Segments

Segment information is presented in accordance with 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 complementary and other products. Complementary and other products includes stucco and exterior insulation and finish systems, as well 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 June 30,
	2018					2017
	Net Sales			Gross Profit		Net Sales			Gross Profit
SBP	$	522,219		$	146,267	$	460,086		$	130,729
MI	82,754			22,830		69,144			18,803
Consolidated	$	604,973		$	169,097	$	529,230		$	149,532
Total gross profit	$	169,097				$	149,532
Total operating expenses	(146,126		)			(132,629		)
Interest expense	(15,345		)			(14,876		)
Other income, net	57					95
Income before income taxes	$	7,683				$	2,122



	Six Months Ended June 30,
	2018					2017
	Net Sales			Gross Profit		Net Sales			Gross Profit
SBP	$	985,879		$	280,704	$	878,549		$	253,155
MI	155,391			42,833		130,138			36,288
Consolidated	$	1,141,270		$	323,537	$	1,008,687		$	289,443
Total gross profit	$	323,537				$	289,443
Total operating expenses	(287,439		)			(264,087		)
Interest expense	(30,477		)			(30,125		)
Other income, net	124					13,384
Income before income taxes	$	5,745				$	8,615

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 June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
United States	$	537,819	$	470,079	$	1,010,760	$	897,020
Canada	67,154		59,151		130,510		111,667
Total	$	604,973	$	529,230	$	1,141,270	$	1,008,687

The following table sets forth property, plant and equipment, goodwill and intangibles by geographic area (in thousands):



	June 30, 2018		December 31, 2017
Property, plant and equipment, net
United States	$	140,803	$	135,330
Canada	15,197		16,078
Total property, plant and equipment, net	$	156,000	$	151,408
Goodwill
United States	$	439,906	$	431,476
Canada	25,856		27,261
Total goodwill	$	465,762	$	458,737
Intangibles, net
United States	$	163,389	$	182,070
Canada	6,349		7,700
Total intangibles, net	$	169,738	$	189,770

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



	Three Months Ended June 30,										Change
	2018					2017					$			%
(dollars in thousands)
SBP Segment
Wallboard⁽¹⁾	$	198,598		38.0	%	$	180,955		39.3	%	$	17,643		9.7	%
Suspended ceiling systems	97,755			18.7	%	83,271			18.1	%	14,484			17.4	%
Metal framing	91,476			17.5	%	72,404			15.7	%	19,072			26.3	%
Complementary and other products	134,390			25.8	%	123,456			26.9	%	10,934			8.9	%
Total SBP net sales	$	522,219		100.0	%	$	460,086		100.0	%	$	62,133		13.5	%

MI Segment
Total MI net sales⁽²⁾	$	82,754		100.0	%	$	69,144		100.0	%	$	13,610		19.7	%
Total net sales	$	604,973				$	529,230				$	75,743		14.3	%

Gross profit - SBP	$	146,267				$	130,729				$	15,538		11.9	%
Gross profit - MI	22,830					18,803					4,027			21.4	%
Total gross profit	$	169,097				$	149,532				$	19,565		13.1	%

Gross margin - SBP	28.0		%			28.4		%			(0.4		)%
Gross margin - MI	27.6		%			27.2		%			0.4		%
Total gross margin	28.0		%			28.3		%			(0.3		)%
⁽¹⁾For the three months ended June 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation.
⁽²⁾MI contains sales from Commercial and industrial insulation and Non-insulation products.



	Six Months Ended June 30,										Change
	2018					2017					$			%
(dollars in thousands)
SBP Segment
Wallboard⁽¹⁾	$	379,251		38.5	%	$	349,195		39.7	%	$	30,056		8.6	%
Suspended ceiling systems	183,933			18.7	%	155,988			17.8	%	27,945			17.9	%
Metal framing	165,443			16.8	%	141,065			16.1	%	24,378			17.3	%
Complementary and other products	257,252			26.0	%	232,301			26.4	%	24,951			10.7	%
Total SBP net sales	$	985,879		100.0	%	$	878,549		100.0	%	$	107,330		12.2	%

MI Segment
Total MI net sales⁽²⁾	$	155,391		100.0	%	$	130,138		100.0	%	$	25,253		19.4	%
Total net sales	$	1,141,270				$	1,008,687				$	132,583		13.1	%

Gross profit - SBP	$	280,704				$	253,155				$	27,549		10.9	%
Gross profit - MI	42,833					36,288					6,545			18.0	%
Total gross profit	$	323,537				$	289,443				$	34,094		11.8	%

Gross margin - SBP	28.5		%			28.8		%			(0.3		)%
Gross margin - MI	27.6		%			27.9		%			(0.3		)%
Total gross margin	28.3		%			28.7		%			(0.4		)%
⁽¹⁾For the six months ended June 30, 2017, wallboard accessories have been reclassified from “Wallboard” to “Complementary and other products” to conform to the current year presentation.
⁽²⁾MI contains sales from Commercial and industrial insulation and Non-insulation products.