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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 March 31, 2021
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 classTrading Symbol(s) Name on each exchange on which registered
Common Stock,$0.01 par value per shareIBP The 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 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 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 April 29, 2021, the registrant had 29,696,832 shares of common stock, par value $0.01 per share, outstanding.



Table of Contents
TABLE OF CONTENTS

i

Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)

 March 31,December 31,
 20212020
ASSETS
Current assets
Cash and cash equivalents$207,343 $231,520 
Accounts receivable (less allowance for credit losses of $8,615 and $8,789 at March 31, 2021 and December 31, 2020, respectively)
270,498 266,566 
Inventories85,980 77,179 
Prepaid expenses and other current assets46,344 48,678 
Total current assets610,165 623,943 
Property and equipment, net105,162 104,022 
Operating lease right-of-use assets54,442 53,766 
Goodwill242,036 216,870 
Customer relationships, net121,051 108,504 
Other intangibles, net67,151 62,889 
Other non-current assets33,609 17,682 
Total assets$1,233,616 $1,187,676 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt$23,770 $23,355 
Current maturities of operating lease obligations19,210 18,758 
Current maturities of finance lease obligations1,875 2,073 
Accounts payable104,001 101,462 
Accrued compensation47,520 45,876 
Other current liabilities48,926 44,951 
Total current liabilities245,302 236,475 
Long-term debt545,138 541,957 
Operating lease obligations34,618 34,413 
Finance lease obligations2,367 2,430 
Deferred income taxes9,957 35 
Other long-term liabilities55,696 53,184 
Total liabilities893,078 868,494 
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
  
Common stock; $0.01 par value: 100,000,000 authorized, 33,208,082 and 33,141,879 issued and 29,689,201 and 29,623,272 shares outstanding at March 31, 2021 and December 31, 2020, respectively
331 331 
Additional paid in capital202,662 199,847 
Retained earnings277,804 269,420 
Treasury stock; at cost: 3,518,881 and 3,518,607 shares at March 31, 2021 and December 31, 2020, respectively
(141,653)(141,653)
Accumulated other comprehensive income (loss)1,394 (8,763)
Total stockholders’ equity340,538 319,182 
Total liabilities and stockholders’ equity$1,233,616 $1,187,676 


1

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(in thousands, except share and per share amounts)
 Three months ended March 31,
 20212020
Net revenue$437,066 $397,331 
Cost of sales311,639 281,071 
Gross profit125,427 116,260 
Operating expenses
Selling20,858 20,355 
Administrative65,077 60,195 
Amortization8,396 6,680 
Operating income31,096 29,030 
Other expense
Interest expense, net7,574 7,358 
Other81  
Income before income taxes23,441 21,672 
Income tax provision6,150 5,684 
Net income$17,291 $15,988 
Other comprehensive income (loss), net of tax:
Net change on cash flow hedges, net of tax (provision) benefit of $(3,428) and $1,939 for the three months ended March 31, 2021 and 2020, respectively
10,157 (5,608)
Comprehensive income$27,448 $10,380 
Basic net income per share$0.59 $0.54 
Diluted net income per share$0.58 $0.53 
Weighted average shares outstanding:
Basic29,286,044 29,722,444 
Diluted29,613,484 29,930,954 
Cash dividends declared per share$0.30  


2

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
(in thousands, except share amounts)

Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated
 Other
Comprehensive
Loss
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - January 1, 202032,871,504 $329 $190,230 $173,371 (2,855,164)$(106,756)$(7,143)$250,031 
Net income15,988 15,988 
Cumulative effect of accounting changes, net of tax(1,190)(1,190)
Issuance of common stock awards to employees89,957 1 (1) 
Surrender of common stock awards(1,759)  
Share-based compensation expense2,302 2,302 
Share-based compensation issued to directors316 33 33 
Common stock repurchase(442,542)(15,759)(15,759)
Other comprehensive loss, net of tax(5,608)(5,608)
BALANCE - March 31, 202032,961,777 $330 $192,564 $188,169 (3,299,465)$(122,515)$(12,751)$245,797 
Common StockAdditional
Paid In
Capital
Retained
Earnings
Treasury StockAccumulated Other
Comprehensive
Income (Loss)
Stockholders’
Equity
SharesAmountSharesAmount
BALANCE - January 1, 202133,141,879 $331 $199,847 $269,420 (3,518,607)$(141,653)$(8,763)$319,182 
Net income17,291 17,291 
Issuance of common stock awards to employees66,203   
Surrender of common stock awards(274)  
Share-based compensation expense2,713 2,713 
Share-based compensation issued to directors102 102 
Dividends declared ($0.30 per share)
(8,907)(8,907)
Other comprehensive income, net of tax10,157 10,157 
BALANCE - March 31, 202133,208,082 $331 $202,662 $277,804 (3,518,881)$(141,653)$1,394 $340,538 

3

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

 Three months ended March 31,
 20212020
Cash flows from operating activities
Net income$17,291 $15,988 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment10,663 10,374 
Amortization of operating lease right-of-use assets5,050 4,207 
Amortization of intangibles8,396 6,680 
Amortization of deferred financing costs and debt discount331 325 
Provision for credit losses127 1,298 
Gain on sale of property and equipment(252)(35)
Noncash stock compensation3,196 2,681 
Amortization of terminated interest rate swap798  
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable1,056 (1,000)
Inventories(7,644)1,411 
Other assets(1,794)6,933 
Accounts payable524 (8,308)
Income taxes receivable/payable4,633 5,649 
Other liabilities(4,757)(10,291)
Net cash provided by operating activities37,618 35,912 
Cash flows from investing activities
Purchases of investments (776)
Maturities of short term investments 12,275 
Purchases of property and equipment(10,846)(9,919)
Acquisitions of businesses, net of cash acquired of $168 and $0 in 2021 and 2020, respectively
(41,930)(8,501)
Proceeds from sale of property and equipment389 162 
Other(5)(1,340)
Net cash used in investing activities(52,392)(8,099)
Cash flows from financing activities
Proceeds from vehicle and equipment notes payable7,808 7,094 
Debt issuance costs (22)
Principal payments on long-term debt(6,481)(6,711)
Principal payments on finance lease obligations(530)(738)
Dividends paid(8,786) 
Acquisition-related obligations(1,414)(2,378)
Repurchase of common stock (15,759)
Net cash used in financing activities(9,403)(18,514)
Net change in cash and cash equivalents(24,177)9,299 
Cash and cash equivalents at beginning of period231,520 177,889 
Cash and cash equivalents at end of period$207,343 $187,188 
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest$10,839 $9,798 
Income taxes, net of refunds1,474 37 
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations5,679 5,612 
Property and equipment obtained in exchange for finance lease obligations268 343 
Seller obligations in connection with acquisition of businesses5,959 2,570 
Unpaid purchases of property and equipment included in accounts payable1,043 1,346 


4

See accompanying notes to consolidated financial statements

Table of Contents
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ORGANIZATION

Installed Building Products (“IBP”), a Delaware corporation formed on October 28, 2011, and its wholly-owned subsidiaries (collectively referred to as the “Company,” and “we,” “us” and “our”) primarily install insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products for residential and commercial builders located in the continental United States. The Company operates in over 190 locations and its corporate office is located in Columbus, Ohio.

We have one operating segment and a single reportable segment. Substantially all of our sales are derived from the service-based installation of various products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations.

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

The COVID-19 pandemic ("COVID-19") has caused significant volatility, uncertainty and economic disruption. Many public health organizations and international, federal, state and local governments implemented measures to combat the spread of COVID-19 during portions of 2020 and 2021 with some of these restrictions still in place as of the date of filing of this Quarterly Report on Form 10-Q. Some of these measures include restrictions on movement such as quarantines, “stay-at-home” orders and social distancing ordinances and restricting or prohibiting outright some or all forms of commercial and business activity. We do not believe the various orders and restrictions or COVID-19 itself significantly impacted our business in the first three months of 2021. However, the extent to which COVID-19 will impact our future operations, customers, suppliers, employees and financial results is uncertain. The future impact of COVID-19 on our financial results depends on numerous factors including government actions and the resulting impact on construction activity, the effect on our customers’ demand for our services, the effects on our supply chain for materials, and the ability of our customers to pay for our services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

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

The information furnished in the Condensed Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) have been omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to prevent the information presented from being misleading when read in conjunction with our audited consolidated financial statements and the notes thereto included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Form 10-K”), as filed with the SEC on February 24, 2021. The December 31, 2020 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 months ended March 31, 2021 are not necessarily indicative of the results to be expected in future operating quarters.

Note 2 to the audited consolidated financial statements in our 2020 Form 10-K describes the significant accounting policies and estimates used in preparation of the audited consolidated financial statements. Other than the recently implemented accounting policies described below, there have been no changes to our significant accounting policies during the three months ended March 31, 2021.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Recently Adopted Accounting Pronouncements
Standard  Effective Date  Adoption
ASU 2021-01, Reference Rate Reform (Topic 848):Scope
  Effective upon issuance  
This pronouncement clarifies the scope and application of ASU 2020-04, "Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)." We continue to evaluate the impact of Topic 848 and may apply other elections as applicable as additional changes in the market occur.
ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income TaxesJanuary 1, 2021This 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.

NOTE 3 - REVENUE RECOGNITION

Our revenues are derived primarily through contracts with customers whereby we install insulation and other complementary building products and are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. An insignificant portion of our sales, primarily retail sales, is accounted for on a point-in-time basis when the sale occurs, adjusted accordingly for any return provisions. We do offer assurance-type warranties on certain of our installed products and services that do not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition.

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

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

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


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


 Three months ended March 31,
 20212020
Residential new construction$326,858 75 %$298,340 75 %
Repair and remodel33,563 8 %24,043 6 %
Commercial76,645 17 %74,948 19 %
Net revenues$437,066 100 %$397,331 100 %

 Three months ended March 31,
 20212020
Insulation$283,456 65 %$259,701 65 %
Waterproofing29,949 7 %28,505 7 %
Shower doors, shelving and mirrors31,433 7 %27,015 7 %
Garage doors24,439 5 %22,987 6 %
Rain gutters19,003 4 %11,576 3 %
Fireproofing/firestopping(1)
12,435 3 %11,741 3 %
Window blinds11,534 3 %10,931 3 %
Other building products24,817 6 %24,875 6 %
Net revenues$437,066 100 %$397,331 100 %

(1)Combined with "Other building products" in previous years but shown separately to conform with updated disclosures.

Contract Assets and Liabilities

Our contract assets consist of unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized, based on costs incurred, exceeds the amount billed to the customer. Our contract assets are recorded in other current assets in our Condensed Consolidated Balance Sheets. Our contract liabilities consist of customer deposits and billings in excess of revenue recognized, based on costs incurred and are included in other current liabilities in our Condensed Consolidated Balance Sheets.

Contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows (in thousands):
 March 31, 2021December 31, 2020
Contract assets$27,641 $24,334 
Contract liabilities(9,724)(8,965)

Uncompleted contracts were as follows (in thousands):
 March 31, 2021December 31, 2020
Costs incurred on uncompleted contracts$182,748 $169,544 
Estimated earnings94,802 90,737 
Total277,550 260,281 
Less: Billings to date254,840 240,665 
Net under billings$22,710 $19,616 


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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Net under billings were as follows (in thousands):

 March 31, 2021December 31, 2020
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)$27,641 $24,334 
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)(4,931)(4,718)
Net under billings$22,710 $19,616 

The difference between contract assets and contract liabilities as of March 31, 2021 compared to December 31, 2020 is primarily the result of timing differences between our performance of obligations under contracts and customer payments. During the three months ended March 31, 2021, we recognized $7.6 million of revenue that was included in the contract liability balance at December 31, 2020. We did not recognize any impairment losses on our receivables and contract assets during the three months ended March 31, 2021 or 2020.

Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $93.2 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

Practical Expedients and Exemptions

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

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
NOTE 4 - CREDIT LOSSES

Our expected loss allowance methodology for accounts receivable is developed using historical losses, current economic conditions and future market forecasts. We also perform ongoing evaluations of our existing and potential customer’s creditworthiness. To date, the COVID-19 pandemic has not had a material impact on the collectability of our existing trade receivables.

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

Balance as of January 1, 2021$8,789 
Current period provision127 
Recoveries collected253 
Amounts written off(554)
Balance as of March 31, 2021$8,615 

NOTE 5 - INVESTMENTS

Cash and cash equivalents includes investments in money market funds that are valued based on the net asset value of the funds. The investments in these funds were $175.5 million and $170.4 million as of March 31, 2021 and December 31, 2020, respectively. See Note 9, Fair Value Measurements, for additional information.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 - GOODWILL AND INTANGIBLES
We anticipate that the COVID-19 pandemic could continue to have an impact on the homebuilding industry in general, as it could result in further business interruptions (government-mandated or otherwise) and could affect, among other factors, employment levels, consumer spending and consumer confidence, which could decrease demand for homes, adversely affecting our business. As such, we considered whether impairment indicators arose through the date of filing of this Quarterly Report on Form 10-Q for our goodwill, long-lived assets and other intangible assets and concluded that no such factors existed to cause us to test for goodwill impairment during the three months ended March 31, 2021. While we ultimately concluded that our goodwill, long-lived assets and other intangibles assets were not impaired as of March 31, 2021, we will continue to assess impairment indicators related to the impact of the COVID-19 pandemic on our business.

Goodwill

The change in carrying amount of goodwill was as follows (in thousands):
 Goodwill
(Gross)
Accumulated
Impairment
Losses
Goodwill
(Net)
January 1, 2021$286,874 $(70,004)$216,870 
Business Combinations25,141 — 25,141 
Other25 — 25 
March 31, 2021$312,040 $(70,004)$242,036 

Other changes included in the above table include minor adjustments for the purchase price allocation of certain acquisitions still under measurement. For additional information regarding changes to goodwill resulting from acquisitions, see Note 16, Business Combinations.

We test goodwill for impairment annually during the fourth quarter of our fiscal year or earlier if there is an impairment indicator. Accumulated impairment losses included within the above table were incurred over multiple periods, with the latest impairment charge being recorded during the year ended December 31, 2010.

Intangibles, net

The following table provides the gross carrying amount, accumulated amortization and net book value for each major class of intangibles (in thousands):
 As of March 31,As of December 31,
 20212020
 Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net
Book
Value
Amortized intangibles:      
Customer relationships$215,841 $94,790 $121,051 $197,641 $89,137 $108,504 
Covenants not-to-compete22,914 14,127 8,787 20,309 13,436 6,873 
Trademarks and tradenames84,057 28,488 55,569 79,657 27,245 52,412 
Backlog18,847 16,052 2,795 18,847 15,243 3,604 
 $341,659 $153,457 $188,202 $316,454 $145,061 $171,393 


9

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The gross carrying amount of intangibles increased approximately $25.2 million during the three months ended March 31, 2021 primarily due to business combinations. For more information, see Note 16, Business Combinations. Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):

Remainder of 2021$25,886 
202231,215 
202327,778 
202424,265 
202518,860 
Thereafter60,198 

NOTE 7 - LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):
 As of March 31,As of December 31,
 20212020
Senior Notes due 2028, net of unamortized debt issuance costs of $4,081 and $4,230, respectively
$295,919 $295,770 
Term loan, net of unamortized debt issuance costs of $1,260 and $1,343, respectively
198,740 198,657 
Vehicle and equipment notes, maturing through March 2026; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8%
68,821 67,493 
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 1.0% to 5.0%
5,428 3,392 
568,908 565,312 
Less: current maturities(23,770)(23,355)
Long-term debt, less current maturities$545,138 $541,957 

Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of March 31, 2021 are as follows (in thousands):

Remainder of 2021$18,264 
202223,154 
202315,963 
202410,095 
2025206,494 
Thereafter300,279 

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 each year until maturity. 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 capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.

Credit Facilities

In December 2019, we amended and restated our $400.0 million, seven-year term loan facility due April 2025 (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of April 13, 2017 (as previously amended by the First Amendment thereto dated November 30, 2017 and by the Second Amendment thereto dated June 19, 2018). The amended Term Loan (i) effects a repricing of the interest rate applicable to the term loans thereunder from LIBOR plus 2.50% to LIBOR plus 2.25% and (ii) replaces Royal Bank of Canada with Bank of America, N.A. as the administrative agent and collateral agent thereunder. As of March 31, 2021, we had $198.7 million, net of unamortized debt issuance costs, due on our Term Loan. The amended Term Loan also has a margin of 1.25% in the case of base rate loans.

In September 2019, we entered into a new asset-based lending credit agreement (the “ABL Credit Agreement”). The ABL Credit Agreement provides for an asset-based lending credit facility (the “ABL Revolver”) of up to $200.0 million with a five-year maturity, which replaced the Company’s previous revolving credit facility. Borrowing availability under the ABL Revolver is based on a percentage of the value of certain assets securing the Company’s obligations and those of the subsidiary guarantors thereunder. In connection with the Amended and Restated Term Loan, we entered into a Second Amendment (the “Second Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and Bank of America, N.A., as Term Loan Agent for the lenders under the Amended and Restated Term Loan. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of March 31, 2021 was $161.2 million.

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 first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second-priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.

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

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

The ABL Credit Agreement contains a financial covenant requiring the satisfaction of a minimum fixed charge coverage ratio of 1.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the
Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock;
(ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal
year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv)
create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in
transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other
distributions from subsidiaries.

Vehicle and Equipment Notes

We are party to a Master Loan and Security Agreement (“Master Loan and Security Agreement”), a Master Equipment Lease Agreement (“Master Equipment Agreement”) and one or more Master Loan Agreements (“Master Loan Agreements” and together with the Master Loan and Security Agreement and Master Equipment Agreement, the “Master Loan and Equipment Agreements”) with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
the normal course of business. Each financing arrangement under these agreements constitutes a separate note and obligation. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. The specific terms of each note are based on specific criteria, including the type of vehicle or equipment and the market interest rates at the time. No termination date applies to these agreements. As of March 31, 2021, approximately $56.3 million of the various loan agreements was available for purchases of equipment.

Total gross assets relating to our Master Loan and Equipment Agreements were $134.5 million and $132.2 million as of March 31, 2021 and December 31, 2020, respectively. The net book value of assets under these agreements was $66.5 million and $65.7 million as of March 31, 2021 and December 31, 2020, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.
NOTE 8 - LEASES
We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install, various office spaces for selling and administrative activities to support our business, and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment.

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

(in thousands)ClassificationAs of March 31, 2021As of December 31, 2020
Assets   
Non-Current   
OperatingOperating lease right-of-use assets$54,442 $53,766 
FinanceProperty and equipment, net4,591 4,946 
Total lease assets $59,033 $58,712 
Liabilities 
Current 
OperatingCurrent maturities of operating lease obligations$19,210 $18,758 
FinancingCurrent maturities of finance lease obligations1,875 2,073 
Non-Current 
OperatingOperating lease obligations34,618 34,413 
FinancingFinance lease obligations2,367 2,430 
Total lease liabilities$58,070 $57,674 
Weighted-average remaining lease term:
Operating leases 4.0 years4.1 years
Finance leases 2.6 years2.6 years
Weighted-average discount rate:
Operating leases 3.56 %3.67 %
Finance leases 5.11 %5.08 %


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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Lease Costs

The table below presents certain information related to the lease costs for finance and operating leases:
  Three months ended March 31,
(in thousands)Classification20212020
Operating lease cost(1)
Administrative$6,350 $5,572 
Finance lease cost
Amortization of leased assets(2)
Cost of sales792 965 
Interest on finance lease obligationsInterest expense, net55 73 
Total lease costs$7,197 $6,610 

(1)Includes variable lease costs of $0.7 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively, and short-term lease costs of $0.3 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.
(2)Includes variable lease costs of $0.2 million for each of the three months ended March 31, 2021 and 2020.

Other Information

The table below presents supplemental cash flow information related to leases (in thousands):
 Three months ended March 31,
 20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$5,324 $4,746 
Operating cash flows for finance leases55 73 
Financing cash flows for finance leases530 738 

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of March 31, 2021 (in thousands):
 Finance LeasesOperating Leases
  Related PartyOtherTotal Operating
Remainder of 2021$1,762 $754 $15,242 $15,996 
20221,287 986 15,751 16,737 
2023926 534 10,490 11,024 
2024512 548 4,835 5,383 
2025144 561 2,649 3,210 
Thereafter9 526 5,131 5,657 
Total minimum lease payments4,640 $3,909 $54,098 58,007 
Less: Amounts representing executory costs(67)
Less: Amounts representing interest(331)(4,179)
Present value of future minimum lease payments4,242 53,828 
Less: Current obligation under leases(1,875)(19,210)
Long-term lease obligations$2,367 $34,618 


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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets, specifically other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 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 fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three months ended March 31, 2021 and 2020, we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.

Estimated Fair Value of Financial Instruments

Accounts receivable, accounts payable and accrued liabilities as of March 31, 2021 and December 31, 2020 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of certain long-term debt, including the Term Loan and ABL Revolver as of March 31, 2021 and December 31, 2020, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of our operating lease right-of-use assets and the obligations associated with our operating and finance leases as well as our vehicle and equipment notes approximate fair value as of March 31, 2021 and December 31, 2020. All debt classifications represent Level 2 fair value measurements.

Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods. Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments, calculated based on a weighted average of various future forecast scenarios, to
their net present value. The fair values of financial assets and liabilities that are recorded at fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):
 As of March 31, 2021As of December 31, 2020
 TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial assets:
Cash equivalents$175,475 $175,475 $ $ $170,398 $170,398 $ $ 
Derivative financial instruments18,075 18,075  5,130 5,130  
Total financial assets$193,550 $175,475 $18,075 $ $175,528 $170,398 $5,130 $ 
Financial liabilities:
Contingent consideration$7,510 $ $ $7,510 $4,004 $ $ $4,004 
Derivative financial instruments482  482  324  324  
Total financial liabilities$7,992 $ $482 $7,510 $4,328 $ $324 $4,004 

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


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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The change in fair value of the contingent consideration (a Level 3 input) was as follows (in thousands):

Contingent consideration liability - January 1, 2021$4,004 
Preliminary purchase price4,000 
Fair value adjustments(200)
Accretion in value561 
Amounts cancelled(36)
Amounts paid to sellers(819)
Contingent consideration liability - March 31, 2021$7,510 

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

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

 As of March 31, 2021As of December 31, 2020
 Carrying ValueFair ValueCarrying ValueFair Value
Senior Notes(1)
$300,000 $313,287 $300,000 $320,013 
(1)Excludes the impact of unamortized debt issuance costs.

See Note 7, Long-Term Debt, for more information on our Senior Notes.
NOTE 10 - DERIVATIVES AND HEDGING ACTIVITIES

Cash Flow Hedges of Interest Rate Risk

Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. During the three months ended March 31, 2021, we used interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of March 31, 2021, we have not posted any collateral related to these agreements.

In August 2020, we terminated our two existing interest rate swaps and our forward interest rate swap and simultaneously entered into a new forward interest rate swap beginning July 30, 2021. The unrealized loss included in accumulated other comprehensive income (loss) associated with the terminated swaps of $17.8 million at the time of termination will be amortized to interest expense over the course of the originally scheduled settlement dates of the terminated swaps. During the three months ended March 31, 2021, we amortized $0.8 million of the unrealized loss to interest expense, net. The new forward interest rate swap has a beginning notional amount of $200.0 million, a fixed rate of 0.51% and a maturity date of April 15, 2030. Upon commencement, this forward swap will serve to hedge substantially all of the variable cash flows on our Term Loan until its maturity and if extended. The assets and liabilities associated with the forward interest rate swap are included in other long-term assets and other current liabilities on the Condensed Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements.

The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in other comprehensive income, net of tax on the Condensed Consolidated Statements of Operations and Comprehensive Income and in accumulated other comprehensive income (loss) on the Condensed Consolidated Balance Sheets and subsequently reclassified

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
into earnings in the period that the hedged forecasted transaction affects earnings. We had no such changes during the three months ended March 31, 2021 or 2020.

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 $3.7 million will be reclassified as an increase to interest expense, net.

LIBOR is used as a reference rate for our interest rate swap agreement we use to hedge our interest rate exposure. 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 reference rate, to June 2023. In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848) and in January 2021, the FASB subsequently issued ASU 2021-01, Reference Rate Reform - Scope, which clarified the scope and application of the original guidance. The purpose of this guidance is to provide relief for impacted areas as it relates to impending reference rate reform. We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.
NOTE 11 - STOCKHOLDERS’ EQUITY

As of March 31, 2021, we had a gain of $1.4 million and as of December 31, 2020, we had a loss of $8.8 million, respectively, in accumulated other comprehensive income (loss) on our Condensed Consolidated Balance Sheets. The gain as of March 31, 2021 represented the effective portion of the unrealized gain on our forward interest rate swap of $12.5 million, net of taxes, less the unrealized loss on our terminated interest rate swaps of $11.1 million, net of taxes. The loss as of December 31, 2020 represented the unrealized loss on our terminated interest rate swaps of $12.2 million, net of taxes, less the effective portion of the unrealized gain on our forward interest rate swap of $3.4 million, net of taxes. For additional information, see Note 10, Derivatives and Hedging Activities.

During the three months ended March 31, 2020, we repurchased approximately 443 thousand shares of our common stock with an aggregate price of approximately $15.8 million, or $35.59 average price per share. We did not repurchase any shares during the three months ended March 31, 2021. On February 22, 2021, our board of directors authorized an extension of our stock repurchase program through March 1, 2022 and concurrently authorized an increase in the total amount of our outstanding common stock we can purchase up to $100.0 million. As of March 31, 2021, we have $100.0 million remaining on our current stock repurchase program. The effect of these treasury shares reducing the number of common shares outstanding is reflected in our earnings per share calculation.

Dividends

During the three months ended March 31, 2021, we declared and paid the following cash dividend (amount declared and amount paid in thousands):

Declaration DateRecord DatePayment DateDividend Per ShareAmount DeclaredAmount Paid
2/23/20213/15/20213/31/2021$0.30 $8,907 $8,786 


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 accrue dividend equivalent rights that are paid when the award vests. The payment of future dividends will be at the discretion of our board of directors and will depend on our future earnings, capital requirements, financial condition, future prospects, results of operations, contractual restrictions, legal requirements, and other factors deemed relevant by our board of directors. We did not declare or pay any cash dividends on our capital stock during the three months ended March 31, 2020.

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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 12 - 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 $7.2 million and $7.0 million for the three months ended March 31, 2021 and 2020, respectively, for all plans. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Condensed Consolidated Balance Sheets and was $3.3 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively.

Workers’ Compensation

Workers’ compensation expense totaled $4.2 million and $4.4 million for the three months ended March 31, 2021 and 2020, respectively. Workers’ compensation known claims and IBNR reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):
 March 31, 2021December 31, 2020
Included in other current liabilities$6,876 $7,703 
Included in other long-term liabilities12,618 11,986 
$19,494 $19,689 

We also had an insurance receivable for claims that exceeded the stop loss limit for fully insured policies included on the Condensed Consolidated Balance Sheets. This receivable offsets an equal liability included within the reserve amounts noted above and was as follows (in thousands):
 March 31, 2021December 31, 2020
Included in other non-current assets$1,997 $1,854 

Retirement Plans

We participate in multiple 401(k) plans, whereby we provide a matching contribution of wages deferred by employees and can also make discretionary contributions to each plan. Certain plans allow for discretionary employer contributions only. These plans cover substantially all our eligible employees. We recognized 401(k) plan expenses of $0.7 million and $0.6 million during the three months ended March 31, 2021 and 2020, re