Information on Segments

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

INFORMATION ON SEGMENTS

INFORMATION ON SEGMENTSDuring the first quarter of 2022, our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), changed the manner in which he reviews financial information for purposes of assessing business performance, managing the business and allocating resources. In conjunction with this change, we realigned our segment structure resulting in our Company having three operating segments consisting of Installation, Distribution and Manufacturing.

Our Installation operating segment represents the majority of our net revenue and gross profit and forms our one reportable segment. This operating segment represents the service-based installation of insulation and complementary building products in the residential new construction, repair and remodel and commercial construction end markets from our national network of branch locations. These branch locations have similar economic and operating characteristics including the nature of products and services offered, operating procedures and risks, customer bases, employee incentives, material procurement and shared corporate resources which led us to conclude that they combine to form one operating segment.

The Other category reported below reflects the operations of our two remaining operating segments, Distribution and Manufacturing, which do not meet the quantitative thresholds for separate reporting. Our Distribution operating segment includes our recently acquired distribution business that sells insulation and accessories primarily to installers of these products who operate in multiple end markets. Our Manufacturing operating segment consists of our cellulose insulation manufacturing operation which was previously combined with our Installation operating segment. In addition to sales of cellulose insulation, revenues from this operating segment consist of sales of asphalt and industrial fibers to distributors and installers of these products.

The key metrics used to assess the performance of our operating segments are revenue and adjusted gross profit as these are the metrics used by our CODM to review results, assess performance and allocate resources. We define adjusted gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets or related depreciation and amortization expenses by segment because our CODM does not use this information to assess segment performance or allocate resources.

The Installation reportable segment includes substantially all of our net revenue from services while net revenue included in the Other category includes substantially all of our net revenue from sales of products. The intercompany sales from the Other category to the Installation reportable segment include a profit margin while our Installation segment records these transactions at cost.

The following table represents our segment information for the three months ended March 31, 2022 (in thousands):

	Installation		Other		Eliminations		Consolidated
Revenue	$	561,631	$	26,650	$	(789)	$	587,492
Cost of sales (exclusive of depreciation and amortization shown separately below)	385,692		19,373		(609)		404,456
Adjusted gross profit	175,939		7,277		(180)		183,036
Depreciation and amortization							10,633
Gross profit, as reported							172,403
Selling							25,192
Administrative							79,144
Amortization							11,097
Operating income							56,970
Interest expense, net							10,600
Other expense							145
Income before income taxes							$	46,225

The following table represents our segment information for the three months ended March 31, 2021 (in thousands):

	Installation		Other		Eliminations		Consolidated
Revenue	$	432,178	$	5,253	$	(365)	$	437,066
Cost of sales (exclusive of depreciation and amortization shown separately below)	297,832		4,067		(283)		301,616
Adjusted gross profit	134,346		1,186		(82)		135,450
Depreciation and amortization							10,023
Gross profit, as reported							125,427
Selling							20,858
Administrative							65,077
Amortization							8,396
Operating income							31,096
Interest expense, net							7,574
Other expense							81
Income before income taxes							$	23,441

The prior period disclosures in the above table have been recast to conform to the current period segment presentation.