| Segment Information |
7. SEGMENT INFORMATION
Our reportable segments are Installation (TruTeam) and Distribution (Service Partners).
Our Installation segment installs insulation and other building products. We sell primarily to the residential new construction market, with increasing activity in both the commercial construction industry and repair/remodel of residential housing. In addition to insulation, our installed product lines include rain gutters, fireproofing and firestopping products, garage doors, fireplaces, shower enclosures, closet shelving, and other building products.
Our Distribution segment sells and distributes insulation and other building products. Our distributed products include insulation, insulation accessories, rain gutters, and roofing, among others. Distributed products are sold primarily to contractors and dealers (including lumber yards) from distribution centers in various parts of the United States.
Our segments are based on our operating units, for which financial information is regularly evaluated by our corporate operating executives in determining resource allocation and assessing performance. Accounting policies for the segments are generally the same as those for the Company. The key performance metric we use to evaluate our businesses is segment operating profit. Operating profit for the individual segments includes corporate costs which are allocated to the segments based on various metrics including sales and headcount.
Intercompany sales from the Distribution segment to the Installation segment are recorded by the Distribution segment with a profit margin and by our Installation segment at cost.
The following table is a summary of the annual percentage of net sales by product category for the years ended December 31:
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2017
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2016
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2015
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Insulation
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72
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%
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71
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%
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72
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%
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Rain gutters
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7
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7
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7
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Accessories
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5
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5
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4
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Afterpaint (shower enclosures, closet shelving, mirrors/glass, bath accessories, etc.)
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4
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3
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4
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Fireproofing and firestopping
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3
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2
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2
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Garage doors
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2
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2
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3
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Fireplaces
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2
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2
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2
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Roofing materials
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1
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2
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2
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Other
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4
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6
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4
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100
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%
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100
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%
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100
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%
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Information about us by segment is as follows, for the years ended December 31, in thousands:
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Net Sales
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Operating Profit (b)
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2017
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2016
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2015
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2017
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2016
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2015
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Our operations by segment were (a):
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Installation (exclusive of significant legal settlement, shown separately below)
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$
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1,281,296
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$
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1,150,168
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$
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1,057,553
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$
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139,316
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$
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97,140
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$
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55,232
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Significant legal settlement (Installation segment) (c)
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—
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—
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—
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(30,000)
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—
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—
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Distribution
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719,759
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676,672
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646,441
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68,733
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59,654
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55,700
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Intercompany eliminations and other adjustments
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(94,789)
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(83,990)
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(87,414)
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(16,463)
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(14,388)
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(4,796)
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Total
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$
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1,906,266
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$
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1,742,850
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$
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1,616,580
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161,586
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142,406
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106,136
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General corporate expense, net (d)
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(24,722)
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(20,802)
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(22,605)
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Operating profit, as reported
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136,864
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121,604
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83,531
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Other expense, net
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(8,824)
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(5,331)
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(9,416)
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Income from continuing operations
before income taxes
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$
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128,040
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$
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116,273
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$
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74,115
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Property Additions
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Depreciation and
Amortization
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Total Assets
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2017
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2016
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2015
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2017
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2016
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2015
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2017
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2016
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Our operations by segment were (a):
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Installation
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$
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21,956
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$
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7,584
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$
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9,802
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$
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12,208
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$
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8,149
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$
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8,371
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$
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1,061,418
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$
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934,499
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Distribution
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5,845
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3,348
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3,123
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3,561
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3,604
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3,699
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599,503
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584,421
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Corporate
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1,620
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3,433
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1,302
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684
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258
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38
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88,628
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171,199
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Total, as reported
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$
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29,421
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$
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14,365
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$
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14,227
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$
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16,453
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$
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12,011
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$
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12,108
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$
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1,749,549
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$
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1,690,119
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(a)
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All of our operations are located in the U.S.
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(b)
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Segment operating profit for years ended December 31, 2017 and 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 year ended December 31, 2015, includes an estimate of general corporate expense calculated based on a percentage of sales. For the year ended December 31, 2015, the $7.2 million difference between estimated expense and actual corporate expense, is recorded in intercompany eliminations and other adjustments.
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(c)
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Significant legal settlement expense of $30 million incurred for the twelve months ended December 31, 2017, related to the settlement agreement with Owens Corning. For more information see Note 11 – Other Commitments and Contingencies.
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(d)
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General corporate expense, net included expenses not specifically attributable to our segments for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs.
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