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Information on Segments
 12 Months Ended
Dec. 31, 2022
Segment Reporting [Abstract]  
INFORMATION ON SEGMENTS INFORMATION ON SEGMENTS
During 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 businesses that sell insulation, gutters 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 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. These transactions are shown in the Eliminations column in the tables below.
The key metrics used to assess the performance of our operating segments are revenue and segment gross profit as these are the metrics used by our CODM to review results, assess performance and allocate resources. We define segment gross profit as revenue less cost of sales, excluding depreciation and amortization. We do not report total assets, depreciation and amortization expenses included in reported cost of sales, operating expenses or other expense, net by segment because our CODM does not use this information to assess segment performance or allocate resources. The following tables represents our segment information for the years ended December 31, 2022, 2021 and 2020 (in thousands):
Year ended December 31, 2022
InstallationOtherEliminationsConsolidated
Revenue$2,513,557 $162,433 $(6,146)$2,669,844 
Cost of sales (1)
1,678,771 123,705 (4,826)1,797,650 
Segment gross profit$834,786 $38,728 $(1,320)$872,194 
Segment gross profit percentage33.2 %23.8 %21.5 %32.7 %
Year ended December 31, 2021
InstallationOtherEliminationsConsolidated
Revenue$1,941,543 $29,332 $(2,225)$1,968,650 
Cost of sales (1)
1,317,739 22,155 (1,701)1,338,193 
Segment gross profit$623,804 $7,177 $(524)$630,457 
Segment gross profit percentage32.1 %24.5 %23.6 %32.0 %
Year ended December 31, 2020
InstallationOtherEliminationsConsolidated
Revenue$1,636,361 $17,762 $(898)$1,653,225 
Cost of sales (1)
1,092,139 12,771 (670)1,104,240 
Segment gross profit$544,222 $4,991 $(228)$548,985 
Segment gross profit percentage33.3 %28.1 %25.4 %33.2 %
(1)Cost of sales included in segment gross profit is exclusive of depreciation and amortization for the years ended December 31, 2022, 2021 and 2020.
The prior period disclosures in the above tables have been recast to conform to the current period segment presentation.
The reconciliation between consolidated segment gross profit for each period as shown in the tables above to consolidated income before income taxes is as follows:
Years ended December 31,
202220212020
Segment gross profit - Consolidated$872,194 $630,457 $548,985 
Depreciation and amortization (1)
44,410 40,938 39,011 
Gross profit, as reported827,784 589,519 509,974 
Operating expenses482,373 401,639 348,107 
Operating income345,411 187,880 161,867 
Other expense, net42,104 32,405 30,690 
Income before income taxes$303,307 $155,475 $131,177 
(1)Cost of sales included in segment gross profit is exclusive of depreciation and amortization for the years ended December 31, 2022, 2021 and 2020.