UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2021


☐	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: 001-36870

TopBuild Corp.

(Exact name of Registrant as Specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation or
Organization)

47-3096382

(I.R.S. Employer
Identification No.)

475 North Williamson Boulevard

Daytona Beach, Florida

(Address of Principal Executive Offices)

32114

(Zip Code)

(386) 304-2200

(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, par value $0.01 per share	BLD	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 (§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 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

The registrant had outstanding 33,061,398 shares of Common Stock, par value $0.01 per share as of April 27, 2021.

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GLOSSARY

We use acronyms, abbreviations, and other defined terms throughout this quarterly report on Form 10-Q, which are defined in the glossary below:


Term		Definition
2015 LTIP		2015 Long-Term Incentive Program authorizes the Board to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents
2019 ASR Agreement		$50 million accelerated share repurchase agreement with Bank of America, N.A.
2019 Repurchase Program		$200 million share repurchase program authorized by the Board on February 22, 2019
ABS		American Building Systems, Inc.
Amended Credit Agreement		Senior secured credit agreement and related security and pledge agreement dated March 8, 2021
Annual Report		Annual report filed with the SEC on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
Board		Board of Directors of TopBuild
BofA		Bank of America, N.A.
Cooper		Cooper Glass Company, LLC
Creative		Creative Conservation Co.
Current Report		Current report filed with the SEC on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
EBITDA		Earnings before interest, taxes, depreciation, and amortization
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
GAAP		Generally accepted accounting principles in the United States of America
Garland		Garland Insulating, Ltd.
Hunter		J.P. Hunter Enterprises, Inc.
IBR		Incremental borrowing rate, as defined in ASC 842
Lenders		Bank of America, N.A., together with the other lenders party to the "Amended Credit Agreement"
LCR		L.C.R. Contractors, LLC
LIBOR		London interbank offered rate
Net Leverage Ratio		As defined in the “Amended Credit Agreement,” the ratio of outstanding indebtedness, less up to $100 million of unrestricted cash, to EBITDA
New Senior Notes		TopBuild's 3.625% senior unsecured notes due on March 15, 2029
NYSE		New York Stock Exchange
Old Senior Notes		TopBuild's 5.625% senior unsecured notes which were due on May 1, 2026 and redeemed in full on March 15, 2021
Original Credit Agreement		Senior secured credit agreement and related security and pledge agreement dated May 5, 2017, as amended and restated on March 20, 2020
Ozark		Ozark Foam Insealators, Inc.
Quarterly Report		Quarterly report filed with the SEC on Form 10-Q pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Revolving Facility		Senior secured revolving credit facilities available under the Amended Credit Agreement, of $450 million with applicable sublimits for letters of credit and swingline loans.
ROU		Right of use (asset), as defined in ASC 842
RSA		Restricted stock award
Santa Rosa		Santa Rosa Insulation and Fireproofing, LLC
SEC		United States Securities and Exchange Commission
Secured Leverage Ratio		As defined in the “Amended Credit Agreement,” the ratio of outstanding indebtedness, including letters of credit, to EBITDA
TopBuild		TopBuild Corp. and its wholly-owned consolidated domestic subsidiaries. Also, the "Company," "we," "us," and "our"
Viking		Viking Insulation Co.

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PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TOPBUILD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share data)


	As of
	March 31,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	319,619	$	330,007
Receivables, net of an allowance for credit losses of $7,171 at March 31, 2021, and $6,926 at December 31, 2020		462,848		427,340
Inventories, net		163,988		161,369
Prepaid expenses and other current assets		14,255		17,689
Total current assets		960,710		936,405

Right of use assets		94,094		83,490
Property and equipment, net		187,033		180,053
Goodwill		1,430,913		1,410,685
Other intangible assets, net		205,513		190,605
Deferred tax assets, net		2,767		2,728
Other assets		11,072		11,317
Total assets	$	2,892,102	$	2,815,283

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	330,813	$	331,710
Current portion of long-term debt		23,406		23,326
Accrued liabilities		124,946		107,949
Short-term lease liabilities		35,119		33,492
Total current liabilities		514,284		496,477

Long-term debt		686,493		683,396
Deferred tax liabilities, net		168,424		168,568
Long-term portion of insurance reserves		50,197		50,657
Long-term lease liabilities		62,688		53,749
Other liabilities		13,653		13,642
Total liabilities		1,495,739		1,466,489

Commitments and contingencies

Equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock, $0.01 par value: 250,000,000 shares authorized; 39,121,670 shares issued and 33,061,398 outstanding at March 31, 2021, and 39,029,913 shares issued and 33,018,925 outstanding at December 31, 2020		390		389
Treasury stock, 6,060,272 shares at March 31, 2021, and 6,010,988 shares at December 31, 2020, at cost		(396,525)		(386,669)
Additional paid-in capital		855,996		858,414
Retained earnings		936,502		876,660
Total equity		1,396,363		1,348,794
Total liabilities and equity	$	2,892,102	$	2,815,283

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands except share and per common share data)


	Three Months Ended March 31,
	2021		2020
Net sales	$	742,798	$	653,228
Cost of sales		545,039		481,272
Gross profit		197,759		171,956

Selling, general, and administrative expense		101,872		101,967
Operating profit		95,887		69,989

Other income (expense), net:
Interest expense		(6,603)		(8,742)
Loss on extinguishment of debt		(13,862)		(233)
Other, net		77		472
Other expense, net		(20,388)		(8,503)
Income before income taxes		75,499		61,486

Income tax expense		(15,657)		(10,715)
Net income	$	59,842	$	50,771

Net income per common share:
Basic	$	1.82	$	1.53
Diluted	$	1.80	$	1.51

Weighted average shares outstanding:
Basic		32,826,515		33,168,453
Diluted		33,202,563		33,599,847

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)


	Three Months Ended March 31,
	2021		2020
Cash Flows Provided by (Used in) Operating Activities:
Net income	$	59,842	$	50,771
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,519		14,190
Share-based compensation		3,111		3,908
Loss on extinguishment of debt		13,862		233
Loss on sale or abandonment of property and equipment		56		383
Amortization of debt issuance costs		422		328
Provision for bad debt expense		1,765		1,670
Loss from inventory obsolescence		653		529
Deferred income taxes, net		(183)		(39)
Change in certain assets and liabilities
Receivables, net		(20,831)		(5,048)
Inventories, net		(2,088)		(3,964)
Prepaid expenses and other current assets		3,517		6,193
Accounts payable		(2,244)		(4,173)
Accrued liabilities		16,591		9,981
Other, net		(570)		(2,032)
Net cash provided by operating activities		89,422		72,930

Cash Flows Provided by (Used in) Investing Activities:
Purchases of property and equipment		(12,284)		(15,892)
Acquisition of businesses		(61,092)		(20,526)
Proceeds from sale of property and equipment		56		194
Net cash used in investing activities		(73,320)		(36,224)

Cash Flows Provided by (Used in) Financing Activities:
Proceeds from issuance of long-term debt		411,250		300,000
Repayment of long-term debt		(415,856)		(307,668)
Payment of debt issuance costs		(6,500)		(2,280)
Taxes withheld and paid on employees' equity awards		(11,480)		(10,399)
Exercise of stock options		5,952		—
Repurchase of shares of common stock		(9,856)		(14,127)
Net cash used in financing activities		(26,490)		(34,474)

Cash and Cash Equivalents
(Decrease) increase for the period		(10,388)		2,232
Beginning of period		330,007		184,807
End of period	$	319,619	$	187,039

Supplemental disclosure of noncash activities:
Leased assets obtained in exchange for new operating lease liabilities	$	20,322	$	9,167
Accruals for property and equipment		524		496

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(In thousands except share data)


	Common		Treasury		Additional
	Stock		Stock		Paid-in		Retained
	($0.01 par value)		at cost		Capital		Earnings		Equity
Balance at December 31, 2019	$	388	$	(330,018)	$	849,657	$	632,862	$	1,152,889
Cumulative-effect of accounting change		—		—		—		(3,225)		(3,225)
Net income		—		—		—		50,771		50,771
Share-based compensation		—		—		3,908		—		3,908
Issuance of 63,780 restricted share awards under long-term equity incentive plan		1		—		(1)		—		—
Repurchase of 73,455 shares pursuant to the settlement of the 2019 ASR Agreement		—		(7,500)		7,500		—		—
Repurchase of 188,100 shares pursuant to the 2019 Repurchase Program		—		(14,127)		—		—		(14,127)
97,144 shares withheld to pay taxes on employees' equity awards		—		—		(10,399)		—		(10,399)
Balance at March 31, 2020	$	389	$	(351,645)	$	850,665	$	680,408	$	1,179,817


	Common		Treasury		Additional
	Stock		Stock		Paid-in		Retained
	($0.01 par value)		at cost		Capital		Earnings		Equity
Balance at December 31, 2020	$	389	$	(386,669)	$	858,414	$	876,660	$	1,348,794
Net income		—		—		—		59,842		59,842
Share-based compensation		—		—		3,111		—		3,111
Issuance of 30,284 restricted share awards under long-term equity incentive plan		1		—		(1)		—		—
Repurchase of 49,284 shares pursuant to the 2019 Repurchase Program		—		(9,856)		—		—		(9,856)
43,290 shares withheld to pay taxes on employees' equity awards		—		—		(11,480)		—		(11,480)
51,915 shares issued upon exercise of stock options		—		—		5,952		—		5,952
Balance at March 31, 2021	$	390	$	(396,525)	$	855,996	$	936,502	$	1,396,363

See notes to our unaudited condensed consolidated financial statements.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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1. BASIS OF PRESENTATION

TopBuild was formed on June 30, 2015, and is listed on the NYSE under the ticker symbol “BLD.” We report our business in two segments: Installation and Distribution. Our Installation segment primarily installs insulation and other building products. Our Distribution segment primarily sells and distributes insulation and other building products. Our segments are based on our operating units, for which financial information is regularly evaluated by our chief operating decision maker.

We believe the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of March 31, 2021, and our results of operations and cash flows for the three months ended March 31, 2021 and 2020. The condensed consolidated balance sheet at December 31, 2020, was derived from our audited financial statements, but does not include all disclosures required by GAAP.

These condensed consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report for the year ended December 31, 2020, as filed with the SEC on February 23, 2021.

2. ACCOUNTING POLICIES

Financial Statement Presentation. Our condensed consolidated financial statements have been developed in conformity with GAAP, which requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. All intercompany transactions between TopBuild entities have been eliminated.

Recently Adopted Accounting Pronouncements

Income Taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.” This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles included in current guidance, as well as improving consistent application of and simplifying GAAP for other areas by clarifying and amending existing guidance. We adopted this standard on January 1, 2021, using the modified retrospective method related to franchise taxes. There was no cumulative-effect adjustment recorded as of the beginning of 2021.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss methodology with an expected loss methodology, referred to as the current expected credit loss (CECL) methodology. We adopted Topic 326 on January 1, 2020, using the modified retrospective method, which resulted in a $3.2 million cumulative-effect adjustment recorded through retained earnings at the beginning of 2020.

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes additional ASUs which were adopted, but did not have a material impact on our accounting policies or our consolidated financial statements and related disclosures:


ASU	Description	Period Adopted	Method
ASU 2021-01	Reference Rate Reform	01/01/21	Prospective
ASU 2017-04	Simplifying the Test for Goodwill Impairment	01/01/20	Prospective
ASU 2018-13	Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	01/01/20	Prospective

3. REVENUE RECOGNITION

Revenue is disaggregated between our Installation and Distribution segments and further based on market and product, as we believe this best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following tables present our revenues disaggregated by market (in thousands):


	Three Months Ended March 31, 2021
		Installation		Distribution		Elims		Total
Residential	$	418,077	$	192,045	$	(33,338)	$	576,784
Commercial		114,676		59,556		(8,218)		166,014
Net sales	$	532,753	$	251,601	$	(41,556)	$	742,798


	Three Months Ended March 31, 2020
		Installation		Distribution		Elims		Total
Residential	$	373,281	$	162,456	$	(29,006)	$	506,731
Commercial		102,592		51,767		(7,862)		146,497
Net sales	$	475,873	$	214,223	$	(36,868)	$	653,228

The following tables present our revenues disaggregated by product (in thousands):


	Three Months Ended March 31, 2021
		Installation		Distribution		Elims		Total
Insulation and accessories	$	417,597	$	211,494	$	(34,527)	$	594,564
Glass and windows		43,047		—		—		43,047
Gutters		19,358		25,839		(5,305)		39,892
All other		52,751		14,268		(1,724)		65,295
Net sales	$	532,753	$	251,601	$	(41,556)	$	742,798


	Three Months Ended March 31, 2020
		Installation		Distribution		Elims		Total
Insulation and accessories	$	369,996	$	180,249	$	(30,059)	$	520,186
Glass and windows		41,319		—		—		41,319
Gutters		18,930		19,991		(5,387)		33,534
All other		45,628		13,983		(1,422)		58,189
Net sales	$	475,873	$	214,223	$	(36,868)	$	653,228

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table represents our contract assets and contract liabilities with customers, in thousands:


	Included in Line Item on	As of
	Condensed	March 31,		December 31,
	Balance Sheets	2021		2020
Contract Assets:
Receivables, unbilled	Receivables, net	$	64,519	$	48,839

Contract Liabilities:
Deferred revenue	Accrued liabilities	$	8,091	$	6,542

The increase in contract assets as of March 31, 2021 is primarily driven by an increase in organic sales as well as sales from our acquisitions during the quarter.

The aggregate amount remaining on uncompleted performance obligations was $283.3 million as of March 31, 2021. We expect to satisfy the performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

4. GOODWILL AND OTHER INTANGIBLES

We have two reporting units which are also our operating and reporting segments: Installation and Distribution. Both reporting units contain goodwill. Assets acquired and liabilities assumed are assigned to the applicable reporting unit based on whether the acquired assets and liabilities relate to the operations of and determination of the fair value of such unit. Goodwill assigned to the reporting unit is the excess of the fair value of the acquired business over the fair value of the individual assets acquired and liabilities assumed for the reporting unit.

In the fourth quarter of 2020, we performed an annual assessment on our goodwill resulting in no impairment.

Changes in the carrying amount of goodwill for the three months ended March 31, 2021 by segment, were as follows, in thousands:


							Accumulated
	Gross Goodwill				Gross Goodwill		Impairment		Net Goodwill
	December 31, 2020		Additions		March 31, 2021		Losses		March 31, 2021
Goodwill, by segment:
Installation	$	1,726,356	$	20,228	$	1,746,584	$	(762,021)	$	984,563
Distribution		446,350		—		446,350		—		446,350
Total goodwill	$	2,172,706	$	20,228	$	2,192,934	$	(762,021)	$	1,430,913

See Note 13 – Business Combinations for goodwill recognized on acquisitions that occurred during the quarter.

Other intangible assets, net includes customer relationships, non-compete agreements, and trademarks / trade names. The following table sets forth our other intangible assets, in thousands:


	As of
	March 31,		December 31,
	2021		2020
Gross definite-lived intangible assets	$	273,801	$	252,751
Accumulated amortization		(68,288)		(62,146)
Net definite-lived intangible assets		205,513		190,605

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth our amortization expense, in thousands:

5. LONG-TERM DEBT

The following table reconciles the principal balances of our outstanding debt to our condensed consolidated balance sheets, in thousands:


	As of
	March 31,		December 31,
	2021		2020
Senior Notes - 3.625% as of March 31, 2021	$	400,000	$	400,000
Term loan		300,000		288,750
Equipment notes		23,399		25,451
Unamortized debt issuance costs		(13,500)		(7,479)
Total debt, net of unamortized debt issuance costs		709,899		706,722
Less: current portion of long-term debt		23,406		23,326
Total long-term debt	$	686,493	$	683,396

The following table sets forth our remaining principal payments for our outstanding debt balances as of March 31, 2021, in thousands:


	Payments Due by Period
	2021		2022		2023		2024		2025		Thereafter		Total
Senior Notes	$	—	$	—	$	—	$	—	$	—	$	400,000	$	400,000
Term loan		11,250		15,000		20,625		22,500		28,125		202,500		300,000
Equipment notes		6,281		8,651		6,337		2,130		—				23,399
Total	$	17,531	$	23,651	$	26,962	$	24,630	$	28,125	$	602,500	$	723,399

Amendment to Original Credit Agreement and Senior Secured Term Loan Facility

On March 8, 2021, the Company entered into an Amendment to our Original Credit Agreement (as so amended, the Amended Credit Agreement). The Amended Credit Agreement provides for a term loan facility in an aggregate principal amount of $300.0 million, all of which was drawn on March 8, 2021 and a Revolving Facility with an aggregate borrowing capacity of $450.0 million, including a $100.0 million letter of credit sublimit and up to a $35.0 million swingline sublimit. The maturity date for the loans under the Amended Credit Agreement was extended from March 2025 to March 2026, the floor for base rate loans has been reduced from 1.5% to 1.0%, and the floor for Eurodollar rate loans has been reduced from 0.5% to 0.0%. Additional provisions have also been made for the eventual replacement of LIBOR with another alternate benchmark rate.

The following table outlines the key terms of our Amended Credit Agreement (dollars in thousands):


Senior secured term loan facility	$	300,000

Additional term loan and/or revolver capacity available under incremental facility (a)	$	300,000

Revolving Facility	$	450,000
Sublimit for issuance of letters of credit under Revolving Facility (b)	$	100,000
Sublimit for swingline loans under Revolving Facility (b)	$	35,000

Interest rate as of March 31, 2021		1.11	%
Scheduled maturity date		3/20/2026

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TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(a)	Additional borrowing capacity is available under the incremental facility, subject to certain terms and conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity).

(b)	Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the Revolving Facility.

Interest payable on borrowings under the Amended Credit Agreement is based on an applicable margin rate plus, at our option, either:

●

A base rate determined by reference to the highest of either (i) the federal funds rate plus 0.50 percent, (ii) BofA’s “prime rate,” and (iii) the LIBOR rate for U.S. dollar deposits with a term of one month, plus 1.00 percent; or

●

A LIBOR rate (or a comparable successor rate) determined by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowings, subject to a floor of 0%.

The Amended Credit Agreement contemplates future amendment by the Company and the agent to provide for the replacement of LIBOR with another alternate benchmark rate, giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities for such alternative benchmarks, including any related mathematical or other applicable adjustments.

The applicable margin rate is determined based on our Secured Leverage Ratio. In the case of base rate borrowings, the applicable margin rate ranges from 0.00 percent to 1.00 percent and in the case of LIBOR rate borrowings, the applicable margin ranges from 1.00 percent to 2.50 percent. Borrowings under the Amended Credit Agreement are prepayable at the Company’s option without premium or penalty. The Company is required to make prepayments with the net cash proceeds of certain asset sales and certain extraordinary receipts.

Revolving Facility

The Company has outstanding standby letters of credit that secure our financial obligations related to our workers’ compensation, general insurance, and auto liability programs. These standby letters of credit, as well as any outstanding amount borrowed under our Revolving Facility, reduce the availability under the Revolving Facility. The following table summarizes our availability under the Revolving Facility, in thousands:


	As of
	March 31,		December 31,
	2021		2020
Revolving Facility	$	450,000	$	450,000
Less: standby letters of credit		(60,382)		(60,382)
Availability under Revolving Facility	$	389,618	$	389,618

We are required to pay commitment fees to the Lenders in respect of any unutilized commitments. The commitment fees range from 0.15 percent to 0.275 percent per annum, depending on our Secured Leverage Ratio. We must also pay customary fees on outstanding letters of credit.

Senior Notes

On March 15, 2021, the Company completed a private offering of $400.0 million aggregate principal amount of 3.625% New Senior Notes due 2029. The Company used the proceeds from the issuance of the New Senior Notes, together with cash on hand, to redeem 100% of its $400.0 million aggregate principal amount of 5.625% Old Senior Notes due 2026. The New Senior Notes are our senior unsecured obligations and bear interest at 3.625% per year, payable semiannually in arrears on March 15 and September 15 of each year, which begins on September 15, 2021. The New Senior Notes mature on March 15, 2029, unless redeemed early or repurchased. If we undergo a change in control, we must make an offer to repurchase all of the Senior Notes then outstanding at a repurchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest (if any) to, but not including, the repurchase date.

Table of Contents

TOPBUILD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company may redeem the Notes, in whole or in part, at any time on or after March 15, 2024 at the redemption prices specified in the Notes. The Company may also redeem all or part of the Notes at any time prior to March 15, 2024 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus the Applicable Premium (as defined in the Indenture), as of, and accrued and unpaid interest to, the redemption date. Additionally, the Company may redeem up to 40% of the aggregate principal amount of the Notes prior to March 15, 2024 with the net cash proceeds of certain sales of its capital stock at 103.625% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the date of redemption only if, after the redemption, at least 60% of the aggregate principal amount of the Notes originally issued remains outstanding.

Equipment Notes

As of December 31, 2020, the company has issued $41.6 million of equipment notes for the purpose of financing the purchase of vehicles and equipment. No equipment notes were issued during the three months ended March 31, 2021. The Company’s equipment notes each have a five year term maturing from 2023 to 2024 and bear interest at fixed rates between 2.8% and 4.4%.

Covenant Compliance

The indenture governing our New Senior Notes contains restrictive covenants that, among other things, generally limit the ability of the Company and certain of its subsidiaries (subject to certain exceptions) to (i) create liens, (ii) pay dividends, acquire shares of capital stock and make payments on subordinated debt, (iii) place limitations on distributions from certain subsidiaries, (iv) issue or sell the capital stock of certain subsidiaries, (v) sell assets, (vi) enter into transactions with affiliates and (vii) effect mergers. The indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest; breach of covenants or other agreements in the indenture; defaults in failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the indenture, the trustee or the holders of at least 30% in aggregate principal amount of the New Senior Notes then outstanding may declare the principal of, premium, if any, and accrued interest on all the New Senior Notes immediately due and payable. The New Senior Notes and related guarantees have not been registered under the Securities Act of 1933, and we are not required to register either the New Senior Notes or the guarantees in the future.

The Amended Credit Agreement contains certain covenants that limit, among other things, the ability of the Company to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes. The Amended Credit Agreement contains customary affirmative covenants and events of default.

The Amended Credit Agreement requires that we maintain a Net Leverage Ratio and minimum Interest Coverage Ratio throughout the term of the agreement. The following table outlines the key financial covenants effective for the period covered by this Quarterly Report:


		As of March 31, 2021
Maximum Net Leverage Ratio		3.50:1.00
Minimum Interest Coverage Ratio		3.00:1.00
Compliance as of period end		In Compliance


		Page No.
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Operations	5

	Condensed Consolidated Statements of Cash Flows	6

	Condensed Consolidated Statements of Changes in Equity	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

Part II.	Other Information

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

Index to Exhibits		30

Signature		31

Three Months Ended March 31,

Amortization expense