,196
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable		(17,876	)		(20,192	)
Inventories		(1,650	)		(3,995	)
Other assets		(1,495	)		(3,739	)
Accounts payable		(1,253	)		304
Income taxes receivable / payable		6,347			5,187
Other liabilities		(3,914	)		(4,622	)
Net cash provided by operating activities		52,400			33,125
Cash flows from investing activities
Purchases of investments		(17,352	)		(17,782	)
Maturities of short term investments		17,560			27,500
Purchases of property and equipment		(17,778	)		(18,478	)
Acquisitions of businesses		(21,290	)		(18,626	)
Proceeds from sale of property and equipment		452			557
Other		(876	)		(1,540	)
Net cash used in investing activities		(39,284	)		(28,369	)
Cash flows from financing activities
Proceeds from term loan (Note 6)		—			100,000
Payments on term loan (Note 6)		(2,000	)		(750	)
Proceeds from vehicle and equipment notes payable		13,783			14,271
Debt issuance costs		—			(1,933	)
Principal payments on long-term debt		(9,751	)		(6,863	)
Principal payments on finance lease obligations		(2,481	)		(3,028	)
Acquisition-related obligations		(5,039	)		(2,295	)
Repurchase of common stock		—			(24,640	)
Surrender of common stock awards by employees		(2,323	)		(2,282	)
Net cash (used in) provided by financing activities		(7,811	)		72,480
Net change in cash and cash equivalents		5,305			77,236
Cash and cash equivalents at beginning of period		90,442			62,510
Cash and cash equivalents at end of period	$	95,747		$	139,746
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	11,793		$	8,349
Income taxes, net of refunds		3,595			1,906
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations		8,677			—
Property and equipment obtained in exchange for finance lease obligations		1,830			814
Seller obligations in connection with acquisition of businesses		3,162			3,801
Unpaid purchases of property and equipment included in accounts payable		2,334			1,027

5

See accompanying notes to consolidated financial statements

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION

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

We have one operating segment and a single reportable segment. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects from our national network of branch locations.

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

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

The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) have been omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to prevent the information presented from being misleading when read in conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Form 10-K”), as filed with the SEC on February 28, 2019. The December 31, 2018 Condensed Consolidated Balance Sheet data herein was derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP.

Our interim operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected in future operating quarters. See Item 1A, Risk Factors, in our 2018 Form 10-K for additional information regarding risk factors that may impact our results.

Note 2 to the audited consolidated financial statements in our 2018 Form 10-K describes the significant accounting policies and estimates used in preparation of the audited consolidated financial statements. There have been no changes to our significant accounting policies during the three or six months ended June 30, 2019, except for the manner in which we account for leases as described in Note 7, Leases.

6

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Adopted Accounting Pronouncements

Standard

Adoption

ASU 2016-02, Leases (Topic 842)

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

Standard Description Effective Date Effect on the financial statements
or other significant matters