SEC Filing | Installed Building Products, Inc.

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ibp-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


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

For the Transition Period From _________ To ________

Commission File Number: 001-36307

Installed Building Products, Inc.

(Exact name of registrant as specified in its charter)


Delaware									45-3707650
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

495 South High Street, Suite 50
Columbus, Ohio									43215
(Address of principal executive offices)									(Zip Code)

(614) 221-3399

(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock,

$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 April 27, 2023, the registrant had 28,404,505 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents

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			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			35
PART II – OTHER INFORMATION			36
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults Upon Senior Securities			36
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			36
Item 6. Exhibits			37
SIGNATURES			38

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)


	March 31,		December 31,
	2023		2022
ASSETS
Current assets
Cash and cash equivalents	$	218,690	$	229,627

Accounts receivable (less allowance for credit losses of $10,059 and $9,549 at March 31, 2023 and December 31, 2022, respectively)	397,573		397,222
Inventories	170,115		176,629
Prepaid expenses and other current assets	76,217		80,933
Total current assets	862,595		884,411
Property and equipment, net	126,384		118,774
Operating lease right-of-use assets	74,602		76,174
Goodwill	392,625		373,555
Customer relationships, net	194,850		192,328
Other intangibles, net	94,751		91,145
Other non-current assets	33,756		42,545
Total assets	$	1,779,563	$	1,778,932
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	31,165	$	30,983
Current maturities of operating lease obligations	26,000		26,145
Current maturities of finance lease obligations	2,588		2,508
Accounts payable	134,836		149,186
Accrued compensation	45,613		51,608
Other current liabilities	76,136		67,631
Total current liabilities	316,338		328,061
Long-term debt	830,225		830,171
Operating lease obligations	48,339		49,789
Finance lease obligations	6,559		6,397
Deferred income taxes	25,993		28,458
Other long-term liabilities	46,887		42,557
Total liabilities	1,274,341		1,285,433
Commitments and contingencies (Note 16)
Stockholders’ equity
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	—		—
Common stock; $0.01 par value: 100,000,000 authorized, 33,498,693 and 33,429,557 issued and 28,375,037 and 28,306,482 shares outstanding at March 31, 2023 and December 31, 2022, respectively	335		334
Additional paid in capital	232,503		228,827
Retained earnings	527,468		513,095
Treasury stock; at cost: 5,123,656 and 5,123,075 shares at March 31, 2023 and December 31, 2022, respectively	(289,335)		(289,317)
Accumulated other comprehensive income	34,251		40,560
Total stockholders’ equity	505,222		493,499
Total liabilities and stockholders’ equity	$	1,779,563	$	1,778,932

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share amounts)


	Three months ended March 31,
	2023		2022
Net revenue	$	659,309	$	587,492
Cost of sales	448,887		415,089
Gross profit	210,422		172,403
Operating expenses
Selling	32,607		25,192
Administrative	89,504		79,144
Amortization	11,435		11,097
Operating income	76,876		56,970
Other expense, net
Interest expense, net	9,670		10,600
Other (income) expense	(153)		145
Income before income taxes	67,359		46,225
Income tax provision	18,085		12,403
Net income	$	49,274	$	33,822
Other comprehensive (loss) income, net of tax:
Net change on cash flow hedges, net of tax benefit (provision) of $2,252 and $(6,430) for the three months ended March 31, 2023 and 2022, respectively.	(6,309)		18,111
Comprehensive income	$	42,965	$	51,933
Earnings Per Share:
Basic	$	1.76	$	1.15
Diluted	$	1.74	$	1.14
Weighted average shares outstanding:
Basic	28,075,678		29,302,396
Diluted	28,278,220		29,580,731

Cash dividends declared per share	$	1.23	$	1.22

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND MARCH 31, 2023

(in thousands, except share and per share amounts)


	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2022	33,271,659	$	333	$	211,430	$	352,543	(3,565,258)	$	(147,239)	$	(227)	$	416,840
Net income						33,822							33,822
Issuance of common stock awards to employees	40,980	1		(1)									—
Surrender of common stock awards								(50)	—				—
Share-based compensation expense				3,089									3,089
Share-based compensation issued to directors				124									124
Issuance of awards previously classified as liability awards	39,204			4,000									4,000
Dividends declared ($1.22 per share)						(35,890)							(35,890)
Common Stock repurchase								(510,943)	(49,865)				(49,865)
Other comprehensive income, net of tax											18,111		18,111
BALANCE - March 31, 2022	33,351,843	$	334	$	218,642	$	350,475	(4,076,251)	$	(197,104)	$	17,884	$	390,231

	Common Stock			Additional Paid In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount						Shares	Amount
BALANCE - January 1, 2023	33,429,557	$	334	$	228,827	$	513,095	(5,123,075)	$	(289,317)	$	40,560	$	493,499
Net income						49,274							49,274

Issuance of common stock awards to employees	69,136	1		(1)									—
Surrender of common stock awards								(581)	(18)				(18)
Share-based compensation expense				3,529									3,529
Share-based compensation issued to directors				148									148

Dividends declared ($1.23 per share)						(34,901)							(34,901)

Other comprehensive (loss), net of tax											(6,309)		(6,309)
BALANCE - March 31, 2023	33,498,693	$	335	$	232,503	$	527,468	(5,123,656)	$	(289,335)	$	34,251	$	505,222

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Three months ended March 31,
	2023		2022
Cash flows from operating activities
Net income	$	49,274	$	33,822
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	12,525		11,329
Amortization of operating lease right-of-use assets	7,316		6,371
Amortization of intangibles	11,435		11,097
Amortization of deferred financing costs and debt discount	475		484
Provision for credit losses	1,678		653
Gain on sale of property and equipment	(639)		(92)
Noncash stock compensation	3,436		3,418

Other, net	(2,523)		790
Changes in assets and liabilities, excluding effects of acquisitions
Accounts receivable	1,716		(32,700)
Inventories	7,699		(16,300)

Other assets	4,434		169
Accounts payable	(16,906)		16,486
Income taxes receivable/payable	16,450		11,433
Other liabilities	(22,537)		1,265
Net cash provided by operating activities	73,833		48,225
Cash flows from investing activities
Purchases of investments	—		(49,957)


Purchases of property and equipment	(14,949)		(10,362)
Acquisitions of businesses, net of cash acquired of $10 and $0 in 2023 and 2022, respectively	(38,008)		(8,050)
Proceeds from sale of property and equipment	741		265

Other	4,602		(614)
Net cash used in investing activities	$	(47,614)	$	(68,718)

See accompanying notes to consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, CONTINUED)

(in thousands)




	Three months ended March 31,
	2023		2022
Cash flows from financing activities
Payments on Term Loan	$	(1,250)	$	(1,250)
Proceeds from vehicle and equipment notes payable	8,119		4,752
Debt issuance costs	—		(627)
Principal payments on long-term debt	(7,024)		(6,618)

Principal payments on finance lease obligations	(727)		(521)
Dividends paid	(34,536)		(35,426)
Acquisition-related obligations	(1,720)		(6,003)

Repurchase of common stock	—		(49,865)
Surrender of common stock awards by employees	(18)		—
Net cash used in financing activities	(37,156)		(95,558)
Net change in cash and cash equivalents	(10,937)		(116,051)
Cash and cash equivalents at beginning of period	229,627		333,485
Cash and cash equivalents at end of period	$	218,690	$	217,434
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	14,658	$	14,293
Income taxes, net of refunds	1,524		1,088
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease obligations	$	5,650	$	5,514

Property and equipment obtained in exchange for finance lease obligations	957		544
Seller obligations in connection with acquisition of businesses	6,035		1,878
Unpaid purchases of property and equipment included in accounts payable	2,316		1,884

See accompanying notes to consolidated financial statements

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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 more than 240 locations and its corporate office is located in Columbus, Ohio.

The vast majority of our sales originate from our one reportable segment, Installation. Substantially all of our Installation segment 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 Installation 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, and see Note 10, Information on Segments, for information on how we segment the business.

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, 2022 (“2022 Form 10-K”), as filed with the SEC on February 22, 2023. The December 31, 2022 Condensed Consolidated Balance Sheet data herein was derived from the audited consolidated financial statements but the related footnotes do not include all disclosures required by U.S. GAAP.

Our interim operating results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected in future operating quarters.

Note 2 to the audited consolidated financial statements in our 2022 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 policy described below, there have been no changes to our significant accounting policies during the three months ended March 31, 2023.

Recently Adopted Accounting Pronouncements

Standard

Effective Date

Adoption

ASU 2021-08, Business Combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers

December 15, 2022

This pronouncement amended Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. This did not have a material impact on our consolidated financial statements

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Issued Accounting Pronouncements Not Yet Adopted

We are currently evaluating the impact of the following Accounting Standards Update ("ASU") on our Condensed Consolidated Financial Statements or Notes to Condensed Consolidated Financial Statements:

Standard

Description

Effective Date

Effect on the financial statements or other significant matters

ASU 2023-01 Leases (Topic 842): Common Control Arrangements

This pronouncement amends Topic 842 to require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

Annual periods beginning after December 15, 2023, including interim periods therein. Early adoption is permitted.

We are currently assessing the impact of adoption on our consolidated financial statements.

NOTE 3 - REVENUE RECOGNITION

We disaggregate our revenue from contracts with customers for our Installation segment 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. Revenues for the Other category are presented net of intercompany sales in the tables below. The following tables present our net revenues disaggregated by end market and product (in thousands):


	Three months ended March 31,
	2023				2022
Installation:
Residential new construction	$	475,095	72	%	$	442,404	75	%
Repair and remodel	37,675		6	%	32,641		6	%
Commercial	109,972		16	%	86,586		15	%
Net revenue, Installation	$	622,742	94	%	$	561,631	96	%

Other	36,567		6	%	25,861		4	%
Net revenue, as reported	$	659,309	100	%	$	587,492	100	%


	Three months ended March 31,
	2023				2022
Installation:
Insulation	$	394,043	60	%	$	364,943	63	%
Shower doors, shelving and mirrors	45,513		7	%	36,340		6	%
Garage doors	43,312		7	%	35,979		6	%
Waterproofing	29,939		4	%	29,022		5	%
Rain gutters	27,800		4	%	23,546		4	%
Window Blinds	15,881		2	%	13,058		2	%
Fireproofing/firestopping	15,175		2	%	15,922		3	%
Other building products	51,079		8	%	42,821		7	%
Net revenue, Installation	$	622,742	94	%	$	561,631	96	%

Other	36,567		6	%	25,861		4	%
Net revenue, as reported	$	659,309	100	%	$	587,492	100	%

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

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

consist of customer deposits and billings in excess of revenue recognized, based on costs incurred and are included in other current liabilities in our Condensed Consolidated Balance Sheets.

Contract assets and liabilities related to our uncompleted contracts and customer deposits were as follows (in thousands):


	March 31, 2023		December 31, 2022
Contract assets	$	36,048	$	29,431
Contract liabilities	(17,331)		(18,884)

Uncompleted contracts were as follows (in thousands):


	March 31, 2023		December 31, 2022
Costs incurred on uncompleted contracts	$	279,994	$	273,788
Estimated earnings	116,621		114,781
Total	396,615		388,569
Less: Billings to date	369,686		368,009
Net under billings	$	26,929	$	20,560

Net under billings were as follows (in thousands):


	March 31, 2023		December 31, 2022
Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets)	$	36,048	$	29,431
Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities)	(9,119)		(8,871)
Net under billings	$	26,929	$	20,560

The difference between contract assets and contract liabilities as of March 31, 2023 compared to December 31, 2022 is primarily the result of timing differences between our performance of obligations under contracts and customer payments and billings. During three months ended March 31, 2023, we recognized $15.8 million of revenue that was included in the contract liability balance at December 31, 2022. We did not recognize any impairment losses on our receivables and contract assets during the three months ended March 31, 2023 or 2022.

Remaining performance obligations represent the transaction price of contracts for which work has not been performed and excludes unexercised contract options and potential modifications. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $154.3 million. We expect to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 18 months.

NOTE 4 - CREDIT LOSSES

Our expected loss allowance methodology for accounts receivable is developed using historical experience, present economic conditions and other relevant factors management considers relevant to estimate expected credit losses. We also perform ongoing evaluations of creditworthiness of our existing and potential customers.

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


Balance as of January 1, 2023	$	9,549
Current period provision	1,678
Recoveries collected and additions	61
Amounts written off	(1,229)
Balance as of March 31, 2023	$	10,059

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 amounted to approximately $197.9 million and $191.9 million as of March 31, 2023 and December 31, 2022, respectively. See Note 9, Fair Value Measurements, for additional information.

NOTE 6 - GOODWILL AND INTANGIBLES

Goodwill

The change in carrying amount of goodwill was as follows (in thousands):


	Installation		Other		Consolidated

Goodwill (gross) - January 1, 2023	$	355,226	$	88,333	$	443,559
Business combinations	13,540		—		13,540
Other	257		5,273		5,530
Goodwill (gross) - March 31, 2023	369,023		93,606		462,629
Accumulated impairment losses	(70,004)		—		(70,004)
Goodwill (net) - March 31, 2023	$	299,019	$	93,606	$	392,625

Other changes presented in the above table primarily include adjustments for the allocation of certain acquisitions still under measurement made during the three months ended March 31, 2023, including a change in tax election that resulted in a $4.9 million change in purchase price for a 2022 acquisition. For additional information regarding changes to goodwill resulting from acquisitions, see Note 17, 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 and were all associated with the Installation segment, with the latest impairment charge being recorded during the year ended December 31, 2010.

Intangibles, net

The following table provides the gross carrying amount, accumulated amortization and net book value for each major class of intangibles (in thousands):


	As of March 31,						As of December 31,
	2023						2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Amortized intangibles:
Customer relationships	$	349,019	$	154,169	$	194,850	$	338,050	$	145,722	$	192,328
Covenants not-to-compete	31,207		21,028		10,179		30,899		20,086		10,813
Trademarks and tradenames	125,078		41,518		83,560		119,612		39,638		79,974
Backlog	21,635		20,623		1,012		20,815		20,457		358
	$	526,939	$	237,338	$	289,601	$	509,376	$	225,903	$	283,473

The gross carrying amount of intangibles increased approximately $17.6 million during the three months ended March 31, 2023 primarily due to business combinations. For more information, see Note 17, Business Combinations.

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Remaining estimated aggregate annual amortization expense is as follows (amounts, in thousands, are for the fiscal year ended):


Remainder of 2023	$	32,834
2024	39,843
2025	34,301
2026	30,350
2027	26,064
Thereafter	126,209

NOTE 7 - LONG-TERM DEBT

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


	As of March 31,		As of December 31,
	2023		2022
Senior Notes due 2028, net of unamortized debt issuance costs of $2,887 and $3,036, respectively	$	297,113	$	296,964
Term loan, net of unamortized debt issuance costs of $5,524 and $5,767, respectively	488,226		489,233
Vehicle and equipment notes, maturing through March 2028; payable in various monthly installments, including interest rates ranging from 1.9% to 6.2%	74,078		72,984
Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0%	1,973		1,973
	861,390		861,154
Less: current maturities	(31,165)		(30,983)
Long-term debt, less current maturities	$	830,225	$	830,171

Remaining required repayments of debt principal, gross of unamortized debt issuance costs, as of March 31, 2023 are as follows (in thousands):


Remainder of 2023	$	23,976
2024	27,027
2025	21,201
2026	16,250
2027	11,002
Thereafter	770,345

NOTE 8 - LEASES

We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install, various office spaces for selling and administrative activities to support our business, and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment.

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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


		As of March 31,			As of December 31,
(in thousands)	Classification	2023			2022
Assets
Non-Current
Operating	Operating lease right-of-use assets	$	74,602		$	76,174
Finance	Property and equipment, net	9,159			8,928
Total lease assets		$	83,761		$	85,102
Liabilities
Current
Operating	Current maturities of operating lease obligations	$	26,000		$	26,145
Financing	Current maturities of finance lease obligations	2,588			2,508
Non-Current
Operating	Operating lease obligations	48,339			49,789
Financing	Finance lease obligations	6,559			6,397
Total lease liabilities		$	83,486		$	84,839
Weighted-average remaining lease term:
Operating leases		3.9 years			4.0 years
Finance leases		3.8 years			3.6 years
Weighted-average discount rate:
Operating leases		4.60		%	4.41		%
Finance leases		6.08		%	5.76		%

Lease Costs

The table below presents certain information related to the lease costs for finance and operating leases:


		Three months ended March 31,
(in thousands)	Classification	2023		2022
Operating lease cost(1)	Administrative	$	9,203	$	7,759
Finance lease cost:
Amortization of leased assets(2)	Cost of sales	977		716
Interest on finance lease obligations	Interest expense, net	131		61
Total lease costs		$	10,311	$	8,536

(1)Includes variable lease costs of $1.2 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively, and short-term lease costs of $0.3 million for each of the three months ended March 31, 2023 and 2022.

(2)Includes variable lease costs of $0.2 million for each of the three months ended March 31, 2023 and 2022.

Other Information

The table below presents supplemental cash flow information related to leases (in thousands):


	Three months ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,691	$	6,463
Operating cash flows for finance leases	131		61
Financing cash flows for finance leases	727		521

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of March 31, 2023 (in thousands):


	Finance Leases		Operating Leases
			Related Party		Other		Total Operating
Remainder of 2023	$	2,354	$	1,068	$	21,268	$	22,336
2024	2,668		1,175		21,565		22,740
2025	2,299		1,017		14,742		15,759
2026	1,968		—		9,616		9,616
2027	997		—		5,252		5,252
Thereafter	17		—		5,559		5,559
Total minimum lease payments	10,303		$	3,260	$	78,002	81,262
Less: Amounts representing executory costs	(2)						—
Less: Amounts representing interest	(1,154)						(6,923)
Present value of future minimum lease payments	9,147						74,339
Less: Current obligation under leases	(2,588)						(26,000)
Long-term lease obligations	$	6,559					$	48,339

NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets, specifically other intangible and long-lived assets, are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. Assets measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022 are categorized based on the lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three months ended March 31, 2023 and 2022, we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.

Estimated Fair Value of Financial Instruments

Accounts receivable, accounts payable and accrued liabilities as of March 31, 2023 and December 31, 2022 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of certain long-term debt, including the Term Loan and ABL Revolver as of March 31, 2023 and December 31, 2022, approximate fair value due to the variable rate nature of the agreements. The carrying amounts of our operating lease right-of-use assets and the obligations associated with our operating and finance leases as well as our vehicle and equipment notes approximate fair value as of March 31, 2023 and December 31, 2022. All debt classifications represent Level 2 fair value measurements. Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods.

Contingent consideration liabilities arise from future earnout payments to the sellers associated with certain acquisitions and are based on predetermined calculations of certain future results. These future payments are estimated by considering various factors, including business risk and projections. The contingent consideration liabilities are measured at fair value by discounting estimated future payments, calculated based on a weighted average of various future forecast scenarios, to their net present value.

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INSTALLED BUILDING PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Fair value in the Condensed Consolidated Balance Sheets and not described above were as follows (in thousands):


	As of March 31, 2023								As of December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial assets:
Cash equivalents	$	197,910	$	197,910	$	—	$	—	$	191,881	$	191,881	$	—	$	—
Derivative financial instruments	30,020		—		30,020		—		38,671		—		38,671		—
Total financial assets	$	227,930	$	197,910	$	30,020	$	—	$	230,552	$	191,881	$	38,671	$	—
Financial liabilities:
Contingent consideration	$	968	$	—	$	—	$	968	$	1,858	$	—	$	—	$	1,858
Derivative financial instruments	1,014		—		1,014		—		—		—