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What changed in Installed Building Products, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Installed Building Products, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+358 added−383 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-22)

Top changes in Installed Building Products, Inc.'s 2023 10-K

358 paragraphs added · 383 removed · 298 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

86 edited+17 added−15 removed61 unchanged
Biggest changeSAFETY AND QUALITY CONTROL Our quality control process starts with the initial proposal. Our sales staff and managers are knowledgeable about our service offerings and scope of work. They are trained on manufacturers’ guidelines as well as state and local building codes. Our quality control programs emphasize onsite inspections, training by manufacturers and various certification programs.
Biggest changeThey are trained on manufacturers’ guidelines as well as state and local building codes. Our quality control programs emphasize onsite inspections, training by manufacturers and various certification programs. We consider safety and risk management to be a core business objective and require our installers to wear personal protective equipment in the process of completing their work.
We seek to work with the most profitable and efficient builders and commercial general contractors in our markets; 5 • recruit, develop and retain an exceptional workforce by investing in our employees and our communities and promoting a family-oriented culture; • capitalize on our ability to cross-sell products through existing markets as well as new markets entered as a result of organic expansion and acquisitions.
We seek to work with the most profitable and efficient builders and commercial general contractors in our markets; • recruit, develop and retain an exceptional workforce by investing in our employees and our communities and promoting a family-oriented culture; 5 • capitalize on our ability to cross-sell products through existing markets as well as new markets entered as a result of organic expansion and acquisitions.
As part of our acquisition strategy, we seek to maintain the management teams of the companies we acquire as well as retain their local branding, which further reduces associated risk; and • we integrate new acquisitions quickly and seamlessly into our corporate infrastructure, including our accounting and employee systems.
As part of our acquisition strategy, we seek to maintain the management teams of the companies we acquire as well as retain their local branding, which further reduces associated risk; and • integrate new acquisitions quickly and seamlessly into our corporate infrastructure, including our accounting and employee systems.
We believe the benefits of this diversification include: • Margin enhancement by leveraging branch costs across multiple products • Diversified end-market exposure • A more diverse customer base • Stronger established local relationships • Reduced cyclicality Product and end market diversification has been a primary strategic initiative throughout our history.
We believe the benefits of this diversification include: • margin enhancement by leveraging branch costs across multiple products; • diversified end-market exposure; • a more diverse customer base; • stronger established local relationships; and • reduced cyclicality. Product and end market diversification has been a primary strategic initiative throughout our history.
We may be required to investigate, remove, remediate or monitor the presence or release of such hazardous or toxic substances or petroleum products 10 and may be held liable by a governmental entity for fines and penalties or to any third parties for damages, including for bodily injury, property damage and natural resource damage in connection with the presence or release of hazardous or toxic substances or petroleum products.
We may be required to investigate, remove, remediate or monitor the presence or release of such hazardous or toxic substances or petroleum products and may be held liable by a governmental entity for fines and penalties or to any third parties for damages, including for bodily injury, property damage and natural resource damage in connection with the presence or release of hazardous or toxic substances or petroleum products.
Our current strategic objectives include: • capitalize on the new residential and large commercial construction markets; • continue to strengthen our market share position by working with the best customers.
Our current strategic objectives include: • capitalize on the new residential and commercial construction markets; • continue to strengthen our market share position by working with the best customers.
In addition, two recently-acquired regional distribution operations serve the Midwest, Mountain West, Northeast and Mid-Atlantic regions of the United States, and we operate a cellulose manufacturing facility. IBP was formed as a Delaware corporation on October 28, 2011, however our business began in 1977 with one location in Columbus, Ohio.
In addition, two regional distribution operations serve the Midwest, Mountain West, Northeast and Mid-Atlantic regions of the United States, and we operate a cellulose manufacturing facility. IBP was formed as a Delaware corporation on October 28, 2011, however our business began in 1977 with one location in Columbus, Ohio.
The installation and service of waterproofing comprised approximately 5% of our net revenue for the year ended December 31, 2022. Shower Doors, Closet Shelving and Mirrors Some of our locations install a variety of shower enclosures, ranging from basic sliding door designs to complex custom designs.
The installation and service of waterproofing comprised approximately 5% of our net revenue for the year ended December 31, 2023. Shower Doors, Closet Shelving and Mirrors Some of our locations install a variety of shower enclosures, ranging from basic sliding door designs to complex custom designs.
Since 1999, we have successfully completed and integrated over 180 acquisitions, which has allowed us to generate significant scale and to diversify our product offerings while expanding into some of the most attractive new construction markets in the United States.
Since 1999, we have successfully completed and integrated over 190 acquisitions, which has allowed us to generate significant scale and to diversify our product offerings while expanding into some of the most attractive new construction markets in the United States.
TRENDS IN THE MARKETPLACE Our business relies on various market factors, one of which is residential housing demand. Following the late 2000s recession in the U.S. economy, housing starts dropped well below historical averages. Rates returned to early 2000s levels in 2021 and 2022 as each year had 1.6 million non-seasonally adjusted starts.
TRENDS IN THE MARKETPLACE Our business relies on various market factors, one of which is residential housing demand. Following the late 2000s recession in the U.S. economy, housing starts dropped well below historical averages. Rates returned to early 2000s levels in 2021 and 2022 as each year had 1.6 million non-seasonally adjusted starts according to U.S. Census Bureau data.
The proximity of certain of our branch locations to insulation manufacturers’ facilities provides additional mutual benefits, including opportunities for cost savings and joint planning regarding future production. Due to the limited number of large fiberglass insulation manufacturers, our three largest suppliers in the aggregate accounted for approximately 33% of all material purchases for the year ended December 31, 2022.
The proximity of certain of our branch locations to insulation manufacturers’ facilities provides additional mutual benefits, including opportunities for cost savings and joint planning regarding future production. Due to the limited number of large fiberglass insulation manufacturers, our three largest suppliers in the aggregate accounted for approximately 35% of all material purchases for the year ended December 31, 2023.
We are also a diversified installer of complementary building products including waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products. We offer our portfolio of services from our national network of over 230 branch locations serving all 48 continental states and the District of Columbia.
We are also a diversified installer of complementary building products including waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors and other products. We offer our portfolio of services from our national network of approximately 250 branch locations serving all 48 continental states and the District of Columbia.
We believe our continued emphasis on expanding our product offering, further expansion into the commercial construction market and other lines of business, and targeting geographies where we look to grow market share will reduce potential future cyclicality of our operations.
We believe our continued emphasis on expanding our product offering, further expansion into other lines of business, and targeting geographies where we look to grow market share will reduce potential future cyclicality of our operations.
We have diversified our end customer demographic from the year ended December 31, 2013, when revenue from the commercial end market comprised approximately 11% of revenues, to the year ended December 31, 2022 when it comprised 14% of revenues. Our exposure to commercial end markets diversifies our customer base and makes our business less dependent on residential new construction.
We have diversified our end customer demographic from the year ended December 31, 2013, when revenue from the commercial end market comprised approximately 11% of revenues, to the year ended December 31, 2023 when it comprised 16% of revenues. Our exposure to commercial end markets diversifies our customer base and makes our business less dependent on residential new construction.
This diversity in turn contributes to enhanced profitability as compared to branches in our newer, less developed markets. Given the current economic uncertainty and inflationary environment, we can provide no assurance that the positive trends reflected in our recent financial and operating results will continue in 2023.
This diversity in turn contributes to enhanced profitability as compared to branches in our newer, less developed markets. Given the current economic uncertainty, interest rate volatility and inflationary environment, we can provide no assurance that the positive trends reflected in our recent financial and operating results will continue in 2024.
While typically having the highest insulating value per inch and sealing effectiveness of all insulation materials that we offer, spray foam is also typically the most expensive on an installed basis. Spray foam insulation accounted for approximately 17% of our insulation sales for the year ended December 31, 2022.
While typically having the highest insulating value per inch and sealing effectiveness of all insulation materials that we offer, spray foam is also typically the most expensive on an installed basis. Spray foam insulation accounted for approximately 18% of our insulation installation sales for the year ended December 31, 2023.
Fiberglass and cellulose insulation accounted for approximately 83% of our insulation sales for the year ended December 31, 2022. • Spray Foam Insulation – Spray foam insulation, which is generally a polyurethane foam, is applied at a job site by mixing two chemical components together in specialized application equipment.
Fiberglass and cellulose insulation accounted for approximately 82% of our insulation installation sales for the year ended December 31, 2023. • Spray Foam Insulation – Spray foam insulation, which is generally a polyurethane foam, is applied at a job site by mixing two chemical components together in specialized application equipment.
Backlog is not a guarantee of future revenues as contractual commitments may change. There can be no assurance that backlog will result in revenues within the expected timeframe, if at all. We estimate backlog was $162.3 million as of December 31, 2022 and we estimated it to be $143.2 million as of December 31, 2021.
Backlog is not a guarantee of future revenues 7 as contractual commitments may change. There can be no assurance that backlog will result in revenues within the expected timeframe, if at all. We estimate backlog was $115.7 million as of December 31, 2023 and we estimated it to be $162.3 million as of December 31, 2022.
Our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “IBP.” We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and file annual, quarterly and current reports, proxy statements and other information with the SEC.
Our main telephone number is (614) 221-3399. Our common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “IBP.” We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and file annual, quarterly and current reports, proxy statements and other information with the SEC.
We service the residential new construction and repair and remodel markets, both of which consist of single-family and multi-family dwellings, as well as the commercial construction market. The multi-family subset of the residential end market can offset decreasing single-family demand during economic downturns.
We service the residential new construction and repair and remodel markets, both of which consist of single-family and multi-family dwellings, as well as the commercial construction market. The multi-family subset of the residential end market can offset decreasing single-family demand during economic downturns or elevated interest rate environments.
We have successfully diversified our product offering from the year ended December 31, 2013, when insulation installation comprised approximately 74% of revenues, to the year ended December 31, 2022, when it comprised 61% of revenues.
We have successfully diversified our product offering from the year ended December 31, 2013, when insulation installation comprised approximately 74% of revenues, to the year ended December 31, 2023, when it comprised 60% of revenues.
In 2022, the foundation and the Company awarded 256 grants and made contributions totaling $3.0 million in the form of scholarships and financial assistance to our employees as well as donations and matching gifts to various charities supported by our employees. This is an increase from 2019 when the foundation and the Company awarded 94 grants totaling $1.2 million.
In 2023, the Foundation and the Company awarded 172 grants and made contributions totaling $2.5 million in the form of scholarships and financial assistance to our employees as well as donations and matching gifts to various charities supported by our employees . This is an increase from 2019 when the Foundation and the Company awarded 94 grants totaling $1.2 million.
In addition to offering certain benefits to most employees, including medical insurance, 401k and paid time off, we also offer longevity stock awards, financial wellness training and savings matching in order to recruit and retain employees. Our retention efforts have reduced our employee turnover to a level below industry averages.
In addition to offering certain benefits to most employees, including medical insurance, 401k and paid time off, we also offer longevity stock awards, financial wellness training and savings matching in order to recruit and retain employees. Our retention efforts have reduced our employee turnover to a level below industry averages. Opportunity for professional growth, training and advancement are strongly encouraged.
Our regional managers, local branch managers and sales force have significant experience in the industry and have spent an average of more than 11 years with our operations. We also created the Installed Building Products Foundation in 2019 as a separate, not-for-profit organization to help support our employees for their education, financial and philanthropic needs.
Our regional managers, local branch managers and sales force have significant experience in the industry and have spent an average of more than 12 years with our operations. The Installed Building Products Foundation ("the Foundation") is a separate, not-for-profit organization to help support our employees for their education, financial and philanthropic needs.
We have the ability to meet our customers’ diverse needs by customizing shower enclosures by size and style according to their specifications, including framing, hardware and glass options. We design and install closet shelving systems 2 in select markets utilizing some of the highest quality products available from national brands.
We have the ability to meet our customers’ diverse needs by customizing shower enclosures by size and style according to their specifications, including framing, hardware and glass options. We design and install closet shelving systems in select markets utilizing some of the highest quality products available from national brands. We also offer standard and custom designed mirrors for our customers.
We are also subject to safety requirements governing interstate operations prescribed by the DOT. In addition, vehicle dimension and weight and driver hours of service are subject to both federal and state regulation. Our operations are also subject to the regulatory jurisdiction of the U.S.
Department of Transportation, or DOT, which has broad administrative powers. We are also subject to safety requirements governing interstate operations prescribed by the DOT. In addition, vehicle dimension and weight and driver hours of service are subject to both federal and state regulation. Our operations are also subject to the regulatory jurisdiction of the U.S.
We are committed to diversity, equity and inclusion ("DE&I") practices and maintaining workplaces free from discrimination and harassment on the basis of race, color, age, religion, sex, national origin, ancestry, gender, sexual orientation, gender identification, disability, military status, veteran status, or any other status protected by law. We are proud of our strong and diverse workforce.
We are committed to diversity, equity, inclusion and belonging ("DEI&B") practices and maintaining workplaces free from discrimination and harassment on the basis of race, color, age, religion, sex, national origin, ancestry, gender, sexual orientation, gender identification, disability, military status, veteran status, or any other status protected by law.
The contents of our website are not incorporated by reference in, or otherwise made a part of, this Form 10-K or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only. Insulation is a critical component in reducing energy usage and greenhouse gas emissions.
The contents of our website are not incorporated by reference in, or otherwise made a part of, this Form 10-K or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
We also capitalize on cross-selling opportunities from existing customer relationships and identifying situations where customers may benefit from more than one of our installation service offerings. By executing this strategy, we believe we can continue to generate incremental sales volumes with new and existing customers. Experienced sales and service professionals are important to our customer growth and increasing our profitability.
Our strategy is centered on building and maintaining strong customer relationships. We also capitalize on cross-selling opportunities from existing customer relationships and identifying situations where customers may benefit from more than one of our installation service offerings. By executing this strategy, we believe we can continue to generate incremental sales volumes with new and existing customers.
We are subject to various federal, state and local laws and regulations applicable in the jurisdictions in which we operate, including laws and regulations relating to our relationships with our employees, public health and safety, workplace safety, transportation, zoning and fire codes. We strive to operate in accordance with applicable laws, codes and regulations.
We also provide longevity stock awards and financial wellness training to our employees. We are subject to various federal, state and local laws and regulations applicable in the jurisdictions in which we operate, including laws and regulations relating to our relationships with our employees, public health and safety, workplace safety, transportation, zoning and fire codes.
We have long-term relationships with many of our customers and have served each of our top ten customers at least a decade. 7 BACKLOG For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method.
Of our top 20 customers, 18 represent homebuilders and two represent commercial customers. We have long-term relationships with many of our customers and have served most of our top 20 customers for at least two decades. BACKLOG For contracts that are not complete at the reporting date, we recognize revenue over time utilizing a cost-to-cost input method.
As the nature of our business involves the use or handling of certain potentially hazardous or toxic substances, including spray foam applications and lead-based paint, we may be held liable for claims alleging injury or damage resulting from the release of or exposure to such substances, as well as claims relating to the presence of mold, fungal growth and moisture intrusion alleged in connection with our business activities.
However, we could be subject to material costs, liabilities or claims relating to environmental compliance in the future, especially in the event of changes in existing laws and regulations or in their interpretation or enforcement. 10 As the nature of our business involves the use or handling of certain potentially hazardous or toxic substances, including spray foam applications and lead-based paint, we may be held liable for claims alleging injury or damage resulting from the release of or exposure to such substances, as well as claims relating to the presence of mold, fungal growth and moisture intrusion alleged in connection with our business activities.
Significant staffing, funding and other resources are allocated to our management systems that enhance safety and quality for our employees and our customers. Our branch managers are held accountable for the safety of employees and quality of workmanship at their locations. We provide our employees with ongoing training and development programs necessary to improve safety performance and work quality.
Our branch managers are held accountable for the safety of employees and quality of workmanship at their locations. We provide our employees with ongoing training and development programs necessary to improve safety performance and work quality.
Retaining and motivating local employees has been an important component of our acquisition and operating strategies. As of December 31, 2022, we employed approximately 700 sales professionals and our sales force has spent an average of approximately ten years with our operations.
Experienced sales and service professionals are important to our customer growth and increasing our profitability. Retaining and motivating local employees has been an important component of our acquisition and operating strategies. As of December 31, 2023, we employed approximately 700 sales professionals and our sales force has spent an average of approximately eleven years with our operations.
In response to the COVID-19 pandemic, we continue to enhance and evolve our safety protocols to protect our employees’ health and well-being, and to comply with regulations from federal, state and local government agencies. INFORMATION TECHNOLOGY JobCORE is our web-enabled internal software technology used by the majority of our branches.
We continuously enhance and evolve our safety protocols to protect our employees’ health and well-being, and to comply with regulations from federal, state and local government agencies. INFORMATION TECHNOLOGY JobCORE is our web-enabled internal software technology used by the majority of our branches. The system is designed to operate our business in a highly efficient manner and manage our operations.
Inflation can adversely affect us by increasing the costs of materials, labor and interest rates which, in turn, can have a negative impact on housing affordability, impacting consumer sentiment and increasing market uncertainty. Per the Bureau of Labor Statistics, inflation in the United States averaged 8.0% in 2022 as measured by the consumer price index.
Inflation can adversely affect us by increasing the costs of materials, labor and interest rates which, in turn, can have a negative impact on housing affordability, impacting consumer sentiment and increasing market uncertainty.
For a further discussion of our industry and trends affecting our industry, please refer to Item 7, Management’s Discussion and Analysis of Financial Condition, "Key Factors Affecting our Operating Results" of this Form 10-K. OUR OPERATIONS Segment Overview In early 2022, we realigned our operating segments to reflect recent changes in our business.
For a further discussion of our industry and trends affecting our industry, please refer to Item 7, Management’s Discussion and Analysis of Financial Condition, "Key Factors Affecting our Operating Results" of this Form 10-K. OUR OPERATIONS Segment Overview We have three operating segments consisting of our Installation, Distribution and Manufacturing operations.
While we anticipate the decline in housing starts will impact our business negatively in 2023, we expect to benefit from our growing multi-family business in 2023 thanks to an extended backlog in this end market as well as housing shortages in some of the markets that we service.
While we anticipate a slight decline in overall housing starts, we expect that this decrease will be concentrated in the multi-family subset of the residential end market. We expect to still benefit from our multi-family business in 2024 thanks to an extended backlog in this end market as well as housing shortages in some of the markets that we service.
We do not tolerate inappropriate behavior or harassment. The health and safety of our employees is of primary importance. See “Safety and Quality Control” above for details on our policies and practices. Our policy is designed to protect against accidents, injuries, and illnesses, in compliance with applicable safety and health laws and regulations.
See “Safety and Quality Control” above for details on our policies and practices. Our policy is designed to protect against accidents, injuries, and illnesses, in compliance with applicable safety and health laws and regulations.
However, we were able to mitigate most of these increases through selling price increase to our customers as evidenced by our increased gross margin. The increase in demand also caused significant shortages of many of the materials we install and sell.
However, we were able to mitigate most of these increases through selling price increases to our customers as evidenced by our increased gross margin. The decrease in housing starts in 2023 alleviated the significant shortages of many of the materials we install and sell which stemmed from the unanticipated demand in previous years.
We also offer standard and custom designed mirrors for our customers. Shower doors, closet shelving and mirror installations comprised approximately 7% of our net revenue for the year ended December 31, 2022. Garage Doors Some of our locations install and service garage doors and openers for new residential construction builders, homeowners and commercial customers.
Shower doors, closet shelving and mirror installations comprised approximately 7% of our net revenue for the year ended December 31, 2023. 2 Garage Doors Some of our locations install and service garage doors and openers for new residential construction builders, homeowners and commercial customers. We offer a variety of options from some of the best-known garage door brands.
Through insulating homes and commercial structures, our industry promotes energy efficiency. Our loose-fill cellulose insulation is manufactured from recycled waste paper and our fiberglass insulation is made from recycled glass which helps reuse resources and reduce our global carbon footprint. We are committed to socially responsible corporate practices.
Our loose-fill cellulose insulation is manufactured from recycled waste paper and our fiberglass insulation is made from recycled glass which helps reuse resources and reduce our global carbon footprint. We are committed to socially responsible corporate practices. Through the Foundation and other volunteer opportunities, we give back to the communities we serve.
See "Competitive Advantages, Engaged employees” above for further details on the benefits we offer. As described in the Competitive Advantages section above, the Installed Building Products Foundation was formed by us in 2019 primarily to benefit our employees and their families and the communities in which they live and work.
As described in the Competitive Advantages section above, the Foundation was formed by us primarily to benefit our employees and their families and the communities in which they live and work.
We are responsible for adhering to several federal, state and local regulations covering building codes, compliance with COVID-19 restrictions, labor-related regulations covering minimum wage and employee safety, and transportation procedures. Our transportation operations are subject to the regulatory jurisdiction of the U.S. Department of Transportation, or DOT, which has broad administrative powers.
We strive to operate in accordance with applicable laws, codes and regulations. We are responsible for adhering to several federal, state and local regulations covering building codes, labor-related regulations covering minimum wage, employee classification and employee safety, and transportation procedures. Our transportation operations are subject to the regulatory jurisdiction of the U.S.
Our senior management team (Chief Executive Officer, Chief Financial Officer and Chief Operating Officer) have been directing our strategy for over two decades. This team has led us through multiple housing industry cycles, providing valuable continuity and a demonstrated ability to improve operations and grow our business both organically and through acquisitions.
This team has led us through multiple housing industry cycles, providing valuable continuity and a demonstrated ability to improve operations and grow our business both organically and through acquisitions.
Unlike the other products we install, the garage door business has an ongoing aftermarket service component, which represented approximately one-quarter of the net revenue resulting from garage doors for the year ended December 31, 2022. The installation and service of garage doors comprised approximately 6% of our net revenue for the year ended December 31, 2022.
We offer steel, aluminum, wood and vinyl garage doors as well as opener systems. Unlike the other products we install, the garage door business has an ongoing aftermarket service component, which represented approximately 16% of the net revenue resulting from garage doors for the year ended December 31, 2023.
With our purchase of a cellulose manufacturer in November 2018, we are subject to similar laws and regulations that apply to our suppliers. CORPORATE AND AVAILABLE INFORMATION Installed Building Products, Inc. is a holding company that derives all of its operating income from its subsidiaries.
We, through our cellulose manufacturer, are subject to similar laws and regulations that apply to our suppliers. CORPORATE AND AVAILABLE INFORMATION Installed Building Products, Inc. is a holding company that derives all of its operating income from its subsidiaries. Our principal executive offices are located at 495 South High Street, Suite 50, Columbus, Ohio 43215.
See Note 11, Information on Segments, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information.
The Installation operating segment represents the majority of our net revenue and gross profit and forms our one reportable segment. See Note 11, Information on Segments, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information.
This segment comprised approximately 1% of our net revenue for the year ended December 31, 2022. Sales and Marketing We seek to attract and retain customers through exceptional customer service, superior installation quality, broad service offerings and competitive pricing. Our strategy is centered on building and maintaining strong customer relationships.
AFT sells its products to a wide range of customers including distributors, retailers and insulation contractors. This segment comprised approximately 1% of our net revenue for the year ended December 31, 2023. Sales and Marketing We seek to attract and retain customers through exceptional customer service, superior installation quality, broad service offerings and competitive pricing.
The installation of window blinds comprised approximately 2% of our net revenue for the year ended December 31, 2022. Other Building Products Some of our locations install other complementary building products, none of which is an individually significant percentage of net revenue.
Other Building Products Some of our locations install other complementary building products, none of which is an individually significant percentage of net revenue. Installation of other building products comprised approximately 7% of our net revenue for the year ended December 31, 2023. Distribution Operating Segment We have two businesses that comprise our distribution platform. AMD Distribution, Inc.
The system is designed to operate our business in a highly efficient manner and manage our operations. The jobCORE software provides in-depth real-time job-level operational and financial performance data from each branch to the corporate office. JobCORE provides us, our branch managers and our sales personnel with an important operational tool for monitoring branch level performance.
The jobCORE software provides in-depth real-time job-level operational and financial performance data from each branch to the corporate office. JobCORE provides us, our 9 branch managers and our sales personnel with an important operational tool for monitoring branch level performance. It assists management in assessing important business questions, including customer analysis, sales staff analysis, branch analysis and other operating activities.
It assists management in assessing important business questions, including customer analysis, sales staff analysis, branch analysis and other operating activities. 9 INTELLECTUAL PROPERTY We possess intellectual property rights, including trademarks, trade names and know-how and other proprietary rights that are important to our business.
INTELLECTUAL PROPERTY We possess intellectual property rights, including trademarks, trade names and know-how and other proprietary rights that are important to our business.
Fire-stopping is a passive fire protection approach that relies on compartmentalization of various building components, including fire-rated walls, joints, and floors. The installation of these products collectively comprised approximately 2% of our net revenue for the year ended December 31, 2022. Window Blinds Some of our locations install different types of window blinds, including cordless blinds, shades and shutters.
The installation of these products collectively comprised approximately 3% of our net revenue for the year ended December 31, 2023. Window Blinds Some of our locations install different types of window blinds, including cordless blinds, shades and shutters. The installation of window blinds comprised approximately 2% of our net revenue for the year ended December 31, 2023.
Opportunity for professional growth, training and advancement are 4 strongly encouraged. We focus on the well-being of our employees through our Positive Production Program. This micro-video program is designed to help employees thrive in all aspects of life through learning and practicing research-backed physical, intellectual and emotional skills.
We focus on the well-being of our employees through our Positive Production Program. This micro-video program is designed to help employees thrive in all aspects of life through learning and practicing research-backed physical, intellectual and emotional skills. Engaged, long-tenured employees benefit our business by being highly skilled and efficient, which drives profitability and encourages repeat business and customer loyalty.
The Department of Energy, or DOE, states that over half of the energy used in the average American home is for heating and cooling due to many homes not having proper insulation. Per an insulation fact sheet provided by the DOE, inadequate insulation and air leakage are leading causes of energy waste in most homes.
Insulation is a critical component in reducing energy usage and greenhouse gas emissions. The Department of Energy, or DOE, states that over half of the energy used in the average American home is for heating and cooling due to many homes not having proper insulation.
Rain Gutters Some of our locations install a wide range of rain gutters, which direct water from a home’s roof away from the structure and foundation. Rain gutters are typically constructed from aluminum or copper and are available in a wide variety of colors, shapes and widths. They are generally assembled on the job site using specialized equipment.
Rain gutters are typically constructed from aluminum or copper and are available in a wide variety of colors, shapes and widths. They are generally assembled on the job site using specialized equipment. The installation of rain gutters comprised approximately 4% of our net revenue for the year ended December 31, 2023.
Construction cycle times continue to be lengthened due to 6 supply chain delays and disruptions, and the commercial sector is predicted to see a 3% decline in starts in 2023 over 2022, according to Dodge Data & Analytics.
Commercial demand showed growth in 2023 as supply chain delays and disruptions waned, and the commercial sector is predicted to see a modest 2% decline in starts in 2024 over 2023, according to Dodge Data & Analytics.
It is primarily available in two forms: batts (also referred to as blankets) and loosefill (also referred to as blown in). Fiberglass is the most widely used residential insulation material in the United States. Cellulose insulation is made primarily of waste paper and cardboard and has a composition of at least 75% recycled content.
It is typically comprised of an average of 50% recycled material, with some products containing up to 80% recycled material. It is primarily available in two forms: batts (also referred to as blankets) and loosefill (also referred to as blown in). Fiberglass is the most widely used residential insulation material in the United States.
We have strong workplace safety measures, including Safety Wanted 365, an initiative focused on creating a safer working environment to reduce job site injuries for both our employees and other jobsite personnel through year-round education and training. Additionally, our branch managers are held accountable for the safety of employees and quality of workmanship at their locations.
Each year, we allocate significant staffing, funding and resources to our management systems that directly impact safety. We have strong workplace safety measures, including our Lead With Safety program, an initiative focused on creating a safer working environment to reduce job site injuries for both our employees and other jobsite personnel through year-round education and training.
In addition to insulation and air infiltration products, we install garage doors, rain gutters, mirrors and shower doors, waterproofing, fireproofing and fire-stopping, window blinds and various other products; • enhance profitability from our operating leverage and national scale; • continue expansion in the multibillion-dollar commercial end market.
In addition to insulation and air infiltration products, we install garage doors, rain gutters, mirrors, shelving, shower doors, waterproofing, fireproofing and fire-stopping, window blinds and various other products; • enhance profitability from our operating leverage and national scale; • pursue value enhancing acquisitions in markets we currently serve as well as markets that are new to us by continuing our disciplined approach to valuations and pricing.
CAS has three locations which primarily sell to high-volume gutter installers and independent contractors in residential, multi-family and commercial markets. The products are primarily used in existing or retrofit construction projects across the Northeast and Mid-Atlantic regions. CAS purchases the majority of its finished painted aluminum from one supplier and is subject to the commodity pricing of aluminum metal.
The products are primarily used in existing or retrofit construction projects across the Northeast and Mid-Atlantic regions. CAS purchases the majority of its finished painted aluminum from one supplier and is subject to the commodity pricing of aluminum metal. Our Distribution segment comprised approximately 5% of our net revenue for the year ended December 31, 2023.
See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Key Factors Affecting our Operating Results" of this Form 10-K for more information.
In recent years, the industry experienced manufacturer supply constraints for some of the materials we purchase. We expect these challenges to persist but to a lesser degree in 2024. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, "Key Factors Affecting our Operating Results" of this Form 10-K for more information.
We expect to continue to effectively compete in our local markets given our long-standing customer relationships, access to capital, tenure and quality of local staff, quality installation reputation and competitive pricing. 8 HUMAN CAPITAL RESOURCES As of December 31, 2022, we had approximately 10,300 employees, consisting of approximately 7,200 installers, approximately 700 sales professionals, approximately 700 production personnel and approximately 1,700 administrative and management personnel.
We expect to continue to effectively compete in our local markets given our long-standing customer relationships, access to capital, tenure and quality of local staff, quality installation reputation and competitive pricing.
These locations service several states throughout the Midwest and Mountain West. AMD distributes products and materials purchased wholesale from manufacturers such as spray foam insulation, metal building insulation, residential insulation, and mechanical and fabricated Styrofoam insulation. AMD sells to a diverse group of independent contractors of various sizes working on projects in the residential, commercial and agricultural markets.
("AMD") is headquartered in Spring Valley, Minnesota and has eight locations which includes distribution centers and bonded warehouses. These locations service several states throughout the Midwest and Mountain West. AMD distributes products and materials purchased wholesale from manufacturers such as spray foam insulation, metal building insulation, residential insulation, and mechanical and fabricated Styrofoam insulation.
We install a variety of products in multiple markets for our largest customers, further diversifying our relationship with them. For example, our largest customer is independently serviced by 78 different IBP branches nationwide despite representing approximately 5% of net revenue for the year ended December 31, 2022. While our largest customers are homebuilders, our customer base is also diverse.
For example, our largest customer is independently serviced by 84 different IBP branches nationwide despite representing approximately 5% of net revenue for the year ended December 31, 2023. While our largest customers are homebuilders, our customer base is also diverse. We work on a range of commercial projects including office buildings, airports, sports complexes, museums, hospitals, hotels and educational facilities.
Cellulose is only available in loosefill form and is blown into the structure with specialized equipment.
Cellulose insulation is made primarily of waste paper and cardboard and has a composition of at least 75% recycled content. Cellulose is only available in loosefill form and is blown into the structure with specialized equipment.
We track all incidents that occur on our job sites that could result in injury, including minor incidents that may not require first aid or medical treatment. We use this incident information to continually refine and develop our safety training programs for new hires and the continual training and safety knowledge throughout employment at IBP.
Additionally, our branch managers are held accountable for the safety of employees and quality of workmanship at their locations. We track all incidents that occur on our job sites that could result in injury, including minor incidents that may not require first aid or medical treatment.
Less than 4% of our employees are covered under collective bargaining agreements. We have never experienced a work stoppage or strike, and we believe that we have good relationships with our employees. We monitor certain financial and operational statistics related to our workforce.
We have never experienced a work stoppage or strike, and we believe that we have good relationships with our employees. We monitor certain financial and operational statistics related to our workforce. For example, we utilize sales per installer per business day to 8 ensure we maintain the proper level of staffing to complete our jobs.
AFT's primary product, cellulose insulation, is made of primarily wastepaper and helps reduce greenhouse emissions by reducing the wastepaper decomposing in landfills which releases methane and carbon dioxide gases. AFT sells its products to a wide range of customers including distributors, retailers and insulation contractors.
Manufacturing Operating Segment Our small manufacturing operation, Advanced Fiber Technology ("AFT"), operates in Bucyrus, Ohio producing cellulose insulation and specialty industrial fibers. AFT's primary product, cellulose insulation, is made of primarily wastepaper and 3 helps reduce greenhouse emissions by reducing the wastepaper decomposing in landfills which releases methane and carbon dioxide gases.
However, housing starts peaked in the first half of 2022 and overall fell by 3% in 2022 as compared to 2021. Starts are forecasted to fall to 1.3 million starts in 2023 according to Wolters Kluwer’s Blue Chip Economic Indicators January 2023 forecast which would be the fewest starts since 2018.
However, housing starts decreased 9% as compared to 2022 to 1.4 million non-seasonally adjusted starts in 2023. 1.4 million starts are forecasted in 2024 with an overall decrease of 4% according to Wolters Kluwer’s Blue Chip Economic Indicators January 2024 forecast.
Insulation installation comprised approximately 61% of our net revenue of $2.7 billion, $2.0 billion and $1.7 billion for the years ended December 31, 2022, 2021 and 2020, respectively. We handle every stage of the installation process, including 1 material procurement, project scheduling and logistics, multi-phase professional installation, quality inspection, waste management and recycling.
Insulation installation comprised approximately 60%, 61% and 63% of our net revenue of $2.8 billion, $2.7 billion and $2.0 billion for the years ended December 31, 2023, 2022 and 2021, respectively.
While we believe the demand for our installation services remains high due to the extended single family and multi-family construction industry backlog of both units under construction and units not started, we are seeing signs of a slowdown in homebuilding demand resulting from these risks as we head into 2023.
Despite elevated mortgage rates, we believe the demand for our installation services remains high due to the forecasted increase in single family housing starts and the backlog of both units under construction and units not started in the multi-family residential end market.
For example, across our installer base, we experienced average monthly turnover of 3.4% in 2022 compared with 4.4% for the U.S. construction industry, according to the U.S. Bureau of Labor Statistics. In addition, we offer many benefits and resources to most employees, some of which are above and beyond what others in our industry offer.
We consider retaining skilled employees to be a competitive advantage and employ various strategies to improve turnover metrics. Our turnover rate is typically better than industry averages. For example, across our installer base, we experienced average monthly turnover of 3.3% in 2023 compared with 4.4% for the U.S. construction industry, according to the U.S. Bureau of Labor Statistics.
We are committed in policy and practice to providing equal employment opportunities for all applicants and employees based upon their training, experience, and overall qualifications. Employees across all our branches are invited to participate in our regional and national DE&I committees to determine the standards for how employees should interact with one another and their communities.
Employees across all our branches are invited to participate in our regional and national DEI&B committees to determine the standards for how employees should interact with one another and their communities. We do not tolerate inappropriate behavior or harassment. The health and safety of our employees is of primary importance.
We also reported a 27% decrease in severe incidents from 2021 to 2022 as we had only 8 severe incidents in 2022. We had zero fatalities in 2020, 2021 and 2022, and are continually finding ways to improve our practices throughout the organization in order to improve the health and safety of our workforce.
We had zero fatalities in 2021, 2022 and 2023, and are continually finding ways to improve our practices throughout the organization in order to improve the health and safety of our workforce. CUSTOMERS We serve a broad group of national, regional and local homebuilders, multi-family and commercial construction firms, individual homeowners and repair and remodeling contractors.
CUSTOMERS We serve a broad group of national, regional and local homebuilders, multi-family and commercial construction firms, individual homeowners and repair and remodeling contractors. Our top ten customers, which are primarily a combination of national and regional builders, accounted for approximately 16% of net revenue for the year ended December 31, 2022.
Our top ten customers, which are primarily a combination of national and regional builders, accounted for approximately 15% of net revenue for the year ended December 31, 2023. We install a variety of products in multiple markets for our largest customers, further diversifying our relationship with them.
Engaged, long-tenured employees benefit our business by being highly skilled and efficient, which drives profitability and encourages repeat business and customer loyalty. Higher employee retention also benefits our business through lower recruitment and training expense. We also consider safety and risk management to be a core business objective.
Higher employee retention also benefits our 4 business through lower recruitment and training expense. We also consider safety and risk management to be a core business objective. Significant staffing, funding and other resources are allocated to our management systems that enhance safety and quality for our employees and our customers.
Insulation Materials We offer a wide range of insulation materials consisting of: • Fiberglass and Cellulose Insulation – Fiberglass insulation is made of fibrous glass that is held together by a thermoset resin creating insulating air pockets. It is typically comprised of an average of 50% recycled material, with some products containing up to 80% recycled material.
We handle every stage of the installation process, including material procurement, project scheduling and logistics, multi-phase professional installation, quality inspection, waste management and recycling. 1 Insulation Materials We offer a wide range of insulation materials consisting of: • Fiberglass and Cellulose Insulation – Fiberglass insulation is made of fibrous glass that is held together by a thermoset resin creating insulating air pockets.
AMD is also a distributor of accessories and equipment used throughout the insulation installation process. Central Aluminum Supply Corporation and Central Aluminum Supply of North Jersey, LLC (“CAS”) is a distributor of gutter supplies and accessories headquartered in Trenton, New Jersey.
Central Aluminum Supply Corporation and Central Aluminum Supply of North Jersey, LLC (“CAS”) is a distributor of gutter supplies and accessories headquartered in Trenton, New Jersey. CAS has five locations which primarily sell to high-volume gutter installers and independent contractors in residential, multi-family and commercial markets.
High inflation, economic uncertainty and rising interest rates are the primary drivers behind the overall decrease in demand for new single-family homes forecasted in 2023.
Elevated inflation, global economic uncertainty and tight Federal Reserve monetary policy affecting interest rates are expected to continue affecting affordability of new homes, all of which are the primary drivers behind the projected decrease in demand for new housing starts forecasted in 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, our hedging transactions may expose us to certain risks and financial losses, including, among other things: • the risk that the other parties to the agreements would not perform; • the risk that the duration or amount of the hedges may not match the duration or amount of the related liability; • the risk that the hedging instruments and the related liabilities do not transition to the same LIBOR replacement rate or that the timing or mechanics of such transition do not match between the hedging instruments and the related liabilities, in which case any such differences could decrease the effectiveness of the hedging instruments and change our financial position; • the risk that hedging transactions may be adjusted from time to time in accordance with accounting rules to reflect changes in fair values including downward adjustments which would affect our stockholders’ equity; and • the risk that we may not be able to meet the terms and conditions of the hedging instruments, in which case we may be required to settle the instruments prior to maturity with cash payments that could significantly affect our liquidity.
Biggest changeIn addition, our hedging transactions may expose us to certain risks and financial losses, including, among other things: • the risk that the other parties to the agreements would not perform; • the risk that the duration or amount of the hedges may not match the duration or amount of the related liability; • the risk that hedging transactions may be adjusted from time to time in accordance with accounting rules to reflect changes in fair values including downward adjustments which would affect our stockholders’ equity; and • the risk that we may not be able to meet the terms and conditions of the hedging instruments, in which case we may be required to settle the instruments prior to maturity with cash payments that could significantly affect our liquidity.
We currently have one short-term agreement with a supplier and may enter into other short- or long-term supply agreements at any time.
We currently have one long-term agreement with a supplier and may enter into other short- or long-term supply agreements at any time.
While to date these threats have not had a material impact on our business or operations, if such an event occurred, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
While these threats have not had a material impact on our business or operations to date, if such an event occurred, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, a failure to comply with the provisions of our credit facilities, any future credit facility, the indenture governing our senior 24 notes, or other debt instruments could result in a default or an event of default that could enable our lenders or other debt holders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable.
In addition, a failure to comply with the provisions of our credit facilities, any future credit facility, the indenture governing our senior notes, or other debt instruments could result in a default or an event of default that could enable our lenders or other debt holders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and 24 payable.
Acquisitions involve a number of special risks, including: • our inability to manage acquired businesses or control integration costs and other costs relating to acquisitions; • potential adverse short-term effects on operating results from increased costs, business disruption or otherwise; • diversion of management’s attention; • loss of suppliers, customers or other significant business partners of the acquired business; • failure to retain existing key personnel of the acquired business and recruit qualified new employees at the location; • failure to successfully implement infrastructure, logistics and systems integration; • potential impairment of goodwill and other intangible assets; • risks associated with new lines of business and business models; • risks associated with the internal controls of acquired businesses; • exposure to legal claims for activities of the acquired business prior to acquisition and inability to realize on any indemnification claims, including with respect to environmental and immigration claims; • the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities; and • our inability to obtain financing necessary to complete acquisitions on attractive terms or at all.
Acquisitions involve a number of special risks, including: • our inability to manage acquired businesses or control integration costs and other costs relating to acquisitions; • potential adverse short-term effects on operating results from increased costs, business disruption or otherwise; • diversion of management’s attention; • loss of suppliers, customers or other significant business partners of the acquired business; • failure to retain existing key personnel of the acquired business and recruit qualified new employees at the location; • failure to successfully implement infrastructure, logistics and systems integration; • potential impairment of goodwill and other intangible assets; • risks associated with new lines of business and business models; • risks associated with the internal controls of acquired businesses; • exposure to legal claims for activities of the acquired business prior to acquisition and inability to realize on any indemnification claims, including with respect to environmental, employment and immigration claims; • the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities; and • our inability to obtain financing necessary to complete acquisitions on attractive terms or at all.
The market price of our common stock may be significantly affected by factors, such as: • market conditions affecting the residential construction, commercial construction and building products industries; • quarterly variations in our results of operations; • changes in government regulations; • the announcement of acquisitions by us or our competitors; • changes in general economic and political conditions; • volatility in the financial markets; • results of our operations and the operations of others in our industry; • changes in interest rates; • the reduction, suspension or elimination of dividend payments; • threatened or actual litigation and government investigations; • the addition or departure of key personnel; • actions taken by our stockholders, including the sale or disposition of their shares of our common stock; • the extent of short-selling of shares of our common stock and the stock of our competitors; and • differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections.
The market price of our common stock may be significantly affected by factors, such as: • market conditions affecting the residential construction, commercial construction and building products industries; • quarterly variations in our results of operations; • changes in government regulations; • the announcement of acquisitions by us or our competitors; • changes in general economic and political conditions; • volatility in the financial markets; • results of our operations and the operations of others in our industry; • changes and volatility in interest rates; • the reduction, suspension or elimination of dividend payments; • threatened or actual litigation and government investigations; • the addition or departure of key personnel; • actions taken by our stockholders, including the sale or disposition of their shares of our common stock; • the extent of short-selling of shares of our common stock and the stock of our competitors; and 26 • differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections.
In addition, the residential construction and commercial construction industries are subject to various federal, state and local statutes, ordinances, rules and regulations concerning zoning, building design and safety, construction, contractors’ licensing, energy conservation and similar matters, including regulations that impose restrictive zoning and density requirements on the residential new construction industry or that limit the number of homes that can be built within the boundaries of a particular area.
In addition, the residential construction and commercial construction industries are subject to various federal, state and local statutes, ordinances, rules and regulations concerning zoning, building design and safety, construction, contractors’ licensing, energy conservation and similar matters, including regulations that impose restrictive zoning and density requirements on the 22 residential new construction industry or that limit the number of homes that can be built within the boundaries of a particular area.
Even if we are able to raise capital through equity or debt financings, as to which there can be no assurance, the interest of existing stockholders in our company may be diluted, and the securities we issue may have rights, preferences and privileges that are senior to those of our common stock or may otherwise materially and adversely affect the holdings or rights of our existing 26 stockholders.
Even if we are able to raise capital through equity or debt financings, as to which there can be no assurance, the interest of existing stockholders in our company may be diluted, and the securities we issue may have rights, preferences and privileges that are senior to those of our common stock or may otherwise materially and adversely affect the holdings or rights of our existing stockholders.
This winter slowdown contributes to traditionally lower sales and profitability in our first quarter. 17 In addition, climate change and/or adverse weather conditions, such as unusually prolonged cold conditions, rain, blizzards, hurricanes, earthquakes, fires, other natural disasters, epidemics or other catastrophic events could accelerate, delay or halt construction or installation activity or impact our suppliers.
This winter slowdown contributes to traditionally lower sales and profitability in our first quarter. In addition, climate change and/or adverse weather conditions, such as unusually prolonged cold conditions, rain, blizzards, hurricanes, earthquakes, fires, other natural disasters, epidemics or other catastrophic events could accelerate, delay or halt construction or installation activity or impact our suppliers.
In addition, our results of operations for individual quarterly periods can be, and have been, adversely affected 14 by a delay between when building product cost increases are implemented and when we are able to increase prices for our products and services, if at all. Our supplier purchase prices often depend on volume requirements.
In addition, our results of operations for individual quarterly periods can be, and have been, adversely affected by a delay between when building product cost increases are implemented and when we are able to increase prices for our products and services, if at all. Our supplier purchase prices often depend on volume requirements.
The new distribution businesses and any other future lines of business we may enter or acquire involve competitive, operational, financial and accounting challenges and other risks that differ from our traditional residential installation business. For example, particular commodity pricing can affect selling prices and costs for certain products we sell through distribution.
The distribution businesses, and any other future lines of business we may enter or acquire, involve competitive, operational, financial and accounting challenges and other risks that differ from our traditional residential installation business. For example, particular commodity pricing can affect selling prices and costs for certain products we sell through distribution.
If this occurs, we would be in 25 default under such indebtedness, the holders of such indebtedness and other lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. Adverse credit ratings could increase our costs of borrowing money and limit our access to capital markets and commercial credit.
If this occurs, we would be in default under such indebtedness, the holders of such indebtedness and other lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. Adverse credit ratings could increase our costs of borrowing money and limit our access to capital markets and commercial credit.
Moody’s Investor Service and Standard & Poor’s routinely evaluate our credit profile on an ongoing basis and have assigned ratings for our long-term debt. If these rating agencies downgrade any of our current credit ratings, our borrowing costs could increase and our access to the capital and commercial credit markets could be adversely affected.
Moody’s Investor Service and Standard & Poor’s routinely evaluate our credit profile on an ongoing basis and have assigned ratings for our long-term debt. If these rating agencies downgrade any of our current credit ratings, our borrowing costs could 25 increase and our access to the capital and commercial credit markets could be adversely affected.
Our business depends in part on our ability to diversify and grow our businesses and also expand the types of complementary building products that we install and sell. Our product and geographic expansion may not be successful and may not deliver expected results, which could negatively impact our future sales and results of operations.
Our business depends in part on our ability to diversify and grow our businesses and also 18 expand the types of complementary building products that we install and sell. Our product and geographic expansion may not be successful and may not deliver expected results, which could negatively impact our future sales and results of operations.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, 28 results of operations, capital requirements, the limits imposed by the terms of our credit facilities, or any then-existing debt instruments, and such other factors as our board of directors deems relevant.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, the limits imposed by the terms of our credit facilities, or any then-existing debt instruments, and such other factors as our board of directors deems relevant.
The jobCORE software provides in-depth operational and financial performance data from individual branch locations to the corporate office. We rely upon such information technology systems to manage customer orders on a timely basis, coordinate our sales and installation activities across locations and manage invoicing.
The jobCORE software provides in-depth operational and financial performance data from individual branch locations to the corporate office. We rely upon such information technology systems to manage customer orders on a 17 timely basis, coordinate our sales and installation activities across locations and manage invoicing.
We may be required to investigate, remove, 23 remediate or monitor the presence or release of such hazardous or toxic substances or petroleum products. We may also be held liable for fines, penalties or damages, including for bodily injury, property damage and natural resource damage in connection with the presence or release of hazardous or toxic substances or petroleum products.
We may be required to investigate, remove, remediate or monitor the presence or release of such hazardous or toxic substances or petroleum products. We may also be held liable for fines, penalties or damages, including for bodily injury, property damage and natural resource damage in connection with the presence or release of hazardous or toxic substances or petroleum products.
In addition, expenditures may be required in the future as a result of releases of, or exposure to, hazardous or toxic substances or petroleum products, the discovery of currently unknown environmental conditions or changes in environmental laws and regulations or their interpretation or enforcement and, in certain instances, such expenditures may be material.
In addition, expenditures may be required 23 in the future as a result of releases of, or exposure to, hazardous or toxic substances or petroleum products, the discovery of currently unknown environmental conditions or changes in environmental laws and regulations or their interpretation or enforcement and, in certain instances, such expenditures may be material.
If we fail to comply with DOT regulations or the regulations become more stringent, we could experience 22 increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, and we could be subject to increased audit and compliance costs.
If we fail to comply with DOT regulations or the regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, and we could be subject to increased audit and compliance costs.
Any of these competitors may: (i) foresee the course of market development more accurately than we do; (ii) offer services that are deemed superior to ours; (iii) sell building products and services at a lower cost; (iv) develop stronger relationships with homebuilders and suppliers; (v) adapt more quickly to new technologies, new installation techniques or evolving customer requirements; or (vi) have access to financing on more favorable terms than we can obtain in the market.
Any of these competitors may: (i) foresee the course of market development more accurately than we do; (ii) offer services that are deemed superior to ours; (iii) sell building products and services at a lower cost; (iv) develop stronger relationships with homebuilders and suppliers; (v) adapt more quickly to new technologies, new installation techniques, new types of materials or evolving customer requirements; or (vi) have access to financing on more favorable terms than we can obtain in the market.
Any of these factors could result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of their investment. Item 1B. Unresolved Staff Comments None. 29
Any of these factors could result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of their investment. Item 1B. Unresolved Staff Comments None.
Since our business is dependent on the housing and construction industries, such adverse effects on the economy could negatively affect these 18 industries and, therefore, our business, our employees and our customers, which could negatively impact our financial condition and results of operations.
Since our business is dependent on the housing and construction industries, such adverse effects on the economy could negatively affect these industries and, therefore, our business, our employees and our customers, which could negatively impact our financial condition and results of operations.
Given these factors, we can provide no assurance that present growth trends will continue, whether overall or in our markets. The economic downturn in 2007-2010 severely affected our business. Another reduction in housing demand in the future could have a similar effect on our business.
Given these factors, we can provide no assurance that recent growth trends will continue, whether overall or in our markets. The economic downturn in 2007-2010 severely affected our business. Another reduction in housing demand in the future could have a similar effect on our business.
The strength of the commercial construction market depends on business investment which is a function of many national, regional and local economic conditions beyond our control, including capital and credit availability for commercial construction projects, material costs, interest rates, employment rates, demand for office space due to COVID-19-related changes in employment practices, vacancy rates, labor and healthcare costs, fuel and other energy costs and changes in tax laws affecting the real estate industry.
The strength of the commercial construction market depends on business investment which is a function of many national, regional and local economic conditions beyond our control, including capital and credit availability for commercial construction projects, material costs, interest rates, employment rates, demand for office space due to changes in employment practices, vacancy rates, labor and healthcare costs, fuel and other energy costs and changes in tax laws affecting the real estate industry.
Specifically, we had no outstanding borrowings on our Revolver, as hereinafter defined, as of December 31, 2022, but should we have a balance in the future, we would incur interest based on a rate that varies per the conditions set forth in our agreement.
Specifically, we had no outstanding borrowings on our Revolver, as hereinafter defined, as of December 31, 2023, but should we have a balance in the future, we would incur interest based on a rate that varies per the conditions set forth in our agreement.
Any deterioration in economic or housing market conditions or continuation of uncertain economic or housing market conditions could have a material adverse effect on our business, financial condition, results of operations and prospects. A continued downturn in the housing market could materially and adversely affect our business and financial results. In 2022, the U.S.
Any deterioration in economic or housing market conditions or continuation of uncertain economic or housing market conditions could have a material adverse effect on our business, financial condition, results of operations and prospects. A continued downturn in the housing market could materially and adversely affect our business and financial results. In 2023, the U.S.
In addition, as a result of our acquisition strategy, we have recorded goodwill and may incur impairment charges in connection with prior and future acquisitions. Our recent distribution business acquisitions maintain significant goodwill balances in a separate reporting unit from our traditional installation business.
In addition, as a result of our acquisition strategy, we have recorded goodwill and may incur impairment charges in connection with prior and future acquisitions. Our distribution businesses maintain significant goodwill balances in a separate reporting unit from our traditional installation business.
If we are unable to successfully integrate this new platform into our business model and compete effectively, we may be required to recognize 13 impairment charges on our goodwill and other intangible assets within this reporting unit.
If we are unable to successfully integrate this platform into our business model and compete effectively, we may be required to recognize impairment charges on our goodwill and other intangible assets within this reporting unit.
RISKS TO OUR BUSINESS FROM EXTERNAL THREATS A major pandemic or other public health issue could adversely impact the U.S. economy as well as our business, financial condition, operating results and cash flows. The United States has experienced, and may experience again in the future, outbreaks of contagious diseases that affect public health and public perception of health.
RISKS TO OUR BUSINESS FROM EXTERNAL THREATS A major public health issue could adversely impact the U.S. economy as well as our business, financial condition, operating results and cash flows. The United States has experienced, and may experience again in the future, outbreaks of contagious diseases that affect public health and public perception of health.
Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of our common stock and materially affect the value of your investment.
Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with our performance, and these fluctuations could materially reduce the price of our common stock and materially affect the value of your investment.
We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them. We have consummated over 180 acquisitions.
We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them. We have consummated over 190 acquisitions.
In addition, advances under our Revolver generally bear interest based on, at our election, either the Secured Overnight Financing Rate (“Term SOFR”) or the base rate (which approximated the prime rate) plus a margin based on the type of rate applied and leverage ratio.
In addition, advances under our Revolver generally bear interest based on, at our election, either a forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFR”) or the base rate (which approximated the prime rate) plus a margin based on the type of rate applied and leverage ratio.
We maintain our Safety Wanted 365 program to help reduce jobsite, warehouse and plant injuries. Product liability, workmanship warranty, casualty, negligence, construction defect, breach of contract and other claims and legal proceedings can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome.
We maintain our Lead with Safety program to help reduce jobsite, warehouse and plant injuries. Product liability, workmanship warranty, casualty, negligence, construction defect, breach of contract and other claims and legal proceedings can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome.
These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We have approximately 28.3 million shares of common stock outstanding as of December 31, 2022.
These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We have approximately 28.4 million shares of common stock outstanding as of December 31, 2023.
Our recent acquisitions of two distribution businesses have substantially increased our inventory balances, and deflation could cause the value of our inventories to decline. Certain products our distribution businesses sell are composed of materials with prices that fluctuate based on current market pricing. Fluctuations in market pricing of these materials can affect our selling prices.
Our two distribution businesses have substantially higher inventory balances, and deflation could cause the value of our inventories to decline. Certain products our distribution businesses sell are composed of materials with prices that fluctuate based on current market pricing. Fluctuations in market pricing of these materials can affect our selling prices.
In particular, continued increases in mortgage interest rates, rising home prices, sustained periods of inflation, or other economic factors can reduce home affordability and may lead to a continued decline in the home construction market.
In particular, prolonged periods of higher mortgage interest rates, rising home prices, sustained periods of inflation, or other economic factors can reduce home affordability and may lead to a continued decline in the home construction market.
We did not record any goodwill impairment charges in 2022, 2021, or 2020; however, a decline in the expectation of our future performance, a decline in our market capitalization, sustained periods of economic inflation, a significant rise in interest rates, deterioration in expectations regarding the general economy and/or the timing and the extent of new home construction, home improvement and commercial construction activity may cause us to recognize non-cash, pre-tax impairment charges for goodwill or other long-lived assets, which are not determinable at this time.
We did not record any goodwill impairment charges in 2023, 2022, or 2021; however, a decline in the expectation of our future performance, a decline in our market capitalization, sustained periods of economic inflation, prolonged periods of high interest rates, deterioration in expectations 13 regarding the general economy and/or the timing and the extent of new home construction, home improvement and commercial construction activity may cause us to recognize non-cash, pre-tax impairment charges for goodwill or other long-lived assets, which are not determinable at this time.
These breaches or intrusions could lead to business interruption, exposure of proprietary or confidential information, data corruption, damage to our reputation, exposure to legal and regulatory proceedings and other costs. Such events could have a material adverse impact on our financial condition, results of operations and cash flows.
These breaches or incidents could lead to business interruption, exposure of proprietary or confidential information, data corruption, damage to our reputation, exposure to legal and regulatory proceedings and other costs. Such events could impair our ability to conduct business and have a material adverse impact on our financial condition, results of operations and cash flows.
Any future claims or liabilities could be significant. 20 Our ability to seek indemnification from the former owners of our acquired businesses for these claims or liabilities may be limited by various factors, including the specific time, monetary or other limitations contained in the respective acquisition agreements and the financial ability of the former owners to satisfy our indemnification claims.
Our ability to seek indemnification from the former owners of our acquired businesses for these claims or liabilities may be limited by various factors, including the specific time, monetary or other limitations contained in the respective acquisition agreements and the financial ability of the former owners to satisfy our indemnification claims.
Accordingly, our ability to conduct our business in the manner previously or currently expected could be materially and negatively affected, any of which could have a material adverse impact on our business, financial condition, operating results and cash flows. Our business is seasonal and may be affected by adverse weather conditions, climate change, natural disasters or other catastrophic events.
Accordingly, our ability to conduct our business could be materially and negatively affected, any of which could have a material adverse impact on our business, financial condition, operating results and cash flows. Our business is seasonal and may be affected by adverse weather conditions, climate change, natural disasters or other catastrophic events.
From time to time we are subject to claims or liabilities arising from the ownership or operation of acquired businesses for the periods prior to our acquisition of them, including environmental, employee-related and other liabilities and claims not covered by insurance.
From time to time we are subject to claims or liabilities arising from the ownership or operation of acquired businesses for the periods prior to our acquisition of them, including environmental, employee-related and other liabilities and claims not covered by insurance. Any future claims or liabilities could be significant.
If this market does not grow in the future, the growth potential of our business, and our financial condition, results of operations and cash flows could be adversely affected. The commercial construction market, as measured by investment dollars, increased 7% in 2022 from 2021 per the U.S.
If this market does not grow in the future, the growth potential of our business, and our financial condition, results of operations and cash flows could be adversely affected. The commercial construction market, as measured by investment dollars, increased 20% in 2023 from 2022 per the U.S. Census Bureau.
If we identify material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 or are unable to assert that our internal controls over financial reporting are effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources. 27 Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
If we identify material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 or are unable to assert that our internal controls over financial reporting are effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
If participants in these industries postpone spending in response to tighter credit, negative financial news and declines in income or asset values or other factors such as unfavorable news surrounding the COVID-19 pandemic, this could have a material negative effect on the demand for our products and services and on our business, financial condition and results of operations.
If participants in these industries postpone spending in response to tighter credit, negative financial news and declines in income or asset values or other factors, this could have a material negative effect on the demand for our products and services and on our business, financial condition and results of operations.
Despite these efforts, our information technology systems, including but not limited to jobCORE or other operational systems, financial systems, Human Resource and payroll systems, fleet management software, and risk management systems may be damaged, disrupted or shut down due to attacks by unauthorized access, malicious software, computer viruses, undetected intrusion, hardware failures or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate.
Despite these efforts, our information technology systems, including but not limited to jobCORE or other operational systems, financial systems, Human Resource and payroll systems, fleet management software, and risk management systems may be damaged, disrupted or shut down due to cyberattacks, unauthorized access to our systems, undetected intrusions, malicious software, computer viruses, ransomware, Trojan horses, worms, hardware or software failures or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate.
If we are unable to successfully obtain insurance coverage of third-party claims or enforce our indemnification rights against the former owners, or if the former owners are unable to satisfy their obligations for any reason, including because of their financial position, we could be held liable for the costs or obligations associated with such claims or liabilities, which could adversely affect our financial condition and results of operations.
If we are unable to successfully obtain insurance coverage of third-party claims or enforce our indemnification rights against the former owners, or if the former owners are unable to satisfy their obligations for any reason, including because of their financial position, we could be held liable for the costs or obligations associated with such claims or liabilities, which could adversely affect our financial condition and results of operations. 20 LEGAL AND REGULATORY RISKS Changes in employment laws may adversely affect our business.
We expect these challenges to persist in 2023 but to a lesser degree. In addition, during prior economic downturns in the housing industry, manufacturers have reduced capacity by closing plants and production lines within plants. Even if such capacity reductions are not permanent, there may be a delay in manufacturers’ ability to increase capacity in times of rising demand.
In addition, during prior economic downturns in the housing industry, manufacturers have reduced capacity by closing plants and production lines within plants. Even if such capacity reductions are not permanent, there may be a delay in manufacturers’ ability to increase capacity in times of rising demand.
Jeff Edwards has significant ownership of our common stock and may have interests that conflict with those of our other stockholders. As of December 31, 2022, Jeff Edwards beneficially owned approximately 17.4% of our outstanding common stock.
Jeff Edwards has significant ownership of our common stock and may have interests that conflict with those of our other stockholders. As of December 31, 2023, Jeff Edwards beneficially owned approximately 16.0% of our outstanding common stock.
For example, one of our distribution businesses uses aluminum in many of its products. Aluminum commodity prices experienced a significant decrease during 2022 which reduced our selling prices while related inventory costs remained high.
For example, one of our distribution businesses uses aluminum in many of its products. Aluminum commodity prices have experienced volatile fluctuations in the recent past including a significant decrease during 2022 which reduced our selling prices while related inventory costs remained high.
This led to a temporary decrease in margins, financial condition, operating results and cash flows for this business until inventory costs began to reflect current market pricing in late 2022. Our customers could purchase materials directly from manufacturers or other sources. We do not have any exclusivity agreements with the manufacturers of the products that we sell.
For part of 2022, this led to a temporary decrease in margins, financial condition, operating results and cash flows for this business. Our customers could purchase materials directly from manufacturers or other sources. We do not have any exclusivity agreements with the manufacturers of the products that we sell.
We anticipate that any such additional funds may be raised through equity or debt financings. Any equity or debt financing, if available at all, may be on terms that are not favorable to us and will be subject to changes in interest rates and the capital markets environment.
Any equity or debt financing, if available at all, may be on terms that are not favorable to us and will be subject to changes in interest rates and the capital markets environment.
If the value of goodwill or other intangible assets in this or other reporting units is impaired, our earnings and stockholders’ equity would be adversely affected. As of December 31, 2022, we had goodwill and other intangible assets in an aggregate amount of $657.0 million, or approximately 37% of our total assets, which is in excess of our stockholders’ equity.
If the value of goodwill or other intangible assets in this or other reporting units is impaired, our earnings and stockholders’ equity would be adversely affected. As of December 31, 2023, we had goodwill and other intangible assets in an aggregate amount of $667.5 million, or approximately 34% of our total assets.
As of December 31, 2022, approximately 1.7 million of the 3.0 million shares of common stock authorized for issuance under the 2014 Omnibus Incentive Plan were available for issuance. These shares will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.
As of December 31, 2023, approximately 1.9 million of the 2.1 million shares of common stock authorized for issuance under the 2023 Omnibus Incentive Plans were available for issuance. These shares will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.
In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation. In addition to the disruptions that may occur in our information technology systems, cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems.
In the event of a cybersecurity incident, we could experience operational interruptions, lose confidential and proprietary information that harms our business, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation. Cybersecurity threats and sophisticated cyberattacks pose a risk to our information technology systems and business operations.
While we expect the COVID-19 pandemic and related events may have a negative effect on us in the future, the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies, depends on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic, additional government actions taken in response to the pandemic, the impact on construction activity and demand for homes (based on employment levels, consumer spending and consumer confidence).
The full extent and scope of impact of an outbreak of any contagious disease, including a resurgence of COVID-19, on our business and industry, as well as national, regional and global markets and economies, depends on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the outbreak, additional government actions taken in response, the impact on construction activity and demand for homes (based on employment levels, consumer spending and consumer confidence).
Additionally, the risk of contracts in backlog being cancelled, terminated or suspended generally increases at times, including as a result of periods of widespread macroeconomic and industry slowdown, weather, seasonality and many of the other factors impacting our business. For example, the COVID-19 pandemic resulted in the starts of certain long-term contracts being delayed.
Additionally, the risk of contracts in backlog being cancelled, terminated or suspended generally increases at times, including as a result of periods of widespread macroeconomic and industry slowdown, weather, seasonality and many of the other factors impacting our business.
Our strategy could be impeded if we do not identify, or face increased competition for, suitable acquisition candidates and our business, financial condition, results of operations and cash flows could be adversely affected if any of the foregoing factors were to occur. 19 Our continued expansion into the commercial construction end market could affect our revenue, margins, financial condition, operating results and cash flows.
Our strategy could be impeded if we do not identify, or face increased competition for, suitable acquisition candidates and our business, financial condition, results of operations and cash flows could be adversely affected if any of the foregoing factors were to occur.
The impacts of climate change may subject us to increased costs, regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business. Most, if not all, of our locations may be vulnerable to the adverse effects of climate change.
The impacts of climate change may subject us to increased costs, regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business. Most, if not all, of our locations may be vulnerable to the adverse effects of climate change. For example, we lease facilities in regions that experience extreme weather conditions.
We are dependent on attracting, training and retaining qualified employees while controlling labor costs. The labor market for the construction industry is competitive, including within the sector in which we operate. We must attract, train and retain a large number of qualified employees to install our products while controlling related labor costs.
The labor market for the construction industry is competitive, including within the sector in which we operate. We must attract, train and retain a large number of qualified employees to install our products while controlling related labor costs. We face significant competition for these employees from our industry as well as from other industries.
These laws include: • employee classification as exempt or non-exempt for overtime and other purposes; • workers’ compensation rates; • immigration status; • mandatory health benefits; • tax reporting; and • other wage and benefit requirements.
Various federal and state labor laws govern the relationship with our employees and impact operating costs. These laws include: • employee classification as exempt or non-exempt for overtime and other purposes; • workers’ compensation rates; • immigration status; • mandatory health benefits; • tax reporting; and • other wage and benefit requirements.
As a result, we began seeing a moderation in housing demand at the end of 2022 and into 2023. 12 Any continued decline in new home construction may result in lower demand for our services and products and may materially adversely affect our business, financial condition, liquidity, results of operations and cash flows.
Any continued decline in new home construction may result in lower demand for our services and products and may materially adversely affect our business, financial condition, liquidity, results of operations and cash flows.
Census Bureau but is still suffering from some inefficiencies and project delays stemming from the pandemic. According to Dodge Data & Analytics, commercial building starts in 2023, measured by investment dollars, are expected to decrease 3% from 2022 while institutional building starts (a subset of the nonresidential construction market in which we participate) are expected to increase 1% from 2022.
According to Dodge Data & Analytics, commercial building starts in 2024, measured by investment dollars, are expected to decrease 2% from 2023 while institutional building starts (a subset of the nonresidential construction market in which we participate) are expected to increase 3% from 2023.
Our primary manufacturing facility is also subject to additional laws and regulations which may increase our exposure to environmental liabilities. Despite providing a benefit to the environment by making structures more energy efficient, certain types of insulation, particularly spray foam applications, require our employees to handle potentially hazardous or toxic substances.
Despite providing a benefit to the environment by making structures more energy efficient, certain types of insulation, particularly spray foam applications, require our employees to handle potentially hazardous or toxic substances.
As cyberattacks become more sophisticated generally, we may be required to incur significant costs to strengthen our systems to protect against outside intrusions and/or continue to maintain insurance coverage related to the threat of such attacks. The increased use of remote work environments, due to the COVID-19 pandemic, may increase our risk of cyberattacks or data breaches.
As risks associated with cybersecurity threats constantly evolve and become more sophisticated generally, we may be required to incur significant costs to strengthen our systems to protect against or respond to such threats. The continued use of remote work environments, which significantly increased due to the COVID-19 pandemic, may increase our risk of cyberattacks or data breaches.
Additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, may also adversely impact our business, financial condition and results of operations. We urge investors to consider carefully the risk factors described below in evaluating the information contained in this report.
Additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, may also adversely impact our business, financial condition and results of operations.
Provisions of our charter documents and Delaware law could delay, discourage or prevent an acquisition of us, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for our stockholders to change our management.
In addition, under our amended and restated certificate of incorporation, Jeff Edwards is permitted to pursue corporate opportunities for himself, rather than for us . 27 Provisions of our charter documents and Delaware law could delay, discourage or prevent an acquisition of us, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for our stockholders to change our management.
Increased market pricing, regardless of the catalyst, could impact our results of operations in the future to the extent that price increases cannot be passed on to our customers.
For example, sudden changes in demand in our industry have resulted in insulation material allocation in the past, 14 leading to increased market pricing. Increased market pricing, regardless of the catalyst, could impact our results of operations in the future to the extent that price increases cannot be passed on to our customers.
We pay dividends to holders of our common stock, but may reduce, suspend, or eliminate dividend payments in the future. Our board of directors approved the initiation of a quarterly cash dividend program in 2021 and also approved the payment of an annual variable dividend in each of 2022 and 2023.
We pay dividends to holders of our common stock, but may reduce, suspend, or eliminate dividend payments in the future. Our board of directors approves any quarterly or annual cash dividend.
For a summary of the following risks, please see "Information Regarding Forward-Looking Statements and Risk Factors Summary" which appears immediately prior to Item 1, Business, of this Form 10-K. 11 RISKS RELATED TO OUR BUSINESS AND INDUSTRY Our business and the industry in which we operate are highly dependent on general and local economic conditions, the housing market, the level of new residential and commercial construction activity and other important factors, all of which are beyond our control.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY Our business and the industry in which we operate are highly dependent on general and local economic conditions, the housing market, the level of new residential and commercial construction activity and other important factors, all of which are beyond our control.
This resulted in higher mortgage interest rates in the second half of 2022 and a lower estimate of housing starts for 2023 of 1.29 million, according to Blue Chip Economic Indicators.
This has resulted in higher mortgage interest rates which has contributed to a lower estimate of housing starts for 2024 of 1.37 million, according to Wolters Kluwer’s Blue Chip Economic Indicators.
Similarly, if additional claims are filed against us in the future, the negative outcome of one or more of such matters could have a material adverse effect on our results, financial condition and cash flows.
Similarly, if additional claims are filed against us in the future, the negative outcome of one or more of such matters could have a material adverse effect on our results, financial condition and cash flows. 21 The nature of our business exposes us to product liability, workmanship warranty, casualty, negligence, health and safety incidents, construction defect, breach of contract and other claims and legal proceedings.
We have established security policies, processes and defenses designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology systems and information and disruption of our operations.
We have established security policies, processes and controls designed to help protect, identify and mitigate against the disruption of our operations and the intentional and unintentional misappropriation or corruption of our information technology systems and information in conjunction with identifying threats from new technologies that may disrupt our systems in the future.
The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price. The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock.
While we believe we are in compliance with applicable laws and regulations, if we are found not to be in compliance as a result of any audits, we may be subject to fines or other remedial actions. 21 Our results of operations, financial condition and cash flows could be adversely affected if pending or future legal claims against us are not resolved in our favor.
While we believe we are in compliance with applicable laws and regulations, if we are found not to be in compliance as a result of any audits, we may be subject to fines or other remedial actions.
Historically, unexpected events, such as incapacitation of supplier facilities due to extreme weather or fire, have temporarily reduced manufacturing capacity and production. During 2021 and 2022, we experienced multiple supply chain disruptions for certain materials we use in our business due to changing demand as well as the effects of the COVID-19 pandemic on the global supply chain.
Historically, unexpected events, such as incapacitation of supplier facilities due to extreme weather or fire, have temporarily reduced manufacturing capacity and production. The overall global supply chain can impact our suppliers as evidenced by disruptions we have experienced since 2021 for certain materials we use in our business. We expect these challenges to persist to a certain degree in 2024.
Our expansion into this market may include opening new branches that have higher start-up costs compared to our acquired branches. These factors and any other challenges we encounter could adversely affect our margins, financial condition, operating results and cash flows. As of December 31, 2022, our estimated backlog associated with the commercial end market was approximately $162.3 million.
These factors and any other challenges we encounter could adversely affect our margins, financial condition, operating results and cash flows. 19 As of December 31, 2023, our estimated backlog associated with the commercial end market was approximately $115.7 million.
Our ability to attract qualified employees and control labor costs is subject to numerous external factors, including competitive wage rates and health and other insurance and benefit costs. Additionally, periods of economic inflation can cause wage expectations to increase and we may have difficulty retaining employees if we do not, or cannot, meet these expectations.
Additionally, periods of economic inflation can cause wage expectations to increase and we may have difficulty retaining employees if we do not, or cannot, meet these expectations.
In addition, we are subject to increased regulation of data privacy and information security, including the adoption of more stringent state laws, including the California Privacy Rights Act and the Virginia Consumer Data Protection Act, which went into effect in January 2023.
In addition, we are subject to increased regulation of data privacy and information security, including the adoption of more stringent laws in states including California, Connecticut, Colorado, Utah and Virginia, with similar laws going into effect in other states in and after 2024.
There can be no assurance that backlog will result in revenues within the expected timeframe, if at all. Our distribution businesses and continued expansion into other new lines of business could affect our revenue, margins, financial condition, operating results and cash flows. We recently acquired two distribution entities operating under different business models than our traditional installation business.
Our distribution businesses and continued expansion into other new lines of business could affect our revenue, margins, financial condition, operating results and cash flows. We operate two distribution entities under a different business model than our traditional installation business.
Our existing branches or any branches we may start or acquire serving the commercial end market involve competitive, operational, financial and accounting challenges and other risks that differ from our traditional residential installation business. In addition, the typical contractual terms and arrangements and billing cycle for the commercial construction end market are different than the residential new construction end market.
Our continued expansion into the commercial construction end market could affect our revenue, margins, financial condition, operating results and cash flows. Our existing branches or any branches we may start or acquire serving the commercial end market involve competitive, operational, financial and accounting challenges and other risks that differ from our traditional residential installation business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeState Number of Locations Approximate Total Square Footage State Number of Locations Approximate Total Square Footage Alabama 4 31,550 Montana 1 4,576 Arizona 2 29,166 Nebraska 2 23,241 California 27 297,369 Nevada 1 15,350 Colorado 13 129,036 New Hampshire 8 75,370 Connecticut 2 31,292 New Jersey 7 121,451 Delaware 4 37,175 New York 8 101,630 Florida 28 248,585 North Carolina 15 194,403 Georgia 13 196,471 Ohio 11 454,165 Idaho 3 43,000 Oklahoma 3 35,543 Illinois 7 85,902 Oregon 2 32,928 Indiana 14 248,082 Pennsylvania 7 89,853 Kansas 2 74,206 South Carolina 8 116,439 Kentucky 4 46,330 South Dakota 2 50,000 Louisiana 2 19,535 Tennessee 7 111,482 Maine 3 38,750 Texas 20 364,455 Maryland 4 59,710 Utah 7 115,523 Massachusetts 4 45,303 Vermont 1 31,020 Michigan 2 36,800 Virginia 6 73,941 Minnesota 9 245,554 Washington 12 163,220 Missouri 2 15,436 Wisconsin 10 211,354 Our Fleet As of December 31, 2022, our fleet consisted of approximately 5,600 total vehicles that we either leased or owned, including approximately 5,400 installation vehicles that our installers use to deliver and install products from our locations to job sites, and approximately 200 other vehicles that are utilized for various purposes, primarily by our distribution operations, sales staff, branch managers and various senior management personnel.
Biggest changeState Number of Locations Approximate Total Square Footage State Number of Locations Approximate Total Square Footage Alabama 2 24,250 Nevada 1 15,350 Arizona 2 29,166 New Hampshire 10 80,640 California 26 290,719 New Jersey 8 132,037 Colorado 14 164,148 New York 9 101,430 Connecticut 3 47,057 North Carolina 18 301,034 Delaware 4 45,185 North Dakota 2 7,392 Florida 31 322,979 Ohio 11 455,416 Georgia 12 192,316 Oklahoma 3 35,543 Idaho 3 43,000 Oregon 2 32,928 Illinois 7 85,902 Pennsylvania 8 110,909 Indiana 13 255,319 Rhode Island 4 31,654 Kansas 2 74,206 South Carolina 8 116,439 Kentucky 4 46,330 South Dakota 2 55,000 Louisiana 2 19,535 Tennessee 7 206,786 Maine 3 38,750 Texas 22 416,260 Maryland 5 65,110 Utah 6 115,809 Massachusetts 5 45,223 Vermont 1 31,020 Michigan 2 36,800 Virginia 7 97,558 Minnesota 7 187,988 Washington 14 203,331 Missouri 2 15,436 West Virginia 1 2,080 Montana 2 4,576 Wisconsin 9 205,808 Nebraska 2 23,241 Our Fleet As of December 31, 2023, our fleet consisted of approximately 6,000 total vehicles that we either leased or owned, including approximately 5,700 installation vehicles that our installers use to deliver and install products from our locations to job sites, and approximately 300 other vehicles that are utilized for various purposes, primarily by our distribution operations, sales staff, branch managers and various senior management personnel.
Item 2. Properties Real Property We lease office and warehouse space in 40 states, including our corporate office in Columbus, Ohio. Our leases are typically short in duration with customary extensions at our option. We believe suitable alternative space is available in all of our markets. We also own our cellulose manufacturing facility in Bucyrus, Ohio.
Item 2. Properties Real Property We lease office and warehouse space in 43 states, including our corporate office in Columbus, Ohio. Our leases are typically short in duration with customary extensions at our option. We believe suitable alternative space is available in all of our markets. We also own our cellulose manufacturing facility in Bucyrus, Ohio.
We believe that our facilities are suitable and adequate for present purposes, and that the productive capacity in such facilities is substantially being utilized. The table below summarizes our locations as of December 31, 2022.
We believe that our facilities are suitable and adequate for present purposes, and that the productive capacity in such facilities is substantially being utilized. The table below summarizes our locations as of December 31, 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 17, Commitments and Contingencies, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information on significant legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 30 PART II
Biggest changeSee Note 17, Commitments and Contingencies, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K for additional information on significant legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 31 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes investments of $100 in our common stock and in each of the four indices and the reinvestment of dividends for the last five fiscal years through December 31, 2022. 31 12/29/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022 IBP 100 44 91 134 186 117 Russell 2000 100 89 112 134 154 122 S&P 500 Industrials 100 87 112 124 151 142 S&P Smallcap 600 (Old) 100 91 112 125 158 133 S&P 600 Building Products (New) 100 80 114 145 182 151 Purchases of Equity Securities by the Issuer The following table shows the stock repurchase activity for the three months ended December 31, 2022: Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2) October 1 - 31, 2022 (1) 720 $ 80.96 — $ — November 1 - 30, 2022 30,000 80.84 30,000 — December 1 - 31, 2022 266,032 86.22 266,032 162.1 million 296,752 $ 85.66 296,032 $ 162.1 million (1) Represents shares surrendered to the Company by employees to satisfy tax withholding obligations arising in connection with the vesting of 2,409 shares of restricted stock awarded under our 2014 Omnibus Incentive Plan.
Biggest changeThe graph assumes investments of $100 in our common stock and in each of the four indices and the reinvestment of dividends for the last five fiscal years through December 31, 2023. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022 12/29/2023 IBP 100 204 303 419 263 571 Russell 2000 100 125 150 173 137 161 S&P 500 Industrials 100 129 144 174 164 194 S&P 600 Building Products 100 143 182 228 190 286 32 Issuer Purchases of Equity Securities The following table shows the stock repurchase activity, including shares surrendered by employees in connection with the vesting of restricted stock awards, for the three months ended December 31, 2023: Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2) October 1 - 31, 2023 87 $ 117.70 — $ — November 1 - 30, 2023 42,491 147.58 42,486 193.7 million December 1 - 31, 2023 4,329 185.82 — — 46,907 $ 151.07 42,486 $ 193.7 million (1) Includes shares surrendered to the Company by employees to satisfy tax withholding obligations arising in connection with the vestin g of 5,252 s hares of restricted stock awarded under ou r 2014 and 2023 Omnibus Incentive Plans.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is traded on the NYSE under the symbol “IBP.” Holders of Record As of February 15, 2023 , there were 1,105 holders of record of our common stock, one of which was Cede & Co., which is the holder of shares held through the Depository Trust Company.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is traded on the NYSE under the symbol “IBP.” Holders of Record As of February 15, 2024, there were 1,231 holder s of record of our common stock, one of which was Cede & Co., which is the holder of shares held through the Depository Trust Company.
Stock Performance Graph The table below compares the cumulative total shareholder return on our common stock with the cumulative total return of (i) the Russell 2000 Index (“Russell 2000”), (ii) the Standard & Poor’s Industrials Index (“S&P 500 Industrials”) and (iii) the S&P Smallcap 600 Index (Old) (“S&P Smallcap 600 (Old)”) and (iv) the S&P 600 Building Products Index (New) ("S&P 600 Building Products (New)").
Stock Performance Graph The table below compares the cumulative total shareholder return on our common stock with the cumulative total return of (i) the Russell 2000 Index (“Russell 2000”), (ii) the Standard & Poor’s Industrials Index (“S&P 500 Industrials”) and (iii) the S&P 600 Building Products Index ("S&P 600 Building Products").
On February 22, 2023 our board of directors authorized a new stock repurchase program that allows for the repurchase of up to $200.0 million of our outstanding common stock through March 1, 2024. This 2023 new program will replace the previous 2022 program.
(2 ) On February 22, 2023, our board of directors authorized a stock repurchase program that allows for the repurchase of up to $200.0 million of our outstanding common stock. The new program replaced the previous program and is in effect through March 1, 2024.
On August 4, 2022 our board of directors authorized a new stock repurchase program that allows for the repurchase of up to $200.0 million of our outstanding common stock through August 10, 2023. This new program replaced the previous program. We repurchased $137.6 million of common stock under our stock repurchase programs during the year ended December 31, 2022.
We repurchased $6.3 million of common stock under our stock repurchase program during the year ended December 31, 2023. On February 22, 2024, we announced that our board of directors authorized a new stock repurchase program that allows for the repurchase of up to $300.0 million of our outstanding common stock .
In addition to the quarterly cash dividend, our board of directors approved an annual variable dividend payable in 2022 and 2023, with the 2023 dividend payable on March 31, 2023 at a rate of 90 cents per common share. We did not declare or pay any cash dividends on our common stock during the year ended December 31, 2020.
In addition to the quarterly cash dividend, our board of directors has approved an annual variable dividend payable since 2022, with the 2024 dividend payable on March 31, 2024 at a rate of $1.60 per common share.
For further information about our stock repurchase programs, see Note 13, Stockholder's Equity, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Recent Sales of Unregistered Securities During 2022, we did not issue or sell any unregistered equity securities. Item 6. [Reserved] 32
This 2024 new program will replace the previous 2023 program and is in effect through March 1, 2025. For further information about our stock repurchase programs, see Note 13, Stockholders' Equity, in Part II, Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Removed
For comparison purposes, we are replacing the S&P Smallcap 600 (Old) with the S&P 600 Building Products as we believe it more closely aligns with our industry.
Added
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities During 2023, we did not issue or sell any unregistered equity securities. Item 6. [Reserved] 33
Removed
(2) On February 24, 2022, our board of directors authorized an extension of our previous stock repurchase program through March 1, 2023 and concurrently authorized an increase in the total amount of our outstanding common stock we can purchase under the extended program up to $200.0 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDuring the year ended December 31, 2021, we recorded an unrealized gain, net of taxes, of $6.4 million on our cash flow hedges primarily due to the market's expectations for interest rates in the future relative to our July 2021 swap.
Biggest changeOther comprehensive (loss) income, net of tax Other comprehensiv e (loss) income, net of tax for 2023, 2022 and 2021 were as follows (in millions): 2023 2022 2021 Unrealized (loss) gain on cash flow hedge, net of taxes $ (6.9) $ 40.8 $ 8.5 During the year ended December 31, 2023, we recorded unrealized losses, net of taxes, of $10.2 million on our cash flow hedges primarily due to the market's expectations for interest rates to decline in the future which offset the previous unrealized gains on our existing and forward swaps.
A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, inflation, consumer confidence, employment rates, housing inventory levels, foreclosure rates, the health of the economy and the availability and affordability of mortgage financing.
A large portion of our net revenue comes from the U.S. residential new construction market, which depends upon a number of economic factors, including demographic trends, interest rates, inflation, consumer confidence, employment rates, housing inventory levels and affordability, foreclosure rates, the health of the economy and the availability of mortgage financing.
Lastly, we expect our selling and administrative expenses to continue to increase as our business grows, which could impact our future operating profitability. SEASONALITY We tend to have higher sales during the second half of the year as our homebuilder customers complete construction of homes placed under contract for sale in the traditionally stronger spring selling season.
Lastly, we expect our selling and administrative expenses to continue to increase as our business grows, which could impact our future operating profitability. 40 SEASONALITY We tend to have higher sales during the second half of the year as our homebuilder customers complete construction of homes placed under contract for sale in the traditionally stronger spring selling season.
The assets and liabilities associated with the forward interest rate swap are included in other current and other non-current assets on the Consolidated Balance Sheets at their fair value amounts as described in Note 10, Fair Value Measurements, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
The assets associated with the forward interest rate swap are included in other current and other non-current assets on the Consolidated Balance Sheets at their fair value amounts as described in Note 10, Fair Value Measurements, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.
Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially 44 different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis.
Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis.
The amendment also allows for modification of specified fees depend upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of December 31, 2022 was $244.2 million. The ABL Revolver provides incremental revolving credit facility commitments of up to $50.0 million.
The amendment also allows for modification of specified fees depend upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. Including outstanding letters of credit, our remaining availability under the ABL Revolver as of December 31, 2023 was $244.2 million. The ABL Revolver provides incremental revolving credit facility commitments of up to $50.0 million.
Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2023, to the extent that price increases cannot be passed on to our customers. Our selling price increases were able to support most material cost increases in 2022 but we may have more difficulty raising prices in 2023 if housing demand slows.
Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations in 2024, to the extent that price increases cannot be passed on to our customers. Our selling price increases were able to support most material cost increases in 2023 but we may have more difficulty raising prices in 2024 if housing demand slows.
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operations for the years ended December 31, 2022, 2021 and 2020.
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to support our ongoing operations and to fund our business needs, commitments and contractual obligations for at least the next 12 months as evidenced by our net positive cash flows from operations for the years ended December 31, 2023, 2022 and 2021.
Housing Market (12) Total Completions Growth 3.7 % 4.2 % 2.5 % Single-Family Completions Growth 5.6 % 6.1 % 0.9 % Multi-Family Completions Growth (1.1) % (0.3) % 6.3 % (1) Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date.
Housing Market (12) Total Completions Growth 4.3 % 3.7 % 4.2 % Single-Family Completions Growth (2.2) % 5.7 % 6.1 % Multi-Family Completions Growth 22.1 % (1.3) % (0.3) % (1) Same branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date.
Cash used in financing activities consists primarily of debt repayments, acquisition-related obligations, dividends and stock repurchases. We had a net use of cash in financing activities in 2022 compared to a net inflow of cash in 2021 primarily due to the proceeds on our Term Loan received in 2021.
Cash used in financing activities consists primarily of debt repayments, acquisition-related obligations, dividends and stock repurchases. We had a net use of cash in financing activities in both 2023 and 2022 compared to a net inflow of cash in 2021 primarily due to the proceeds on our Term Loan received in 2021.
Supply chain constraints and inflationary pressures also contributed to higher material costs in 2022, particularly for spray foam and several complementary installed products, as some products continue to be difficult to source near volume and pricing levels secured in prior periods.
Supply chain constraints and inflationary pressures also contributed to higher material costs in 2022, particularly for spray foam and several complementary installed products, as some products continued to be difficult to source near volume and pricing levels secured in prior periods.
See Note 18, Business Combinations, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for more information regarding our business acquisitions in 2022, 2021 and 2020. Additionally, total cash used to purchase property and equipment increased in 2022, and we expect to continue to support any increases in future net revenue through further capital expenditures.
See Note 18, Business Combinations, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for more information regarding our business acquisitions in 2023, 2022 and 2021. 42 Additionally, total cash used to purchase property and equipment increased in 2023, and we expect to continue to support any increases in future net revenue through further capital expenditures.
We also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers. 34 The following table shows certain key measures of performance we utilize to evaluate our results: Years ended December 31, 2022 2021 2020 Period-over-period Growth Consolidated Sales Growth 35.6 % 19.1 % 9.4 % Consolidated Same Branch Sales Growth (1) 24.6 % 9.7 % 4.5 % Installation (2) Sales Growth (3) 29.5 % 18.7 % 9.6 % Same Branch Sales Growth (1)(3) 24.5 % 9.4 % 4.7 % Single-Family Sales Growth (4) 33.5 % 22.1 % 5.2 % Single-Family Same Branch Sales Growth (1)(4) 28.9 % 14.4 % 0.6 % Multi-Family Sales Growth (5) 31.8 % 14.7 % 37.5 % Multi-Family Same Branch Sales Growth (1)(5) 31.0 % 6.7 % 33.2 % Residential Sales Growth (6) 33.2 % 20.9 % 9.5 % Residential Same Branch Sales Growth (1)(6) 29.2 % 13.2 % 4.9 % Commercial Sales Growth (7) 15.2 % 10.8 % 10.2 % Commercial Same Branch Sales Growth (1)(7) 6.6 % (4.0) % 3.4 % Other (2) Sales Growth (8) 453.8 % 65.1 % (6.3) % Same Branch Sales Growth (1)(8) 41.5 % 44.3 % (6.3) % Same Branch Sales Growth - Installation (2)(9) Volume Growth (1)(10) 5.5 % 7.9 % 1.9 % Price/Mix Growth (1)(11) 23.0 % 3.3 % 2.8 % U.S.
We also utilize gross profit percentage as shown in the following section to monitor our most significant variable costs and to evaluate labor efficiency and success at passing increasing costs of materials to customers. 35 The following table shows certain key measures of performance we utilize to evaluate our results: Years ended December 31, 2023 2022 2021 Period-over-period Growth Consolidated Sales Growth 4.1 % 35.6 % 19.1 % Consolidated Same Branch Sales Growth (1) 0.2 % 24.6 % 9.7 % Installation (2) Sales Growth (3) 3.7 % 29.5 % 18.7 % Same Branch Sales Growth (1)(3) (0.1) % 24.5 % 9.4 % Single-Family Sales Growth (4) (5.4) % 33.5 % 22.1 % Single-Family Same Branch Sales Growth (1)(4) (9.0) % 28.9 % 14.4 % Multi-Family Sales Growth (5) 35.0 % 31.8 % 14.7 % Multi-Family Same Branch Sales Growth (1)(5) 33.3 % 31.0 % 6.7 % Residential Sales Growth (6) 1.0 % 33.2 % 20.9 % Residential Same Branch Sales Growth (1)(6) (2.3) % 29.2 % 13.2 % Commercial Sales Growth (7) 17.2 % 15.2 % 10.8 % Commercial Same Branch Sales Growth (1)(7) 11.5 % 6.6 % (4.0) % Other (2) Sales Growth (8) 12.1 % 453.8 % 65.1 % Same Branch Sales Growth (1)(8) 6.7 % 41.5 % 44.3 % Same Branch Sales Growth - Installation (2)(9) Volume Growth (1)(10) (9.0) % 5.5 % 7.9 % Price/Mix Growth (1)(11) 7.7 % 23.0 % 3.3 % U.S.
We have not made any material changes in our methodology used to establish our insurance reserves during the years ended December 31, 2022 and 2021, and none of the adjustments to our estimates have been material.
We have not made any material changes in our methodology used to establish our insurance reserves during the years ended December 31, 2023 and 2022, and none of the adjustments to our estimates have been material.
Goodwill Impairment We performed an annual quantitative goodwill impairment test as of October 1, 2022 on our Distribution operating segment which we have determined is also a reporting unit.
Goodwill Impairment We performed an annual quantitative goodwill impairment test as of October 1, 2023 on our Distribution operating segment which we have determined is also a reporting unit.
We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over 230 branch locations. 94% of our net revenue comes from the service-based installation of these products across all of our end markets and forms our Installation operating segment and single reportable segment.
We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of approximately 250 branch locations. 94% of our net revenue comes from the service-based installation of these products across all of our end markets and forms our Installation operating segment and single reportable segment.
As of December 31, 2022 and 2021, offsets of these liabilities were $2.3 million and $2.1 million, respectively, with insurance receivables and indemnification assets for claims under fully insured policies or claims that exceeded the stop loss limit. We also participate in a high retention general liability insurance program and a high deductible auto insurance program.
As of December 31, 2023 and 2022, offsets of these liabilities were $3.0 million and $2.3 million, respectively, with insurance receivables and indemnification assets for claims under fully insured policies or claims that exceeded the stop loss limit. We also participate in a high retention general liability insurance program and a high deductible auto insurance program.
The Federal Reserve took actions to moderate and stabilize inflation by raising the federal funds rate multiple times in 2022 and signaling plans to continue raising the rate in 2023. This caused the average mortgage rate in the United States to more than double since the end of 2021.
The Federal Reserve took actions to moderate and stabilize inflation by raising the federal funds rate multiple times in 2022 and 2023. This caused the average mortgage rate in the United States to more than double since the end of 2021.
The net proceeds from the Senior Notes offering were $295.0 million after debt issuance costs. 42 The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.
The indenture covering the Senior Notes contains restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.
Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. We believe the following critical accounting estimate requires judgement and estimation in the preparation of our consolidated financial statements and to be fundamental to our results of operations.
Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements. We believe the following critical accounting estimates require judgement and estimation in the preparation of our consolidated financial statements and to be fundamental to our results of operations.
We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. Cost of Labor Our business is labor intensive. As of December 31, 2022, we had approximately 10,300 employees, most of whom work as installers on local construction sites.
We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. Cost of Labor Our business is labor intensive. As of December 31, 2023, we had approximately 10,600 employees, most of whom work as installers on local construction sites.
Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. Total outstanding loan balances relating to our master loan and equipment agreements were $73.0 million and $69.2 million as of December 31, 2022 and 2021, respectively.
Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. Total outstanding loan balances relating to our master loan and equipment agreements were $83.0 million and $73.0 million as of December 31, 2023 and 2022, respectively.
The estimate of the reporting unit’s fair value was determined by placing a 75% weighting on a discounted cash flow model and a 25% weighting on market-related model using current industry information that involve significant unobservable inputs (Level 3 inputs).
The estimate of the reporting unit’s fair value was determined by placing an 80% weighting on a discounted cash flow model and a 20% weighting on market-related model using current industry information that involve significant unobservable inputs (Level 3 inputs).
As of December 31, 2022 and 2021, offsets of these liabilities were $5.3 million and $3.9 million, respectively, with insurance receivables and indemnification assets for claims under fully insured policies or claims that exceeded the stop loss limit.
As of December 31, 2023 and 2022, offsets of these liabilities were $1.8 46 million and $5.3 million, respectively, with insurance receivables and indemnification assets for claims under fully insured policies or claims that exceeded the stop loss limit.
Based on the results of this evaluation, we concluded that there were no impairments of goodwill as the estimated fair value exceeded its carrying value. The estimated fair value exceeded the Distribution operating segment's carrying value by 8.6%.
Based on the results of this evaluation, we concluded 45 that there were no impairments of goodwill as the estimated fair value exceeded its carrying value. The estimated fair value exceeded the Distribution operating segment's carrying value by 11.9%.
Additionally, we maintain certain production vehicles under a finance lease structure which will require $3.0 million in interest and principal payments under current agreements in 2023. We lease certain locations, vehicles and equipment under operating lease agreements that will require $28.9 million in funds over the next twelve months.
Additionally, we maintain certain production vehicles under a finance lease structure which will require $3.2 million in interest and principal payments under current agreements in 2024. We lease certain locations, vehicles and equipment under operating lease agreements that will require $31.3 million in funds over the next twelve months.
As of December 31, 2022 and 2021, general liability and auto insurance reserves included in other current and long-term liabilities were $25.0 million and $21.9 million, respectively.
As of December 31, 2023 and 2022, general liability and auto insurance reserves included in other current and long-term liabilities were $25.4 million and $25.0 million, respectively.
During 2023, we anticipate discretionary spending for capital improvements and quarterly dividends to approximate 2022 levels of approximately $45.6 million and $36.0 million, respectively, as well as approximately $25.2 million for our annual variable dividend to be paid March 31, 2023.
During 2024, we anticipate discretionary spending for capital improvements and quarterly dividends to approximate 2023 levels of approximately $61.6 million and $37.5 million, respectively, as well as approximately $45.0 million for our annual variable dividend to be paid March 31, 2024.
We have omitted discussion of 2020 results in the sections that follow where it would be redundant to the discussion previously included in Part II, Item 7, of Form 10-K for the year ended December 31, 2021. 2022 Highlights Net revenues increased 35.6%, or $701.2 million, while gross profit increased 40.4% to $827.8 million during the year ended December 31, 2022 compared to 2021.
We have omitted discussion of 2021 results in the sections that follow where it would be redundant to the discussion previously included in Part II, Item 7, of Form 10-K for the year ended December 31, 2022. 2023 Highlights Net revenues increased 4.1%, or $108.8 million, while gross profit increased 12.4% to $930.7 million during the year ended December 31, 2023 compared to 2022.
Our strategic acquisitions over the last several years contributed meaningfully to our 35.6% increase in net revenue during the year ended December 31, 2022 compared to 2021.
Our strategic acquisitions over the last several years contributed meaningfully to our 4.1% increase in net revenue during the year ended December 31, 2023 compared to 2022.
As of December 31, 2022, we had cash and cash equivalents of $229.6 million as well as access to $250.0 million under our asset-based lending credit facility (as defined below), less $5.8 million of outstanding letters of credit, resulting in total liquidity of $473.9 million.
As of December 31, 2023, we had cash and cash equivalents of $386.5 million as well as access to $250.0 million under our asset-based lending credit facility (as defined below), less $5.8 million of outstanding letters of credit, resulting in total liquidity of $630.7 million.
In order to meet customer demand during the year, we purchased materials from distributors and home centers at a premium to what we typically would purchase directly from manufacturers, therefore reducing gross profit.
In order to meet customer demand during these shortages, we have purchased a limited amount of materials from distributors and home centers at a premium to what we typically would purchase directly from manufacturers, therefore reducing gross profit.
Additionally, all obligations under the Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second-priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement. 43 As of December 31, 2022, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement, and the Senior Notes.
Additionally, all obligations under the Term Loan and ABL Revolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second-priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.
The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts' (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.
The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts' (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries. 43 In December 2021, we entered into a new $500 million, seven-year term loan facility due December 2028 (the “Term Loan”) under our credit agreement (the “Term Loan Agreement”), dated as of December 14, 2021 with Royal Bank of Canada as the administrative agent and collateral agent thereunder.
We expect that our net revenue, gross profit and operating income will benefit from this growth over time although we will be negatively impacted by the slowdown in the homebuilding industry in the near term. 2021 Highlights Net revenues increased 19.1%, or $315.4 million, while gross profit increased 15.6% to $589.5 million during the year ended December 31, 2021 compared to 2020.
We expect that our net revenue, gross profit and operating income will benefit from this growth over time although we will be negatively impacted by a slowdown in the homebuilding industry in the near term. 2022 Highlights Net revenues increased 35.6%, or $701.2 million, while gross profit increased 40.4% to $827.8 million during the year ended December 31, 2022 compared to 2021.
These intangible assets consist of customer relationships, backlog, non-competition agreements and business trademarks and trade names. Fair values and estimated useful lives are assigned to the identified intangible assets at the date of acquisition by financial professionals using either the income approach or the market approach along with certain industry information, professional experience and knowledge.
Fair values and estimated useful lives are assigned to the identified intangible assets at the date of acquisition by financial professionals using either the income approach or the market approach along with certain industry information, professional experience and knowledge.
We assess the fair value of the contingent consideration liability at each reporting period, and any changes in the estimated fair value are reflected in gains on acquisition earnouts on the Consolidated Statements of Operations and Comprehensive Income.
We assess the fair value of the contingent consideration liability at each reporting period, and any changes in the estimated fair value are reflected in gains on acquisition earno uts on the Consolidated Statements of Operations and Comprehensive Income. There were no gains on acquisition earnouts during the year ended December 31, 2023.
However, we believe the large residential construction backlog of both units under construction and units not started will partially offset these challenges. Additionally, there are housing shortages in some of the markets we serve and we expect that backlog in our growing multi-family business will also help to offset any declines we may face in the residential homebuilding market.
We believe the large residential construction backlog of both units under construction and units not started will partially offset these challenges. Additionally, there have been housing shortages in some of the markets we serve and the backlog in our growing multi-family business has helped to partially offset the declines we have faced in the residential homebuilding market.
KEY FACTORS AFFECTING OUR OPERATING RESULTS Inflation and Interest Rates Inflation affected the economy as a whole in 2022 as consumer price inflation reached 40-year highs, negatively impacting consumer sentiment and increasing market uncertainty.
KEY FACTORS AFFECTING OUR OPERATING RESULTS Inflation, Housing Affordability and Interest Rates Inflation affected the economy as a whole in 2022 and 2023 as consumer price inflation peaked at 40-year highs which negatively impacted consumer sentiment and increased market uncertainty.
While improved retention drives lower costs to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives. COVID-19 Impacts The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption.
While improved retention drives lower costs to recruit and train new employees, resulting in greater installer productivity, these improvements are somewhat offset by the additional costs of these incentives.
Income Tax Provision Income tax provision and effective tax rates for 2022, 2021 and 2020 were as follows (dollars in thousands): 2022 2021 2020 Income tax provision $ 79,879 $ 36,712 $ 33,938 Effective tax rate 26.3 % 23.6 % 25.9 % During the year ended December 31, 2022, our tax rate was unfavorably impacted by certain expenses not being deductible for income tax reporting purposes.
Income Tax Provision Income tax provision and effective tax rates for 2023, 2022 and 2021 were as follows (in millions): 2023 2022 2021 Income tax provision $ 89.4 $ 79.9 $ 36.7 Effective tax rate 26.8 % 26.3 % 23.6 % During the years ended December 31, 2023 and 2022 , our tax rate was unfavorably impacted by certain expenses not being deductible for income tax reporting purposes.
Selling expense decreased as a percentage of sales primarily due to increased leverage on selling wages from increased sales. 36 Administrative The dollar increase in administrative expenses in 2022 was primarily due to an increase in wages and benefits in the amount of $32.2 million, which was attributable to both acquisitions and organic growth as well as favorable company performance.
Selling expense increased as a percentage of sales primarily due to increased selling wages and bonuses due to higher profitability. Administrative The dollar increase in administrative expenses in 2023 was primarily due to an increase in wages and benefits, which was attributable to both acquisitions and organic growth as well as favorable company performance.
Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability. We experienced unprecedented increases in pricing for fiberglass and foam insulation materials in 2022.
Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based lending credit facility (as defined below), depending on the status of our borrowing base availability.
While inflation and material supply chain issues are likely to persist into 2023, we will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments.
We will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments.
We also amortized $3.2 million of the unrealized loss on our terminated cash flow hedges to interest expense, net during the year ended December 31, 2021, not including tax effects of $1.1 million.
We also amortized $4.5 million of the remaining unrealized gains, off-market terms 38 and unrealized losses on our terminated cash flow hedges to interest expense, net during the year ended December 31, 2023, not including tax effects of $1.2 million.
Rising interest rates began to curtail housing demand in the second half of 2022, reducing mortgage financing affordability. As a result, the residential homebuilding market began showing signs of weakening in late 2022 and early 2023 and housing starts, permits and completions are forecasted to decline in 2023. We expect to be impacted by these economic headwinds in 2023.
Interest rates began to curtail housing demand beginning in the second half of 2022 as mortgage financing affordability was reduced. As a result, the residential homebuilding market began weakening and housing starts declined by 9% in 2023. We expect to be impacted by these economic headwinds in 2024.
The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired. 40 Firm commitments for funds include $68.5 million in interest and principals payments on long-term debt obligations including our Senior Notes, Term Loan, notes payable to sellers of acquisitions and vehicles purchased under the Master Loan and Security Agreement, the Master Equipment Agreement and the Master Loan Agreements.
Firm commitments for funds include $68.1 million in interest and principals payments on long-term debt obligations including our Senior Notes, Term Loan, notes payable to sellers of acquisitions and vehicles purchased under the Master Loan and Security Agreement, the Master Equipment Agreement and the Master Loan Agreements.
The following table summarizes our outstanding bonds, letters of credit and cash-collateral (in thousands): As of December 31, 2022 Performance bonds $ 104,220 Insurance letters of credit and cash collateral 68,475 Permit and license bonds 9,682 Total bonds and letters of credit $ 182,377 We have $58.9 million included in our insurance letters of credit in the above table that are unsecured and therefore do not reduce total liquidity.
The following table summarizes our outstanding bonds, letters of credit and cash-collateral (in millions): As of December 31, 2023 Performance bonds $ 99.5 Insurance letters of credit and cash collateral 67.2 Permit and license bonds 10.7 Total bonds and letters of credit $ 177.4 We have $58.9 million included in our insurance letters of credit in the above table that are unsecured and therefore do not reduce total liquidity.
While home starts are currently projected to be lower in 2023 than 2022, we believe there are several trends that should drive long-term growth in the housing market, even if there are temporary periods of slowed growth.
While total housing starts are currently projected to be slightly lower in 2024 than 2023, we believe there are several trends that should drive long-term growth in the housing market, even if there are temporary periods of slowed growth. These long-term trends include an aging housing stock, population growth, demographic changes and household formation growth.
We believe this is partially a result of various programs meant to benefit our employees, including our financial wellness plan, longevity stock compensation plan for employees and assistance from the Installed Building Products Foundation meant to benefit our employees, their families and their communities.
We believe this is a result of our strong culture and the various programs meant to benefit our employees, including our financial wellness plan, emotional well-being coaching, longevity stock compensation plan and comprehensive benefit packages we offer. We also provide assistance from the Foundation meant to benefit our employees, their families and their communities.
As a percentage of net revenue, gross profit increased during the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily on the strength of sales growth across all of our end markets as well as strong price/mix growth.
As a percentage of net revenue, gross profit increased during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily on the strength of price/mix growth as well as leverage gained on material costs compared to the prior year.
Cost and Availability of Materials We typically purchase the materials we use in our business directly from manufacturers. The industry supply of these materials experienced supply shortages in 2022 due to strong demand and effects from the COVID-19 pandemic.
The remaining portion was attributable to our distribution businesses and the commercial construction end market. 39 Cost and Availability of Materials We typically purchase the materials we use in our business directly from manufacturers. The industry supply of these materials has experienced multiple periods of supply shortages since 2021 due to strong demand and effects from the COVID-19 pandemic.
LIBOR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. For more information on the discontinuance of LIBOR, see Item 7A. Quantitative and Qualitative Disclosures about Market Risk, of this Form 10-K.
Term SOFR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. For more information on Derivatives, see Note 12, Derivatives and Hedging Activities, of this Form 10-K.
Finally, we have a product supply agreement with a certain vendor that requires us to purchase a minimum of $27.0 million of inventory in 2023. Payments for income taxes cannot be estimated at this time.
Finally, we have a product supply agreement with a certain vendor that requires us to purchase a minimum quantity of inventory with variable pricing in 2024. Payments for income taxes cannot be estimated at this time, but our effective tax rate was 26.8% for the year ended December 31, 2023.
Cash used in investing activities consists primarily of purchases of property and equipment, payments for acquisitions and, periodically, purchases of short term investments. Net cash used by investing activities decreased from 2021 to 2022 primarily due to the decrease in payments for acquisitions.
Cash Flows from Investing Activities Sources of cash from investing activities consist primarily of proceeds from the sales of property and equipment and, periodically, maturities from short term investments. Cash used in investing activities consists primarily of purchases of property and equipment, payments for acquisitions and, periodically, purchases of short term investments.
In addition, we occasionally use letters of credit and cash to secure our performance under our general liability and workers’ compensation insurance programs. Permit and license bonds are typically issued for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.
Permit and license bonds are typically issued for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.
A 100 basis point change in the discount rate in our discounted cash flow model using our weighted system would not have resulted in an impairment for our Distribution operating segment, nor would reasonable changes in the weighting of each method. The estimates and assumptions used in the test are subject to uncertainty due to the professional judgments required.
A 100 basis point change in either the discount rate or residual growth rate, or both, utilized in our discounted cash flow model using our weighted system would not have resulted in an impairment for our Distribution operating segment, nor would any change in the weighting of each method.
Our liquidity remains strong despite repurchasing $137.6 million of our Company's stock and paying our variable and regular quarterly dividends of $62.7 million during the year ended December 31, 2022.
Additionally, we received $25.5 million from amending the maturity dates on our three interest rate swaps in July 2022. Our liquidity remained strong despite repurchasing $137.6 million of our Company's stock and paying our variable and regular quarterly dividends of $62.7 million during the year ended December 31, 2022.
We participate in multiple workers’ compensation plans covering a significant portion of our business. Under these plans, we use a high deductible program to cover losses above the deductible amount on a per claim basis. We accrue for the estimated losses occurring from both asserted and unasserted claims.
Under these plans, we use a high deductible program to cover losses above the deductible amount on a per claim basis. We accrue for the estimated losses occurring from both asserted and unasserted claims. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of IBNR claims.
Our workers’ compensation costs also continue to rise as we increase our coverage for additional personnel. We obtained leverage on our labor costs during the year ended December 31, 2022, compared to 2021 due to increased selling prices per job. However, inflation and market competition could increase these costs in the near-term.
We were able to keep our labor costs as a percentage of revenue flat during the year ended December 31, 2023 compared to 2022 due to increased selling prices per job. However, inflation and market competition could increase these costs in the near-term.
Census Bureau data, as revised. 35 Net revenue, cost of sales and gross profit The components of gross profit for 2022, 2021 and 2020 were as follows (dollars in thousands): 2022 Change 2021 Change 2020 Net revenue $ 2,669,844 35.6 % $ 1,968,650 19.1 % $ 1,653,225 Cost of sales 1,842,060 33.6 % 1,379,131 20.6 % 1,143,251 Gross profit $ 827,784 40.4 % $ 589,519 15.6 % $ 509,974 Gross profit percentage 31.0 % 29.9 % 30.8 % Net revenue increased during the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increased selling prices and organic growth as shown in the Key Measures of Performance section above.
Census Bureau data, as revised. 36 Net revenue, cost of sales and gross profit The components of gross profit for 2023, 2022 and 2021 were as follows (in millions): 2023 Change 2022 Change 2021 Net revenue $ 2,778.6 4.1 % $ 2,669.8 35.6 % $ 1,968.7 Cost of sales 1,847.9 0.3 % 1,842.0 33.6 % 1,379.2 Gross profit $ 930.7 12.4 % $ 827.8 40.4 % $ 589.5 Gross profit percentage 33.5 % 31.0 % 29.9 % Net revenue increased during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to increased multi-family and commercial sales and price/mix growth as sh own in the Key Measures of Performance section above.
Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of IBNR claims. In estimating these reserves, historical loss experience and judgments about the expected levels of costs per claim are considered. These claims are accounted for based on actuarial estimates of the undiscounted claims, including IBNR.
In estimating these reserves, historical loss experience and judgments about the expected levels of costs per claim are considered. These claims are accounted for based on actuarial estimates of the undiscounted claims, including IBNR. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals.
As of December 31, 2022 and 2021, our working capital, including cash and cash equivalents, was $556.4 million, or 20.8% of net revenue, and $551.7 million, or 28.0% of net revenue, respectively.
Sources and Uses of Cash and Related Trends Working Capital We carefully manage our working capital and operating expenses. As of December 31, 2023 and 2022, our working capital, including cash and cash equivalents, was $723.6 million, or 26.0% of net revenue, and $556.4 million, or 20.8% of net revenue, respectively.
Operating Expenses Operating expenses for 2022, 2021 and 2020 were as follows (dollars in thousands): 2022 Change 2021 Change 2020 Selling $ 119,031 27.7 % $ 93,204 14.2 % $ 81,613 Percentage of total net revenue 4.5 % 4.7 % 4.9 % Administrative $ 335,688 23.2 % $ 272,391 14.4 % $ 238,147 Percentage of total net revenue 12.6 % 13.8 % 14.4 % Gains on acquisition earnouts $ (16,109) 1456.4 % $ (1,035) 450.5 % $ (188) Percentage of total net revenue (0.6) % (0.1) % 0.0 % Amortization $ 43,763 18.0 % $ 37,079 29.9 % $ 28,535 Percentage of total net revenue 1.6 % 1.9 % 1.7 % Selling The dollar increase in selling expenses in 2022 was primarily driven by a year-over-year increase in selling wages, benefits and commissions of $23.4 million, or 27.5%, which supported our increased net revenue of 35.6%.
Operating Expenses Operating expenses for 2023, 2022 and 2021 were as follows (in millions): 2023 Change 2022 Change 2021 Selling $ 131.8 10.7 % $ 119.0 27.7 % $ 93.2 Percentage of total net revenue 4.7 % 4.5 % 4.7 % Administrative $ 385.3 14.8 % $ 335.7 23.2 % $ 272.4 Percentage of total net revenue 13.9 % 12.6 % 13.8 % Gains on acquisition earnouts $ — (100.0) % $ (16.1) 1,456.4 % $ (1.1) Percentage of total net revenue — % (0.6) % (0.1) % Amortization $ 44.5 1.7 % $ 43.8 18.0 % $ 37.1 Percentage of total net revenue 1.6 % 1.6 % 1.9 % Selling The dollar increase in selling expenses in 2023 was primarily driven by a year-over-year increase in selling wages and commissions to support our increased net revenue of 4.1% and higher credit loss provisions due to increased sales.
The residential new construction and repair and remodel markets represented approximately 80% of our total net revenue for the year ended December 31, 2022, compared to 83% in the same period in 2021. The remaining portion was attributable to our new distribution businesses and the commercial construction end market.
Net revenue derived from our ten largest homebuilder customers in the United States was approximately 15% for the year ended December 31, 2023. The residential new construction and repair and remodel markets represented approximately 78% of our total net revenue for the year ended December 31, 2023, compared to 80% in the same period in 2022.
We expect to spend more to hire, train and retain installers to support our growing business in 2023, as tight labor availability continues within the construction industry. We offer a comprehensive benefits package unlike many of our local competitors, which will increase costs as we hire additional personnel.
We expect to spend more to hire, train and retain installers to support our growing business in 2024, as tight labor availability continues within the construction industry. Our workers’ compensation costs also continue to rise as we increase our coverage for additional personnel.
Specifically, we now present total sales growth and same branch growth metrics for our consolidated results, our Installation reportable segment and our Other category consisting of our Distribution and Manufacturing operating segments. In addition, our volume growth and price/mix growth metrics are now only presented for the Installation reportable segment to align with how we monitor our operations.
Key metrics include total sales growth and same branch growth metrics for our consolidated results, our Installation reportable segment and our Other category consisting of our Distribution and Manufacturing operating segments. We also monitor sales growth for our Installation segment by end market and track volume growth and price/mix growth.
Our operating results may vary based on our product mix and the mix of our end markets among new single-family, multi-family and commercial builders and owners of existing homes.
Our operating results may vary based on our product mix and the mix of our end markets among new single-family, multi-family and commercial builders and owners of existing homes. We maintain a mix of business among all types of homebuilders ranging from small custom builders to large regional and national homebuilders as well as a wide range of commercial builders.
The remaining overall growth in net revenue for the year December 31, 2022 is attributable to the recent acquisitions of AMD Distribution and Central Aluminum which form our Distribution operating segment. This operating segment, combined with our Manufacturing operating segment, grew from $29.3 million to $162.4 million in net revenue for the year ended December 31, 2022.
The remaining overall growth in net revenue for the year December 31, 2023 is attributable to growth in our Distribution and Manufacturing operating segments. These operating segments grew from $162.4 million to $182.0 million in net revenue for the year ended December 31, 2023.
We completed three less acquisitions in 2022 compared to 2021, and the size of the acquisitions were generally larger in the year ended December 31, 2021. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.
The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.
Derivative Instruments As of December 31, 2022, we had five total interest rate swaps including two forward interest rate swaps. For a summary of notional amounts, maturity dates and interest rates for each of these swaps, see Note 12, Derivatives and Hedging Activities, in Item 8, Financial Statements and Supplementary Data of this Form 10-K.
For a summary of notional amounts, maturity dates and interest rates for each of these swaps, see Note 12, Derivatives and Hedging Activities, in Item 8, Financial Statements and Supplementary Data of this Form 10-K. Together, these five swaps serve to hedge $400.0 million of the variable cash flows on our variable rate Term Loan through maturity.
The Senior Notes will mature on February 1, 2028 and interest will be payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020.
Debt 5.75% Senior Notes due 2028 In September 2019, we issued $300.0 million in aggregate principal amount of 5.75% senior unsecured notes (the “Senior Notes”). The Senior Notes will mature on February 1, 2028 and interest will be payable semi-annually in cash in arrears on February 1 and August 1, commencing on February 1, 2020.
We continue to look for opportunities to reduce our working capital as a percentage of net revenue. 41 The following table presents our cash flows (in thousands): Years ended December 31, 2022 2021 2020 Net cash provided by operating activities $ 277,904 $ 138,314 $ 180,789 Net cash used in investing activities $ (158,669) $ (278,439) $ (77,794) Net cash (used in) provided by financing activities $ (223,093) $ 242,090 $ (49,364) Cash Flows from Operating Activities Our primary source of cash provided by operations is revenues generated from installing or selling building products and the resulting operating income generated by these revenues.
The following table presents our cash flows (in millions): Years ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 340.2 $ 277.9 $ 138.3 Net cash used in investing activities (103.4) (158.7) (278.4) Net cash (used in) provided by financing activities (79.9) (223.1) 242.1 Cash Flows from Operating Activities Our primary source of cash provided by operations is revenues generated from installing or selling building products and the resulting operating income generated by these revenues.
See Note 18, Business Combinations, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for information on our acquisitions.
Amortization expense increased in 2023 resulting from the increase in new intangible assets from 2023 acquisitions, with the remaining increase due to a full year of amortization expense attributable to prior year acquisitions. See Note 18, Business Combinations, in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for information on our acquisitions.
Our largest healthcare plan is partially self-funded with an insurance company paying benefits in excess of stop loss limits per individual/family. An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Consolidated Balance Sheets and was $3.8 million and $3.3 million as of December 31, 2022 and 2021, respectively.
An accrual for estimated healthcare claims incurred but not reported (“IBNR”) is included within accrued compensation on the Consolidated Balance Sheets and was $3.9 million and $3.8 million as of December 31, 2023 and 2022, respectively. We participate in multiple workers’ compensation plans covering a significant portion of our business.
Our primary uses of cash from operating activities include payments for installation materials, compensation costs, leases, income taxes and other general corporate expenditures included in net income. Net cash provided by operating activities increased from 2021 to 2022 primarily due to higher net income due to increased sales.
Operating income is adjusted for certain non-cash items, and our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. Our primary uses of cash from operating activities include payments for installation materials, compensation costs, leases, income taxes and other general corporate expenditures included in net income.
We also generated approximately $138.3 million of cash from operating activities. The increase in net revenue and gross profit was primarily driven by the contribution of our recent acquisitions, selling price and product mix improvements as evidenced by the 3.3% increase in our price/mix metric and increased sales volume of 7.9% on a same branch basis for our Installation segment.
The increase in net revenue was primarily driven by the 33.3% growth in same branch multi-family sales, selling price and product mix improvements and the contribution of our recent acquisitions. The 7.7% increase in our price/mix metric for our Installation segment was primarily due to a higher mix of multi-family and commercial jobs.
We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. As of December 31, 2022 and 2021, we estimated total short-term and long-term known and IBNR claims for workers' compensation to be $23.7 million and $21.4 million, respectively.
As of December 31, 2023 and 2022, we estimated total short-term and long-term known and IBNR claims for workers' compensation to be $26.5 million and $23.7 million, respectively.
As a result, U.S. buildings account for 35% of the U.S. carbon dioxide emissions that drive the climate crisis. Insulation is a critical component in the construction of homes and commercial structures. Installing insulation also helps increase energy conservation because it is the best way to prevent energy waste in most homes and commercial structures.
Insulation is a critical component in the construction of homes and commercial structures and helps increase energy conservation because it is the best way to prevent energy waste in most homes and commercial structures. As a leading installer of insulation products, we help ensure that insulation is properly installed to achieve the desired energy conservation and efficiency.
In addition, we expect to use cash and cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue.
In addition, we expect to use cash and cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue each fiscal year. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−5 removed1 unchanged
Biggest changeOur Senior Notes accrued interest at a fixed rate of 5.75%. 46 For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant. We have not entered into and currently do not hold derivatives for trading or speculative purposes.
Biggest changeFor variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant. We have not entered into and currently do not hold derivatives for trading or speculative purposes.
We had three active interest rate swaps which, when combined with our two forward interest rate swaps, serve to hedge $400.0 million of the variable cash flows on our Term Loan until its maturity as of December 31, 2022. As a result, total variable rate debt of $95.0 million was exposed to market risks as of December 31, 2022.
We had three active interest rate swaps which, when combined with our two forward interest rate swaps, serve to hedge $400.0 million of the variable cash flows on our Term Loan until its maturity as of December 31, 2023. As a result, total variable rate debt of $90.0 million was exposed to market risks as of December 31, 2023.
As of December 31, 2022, we had $489.2 million outstanding on the Term Loan, net of unamortized debt issuance costs, no outstanding borrowings on the ABL Revolver and no outstanding borrowings under finance leases subject to variable interest rates.
As of December 31, 2023, we had $485.6 million outstanding on the Term Loan, net of unamortized debt issuance costs, no outstanding borrowings on the ABL Revolver and no outstanding borrowings under finance leases subject to variable interest rates.
A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately $1.0 million.
A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately $0.9 million. Our Senior Notes accrued interest at a fixed rate of 5.75%.
Removed
LIBOR is used as a reference rate for our Term Loan and our interest rate swap agreements we use to hedge our interest rate exposure. In 2017, the Financial Conduct Authority (“FCA”), the authority that regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
Removed
The Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced in March 2021 its intention to extend the publication of certain LIBOR settings, including the setting we use as a reference rate, to June 2023, and it is unclear whether new methods of calculating LIBOR will be established after that point.
Removed
Our Term Loan Agreement and interest rate swap agreements include a provision related to the discontinuance of LIBOR to be replaced with one or more Secured Overnight Financing Rate ("SOFR") values or another alternative benchmark rate. However, when LIBOR ceases to exist after June 2023, the interest rates under the alternative rate could be higher than LIBOR.
Removed
During the year ended December 31, 2022, we adopted ASU 2022-06, Reference Rate Reform: Deferral of the Sunset Date of Topic 848 (Topic 848) which extends the sunset date of previous adopted guidance under ASU 2020-04 to December 31, 2024. The purpose of the guidance is to provide relief for impacted areas as it relates to impending reference rate reform.
Removed
We elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation.

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