NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 ORGANIZATION
Installed Building Products,
Inc. (IBP), a Delaware corporation formed on October 28, 2011, and its subsidiaries (collectively referred to as the Company and we, us and our) primarily install insulation, garage doors,
rain gutters, shower doors, closet shelving and mirrors, and other products for residential and commercial builders located in the continental United States. IBP operates in over 100 locations within the continental United States and its corporate
office is located in Columbus, Ohio.
We have one operating segment and a single reportable segment. Substantially all of our sales come from
service-based installation of various products in the residential new construction and repair and remodel and commercial new construction and repair and remodel end markets. Each of our branches has the capacity to serve all of our end markets. The
following table sets forth the percentage of our net revenue by end market for the three and six months ended June 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
Three and six months ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Residential new construction and repair and remodel
|
|
|
88
|
%
|
|
|
89
|
%
|
Commercial new construction and repair and remodel
|
|
|
12
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The
accompanying condensed consolidated financial statements include all of our wholly owned subsidiaries and majority owned subsidiaries. The non-controlling interest relating to majority owned subsidiaries is not significant for presentation. 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 condensed or 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 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, 2015 (the 2015
Form 10-K), as filed with the SEC on March 9, 2016. The December 31, 2015 condensed consolidated balance sheet data was derived from the audited 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, 2016 are not necessarily indicative of the results to be expected in future
operating quarters. See Item 1A. Risk Factors in our 2015 Form 10-K for additional information regarding risk factors that may impact our results.
5
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2 to the consolidated financial statements in our 2015 Form 10-K describes the significant accounting
policies and estimates used in preparation of the consolidated financial statements. There have been no changes to our significant accounting policies or estimates during the three or six months ended June 30, 2016.
Use of Estimates
Preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the allowance for doubtful accounts, valuation allowance on deferred tax assets, valuation of the reporting unit, intangible
assets and other long-lived assets, share based compensation, reserves for general liability, and workers compensation and medical insurance. Management believes the accounting estimates are appropriate and reasonably determined; however, due
to the inherent uncertainties in making these estimates, actual amounts could differ from such estimates.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was approximately $0.8 million and $1.4 million for the three and six months ended June 30,
2016, respectively, and $0.6 million and $1.0 million for the three and six months ended June 30, 2015, respectively, and is included in selling expense on the Condensed Consolidated Statements of Operations.
Recently Adopted Accounting Pronouncements
In April
2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, Simplifying the Presentation of Debt Issuance Costs. Under this ASU, we present debt issuance costs in the
balance sheet as a reduction from the related debt liability rather than as an asset. Amortization of such costs will continue to be reported as interest expense. During the six months ended June 30, 2016, we retrospectively adopted ASU 2015-03,
which resulted in a reclassification of $0.5 million of debt issuance costs related to our long-term debt from other non-current assets to long-term debt as of December 31, 2015.
In April 2015, the FASB issued ASU 2015-05, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Customers Accounting
for Fees Paid in a Cloud Computing Arrangement. This update provides criteria for customers in a cloud computing arrangement to determine whether the arrangement includes a license of software. We adopted this guidance effective January 1,
2016 and have determined this ASU did not have a material impact on our condensed consolidated financial statements.
In August 2015, the FASB issued ASU
2015-15, Imputation of Interest (Subtopic 835-30). This ASU amends ASU 2015-03 regarding the presentation and subsequent measurement of debt issuance costs related to line of credit arrangements. Specifically, it provides guidance for
deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of
credit arrangement. We adopted this guidance effective January 1, 2016 and have determined this ASU did not have a material impact on our condensed consolidated financial statements. After applying the new guidance, deferred debt issuance costs were
$1.3 million and $0.6 million as of June 30, 2016 and December 31, 2015, respectively.
6
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805). This ASU
requires an acquirer to retrospectively adjust provisional amounts recognized in a business combination during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in this update require that
the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same periods
financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition
date. In addition, an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current period earnings by line item that would have
been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, this update is effective for fiscal years beginning after December 15, 2015,
including interim periods within those fiscal years. While previous adjustments to provisional amounts did not have a material impact on our financial statements, it is possible that future adjustments made during measurement periods to recently
acquired entities or entities acquired in the future could have a material impact on our financial statements.
In March 2016, the FASB issued ASU No.
2016-09, Compensation-Stock Compensation (Topic 718). This update amends the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or
deficiencies. This ASU also clarifies the statement of cash flows presentation for certain components of share-based awards. As early adoption is permitted, we adopted this standard effective January 1, 2016 and have concluded that it did not have a
material impact on our condensed consolidated financial statements. Under ASU 2016-09, we classify the excess income tax benefits from stock-based compensation arrangements as a discrete item within income tax expense, rather than recognizing such
excess income tax benefits in additional paid-in capital. Excess income tax benefits from stock-based compensation arrangements are classified as an operating activity rather than as a financing activity. In addition, when we withhold shares from an
employees vesting of common stock awards to fund payment by us of the employees taxes, the payment is classified as a financing activity. We have elected to continue to estimate the forfeitures expected to occur to determine the amount
of compensation cost to be recognized in each period.
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 sets forth a new revenue recognition model
that requires identifying the contract(s) with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing the revenue upon
satisfaction of performance obligations. In July 2015, the FASB voted to defer the application of the provisions of this standard for public companies until annual reporting periods beginning after December 15, 2017, including interim periods within
that reporting period. We are still evaluating whether this ASU will have a material impact on our consolidated financial statements.
In July 2015, the
FASB issued ASU 2015-11, Inventory (Topic 330). This update requires an entity to measure inventory within the scope of the update at the lower of cost and net realizable value. For public business entities, this update is effective for
financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. We are still evaluating whether this ASU will have a material impact on our consolidated financial statements.
7
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update amends the
existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 requires a modified retrospective transition approach for
all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. For public business entities, this update is effective for annual reporting periods beginning after December 15, 2018,
including interim periods within those fiscal years, and early adoption is permitted as of the standards issuance date. We are still evaluating whether this ASU will have a material impact on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This ASU
clarifies the requirement for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this
amendment is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that
triggers the ability to exercise a call (put) option is related to interest rates or credit risks. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2016 and interim
periods within those fiscal years. We are still evaluating whether this ASU will have a material impact on our consolidated financial statements.
In
April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides supplemental adoption guidance and clarification to ASU 2014-09. ASU
2016-10 must be adopted concurrently with the adoption of ASU 2014-09. We are still evaluating whether the future adoption of these pronouncements will have a material impact on our condensed consolidated financial statements.
In May 2016, the FASB issued ASU No. 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance
Because of Accounting Standards Updates 2014-09 and 2014-16 pursuant to Staff announcements at the March 3, 2016 EITF Meeting This ASU rescinds from the FASB Accounting Standards Codification certain SEC paragraphs as a result of two SEC Staff
Announcements at the March 3, 2016 meeting. For public entities, the amendments related to Topic 605 are effective for interim and annual reporting periods beginning after December 15, 2017 and amendments related to Topic 815 are effective for
interim and annual reporting periods beginning after December 15, 2015. We are still evaluating whether the portion of this ASU related to Topic 605 will have a material impact on our condensed consolidated financial statements but have concluded
that the portion of this ASU related to Topic 815 is not applicable and, therefore, did not have a material impact on our condensed consolidated financial statements.
In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.
The amendments in this ASU provide additional clarification and implementation guidance on the previously issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU provides clarification to Topic 606 on how to
assess collectability, present sales tax, treat noncash consideration, and account for completed and modified contracts at the time of transition. The amendment also clarifies that an entity retrospectively applying the guidance in Topic 606 is not
required to disclose the effect of the accounting change in the period of adoption. The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09, which is effective
for fiscal years, and for interim periods within those years, beginning after December 15, 2017. We are still evaluating whether this ASU will have a material impact on our condensed consolidated financial statements.
8
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. This ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In addition, these amendments require the
measurement of all expected credit losses for financial assets, including trade accounts receivable, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. For public business
entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. We are still evaluating whether this ASU will have a material impact on our
consolidated financial statements.
NOTE 3 GOODWILL AND INTANGIBLES
Goodwill
The change in carrying amount of goodwill was as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
(Gross)
|
|
|
Accumulated
Impairment
Losses
|
|
|
Goodwill
(Net)
|
|
|
|
|
|
January 1, 2016
|
|
$
|
160,516
|
|
|
$
|
(70,004
|
)
|
|
$
|
90,512
|
|
Business Combinations
|
|
|
9,827
|
|
|
|
|
|
|
|
9,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
$
|
170,343
|
|
|
$
|
(70,004
|
)
|
|
$
|
100,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We test goodwill for impairment annually during the fourth quarter of our fiscal year or earlier if there is an impairment
indicator. No impairment was recognized during either of the six month periods ended June 30, 2016 and 2015.
Intangibles, net
The following table provides the gross carrying amount and accumulated amortization for each major class of intangibles (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
|
As of December 31, 2015
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Book
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Book
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Value
|
|
|
Amount
|
|
|
Amortization
|
|
|
Value
|
|
Amortized intangibles:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
73,066
|
|
|
$
|
23,705
|
|
|
$
|
49,361
|
|
|
$
|
62,399
|
|
|
$
|
20,231
|
|
|
$
|
42,168
|
|
Covenants not-to-compete
|
|
|
7,763
|
|
|
|
1,568
|
|
|
|
6,195
|
|
|
|
5,729
|
|
|
|
847
|
|
|
|
4,882
|
|
Trademarks and tradenames
|
|
|
33,555
|
|
|
|
9,255
|
|
|
|
24,300
|
|
|
|
28,320
|
|
|
|
8,152
|
|
|
|
20,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
114,384
|
|
|
$
|
34,528
|
|
|
$
|
79,856
|
|
|
$
|
96,448
|
|
|
$
|
29,230
|
|
|
$
|
67,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The gross carrying amount of intangibles increased approximately $17.9 million during the six months ended
June 30, 2016 primarily due to business combinations. See Note 10, Business Combinations, for more information. Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):
|
|
|
|
|
Remainder of 2016
|
|
$
|
5,531
|
|
2017
|
|
|
10,546
|
|
2018
|
|
|
10,304
|
|
2019
|
|
|
9,880
|
|
2020
|
|
|
9,273
|
|
Thereafter
|
|
|
34,322
|
|
NOTE 4 LONG-TERM DEBT
Debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Term loans, as amended, net of unamortized debt discount of $504 and $249, respectively
|
|
$
|
98,246
|
|
|
$
|
47,876
|
|
Delayed draw term loans, as amended, net of unamortized debt discount of $57 and $261,
respectively
|
|
|
12,443
|
|
|
|
49,739
|
|
Vehicle and equipment notes
|
|
|
29,760
|
|
|
|
21,091
|
|
Various notes payable, maturing through March 2025; payable in various monthly installments,
including interest rates ranging from 4% to 6%
|
|
|
5,282
|
|
|
|
4,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,731
|
|
|
|
123,235
|
|
Less: current maturities
|
|
|
(13,079
|
)
|
|
|
(10,021
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current maturities
|
|
$
|
132,652
|
|
|
$
|
113,214
|
|
|
|
|
|
|
|
|
|
|
On February 29, 2016, we entered into a Credit and Security Agreement (the Credit and Security Agreement) with the
lenders named therein. The Credit and Security Agreement amended and restated our previous credit agreement (the 2015 Credit Agreement), which was scheduled to mature in April 2020. We used a portion of the funds from the Credit and
Security Agreement to pay off the outstanding balances under the 2015 Credit Agreement. The Credit and Security Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $325.0 million, consisting of
a $100.0 million revolving line of credit (the Revolving LOC), a $100.0 million term loan (the Term Loan), and a delayed draw term loan facility (the DDTL) providing for up to $125.0 million in additional term
loan draws during the first year of the Credit and Security Agreement. Under the Revolving LOC, up to an aggregate of $20.0 million is available to us for the issuance of letters of credit and up to an aggregate of $5.0 million is available to us
for swing line loans. The Credit and Security Agreement also includes an accordion feature which allows us, at our option but subject to lender and certain other approvals, to add up to an aggregate of $75.0 million in principal amount of term loans
or additional revolving credit commitments, subject to the same terms as the Revolving LOC and Term Loan. As of June 30, 2016, there were approximately $12.3 million in letters of credit issued and no borrowings outstanding under the Revolving LOC.
All of the obligations under the Credit and Security Agreement are guaranteed by our material domestic subsidiaries, other than Suburban Insulation, Inc.
10
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Loans under the Credit and Security Agreement bear interest at either the eurodollar rate (LIBOR)
or the base rate (which approximates prime rate), at our election, plus a margin based on the type of rate applied and our leverage ratio. At December 31, 2015, the outstanding balances on the term loan and the delayed draw term loan under the 2015
Credit Agreement bore interest at 1-month LIBOR, including margin (1.95%), and the outstanding balances on the Term Loan and DDTL at June 30, 2016 bore interest at 1-month LIBOR, including margin (2.25%). In addition to interest, we are
required to pay commitment fees on the unused portion of the Revolving LOC. The commitment fee rate for the period from February 29, 2016 through August 31, 2016, is 22.5 basis points. Thereafter, the commitment fee rate, like the interest rate
spreads, is subject to adjustment based on our leverage ratio, with possible future commitment fees ranging from 20 to 30 basis points per annum. We are also required to pay a ticking fee of 37.5 basis points per annum on the unused portion of the
DDTL until it is fully drawn or February 28, 2017, whichever is earlier. Any outstanding principal balances on the Term Loan and DDTL are due on February 28, 2021 (the Maturity Date).
The Credit and Security Agreement contains covenants that require us to (1) maintain a fixed charge coverage ratio of not less than 1.10 to 1.0 and (2)
maintain a leverage ratio of no greater than (a) 3.50 to 1.00 through December 30, 2016; (b) 3.25 to 1.00 on December 31, 2016 through June 29, 2017; (c) 3.00 to 1.00 on June 30, 2017 through December 30, 2017; (d) 2.75 to 1.00 on December 31, 2017
through June 29, 2018; and (e) 2.50 to 1.00 on June 30, 2018 and thereafter. The Credit and Security Agreement also contains various restrictive non-financial covenants and a provision that, upon an event of default (as defined by the Credit
and Security Agreement), amounts outstanding under the Credit and Security Agreement would bear interest at the rate as determined above plus 2.0% per annum.
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) with various
lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in 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.
Total gross assets relating to our master loan and equipment agreements were $36.4 million and $25.4 million as of June 30, 2016 and December 31, 2015,
respectively, none of which were fully depreciated as of June 30, 2016 or December 31, 2015, respectively. The net book value of assets under these agreements was $30.1 million and $22.4 million as of June 30, 2016 and December 31, 2015,
respectively, net of accumulated depreciation of $6.3 million and $3.0 million as of June 30, 2016 and December 31, 2015, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated
Statements of Operations.
11
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5 FAIR VALUE MEASUREMENTS
Fair Values
Fair value is the price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Accounting Standards Codification (ASC) 820, Fair Value Measurement, establishes a fair value hierarchy that requires an entity to
maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the
measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entitys own assumptions about the assumptions that market participants
would use in pricing an asset or liability.
Estimated Fair Value of Financial Instruments
Accounts receivable, accounts payable and accrued liabilities as of June 30, 2016 and December 31, 2015 approximate fair value due to the short-term
maturities of these financial instruments. The carrying amounts of the long-term debt, including the Term Loan, DDTL and Revolving LOC, approximate fair value as of June 30, 2016 and December 31, 2015 due to the short term maturities of the
underlying variable rate LIBOR agreements. The carrying amounts of the obligations associated with our vehicle and equipment notes approximate fair value as of June 30, 2016 and December 31, 2015 because the associated assets generate sufficient
cash through operations to settle the obligations. All debt classifications represent Level 2 fair value measurements.
NOTE 6 EMPLOYEE BENEFITS
Healthcare
Our healthcare benefit expense (net
of employee contributions) for all plans was approximately $3.5 million and $3.1 million for the three months ended June 30, 2016 and 2015, respectively, and $7.7 million and $5.8 million for the six months ended June 30, 2016 and 2015,
respectively. An accrual for estimated healthcare claims incurred but not reported (IBNR) is included within accrued compensation on the Condensed Consolidated Balance Sheets and was $1.6 million and $1.5 million as of June 30, 2016 and
December 31, 2015, respectively.
Workers Compensation
Workers compensation expense totaled $2.8 million and $2.0 million for the three months ended June 30, 2016 and 2015, respectively, and $5.8 million and
$4.1 million for the six months ended June 30, 2016 and 2015, respectively. Workers compensation known claims and IBNR reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Included in other current liabilities
|
|
$
|
4,210
|
|
|
$
|
3,263
|
|
Included in other long-term liabilities
|
|
|
6,505
|
|
|
|
7,132
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,715
|
|
|
$
|
10,395
|
|
|
|
|
|
|
|
|
|
|
12
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We also had an insurance receivable for claims that exceeded the stop loss limit included on the Condensed
Consolidated Balance Sheets. That receivable offsets an equal liability included within the reserve amounts noted above and was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Included in other non-current assets
|
|
$
|
1,259
|
|
|
$
|
1,542
|
|
Share-Based Compensation
Directors
During the three months ended June 30, 2016 and
2015, we granted approximately 9 thousand and 13 thousand shares of our common stock, respectively, under our 2014 Omnibus Incentive Plan to non-employee members of our Board of Directors. Accordingly, for each of the three and six month periods
ended June 30, 2016 and 2015, we recorded $0.3 million in compensation expense within administrative expenses on the Condensed Consolidated Statements of Operations. These shares effectively vested on the grant date since there is deemed to be no
service period associated with these awards. The lack of a vesting or service period may not apply to any future share grants under our 2014 Omnibus Incentive Plan.
Employees
During the six months ended June 30, 2016, we
granted approximately 0.1 million shares of our common stock under our 2014 Omnibus Incentive Plan to our employees, which vest in three equal installments (rounded to the nearest whole share) on each of April 20, 2017, April 20, 2018 and April
20, 2019.
During the six months ended June 30, 2016, our employees surrendered approximately 32 thousand shares of our common stock to satisfy tax
withholding obligations arising in connection with the vesting of such common stock awards previously issued under our 2014 Omnibus Incentive Plan. Share-based compensation expense was $0.3 million and $0.9 million for the three and six months ended
June 30, 2016, respectively. We recognized excess tax benefits of approximately $49 thousand and $0.3 million in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016, respectively.
During the six months ended June 30, 2015, we granted approximately 0.1 million shares of our common stock under our 2014 Omnibus Incentive Plan to our
employees, which vested 100% between January 7, 2016 and March 31, 2016 for non-executive employees and vests in three equal installments (rounded to the nearest whole share) on each of March 31, 2016, March 31, 2017 and March 31, 2018 for certain
officers. Share-based compensation expense was $0.6 million and $0.7 million for the three and six months ended June 30, 2015.
13
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nonvested common stock awards for employees as of December 31, 2015 and changes during the six months ended
June 30, 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Awards
|
|
|
Weighted
Average Grant
Date Fair
Market Value
Per Share
|
|
Nonvested common stock awards at December 31, 2015
|
|
|
129,053
|
|
|
$
|
21.52
|
|
Granted
|
|
|
143,528
|
|
|
|
26.98
|
|
Vested
|
|
|
(109,473
|
)
|
|
|
21.48
|
|
Forfeited
|
|
|
(459
|
)
|
|
|
21.79
|
|
|
|
|
|
|
|
|
|
|
Nonvested common stock awards at June 30, 2016
|
|
|
162,649
|
|
|
$
|
26.37
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016, there was $3.8 million of unrecognized compensation expense related to nonvested common stock awards.
This expense is subject to future adjustments for forfeitures and is expected to be recognized on a straight-line basis over the remaining weighted-average period of 2.7 years. Shares forfeited are returned as treasury shares and available for
future issuances.
As of June 30, 2016, approximately 2.7 million shares of common stock were available for issuance under the 2014 Omnibus Incentive
Plan.
NOTE 7 INCOME TAXES
Our provision for
income taxes as a percentage of pretax earnings (effective tax rate) is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items.
During the three and six months ended June 30, 2016, the effective tax rate was 33.2 percent and 33.8 percent, respectively. These rates were favorably
impacted by deductions related to domestic production activities, early adoption of ASU 2016-09 and usage of net operating losses for a tax filing entity which previously had a full valuation allowance. The rates were partially offset by separate
tax filing entities in a loss position for which a full valuation allowance will be accounted for against the losses, causing no tax benefit to be recognized on the losses.
On March 30, 2016, the FASB issued ASU 2016-09 which simplified several aspects of the accounting for employee share-based payment transactions. We decided to
early adopt ASU 2016-09 and per its guidance recognized $49 thousand and $0.3 million of excess income tax benefits from stock-based compensation arrangements as a discrete item within income tax expense for the three and six months ended June 30,
2016, respectively.
NOTE 8 RELATED PARTY TRANSACTIONS
We sell installation services to other companies related to us through common or affiliated ownership and/or Board of Directors and/or management
relationships. We also purchase services and materials and pay rent to companies with common or related ownership.
We lease our headquarters and certain
other facilities from related parties. See Note 9, Commitments and Contingencies, for future minimum lease payments to be paid to these related parties.
14
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the three and six months ended June 30, 2016 and 2015, the amount of sales to related parties as well as
the purchases from and rent expense paid to related parties were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Sales
|
|
$
|
1,573
|
|
|
$
|
1,571
|
|
|
$
|
3,100
|
|
|
$
|
2,737
|
|
Purchases
|
|
|
153
|
|
|
|
170
|
|
|
|
256
|
|
|
|
286
|
|
Rent
|
|
|
154
|
|
|
|
148
|
|
|
|
309
|
|
|
|
296
|
|
As of June 30, 2016 and December 31, 2015, we had related party balances of approximately $1.3 million and $1.8 million,
respectively, included in accounts receivable on our Condensed Consolidated Balance Sheets. These balances represent trade accounts receivable arising during normal course of business with various related parties. M/I Homes, Inc., a customer whose
Chairman, President and Chief Executive Officer is a member of our Board of Directors, accounted for $0.7 million and $1.0 million of these balances as of June 30, 2016 and December 31, 2015, respectively.
On March 13, 2015, we entered into a share repurchase agreement with Installed Building Systems, Inc. (IBS), a related party, for the
purchase of approximately 0.3 million shares of our common stock for a purchase price of approximately $6.1 million (or $19.23 per share, which represented a 7.5% discount to the last reported price of our common stock on March 13, 2015) plus
minor costs we incurred with respect to the transaction of $43 thousand, totaling $6.1 million.
NOTE 9 COMMITMENTS AND CONTINGENCIES
Accrued General Liability
Accrued general insurance
reserves included on the Condensed Consolidated Balance Sheets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Included in other current liabilities
|
|
$
|
1,675
|
|
|
$
|
1,304
|
|
Included in other long-term liabilities
|
|
|
7,663
|
|
|
|
6,879
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,338
|
|
|
$
|
8,183
|
|
|
|
|
|
|
|
|
|
|
15
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We also had insurance receivables included on the Condensed Consolidated Balance Sheets that, in aggregate,
offset an equal liability included within the reserve amounts noted above. The amounts were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Insurance receivable and indemnification asset for claims under a fully insured policy
|
|
$
|
2,815
|
|
|
$
|
2,815
|
|
Insurance receivable for claims that exceeded the stop loss limit
|
|
|
907
|
|
|
|
821
|
|
|
|
|
|
|
|
|
|
|
Total insurance receivables included in other non-current assets
|
|
$
|
3,722
|
|
|
$
|
3,636
|
|
|
|
|
|
|
|
|
|
|
Leases
We are obligated
under capital leases covering vehicles and certain equipment. The vehicle and equipment leases generally have terms ranging from four to six years. Total gross assets relating to capital leases were approximately $64.9 million as of June 30, 2016
and December 31, 2015, and a total of approximately $21.7 million and $19.1 million were fully depreciated as of June 30, 2016 and December 31, 2015, respectively. The net book value of assets under capital leases was approximately $19.2 million and
$22.1 million as of June 30, 2016 and December 31, 2015, respectively, net of accumulated depreciation of $45.7 million and $42.8 million as of June 30, 2016 and December 31, 2015, respectively. Amortization of assets held under capital leases is
included within cost of sales on the Condensed Consolidated Statements of Operations.
We also have several noncancellable operating leases, primarily for
buildings, improvements, equipment, and certain vehicles. These leases generally contain renewal options for periods ranging from one to five years and require us to pay all executory costs such as property taxes, maintenance and insurance.
In some instances, lease agreements exist with related parties. Future minimum lease payments under noncancellable operating leases (with initial or remaining
lease terms in excess of one year) with related parties as of June 30, 2016 are as follows (amounts, in thousands, are as of the fiscal year ended):
|
|
|
|
|
Remainder of 2016
|
|
$
|
286
|
|
2017
|
|
|
366
|
|
2018
|
|
|
155
|
|
2019
|
|
|
|
|
2020
|
|
|
|
|
Thereafter
|
|
|
|
|
Supply Contract Commitments
As of June 30, 2016, we had two product supply contracts, one extending through December 31, 2016 and one extending through August 31, 2017. The contract
extending through August 31, 2017 has been suspended through December 31, 2016. Our obligations for both contracts are based on quantity without a specific rate applied and therefore are not quantifiable. We expect our quantity of purchases to
exceed the minimum quantity commitments for all years covered by the contracts. Actual purchases made under the contract extending through December 31, 2016 for the three months ended June 30, 2016 and 2015 were approximately $12.2 million and $13.1
million, respectively, and $26.4 million and $24.9 million for the six months ended June 30, 2016 and 2015, respectively.
16
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other Commitments and Contingencies
From time to time, various claims and litigation are asserted or commenced against us principally arising from contractual and tort matters and personnel and
employment disputes. In determining loss contingencies, management considers the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that
such a liability has been incurred and when the amount of loss can be reasonably estimated. As litigation is subject to inherent uncertainties, we cannot be certain that we will prevail in these matters. However, we do not believe that the ultimate
outcome of any pending matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
NOTE
10 BUSINESS COMBINATIONS
As part of our ongoing strategy to increase market share in certain markets, we completed four business combinations
during the six months ended June 30, 2016 and three business combinations during the six months ended June 30, 2015. The goodwill recognized in conjunction with these business combinations is attributable to expected improvement in the business of
these acquired companies. We estimate approximately $11.1 million of the goodwill resulting from the 2016 acquisitions is expected to be deductible for tax purposes.
2016
On January 25, 2016, we acquired substantially all
of the assets of Key Green Builder Services, LLC d/b/a Key Insulation. The purchase price consisted of cash of $5.0 million and seller obligations of $0.7 million. Revenue and net loss since the date of acquisition included in our Condensed
Consolidated Statements of Operations for the three months ended June 30, 2016 were $2.2 million and $0.1 million, respectively, and $4.3 million and $0.2 million, respectively, for the six months ended June 30, 2016.
On February 2, 2016, we acquired substantially all of the assets of Marshall Insulation, LLC (Marshall). The purchase price consisted of cash
of $0.9 million and seller obligations of $0.1 million. Revenue and net loss since the date of acquisition included in our Condensed Consolidated Statements of Operations for the three months ended June 30, 2016 were $0.9 million and $76 thousand,
respectively, and $1.5 million and $0.2 million, respectively, for the six months ended June 30, 2016.
On February 29, 2016, we acquired substantially
all of the assets of Kern Door Company, Inc. (Kern). The purchase price consisted of cash of $2.9 million and seller obligations of $0.1 million. Revenue and net loss since the date of acquisition included in our Condensed Consolidated
Statements of Operations for the three months ended June 30, 2016 were $0.7 million and $0.2 million, respectively, and $1.0 million and $0.1 million, respectively, for the six months ended June 30, 2016.
On April 12, 2016, we acquired substantially all of the assets of Alpine Insulation Co., Inc. (Alpine). The purchase price consisted of cash of
$21.2 million and seller obligations of $1.6 million. Revenue and net income since the date of acquisition included in our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 were $6.8 million and $0.4
million, respectively.
2015
On March 12, 2015, we
acquired 100% of the stock and membership interests of nine different legal entities, collectively referred to as BDI Insulation (BDI). The purchase price consisted of cash of $30.7 million and seller obligations of $5.8 million.
Revenue and net income since the date of acquisition
17
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
included in our Condensed Consolidated Statements of Operations for the three months ended June 30, 2015 were $10.0 million and $1.1 million, respectively, and $12.1 million and $1.0 million,
respectively, for the six months ended June 30, 2015.
On April 6, 2015, we acquired 100% of the common stock of C.Q. Insulation Inc.
(CQ). The purchase price consisted of cash of $5.2 million and seller obligations of $2.3 million. Revenue and net income since the date of acquisition included in our Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 2015 were $2.7 million and $0.2 million, respectively.
On June 1, 2015, we acquired substantially all of the assets of Layman
Brothers Contracting (Layman). The purchase price consisted of cash of $9.1 million and seller obligations of $0.6 million. Revenue and net income since the date of acquisition included in our Condensed Consolidated Statements of
Operations for the three and six months ended June 30, 2015 were $1.2 million and $0.1 million, respectively.
Purchase Price Allocations
The estimated fair values of the assets acquired and liabilities assumed for the acquisitions, as well as total purchase prices and cash paid, approximated the
following as of June 30 and as may be adjusted during the valuation period since acquisition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Alpine
|
|
|
Other
|
|
|
Total
|
|
|
BDI
|
|
|
CQ
|
|
|
Layman
|
|
|
Total
|
|
Estimated fair values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
661
|
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
761
|
|
Accounts receivable
|
|
|
3,959
|
|
|
|
1,616
|
|
|
|
5,575
|
|
|
|
4,735
|
|
|
|
1,423
|
|
|
|
1,245
|
|
|
|
7,403
|
|
Inventories
|
|
|
700
|
|
|
|
311
|
|
|
|
1,011
|
|
|
|
980
|
|
|
|
152
|
|
|
|
267
|
|
|
|
1,399
|
|
Other current assets
|
|
|
18
|
|
|
|
8
|
|
|
|
26
|
|
|
|
368
|
|
|
|
39
|
|
|
|
|
|
|
|
407
|
|
Property and equipment
|
|
|
656
|
|
|
|
744
|
|
|
|
1,400
|
|
|
|
1,006
|
|
|
|
190
|
|
|
|
733
|
|
|
|
1,929
|
|
Intangibles
|
|
|
12,800
|
|
|
|
5,036
|
|
|
|
17,836
|
|
|
|
21,280
|
|
|
|
4,350
|
|
|
|
5,330
|
|
|
|
30,960
|
|
Goodwill
|
|
|
6,624
|
|
|
|
3,190
|
|
|
|
9,814
|
|
|
|
16,213
|
|
|
|
3,035
|
|
|
|
3,143
|
|
|
|
22,391
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,736
|
|
|
|
|
|
|
|
|
|
|
|
3,736
|
|
Accounts payable and other current liabilities
|
|
|
(2,046
|
)
|
|
|
(1,238
|
)
|
|
|
(3,284
|
)
|
|
|
(3,303
|
)
|
|
|
(1,539
|
)
|
|
|
(1,030
|
)
|
|
|
(5,872
|
)
|
Deferred income tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,495
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,495
|
)
|
Other long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,736
|
)
|
|
|
(238
|
)
|
|
|
|
|
|
|
(3,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired and purchase price
|
|
|
22,711
|
|
|
|
9,667
|
|
|
|
32,378
|
|
|
|
36,445
|
|
|
|
7,512
|
|
|
|
9,688
|
|
|
|
53,645
|
|
Less seller obligations
|
|
|
1,560
|
|
|
|
870
|
|
|
|
2,430
|
|
|
|
5,765
|
|
|
|
2,319
|
|
|
|
600
|
|
|
|
8,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
21,151
|
|
|
$
|
8,797
|
|
|
$
|
29,948
|
|
|
$
|
30,680
|
|
|
$
|
5,193
|
|
|
$
|
9,088
|
|
|
$
|
44,961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Further adjustments to the allocation for each acquisition still under its measurement period are expected as third-party or
internal valuations are finalized, certain tax aspects of the transaction are completed, and customary post-closing reviews are concluded during the measurement period attributable to each individual business combination. As a result, insignificant
adjustments to the fair value of assets acquired, and in some cases total purchase price, have been made to certain business combinations since the date of acquisition and future adjustments may be made through the end of each measurement period.
Goodwill and intangibles per the above table do not agree to the total gross increases of these assets as shown in Note 3Goodwill and Intangibles during the six months ended June 30, 2016 due to minor adjustments to goodwill for the allocation
of certain acquisitions still under measurement as well as other immaterial intangible assets added during the ordinary course of business. In addition, goodwill and intangibles increased during the six months ended June 30, 2015 due to an
immaterial tuck-in acquisition that does not appear in the above table.
Included in other noncurrent assets in the above table as of June 30, 2016 and
2015 is an insurance receivable of $2.0 million and an indemnification asset associated with the acquisition of BDI in the amount of $1.7 million. These assets offset equal liabilities included in other long-term liabilities in the same table, which
represent additional insurance reserves and an uncertain tax position liability for which we may be liable. All amounts are measured at their acquisition date fair value.
18
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Estimates of acquired intangible assets related to the acquisitions are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Acquired intangibles assets
|
|
Estimated
Fair Value
|
|
|
Weighted
Average
Estimated
Useful
Life (yrs.)
|
|
|
Estimated
Fair Value
|
|
|
Weighted
Average
Estimated
Useful
Life (yrs.)
|
|
Customer relationships
|
|
$
|
10,667
|
|
|
|
9
|
|
|
$
|
19,900
|
|
|
|
8
|
|
Trademarks and trade names
|
|
|
5,235
|
|
|
|
15
|
|
|
|
9,390
|
|
|
|
15
|
|
Non-competition agreements
|
|
|
1,934
|
|
|
|
5
|
|
|
|
1,670
|
|
|
|
5
|
|
Pro Forma Information
The unaudited pro forma information for the combined results of the Company has been prepared as if the 2016 acquisitions had taken place on January 1,
2015 and the 2015 acquisitions had taken place on January 1, 2014. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transactions actually taken place on January 1, 2015 and
2014, and the unaudited pro forma information does not purport to be indicative of future financial operating results. See Note 12, Business Combinations, to our audited financial statements in Item 8 of Part II of our 2015 Form 10-K for
additional information on 2015 acquisitions included in the table below (in thousands, except per share data):
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Pro forma for the three
months ended June 30,
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Pro forma for the six
months ended June 30,
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2016
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2015
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2016
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2015
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Net revenue
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$
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212,719
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$
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185,622
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$
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411,201
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$
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347,873
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Net income attributable to common stockholders
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$
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9,660
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$
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7,688
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$
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15,356
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$
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9,115
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Basic and diluted net income per share attributable to common stockholders
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$
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0.31
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$
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0.25
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$
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0.49
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$
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0.29
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Unaudited pro forma net income reflects additional intangible asset amortization expense of $1.4 million for the three months
ended June 30, 2015, and $0.4 million and $3.4 million for the six months ended June 30, 2016 and 2015, respectively, that would have been recorded had the 2016 acquisitions taken place on January 1, 2015 and the 2015 acquisitions taken place on
January 1, 2014. No additional intangible asset amortization expense is reflected in unaudited proforma net income for the three months ended June 30, 2016. In addition, unaudited pro forma net income attributable to common stockholders includes an
income tax benefit of $0.2 million for the three and six months ended June 30, 2016 and an income tax expense of $0.7 million and $0.8 million for the three and six months ended June 30, 2015, respectively. Approximately $1.0 million in transaction
costs incurred by a seller resulting from a business combination that occurred during the six months ended June 30, 2015 were included in earnings reported for the six months ended June 30, 2014 and, therefore, are not included in proforma net
income reported in the table above.
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INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11 INCOME PER COMMON SHARE
Basic net income per share is calculated by dividing net income attributable to common stockholders by the weighted average shares outstanding during the
period, without consideration for common stock equivalents.
Diluted net income per share is calculated by adjusting weighted average shares outstanding
for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. Potential common stock is included in the diluted income per share calculation when dilutive. Diluted income per share was as
follows (in thousands, except share and per share data):
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For the three months ended
June 30,
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For the six months ended
June 30,
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2016
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2015
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2016
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2015
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Net income attributable to common stockholders - basic and diluted
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$
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9,993
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$
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6,507
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$
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15,806
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$
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7,749
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Weighted average number of common shares outstanding
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31,317,632
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31,228,000
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31,279,935
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31,360,060
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Dilutive effect of outstanding common stock awards after application of the Treasury Stock
Method
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29,435
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21,050
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59,084
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11,156
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Diluted shares outstanding
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31,347,067
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31,249,050
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31,339,019
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31,371,216
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Basic income per share attributable to common stockholders
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$
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0.32
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$
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0.21
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$
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0.51
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$
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0.25
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Diluted income per share attributable to common stockholders
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$
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0.32
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$
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0.21
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$
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0.50
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$
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0.25
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NOTE 12 SUBSEQUENT EVENTS
On July 25, 2016, we acquired substantially all of the assets of FireClass, L.L.C. (FireClass) for total consideration of approximately $2.3
million, subject to a working capital adjustment. The initial accounting for the business combination was not complete at the time the financial statements were issued due to the timing of the acquisition and the filing of this Quarterly Report on
Form 10-Q. As a result, disclosures required under ASC 805-10-50, Business Combinations, cannot be made at this time.
20