Segments

Segment information is presented in accordance with Accounting Standards Codification ("ASC") 280, Segment Reporting, which establishes standards for reporting information about operating segments. It also establishes standards for related disclosures about customers, products and geographic areas. Operating segments are defined as components of an enterprise that engage in business activities that earn revenues, incur expenses and prepare separate financial information that is evaluated regularly by the Company’s CODM in order to allocate resources and assess performance. Resources are allocated and performance is assessed by the CODM.

Based on the provisions of ASC 280, the Company has defined its operating segments by considering management structure and product offerings. This evaluation resulted in the following reportable segments:

•

Specialty Building Products—SBP distributes wallboard, metal framing, suspended ceiling systems and other products. Other products include stucco and exterior insulation and finish systems, as well as complementary offerings, such as tools, safety accessories and fasteners. The primary end markets served are new non-residential, new residential and non-residential repair and remodel construction markets.


•	Mechanical Insulation—MI distributes and fabricates commercial and industrial insulation for pipes and mechanical systems and the primary end markets served are new non-residential construction, non-residential repair and remodel construction and industrial markets.

In addition to the two reportable segments, the Company’s consolidated results include corporate activities and depreciation and amortization.

For purposes of evaluation under these segment reporting principles, the CODM assesses the Company’s ongoing performance based on the periodic review of net sales and gross profit. The Company has not disclosed asset information by segment as its CODM does not use such information for purposes of allocating resources and assessing performance.

The following tables present net sales and gross profit for each reportable segment (in thousands):



	Three Months Ended September 30,
	2017					2016
	Net Sales			Gross Profit		Net Sales			Gross Profit
SBP	$	467,891		$	135,883	$	378,280		$	105,154
MI	67,555			18,900		37,283			7,814
Consolidated	$	535,446		$	154,783	$	415,563		$	112,968
Total gross profit	$	154,783				$	112,968
Total operating expenses	(137,139		)			(109,673		)
Interest expense	(15,069		)			(20,688		)
Other income, net	35					79
Income (loss) before income taxes	$	2,610				$	(17,314	)



	Nine Months Ended September 30,
	2017					2016
	Net Sales			Gross Profit		Net Sales			Gross Profit
SBP	$	1,346,441		$	389,037	$	893,032		$	256,734
MI	197,692			55,189		37,283			7,814
Consolidated	$	1,544,133		$	444,226	$	930,315		$	264,548
Total gross profit	$	444,226				$	264,548
Total operating expenses	(401,226		)			(252,363		)
Interest expense	(45,194		)			(37,202		)
Other income, net	13,419					93
Income (loss) before income taxes	$	11,225				$	(24,924	)

Revenues are attributed to each country based on the location in which sales originate and in which assets are located. The following table provides information about the Company by geographic areas (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
United States	$	473,282	$	380,095	$	1,370,301	$	894,847
Canada	62,164		35,468		173,832		35,468
Total	$	535,446	$	415,563	$	1,544,133	$	930,315

The Company’s net sales by segment and major product line, and segment gross profit and gross margin, are as follows (in thousands):



	Three Months Ended September 30,										Change
	2017					2016					$			%
SBP Segment
Wallboard	$	179,362		38.3	%	$	145,193		38.4	%	$	34,169		23.5	%
Suspended ceiling systems	91,933			19.6	%	62,488			16.5	%	29,445			47.1	%
Metal framing	71,420			15.3	%	64,950			17.2	%	6,470			10.0	%
Other	125,176			26.8	%	105,649			27.9	%	19,527			18.5	%
Total SBP net sales	$	467,891		100.0	%	$	378,280		100.0	%	$	89,611		23.7	%

MI Segment
Commercial and industrial insulation	$	53,447		79.1	%	$	28,128		75.4	%	$	25,319		90.0	%
Non-insulation products	14,108			20.9	%	9,155			24.6	%	4,953			54.1	%
Total MI net sales	$	67,555		100.0	%	$	37,283		100.0	%	$	30,272		81.2	%
Total net sales	$	535,446				$	415,563				$	119,883		28.8	%

Gross profit - SBP	$	135,883				$	105,154				$	30,729		29.2	%
Gross profit - MI	18,900					7,814					11,086			141.9	%
Total gross profit	$	154,783				$	112,968				$	41,815		37.0	%

Gross margin - SBP	29.0		%			27.8		%			1.2		%
Gross margin - MI	28.0		%			21.0		%			7.0		%
Total gross margin	28.9		%			27.2		%			1.7		%



	Nine Months Ended September 30,										Change
	2017					2016					$			%
SBP Segment
Wallboard	528,937			39.3	%	$	371,634		41.6	%	$	157,303		42.3	%
Suspended ceiling systems	247,921			18.4	%	118,323			13.2	%	129,598			109.5	%
Metal framing	212,486			15.8	%	156,415			17.5	%	56,071			35.8	%
Other	357,097			26.5	%	246,660			27.7	%	110,437			44.8	%
Total SBP net sales	$1,346,441			100.0	%	$	893,032		100.0	%	$	453,409		50.8	%

MI Segment
Commercial and industrial insulation	$	148,488		75.1	%	$	28,128		75.4	%	$	120,360		427.9	%
Non-insulation products	49,204			24.9	%	9,155			24.6	%	40,049			437.5	%
Total MI net sales	$	197,692		100.0	%	$	37,283		100	%	$	160,409		430.2	%
Total net sales	$1,544,133					$	930,315				$	613,818		66.0	%

Gross profit - SBP	$	389,037				$	256,734				$	132,303		51.5	%
Gross profit - MI	55,189					7,814					47,375			606.3	%
Total gross profit	$	444,226				$	264,548				$	179,678		67.9	%

Gross margin - SBP	28.9		%			28.7		%			0.2		%
Gross margin - MI	27.9		%			21.0		%			6.9		%
Total gross margin	28.8		%			28.4		%			0.4		%