Installed Building Products (IBP) risk factors, FY2024 10-K

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

1. 01Our 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
2. 02Adverse developments affecting the new residential housing market could materially and unfavorably affect our business and financial results
3. 03Our business relies on commercial construction activity, which has faced significant challenges and is dependent on business investment
4. 04According to Dodge Data & Analytics, commercial building starts in 2025, measured by investment dollars, are expected to increase 6% from 2024 while institutional building starts (a subset of the nonresidential construction market in which we participate) are expected to increase 4% from 2024
5. 05Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our business, financial condition, results of operations and cash flows
6. 06Our industry may develop new product innovations, installation techniques or requirements for insulation materials that could adversely affect our business and financial results
7. 07Product shortages or the loss of key suppliers could affect our business, financial condition, results of operations and cash flows
8. 08Changes in the costs of the products we use in our business, an inability to increase our selling prices or a delay in the timing of such increases can decrease our profit margins
9. 09Our success depends on our key personnel
10. 10We are dependent on attracting, training and retaining qualified employees while controlling labor and benefit costs
11. 11Variability in self-insurance liability estimates could adversely impact our results of operations
12. 12Increases in union organizing activity and/or work stoppages could delay or reduce availability of products that we use in our business and increase our costs
13. 13Increases in fuel costs could adversely affect our results of operations
14. 14Because we operate our business through highly dispersed locations across the United States, our operations may be materially adversely affected by inconsistent practices and the operating results of individual branches may vary
15. 15We are often required to obtain performance bonds and licensing bonds to secure our performance under certain contracts and other arrangements. In addition, the commercial construction end market also requires higher levels of performance bonding
16. 16Increasing scrutiny, changing expectations from stakeholders and government regulations regarding our ESG practices and disclosure may impose additional costs on us or expose us to new or additional risks
17. 17A major public health issue could adversely impact the U.S. economy as well as our business, financial condition, operating results and cash flows
18. 18Our business is seasonal and may be affected by adverse weather conditions, climate change, natural disasters or other catastrophic events
19. 19We may be adversely affected by disruptions in our information technology systems
20. 20In 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
21. 21Terrorist attacks or acts of war against the United States or increased domestic or international instability could have an adverse effect on our operations
22. 22We may not be able to continue to successfully expand into new products or geographic markets and further diversify our business, which could negatively impact our future sales and results of operations
23. 23We may be unable to successfully acquire and integrate other businesses and realize the anticipated benefits of acquisitions
24. 24Our continued expansion into the commercial construction end market could affect our revenue, margins, financial condition, operating results and cash flows
25. 25Our distribution businesses and continued expansion into other new lines of business could affect our revenue, margins, financial condition, operating results and cash flows
26. 26In addition, a significant period of economic deflation could have an adverse impact on our business and financial results. Our three distribution businesses have substantially higher inventory balances, and deflation could cause the value of our inventories to decline
27. 27Our customers could purchase materials directly from manufacturers or other sources
28. 28We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them

LEGAL AND REGULATORY RISKS

1. 29Changes in employment laws may adversely affect our business
2. 30Our business could be adversely affected by changes in immigration laws or failure to properly verify the employment eligibility of our employees
3. 31not fully comply with all recordkeeping obligations of federal and state immigration laws. These factors could have a material adverse effect on our reputation, business, financial condition and results of operations
4. 32Our 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
5. 33The 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
6. 34Federal, state, local and other laws, building codes, trade policies and regulations could impose substantial costs and/or restrictions on our operations and could adversely affect our business
7. 35Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business
8. 36We are subject to environmental regulation and potential exposure to environmental liabilities

RISKS RELATED TO OUR INDEBTEDNESS

1. 37We have debt principal and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations
2. 38Restrictions in our existing credit facilities, senior notes, and any future facilities or any other indebtedness we may incur in the future, limit our ability to take certain actions and could adversely affect our business, financial condition, results of operations, and the value of our common stock
3. 39Our use of interest rate hedging instruments could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations
4. 40If we default on our obligations under the instruments governing our indebtedness, we may not be able to make payments on our debt and our business and financial condition could be adversely affected
5. 41Adverse credit ratings could increase our costs of borrowing money and limit our access to capital markets and commercial credit
6. 42Our indebtedness exposes us to interest expense increases if interest rates increase
7. 43We may require additional capital in the future, which may not be available on favorable terms or at all

RISKS RELATED TO OUR SECURITIES

1. 44The price of our common stock may fluctuate substantially and your investment may decline in value
2. 45These and other factors may lower the market price of our common stock, regardless of our actual operating performance
3. 46Our internal controls over financial reporting may not be effective, which could have a significant and adverse effect on our business and reputation
4. 47To comply with the requirements of being a public company, we may undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff
5. 48Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price
6. 49Jeff Edwards has significant ownership of our common stock and may have interests that conflict with those of our other stockholders
7. 50Provisions 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
8. 51We pay dividends to holders of our common stock, but may reduce, suspend, or eliminate dividend payments in the future
9. 52If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline