10-Q

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

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

For the quarterly period ended March 31, 2016

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

For the transition period from to

Commission file number: 1-36870

TopBuild Corp.

(Exact name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation or
Organization) 47-3096382 (I.R.S. Employer
Identification No.)

260 Jimmy Ann Drive Daytona Beach, Florida (Address of Principal Executive Offices) 32114 (Zip Code)

(386) 304-2200

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes            ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

☒ Yes            ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer   ☐      Accelerated filer   ☐      Smaller reporting company   ☐

Non-accelerated filer ☒ (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes            ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Shares Outstanding at May 2, 2016
Common stock, par value $.01 per share	38,460,478

TOPBUILD CORP.

TABLE OF CONTENTS

		Page No.
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Equity	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
Part II.	Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signature		27
Index to Exhibits		28

2

PART I – FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

TOPBUILD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share data)

	As of
	March 31,		December 31,
	2016		2015
ASSETS
Current assets:
Cash and cash equivalents	$	108,150	$	112,848
Receivables, net of an allowance for doubtful accounts of $3,334 and $3,399 at March 31, 2016 and December 31, 2015, respectively		243,000		235,549
Inventories, net		108,016		118,701
Prepaid expenses and other current assets		6,096		13,263
Total current assets		465,262		480,361
Property and equipment, net		92,098		93,066
Goodwill		1,044,041		1,044,041
Other intangible assets, net		1,778		1,987
Deferred tax assets, net		20,549		20,549
Other assets		2,127		2,245
Total assets	$	1,625,855	$	1,642,249
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	223,308	$	253,311
Current portion of long-term debt		17,500		15,000
Accrued liabilities		65,527		58,369
Total current liabilities		306,335		326,680
Long-term debt		173,543		178,457
Deferred tax liabilities, net		181,251		181,254
Long-term portion of insurance reserves		38,641		39,655
Other liabilities		435		474
Total liabilities		700,205		726,520
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2016 and December 31, 2015		—		—
Common stock, $0.01 par value: 250,000,000 shares authorized; 38,480,200 and 38,268,375 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively		385		377
Treasury stock, 53,408 shares at March 31, 2016, at cost		(1,539)		—
Additional paid-in capital		839,312		838,976
Retained earnings		87,492		76,376
Total equity		925,650		915,729
Total liabilities and equity	$	1,625,855	$	1,642,249

See notes to our unaudited condensed consolidated financial statements.

3

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands except per common share data)

	Three Months Ended March 31,
	2016		2015
Net sales	$	414,024	$	358,460
Cost of sales		324,569		284,644
Gross profit		89,455		73,816
Selling, general, and administrative expense		69,688		74,963
Operating profit (loss)		19,767		(1,147)
Other income (expense), net:
Interest expense		(1,673)		(3,161)
Other, net		75		8
Other expense, net		(1,598)		(3,153)
Income (loss) from continuing operations before income taxes		18,169		(4,300)
Income tax (expense) benefit from continuing operations		(7,053)		500
Income (loss) from continuing operations		11,116		(3,800)
Income from discontinued operations, net		—		1
Net income (loss)	$	11,116	$	(3,799)
Income (loss) per common share:
Basic:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)
Diluted:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)

See notes to our unaudited condensed consolidated financial statements.

4

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Three Months Ended March 31,
	2016		2015
Net Cash From (For) Operating Activities:
Net income (loss)	$	11,116	$	(3,799)
Adjustments to reconcile net income (loss) to net cash from (for) operating activities:
Depreciation and amortization		2,895		3,053
Share-based compensation		1,600		808
Loss on sale or abandonment of property and equipment		950		97
Provision for bad debt expense		1,054		944
Loss from inventory obsolescence		335		358
Deferred income taxes, net		(3)		(500)
Changes in certain assets and liabilities:
Receivables, net		(8,505)		2,047
Inventories, net		10,350		2,223
Prepaid expenses and other current assets		7,167		450
Accounts payable		(29,846)		(31,265)
Long-term portion of insurance reserves		(1,014)		1,713
Accrued liabilities		7,158		5,232
Other, net		96		—
Net cash from (for) operating activities		3,353		(18,639)
Cash Flows From (For) Investing Activities:
Purchases of property and equipment		(2,900)		(2,298)
Proceeds from sale of property and equipment		76		369
Other, net		68		140
Net cash for investing activities		(2,756)		(1,789)
Cash Flows From (For) Financing Activities:
Net transfer from Former Parent		—		21,062
Repayment of long-term debt		(2,500)		—
Taxes withheld and paid on employees' equity awards		(1,256)		—
Repurchase of shares of common stock		(1,539)		—
Net cash (for) from financing activities		(5,295)		21,062
Cash and Cash Equivalents
(Decrease) increase for the period		(4,698)		634
Beginning of year		112,848		2,965
End of period	$	108,150	$	3,599
Supplemental disclosure of noncash investing activities:
Accruals for property and equipment	$	426	$	—

See notes to our unaudited condensed consolidated financial statements.

5

TOPBUILD CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(In thousands except share data)

	Common		Treasury		Additional				Former
	Stock		Stock		Paid-in		Retained		Parent
	($0.01 par value)		at cost		Capital		Earnings		Investment		Equity
Balance at December 31, 2014	$	—	$	—	$	—	$	—	$	952,292	$	952,292
Net loss		—		—		—		—		(3,799)		(3,799)
Net transfers from Former Parent		—		—		—		—		24,770		24,770
Balance at March 31, 2015	$	—	$	—	$	—	$	—	$	973,263	$	973,263
Balance at December 31, 2015	$	377	$	—	$	838,976	$	76,376	$	—	$	915,729
Net income		—		—		—		11,116		—		11,116
Share-based compensation		—		—		1,600		—		—		1,600
Issuance of restricted share awards under long-term equity incentive plan		8		—		(8)		—		—		—
Repurchase of 53,408 shares of common stock pursuant to Share Repurchase Program		—		(1,539)		—		—		—		(1,539)
50,728 shares of common stock withheld to satisfy statutory withholding requirements		—		—		(1,256)		—		—		(1,256)
Balance at March 31, 2016	$	385	$	(1,539)	$	839,312	$	87,492	$	—	$	925,650

See notes to our unaudited condensed consolidated financial statements.

6

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION

On June 30, 2015 (the “Effective Date”), Masco Corporation (“Masco” or the “Former Parent”) completed the separation (the “Separation”) of its Installation and Other Services businesses (the “Services Business”) from its other businesses.  On the Effective Date, TopBuild Corp. (“TopBuild” or the “Company”), a Delaware corporation formed in anticipation of the Separation, became an independent public company which holds, through its subsidiaries, the assets and liabilities associated with the Services Business.  The Separation was achieved through the distribution of 100 percent of the outstanding capital stock of TopBuild to holders of Masco common stock.  References to “TopBuild,” the “Company,” “we,” “our,” and “us” refer to TopBuild Corp. and its consolidated subsidiaries.

These condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Prior to the Separation, the consolidated financial statements of TopBuild were prepared on a stand-alone basis and reflect the historical results of operations, financial position, and cash flows of Masco’s Services Business, including an allocable portion of corporate costs. 

We report our business in two segments: Installation and Distribution.  Our Installation segment principally includes the sale and installation of insulation and other building products.  Our Distribution segment principally includes the distribution of insulation and other building products.  Our segments are based on our operating units, for which financial information is regularly evaluated by our corporate operating executives.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of March 31, 2016, our results of operations for the three months ended March 31, 2016, and cash flows for the three months ended March 31, 2016.  The Condensed Consolidated Balance Sheet at December 31, 2015, was derived from our audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“U.S. GAAP”).

2. ACCOUNTING POLICIES

Financial Statement Presentation.  The condensed consolidated financial statements have been developed in conformity with U.S. GAAP, which requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from these estimates.  Our financial statements for the periods prior to the Separation have been derived from the financial statements and accounting records of Masco using the historical results of operations and historical basis of assets and liabilities of the Services Business, and reflect Masco’s net investment in the Services Business. 

All intercompany transactions between TopBuild entities have been eliminated. Transactions between TopBuild and Masco prior to the Separation, with the exception of purchase transactions, are reflected in the Condensed Consolidated Statements of Cash Flows as a financing activity in “Net transfer from Former Parent” and in the Condensed Consolidated Statements of Changes in Equity as “Former Parent Investment.”

The accompanying condensed consolidated financial statements for the periods prior to the Separation include allocations of general corporate expenses incurred by Masco for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs.  These general corporate expenses were allocated to TopBuild on the basis of sales.  Total allocated general corporate costs were $7.9 million for the three months ended March 31, 2015.  These costs were included in selling, general, and administrative expenses.

7

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Prior to the Separation, Masco incurred certain operating expenses on behalf of the Services Business that were allocated to TopBuild based on direct benefit or usage.  These allocated operating expenses were $4.4 million for the three months ended March 31, 2015.  These costs were included in selling, general, and administrative expenses.  An estimate of these operating expenses was allocated to each of TopBuild’s reporting segments based on a percentage of sales.

For the periods prior to the Separation, these condensed consolidated financial statements may not reflect the actual expenses that would have been incurred had we operated as a stand-alone company and may not reflect the consolidated results of operations, financial position, and cash flows had we operated as a stand-alone company.  Actual costs that would have been incurred if we had operated as a stand-alone company prior to the Separation would have depended on multiple factors, including organizational structure and strategic decisions made in various areas, including, without limitation, information technology and infrastructure.

During the quarter ended March 31, 2015, we identified an error related primarily to the misallocation of a favorable legal settlement to general corporate expenses of TopBuild in the fourth quarter of 2014.  The impact of the error was to understate the allocation of corporate expenses reported as selling, general, and administrative expense and overstate operating profit by $1.9 million.  The error was not considered material to the previously reported 2014 financial statements.  The Company recorded the correction of the error by an out-of-period adjustment in the first quarter of 2015, which is therefore reflected in the three months ended March 31, 2015, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows.

Share-based Compensation.  Our share-based compensation program currently consists of restricted share awards (“RSAs”) and stock option awards (“Options”).  Share-based compensation is reported in selling, general, and administrative expense.

The following table details our award types and accounting policies:

Award Type:	Fair Value Determination	Vesting	Expense Recognition‡	Expense Measurement
Restricted Share Awards
Service Condition	Closing stock price on date of grant	Ratably; 3 or 5 years	Straight-line	Fair value at grant date
Performance Condition	Closing stock price on date of grant	Cliff; 3 years	Straight-line; Adjusted based on meeting or exceeding performance targets	Evaluated quarterly; 0 - 200% of fair value at grant date depending on performance
Market Condition	Monte-Carlo Simulation	Cliff; 3 years	Straight-line; Recognized even if condition is not met	Fair value at grant date
Stock Options†	Black-Scholes Options Pricing Model	Ratably; 3 or 5 years	Straight-line	Fair value at grant date

†Stock options expire no later than 10 years after the grant date.

‡Expense is reversed if award is forfeited prior to vesting.

Recently Issued Accounting Pronouncements:In May 2014 the Financial Accounting Standards Board (“FASB”) issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”).  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries.  ASC 606 is effective for us for annual periods beginning January 1, 2018.  We are currently evaluating the impact the adoption of this new standard will have on our results of operations.

8

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In July 2015, the FASB issued Accounting Standards Update 2015-11 (“ASU 2015-11”) “Simplifying the Measurement of Inventory.”  Under the amendment, ASU 2015-11, inventory should be measured at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  This guidance is effective for fiscal years beginning after December 15, 2016.  Early adoption is permitted; however, we do not anticipate adopting this standard until the first quarter of 2017.  We do not anticipate the adoption of this amendment will have a material impact on our financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”), “Leases.”  This standard requires a lessee to recognize most leases on their balance sheet.  Companies are required to use a modified retrospective transition method for all existing leases.  This standard is effective for annual periods beginning after December 15, 2018, and interim periods therein.  Early adoption is permitted.  We have not yet selected an adoption date nor have we determined the effect on our financial position or results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting.”  This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  Under this guidance, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement.  This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of 2017.  Early adoption is permitted.  We have not yet selected an adoption date nor have we determined the effect on our financial position or results of operations.

3. GOODWILL AND OTHER INTANGIBLES

The changes in the carrying amount of goodwill for the three months ended March 31, 2016, by segment, were as follows, in thousands:

	Gross Goodwill		Gross Goodwill		Accumulated		Net Goodwill
	at		at		Impairment		at
	December 31, 2015		March 31, 2016		Losses		March 31, 2016
Installation	$	1,389,775	$	1,389,775	$	(762,021)	$	627,754
Distribution		416,287		416,287		—		416,287
Total	$	1,806,062	$	1,806,062	$	(762,021)	$	1,044,041

Other intangible assets, net includes the carrying value of our definite-lived intangible assets of $1.8 million (net of accumulated amortization of $18.1 million) at March 31, 2016, and $2.0 million (net of accumulated amortization of $17.9 million) at December 31, 2015.

4. DEPRECIATION AND AMORTIZATION

The following table sets forth our depreciation and amortization expense for the three months ended March 31, 2016 and 2015, in thousands:

	Three Months Ended March 31,
	2016		2015
Depreciation	$	2,686	$	2,782
Amortization		209		271
Total	$	2,895	$	3,053

9

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

5. LONG-TERM DEBT

In connection with the Separation, the Company and its wholly-owned domestic subsidiaries (collectively, the “Guarantors”) entered into a credit agreement and related collateral and guarantee documentation (collectively, the “Credit Agreement”) with PNC Bank, National Association, as administrative agent, and the other lenders and agents party thereto.  The Credit Agreement was executed by the parties thereto on June 9, 2015, with an effective date of June 30, 2015.

The Credit Agreement consists of a senior secured term loan facility (“term loan facility”) of $200 million and a senior secured revolving credit facility (“revolving facility”) which provides borrowing availability of up to $125 million.  Together, the term loan facility and revolving facility are referred to as the credit facility.  Additional borrowing capacity under the credit facility may be accessed by the Company in an aggregate amount not to exceed $100 million without the consent of the lenders, subject to certain conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity).  The credit facility is scheduled to mature on June 30, 2020.

The revolving facility includes a $100 million sublimit for the issuance of letters of credit and a $15 million sublimit for swingline loans.  Swingline loans and letters of credit issued under the revolving facility reduce the availability under the revolving facility.

The proceeds of the $200 million term loan facility were used to finance a cash distribution to Masco in connection with the Separation.  We expect to use the borrowing capacity under the revolving facility from time to time for working capital and funds for general corporate purposes. 

Interest payable on the credit facility is based on either:

- the London interbank offered rate (“LIBOR”), adjusted for statutory reserve requirements (the “Adjusted LIBOR Rate”); or

- the Base Rate, which is defined as the highest of (a) the prime rate, (b) the federal funds open rate plus 0.50 percent, and (c) the daily LIBOR rate for a one-month interest period plus 1.0 percent,

plus, (A) in the case of Adjusted LIBOR Rate borrowings, applicable margins ranging from 1.00 percent to 2.00 percent per annum, and (B) in the case of Base Rate borrowings, spreads ranging from 0.00 percent to 1.00 percent per annum, depending on, in each of (A) and (B), the Company’s Total Leverage Ratio, defined as the ratio of debt to EBITDA, ranging from less than or equal to 1.00:1.00 to greater than 2.50:1.00.  The interest rate period with respect to the Adjusted LIBOR Rate interest rate option can be set at one-, two-, three-, or six-months, and in certain circumstances one-week or 12-months, as selected by the Company in accordance with the terms of the Credit Agreement.  The interest rate as of March 31, 2016, was 2.44 percent.

The Company shall make payments on the outstanding principal amount of the term loan in quarterly principal installments based on annual amortization of (a) for the first year, 5 percent, (b) for the second, third, and fourth years, 10 percent per year, and (c) for the fifth year, 15 percent, with the remaining balance payable on the scheduled maturity date of the term loan.

The following table reconciles the principal balance of our long-term debt to our Condensed Consolidated Balance Sheets, in thousands:

	As of
	March 31,		December 31,
	2016		2015
Current portion of long-term debt	$	17,500	$	15,000
Long-term portion of long-term debt		175,000		180,000
Unamortized debt issuance costs		(1,457)		(1,543)
Long-term debt	$	191,043	$	193,457

10

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Borrowings under the credit facility are prepayable at the Company’s option without premium or penalty.  The Company is required to prepay the term loan with the net cash proceeds of certain asset sales, debt issuances, or casualty events, subject to certain exceptions.

The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes.  In addition, the Credit Agreement requires us to maintain a net leverage ratio (defined as the ratio of debt (less certain cash) to EBITDA that is less than (i) from the date the Credit Agreement is entered into through December 31, 2015, 3.50:1.00, (ii) from March 31, 2016 through September 30, 2016, 3.25:1.00, and (iii) from and after December 31, 2016, 3.00:1.00).  In addition, the Credit Agreement requires us to maintain a minimum fixed charge coverage ratio of 1.10:1.00.  The Credit Agreement also contains customary events of default.  We were compliant with all covenants as of March 31, 2016.

All obligations under the Credit Agreement are guaranteed by the Guarantors, and all obligations under the Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Company and the Guarantors.

We had standby letters of credit outstanding of approximately $55.1 million as of March 31, 2016.  The standby letters of credit were issued to secure financial obligations related to our workers compensation, general insurance, and auto liability programs.

6. FAIR VALUE MEASUREMENTS

The fair value measurement standard defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (referred to as an “exit price”).  Authoritative guidance on fair value measurements and disclosures clarifies that a fair value measurement for a liability should reflect the entity’s non-performance risk.  In addition, a fair value hierarchy is established that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Fair Value on Recurring Basis

The carrying values of cash and cash equivalents, receivables, net, and accounts payable are considered to be representative of their respective fair values due to the short-term nature of these instruments. 

Fair Value on Non-Recurring Basis

Fair value measurements were applied to our long-term debt.  The carrying value of our long-term debt approximates the fair market value primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since we assumed our debt obligations under the credit facility on June 30, 2015.  In addition, due to the floating-rate nature of our long-term debt, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation. 

During the periods presented, there were no transfers between fair value hierarchical levels.

11

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

7. SEGMENT INFORMATION

Information about us by segment is as follows, in thousands:

	Three Months Ended March 31,
	2016		2015		2016		2015
	Net Sales				Operating Profit (Loss) (2)
Our operations by segment were (1):
Installation	$	272,878	$	233,363	$	13,506	$	(1,032)
Distribution		160,888		144,611		14,333		11,377
Intercompany eliminations and other adjustments (3)		(19,742)		(19,514)		(3,352)		(3,589)
Total	$	414,024	$	358,460		24,487		6,756
General corporate expense, net (4)						(4,720)		(7,903)
Operating profit (loss), as reported						19,767		(1,147)
Other expense, net						(1,598)		(3,153)
Income (loss) from continuing operations before income taxes					$	18,169	$	(4,300)

(1) All of our operations are located in the United States.

(2) Segment operating profit for the three months ended March 31, 2016, includes an allocation of general corporate expenses attributable to the operating segments which is based on direct benefit or usage (such as salaries of corporate employees who directly support the segment).  Segment operating profit for the three months ended March 31, 2015, includes an estimate of general corporate expenses calculated based on a percentage of sales.  For the three months ended March 31, 2015, the $0.4 million difference between estimated expenses and actual corporate expenses is recorded in intercompany eliminations and other adjustments.

(3) Intercompany eliminations include the elimination of intercompany profit of $3.4 million for each of the three months ended March 31, 2016 and 2015.  Other adjustments primarily include differences between estimated and actual corporate costs allocated to the segments for the three months ended March 31, 2015, as noted in footnote (2) above.

(4) General corporate expense, net included those expenses not specifically attributable to our segments.

12

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

8. OTHER COMMITMENTS AND CONTINGENCIES

Litigation.  We are subject to claims, charges, litigation, and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defects, insurance coverage, personnel and employment disputes, antitrust, and other matters, including class actions.  We believe we have adequate defenses in these matters and that the likelihood the outcome of these matters would have a material adverse effect on us is remote.  However, there is no assurance that we will prevail in these matters, and we could in the future incur judgments, enter into settlements of claims, or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.

Other Matters.  We enter into contracts, which include customary indemnifications that are standard for the industries in which we operate.  Such indemnifications include customer claims against builders for issues relating to our products and workmanship.  In conjunction with divestitures and other transactions, we occasionally provide customary indemnifications relating to various items including: the enforceability of trademarks; legal and environmental issues; and asset valuations.  We evaluate the probability that amounts may be incurred and appropriately record an estimated liability when deemed probable.

We occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods.  Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed.  Other types of bonds outstanding are principally license and insurance related.

9. INCOME TAXES

Our effective tax rates were 38.8 percent and 11.6 percent for the three months ended March 31, 2016 and 2015, respectively.  The lower rate in 2015 was primarily due to a decrease in our valuation allowance resulting from a partial use of our Federal net operating loss carryforward.

For 2015 activity through the Separation, we file our tax returns as a member of the Masco consolidated group for U.S. Federal and certain State jurisdictions.  As a result, certain tax attributes, primarily the Federal and State net operating loss carryforwards, were treated as assets of the Masco consolidated group, which they were able to utilize through December 31, 2015.  Masco fully utilized the Federal net operating loss and certain State net operating losses by the end of 2015.

In the fourth quarter of 2015, we released all but $0.8 million of our valuation allowance against U.S. Federal and certain state deferred tax assets, due primarily to a return to sustainable operating profitability.

10. INCOME (LOSS) PER SHARE

Basic net income per share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents.

Diluted net income per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method.

For comparative purposes, thecomputation of basic and diluted income per common share for prior year periods presented was calculated using the shares distributed at Separation.  On June 30, 2015, we distributed 37.7 million shares of our common stock to Masco shareholders in conjunction with the Separation.

13

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Basic and diluted income (loss) per share were computed as follows (in thousands except share and per share amounts):

	Three Months Ended March 31,
	2016		2015
Income (loss) from continuing operations	$	11,116	$	(3,800)
Income from discontinued operations, net		—		1
Net income (loss) - basic and diluted	$	11,116	$	(3,799)
Weighted average number of common shares outstanding - basic		37,761,423		37,667,947
Dilutive effect of common stock equivalents:
RSAs with service-based conditions		113,683		—
RSAs with market-based conditions		—		—
RSAs with performance-based conditions		—		—
Stock options		24,004		—
Weighted average number of common shares outstanding - diluted		37,899,110		37,667,947
Basic income (loss) per common share:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)
Diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)

The following table summarizes the shares excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive:

	Three Months Ended March 31,
	2016
Anti-dilutive common stock equivalents:
RSAs with service-based conditions		99,734
RSAs with market-based conditions		25,293
RSAs with performance-based conditions		—
Stock options		484,284
Total anti-dilutive common stock equivalents:		609,311

11. SHARE-BASED COMPENSATION

Prior to the Separation, our employees participated in the Masco share-based compensation program and received restricted share awards and stock options. Effective July 1, 2015, our employees participate in the 2015 TopBuild Long-Term Incentive Plan (the “2015 Plan”).  The 2015 Plan authorizes the Board of Directors to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents.  No more than 4.0 million shares of common stock may be issued under the 2015 Plan. 

Prior to the Separation, share-based compensation expense was allocated to TopBuild based on the awards and options previously granted by Masco to TopBuild employees.  Outstanding, unvested Masco stock options and restricted share awards held by employees of TopBuild as of June 30, 2015, were forfeited upon Separation and replaced with TopBuild long-term incentive awards, issued under the 2015 Plan, immediately subsequent to the Separation.  The replacement awards are subject to the same terms and conditions in effect prior to the Separation and are of generally equivalent value.

14

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Included in selling, general, and administrative expenses is share-based compensation expense of $1.6 million and $0.8 million for the three months ended March 31, 2016 and 2015, respectively.

The following table presents a summary of our share-based compensation activity for the three months ended March 31, 2016 (in thousands, except per share amounts):

	Restricted Share Awards			Stock Options
	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Balance December 31, 2015	586.6	$	21.97	387.6	$	9.35	$	24.03	$	2,611.7
Granted	317.2		28.41	409.3		10.20		26.30
Converted/Exercised	(152.1)		19.16	—		—		—
Forfeited	(1.2)		23.20	—		—		—
Balance March 31, 2016	750.5	$	25.25	796.9	$	9.79	$	25.20	$	3,620.4
Exercisable March 31, 2016				71.7	$	6.69	$	16.86	$	923.9

As of March 31, 2016, there was $16.8 million of unrecognized compensation expense related to unvested restricted share awards; such awards had a weighted average remaining vesting period of 2.2 years.

As of March 31, 2016, there was $6.8 million of unrecognized compensation expense related to unvested stock options; such options had a weighted average remaining vesting period of 2.3 years and weighted average remaining contractual life of 9.4 years. 

Our RSAs with performance-based conditions are evaluated on a quarterly basis with adjustments to compensation expense based on the likelihood of the performance target being achieved or exceeded.  The following table shows the range of payouts and the related expense for our RSAs with performance-based conditions, dollars in thousands:

			Payout Ranges and related expense
RSAs with performance-based conditions	Grant Date Fair Value		0%		25%		100%		200%
February 22, 2016	$	2,351.7	$	—	$	587.9	$	2,351.7	$	4,703.4

The fair value of our RSAs with a market-based condition granted under the 2015 Plan was determined using a Monte Carlo simulation.  The following are key inputs in the Monte Carlo analysis:

	2016
Remaining measurement period (years)		2.86
Risk free interest rate		0.90	%
Dividend yield		0.00	%
Estimated fair value of market-based RSAs granted	$	33.77

The fair values of stock options granted under the 2015 Plan were calculated using the Black-Scholes Options Pricing Model.  The following table presents the assumptions used to estimate the fair values of options granted in 2016 and 2015:

	2016			2015
Risk free interest rate		1.51	%		1.82	%
Expected volatility		38.00	%		37.00	%
Expected life (in years)		6.00			6.00
Dividend yield		0.00	%		0.00	%
Estimated fair value of options granted	$	10.20		$	10.44

15

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 12. SHARE REPURCHASE PROGRAM

On March 1, 2016, our Board of Directors authorized a share repurchase program (the “Share Repurchase Program”), pursuant to which we may purchase up to $50 million of our common stock.  Share repurchases may be executed through various means including, without limitation, open market purchases, privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan.  The Share Repurchase Program does not obligate us to purchase any shares and expires in one year.  In its discretion, the Board of Directors may terminate, modify, or amend the Share Repurchase Program at any time.

During the three months ended March 31, 2016, we repurchased 53,408 shares of our common stock at a cost of approximately $1.5 million.

NOTE 13. CLOSURE COSTS

We continuously evaluate our national footprint to ensure we are strategically located throughout the U.S. to serve our customers and position ourselves for continued growth.  As a result of this evaluation, management approved a plan to close 13 locations within our Installation and Distribution segments during the first and second quarters of 2016.  In conjunction with this evaluation, we eliminated certain positions at our corporate headquarters located in Daytona Beach, Florida.  We recognize expenses related to branch closures and position eliminations at the time of announcement or notification.  Such costs may include termination and other severance benefits, lease abandonment costs, and other contract termination costs.  Closure costs are accrued on our Condensed Consolidated Balance Sheets as part of accrued liabilities and reflected in our Condensed Consolidated Statements of Operations as selling, general, and administrative expense.  Unpaid amounts noted as of March 31, 2016, are expected to be paid within the next 12 months.

The following table details our total estimated closure costs by cost type and segment related to the above closures and position eliminations, dollars in thousands:

Segment / Cost Type	Closure Costs Liability at December 31, 2015		Closure Costs Incurred for the Three Months Ended March 31, 2016		Cash Payments for the Three Months Ended March 31, 2016		Closure Costs Liability at March 31, 2016
Installation:
Severance	$	—	$	582.7	$	(71.9)	$	510.8
Lease abandonment		—		212.6		(26.4)		186.2
Total Installation:		—		795.3		(98.3)		697.0
Distribution:
Severance		—		12.6		(12.6)		—
Lease abandonment		—		70.0		—		70.0
Total Distribution:		—		82.6		(12.6)		70.0
Corporate:
Severance		—		97.8		—		97.8
Total Corporate:		—		97.8		—		97.8
Consolidated:
Severance		—		693.1		(84.5)		608.6
Lease abandonment		—		282.6		(26.4)		256.2
Total Consolidated:	$	—	$	975.7	$	(110.9)	$	864.8

16

TOPBUILD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 14. SUBSEQUENT EVENTS

On May 9, 2016, the Company and its lenders executed an amendment to the Credit Agreement (“the Amendment”).  The Amendment provides for the exclusion of up to $50 million of completed share repurchases (on a trailing twelve month basis) from the Credit Agreement’s definition of “Fixed Charges” for the purposes of determining the Company’s compliance with the quarterly Fixed Charge Coverage Ratio (“FCCR”) financial covenant.  The Amendment provides for an initial exclusion of up to $25 million and allows for the exclusion of an additional $25 million of completed share repurchases from the FCCR calculation provided that the Company’s Total Leverage Ratio is below 2.0X at the time of such share repurchase and after giving pro forma effect to any such share repurchase. 

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

TopBuild Corp., headquartered in Daytona Beach, Florida, is the leading installer and distributor of insulation products to the United States construction industry, based on revenue.  Prior to June 30, 2015, we operated as a subsidiary of Masco Corporation.  We were incorporated in Delaware in February 2015 as Masco SpinCo Corp. and we changed our name to TopBuild Corp. on March 20, 2015.  On June 30, 2015, the separation from Masco (the “Separation”) was completed and on July 1, 2015, we began trading on the NYSE under the symbol “BLD.”

We operate in two segments:  Installation (TruTeam) and Distribution (Service Partners).  Through our Installation segment, we provide insulation installation services nationwide through our TruTeam contractor services business which has over 175 branches located in 40 states.  We install various insulation applications, including fiberglass batts and rolls, blown-in loose fill fiberglass, blown-in loose fill cellulose, and polyurethane spray foam.  Additionally, we install other building products, including rain gutters, garage doors, fireplaces, shower enclosures, and closet shelving.  We handle every stage of the installation process, including material procurement supplied by leading manufacturers, project scheduling and logistics, multi-phase professional installation, and installation quality assurance. 

Through our Distribution segment, we distribute insulation and other building products, including rain gutters, fireplaces, closet shelving, and roofing materials through our Service Partners business, which has over 70 branches in 33 states.  Our Service Partners customer base consists of thousands of insulation contractors of all sizes, gutter contractors, weatherization contractors, other contractors, dealers, metal building erectors, and modular home builders.

For additional details pertaining to our operating results by segment see Note 7 – Segment Information – in the notes to the unaudited condensed consolidated financial statements, which is incorporated herein by reference.

FIRST QUARTER 2016 VERSUS  FIRST QUARTER 2015

The following discussion and analysis contains forward-looking statements and should be read in conjunction with the unaudited condensed consolidated financial statements, the notes therein, and the section entitled “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q.

The following table sets forth our net sales, gross profit, operating profit, and margins, as reported in our Consolidated Statements of Operations, in thousands:

	Three Months Ended March 31,
	2016			2015
Net sales	$	414,024		$	358,460
Cost of sales		324,569			284,644
Cost of sales ratio		78.4	%		79.4	%
Gross profit		89,455			73,816
Gross profit margin		21.6	%		20.6	%
Selling, general, and administrative expense		69,688			74,963
Selling, general, and administrative expense to sales ratio		16.8	%		20.9	%
Operating profit (loss)		19,767			(1,147)
Operating profit margin		4.8	%		(0.3)	%
Other expense, net		(1,598)			(3,153)
Income tax (expense) benefit from continuing operations		(7,053)			500
Income (loss) from continuing operations	$	11,116		$	(3,800)
Net margin on continuing operations		2.7	%		(1.1)	%

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We report our financial results in accordance with generally accepted accounting principles (“GAAP”) in the United States.  However, we believe that certain non-GAAP performance measures and ratios used in managing the business may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods.  Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, our financial results reported in accordance with GAAP.

Sales and Operations

Net sales increased 15.5 percent for the three months ended March 31, 2016, from the comparable period of 2015.  The increase was principally driven by sales volume growth in both the Installation and Distribution segments.  Our sales benefited from mild winter weather conditions which contributed to increased volume in residential new construction and commercial construction activity, one additional business day compared to the same period in the prior year, increased insulation sales volume driven by changing building code requirements, as well as increased selling prices.

Our gross profit margin was 21.6 percent for the three months ended March 31, 2016, compared with 20.6 percent for the comparable period of 2015.  Gross profit margins were positively impacted by favorable leverage on higher sales volume, partially offset by higher insurance claims.

Selling, general, and administrative expense, as a percent of sales, was 16.8 percent for the three months ended March 31, 2016, compared with 20.9 percent for the comparable period of 2015.  Reduced selling, general, and administrative expense as a percent of sales was a result of lower corporate expenses, increased sales volume, and benefits associated with cost savings initiatives, partially offset by higher share-based compensation expense, losses on fixed asset disposals, and higher rationalization charges related to closure costs and the costs associated with position eliminations, as noted below.  Selling, general, and administrative expense for the three months ended March 31, 2015, included allocations of Masco general corporate expenses of $7.9 million. 

Operating margins for the three months ended March 31, 2016 and 2015, were 4.8 percent and (0.3) percent, respectively.  Operating margins before general corporate expenses were 5.9 percent and 1.9 percent for the three months ended March 31, 2016 and 2015, respectively.  Operating margins were positively impacted by increased sales volume, lower corporate expenses, and benefits associated with cost savings initiatives, partially offset by higher insurance claims, share-based compensation expense, and losses on fixed asset disposals.

Closure and Related Costs

We incurred expense of $1.0 million during the three months ended March 31, 2016, related to management’s approval to close 13 locations within our Installation and Distribution segments and elimination of certain positions at our corporate headquarters.  We anticipate recovering these costs within the next 12 months.

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Business Segment Results

The following table sets forth our net sales and operating profit margins by business segment, in thousands:

	Three Months Ended March 31,						Percent Change
	2016			2015			2016 vs. 2015
Sales by business segment:
Installation	$	272,878		$	233,363		16.9	%
Distribution		160,888			144,611		11.3	%
Intercompany eliminations and other adjustments		(19,742)			(19,514)
Net sales	$	414,024		$	358,460		15.5	%
Operating profit (loss) by business segment:
Installation	$	13,506		$	(1,032)		1,408.7	%
Distribution		14,333			11,377		26.0	%
Intercompany eliminations and other adjustments		(3,352)			(3,589)
Operating profit before general corporate expense		24,487			6,756		262.4	%
General corporate expense, net		(4,720)			(7,903)		40.3	%
Operating profit (loss)	$	19,767		$	(1,147)		1,823.5	%
Operating profit margins:
Installation		4.9	%		(0.4)	%
Distribution		8.9	%		7.9	%
Operating profit margin before general corporate expense		5.9	%		1.9	%
Operating profit margin		4.8	%		(0.3)	%

Installation

Sales

Sales in the Installation segment increased $39.5 million, or 16.9 percent, for the three months ended March 31, 2016, compared to the same period in 2015.  Mild winter weather conditions contributed to increased sales volume, which increased sales by 14.4 percent, related to a higher level of activity in new home construction and an increased sales volume of commercial installation, as well as one additional business day compared to the same period in the prior year.  Sales also increased 3.0 percent due to increased selling prices.

Operating results

Operating margins in the Installation segment for the three months ended March 31, 2016 and 2015, were 4.9 percent and (0.4) percent, respectively.  Operating margins were positively impacted by increased sales volume, higher selling prices, and related absorption of fixed costs, the benefits associated from cost savings initiatives, and lower corporate expenses which were allocated to the segments based on direct benefit or usage, partially offset by higher insurance claims, current rationalization charges related to the closure costs noted above, and losses on fixed asset disposals.

Distribution

Sales

Sales in the Distribution segment increased $16.3 million, or 11.3 percent, for the three months ended March 31, 2016, compared to the same period in 2015.  Mild winter weather conditions contributed to increased sales volume, which increased sales by 13.1 percent, as well as one additional business day compared to the same period in the prior year, partially offset by a 1.9 percent decrease in sales as a result of lower selling prices.

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Operating results

Operating margins in the Distribution segment for the three months ended March 31, 2016 and 2015, were 8.9 percent and 7.9 percent, respectively.  Operating margins were positively impacted by increased volume and related absorption of fixed costs, as well as benefits associated with cost savings initiatives, partially offset by a decrease in selling prices.

OTHER ITEMS

Other expense, net

Interest expense was $1.7 million and $3.2 million for the three months ended March 31, 2016 and 2015, respectively. Prior to the Separation, interest expense was allocated by Masco and as such, this expense is not indicative of our future interest expense.  Utilizing our current interest rate of 2.44 percent as of March 31, 2016, our expected interest expense, including the amortization of debt issuance costs, is estimated to be $3.7 million for the remaining nine months of 2016.

Income tax (expense) benefit from continuing operations

Income tax (expense) benefit from continuing operations was $(7.1) million or 38.8 percent for the three months ended March 31, 2016 compared with $0.5 million or 11.6 percent for the three months ended March 31, 2015.  The lower 2015 rate was primarily due to the decrease in valuation allowance resulting from the partial use of the Federal net operating loss carryforward.

Cash Flows and Liquidity

Significant sources (uses) of cash and cash equivalents for the three months ended March 31, 2016 and 2015, are summarized as follows, in thousands:

	Three Months Ended March 31,
	2016			2015
Net cash from (for) operating activities	$	3,353		$	(18,639)
Purchases of property and equipment		(2,900)			(2,298)
Proceeds from sale of property and equipment		76			369
Other investing, net		68			140
Net transfer from Former Parent		—			21,062
Repayment of long-term debt		(2,500)			—
Acquisition of common stock for tax withholding obligations		(1,256)			—
Repurchase of shares of common stock		(1,539)			—
Cash and cash equivalents (decrease) increase	$	(4,698)		$	634
Working capital (receivables, net plus inventories, less accounts payable) as a percentage of net sales for the trailing 12 months		7.6	%		8.1	%

As of March 31, 2016 and 2015, our working capital was 7.6 percent and 8.1 percent of net sales, respectively.  One of our objectives in managing working capital is to reduce working capital as a percentage of net sales.  Working capital was relatively flat, only increasing $3.6 million to $127.7 million at March 31, 2016, compared to March 31, 2015.  As such, the decrease in working capital as a percentage of net sales for the trailing 12 months ended March 31, 2016 and 2015 was primarily due to an increase of $135.2 million in trailing twelve-months sales.

The change in net cash from operating activities when comparing the three months ended March 31, 2016, to the comparable period in 2015 was primarily due to improved net income and a decrease in inventory (both of which related to an increase in sales), and a decrease in prepaid expenses and other current assets, partially offset by an increase in customer receivables resulting from higher sales.

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Net cash used for investing activities was $2.8 million for the three months ended March 31, 2016, primarily comprised of $2.9 million in purchases of property and equipment, partially offset by $0.1 million of proceeds from sale of property and equipment.  Net cash used for investing activities was $1.8 million for the three months ended March 31, 2015, primarily comprised of $2.3 million in purchases of property and equipment, partially offset by $0.4 million of proceeds from sale of property and equipment.

Net cash used for financing activities was $5.3 million for the three months ended March 31, 2016, primarily comprised of $2.5 million of repayments of our long-term debt, $1.5 million of repurchases of our common stock related to our $50 million share repurchase program announced in March 2016, and $1.3 million of purchases of common stock for tax withholding obligations related to the vesting of restricted share awards during the three months ended March 31, 2016.  Net cash from financing activities for the three months ended March 31, 2015, was comprised of $21.1 million in transfers from our Former Parent.

Prior to the Separation, we largely funded our growth through cash provided by our operations, combined with support from Masco, through its operating cash flows, its long-term debt, and its issuance of securities in the financial markets.

In June 2015, we entered into a Credit Agreement with a bank group.  The Credit Agreement consists of a senior secured term loan facility of $200 million, which was used to finance a $200 million cash distribution to Masco in connection with the Separation, and a senior secured revolving facility which provides for borrowing and/or standby letter of credit issuances of up to $125 million.  Additional borrowing capacity under the credit facility may be accessed by the Company without the consent of the lenders in an aggregate amount not to exceed $100 million, subject to certain conditions.

Following the Separation, we have access to liquidity through our cash from operations and available borrowing capacity under our credit facility.  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 debt service requirements, capital expenditures, and working capital for at least the next 12 months.  Cash flows are seasonally stronger in the third and fourth quarters as a result of increased new construction activity.

The following table summarizes our liquidity, in thousands:

	As of
	March 31,		December 31,
	2016		2015
Cash and cash equivalents	$	108,150	$	112,848
Revolving credit facility		125,000		125,000
Less: standby letters of credit		(55,096)		(55,096)
Available borrowings		69,904		69,904
Total liquidity	$	178,054	$	182,752

We occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods.  Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed.  We also have bonds outstanding for licensing and insurance.  The following table summarizes our outstanding bonds, dollars in thousands:

	As of
	March 31,		December 31,
	2016		2015
Performance bonds	$	20,789	$	19,475
Licensing, insurance, and other bonds		9,975		9,976
Total	$	30,764	$	29,451

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CRITICAL ACCOUNTING POLICIES

We prepare our condensed consolidated financial statements in conformity with GAAP.  The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of sales, costs, and expenses during the reporting period.  Actual results could differ from those estimates.  Our critical accounting policies have not changed materially from those previously reported in our Annual Report on Form 10-K for year ended December 31, 2015, as filed with the SEC on March 3, 2016.

APPLICATION OF NEW ACCOUNTING STANDARDS

Information regarding application of new accounting standards is incorporated by reference from Note 2 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

Statements contained in this report that reflect our views about our future performance constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as “will,” “would,” “anticipate,” “expect,” “believe,” or “intend,” the negative of these terms, and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements.  We caution you against unduly relying on any of these forward-looking statements.  Our future performance may be affected by our reliance on residential new construction, residential repair/remodel, and commercial construction; our reliance on third-party suppliers and manufacturers; our ability to attract, develop and retain talented personnel and our sales and labor force; our ability to maintain consistent practices across our locations; our ability to maintain our competitive position; and our ability to realize the expected benefits of the Separation.  We discuss many of the risks we face under the caption entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC.  Our forward-looking statements in this filing speak only as of the date of this filing.  Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them.  Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events, or otherwise.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Prior to the Separation, we participated in Masco’s centralized cash management program and were funded through an intercompany loan arrangement whereby Masco provided daily liquidity, as needed, to fund our operations.  As a result of this intercompany funding arrangement, prior to the Separation, we had no external indebtedness that exposed us to interest rate risk.  Our historical financial statements include standby letter of credit costs, as Masco allocated these costs to TopBuild in related party interest expense allocations.

On June 9, 2015, we entered into the Credit Agreement. The Credit Agreement consists of a senior secured term loan facility in the amount of $200 million and a senior secured revolving facility in the amount of $125 million.

Interest payable on both the term loan facility and revolving facility is based on a variable interest rate.  As a result, we are exposed to market risks related to fluctuations in interest rates on our outstanding indebtedness. Based on the current interest rate of 2.44 percent under the senior secured term loan facility, a 100 basis point increase in the interest rate would result in a $1.9 million increase in our annualized interest expense.  There was no outstanding balance under the revolving facility as of March 31, 2016.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer have concluded, based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

During the three months ended March 31, 2016, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  We continue to review and document our internal controls over financial reporting and may, from time to time, make changes aimed at enhancing their effectiveness. 

24

PART II – OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

None.

Item 1A. RISK FACTORS

There have been no material changes to our risk factors as previously disclosed in our Annual Report on Form 10-K as filed with the SEC on March 3, 2016.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information regarding the repurchase of Company common stock for the three months ended March 31, 2016 (in thousands, except share data):

Period	Total Number of Shares Purchased	Average Price Paid per Common Share		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 (a)
January 1 - January 31, 2016	—	$	—	—	$	—
February 1 - February 29, 2016	—	$	—	—	$	—
March 1 - March 31, 2016	53,408	$	28.81	53,408	$	48,461
Total	53,408	$	28.81	53,408	$	48,461

(a) On March 1, 2016, our Board of Directors authorized a share repurchase program, which we publicly announced on March 3, 2016 (the “Share Repurchase Program”), pursuant to which we may purchase up to $50 million of our common stock.  The Share Repurchase program does not obligate us to purchase any shares and expires in one year.  The Share Repurchase Program may be terminated, increased, or decreased by our Board of Directors at its discretion at any time.

During the three months ended March 31, 2016, we repurchased 53,408 shares of our common stock for approximately $1.5 million under the $50 million Share Repurchase Program.  All repurchases were made using cash resources.  Our common stock repurchases occurred on the open market pursuant to a Rule 10b5-1 plan.  Excluded from this disclosure are shares repurchased to settle statutory employee tax withholding related to the vesting of stock awards.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

25

Item 5. OTHER INFORMATION

As noted in Part 1.  Financial Information, Item 1: Note 14 – Subsequent Events, on May 9, 2016, the Company and its lenders executed an amendment to the Credit Agreement (the “Amendment”).  The Amendment provides for the exclusion of up to $50 million of completed share repurchases (on a trailing twelve month basis) from the Credit Agreement’s definition of “Fixed Charges” for the purposes of determining the Company’s compliance with the quarterly Fixed Charge Coverage Ratio (“FCCR”) financial covenant.  The Amendment provides for an initial exclusion of up to $25 million and allows for the exclusion of an additional $25 million of completed share repurchases from the FCCR calculation provided that the Company’s Total Leverage Ratio is below 2.0X at the time of such share repurchase and after giving pro forma effect to any such share repurchase.  The foregoing description of the Amendment is only a summary and is qualified in its entirety by reference to the full text of the Amendment, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Item 6. EXHIBITS

The Exhibits listed on the accompanying Index to Exhibits are filed or furnished (as noted on such Index) as part of this Form 10-Q and incorporated herein by reference.

26

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TOPBUILD CORP.
By:	/s/ John S. Peterson
Name:	John S. Peterson
Title:	Vice President and Chief Financial Officer

May 11, 2016

27

INDEX TO EXHIBITS

		Incorporated By Reference			Filed
Exhibit No.	Exhibit Title	Form	Exhibit	Filing Date	Herewith
10.1	1st Amendment to Credit Agreement, dated May 9, 2016, among TopBuild Corp. and PNC Bank, National Association, as administrative agent, and the other lenders and agents party thereto.				X
10.2	Amended and Restated TopBuild Corp. 2015 Long Term Stock Incentive Plan.				X
31.1	Principal Executive Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Principal Financial Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1†	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
32.2†	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.				X
101.SCH	XBRL Taxonomy Extension Schema Document.				X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.				X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.				X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				X
	†Furnished herewith.

28

EX-10.1

Exhibit 10.1

Execution Version

AMENDMENT NO. 1 TO CREDIT AGREEMENT

This AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”) is entered into as of May 9, 2016 (the “Effective Date”) among the following:  (i) TopBuild Corp., a Delaware corporation (the “Borrower”); (ii) the Lenders party hereto; and (iii) PNC Bank, National Association, as the administrative agent (the “Administrative Agent”).

RECITALS:

A.The Borrower, the Administrative Agent and the lenders from time to time party thereto (each a “Lender” and collectively, the “Lenders”) are parties to the Credit Agreement, dated as of June 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

B.The Borrower, the Administrative Agent and the Lenders party hereto desire to amend the Credit Agreement to modify certain provisions thereof.

AGREEMENT:

In consideration of the premises and mutual covenants herein and for other valuable consideration, the Borrower, the Administrative Agent and the Lenders party hereto agree as follows:

Section 1.  Definitions.  Unless otherwise defined herein, each capitalized term used in this Amendment and not defined herein shall be defined in accordance with the Credit Agreement.

Section 2.  Amendments

(a)Amendment to Section 1.01.  Section 1.01 of the Credit Agreement is hereby amended by replacing the definition of “Designated Hedge Agreement” with the following definition in lieu thereof:

“Designated Hedge Agreement” means any Hedge Agreement to which the Borrower or any of its Subsidiaries is a party and as to which a Secured Hedge Provider is a counterparty that, pursuant to a written instrument signed by the Borrower, has been designated as a Designated Hedge Agreement so that the Borrower’s or such Subsidiary’s counterparty’s credit exposure thereunder will be entitled to share in the benefits of a Guaranty and the Security Documents; provided that such Secured Hedge Provider or the Borrower shall have provided the Administrative Agent with written notice thereof on or prior to the date any of the foregoing is incurred, together with such supporting documentation as the Administrative Agent may have reasonably requested from the applicable Lender or its Affiliates with respect thereto or the Borrower.

(b)Amendment to Section 1.01.  Section 1.01 of the Credit Agreement is hereby amended by replacing the definition of “Fixed Charges” with the following definition in lieu thereof:

“Fixed Charges” means for any period of determination the sum of, without duplication, (i) cash Consolidated Interest Expense, (ii) cash tax expense, (iii) scheduled principal installments on Indebtedness for borrowed money (excluding, for the avoidance of doubt, voluntary or mandatory prepayments and any refinancing of such Indebtedness for borrowed money), (iv) cash Capital Distributions (excluding (x) the Spin-Off Dividend and (y) Excluded Capital Distributions) and (v) Capital Expenditures to the extent not financed with Long Term Indebtedness, in each case of the Borrower and its Subsidiaries (other than with respect to item (iv) which shall be solely of the Borrower) for such period determined and consolidated in accordance with GAAP.  For purposes of calculating

Fixed Charges for any period, if during such period the Borrower or any Subsidiary shall have consummated a Material Acquisition or a Material Disposition, Fixed Charges for such period shall be calculated after giving pro forma effect thereto in accordance with Section 1.05(b).

(c)Amendment to Section 1.01.  The following definition of Excluded Capital Distributions is hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order thereto:

“Excluded Capital Distributions” means (i) any repurchase of Equity Interests made pursuant to Section 7.06(c) in an aggregate amount not to exceed $25,000,000 during any four Fiscal Quarter period plus (ii) any additional repurchase of Equity Interests made pursuant to Section 7.06(c), if at the time of such repurchase and after giving pro forma effect to any such repurchase, (x) the Total Leverage Ratio of the Borrower and its Subsidiaries on a Pro Forma Basis is less than  2.00 to 1.00 and (y) the aggregate amount of all repurchases made pursuant to this clause (ii) in any four Fiscal Quarter period does not exceed $25,000,000.

Section 3.  Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

(i)this Amendment shall have been executed by the Borrower, each Subsidiary Guarantor, the Administrative Agent and the Required Lenders, and counterparts hereof as so executed shall have been delivered to the Administrative Agent;

(ii)immediately before and after giving effect to this Amendment, there shall exist no Default, Event of Default or event, which with the giving of notice or passage of time or both, would be an Event of Default;

(iii)all representations and warranties of the Credit Parties contained herein or in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties shall have been true and correct in all material respects as of the date when made; and

(iv)the Borrower shall have paid to the Administrative Agent (i) all legal fees and expenses of the Administrative Agent in connection with the preparation and negotiation of this Amendment and the other documents being executed or delivered in connection herewith and (ii) any other amounts due and payable by the Credit Parties under the Credit Agreement on or prior to the date hereof.

Section 4.  Miscellaneous.

4.1Representations and Warranties.   The Borrower and each Subsidiary Guarantor, by signing below, hereby represents and warrants to the Administrative Agent and the Lenders that:

(i)the Borrower and each Subsidiary Guarantor has the legal power and authority to execute and deliver this Amendment;

(ii)the officers executing this Amendment on behalf of the Borrower and each Subsidiary Guarantor have been duly authorized to execute and deliver the same and bind the Borrower or such Subsidiary Guarantor with respect to the provisions hereof;

(iii)the execution and delivery hereof by the Borrower or each Subsidiary Guarantor and the performance and observance by the Borrower and each Subsidiary Guarantor of the provisions hereof do not (x) violate or conflict with (A) the Organizational Documents of the Borrower or any Subsidiary Guarantor or (B) any law applicable to the Borrower or any Subsidiary Guarantor, except in the case of this clause (B), as would not reasonably be expected to have a Material Adverse Effect, or (y) result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against the Borrower or such Subsidiary Guarantor;

(iv)no Default or Event of Default exists under the Credit Agreement, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof;

(v)neither the Borrower nor any Subsidiary Guarantor has any claim or offset against, or defense or counterclaim to, any obligations or liabilities of the Borrower or such Subsidiary Guarantor under the Credit Agreement or any other Loan Document;

(vi)this Amendment constitutes a valid and binding obligation of the Borrower and each Subsidiary Guarantor in every respect, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies; and

(vii)each of the representations and warranties set forth in Article V of the Credit Agreement is true and correct in all material respects as of the date hereof, except to the extent that any thereof expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of the date when made.

4.2Credit Agreement Unaffected.  Each reference to the Credit Agreement or in any other Loan Document shall hereafter be construed as a reference to the Credit Agreement as amended hereby.  This Amendment is a Loan Document.

4.3Subsidiary Guarantor Acknowledgment.  Each Subsidiary Guarantor, by signing this Amendment:

(i)consents and agrees to and acknowledges the terms of this Amendment;

(ii)acknowledges and agrees that all of the Loan Documents to which such Subsidiary Guarantor is a party or otherwise bound shall continue in full force and effect and that all of such Subsidiary Guarantor’s obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment;

(iii)represents and warrants to the Administrative Agent and the Lenders that all representations and warranties made by such Subsidiary Guarantor and contained in this Amendment or any other Loan Document to which it is a party are true and correct in all material respects on and as of the Effective Date to the same extent as though made on and as of the Effective Date, except to the extent that any thereof expressly relate to an earlier date; and

(iv)acknowledges and agrees that (A) notwithstanding the conditions to effectiveness set forth in this Amendment, such Subsidiary Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to which such Subsidiary Guarantor is a party to consent

to the amendments to the Credit Agreement effected pursuant to this Amendment and (B) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Subsidiary Guarantor to any future amendments or modifications to the Credit Agreement.

4.4Waiver.  The Borrower and each Subsidiary Guarantor, by signing below, hereby waives and releases the Administrative Agent and each of the Lenders and their respective Related Parties from any and all claims, offsets, defenses and counterclaims arising out of or related to the transactions contemplated by this Amendment or any of the other Loan Documents, or any act, omission or event occurring in connection herewith or therewith, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.

4.5Entire Agreement.  This Agreement, together with the Credit Agreement and the other Loan Documents integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.

4.6Effect of Amendment.  Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, amend, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothingherein shall be deemed to entitle any Credit Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply and be effective solely with respect to the matters expressly referred to herein.

4.7Counterparts  This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.

4.8Governing Law.  THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).  TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK GOVERNS THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

4.9JURY TRIAL WAIVER.  EACH OF THE PARTIES TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS RELATING TO ANY OF THE FOREGOING), OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

[Signature pages follow.]

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.

TOPBUILD CORP., as the Borrower
By:	/s/ John S. Peterson
Name:	John S. Peterson
Title:	Vice President and Chief Financial Officer

PNC BANK, NATIONAL ASSOCIATION,
as the Administrative Agent and as a Lender
By:	/s/Scott M. Kowalksi
Name:	Scott M. Kowalski
Title:	Senior Vice President

BANK OF AMERICA, N.A.,
as a Lender
By:	/s/ Cameron Cardozo
Name:	Cameron Cardozo
Title:	Senior Vice President

SUNTRUST BANK,
as a Lender
By:	/s/ Chris Hursey
Name:	Chris Hursey
Title:	Director

THE BANK OF NOVA SCOTIA,
as a Lender
By:	/s/ Brad Jarman
Name:	Brad Jarman
Title:	Associate Director
By:	/s/ Paula J. Czach
Name:	Paula J. Czach
Title:	Managing Director

THE HUNTINGTON NATIONAL BANK,
as a Lender
By:	/s/ Dan Swanson
Name:	Dan Swanson
Title:	Assistant Vice President

U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By:	/s/ Marty McDonald
Name:	Marty McDonald
Title:	AVP

Each of the undersigned acknowledge the terms of and consent to the foregoing:
American National Services, Inc. Builder Services Group, Inc. Cell-Pak, LLC Coast Insulation Contractors,     Inc. Denver Southwest, LLC Industrial Products Co., LLC Insulation Sales of Michigan,     LLC Insul-Mart, LLC InsulPro Projects, Inc. Johnson Products, LLC Lilienthal Insulation Company,     LLC Moore Products, LLC Renfrow Insulation, LLC Renfrow Supply, LLC Sacramento Insulation     Contractors Service Partners Gutter Supply,     LLC Service Partners Northwest,     LLC Service Partners of Florida, LLC Service Partners of the     Carolinas, LLC Service Partners Supply, LLC Service Partners, LLC Superior Contracting     Corporation Thermoguard Insulation     Company, LLC TopBuild Home Services, Inc. TopBuild Support Services, Inc. TruTeam, LLC TruTeam of California, Inc. TopBuild Services Group Corp. Vest Insulation, LLC,     each as a Subsidiary Guarantor
By:	/s/ George Sellew
Name:	George Sellew
Title:	Treasurer

EX-10.2

Exhibit 10.2

TOPBUILD CORP.

2015 LONGTERMSTOCKINCENTIVEPLAN

Amended and Restated EffectiveMay 2, 2016

SECTION 1. Purposes.

Thepurposes ofthe2015LongTerm StockIncentivePlan (the “Plan”)are to encourage selected employees and non-employee directors of and  consultants toTopBuildCorp. (the  “Company”)and its Affiliates to acquireaproprietaryinterest in the Companyin order to createan increasedincentiveto contributeto theCompany’sfuturesuccess and prosperity,and enhancetheabilityof the Companyand its Affiliates to attract andretain exceptionallyqualified individuals upon whom the sustained progress,growth and profitabilityofthe Companydepend, thus enhancingthe value ofthe Companyfor thebenefit of its stockholders. The Plan is intended to provide Plan Participants with forms of long-term incentive compensation that are not subject to the deduction limitation rules prescribed under Section 162(m) of the Code, and should be construed to the extent possible as providing for remuneration which is “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.

SECTION 2. Definitions.

As used in thePlan, the followingterms shallhavethe meanings set forth below:

(a)   “Affiliate”shall mean  anyentityin which theCompany’s direct or indirect equity interest is at leasttwentypercent,and anyother  entityin which the Companyhasa significant direct or indirect equityinterest, whethermoreor less thantwentypercent, as determined  bythe Committee.

(b)   “Award”shall mean  anyOption, Stock Appreciation Right, RestrictedStock, Restricted  Stock Unit,  PerformanceAward, orDividend Equivalent grantedunderthe Plan.

(c)   “Award Agreement”shall mean  anyagreement, contract or other instrument or document (including in an electronic medium) evidencing  anyAwardgranted under  thePlan which may, but need not, be executed bytheParticipant.

(d)   “Board”shall mean the Board ofDirectors oftheCompany.

(e)   “Changein Control” shall mean at any time during a period of twenty-four consecutive calendar months, the individuals who at the beginning of such period constitute the Company’s Board, and any new directors (other than Excluded Directors, as hereinafter defined), whose election by such Board or nomination for election by stockholders was approved by a vote of at least two-thirds of the members of such Board who were either directors on such Board at the beginning of the period or whose election or nomination for election as directors was previously so approved, for any reason cease to constitute at least a majority of the members thereof. For purposes hereof, “Excluded Directors” are directors whose (i) election by the Board or approval by the Board for stockholder election occurred within one year after any “person” or “group of persons,” as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, commencing a tender offer for, or becoming the beneficial owner of, voting securities representing 25 percent or more of the combined voting power of all outstanding voting securities of the Company, other than pursuant to a tender offer approved by the Board prior to its commencement or pursuant to stock acquisitions approved by the Board prior to their representing 25 percent or more of such combined voting power or (ii) initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 or Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of

proxies orconsents byor on behalfof  an individual, corporation, partnership, group,associate or otherentityor “person”other  than the Board.

(f)“Code”shall mean theInternal  RevenueCodeof 1986, as amended  from timeto  time.

(g)“Committee”shall mean a  committeeof theCompany’s directors designated  bythe Board toadminister thePlan and composed of notless than two directors, each of whom is a “non-employeedirector,”an“independent director”  and an“outsidedirector,”within the meaningof  and to the  extent requiredrespectivelybyRule16b-3, theapplicable rules ofthe NYSE  and Section162(m) ofthe Code,  and anyregulations issued thereunder.

(h)   “Dividend Equivalent”shall mean  anyrightgranted under Section6(f)of thePlan.

(i)   “ExchangeAct”shall mean the Securities ExchangeAct of1934, as amended.

(j)   “ExecutiveGroup”shall mean  everypersonwho theCommitteebelieves maybe both (i) a “coveredemployee”as defined in Section162(m)of theCode  asof the  end ofthe taxableyear in which theCompanyexpects to takeadeduction ofthe Award, and (ii)the recipient ofcompensation of morethan $1,000,000 (as such amountappearingin Section 162(m)of theCode maybe  adjusted  byanysubsequent legislation) forthat taxable year.

(k)“Fair Market Value” of a Share means the closing price of a Share as reported by the consolidated tape of the NYSE on the date in question.

(l)   “IncentiveStockOption”shall mean  an Option granted under Section6(a) ofthe Plan that  is intended to meet  the requirements of Section422 ofthe Code,or  anysuccessor provision thereto.

(m)“Non-Qualified StockOption”shall mean  an Option granted under Section6(a) of the Plan that is not intended to be anIncentiveStock Option.

(n)“NYSE”shall mean  theNew  York Stock Exchange.

(o)“Option”shall mean  anIncentiveStockOption or aNon-Qualified  Stock Option.

(p)“Participant”shallmean  an  employeeof orconsultant to theCompanyorany Affiliateor adirector of  theCompanydesignated to begrantedan Award under thePlan or, forthe purposeofgrantingSubstitute Awards,aholderof options or otherequitybased  awardsrelatingto theshares of acompanyacquired  bythe Companyorwith which the Companycombines.

(q)“PerformanceAward”shall mean  anyright granted under Section6(e)ofthe Plan.

(r)“Restricted Period”shall mean the period oftimeduringwhichAwards of Restricted  Stock orRestricted  Stock Units aresubject  to restrictions.

(s)“Restricted Stock”shallmean  anySharegranted under Section6(d) ofthe Plan.

(t)“Restricted Stock Unit”shall mean  anyrightgranted under Section6(d)of thePlan that is denominated in Shares.

(u)“Rule 16b-3”shall mean Rule 16b-3 promulgated bythe Securities andExchange Commission underthe ExchangeAct, or anysuccessor rule orregulation.

(v)“Section16”shall mean  Section16 ofthe ExchangeAct, the  rulesandregulations promulgated bytheSecurities and ExchangeCommission thereunder, or  anysuccessor provision, rule or  regulation.

-  2  -

(w)“Shares”shall meanthe Company’scommon stock, par value $0.01 per share,  and suchothersecurities orpropertyas maybecome thesubject of Awards, orbecome subject  to Awards, pursuant to  an  adjustment madeunder Section4(c) ofthe Plan.

(x)   “StockAppreciation Right”shall mean  anyrightgranted under Section6(c) ofthe Plan.

(y)   “Substitute Awards” shall mean Awardsgranted in assumption of, orin substitution for, outstandingawards previouslygranted bya  companyacquired  by the Companyor with which  theCompanycombines,  or  Awardsgranted in replacement or substitution of  awards previouslygranted byMasco Corporation prior to their forfeitureupon the effectivedate of thespin-off ofthe Companyfrom Masco.

SECTION 3. Administration.

TheCommitteeshall administerthe Plan, and subject  to theterms of thePlan and applicable law, theCommittee’s authorityshallincludewithoutlimitationthe power to:

(a)designate Participants;

(b)   determinethe types  of  Awards to begranted;

(c)   determinethe number ofShares to becovered  byAwards andanypayments, rights orothermatters to becalculated in connection therewith;

(d)determinethe termsand conditions of Awards and  amend theterms and  conditions ofoutstandingAwards;

(e)determinehow, whether, to what extent, and under  what circumstancesAwards may besettled or exercised incash, Shares, other securities, other  Awards orother property,  or  canceled, forfeited or suspended;

(f)determinehow,whether, to what extent, and under  what circumstancescash, Shares, other securities,  otherAwards, other propertyand otheramounts payable with respect  to  anAward shallbedeferredeitherautomaticallyor  at  the  electionofthe holder thereofor of theCommittee;

(g)   determinethe methods or procedures for  establishingthe fair marketvalue of  any property(including, without limitation, anyShares or other securities)transferred, exchanged,given orreceived with respect  to the Plan or  anyAward;

(h)   prescribeand amend the forms of Award Agreements and other instruments required under oradvisable with respect  to the Plan;

(i)   designate Optionsgranted to keyemployees of theCompanyor its subsidiaries as  IncentiveStock Options;

(j)   interpret and administer thePlan, Award Agreements, Awards andanycontract, document, instrument or  agreement relatingthereto;

(k)   establish, amend, suspend orwaivesuch  rulesand regulations andappointsuch agents as itshall deem appropriate for the  administration ofthe Plan;

(l)   decide allquestions and settle allcontroversies anddisputes which mayarisein connection with thePlan,Award Agreements andAwards;

-  3  -

(m)   delegate to acommitteeof one or more directors of theCompany, subject to such terms and limitations as the Committee shall determine,the authorityto designateParticipants and  grant Awards, and to amend Awardsgranted toParticipants, exceptwith respect  to  Participants who areofficers ordirectors ofthe Companyfor purposes of Section16 ofthe ExchangeAct;

(n)   delegateto one ormoreofficers ormanagers of theCompany,  or acommitteeof suchofficers and managers, the  authority, subject  to such terms and limitations as the Committeeshall determine, to cancel, modify,waive rights with respect  to,alter, discontinue, suspend orterminate Awards held byemployees, except employees who areofficers or directors ofthe Companyforpurposes of Section 16 ofthe ExchangeAct;provided, however, thatanydelegation to management shall conform with the requirements of the NYSE  applicable to theCompanyandDelaware corporatelaw;and

(o)   make  anyotherdetermination and take  anyother  actionthat the Committeedeems necessaryor desirable for theinterpretation, application and administration ofthe Plan, Award Agreements andAwards.

All designations, determinations, interpretations and otherdecisions underorwith respect to thePlan, Award Agreements or anyAward shall be within thesolediscretion ofthe Committee, maybemade  at anytime and shallbefinal, conclusive  and bindingupon allpersons, includingthe Company,Affiliates, Participants, beneficiaries of Awardsand stockholders  of the Company.

SECTION 4. SharesAvailable forAwards.

(a)Shares  Available. Subject  to  adjustment as provided in Section4(c), themaximum numberof Shares available forissuancein respectofAwards madeunder thePlan shallbe 4,000,000 Shares, provided, however,that ifforanyreason anyAward under thePlan other than aSubstitute Award is forfeited, canceled, expired, or settled in cash, thenumber ofShares availableforissuancein respect ofAwards under thePlan shallbeincreased  bythe number  of  Shares so forfeited, canceled, expired or settled in cash.

Notwithstanding anything to the contrary contained herein, the following shall not increase the number of Shares available for issuance in respect of Awards under the Plan:  (i) Shares delivered in payment of an Option, (ii) Shares that are repurchased by the Company with Option proceeds and (iii) Shares withheld to satisfy withholding taxes on any Award. In addition, Shares covered by an SAR, to the extent that it is exercised and settled in Shares, and regardless of whether or not Shares are actually issued to the Participant upon exercise of the SAR, shall be considered issued or transferred pursuant to the Plan. Subject to the foregoing, Shares may be made available from the authorized but unissued Shares of the Company or from Shares reacquired by the Company.

Additionally, in the event that a corporation acquired by (or combined with) the Company or any subsidiary has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that awards using such

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available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or any subsidiary prior to such acquisition or combination.

(b)IndividualStock-Based Awards.Subject  to  adjustment as provided in Section4(c), no Participant mayreceiveOptions or Stock Appreciation Rights under thePlan in anycalendar  year that  relateto morethan1,000,000 Shares in theaggregate;provided, however,that such numbermaybeincreased with respect  to  anyParticipant byanySharesavailable forgrant to suchParticipant in  accordancewith this Section4(b)in anyprioryears thatwerenotgranted in suchprioryear. No provision of this Section4(b)shall be construed  as limitingthe amountof anyother stock-based orcash-based  award whichmaybegranted toanyParticipant. In any fiscal year of the Company, no Participant who is a non-employee director of the Company may be granted Awards valued at more than $450,000at the time of grant.

(c)   Adjustments. Upon the occurrence of any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), change in the capital or shares of capital stock, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or extraordinary transaction or event which affects the Shares, then the Committee shall make such adjustment, if any, in such manner as it deems appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, in (i) the number and type of Shares (or other securities or property) which thereafter may be made the subject of Awards both to any individual and to all Participants, (ii) outstanding Awards including without limitation the number and type of Shares (or other securities or property) subject thereto, and (iii) the grant, purchase or exercise price with respect to outstanding Awards and, if deemed appropriate, make provision for cash payments to the holders of outstanding Awards; provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

(d)Substitute Awards.Shares underlyingSubstitute Awards shallnot reducethe number of shares  remaining available  forissuanceunder  the  Plan for  anypurpose.

SECTION 5. Eligibility.

Anyemployeeof or  consultant to the CompanyoranyAffiliate, oranydirector ofthe Company, is eligibleto be designated aParticipant.

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SECTION 6. Awards.

(a)Options.

(i)      Grant. TheCommitteeisauthorized to grantOptions to Participants with suchterms and conditions, not inconsistent with  theprovisions of thePlan, as the Committee shall determine, as specified in the applicable Award Agreement. TheAward Agreement shallspecify:

(A)the purchasepriceper Shareunder  each Option,provided, however, that such price shall benot less than 100%of the fair market  value ofthe Shares underlyingsuchOption on the date ofgrant (except in the caseof Substitute Awards);

(B)the term ofeach Option (not to  exceed tenyears);

(C)the timeor times at which an Option maybeexercised, in whole orinpart, the method ormethods bywhich and the form orforms (including, withoutlimitation, cash, Shares, other  Awards orotherproperty,  or  anycombination thereof, havingafair market value on the  exercise date  equal  to the relevant exercise price) in which payment of the exercise pricewith respect  thereto maybemadeor deemed to havebeen made;

(i)   vesting requirements including, for time-based Awards in excess of 5% of the number of Shares available for Awards pursuant to Section 4, a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business entity or in limited cases of an intervening event related to death, disability, retirement, or a Change in Control, and

(E)   all other terms and conditions applicable to the Option as shall be determined by the Committee in its discretion, including provisions applicable in the event the Participant terminates employment.

A Participant shall havetherights of astockholderonlyas andwhen  Shares havebeenactuallyissued to theParticipant pursuant to the Plan.

(ii)      ISOs.  Theterms ofany  IncentiveStock Option granted under thePlan shall  complyin all respects with theprovisions of Section422 oftheCode, or anysuccessor provision thereto, and anyregulations promulgated thereunder. Themaximum numberof Shares that maybe awarded  asIncentiveStock Options is4,000,000. Each Award Agreement shall specify whether (or the extent to which) the Option is an Incentive Stock Option or a Non-Qualified Stock Option. Notwithstanding any such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by an Participant during any calendar year (under all plans of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options. Options failing to qualify as Incentive Stock Options for any reason will be treated as Non-Qualified Stock Options, rather than forfeited.

(b)Restoration Options.TheCommittee maynotgrant restoration options.

(c)StockAppreciation Rights.TheCommitteeis authorized to grant StockAppreciation Rights to  Participants. Subject  to the terms ofthePlan, aStock Appreciation Right granted

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under the Plan shallconfer on theholderthereofaright to receive, upon exercise thereof, the  excess of (i)the fair market valueofoneShareon thedateof  exercise or, if theCommitteeshall so determinein thecaseofanysuch right other thanone related toany  IncentiveStock Option, at  anytime during aspecified period beforeorafterthe date of  exercise over(ii)the fair market value on thedate ofgrant.

Subject to the terms of the Plan, the Committee shall determine the grant price, which shall not be less than 100% of the fair market value of the Shares underlying the Stock Appreciation Right on the date of grant, term (not to exceed ten years).  The Committee shall also determine, in its discretion, methods of exercise and settlement and any other terms and conditions of any Stock Appreciation Right and may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate, which terms and conditions shall be described in the applicable Award Agreement.  The Award Agreement shall set forth applicable vesting requirements including, for time-based Awards in excess of 5% of the number of Shares available for Awards pursuant to Section 4, a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business entity or in limited cases of an intervening event related to death, disability, retirement, or a Change in Control.

(d)Restricted StockandRestricted StockUnits.

(i)Issuance.  TheCommitteeis authorized to grant to  Participants Awards of Restricted  Stock, which shallconsist of Shares, andRestricted  Stock Units which shallgive theParticipant the right to  receive cash,Shares, other securities,otherAwards orotherproperty, ineachcase subject  to the termination ofthe Restricted Perioddetermined  bythe Committee. Notwithstandingthe followingterms, theCommitteemayimposeotherterms that  maybemore orless favorable to the Companyas itdeems fit.In the  absenceof anysuch differingprovisions, Awards ofRestricted Stock  and Restricted StockUnits shall havethe provisions described below.

(ii)   Restrictions.The Restricted Period may differ among Participants and may have different expiration dates with respect to portions of Shares covered by the same Award.  Subject to the terms of the Plan, Awards of Restricted Stock and Restricted Stock Units shall have such restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive any dividend or other right or property), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise (including the achievement of performance measures as set forth in Section 6(e) hereof), as the Committee may deem appropriate. The applicable Award Agreement shall set forth all such restrictions, as well as such other terms and conditions applicable to the Award as shall be determined by the Committee in its discretion, including provisions related to vesting and the provisions applicable in the event the Participant terminates employment.  The Award Agreement shall set forth applicable vesting requirements including, for time-based Awards in excess of 5% of the number of Shares available for Awards pursuant to Section 4, a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business entity or in limited cases of an intervening event related to death, disability, retirement, or a Change in Control.  Subject to the aforementioned restrictions and the

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provisionsof thePlan, includingthe provisionsofSection 4(c)  hereof,a  Participant shall have  allofthe rights of a stockholder  with respectto Restricted  Stock.

(iii)   Registration.Restricted Stock granted underthe Plan maybe  evidenced in such manner  as the Committeemaydeemappropriate,including, withoutlimitation, book-entry registration orissuanceof stock  certificates.

(e)PerformanceAwards.

(i)TheCommitteeis herebyauthorized to grant PerformanceAwards to Participants.

(ii)   Subject to the terms of the Plan, a Performance Award granted under the Plan (A) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock or Restricted Stock Units), other securities or other Awards, and (B) shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. Unless the Committee determines otherwise, the performance period relating to any Performance Award shall be at least one calendar year commencing January 1 and ending December 31 (except in circumstances in connection with a Change in Control, in which event the performance period may be shorter than one year).

(iii)   If the Committee intends that a Performance Award to a member of the Executive Group should constitute “qualified performance-based compensation” for purposes of Section 162(m) of the Code, then such award shall include a pre-established formula, such that payment, retention or vesting of the Award is subject to the achievement during a performance period or periods, as determined by the Committee, of a level or levels, as determined by the Committee, of one or more performance measures with respect to the Company or any of its Affiliates.  Available performance measures shall be based on the following performance measures (or an equivalent metric) each determined in accordance with generally accepted accounting principles, where applicable, as consistently applied by the Company:

Cash flow (before or after dividends)	Return on net assets
Earnings pershare	Return on net  tangible  assets
EBIT	Return on sales
EBITDA	Revenuegrowth
Gross margin	Revenues
Gross profit	Safetymeasures
Net  income	SG&A  asapercent of sales
Operatingmargin	Total cost productivity

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Operatingprofit	Total shareholder  return
Qualitymeasures	Workingcapital
Return on assets	Workingcapital asapercent of sales
Return on equity	Workingcapital  efficiency
Return on invested  capital

The Applicable performance measures shall be described in the Award Agreement. If the Committee so provides in an Award Agreement, the following may be excluded in determining whether any performance criterion has been attained: impact of charges for restructurings, the effects of acquisitions and divestitures and related expenses, losses resulting from discontinued operations, extraordinary losses (in accordance with generally accepted accounting principles, as currently in effect), the cumulative effect of changes in accounting principles and other unusual, non-recurring items of loss that are separately identified and quantified in the Company’s audited financial statements. Performance measures may vary from Performance Award to Performance Award and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative; in addition, performance measures may be applied on a corporate-wide or division/business segment basis, and may be applied to the performance of the Company and/or one or more Affiliates relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. To the extent a Performance Award is designed to constitute performance-based compensation under Section 162(m) of the Code, performance measures shall be established within 90 days of the beginning of the period of service to which the performance measures relate.  For any Performance Award, the maximum amount that may be delivered or earned in settlement of all such Awards granted in any year shall be (x) if and to the extent that such Awards are denominated in Shares, 1,000,000 Shares (subject to adjustment as provided in Section 4(c)) and (y) if and to the extent that such Awards are denominated in cash, $5,000,000. Notwithstanding any provision of the Plan to the contrary, the Committee shall not be authorized to increase the amount payable under any Award to which this Section 6(e)(iii) applies upon attainment of such pre-established formula.

(f)DividendEquivalents.TheCommitteeis authorized to grant to  Participants Awards under  which theholders thereofshallbe  entitled to receivepayments equivalent to dividends or interest with respect  to anumberof Shares determined bythe Committee,  and the Committee mayprovidethat such  amounts (if any)shall bedeemed to havebeenreinvested in additional Shares or otherwisereinvested. Subject  to the terms of thePlan, such Awards mayhavesuch terms and conditions as the Committeeshall determine, as set forth in the Award Agreement, but shallnot be awarded on Options or Stock Appreciation Rights, or on unearned  PerformanceAwards.

(g)Termination ofEmployment.Except as otherwiseprovided in thePlan or the applicable Award Agreement,or as determined  by the Committee:

(i)Awards granted to, orotherwiseheld by,  employees willterminate, expire  and be forfeited upon termination of  employment, whichshall include a  changeinstatus from employee to consultant and termination byreason of thefactthat an  entityis no longeran Affiliate,and

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(ii)   aParticipant’s employment shall not be considered to be terminated (A)in the caseof approved sick leaveor other  approved leaveof absence  (not to  exceed oneyear orsuch  other period as the Committeemaydetermine), or  (B)in the caseof atransfer  amongthe Company  and its Affiliates.

(h)   Section 409A Compliance. To the extent an Award constitutes “deferred compensation” within the meaning of Section 409A of the Code, the Committee shall establish Award Agreement terms and provisions that comply with Section 409A of the Code and regulations thereunder.

SECTION 7. General.

(a)No Cash Consideration for Awards.Awards maybegrantedforno cash consideration or forsuchminimal cash consideration as mayberequired  byapplicable law.

(b)Awards MayBeGranted Separately or Together.Subject to the provisions of Section 7(h), awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other Plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under another Plan of the Company or an Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

(c)Forms of Payment Under Awards.Subject  to the terms of thePlan and of  anyapplicable Award Agreement, payments or transfers to bemadebytheCompanyor  anAffiliateupon the grant, exercise, orpayment of an Award maybemadein such form or  forms as theCommittee shall determine, including, withoutlimitation, cash, Shares, other securities, other  Awards, or otherproperty,  or  anycombination thereof,  and maybemadeinasingle payment or transfer, in installments, or on adeferred basis, in each  caseinaccordancewith rules and procedures  established bytheCommittee.  Such rules andprocedures mayinclude, withoutlimitation, provisions forthe payment or creditingof reasonable interest on installment ordeferred payments or thegrant orcreditingof  Dividend Equivalents in respect of installment ordeferred payments.

(d)Limits on Transfer ofAwards.Awards cannotbetransferred,except theCommitteeis herebyauthorized to permit  thetransfer ofAwards under the  followingterms and conditions and with such  additional terms and conditions, in eithercasenot inconsistent with theprovisions of the Plan, as the Committeeshall determine:

(i)No Award or  right under  anyAward maybesold, encumbered, pledged, alienated, attached,assigned or transferred in anymanner  and  anyattemptto do anyof theforegoing shall bevoid and unenforceableagainstthe Company.

(ii)   Notwithstandingtheprovisions of Section7(d)(i)  above:  

(A)An Option maybetransferred:

(1)   to a beneficiarydesignated bythe Participant in writingon aform approved  bythe Committee;

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(2)   bywillor the  applicable laws ofdescent and distribution to thepersonal representative, executoror  administrator ofthe Participant’s estate;or

(3)   to a revocablegrantortrust establishedbytheParticipant forthe sole benefit of theParticipant duringthe Participant’s life,  and under theterms of  which the Participant is and remains thesoletrusteeuntil death or physical or mental incapacity.  Such  assignment shall be  effected byawritten instrument in form and content satisfactoryto theCommittee,  and the Participant shalldeliver to the Committeeatrue  copyofthe agreement orotherdocument evidencingsuchtrust.If in thejudgment ofthe Committeethe trust to which aParticipant mayattemptto assign rights under suchan Award does not meetthe criteria of atrust to  which an  assignment is permitted  bythe terms hereof, orifafterassignment, becauseof amendment, byforceof law or  anyother  reason such trust no longer meetssuch criteria, suchattempted  assignment shallbevoidand maybedisregarded  bythe Committee  and the Companyand allrights to  anysuchOptions shall revertto and remain solelywith theParticipant. Notwithstandingaqualified  assignment,forthe purposeof determining compensation arisingbyreason of theOption, the Participant, and not the trust to which rights undersuch  an Option maybeassigned, shall continueto be considered  anemployeeor  consultant, as the casemaybe, of the Companyoran Affiliate, but such trust and the  Participant shall bebound  byall ofthe terms and conditions of theAward Agreement and this Plan. Shares issuedin the name of  and delivered to such trust shallbe  conclusivelyconsidered issuance  and deliveryto theParticipant.

(B)A Participant mayassign or transferrightsunder  an  Award of Restricted  Stock orRestricted  Stock Units:

(1)to a beneficiarydesignated bythe Participant in writingon aform  approved  bythe Committee;

(2)   bywillor the  applicable laws ofdescent and distribution to thepersonal representative, executoror  administrator ofthe Participant’s estate;or

(3)   to a revocablegrantortrust establishedbytheParticipant forthe sole benefit of theParticipant duringthe Participant’s life,  and under theterms of which the Participant is and remainsthe sole trusteeuntil death or physicalor mental  incapacity.  Suchassignment shallbeeffected byawritten instrument in form and content satisfactoryto theCommittee,  and the Participant shalldeliver to theCommitteeatruecopyof theagreement orotherdocument evidencing suchtrust.If in thejudgment of the Committeethe trust to which aParticipant mayattemptto assign rights under such  an  Awarddoes not meet  the  criteriaof a trust to which  an  assignment is permitted  bythe terms hereof,  or ifafter  assignment, because of amendment, byforceof law or  anyotherreason such trust no longer meets such  criteria, suchattemptedassignment shallbevoidand maybedisregarded  bytheCommittee  and the Companyand allrights to  any suchAwards shallrevert to and remain solelywiththe Participant. Notwithstandingaqualified  assignment, forthe purposeof determining compensation arisingbyreason of theAward, the  Participant, and not the trust to which rights under such  an Award maybeassigned,

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shall continue to be consideredan  employeeor  consultant, as the casemaybe, of theCompanyor  an Affiliate, but such trust and the Participant shallbebound byallof theterms and conditions of theAwardAgreementand this  Plan. Shares issuedin thenameof and delivered to such trust shallbe  conclusivelyconsidered issuance  and deliveryto theParticipant.

(iii)      The Committee, the Company and its officers, agents and employees may rely upon any beneficiary designation, assignment or other instrument of transfer, copies of trust agreements and any other documents delivered to them by or on behalf of the Participant which they believe genuine and any action taken by them in reliance thereon shall be conclusive and binding upon the Participant, any trustee, the personal representatives of the Participant’s estate and all persons asserting a claim based on an Award. The delivery by a Participant of a beneficiary designation, or an assignment of rights under an Award as permitted hereunder, shall constitute the Participant’s irrevocable undertaking to hold the Committee, the Company and its officers, agents and employees harmless against claims, including any cost or expense incurred in defending against claims, of any person (including the Participant) which may be asserted or alleged to be based on an Award subject to a beneficiary designation or an assignment. In addition, the Company may decline to deliver Shares to a beneficiary, heir or trustee until it receives indemnity against claims of third parties satisfactory to the Company.

(e)ShareCertificates.All certificatesfor, or otherindicia of,  Shares or other securities delivered under thePlanpursuant to  anyAward orthe exercise thereofshallbesubject  to such stop transfer orders and other restrictions as the Committeemaydeem advisable under thePlan orthe rules, regulations and other requirements ofthe Securities and ExchangeCommission, any stock exchangeupon which such  Shares  or other  securities arethen listed and anyapplicable federal or statesecuritieslaws, andthe Committeemaycausealegend or legends to beput on anysuch  certificates to make  appropriate referenceto such restrictions.

(f)Changein Control. The vesting and payment terms applicable to an Award following a Change in Control, if any, shall be determined by the Committee at the time the Award is granted and shall be specified in the applicable Award Agreement. 

(g)Cash Settlement.Notwithstandinganyprovision ofthis  Plan orof anyAward Agreement to thecontrary, but subject to provisions of Section 409A of the Code, anyAward outstandinghereunder mayatanytime be cancelled in the Committee’s sole discretion upon payment of thevalue ofsuchAward to theholderthereofin cash or in another  Awardhereunder, such  value to bedetermined  bythe Committeein its sole discretion.

(h)Repricing.Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended to reduce the exercise price of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other awards or Options or

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Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights without stockholder approval.

(i)ClawbackUpon Restatement.  In the event theCompanyhasa restatement ofits financial statements, otherthan asa resultof changes to accountingrules andregulations, the Committee shall havethe discretion at anytime (notwithstandinganyexpiration ofthisPlan orof the  rights orobligations otherwisearisinghereunder)to require  anyParticipantto return allcash or Shares which hemayhaveacquired (orwhich heis deemed to haveacquired)  as aresultof any  PerformanceAward payment or  as a resultof thesale ofShareswhich mayhavevested under  anyAward, and to waive,  forfeitand surrender tothe Companytheright toanyunrealized  PerformanceAward payments and to all unsold vested Shares  and allunvested Shares made under  anyAward(whether ornot such  Participant maythen be  anemployee,  consultant or director ofthe Companyor  anyof its affiliates, and whetheror not such  Participant’s or  any otherperson’s misconduct  mayhavecausedsuchrestatement),  provided that such payment or right to payment orAward was earned, paid orgranted duringthe three-year period preceding the date ofrestatement ofsuch restatedfinancial results andprovided, further, that anysuch recoveryshall be offset  byrecoveryotherwiseobtained hereunder. TheCommittee retains discretion regardingthe application oftheseprovisions.

SECTION 8. Amendment andTermination.

Except to the extent prohibited byapplicable lawand unless otherwiseexpresslyprovided in an AwardAgreementorin thePlan:

(a)Amendments to the Plan.TheBoard mayamend the Plan  and the Boardorthe CommitteemayamendanyoutstandingAward;provided, however,that: (I)no Plan amendment shall beeffectiveuntil approved  bystockholders of theCompany(i)ifany stockholder  approval  thereofis required in order  forthe Plan to continue to satisfythe conditions of the  applicable rules andregulations that the Committeehas determined to be necessaryto complywith, and (ii)if such  Plan amendment would materially(A)increasethe numberof Shares available under thePlan orissuable to aParticipant (otherthan a  changein the numberofShares madein connection with anevent described in Section4(c) hereof), (B)changethetypes ofAwards that  maybegranted under thePlan, (C)expand the class of persons eligibleto receiveAwards under thePlan,or (D)directlyor indirectly(including through  an  exchangeof underwater options or SARs for cash or other  Awards)reducethe price  at whichan OptionorStock Appreciation Right is exercisable(other  than in connection with an event described  in  Section4(c) hereofor thegrantingof aSubstituteAward),  and(II) withoutthe consent of affected Participants, no amendment ofthe Plan or (otherthan as  required herein) of  anyAward mayimpair the  rights of Participants under outstandingAwards.

(b)   Waivers.TheCommitteemaywaive anyconditions to the Company’sobligations or  rights of theCompanyunder  anyAward theretoforegranted, prospectivelyor retroactively,withoutthe consent of anyParticipant.

(c)Adjustments ofAwards Upon the Occurrenceof  Certain Unusual or Nonrecurring Events.TheCommitteeshall be authorized to make  adjustments in the terms and conditions of,  and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, withoutlimitation, the  events described in Section4(c)hereof)affectingthe  

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Company,  anyAffiliate,orthe financial statements of theCompanyor  anyAffiliate, or of  changes in applicable laws, regulations, or accountingprinciples, whenever theCommittee determines that such adjustments are  appropriate inorder to prevent dilution or enlargement ofthe benefits or potential benefits to bemade  available under thePlan;provided, however, no such  adjustment shallbemadeto an Awardgranted under Section6(e)(iii) ifthe Committeeintends such Award to constitute “qualified performance-basedcompensation” unless such  adjustment is permitted under Section162(m)of theCode.

SECTION 9. CorrectionofDefects, Omissions, andInconsistencies.

TheCommitteemaycorrect anydefect, supplyanyomission or  reconcile anyinconsistency in thePlan or  anyAwardin themanner  and to theextent itshall deem desirable to effectuatethe  Plan.

SECTION 10. GeneralProvisions.

(a)No Rights to Awards.No Participant orotherperson shallhaveanyclaim  to begranted anyAward under thePlan, and thereis no obligation for uniformityof treatment of Participants orholders or beneficiaries of Awards under thePlan. Theterms andconditions of Awards of the same type  and the determination of theCommitteeto grantawaiverormodification of  any Awardand the terms andconditions thereofneednot be thesamewith respect  to  each  Participant.

(b)Withholding.TheCompanyoranyAffiliateshallbe  authorized to withhold from any Awardgranted oranypayment due or transfer  madeunder  anyAward orunder thePlan the amount(in cash, Shares,othersecurities, other  Awards orother property)ofwithholdingtaxes due (limited to the minimum statutory amount) in respect of an  Award, its exercise or  anypayment or transfer under  such Award orunder the Plan  and to takesuchother action as maybenecessaryin theopinion ofthe Companyor Affiliateto satisfyallobligations forthe paymentofsuchtaxes.

(c)No Limiton Other  Compensation Arrangements.Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, including the grant of options and other stock-based awards, and such arrangements may be either generally applicable or applicable only in specific cases.

(d)No Right to Employment or Service.Thegrant of an Award shallnot beconstrued  as  givingaParticipant theright to beretained in theemployor serviceof theCompanyor  any Affiliate.  Further, theCompanyoran Affiliatemayatanytime dismissa Participantfrom employment orservice,freefrom anyliability, oranyclaim underthe Plan,unless otherwise expresslyprovided in thePlan orin anyAwardAgreement orinanyotheragreement bindingthe parties.

(e)   Governing Law.Thevalidity,  construction andeffect of thePlan andanyrulesand regulations relatingto thePlan shallbedetermined in accordancewith thelaws of theStateof Florida (without regard to any state’s conflict of laws principles) andapplicableFederal  law.  Any legal action related to this Plan shall be brought only in a federal or state court located in Florida.

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(f)   Severability.Ifanyprovision ofthe Plan or anyAward is orbecomes or is deemedto be invalid, illegal or unenforceable inanyjurisdiction or  as to anyperson orAward, orwould disqualifythe Plan oranyAward under  anylaw  deemed applicable bytheCommittee, such provision shallbe  construed or deemed  amendedto conform  to  applicablelaws, or ifitcannot be so construed or deemed amended without, in thedetermination ofthe Committee, materially  alteringtheintent of the  Plan orthe Award, suchprovision shallbestricken  as to such jurisdiction, person orAward, and theremainderofthe Plan  and anysuchAward shall  remain in full forceand effect.

(g)   No Trustor FundCreated. Neither thePlan nor  anyAward shallcreateorbe  construed to createatrust or separate fund of  anykind orafiduciaryrelationship between the Companyor anyAffiliateand aParticipant or  anyotherperson. To the extent that anyperson acquires a right to receive payments fromthe CompanyoranyAffiliatepursuant to  an Award, such right shall be no greater than the rightof  anyunsecuredgeneral creditorof theCompanyor anyAffiliate.

(h)   No Fractional Shares.No fractional  Shares shallbeissued or deliveredpursuant to the Plan or  anyAward, and theCommitteeshall determinewhethercash, othersecurities, orother propertyshall be paid ortransferred in lieu ofanyfractional  Shares, or whethersuch  fractional  Shares or anyrights thereto shall be cancelled, terminated orotherwiseeliminated.

(i)   Headings. Headings  are given to the Sections and subsections of thePlan solelyasa  convenienceto facilitate reference.  Such headingsshall not bedeemed in anywaymaterial  or relevant to the construction orinterpretation of thePlan or  anyprovision thereof.

SECTION 11. Term.

ThePlan shallbe restated effective  as of thedate ofits approval  bytheCompany’sstockholders and no Awards shallbemadeunder thePlan ten years after the restatement date.

-  15  -

TOPBUILDCORP.

NON-EMPLOYEEDIRECTORSEQUITYPROGRAM UNDERTHE 2015LONG

TERMSTOCKINCENTIVEPLAN

Amended and Restated Effective May 2, 2016

For purposes of the TopBuild Corp. (the “Company”) Non-Employee Directors Equity Program (the “Program”), an “Eligible Director” is any director of the Company who is not an employee of the Company and who receives a fee for services as a director.  Terms not defined herein have the meaning given to them in the Company’s 2015 Long Term Stock Incentive Plan, as amended from time to time (the “Plan”).

Section1. RestrictedStockAward

(a)   (i)  Eligibility for Award.  Effective on July 1, 2015 (the “Effective Date”) and thereafter on the date of each of the Company’s annual stockholders’ meetings (the “Annual Meeting”), each person who is or becomes an Eligible Director on the Effective Date or at such Annual Meetings shall be granted an Award of Restricted Stock.

(ii)  AmountofAward.  The amount of the Award of Restricted Stock shall be equal to one-half of the annual retainer then paid to non-employee directors as compensation for their service as a director, rounded to the nearest ten Shares and disregarding any retainer provided as compensation for service on a Board committee, or as Chair of a Board committee or the Board (if awarded at the Effective Date, the “Initial Award” and if awarded at an Annual Meeting, the “Annual Retainer”). If an Eligible Director begins serving as a director other than as of the Effective Date or as of the date of an Annual Meeting, Awards of Restricted Stock granted hereunder shall be granted on the date of the meeting of the Governance Committee that takes place on or after such Eligible Director is first elected or appointed to the Board, and such Awards shall be pro-rated to reflect the partial service to be provided by such Eligible Director in the period between Annual Meetings.

(iii)  AdjustmenttoAmountorTermsofAward.  The Board shall have sole discretion to adjust the amount of the Initial Award or the Annual Retainer to be paid in the form of Shares and the terms of any such Award of Shares.  Except as the Board may otherwise determine, any increase or decrease in an Eligible Director’s Initial Award or the Annual Retainer during a period with respect to which such Eligible Director has already been granted an Award of Restricted Stock shall be implemented by increasing or decreasing the cash portion of such Eligible Director’s Annual Retainer; provided that any such increase or decrease shall comply with Section 409A of the Code and regulations thereunder to the extent an Award constitutes “deferred compensation” within the meaning of Section 409A of the Code.

(b)   Each Award of Restricted Stock granted hereunder shall vest on such schedule as determined by the Board at the time the Award is granted.  The applicable Award Agreement shall set forth vesting conditions as well as such other terms and conditions applicable to the Award as shall be determined by the Board in its discretion, including

-  16  -

provisions applicable upon the termination of the Eligible Director’s term of service as a director.

(c)   The price of the Shares used in determining the number of Shares subject to an Award of Restricted Stock granted hereunder shall be calculated in accordance with the Company’s pricing policy or, if a pricing policy has not been adopted by the Company, shall be the fair market value of the Shares as determined by the Board on the effective grant date of such Award.

(d)   Each Eligible Director shall be entitled to vote and receive dividends on the Shares subject to the Award of Restricted Stock, but will not be able to obtain a stock certificate or sell, encumber or otherwise transfer such Shares of Restricted Stock except in accordance with the terms of the Plan.

Section2.Non-CompeteProvision

Each Award of Restricted Stock granted hereunder shall contain a provision whereby the Award holder shall agree, in consideration for the Award and regardless of whether restrictions on Shares of Restricted Stock have lapsed, as follows:

(a)   While the holder is a director of the Company and for a period of one year following the later of the last date of vesting of any Shares or the termination of such holder’s term as a director of the Company, other than a termination following a Change in Control, the Award holder shall agree not to engage in, and not to become associated in a “Prohibited Capacity” (as hereinafter defined) with any other entity engaged in, any ‘‘Business Activities” (as hereinafter defined) and not to encourage or assist others in encouraging any employee of the Company or any of its subsidiaries to terminate employment or to become engaged in any such Prohibited Capacity with an entity engaged in any Business Activities. “Business Activities” shall mean the design, development, manufacture, sale, marketing or servicing of any product, or providing of services competitive with the products or services, of the Company or any subsidiary at any time while the Award is outstanding, to the extent that such competitive products or services are distributed or provided either (1) in the same geographic area as are such products or services of the Company or any of its subsidiaries or (2) to any of the same customers as such products or services of the Company or any of its subsidiaries are distributed or provided.  “Prohibited Capacity” shall mean being associated with an entity as a director, employee, consultant, investor or in another capacity where (1) confidential business information of the Company or any of its subsidiaries could be used in fulfilling any of the holder’s duties or responsibilities with such other entity, or (2) an investment by the Award holder in such other entity represents more than 1% of such other entity’s capital stock, partnership or other ownership interests.

(b)   Should the Award holder breach any of the restrictions contained in the preceding paragraph, by accepting an Award, the Award holder shall agree, independent of any equitable or legal remedies that the Company may have and without limiting the Company’s  right to any other equitable or legal remedies, to pay to the Company in cash immediately upon the demand of the Company (1) the amount of income realized for income tax purposes from the Award, net of all federal, state and other taxes payable on the amount of such income, but only to the extent that such income is realized from restrictions lapsing on Shares

-  17  -

or exercises occurring, as the case may be, on or after the termination of the Award holder’s term as a director of the Company or within the two-year period prior to the date of such termination, plus (2) all costs and expenses of the Company in any effort to enforce its rights under this or the preceding paragraph.  The Company shall have the right to set off or withhold any amount owed to the Award holder by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by the Award holder hereunder.

Section3.Termination, ModificationorSuspension

TheBoardmayterminate, modifyorsuspendtheProgramat anytimeasitmaydeem advisable.

-  18  -

EX-31.1

Exhibit 31.1

Certifications

I, Gerald Volas, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TopBuild Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May  11, 2016	/s/ Gerald Volas
	Gerald Volas
	Chief Executive Officer and Director
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certifications

I, John S. Peterson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TopBuild Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2016	/s/ John S. Peterson
	John S. Peterson
	Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIOD REPORT

I, Gerald Volas, Chief Executive Officer and Director of TopBuild Corp. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:

(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 11, 2016	/s/ Gerald Volas
	Gerald Volas
	Chief Executive Officer and Director
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIOD REPORT

I, John S. Peterson, Vice President and Chief Financial Officer of TopBuild Corp. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:

(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 11, 2016	/s/ John S. Peterson
	John S. Peterson
	Vice President and Chief Financial Officer
	(Principal Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 02, 2016
Document and Entity Information
Entity Registrant Name	TopBuild Corp
Entity Central Index Key	0001633931
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		38,460,478
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 108,150	$ 112,848
Receivables, net of an allowance for doubtful accounts of $3,334 and $3,399 at March 31, 2016 and December 31, 2015, respectively	243,000	235,549
Inventories, net	108,016	118,701
Prepaid expenses and other current assets	6,096	13,263
Total current assets	465,262	480,361
Property and equipment, net	92,098	93,066
Goodwill	1,044,041	1,044,041
Other intangible assets, net	1,778	1,987
Deferred tax assets, net	20,549	20,549
Other assets	2,127	2,245
Total Assets	1,625,855	1,642,249
Current liabilities:
Accounts payable	223,308	253,311
Current portion of long-term debt	17,500	15,000
Accrued liabilities	65,527	58,369
Total current liabilities	306,335	326,680
Long-term debt	173,543	178,457
Deferred tax liabilities, net	181,251	181,254
Long-term portion of insurance reserves	38,641	39,655
Other liabilities	435	474
Total Liabilities	$ 700,205	$ 726,520
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2016 and December 31, 2015
Common stock, $0.01 par value: 250,000,000 shares authorized; 38,480,200 and 38,268,375 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	$ 385	$ 377
Treasury stock, 53,408 shares at March 31, 2016, at cost	(1,539)
Additional paid-in capital	839,312	838,976
Retained earnings	87,492	76,376
Total equity	925,650	915,729
Total liabilities and equity	$ 1,625,855	$ 1,642,249

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
CONSOLIDATED BALANCE SHEETS
Allowance for doubtful accounts	$ 3,334	$ 3,399
Preferred Stock, Par Value (in dollars per share)	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares, Issued	0	0
Preferred Stock, Shares, Outstanding	0	0
Common Stock, Par Value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, Shares Authorized	250,000,000	250,000,000
Common Stock, Shares, Issued	38,480,200	38,268,375
Common Stock, Shares, Outstanding	38,480,200	38,268,375
Treasury stock, shares at cost	53,408

XML

CONSLIDATED STATEMENT OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 414,024	$ 358,460
Cost of sales	324,569	284,644
Gross profit	89,455	73,816
Selling, general and administrative expenses	69,688	74,963
Operating profit (loss)	19,767	(1,147)
Other income (expense), net:
Interest expense	(1,673)	(3,161)
Other, net	75	8
Other expense, net	(1,598)	(3,153)
Income (loss) from continuing operations before income taxes	18,169	(4,300)
Income tax (expense) benefit from continuing operations	(7,053)	500
Income (loss) from continuing operations	11,116	(3,800)
Income from discontinued operations, net		1
Net income (loss)	$ 11,116	$ (3,799)
Basic:
Income (loss) from continuing operations	$ 0.29	$ (0.10)
Net income (loss)	0.29	(0.10)
Diluted:
Income (loss) from continuing operations	0.29	(0.10)
Net income (loss)	$ 0.29	$ (0.10)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net Cash From (For) Operating Activities:
Net income (loss)	$ 11,116	$ (3,799)
Adjustments to reconcile net income to net cash from (for) operating activities:
Depreciation and amortization	2,895	3,053
Share-based compensation	1,600	808
Loss on sale of property and equipment	950	97
Provision for bad debt expense	1,054	944
Loss from inventory obsolescence	335	358
Deferred income taxes, net	(3)	(500)
Changes in certain assets and liabilities:
Receivables, net	(8,505)	2,047
Inventories, net	10,350	2,223
Prepaids and other current assets	7,167	450
Accounts payable	(29,846)	(31,265)
Long-term portion of insurance reserves	(1,014)	1,713
Accrued liabilities	7,158	5,232
Other, net	96
Net cash from (for) operating activities	3,353	(18,639)
Cash Flows From (For) Investing Activities:
Purchases of property and equipment	(2,900)	(2,298)
Proceeds from sale of property and equipment	76	369
Other, net	68	140
Net cash for investing activities	(2,756)	(1,789)
Cash Flows From (For) Financing Activities:
Net transfer from Former Parent		21,062
Repayment of long-term debt	(2,500)
Taxes withheld and paid on employees' equity awards	(1,256)
Repurchase of shares of common stock	(1,539)
Net cash (for) from financing activities	(5,295)	21,062
CASH AND CASH EQUIVALENTS:
(Decrease) increase for the year	(4,698)	634
Cash and cash equivalents at beginning of period	112,848	2,965
Cash and cash equivalents at end of period	108,150	$ 3,599
Supplemental disclosure of noncash investing activities:
Accruals for property and equipment	$ 426

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Common Stock	Treasury Stock at Cost	Additional Paid-in Capital	Retained Earnings	Former Parent Investment	Total
Balance at Dec. 31, 2014					$ 952,292	$ 952,292
Increase (Decrease) in Stockholders' Equity
Net income (loss)					(3,799)	(3,799)
Net transfers from Former Parent					24,770	24,770
Balance at Mar. 31, 2015					$ 973,263	973,263
Balance at Dec. 31, 2015	$ 377		$ 838,976	$ 76,376		915,729
Increase (Decrease) in Stockholders' Equity
Net income (loss)				11,116		11,116
Share-based compensation			1,600			1,600
Issuance of restricted share awards under long-term equity incentive plan	8		(8)
Repurchase of 53,408 shares of common stock pursuant to Share Repurchase Program		$ (1,539)				(1,539)
50,728 shares of common stock withheld to satisfy statutory withholding requirements			(1,256)			(1,256)
Balance at Mar. 31, 2016	$ 385	$ (1,539)	$ 839,312	$ 87,492		$ 925,650

XML

CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical)	3 Months Ended
	Mar. 31, 2016 shares
CONSOLIDATED STATEMENTS OF EQUITY
Repurchase of shares of common stock pursuant to Share Repurchase Program (in shares)	53,408
Numberof shares of common stock withheld to satisfy statutory withholding requirements (in shares)	50,728

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2016

Basis of Presentation

Basis of Presentation

1. BASIS OF PRESENTATION

On June 30, 2015 (the “Effective Date”), Masco Corporation (“Masco” or the “Former Parent”) completed the separation (the “Separation”) of its Installation and Other Services businesses (the “Services Business”) from its other businesses.  On the Effective Date, TopBuild Corp. (“TopBuild” or the “Company”), a Delaware corporation formed in anticipation of the Separation, became an independent public company which holds, through its subsidiaries, the assets and liabilities associated with the Services Business.  The Separation was achieved through the distribution of 100 percent of the outstanding capital stock of TopBuild to holders of Masco common stock.  References to “TopBuild,” the “Company,” “we,” “our,” and “us” refer to TopBuild Corp. and its consolidated subsidiaries.

These condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Prior to the Separation, the consolidated financial statements of TopBuild were prepared on a stand-alone basis and reflect the historical results of operations, financial position, and cash flows of Masco’s Services Business, including an allocable portion of corporate costs. 

We report our business in two segments: Installation and Distribution.  Our Installation segment principally includes the sale and installation of insulation and other building products.  Our Distribution segment principally includes the distribution of insulation and other building products.  Our segments are based on our operating units, for which financial information is regularly evaluated by our corporate operating executives.

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to state fairly our financial position as of March 31, 2016, our results of operations for the three months ended March 31, 2016, and cash flows for the three months ended March 31, 2016.  The Condensed Consolidated Balance Sheet at December 31, 2015, was derived from our audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States of America (“U.S. GAAP”).

XML

Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies

Accounting Policies

2. ACCOUNTING POLICIES

Financial Statement Presentation.  The condensed consolidated financial statements have been developed in conformity with U.S. GAAP, which requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from these estimates.  Our financial statements for the periods prior to the Separation have been derived from the financial statements and accounting records of Masco using the historical results of operations and historical basis of assets and liabilities of the Services Business, and reflect Masco’s net investment in the Services Business. 

All intercompany transactions between TopBuild entities have been eliminated. Transactions between TopBuild and Masco prior to the Separation, with the exception of purchase transactions, are reflected in the Condensed Consolidated Statements of Cash Flows as a financing activity in “Net transfer from Former Parent” and in the Condensed Consolidated Statements of Changes in Equity as “Former Parent Investment.”

The accompanying condensed consolidated financial statements for the periods prior to the Separation include allocations of general corporate expenses incurred by Masco for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs.  These general corporate expenses were allocated to TopBuild on the basis of sales.  Total allocated general corporate costs were $7.9 million for the three months ended March 31, 2015.  These costs were included in selling, general, and administrative expenses.

Prior to the Separation, Masco incurred certain operating expenses on behalf of the Services Business that were allocated to TopBuild based on direct benefit or usage.  These allocated operating expenses were $4.4 million for the three months ended March 31, 2015.  These costs were included in selling, general, and administrative expenses.  An estimate of these operating expenses was allocated to each of TopBuild’s reporting segments based on a percentage of sales.

For the periods prior to the Separation, these condensed consolidated financial statements may not reflect the actual expenses that would have been incurred had we operated as a stand-alone company and may not reflect the consolidated results of operations, financial position, and cash flows had we operated as a stand-alone company.  Actual costs that would have been incurred if we had operated as a stand-alone company prior to the Separation would have depended on multiple factors, including organizational structure and strategic decisions made in various areas, including, without limitation, information technology and infrastructure.

During the quarter ended March 31, 2015, we identified an error related primarily to the misallocation of a favorable legal settlement to general corporate expenses of TopBuild in the fourth quarter of 2014.  The impact of the error was to understate the allocation of corporate expenses reported as selling, general, and administrative expense and overstate operating profit by $1.9 million.  The error was not considered material to the previously reported 2014 financial statements.  The Company recorded the correction of the error by an out-of-period adjustment in the first quarter of 2015, which is therefore reflected in the three months ended March 31, 2015, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows.

Share-based Compensation.  Our share-based compensation program currently consists of restricted share awards (“RSAs”) and stock option awards (“Options”).  Share-based compensation is reported in selling, general, and administrative expense.

The following table details our award types and accounting policies:

Award Type:	Fair Value Determination	Vesting	Expense Recognition‡	Expense Measurement
Restricted Share Awards
Service Condition	Closing stock price on date of grant	Ratably; 3 or 5 years	Straight-line	Fair value at grant date
Performance Condition	Closing stock price on date of grant	Cliff; 3 years	Straight-line; Adjusted based on meeting or exceeding performance targets	Evaluated quarterly; 0 - 200% of fair value at grant date depending on performance
Market Condition	Monte-Carlo Simulation	Cliff; 3 years	Straight-line; Recognized even if condition is not met	Fair value at grant date
Stock Options†	Black-Scholes Options Pricing Model	Ratably; 3 or 5 years	Straight-line	Fair value at grant date

†Stock options expire no later than 10 years after the grant date.

‡Expense is reversed if award is forfeited prior to vesting.

Recently Issued Accounting Pronouncements:In May 2014 the Financial Accounting Standards Board (“FASB”) issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”).  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries.  ASC 606 is effective for us for annual periods beginning January 1, 2018.  We are currently evaluating the impact the adoption of this new standard will have on our results of operations.

In July 2015, the FASB issued Accounting Standards Update 2015-11 (“ASU 2015-11”) “Simplifying the Measurement of Inventory.”  Under the amendment, ASU 2015-11, inventory should be measured at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  This guidance is effective for fiscal years beginning after December 15, 2016.  Early adoption is permitted; however, we do not anticipate adopting this standard until the first quarter of 2017.  We do not anticipate the adoption of this amendment will have a material impact on our financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”), “Leases.”  This standard requires a lessee to recognize most leases on their balance sheet.  Companies are required to use a modified retrospective transition method for all existing leases.  This standard is effective for annual periods beginning after December 15, 2018, and interim periods therein.  Early adoption is permitted.  We have not yet selected an adoption date nor have we determined the effect on our financial position or results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting.”  This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  Under this guidance, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement.  This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of 2017.  Early adoption is permitted.  We have not yet selected an adoption date nor have we determined the effect on our financial position or results of operations.

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Goodwill and Other Intangibles

3 Months Ended

Mar. 31, 2016

Goodwill and Other Intangibles

Goodwill and Other Intangibles

3. GOODWILL AND OTHER INTANGIBLES

The changes in the carrying amount of goodwill for the three months ended March 31, 2016, by segment, were as follows, in thousands:

	Gross Goodwill		Gross Goodwill		Accumulated		Net Goodwill
	at		at		Impairment		at
	December 31, 2015		March 31, 2016		Losses		March 31, 2016
Installation	$	1,389,775	$	1,389,775	$	(762,021)	$	627,754
Distribution		416,287		416,287		—		416,287
Total	$	1,806,062	$	1,806,062	$	(762,021)	$	1,044,041

Other intangible assets, net includes the carrying value of our definite-lived intangible assets of $1.8 million (net of accumulated amortization of $18.1 million) at March 31, 2016, and $2.0 million (net of accumulated amortization of $17.9 million) at December 31, 2015.  

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Depreciation and Amortization

3 Months Ended

Mar. 31, 2016

Depreciation and Amortization

Depreciation and Amortization

4. DEPRECIATION AND AMORTIZATION

The following table sets forth our depreciation and amortization expense for the three months ended March 31, 2016 and 2015, in thousands:

	Three Months Ended March 31,
	2016		2015
Depreciation	$	2,686	$	2,782
Amortization		209		271
Total	$	2,895	$	3,053

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Long-Term Debt

3 Months Ended

Mar. 31, 2016

Long-Term Debt

Long-Term Debt

5. LONG-TERM DEBT

In connection with the Separation, the Company and its wholly-owned domestic subsidiaries (collectively, the “Guarantors”) entered into a credit agreement and related collateral and guarantee documentation (collectively, the “Credit Agreement”) with PNC Bank, National Association, as administrative agent, and the other lenders and agents party thereto.  The Credit Agreement was executed by the parties thereto on June 9, 2015, with an effective date of June 30, 2015.

The Credit Agreement consists of a senior secured term loan facility (“term loan facility”) of $200 million and a senior secured revolving credit facility (“revolving facility”) which provides borrowing availability of up to $125 million.  Together, the term loan facility and revolving facility are referred to as the credit facility.  Additional borrowing capacity under the credit facility may be accessed by the Company in an aggregate amount not to exceed $100 million without the consent of the lenders, subject to certain conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity).  The credit facility is scheduled to mature on June 30, 2020.

The revolving facility includes a $100 million sublimit for the issuance of letters of credit and a $15 million sublimit for swingline loans.  Swingline loans and letters of credit issued under the revolving facility reduce the availability under the revolving facility.

The proceeds of the $200 million term loan facility were used to finance a cash distribution to Masco in connection with the Separation.  We expect to use the borrowing capacity under the revolving facility from time to time for working capital and funds for general corporate purposes. 

Interest payable on the credit facility is based on either:

- the London interbank offered rate (“LIBOR”), adjusted for statutory reserve requirements (the “Adjusted LIBOR Rate”); or

- the Base Rate, which is defined as the highest of (a) the prime rate, (b) the federal funds open rate plus 0.50 percent, and (c) the daily LIBOR rate for a one-month interest period plus 1.0 percent,

plus, (A) in the case of Adjusted LIBOR Rate borrowings, applicable margins ranging from 1.00 percent to 2.00 percent per annum, and (B) in the case of Base Rate borrowings, spreads ranging from 0.00 percent to 1.00 percent per annum, depending on, in each of (A) and (B), the Company’s Total Leverage Ratio, defined as the ratio of debt to EBITDA, ranging from less than or equal to 1.00:1.00 to greater than 2.50:1.00.  The interest rate period with respect to the Adjusted LIBOR Rate interest rate option can be set at one-, two-, three-, or six-months, and in certain circumstances one-week or 12-months, as selected by the Company in accordance with the terms of the Credit Agreement.  The interest rate as of March 31, 2016, was 2.44 percent.

The Company shall make payments on the outstanding principal amount of the term loan in quarterly principal installments based on annual amortization of (a) for the first year, 5 percent, (b) for the second, third, and fourth years, 10 percent per year, and (c) for the fifth year, 15 percent, with the remaining balance payable on the scheduled maturity date of the term loan.

The following table reconciles the principal balance of our long-term debt to our Condensed Consolidated Balance Sheets, in thousands:

	As of
	March 31,		December 31,
	2016		2015
Current portion of long-term debt	$	17,500	$	15,000
Long-term portion of long-term debt		175,000		180,000
Unamortized debt issuance costs		(1,457)		(1,543)
Long-term debt	$	191,043	$	193,457

Borrowings under the credit facility are prepayable at the Company’s option without premium or penalty.  The Company is required to prepay the term loan with the net cash proceeds of certain asset sales, debt issuances, or casualty events, subject to certain exceptions.

The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes.  In addition, the Credit Agreement requires us to maintain a net leverage ratio (defined as the ratio of debt (less certain cash) to EBITDA that is less than (i) from the date the Credit Agreement is entered into through December 31, 2015, 3.50:1.00, (ii) from March 31, 2016 through September 30, 2016, 3.25:1.00, and (iii) from and after December 31, 2016, 3.00:1.00).  In addition, the Credit Agreement requires us to maintain a minimum fixed charge coverage ratio of 1.10:1.00.  The Credit Agreement also contains customary events of default.  We were compliant with all covenants as of March 31, 2016.  

All obligations under the Credit Agreement are guaranteed by the Guarantors, and all obligations under the Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Company and the Guarantors.

We had standby letters of credit outstanding of approximately $55.1 million as of March 31, 2016.  The standby letters of credit were issued to secure financial obligations related to our workers compensation, general insurance, and auto liability programs.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements

Fair Value Measurements

6. FAIR VALUE MEASUREMENTS

The fair value measurement standard defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (referred to as an “exit price”).  Authoritative guidance on fair value measurements and disclosures clarifies that a fair value measurement for a liability should reflect the entity’s non-performance risk.  In addition, a fair value hierarchy is established that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Fair Value on Recurring Basis

The carrying values of cash and cash equivalents, receivables, net, and accounts payable are considered to be representative of their respective fair values due to the short-term nature of these instruments. 

Fair Value on Non-Recurring Basis

Fair value measurements were applied to our long-term debt.  The carrying value of our long-term debt approximates the fair market value primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since we assumed our debt obligations under the credit facility on June 30, 2015.  In addition, due to the floating-rate nature of our long-term debt, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation. 

During the periods presented, there were no transfers between fair value hierarchical levels.

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Segment Information

3 Months Ended

Mar. 31, 2016

Segment Information

Segment Information

7. SEGMENT INFORMATION

Information about us by segment is as follows, in thousands:

	Three Months Ended March 31,
	2016		2015		2016		2015
	Net Sales				Operating Profit (Loss) (2)
Our operations by segment were (1):
Installation	$	272,878	$	233,363	$	13,506	$	(1,032)
Distribution		160,888		144,611		14,333		11,377
Intercompany eliminations and other adjustments (3)		(19,742)		(19,514)		(3,352)		(3,589)
Total	$	414,024	$	358,460		24,487		6,756
General corporate expense, net (4)						(4,720)		(7,903)
Operating profit (loss), as reported						19,767		(1,147)
Other expense, net						(1,598)		(3,153)
Income (loss) from continuing operations before income taxes					$	18,169	$	(4,300)

(1) All of our operations are located in the United States.

(2) Segment operating profit for the three months ended March 31, 2016, includes an allocation of general corporate expenses attributable to the operating segments which is based on direct benefit or usage (such as salaries of corporate employees who directly support the segment).  Segment operating profit for the three months ended March 31, 2015, includes an estimate of general corporate expenses calculated based on a percentage of sales.  For the three months ended March 31, 2015, the $0.4 million difference between estimated expenses and actual corporate expenses is recorded in intercompany eliminations and other adjustments.

(3) Intercompany eliminations include the elimination of intercompany profit of $3.4 million for each of the three months ended March 31, 2016 and 2015.  Other adjustments primarily include differences between estimated and actual corporate costs allocated to the segments for the three months ended March 31, 2015, as noted in footnote (2) above.

(4) General corporate expense, net included those expenses not specifically attributable to our segments.

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Other Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Other Commitments and Contingencies

Other Commitments and Contingencies

8. OTHER COMMITMENTS AND CONTINGENCIES

Litigation.  We are subject to claims, charges, litigation, and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defects, insurance coverage, personnel and employment disputes, antitrust, and other matters, including class actions.  We believe we have adequate defenses in these matters and that the likelihood the outcome of these matters would have a material adverse effect on us is remote.  However, there is no assurance that we will prevail in these matters, and we could in the future incur judgments, enter into settlements of claims, or revise our expectations regarding the outcome of these matters, which could materially impact our results of operations.

Other Matters.  We enter into contracts, which include customary indemnifications that are standard for the industries in which we operate.  Such indemnifications include customer claims against builders for issues relating to our products and workmanship.  In conjunction with divestitures and other transactions, we occasionally provide customary indemnifications relating to various items including: the enforceability of trademarks; legal and environmental issues; and asset valuations.  We evaluate the probability that amounts may be incurred and appropriately record an estimated liability when deemed probable.

We occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods.  Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed.  Other types of bonds outstanding are principally license and insurance related.

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Taxes

Income Taxes

9. INCOME TAXES

Our effective tax rates were 38.8 percent and 11.6 percent for the three months ended March 31, 2016 and 2015, respectively.  The lower rate in 2015 was primarily due to a decrease in our valuation allowance resulting from a partial use of our Federal net operating loss carryforward.

For 2015 activity through the Separation, we file our tax returns as a member of the Masco consolidated group for U.S. Federal and certain State jurisdictions.  As a result, certain tax attributes, primarily the Federal and State net operating loss carryforwards, were treated as assets of the Masco consolidated group, which they were able to utilize through December 31, 2015.  Masco fully utilized the Federal net operating loss and certain State net operating losses by the end of 2015.

In the fourth quarter of 2015, we released all but $0.8 million of our valuation allowance against U.S. Federal and certain state deferred tax assets, due primarily to a return to sustainable operating profitability.

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Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share

Earnings Per Share

10. INCOME (LOSS) PER SHARE

Basic net income per share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents.

Diluted net income per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method.

For comparative purposes, thecomputation of basic and diluted income per common share for prior year periods presented was calculated using the shares distributed at Separation.  On June 30, 2015, we distributed 37.7 million shares of our common stock to Masco shareholders in conjunction with the Separation.

Basic and diluted income (loss) per share were computed as follows (in thousands except share and per share amounts):

	Three Months Ended March 31,
	2016		2015
Income (loss) from continuing operations	$	11,116	$	(3,800)
Income from discontinued operations, net		—		1
Net income (loss) - basic and diluted	$	11,116	$	(3,799)
Weighted average number of common shares outstanding - basic		37,761,423		37,667,947
Dilutive effect of common stock equivalents:
RSAs with service-based conditions		113,683		—
RSAs with market-based conditions		—		—
RSAs with performance-based conditions		—		—
Stock options		24,004		—
Weighted average number of common shares outstanding - diluted		37,899,110		37,667,947
Basic income (loss) per common share:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)
Diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)

The following table summarizes the shares excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive:

	Three Months Ended March 31,
	2016
Anti-dilutive common stock equivalents:
RSAs with service-based conditions		99,734
RSAs with market-based conditions		25,293
RSAs with performance-based conditions		—
Stock options		484,284
Total anti-dilutive common stock equivalents:		609,311

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Share-Based Compensation

3 Months Ended

Mar. 31, 2016

Share-Based Compensation.

Share-Based Compensation

11. SHARE-BASED COMPENSATION

Prior to the Separation, our employees participated in the Masco share-based compensation program and received restricted share awards and stock options. Effective July 1, 2015, our employees participate in the 2015 TopBuild Long-Term Incentive Plan (the “2015 Plan”).  The 2015 Plan authorizes the Board of Directors to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents.  No more than 4.0 million shares of common stock may be issued under the 2015 Plan. 

Prior to the Separation, share-based compensation expense was allocated to TopBuild based on the awards and options previously granted by Masco to TopBuild employees.  Outstanding, unvested Masco stock options and restricted share awards held by employees of TopBuild as of June 30, 2015, were forfeited upon Separation and replaced with TopBuild long-term incentive awards, issued under the 2015 Plan, immediately subsequent to the Separation.  The replacement awards are subject to the same terms and conditions in effect prior to the Separation and are of generally equivalent value.

Included in selling, general, and administrative expenses is share-based compensation expense of $1.6 million and $0.8 million for the three months ended March 31, 2016 and 2015, respectively.

The following table presents a summary of our share-based compensation activity for the three months ended March 31, 2016 (in thousands, except per share amounts):

	Restricted Share Awards			Stock Options
	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Balance December 31, 2015	586.6	$	21.97	387.6	$	9.35	$	24.03	$	2,611.7
Granted	317.2		28.41	409.3		10.20		26.30
Converted/Exercised	(152.1)		19.16	—		—		—
Forfeited	(1.2)		23.20	—		—		—
Balance March 31, 2016	750.5	$	25.25	796.9	$	9.79	$	25.20	$	3,620.4
Exercisable March 31, 2016				71.7	$	6.69	$	16.86	$	923.9

As of March 31, 2016, there was $16.8 million of unrecognized compensation expense related to unvested restricted share awards; such awards had a weighted average remaining vesting period of 2.2 years.

As of March 31, 2016, there was $6.8 million of unrecognized compensation expense related to unvested stock options; such options had a weighted average remaining vesting period of 2.3 years and weighted average remaining contractual life of 9.4 years. 

Our RSAs with performance-based conditions are evaluated on a quarterly basis with adjustments to compensation expense based on the likelihood of the performance target being achieved or exceeded.  The following table shows the range of payouts and the related expense for our RSAs with performance-based conditions, dollars in thousands:

			Payout Ranges and related expense
RSAs with performance-based conditions	Grant Date Fair Value		0%		25%		100%		200%
February 22, 2016	$	2,351.7	$	—	$	587.9	$	2,351.7	$	4,703.4

The fair value of our RSAs with a market-based condition granted under the 2015 Plan was determined using a Monte Carlo simulation.  The following are key inputs in the Monte Carlo analysis:

	2016
Remaining measurement period (years)		2.86
Risk free interest rate		0.90	%
Dividend yield		0.00	%
Estimated fair value of market-based RSAs granted	$	33.77

The fair values of stock options granted under the 2015 Plan were calculated using the Black-Scholes Options Pricing Model.  The following table presents the assumptions used to estimate the fair values of options granted in 2016 and 2015:

	2016			2015
Risk free interest rate		1.51	%		1.82	%
Expected volatility		38.00	%		37.00	%
Expected life (in years)		6.00			6.00
Dividend yield		0.00	%		0.00	%
Estimated fair value of options granted	$	10.20		$	10.44

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Share Repurchase Program

3 Months Ended

Mar. 31, 2016

Share Repurchase Program

Share Repurchase Program

NOTE 12. SHARE REPURCHASE PROGRAM

On March 1, 2016, our Board of Directors authorized a share repurchase program (the “Share Repurchase Program”), pursuant to which we may purchase up to $50 million of our common stock.  Share repurchases may be executed through various means including, without limitation, open market purchases, privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan.  The Share Repurchase Program does not obligate us to purchase any shares and expires in one year.  In its discretion, the Board of Directors may terminate, modify, or amend the Share Repurchase Program at any time.

During the three months ended March 31, 2016, we repurchased 53,408 shares of our common stock at a cost of approximately $1.5 million.

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Closure Costs

3 Months Ended

Mar. 31, 2016

Closure Costs

Closure Costs

NOTE 13. CLOSURE COSTS

We continuously evaluate our national footprint to ensure we are strategically located throughout the U.S. to serve our customers and position ourselves for continued growth.  As a result of this evaluation, management approved a plan to close 13 locations within our Installation and Distribution segments during the first and second quarters of 2016.  In conjunction with this evaluation, we eliminated certain positions at our corporate headquarters located in Daytona Beach, Florida.  We recognize expenses related to branch closures and position eliminations at the time of announcement or notification.  Such costs may include termination and other severance benefits, lease abandonment costs, and other contract termination costs.  Closure costs are accrued on our Condensed Consolidated Balance Sheets as part of accrued liabilities and reflected in our Condensed Consolidated Statements of Operations as selling, general, and administrative expense.  Unpaid amounts noted as of March 31, 2016, are expected to be paid within the next 12 months.

The following table details our total estimated closure costs by cost type and segment related to the above closures and position eliminations, dollars in thousands:

Segment / Cost Type	Closure Costs Liability at December 31, 2015		Closure Costs Incurred for the Three Months Ended March 31, 2016		Cash Payments for the Three Months Ended March 31, 2016		Closure Costs Liability at March 31, 2016
Installation:
Severance	$	—	$	582.7	$	(71.9)	$	510.8
Lease abandonment		—		212.6		(26.4)		186.2
Total Installation:		—		795.3		(98.3)		697.0
Distribution:
Severance		—		12.6		(12.6)		—
Lease abandonment		—		70.0		—		70.0
Total Distribution:		—		82.6		(12.6)		70.0
Corporate:
Severance		—		97.8		—		97.8
Total Corporate:		—		97.8		—		97.8
Consolidated:
Severance		—		693.1		(84.5)		608.6
Lease abandonment		—		282.6		(26.4)		256.2
Total Consolidated:	$	—	$	975.7	$	(110.9)	$	864.8

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events

Subsequent Events

NOTE 14. SUBSEQUENT EVENTS

On May 9, 2016, the Company and its lenders executed an amendment to the Credit Agreement (“the Amendment”).  The Amendment provides for the exclusion of up to $50 million of completed share repurchases (on a trailing twelve month basis) from the Credit Agreement’s definition of “Fixed Charges” for the purposes of determining the Company’s compliance with the quarterly Fixed Charge Coverage Ratio (“FCCR”) financial covenant.  The Amendment provides for an initial exclusion of up to $25 million and allows for the exclusion of an additional $25 million of completed share repurchases from the FCCR calculation provided that the Company’s Total Leverage Ratio is below 2.0X at the time of such share repurchase and after giving pro forma effect to any such share repurchase. 

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies

Financial Statement Presentation

Financial Statement Presentation.  The condensed consolidated financial statements have been developed in conformity with U.S. GAAP, which requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from these estimates.  Our financial statements for the periods prior to the Separation have been derived from the financial statements and accounting records of Masco using the historical results of operations and historical basis of assets and liabilities of the Services Business, and reflect Masco’s net investment in the Services Business. 

All intercompany transactions between TopBuild entities have been eliminated. Transactions between TopBuild and Masco prior to the Separation, with the exception of purchase transactions, are reflected in the Condensed Consolidated Statements of Cash Flows as a financing activity in “Net transfer from Former Parent” and in the Condensed Consolidated Statements of Changes in Equity as “Former Parent Investment.”

The accompanying condensed consolidated financial statements for the periods prior to the Separation include allocations of general corporate expenses incurred by Masco for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs.  These general corporate expenses were allocated to TopBuild on the basis of sales.  Total allocated general corporate costs were $7.9 million for the three months ended March 31, 2015.  These costs were included in selling, general, and administrative expenses.

Prior to the Separation, Masco incurred certain operating expenses on behalf of the Services Business that were allocated to TopBuild based on direct benefit or usage.  These allocated operating expenses were $4.4 million for the three months ended March 31, 2015.  These costs were included in selling, general, and administrative expenses.  An estimate of these operating expenses was allocated to each of TopBuild’s reporting segments based on a percentage of sales.

For the periods prior to the Separation, these condensed consolidated financial statements may not reflect the actual expenses that would have been incurred had we operated as a stand-alone company and may not reflect the consolidated results of operations, financial position, and cash flows had we operated as a stand-alone company.  Actual costs that would have been incurred if we had operated as a stand-alone company prior to the Separation would have depended on multiple factors, including organizational structure and strategic decisions made in various areas, including, without limitation, information technology and infrastructure.

During the quarter ended March 31, 2015, we identified an error related primarily to the misallocation of a favorable legal settlement to general corporate expenses of TopBuild in the fourth quarter of 2014.  The impact of the error was to understate the allocation of corporate expenses reported as selling, general, and administrative expense and overstate operating profit by $1.9 million.  The error was not considered material to the previously reported 2014 financial statements.  The Company recorded the correction of the error by an out-of-period adjustment in the first quarter of 2015, which is therefore reflected in the three months ended March 31, 2015, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows.

Share-based Compensation

Share-based Compensation.  Our share-based compensation program currently consists of restricted share awards (“RSAs”) and stock option awards (“Options”).  Share-based compensation is reported in selling, general, and administrative expense.

The following table details our award types and accounting policies:

Award Type:	Fair Value Determination	Vesting	Expense Recognition‡	Expense Measurement
Restricted Share Awards
Service Condition	Closing stock price on date of grant	Ratably; 3 or 5 years	Straight-line	Fair value at grant date
Performance Condition	Closing stock price on date of grant	Cliff; 3 years	Straight-line; Adjusted based on meeting or exceeding performance targets	Evaluated quarterly; 0 - 200% of fair value at grant date depending on performance
Market Condition	Monte-Carlo Simulation	Cliff; 3 years	Straight-line; Recognized even if condition is not met	Fair value at grant date
Stock Options†	Black-Scholes Options Pricing Model	Ratably; 3 or 5 years	Straight-line	Fair value at grant date

†Stock options expire no later than 10 years after the grant date.

‡Expense is reversed if award is forfeited prior to vesting.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements:In May 2014 the Financial Accounting Standards Board (“FASB”) issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”).  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries.  ASC 606 is effective for us for annual periods beginning January 1, 2018.  We are currently evaluating the impact the adoption of this new standard will have on our results of operations.

In July 2015, the FASB issued Accounting Standards Update 2015-11 (“ASU 2015-11”) “Simplifying the Measurement of Inventory.”  Under the amendment, ASU 2015-11, inventory should be measured at the lower of cost and net realizable value.  Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  This guidance is effective for fiscal years beginning after December 15, 2016.  Early adoption is permitted; however, we do not anticipate adopting this standard until the first quarter of 2017.  We do not anticipate the adoption of this amendment will have a material impact on our financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”), “Leases.”  This standard requires a lessee to recognize most leases on their balance sheet.  Companies are required to use a modified retrospective transition method for all existing leases.  This standard is effective for annual periods beginning after December 15, 2018, and interim periods therein.  Early adoption is permitted.  We have not yet selected an adoption date nor have we determined the effect on our financial position or results of operations.

In March 2016, the FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting.”  This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  Under this guidance, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement.  This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of 2017.  Early adoption is permitted.  We have not yet selected an adoption date nor have we determined the effect on our financial position or results of operations.

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Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies

Summary of award types and accounting policies

Award Type:	Fair Value Determination	Vesting	Expense Recognition‡	Expense Measurement
Restricted Share Awards
Service Condition	Closing stock price on date of grant	Ratably; 3 or 5 years	Straight-line	Fair value at grant date
Performance Condition	Closing stock price on date of grant	Cliff; 3 years	Straight-line; Adjusted based on meeting or exceeding performance targets	Evaluated quarterly; 0 - 200% of fair value at grant date depending on performance
Market Condition	Monte-Carlo Simulation	Cliff; 3 years	Straight-line; Recognized even if condition is not met	Fair value at grant date
Stock Options†	Black-Scholes Options Pricing Model	Ratably; 3 or 5 years	Straight-line	Fair value at grant date

†Stock options expire no later than 10 years after the grant date.

‡Expense is reversed if award is forfeited prior to vesting.

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Goodwill and Other Intangibles (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Other Intangibles

Changes in carrying amount of goodwill by segment

The changes in the carrying amount of goodwill for the three months ended March 31, 2016, by segment, were as follows, in thousands:

	Gross Goodwill		Gross Goodwill		Accumulated		Net Goodwill
	at		at		Impairment		at
	December 31, 2015		March 31, 2016		Losses		March 31, 2016
Installation	$	1,389,775	$	1,389,775	$	(762,021)	$	627,754
Distribution		416,287		416,287		—		416,287
Total	$	1,806,062	$	1,806,062	$	(762,021)	$	1,044,041

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Depreciation and Amortization (Tables)

3 Months Ended

Mar. 31, 2016

Depreciation and Amortization

Schedule of depreciation and amortization expense

	Three Months Ended March 31,
	2016		2015
Depreciation	$	2,686	$	2,782
Amortization		209		271
Total	$	2,895	$	3,053

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2016

Long-Term Debt

Principal balance of our long-term debt

	As of
	March 31,		December 31,
	2016		2015
Current portion of long-term debt	$	17,500	$	15,000
Long-term portion of long-term debt		175,000		180,000
Unamortized debt issuance costs		(1,457)		(1,543)
Long-term debt	$	191,043	$	193,457

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2016

Segment Information

Schedule of information by segment

	Three Months Ended March 31,
	2016		2015		2016		2015
	Net Sales				Operating Profit (Loss) (2)
Our operations by segment were (1):
Installation	$	272,878	$	233,363	$	13,506	$	(1,032)
Distribution		160,888		144,611		14,333		11,377
Intercompany eliminations and other adjustments (3)		(19,742)		(19,514)		(3,352)		(3,589)
Total	$	414,024	$	358,460		24,487		6,756
General corporate expense, net (4)						(4,720)		(7,903)
Operating profit (loss), as reported						19,767		(1,147)
Other expense, net						(1,598)		(3,153)
Income (loss) from continuing operations before income taxes					$	18,169	$	(4,300)

(1) All of our operations are located in the United States.

(2) Segment operating profit for the three months ended March 31, 2016, includes an allocation of general corporate expenses attributable to the operating segments which is based on direct benefit or usage (such as salaries of corporate employees who directly support the segment).  Segment operating profit for the three months ended March 31, 2015, includes an estimate of general corporate expenses calculated based on a percentage of sales.  For the three months ended March 31, 2015, the $0.4 million difference between estimated expenses and actual corporate expenses is recorded in intercompany eliminations and other adjustments.

(3) Intercompany eliminations include the elimination of intercompany profit of $3.4 million for each of the three months ended March 31, 2016 and 2015.  Other adjustments primarily include differences between estimated and actual corporate costs allocated to the segments for the three months ended March 31, 2015, as noted in footnote (2) above.

General corporate expense, net included those expenses not specifically attributable to our segments.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share

Schedule of basic and diluted earnings per share

Basic and diluted income (loss) per share were computed as follows (in thousands except share and per share amounts):

	Three Months Ended March 31,
	2016		2015
Income (loss) from continuing operations	$	11,116	$	(3,800)
Income from discontinued operations, net		—		1
Net income (loss) - basic and diluted	$	11,116	$	(3,799)
Weighted average number of common shares outstanding - basic		37,761,423		37,667,947
Dilutive effect of common stock equivalents:
RSAs with service-based conditions		113,683		—
RSAs with market-based conditions		—		—
RSAs with performance-based conditions		—		—
Stock options		24,004		—
Weighted average number of common shares outstanding - diluted		37,899,110		37,667,947
Basic income (loss) per common share:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)
Diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.29	$	(0.10)
Income from discontinued operations, net		—		—
Net income (loss)	$	0.29	$	(0.10)

Summary of shares excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive

	Three Months Ended March 31,
	2016
Anti-dilutive common stock equivalents:
RSAs with service-based conditions		99,734
RSAs with market-based conditions		25,293
RSAs with performance-based conditions		—
Stock options		484,284
Total anti-dilutive common stock equivalents:		609,311

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Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Share-Based Compensation

Schedule of share-based compensation activity

The following table presents a summary of our share-based compensation activity for the three months ended March 31, 2016 (in thousands, except per share amounts):

	Restricted Share Awards			Stock Options
	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
Balance December 31, 2015	586.6	$	21.97	387.6	$	9.35	$	24.03	$	2,611.7
Granted	317.2		28.41	409.3		10.20		26.30
Converted/Exercised	(152.1)		19.16	—		—		—
Forfeited	(1.2)		23.20	—		—		—
Balance March 31, 2016	750.5	$	25.25	796.9	$	9.79	$	25.20	$	3,620.4
Exercisable March 31, 2016				71.7	$	6.69	$	16.86	$	923.9

Schedule of assumptions used to estimate the fair values of options granted

	2016			2015
Risk free interest rate		1.51	%		1.82	%
Expected volatility		38.00	%		37.00	%
Expected life (in years)		6.00			6.00
Dividend yield		0.00	%		0.00	%
Estimated fair value of options granted	$	10.20		$	10.44

Performance-based conditions | Restricted Stock Awards

Share-Based Compensation

Schedule of the range of payouts and the related expense for RSAs with performance-based conditions

			Payout Ranges and related expense
RSAs with performance-based conditions	Grant Date Fair Value		0%		25%		100%		200%
February 22, 2016	$	2,351.7	$	—	$	587.9	$	2,351.7	$	4,703.4

Market-based conditions | Restricted Stock Awards

Share-Based Compensation

Schedule of key inputs used to estimate the fair value of awards

	2016
Remaining measurement period (years)		2.86
Risk free interest rate		0.90	%
Dividend yield		0.00	%
Estimated fair value of market-based RSAs granted	$	33.77

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Closure Costs (Tables)

3 Months Ended

Mar. 31, 2016

Closure Costs

Schedule of estimated closure costs by costs type and segment

Segment / Cost Type	Closure Costs Liability at December 31, 2015		Closure Costs Incurred for the Three Months Ended March 31, 2016		Cash Payments for the Three Months Ended March 31, 2016		Closure Costs Liability at March 31, 2016
Installation:
Severance	$	—	$	582.7	$	(71.9)	$	510.8
Lease abandonment		—		212.6		(26.4)		186.2
Total Installation:		—		795.3		(98.3)		697.0
Distribution:
Severance		—		12.6		(12.6)		—
Lease abandonment		—		70.0		—		70.0
Total Distribution:		—		82.6		(12.6)		70.0
Corporate:
Severance		—		97.8		—		97.8
Total Corporate:		—		97.8		—		97.8
Consolidated:
Severance		—		693.1		(84.5)		608.6
Lease abandonment		—		282.6		(26.4)		256.2
Total Consolidated:	$	—	$	975.7	$	(110.9)	$	864.8

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Basis of Presentation (Details) - segment		3 Months Ended
	Jun. 30, 2015	Mar. 31, 2016
Basis of Presentation
Percentage Of Capital Distribution	100.00%
Number of reportable segments		2

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Accounting Policies - Allocation of Expenses (Details) $ in Millions	3 Months Ended
	Mar. 31, 2015 USD ($)
Accounting Policies
Allocated general corporate costs	$ 7.9
Allocated operating expenses	4.4
Understatement of Allocation of Corporate Expense
Accounting Policies
Correction or error, amount	$ 1.9

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Accounting Policies - Share-Based Compensation (Details)	3 Months Ended
	Mar. 31, 2016
Stock Options | Minimum
Share-Based Compensation
Vesting period	3 years
Stock Options | Maximum
Share-Based Compensation
Vesting period	5 years
Expiration period	10 years
Service-based conditions | Restricted Stock Awards | Minimum
Share-Based Compensation
Vesting period	3 years
Service-based conditions | Restricted Stock Awards | Maximum
Share-Based Compensation
Vesting period	5 years
Performance-based conditions | Restricted Stock Awards
Share-Based Compensation
Vesting period	3 years
Performance-based conditions | Restricted Stock Awards | Minimum
Share-Based Compensation
Expense measurement, payout range (as percent)	0.00%
Performance-based conditions | Restricted Stock Awards | Maximum
Share-Based Compensation
Expense measurement, payout range (as percent)	200.00%
Market-based conditions | Restricted Stock Awards
Share-Based Compensation
Vesting period	3 years

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Goodwill and Other Intangibles - Goodwill (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Changes in the carrying amount of goodwill
Gross Goodwill	$ 1,806,062	$ 1,806,062
Accumulated Impairment Losses	(762,021)
Net Goodwill	1,044,041	1,044,041
Installation
Changes in the carrying amount of goodwill
Gross Goodwill	1,389,775	1,389,775
Accumulated Impairment Losses	(762,021)
Net Goodwill	627,754
Distribution
Changes in the carrying amount of goodwill
Gross Goodwill	416,287	$ 416,287
Net Goodwill	$ 416,287

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Goodwill and Other Intangibles - Other intangible assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Other intangible assets
Accumulated amortization	$ (18,100)		$ (17,900)
Net definite-lived intangible assets	1,800		2,000
Other intangible assets, net	1,778		$ 1,987
Amortization expense recognized	$ 209	$ 271

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Depreciation and Amortizations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Depreciation and Amortization
Depreciation	$ 2,686	$ 2,782
Amortization	209	271
Total	$ 2,895	$ 3,053

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Long-Term Debt - Narratives (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($)
Long-Term Debt
Letters of credit outstanding	$ 55.1
Credit Agreement
Long-Term Debt
Additional borrowing capacity available, subject to certain conditions	$ 100.0
Interest rate at period end	2.44%
Minimum fixed charge coverage ratio	1.10
Credit Agreement | Debt Covenants Term Period One
Long-Term Debt
Leverage ratio	3.50
Credit Agreement | Debt Covenants Term Period Two
Long-Term Debt
Leverage ratio	3.25
Credit Agreement | Debt Covenant Term Period Three
Long-Term Debt
Leverage ratio	3.00
Credit Agreement | Adjusted LIBOR Borrowings | Minimum
Long-Term Debt
Applicable margin based on total leverage ratio	1.00%
Leverage ratio used to determine applicable margin on borrowings	1.00
Credit Agreement | Adjusted LIBOR Borrowings | Maximum
Long-Term Debt
Applicable margin based on total leverage ratio	2.00%
Leverage ratio used to determine applicable margin on borrowings	2.50
Credit Agreement | Base Rate Borrowings | Minimum
Long-Term Debt
Applicable margin based on total leverage ratio	0.00%
Leverage ratio used to determine applicable margin on borrowings	1.00
Credit Agreement | Base Rate Borrowings | Maximum
Long-Term Debt
Applicable margin based on total leverage ratio	1.00%
Leverage ratio used to determine applicable margin on borrowings	2.50
Credit Agreement | Base Rate Borrowings | Federal Funds Open Rate
Long-Term Debt
Basis spread	0.50%
Credit Agreement | Base Rate Borrowings | LIBOR
Long-Term Debt
Basis spread	1.00%
Term Loan Facility
Long-Term Debt
Face amount of debt	$ 200.0
Proceeds from issuance of debt	$ 200.0
Amortization of outstanding principal to be paid in quarterly installments, expressed as a percentage, year one	5.00%
Amortization of outstanding principal to be paid in quarterly installments, expressed as a percentage, year two through year four	10.00%
Amortization of outstanding principal to be paid in quarterly installments, expressed as a percentage, year five	15.00%
Revolving Facility
Long-Term Debt
Maximum borrowing capacity	$ 125.0
Sublimit available for issuance of letters of credit	100.0
Sublimit available for swingline loans	$ 15.0

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Long-Term Debt - Schedule of debt (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Long-Term Debt
Current portion of long-term debt	$ 17,500	$ 15,000
Long term portion of long-term debt	175,000	180,000
Unamortized debt issuance costs	(1,457)	(1,543)
Long-term debt	$ 191,043	$ 193,457

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Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Fair Value on Non-Recurring Basis
Amount of transfers of assets and liabilities measured on a recurring and non-recurring basis between Levels 1, 2 and 3 of the fair value hierarchy	$ 0	$ 0

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Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Segment information
Net sales	$ 414,024	$ 358,460
Operating profit (loss)	19,767	(1,147)
Other expense, net	(1,598)	(3,153)
Income from continuing operations before income taxes	18,169	(4,300)
Total Assets	1,625,855		$ 1,642,249
Operating Segment
Segment information
Operating profit (loss)	24,487	6,756
Operating Segment | Installation
Segment information
Net sales	272,878	233,363
Operating profit (loss)	13,506	(1,032)
Operating Segment | Distribution
Segment information
Net sales	160,888	144,611
Operating profit (loss)	14,333	11,377
Intercompany Eliminations and Other Adjustments
Segment information
Net sales	(19,742)	(19,514)
Operating profit (loss)	(3,352)	(3,589)
Intercompany Eliminations
Segment information
Operating profit (loss)	3,400	3,400
Other Adjustments
Segment information
Operating profit (loss)		400
Corporate
Segment information
General corporate expense, net	$ (4,720)	$ (7,903)

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Taxes
Effective tax rate (as a percent)	38.80%	11.60%
Deferred tax valuation allowance			$ 0.8

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Earnings Per Share - Computation (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Jun. 30, 2015	Mar. 31, 2016	Mar. 31, 2015
Income (loss) from continuing operations		$ 11,116	$ (3,800)
Income from discontinued operations, net			1
Net income (loss)		$ 11,116	$ (3,799)
Weighted average number of common shares outstanding - basic		37,761,423	37,667,947
Dilutive effect of common stock equivalents:
Stock options		24,004
Weighted average number of common shares outstanding - diluted		37,899,110	37,667,947
Basic earnings (loss) per common share:
Income (loss) from continuing operations		$ 0.29	$ (0.10)
Net income (loss)		0.29	(0.10)
Diluted earnings (loss) per common share:
Income (loss) from continuing operations		0.29	(0.10)
Net income (loss)		$ 0.29	$ (0.10)
Other disclosures
Issuance of common stock in conjunction with the Separation (in shares)	37,700,000
Service-based conditions
Dilutive effect of common stock equivalents:
Restricted stock awards		113,683

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Earnings Per Share - Anti-dilutive common stock equivalents (Details)	3 Months Ended
	Mar. 31, 2016 shares
Anti-dilutive common stock equivalents
Total anti-dilutive common stock equivalents	609,311
Restricted Stock Awards | Service-based conditions
Anti-dilutive common stock equivalents
Total anti-dilutive common stock equivalents	99,734
Restricted Stock Awards | Market-based conditions
Anti-dilutive common stock equivalents
Total anti-dilutive common stock equivalents	25,293
Stock Options
Anti-dilutive common stock equivalents
Total anti-dilutive common stock equivalents	484,284

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Share-Based Compensation - Expense (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Selling, General and Administrative Expenses
Share-Based Compensation
Share-based compensation expense	$ 1.6	$ 0.8
2015 Plan
Share-Based Compensation
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	4.0

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Share-Based Compensation - Activity (Details) - USD ($)		3 Months Ended
	Feb. 22, 2016	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Restricted Stock Awards
Restricted Stock Awards, Number of Shares
Balance at beginning of period (in shares)		586,600
Granted (in shares)		317,200
Converted/Exercised (in shares)		(152,100)
Forfeited (in shares)		(1,200)
Balance at end of period (in shares)		750,500
Restricted Stock Awards, Weighted Average Grant Date Fair Value Per Share
Balance at beginning of period (in dollars per share)		$ 21.97
Granted (in dollars per share)		28.41
Converted/Exercised (in dollars per share)		19.16
Forfeited (in dollars per share)		23.20
Balance at end of period (in dollars per share)		$ 25.25
Restricted stock awards, additional disclosures
Unrecognized compensation expense related to unvested restricted stock awards		$ 16,800,000
Weighted average remaining vesting period		2 years 2 months 12 days
Assumptions used to estimate the fair values of the awards granted:
Remaining measurement period		2 years 10 months 10 days
Risk free interest rate (as a percent)		0.90%
Dividend yield (as a percent)		0.00%
Estimated fair value of awards granted (in dollars per share)		$ 33.77
Stock Options
Stock Options, Number of Shares
Balance at beginning of period (in shares)		387,600
Granted (in shares)		409,300
Balance at end of period (in shares)		796,900
Stock Options, Weighted Average Grant Date Fair Value Per Share
Balance at beginning of period (in dollars per share)		$ 9.35
Granted (in dollars per share)		10.20
Balance at end of period (in dollars per share)		9.79
Stock Options, Weighted Average Exercise Price Per Share
Balance at beginning of period (in dollars per share)		24.03
Granted (in dollars per share)		26.30
Balance at end of period (in dollars per share)		$ 25.20
Stock options, additional disclosures
Aggregate intrinsic value		$ 3,620,400		$ 2,611,700
Unrecognized compensation expense related to unvested stock options		$ 6,800,000
Weighted average remaining vesting period		2 years 3 months 18 days
Weighted average remaining contractual life		9 years 4 months 24 days
Exercisable, Number of shares		71,700
Exercisable, Weighted Average Grant Date Fair Value Per Share		$ 6.69
Exercisable Weighted Average Exercise Price Per Share		$ 16.86
Exercisable, Aggregate Intrinsic Value		$ 923,900
Assumptions used to estimate the fair values of the awards granted:
Risk free interest rate (as a percent)		1.51%	1.82%
Expected volatility (as a percent)		38.00%	37.00%
Expected life (in years)		6 years	6 years
Dividend yield (as a percent)		0.00%	0.00%
Estimated fair value of awards granted (in dollars per share)		$ 10.20	$ 10.44
Performance-based conditions | Restricted Stock Awards
Restricted stock awards, additional disclosures
Grant date fair value	$ 2,351,700
Performance-based conditions | Restricted Stock Awards | Payout Range-0%
Restricted stock awards, additional disclosures
Payout range (as a percent)	0.00%
Performance-based conditions | Restricted Stock Awards | Payout Range-25%
Restricted stock awards, additional disclosures
Payout range (as a percent)	25.00%
Related expenses	$ 587,900
Performance-based conditions | Restricted Stock Awards | Payout Range-100%
Restricted stock awards, additional disclosures
Payout range (as a percent)	100.00%
Related expenses	$ 2,351,700
Performance-based conditions | Restricted Stock Awards | Payout Range-200%
Restricted stock awards, additional disclosures
Payout range (as a percent)	200.00%
Related expenses	$ 4,703,400

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Share Repurchase Program (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 01, 2016
Share Repurchase Program
Share repurchase program, authorized amount		$ 50,000
Shares repurchased (in shares)	53,408
Cost of shares repurchased	$ 1,539

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Closure Costs (Details)	3 Months Ended
	Mar. 31, 2016 USD ($)
Closure Costs
Closure Costs Incurred for the Period	$ 975,700
Cash Payments for the Period	(110,900)
Closure Costs Liability, Ending Balance	864,800
Severance
Closure Costs
Closure Costs Incurred for the Period	693,100
Cash Payments for the Period	(84,500)
Closure Costs Liability, Ending Balance	608,600
Lease abandonment
Closure Costs
Closure Costs Incurred for the Period	282,600
Cash Payments for the Period	(26,400)
Closure Costs Liability, Ending Balance	256,200
Corporate
Closure Costs
Closure Costs Incurred for the Period	97,800
Closure Costs Liability, Ending Balance	97,800
Corporate | Severance
Closure Costs
Closure Costs Incurred for the Period	97,800
Closure Costs Liability, Ending Balance	97,800
Installation | Operating Segment
Closure Costs
Closure Costs Incurred for the Period	795,300
Cash Payments for the Period	(98,300)
Closure Costs Liability, Ending Balance	697,000
Installation | Operating Segment | Severance
Closure Costs
Closure Costs Incurred for the Period	582,700
Cash Payments for the Period	(71,900)
Closure Costs Liability, Ending Balance	510,800
Installation | Operating Segment | Lease abandonment
Closure Costs
Closure Costs Incurred for the Period	212,600
Cash Payments for the Period	(26,400)
Closure Costs Liability, Ending Balance	186,200
Distribution | Operating Segment
Closure Costs
Closure Costs Incurred for the Period	82,600
Cash Payments for the Period	(12,600)
Closure Costs Liability, Ending Balance	70,000
Distribution | Operating Segment | Severance
Closure Costs
Closure Costs Incurred for the Period	12,600
Cash Payments for the Period	(12,600)
Distribution | Operating Segment | Lease abandonment
Closure Costs
Closure Costs Incurred for the Period	70,000
Closure Costs Liability, Ending Balance	$ 70,000

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Subsequent Events (Details) - Subsequent Event - Credit Agreement - Amendment $ in Millions	May. 09, 2016 USD ($)
Subsequent Events
Maximum exclusion of share repurchases from the Credit Agreement's definition of "Fixed Charges"	$ 50
Initial exclusion of share repurchases from the Credit Agreement's definition of "Fixed Charges"	25
Additional exclusion of share repurchases from the Credit Agreement's definition of "Fixed Charges", provided the Company's Total Leverage Ratio is below specified threshold	$ 25
Total Leverage Ratio used to determine the additional exclusion of completed share repurchases	2.0