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, 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 class		Trading Symbol(s)	Name on each exchange on which registered
Common Stock,	$0.01 par value per share	IBP	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, 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 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 July 29, 2021, the registrant had 29,701,382 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	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	38
PART II – OTHER INFORMATION	39
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	41
Item 4. Mine Safety Disclosures	41
Item 5. Other Information	41
Item 6. Exhibits	41
SIGNATURES	42

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,
	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	203,911	$	231,520
Accounts receivable (less allowance for credit losses of $8,291 and $8,789 at June 30, 2021 and December 31, 2020, respectively)	283,304		266,566
Inventories	99,482		77,179
Prepaid expenses and other current assets	49,308		48,678
Total current assets	636,005		623,943
Property and equipment, net	105,734		104,022
Operating lease right-of-use assets	60,310		53,766
Goodwill	249,982		216,870
Customer relationships, net	124,567		108,504
Other intangibles, net	70,345		62,889
Other non-current assets	26,678		17,682
Total assets	$	1,273,621	$	1,187,676
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	24,275	$	23,355
Current maturities of operating lease obligations	20,489		18,758
Current maturities of finance lease obligations	1,822		2,073
Accounts payable	108,164		101,462
Accrued compensation	53,415		45,876
Other current liabilities	55,850		44,951
Total current liabilities	264,015		236,475
Long-term debt	543,592		541,957
Operating lease obligations	39,188		34,413
Finance lease obligations	2,756		2,430
Deferred income taxes	8,581		35
Other long-term liabilities	52,949		53,184
Total liabilities	911,081		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 June 30, 2021 and December 31, 2020, respectively	—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,264,517 and 33,141,879 issued and 29,701,575 and 29,623,272 shares outstanding at June 30, 2021 and December 31, 2020, respectively	333		331
Additional paid in capital	205,597		199,847
Retained earnings	306,107		269,420
Treasury stock; at cost: 3,562,942 and 3,518,607 shares at June 30, 2021 and December 31, 2020, respectively	(147,204)		(141,653)
Accumulated other comprehensive loss	(2,293)		(8,763)
Total stockholders’ equity	362,540		319,182
Total liabilities and stockholders’ equity	$	1,273,621	$	1,187,676

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,
	2021		2020		2021		2020
Net revenue	$	488,098	$	393,939	$	925,164	$	791,270
Cost of sales	336,212		266,800		647,851		547,871
Gross profit	151,886		127,139		277,313		243,399
Operating expenses
Selling	22,631		19,011		43,489		39,366
Administrative	66,474		59,060		131,551		119,255
Amortization	9,178		6,724		17,574		13,404
Operating income	53,603		42,344		84,699		71,374
Other expense, net
Interest expense, net	7,520		7,757		15,094		15,115
Other (income) expense	(92)		129		(11)		129
Income before income taxes	46,175		34,458		69,616		56,130
Income tax provision	8,962		9,121		15,112		14,805
Net income	$	37,213	$	25,337	$	54,504	$	41,325
Other comprehensive (loss) income, net of tax:
Net change on cash flow hedges, net of tax benefit (provision) of $1,244 and $51 for the three months ended June 30, 2021 and 2020, respectively, and $(2,184) and $1,990 for the six months ended June 30, 2021 and 2020, respectively	(3,687)		(150)		6,470		(5,758)
Comprehensive income	$	33,526	$	25,187	$	60,974	$	35,567
Basic net income per share	$	1.27	$	0.86	$	1.86	$	1.40
Diluted net income per share	$	1.26	$	0.86	$	1.84	$	1.39
Weighted average shares outstanding:
Basic	29,374,801		29,447,121		29,330,910		29,584,782
Diluted	29,609,744		29,584,167		29,612,101		29,757,560
Cash dividends declared per share	$	0.30	$	—	$	0.60	$	—

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, 2020 AND JUNE 30, 2021

(in thousands, except share amounts)

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated  Other Comprehensive Loss		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - April 1, 2020	32,961,777	$	330	$	192,564	$	188,169	(3,299,465)	$	(122,515)	$	(12,751)	$	245,797
Net income						25,337							25,337
Issuance of common stock awards to employees	156,405	1		(1)									—
Surrender of common stock awards								(25,584)	(973)				(973)
Share-based compensation expense				2,633									2,633
Share-based compensation issued to directors	6,055			92									92
Other comprehensive loss, net of tax											(150)		(150)
BALANCE - June 30, 2020	33,124,237	$	331	$	195,288	$	213,506	(3,325,049)	$	(123,488)	$	(12,901)	$	272,736
	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - April 1, 2021	33,208,082	$	331	$	202,662	$	277,804	(3,518,881)	$	(141,653)	$	1,394	$	340,538
Net income						37,213							37,213
Issuance of common stock awards to employees	52,205	2		(2)									—
Surrender of common stock awards								(44,061)	(5,551)				(5,551)
Share-based compensation expense				2,826									2,826
Share-based compensation issued to directors	4,230			111									111
Dividends Declared ($0.30 per share)						(8,910)							(8,910)
Other comprehensive loss, net of tax											(3,687)		(3,687)
BALANCE - June 30, 2021	33,264,517	$	333	$	205,597	$	306,107	(3,562,942)	$	(147,204)	$	(2,293)	$	362,540

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, 2020 AND JUNE 30, 2021

(in thousands, except share amounts)

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated  Other Comprehensive Loss		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2020	32,871,504	$	329	$	190,230	$	173,371	(2,855,164)	$	(106,756)	$	(7,143)	$	250,031
Net income						41,325							41,325
Cumulative effect of accounting changes, net of tax						(1,190)							(1,190)
Issuance of common stock awards to employees	246,362	2		(2)									—
Surrender of common stock awards								(27,343)	(973)				(973)
Share-based compensation expense				4,935									4,935
Share-based compensation issued to directors	6,371			125									125
Common stock repurchase								(442,542)	(15,759)				(15,759)
Other comprehensive loss, net of tax											(5,758)		(5,758)
BALANCE - June 30, 2020	33,124,237	$	331	$	195,288	$	213,506	(3,325,049)	$	(123,488)	$	(12,901)	$	272,736
	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2021	33,141,879	$	331	$	199,847	$	269,420	(3,518,607)	$	(141,653)	$	(8,763)	$	319,182
Net income						54,504							54,504
Issuance of common stock awards to employees	118,408	2		(2)									—
Surrender of common stock awards								(44,335)	(5,551)				(5,551)
Share-based compensation expense				5,539									5,539
Share-based compensation issued to directors	4,230			213									213
Dividends declared ($0.60 per share)						(17,817)							(17,817)
Other comprehensive income, net of tax											6,470		6,470
BALANCE - June 30, 2021	33,264,517	$	333	$	205,597	$	306,107	(3,562,942)	$	(147,204)	$	(2,293)	$	362,540

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,
	2021		2020
Cash flows from operating activities
Net income	$	54,504	$	41,325
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	21,570		20,623
Amortization of operating lease right-of-use assets	10,549		8,545
Amortization of intangibles	17,574		13,404
Amortization of deferred financing costs and debt discount	663		670
Provision for credit losses	102		2,668
Gain on sale of property and equipment	(560)		(144)
Noncash stock compensation	6,693		5,415
Deferred income taxes	—		(1,679)
Amortization of terminated interest rate swap	1,602		—
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable	(3,953)		(3,158)
Inventories	(19,973)		6,072
Other assets	(1,225)		9,351
Accounts payable	3,724		(18,504)
Income taxes receivable/payable	(297)		16,015
Other liabilities	(7,538)		4,922
Net cash provided by operating activities	83,435		105,525
Cash flows from investing activities
Purchases of investments	—		(776)
Maturities of short term investments	—		22,050
Purchases of property and equipment	(20,278)		(16,345)
Acquisitions of businesses, net of cash acquired of $168 and $0 in 2021 and 2020, respectively	(67,715)		(12,625)
Proceeds from sale of property and equipment	1,112		314
Other	(5)		(1,340)
Net cash used in investing activities	(86,886)		(8,722)
Cash flows from financing activities
Proceeds from vehicle and equipment notes payable	15,103		12,768
Debt issuance costs	—		(157)
Principal payments on long-term debt	(13,012)		(13,205)
Principal payments on finance lease obligations	(1,041)		(1,392)
Dividends paid	(17,607)		—
Acquisition-related obligations	(2,050)		(3,486)
Repurchase of common stock	—		(15,759)
Surrender of common stock awards by employees	(5,551)		(973)
Net cash used in financing activities	(24,158)		(22,204)
Net change in cash and cash equivalents	(27,609)		74,599
Cash and cash equivalents at beginning of period	231,520		177,889
Cash and cash equivalents at end of period	$	203,911	$	252,488
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	12,899	$	13,006
Income taxes, net of refunds	15,288		476
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations	16,967		10,229
Release of indemnification of acquisition-related debt	2,036		—
Property and equipment obtained in exchange for finance lease obligations	1,134		600
Seller obligations in connection with acquisition of businesses	12,954		4,037
Unpaid purchases of property and equipment included in accounts payable	886		1,981

5

See accompanying notes to consolidated financial statements

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 significantly impacted our business in the first six months of 2021. However, COVID-19 has caused disruptions in the building products supply chain, impacting our ability to purchase certain materials we install through typical channels. The extent to which COVID-19 will impact our future operations, customers, suppliers, employees and financial results is uncertain. The future impact on our financial results will depend 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 and six months ended June 30, 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 or six months ended June 30, 2021.

6

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 Taxes	January 1, 2021	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.

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.

7

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 June 30,								Six months ended June 30,
	2021				2020				2021				2020
Residential new construction	$	373,883	77	%	$	298,321	76	%	$	705,069	76	%	$	596,661	75	%
Repair and remodel	30,776		6	%	23,034		6	%	59,636		7	%	47,077		6	%
Commercial	83,439		17	%	72,584		18	%	160,459		17	%	147,532		19	%
Net revenues	$	488,098	100	%	$	393,939	100	%	$	925,164	100	%	$	791,270	100	%

	Three months ended June 30,								Six months ended June 30,
	2021				2020				2021				2020
Insulation	$	313,365	64	%	$	251,052	64	%	$	596,820	65	%	$	510,753	64	%
Waterproofing	34,264		7	%	28,078		7	%	64,213		7	%	56,583		7	%
Shower doors, shelving and mirrors	34,986		7	%	28,902		7	%	66,419		7	%	55,917		7	%
Garage doors	26,044		5	%	21,667		6	%	50,483		5	%	44,654		6	%
Rain gutters	21,460		4	%	13,071		3	%	40,464		4	%	24,647		3	%
Fireproofing/firestopping(1)	13,036		3	%	13,537		3	%	25,472		3	%	25,279		3	%
Window blinds	12,667		3	%	11,554		3	%	24,201		3	%	22,485		3	%
Other building products	32,276		7	%	26,078		7	%	57,092		6	%	50,952		7	%
Net revenues	$	488,098	100	%	$	393,939	100	%	$	925,164	100	%	$	791,270	100	%

(1)Combined with "Other building products" in previous years.

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):

	June 30, 2021		December 31, 2020
Contract assets	$	28,370	$	24,334
Contract liabilities	(10,305)		(8,965)

Uncompleted contracts were as follows (in thousands):

	June 30, 2021		December 31, 2020
Costs incurred on uncompleted contracts	$	216,067	$	169,544
Estimated earnings	107,440		90,737
Total	323,507		260,281
Less: Billings to date	299,878		240,665
Net under billings	$	23,629	$	19,616

8

INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Net under billings were as follows (in thousands):

	June 30, 2021		December 31, 2020
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	28,370	$	24,334
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(4,741)		(4,718)
Net under billings	$	23,629	$	19,616

The difference between contract assets and contract liabilities as of June 30, 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 and six months ended June 30, 2021, we recognized $0.9 million and $8.5 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 and six months ended June 30, 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 June 30, 2021, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $101.0 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 provision	102
Recoveries collected	463
Amounts written off	(1,063)
Balance as of June 30, 2021	$	8,291

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 were $160.4 million and $170.4 million as of June 30, 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 six months ended June 30, 2021. While we ultimately concluded that our goodwill, long-lived assets and other intangibles assets were not impaired as of June 30, 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 Combinations	33,087		—		33,087
Other	25		—		25
June 30, 2021	$	319,986	$	(70,004)	$	249,982

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 June 30,						As of December 31,
	2021						2020
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized intangibles:
Customer relationships	$	225,509	$	100,942	$	124,567	$	197,641	$	89,137	$	108,504
Covenants not-to-compete	24,066		14,857		9,209		20,309		13,436		6,873
Trademarks and tradenames	87,547		29,809		57,738		79,657		27,245		52,412
Backlog	20,425		17,027		3,398		18,847		15,243		3,604
	$	357,547	$	162,635	$	194,912	$	316,454	$	145,061	$	171,393

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The gross carrying amount of intangibles increased approximately $41.1 million during the six months ended June 30, 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	$	18,738
2022	34,136
2023	29,814
2024	26,301
2025	20,896
Thereafter	65,027

NOTE 7 - LONG-TERM DEBT

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

	As of June 30,		As of December 31,
	2021		2020
Senior Notes due 2028, net of unamortized debt issuance costs of $3,932 and $4,230, respectively	$	296,068	$	295,770
Term loan, net of unamortized debt issuance costs of $1,177 and $1,343, respectively	198,823		198,657
Vehicle and equipment notes, maturing through June 2026; payable in various monthly installments, including interest rates ranging from 1.9% to 4.8%	69,584		67,493
Various notes payable, maturing through March 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0%	3,392		3,392
	567,867		565,312
Less: current maturities	(24,275)		(23,355)
Long-term debt, less current maturities	$	543,592	$	541,957

Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of June 30, 2021 are as follows (in thousands):

Remainder of 2021	$	12,669
2022	22,502
2023	17,382
2024	11,554
2025	207,988
Thereafter	300,881

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 June 30, 2021, we had $198.8 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”).