Installed Building Products, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. IBP installs insulation and complementary building products across residential, repair-and-remodel, and commercial markets in the continental United States.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net revenue | $1,968.7 million | $1,653.2 million | +19.1% |
| Gross profit | $589.5 million | $510.0 million | +15.6% |
| Gross margin | 29.9% | 30.8% | -0.9 percentage points |
| Operating income | $187.9 million | $161.9 million | +16.1% |
| Net income | $118.8 million | $97.2 million | +22.1% |
| Diluted earnings per share | $4.01 | $3.27 | +22.6% |
| Cash from operating activities | $138.3 million | $180.8 million | Down $42.5 million |
Residential new construction generated 76% of revenue; repair and remodel contributed 7%, and commercial 17%. Insulation represented 64% of revenue. Same-branch sales rose 9.7%, comprising 7.7% volume growth and 3.2% price/mix growth. These metrics exclude certain large-commercial activity as described in the filing.
Balance sheet, liquidity, and capital allocation
- Cash and cash equivalents were $333.5 million at year-end, versus $231.5 million a year earlier. Working capital was $551.7 million, up from $387.5 million.
- Total debt carrying value was approximately $863.0 million, including $493.3 million on the new term loan, $296.4 million of senior notes, and vehicle, equipment, and other notes. No borrowings were outstanding on the ABL revolver; reported remaining availability was $155.7 million after letters of credit. The company reported total liquidity of $489.2 million.
- In December 2021, IBP refinanced its prior term loan with a $500 million, seven-year facility due in December 2028. The $300 million senior notes carry a 5.75% coupon and mature in 2028. Interest-rate swaps hedge $400 million of variable-rate term-loan exposure.
- Investing cash outflow was $278.4 million, including $241.3 million for acquisitions; financing cash inflow was $242.1 million, primarily reflecting the new term loan. Capital expenditures were $37.0 million.
- IBP declared $1.20 per share in dividends for 2021. At filing, it had announced a $0.90-per-share annual variable dividend and a $0.315 quarterly dividend for payment in March 2022, subject to the terms and dates disclosed. The board also extended and increased the authorized share repurchase program in February 2022.
Year-over-year changes and management commentary
Revenue growth reflected acquisitions, higher selling prices and greater same-branch volume. Single-family sales rose 21.9%; commercial sales increased 10.2% overall, but commercial same-branch sales declined 8.0% amid project delays. Gross profit grew more slowly than revenue as material, fuel, and union costs rose and commercial operating efficiencies weakened.
Supply disruptions led IBP to buy some materials through distributors and home centers at a premium. Management estimated this increased 2021 cost of sales by approximately $8.8 million. Selling-price increases lagged material-cost inflation earlier in the year, with improvement in price/mix in the second half. Operating cash flow declined partly because of higher inventory purchases and payment of payroll taxes deferred under the CARES Act in 2020.
IBP completed 11 business combinations in 2021. Cash paid for acquisitions was $243.0 million, with $29.2 million in seller obligations. The filing identifies AMD Distribution as a December acquisition and says the company acquired a business with a different model; management was evaluating the future impact on segment reporting after a change in internal performance reviews in early 2022.
Outlook, risks, and unusual items
- IBP did not provide a specific numerical company forecast for 2022. Management expected housing demand to remain supportive but cautioned that supply constraints, material-price increases, inflation, labor availability, and COVID-19 effects could pressure revenue, earnings, margins, and cash flow. The full 2022 impact was not estimable.
- Management cited external forecasts of approximately 1.6 million U.S. housing starts in 2022 and 12% growth in commercial building starts, based on third-party sources; these are market forecasts, not company guidance.
- Backlog was estimated at $143.2 million at year-end, compared with $78.5 million in 2020. Backlog is not guaranteed revenue; contracts may be delayed, reduced, suspended, or cancelled.
- Key risks include construction-market cyclicality and seasonality, material and supplier constraints, inability to pass through cost increases, labor recruitment and wage costs, acquisition integration, customer project delays, weather, litigation and insurance-reserve estimation, cybersecurity, and debt and interest-rate exposure. Three suppliers accounted for approximately 33% of material purchases.
- The company reported no goodwill or intangible impairment in 2021. Goodwill and other intangible assets totaled $586.9 million, approximately 36% of assets. The auditor issued unqualified opinions on the financial statements and internal controls; the audit’s critical audit matter was revenue estimates for incomplete contracts recognized over time.
Important facts for investors to verify
- Whether material availability and pricing improved, and whether selling-price increases continued to offset input-cost inflation after 2021.
- Whether the 2021 margin decline and lower operating cash flow reversed, including the trajectory of inventory and working capital.
- How commercial same-branch performance and the $143.2 million backlog converted into completed work and cash collections.
- Acquisition returns, integration progress, and the effects of the AMD transaction and any resulting segment-reporting changes.
- Debt repayment capacity, revolver availability, covenant headroom, and the sustainability of dividends and repurchase plans.