As filed with the Securities and Exchange Commission on August 4, ~~2016~~2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2016~~2017

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number: 001-36293



CONTINENTAL BUILDING PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware		61-1718923
(State or other jurisdiction of incorporation)		(I.R.S Employer Identification No.)
12950 Worldgate Drive, Suite 700, Herndon, VA		20170
(Address of principal executive offices)		(Zip Code)
(703) 480-3800
(Registrant's telephone number, including the area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨x Accelerated filer x¨

Non-accelerated filer ¨ Smaller ~~Reporting Company~~reporting company ¨

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of August ~~1, 2016,~~2, 2017, the registrant had outstanding ~~40,447,902~~38,420,573 shares of the registrant’s common stock, which amount excludes ~~3,743,468~~5,884,091 shares of common stock held by the registrant as treasury shares.

Table of Contents to Second Quarter ~~2016~~2017 Form 10-Q



Part I - Financial Information		3
Item 1.	Financial Statements	3
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	6
	Notes to the Unaudited Consolidated Financial Statements	7
	1. Background and Nature of Operations	7
	2. Significant Accounting Policies	87
	3. Receivables, Net	9
	4. Inventories, Net	9
	5. Property, Plant and Equipment, Net	910
	6. Customer Relationships and Other Intangibles, Net	10
	7. Investment in Seven Hills	11
	8. Accrued and Other Liabilities	10
	~~8. Income Taxes~~	1011
	9. ~~Commitments and Contingencies~~Debt	11
	10. ~~Related Party Transactions~~Derivative Instruments	1213
	11. ~~Investment in Seven Hills~~	12
	~~12. Debt~~	12
	~~13. Derivative Instruments~~Treasury Stock	14
	12. Share-Based Compensation	14
	13. Accumulated Other Comprehensive Loss	15
	14. ~~Segment Reporting~~Income Taxes	15
	15. ~~Treasury Stock~~Earnings Per Share	15
	16. Commitments and Contingencies	16
	~~16. Share-Based Compensation~~	17
	17. ~~Earnings Per Share~~Segment Reporting	17
	18. Fair Value Disclosures	18
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Overview	19
	Results of Operations	2021
	Non-GAAP Measures	2223
	Liquidity and Capital Resources	2324
	Critical Accounting Policies and Estimates	2324
	Forward-Looking Statements	2425
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2526
Item 4.	Controls and Procedures	2627
Part II - Other Information		2728
Item 1.	Legal Proceedings	2728
Item 1A.	Risk Factors	2728
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2728
Item 3.	Defaults Upon Senior Securities	2728
Item 4.	Mine Safety Disclosures	2728
Item 5.	Other Information	2728
Item 6.	Exhibits	2829
	Signatures	2930

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Continental Building Products, Inc.

Consolidated Statements of Operations

(unaudited)


	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	(in thousands, except share data and per share amounts)												(in thousands, except share data and per share amounts)
Net Sales	$	117,115		$	110,996		$	228,600		$	203,172
Net sales													$	120,630		$	117,115		$	241,245		$	228,600
Costs, expenses and other income:
Cost of goods sold	83,744			81,516			163,699			153,191			89,817			83,744			179,441			163,699
Selling and administrative	10,163			9,363			19,123			17,791			9,193			10,163			18,497			19,123
Long Term Incentive Plan funded by Lone Star	—			15,842			—			20,013
Total costs and operating expenses	93,907			106,721			182,822			190,995			99,010			93,907			197,938			182,822
Operating income	23,208			4,275			45,778			12,177			21,620			23,208			43,307			45,778
Other income/(expense), net	6			31			160			(417		)
Other (expense)/income, net													(135		)	6			(779		)	160
Interest expense, net	(3,648		)	(4,184		)	(7,346		)	(8,405		)	(3,062		)	(3,648		)	(5,978		)	(7,346		)
Income before losses from equity method investment and (provision for)/benefit from income tax	19,566			122			38,592			3,355
Losses from equity method investment	(240		)	(311		)	(435		)	(252		)
Income/(loss) before (provision for)/benefit from income taxes	19,326			(189		)	38,157			3,103
(Provision for)/benefit from income taxes	(6,604		)	63			(12,934		)	(1,209		)
Net income/(loss)	$	12,722		$	(126	)	$	25,223		$	1,894
Income before income/(losses) from equity method investment and provision for income tax													18,423			19,566			36,550			38,592
Income/(losses) from equity method investment													345			(240		)	175			(435		)
Income before provision for income taxes													18,768			19,326			36,725			38,157
Provision for income taxes													(6,370		)	(6,604		)	(12,100		)	(12,934		)
Net income													$	12,398		$	12,722		$	24,625		$	25,223

Net income per share:
Basic	$	0.31		$	—		$	0.61		$	0.04		$	0.32		$	0.31		$	0.63		$	0.61
Diluted	$	0.31		$	—		$	0.61		$	0.04		$	0.32		$	0.31		$	0.62		$	0.61
Weighted average shares outstanding:
Basic	40,670,650			43,606,410			41,097,472			43,840,105			39,125,571			40,670,650			39,349,674			41,097,472
Diluted	40,717,162			43,606,410			41,128,466			43,876,757			39,210,219			40,717,162			39,454,928			41,128,466

See accompanying notes to unaudited consolidated financial statements.

Continental Building Products, Inc.

Consolidated Statements of Comprehensive Income

(unaudited)

For the Three Months Ended For the Six Months Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
(in thousands)
Net income/(loss) $ 12,722
$ (126 ) $ 25,223
$ 1,894
Foreign currency translation adjustment 16
425
1,123
(1,138 )
Gain on derivatives qualifying as cash flow hedges, net of tax 336
405
161
498
Other comprehensive income/(loss) 352
830
1,284
(640 )
Comprehensive income $ 13,074
$ 704
$ 26,507
$ 1,254



	For the Three Months Ended					For the Six Months Ended
	June 30, 2017			June 30, 2016		June 30, 2017			June 30, 2016
	(in thousands)
Net income	$	12,398		$	12,722	$	24,625		$	25,223
Foreign currency translation adjustment	440			16		564			1,123
Net unrealized (losses)/gains on derivatives, net of tax	(598		)	336		(578		)	161
Other comprehensive income	(158		)	352		(14		)	1,284
Comprehensive income	$	12,240		$	13,074	$	24,611		$	26,507

See accompanying notes to unaudited consolidated financial statements.

Continental Building Products, Inc.

Consolidated Balance Sheets


	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Assets:
Cash and cash equivalents	$	15,726		$	14,729		$	55,847		$	51,536
Receivables, net	37,810			35,812			37,411			32,473
Inventories	26,199			27,080
Inventories, net							27,111			25,239
Prepaid and other current assets	6,897			6,448			5,862			7,485
Total current assets	86,632			84,069			126,231			116,733
Property, plant and equipment, net	312,122			326,407			297,931			307,838
Customer relationships and other intangibles, net	88,500			94,835			75,522			81,555
Goodwill	119,945			119,945			119,945			119,945
Equity method investment	8,696			9,262			8,628			8,020
Debt issuance costs	315			450			568			658
Total Assets	$	616,210		$	634,968		$	628,825		$	634,749
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable	$	22,799		$	22,788		$	26,262		$	27,411
Accrued and other liabilities	11,585			12,334			10,328			12,321
Notes payable, current portion							1,720			1,742
Total current liabilities	34,384			35,122			38,310			41,474
Deferred taxes and other long-term liabilities	12,514			12,537			19,251			19,643
Notes payable, non-current portion	262,616			286,543			263,776			264,620
Total liabilities	309,514			334,202
Total Liabilities							321,337			325,737
Equity:
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2016 and December 31, 2015	—			—
Common stock, $0.001 par value per share; 190,000,000 shares authorized; 44,191,370 and 44,145,080 shares issued at June 30, 2016 and December 31, 2015, respectively; 40,513,182 and 41,750,031 shares outstanding at June 30, 2016 and December 31, 2015, respectively	44			44
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2016							—			—
Common stock, $0.001 par value per share; 190,000,000 shares authorized; 44,304,664 and 44,191,370 shares issued at June 30, 2017 and December 31, 2016, respectively; 38,655,886 and 39,691,715 shares outstanding at June 30, 2017 and December 31, 2016, respectively							44			44
Additional paid-in capital	321,250			319,817			324,086			322,384
Less: Treasury stock	(70,489		)	(48,479		)	(116,592		)	(88,756		)
Accumulated other comprehensive loss	(4,057		)	(5,341		)	(3,423		)	(3,409		)
Accumulated earnings	59,948			34,725			103,373			78,749
Total equity	306,696			300,766
Total liabilities and equity	$	616,210		$	634,968
Total Equity							307,488			309,012
Total Liabilities and Equity							$	628,825		$	634,749

See accompanying notes to unaudited consolidated financial statements.

Continental Building Products, Inc.

Consolidated Statements of Cash Flows

(unaudited)


	For the Six Months Ended						For the Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016
	(in thousands)						(in thousands)
Cash flows from operating activities:
Net income	$	25,223		$	1,894		$	24,625		$	25,223
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,788			26,270			23,760			23,788
Bad debt expense/(recovery)	28			(250		)
Bad debt expense							22			28
Amortization of debt issuance costs and debt discount	1,207			1,106			586			1,207
Loss on disposal of property, plant and equipment	41			—			18			41
Losses from equity method investment	435			252
Share based compensation	1,152			407
(Income)/losses from equity method investment							(175		)	435
Loss on debt extinguishment							686			—
Stock-based compensation							1,479			1,152
Deferred taxes	268			457			92			268
Change in assets and liabilities:
Receivables	(1,973		)	(1,890		)	(4,964		)	(1,973		)
Inventories	1,053			(1,505		)	(1,811		)	1,053
Prepaid expenses and other current assets	(534		)	222			966			(534		)
Accounts payable	(620		)	(1,302		)	(564		)	(620		)
Accrued and other current liabilities	(152		)	(3,120		)	(2,038		)	(152		)
Other long term liabilities	(413		)	(93		)	(188		)	(413		)
Net cash provided by operating activities	49,503			22,448			42,494			49,503
Cash flows from investing activities:
Capital expenditures	(1,765		)	(1,733		)	(8,070		)	(1,765		)
Software purchased or developed	(356		)	(554		)	(133		)	(356		)
Capital contributions to equity method investment	(226		)	—			(647		)	(226		)
Distributions from equity method investment	356			583			214			356
Net cash used in investing activities	(1,991		)	(1,704		)	(8,636		)	(1,991		)
Cash flows from financing activities:
Capital contribution from Lone Star Funds	—			19,893
Proceeds from exercise of stock options	20			—			230			20
Principal payments for First Lien Credit Agreement	(25,000		)	(20,000		)
Tax withholdings on share-based compensation							(240		)	—
Proceeds from debt refinancing							273,625			—
Disbursements for debt refinancing							(273,625		)	—
Payments of financing costs							(649		)	—
Principal payments for debt							(1,368		)	(25,000		)
Payments to repurchase common stock	(22,010		)	(20,036		)	(27,836		)	(22,010		)
Net cash used in financing activities	(46,990		)	(20,143		)	(29,863		)	(46,990		)
Effect of foreign exchange rates on cash and cash equivalents	475			(389		)	316			475
Net change in cash and cash equivalents	997			212			4,311			997
Cash, beginning of period	14,729			15,627			51,536			14,729
Cash, end of period	$	15,726		$	15,839		$	55,847		$	15,726

See accompanying notes to unaudited consolidated financial statements.

Continental Building Products, Inc.

Notes to the Unaudited Consolidated Financial Statements

1. BACKGROUND AND NATURE OF OPERATIONS

Description of Business

Continental Building Products, Inc. ~~("CBP", the~~(the "Company") is a Delaware corporation. Prior to the acquisition of the gypsum division of Lafarge North America Inc. (“("Lafarge N.A.”") ~~further~~ described below, the Company had no operating activity.

The Company manufactures gypsum wallboard related products for commercial and residential buildings and houses. The Company operates a network of three highly efficient wallboard facilities, all located in the eastern United States, and produces joint compound at one plant in the United States and at another plant in Canada.

The Acquisition

On June 24, 2013, Lone Star Fund VIII (U.S.), L.P., (along with its affiliates and associates, but excluding the ~~Company and~~ companies that it owns as a result of its investment activity, “Lone Star”), entered into a definitive agreement with Lafarge N.A. to purchase the assets of its North American gypsum division for an aggregate purchase price of approximately $703 million (the "Acquisition") in cash. The closing of the Acquisition occurred on August 30, 2013.

~~Initial Public Offering~~

On February 10, 2014, the Company completed the initial public offering of 11,765,000 shares of its common stock at an offering price of $14.00 per share (the "Initial Public Offering"). Net proceeds from the Initial Public Offering after underwriting discounts and commissions, but before other closing costs, were approximately $154 million. The net proceeds were used to pay a $2 million one-time payment to Lone Star in consideration for the termination of the Company’s asset advisory agreement with affiliates of Lone Star. The remaining $152 million of net proceeds and cash on hand of $6.1 million were used to repay the $155 million Second Lien Term Loan in full along with a prepayment premium of $3.1 million (See Note 12, Debt). In expectation of the Initial Public Offering, on February 3, 2014, the Company effected a 32,304 for one stock split of its common stock. The Company’s common stock trades on the New York Stock Exchange under the symbol "CBPX".

Secondary Public Offerings

On March 18, ~~2015,~~2016, following a series of secondary offerings, LSF8 Gypsum Holdings, L.P. ("LSF8"), an affiliate of Lone Star, sold 5,000,000 shares of the Company’s common stock at a price per share of $19.40. As a result of the sale, the aggregate beneficial ownership of Lone Star fell below 50% of the Company’s outstanding shares of common stock and the Company no longer qualified as a "Controlled Company" under the corporate governance standards of New York Stock Exchange. On May 15, 2015 and June 3, 2015, LSF8 sold an additional 4,600,000 and 361,747 shares of the Company’s common stock, respectively, at a price per share of $21.90. On September 16, 2015, LSF8 sold an additional 4,600,000 shares of the Company’s common stock at a price per share of $19.85. The decrease in ownership by Lone Star and its affiliates to below 50% and LSF8’s subsequent sales of common stock triggered an aggregate of $29.9 million in payments to certain officers and the estate of the Company’s former CEO under the LSF8 Gypsum Holdings, L.P. Long Term Incentive Plan, which was funded by LSF8 (See Note 10, Related Party Transactions).

~~On March 18, 2016, LSF8~~ sold its remaining 5,106,803 shares of the Company’s common stock at a price per share of $16.10. Following the March 18, 2016 transaction and the concurrent repurchase by the Company of 900,000 shares of Company’s common stock from LSF8, to the best of the Company's knowledge, neither LSF8 nor any other affiliate of Lone Star held any shares of Company common stock. (See Note ~~15,~~11, Treasury Stock).

2. SIGNIFICANT ACCOUNTING POLICIES

~~(a) Basis of Presentation~~


(a)	Basis of Presentation

The accompanying consolidated financial statements for ~~CBP~~the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

~~(b)~~


(b)	Basis of Presentation for Interim Periods

Certain information and footnote disclosures normally included for the annual financial statements prepared in accordance with

U.S. GAAP have been condensed or omitted for the interim periods presented. Management believes that the unaudited interim

financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial

position of the Company and the results of operations and cash flows for the periods presented.

The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year

ending December 31, ~~2016.~~2017. Seasonal changes and other conditions can affect the sales volumes of the Company’s products.

Therefore, the financial results for any interim period do not necessarily indicate the expected results for the year.

The financial statements should be read in conjunction with ~~CBP’s~~Company’s audited consolidated financial statements and the notes

thereto for the year ended December 31, ~~2015~~2016 included in the Company’s Annual Report on Form 10-K for the fiscal year then

ended (the ~~"2015~~"2016 10-K"). The Company has continued to follow the accounting policies set forth in those financial statements.

~~(c)~~


(c)	Supplemental Cash Flow Disclosure



Table 2.1: Certain Cash and Non-Cash Transactions
	For the Six Months Ended
	June 30, 2017		June 30, 2016
	(in thousands)
Cash paid during the period for:
Interest paid on term loan	$	4,973	$	5,876
Income taxes paid, net	10,259		12,160
Non-cash activity:
Amounts in accounts payable for capital expenditures	1,899		547


(d)	Recent Accounting Pronouncements

Accounting Standards Adopted During the Period

In ~~May 2014,~~July 2015, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB") issued Accounting Standards Update ("ASU") ~~No. 2014-9,~~2015-11, ~~Revenue from Contracts with Customers (Topic 606)~~"Inventory:Simplifying the Measurement of Inventory."~~, which provides accounting~~ This guidance applies to inventory valued at first-in, first-out (FIFO) or average cost and requires inventory to be measured at the lower of cost and net realizable value, rather than at the lower of cost or market. ASU 2015-11 is effective on a prospective basis for ~~all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. In August 2015, the FASB issued ASU No. 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU No. 2014-9 for all entities by one year to~~ annual periods, including interim reporting periods within those periods, beginning after December 15, ~~2017. The ASU requires retroactive application on either a full or modified basis. Early application is permitted as of the original effective date on December 15,~~ 2016. The Company ~~is currently evaluating ASU 2014-9 to determine~~values its ~~impact on its consolidated financial statements~~inventory under the average cost method and ~~disclosures.~~

~~In August 2014, the FASB issued ASU No. 2014-15,~~ ~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern: Presentation of Financial Statements— Going Concern (Subtopic 205-40). This ASU defines when and how companies are~~thus will be required to ~~disclose going concern uncertainties, which must be evaluated each interim and annual period. Specifically, it requires management to determine whether substantial doubt exists regarding~~adopt the entity’s going concern presumption. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). If substantial doubt exists, certain disclosures are required; the extent of those disclosures depends on an evaluation of management’s plans (if any) to mitigate the going concern uncertainty. The provisions of ASU 2014-15 will be effective for annual periods ending after December 15, 2016, and to annual and interim periods thereafter. Early adoption is permitted. The ASU should be applied on a prospective basis. The Company believes the adoption of this ASU will not have a material impact on the Company’s disclosures.

~~In April 2015, the FASB issued ASU 2015-3,~~ ~~Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,~~ which changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense.standard. The Company adopted ~~ASU 2015-3 during~~the new standard in the first quarter of 2016. Upon adoption, the guidance was applied retroactively to all periods presented in the financial statements, therefore, prior period adjustments were made to the December 31, 2015 balance sheet items and related footnotes. The effect of these adjustments was to reduce prepaid and other current assets by $1.6 million, reduce debt issuance costs by $6.5 million and reduce notes payable by $8.1 million.2017. The adoption of this ~~ASU~~standard did not have a material impact on the ~~Company’s results of operations.~~Company's Consolidated Financial Statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating ASU 2016-02 to determine its impact on its consolidated financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,", which introduces targeted amendments intended to simplify the accounting for stock compensation. Specifically, the ASU requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits, and assess the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period. That is, ~~off balance~~off-balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized when they arise. Existing net operating losses that are currently tracked ~~off balance~~off-balance sheet would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption. Entities will no longer need to maintain and track an ~~“APIC~~"APIC pool.”" The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows. The amendments ~~are~~were effective for annual periods beginning after December 15, 2016. ~~Early~~The Company adopted the new standard in the first quarter of 2017, which resulted in a favorable adjustment to income tax provision of $0.2 million.

Accounting Standards Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-9, "Revenue from Contracts with Customers (Topic 606)," which provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers the effective date of ASU No. 2014-9 for all entities by one year to annual reporting periods beginning after December 15, 2017. The ASU requires retroactive application on either a full or modified basis. The Company will adopt the standard on January 1, 2018. The Company has identified a project implementation team and has identified its revenue streams. The Company is in the process of evaluating the various aspects of the standard and how the standard may impact how the Company recognizes revenue. The Company is also evaluating the potential impact that the new guidance will have on its Consolidated Financial Statements. While the Company has not completed its analysis, the Company does not anticipate that the new guidance will have a material impact on its Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of adoption, which is not expected to have a material impact on the Company's Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments." This ASU is intended to introduce a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. The provisions of this standard are effective for reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating ~~ASU 2016-09 to determine its~~the impact that this guidance may have on its ~~consolidated financial statements~~Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and ~~disclosures.~~Cash Payments." This ASU intends to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The provisions of this standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating when it will adopt the ASU and the expected impact to its Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory." The new standard requires companies to recognize the income tax effects of intercompany sales or transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period the sales or transfer occurs. The standard requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. The provisions of this standard are effective for fiscal years beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating when it will adopt the ASU and the expected impact to its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017- 04, "Intangibles - Goodwill and Other." This ASU simplifies the goodwill impairment calculation by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., Step 1 of today’s goodwill impairment test). The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating when it will adopt the ASU and the expected impact to its Consolidated Financial Statements.

3. RECEIVABLES, NET


F3: Detail of Receivables, Net
Table 3: Details of Receivables, Net							Table 3: Details of Receivables, Net
	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(in thousands)						(in thousands)
Trade receivables, gross	$	38,909		$	37,800		$	38,169		$	33,199
Allowance for cash discounts and doubtful accounts	(1,099		)	(1,988		)	(758		)	(726		)
Receivables, net	$	37,810		$	35,812		$	37,411		$	32,473

Trade receivables are recorded net of credit memos issued during the normal course of business.

4. INVENTORIES, NET


F4: Composition of Inventories
Table 4: Details of Inventories, Net					Table 4: Details of Inventories, Net
	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Finished products	$	7,459	$	5,454	$	7,474	$	7,246
Raw materials	11,584		14,557		12,625		10,910
Supplies and other	7,156		7,069		7,012		7,083
Inventories	$	26,199	$	27,080
Inventories, net					$	27,111	$	25,239

5. PROPERTY, PLANT AND EQUIPMENT, NET


F5: Property, Plant and Equipment Details
Table 5: Details of Property, Plant and Equipment, Net							Table 5: Details of Property, Plant and Equipment, Net
	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(in thousands)						(in thousands)
Land	$	12,927		$	12,925		$	13,186		$	12,925
Buildings	112,572			112,121			112,971			112,583
Plant machinery	273,395			272,613			281,516			275,010
Mobile equipment	5,815			3,837			10,552			6,721
Construction in progress	5,500			6,812			10,136			15,016
Property, plant and equipment, at cost	410,209			408,308			428,361			422,255
Accumulated depreciation	(98,087		)	(81,901		)	(130,430		)	(114,417		)
Total property, plant and equipment, net	$	312,122		$	326,407
Property, plant and equipment, net							$	297,931		$	307,838

Depreciation expense was $9.4 million and $17.5 million for the three and six months ended June 30, 2017, respectively, compared to $8.3 million and $16.7 million for the three and six months ended June 30, 2016, ~~respectively, compared to $9.0~~respectively.

6. CUSTOMER RELATIONSHIPS AND OTHER INTANGIBLES, NET



Table 6.1: Details of Customer Relationships and Other Intangibles, Net
	June 30, 2017							December 31, 2016
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(in thousands)
Customer relationships	$	116,488	$	(53,226	)	$	63,262	$	116,267	$	(48,243	)	$	68,024
Purchased and internally developed software	5,453		(4,219		)	1,234		5,322		(3,289		)	2,033
Trademarks	14,811		(3,785		)	11,026		14,783		(3,285		)	11,498
Total	$	136,752	$	(61,230	)	$	75,522	$	136,372	$	(54,817	)	$	81,555

Amortization expense was $3.1 million and ~~$17.8~~$6.3 million for the three and six months ended June 30, ~~2015, respectively.~~

~~6. CUSTOMER RELATIONSHIPS AND OTHER INTANGIBLES, NET~~

F6: Details of Customer Relationships and Other Intangibles, Net
June 30, 2016 December 31, 2015
(in thousands)
Customer relationships $ 116,501
$ 116,073
Purchased and internally developed software 5,649
5,284
Trademarks 14,813
14,759
Customer relationships and other intangibles, at cost 136,963
136,116
Accumulated amortization (48,463 ) (41,281 )
Customer relationships and other intangibles, net $ 88,500
$ 94,835

~~Amortization expense was~~2017, respectively, compared to $3.5 million and $7.1 million for the three and six months ended June 30, 2016, ~~respectively, compared to $4.2 million and $8.4 million for the three and six months ended June 30, 2015,~~ respectively.

~~Amortization of customer relationships is done~~Customer relationship assets are amortized over a 15 year period using an accelerated method that reflects the expected future cash flows from the acquired ~~customer-list~~customer list intangible asset. Trademarks are amortized ~~over~~on a straight-line basis over the estimated useful life of 15 years.

Software development costs are amortized over a 3 year life with the expense recorded in selling and administrative expense. Amortization expense related to capitalized software was $0.4 million and $0.8 million for the three and six months ended June 30, 2016, respectively, compared to $0.4 million and $0.7 million for the three and six months ended June 30, 2015.

~~7. ACCRUED AND OTHER LIABILITIES~~

F7: Details of Accrued and Other Liabilities
June 30, 2016 December 31, 2015
(in thousands)
Employee-related costs $ 5,196
$ 7,621
Income taxes 3,011
2,482
Other taxes 2,877
1,390
Other 501
841
Accrued and other liabilities $ 11,585
$ 12,334

~~8. INCOME TAXES~~

The Company’s annual estimated effective tax rate is approximately 33.9%. The Company is subject to audit examinations at federal, state and local levels by tax authorities in those jurisdictions. In addition, the Canadian operations are subject to audit examinations at federal and provincial levels by tax authorities in those jurisdictions. The tax matters challenged by the tax authorities are typically complex; therefore, the ultimate outcome of these challenges is subject to uncertainty. The Company has not identified any issues that did not meet the recognition threshold or would be impacted by the measurement provisions of the uncertain tax position guidance.



Table 6.2: Future Amortization Expense of Customer Relationships and Other Intangibles
	As of June 30, 2017
	(in thousands)
July 1, 2017 through December 31, 2017	$	5,765
2018	9,468
2019	8,398
2020	7,655
2021	7,042
Thereafter	37,194
Total	$	75,522

~~9. COMMITMENTS AND CONTINGENCIES~~

The Company leases certain buildings and equipment. The Company’s facility and equipment leases may provide for escalations of rent or rent abatements and payment of pro rata portions of building operating expenses. Minimum lease payments are recognized on a straight-line basis over the minimum lease term. The total expenses under operating leases for the three and six months ended June 30, 2016 was $1.1 million and $2.1 million, respectively, compared to $1.1 million and $2.1 million for the same periods in 2015, respectively. The Company also has non-capital purchase commitments that primarily relate to gas, gypsum, paper and other raw materials. The total amounts purchased under such commitments were $15.5 million and $33.1 million for the three and six months ended June 30, 2016, respectively, compared to $16.0 million and $32.8 million for the three and six months ended June 30, 2015, respectively.

F9: Future Minimum Lease Payments Due Under Noncancellable Operating Leases and Purchase Commitments by Year
Future Minimum Lease Payments Purchase Commitments
(in thousands)
July 1, 2016 through December 31, 2016 $ 770
$ 21,994
2017 1,183
31,019
2018 616
29,463
2019 1,494
19,870
2020 —
14,185
2021 —
3,232
Thereafter —
27,173
Total $ 4,063
$ 146,936

Under certain circumstances, the Company provides letters of credit related to its natural gas and other supply purchases. As of June 30, 2016 and December 31, 2015, the Company had outstanding letters of credit of approximately $2.1 million and $3.0 million, respectively.

In March 2015, a group of homebuilders commenced a lawsuit against the Company and other U.S. wallboard manufacturers, alleging that such manufacturers had conspired to fix the price of wallboard in violation of antitrust and unfair competition laws. The complaint, as amended in October 2015, December 2015 and March 2016, also alleged that the manufacturers agreed to abolish the use of "job quotes" and agreed to restrict the supply of wallboard in order to support the allegedly collusive price increases. The case was transferred to the Eastern District of Pennsylvania for coordinated and consolidated pretrial proceedings with existing antitrust litigation in that district. The Company filed a motion to dismiss the case with respect to the Company in April 2016 and denied any wrongdoing of the type alleged in the amended complaint. In June 2016, the Court granted the Company's motion to dismiss the case with respect to the Company, with prejudice. In July 2016, the plaintiffs filed a Motion to Certify Order for Interlocutory Appeal seeking to challenge the Court's decision to grant the Company's motion to dismiss. The Company believes it has meritorious defenses to the allegations and does not believe the lawsuit will have a material adverse effect on its financial condition, results of operation or liquidity.

In July 2015, the Company received a grand jury subpoena directing it to provide certain documents in connection with an investigation being conducted by the Department of Justice regarding antitrust matters in the gypsum drywall industry. The Company is cooperating fully with the Department of Justice in responding to the subpoena. The Company does not believe the investigation will have a material adverse effect on its financial condition, results of operations or liquidity.

In the ordinary course of business, the Company executes contracts involving indemnifications standard in the industry. These indemnifications might include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, it is the opinion of management that these guarantees and indemnifications are not expected to have a materially adverse effect on the Company’s financial condition, results of operations or liquidity.

expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity. While management believes its accruals for such liabilities are adequate, the Company may incur costs in excess of the amounts provided. Although the ultimate amount of liability that may result from these matters or actions is not ascertainable, any amounts exceeding the recorded accruals are not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

~~10. RELATED PARTY TRANSACTIONS~~

~~LTIP Payments~~

In connection with the March, May and September 2015 secondary public offerings and concurrent May and September 2015 stock repurchases, certain officers of the Company and the estate of the Company’s former CEO earned incentive payments in the aggregate amount of approximately $29.9 million under the LSF8 Gypsum Holdings, L.P. Long-Term Incentive Plan ("LTIP"). LSF8 was responsible for funding any payments under the LTIP, including those referenced above. As these payments arose out of employment with the Company, the Company recognized the payments made to the officers and the estate as an expense. The funding of the LTIP payments by LSF8 was recorded as additional paid-in capital. The $29.9 million in LTIP payments were recorded as an expense to the Company, that were tax deductible, and capital contributions by LSF8 in the first, second and third quarters of 2015. No further payments will be made under the LTIP.

~~11.~~7. INVESTMENT IN SEVEN HILLS

The Company is a party with an unaffiliated ~~third-party~~third party to a paperboard liner venture named Seven Hills Paperboard, LLC ("Seven Hills") that provides the Company with a continuous supply of high-quality recycled paperboard liner to meet its ongoing production requirements.

The Company has evaluated the characteristics of its investment and determined that Seven Hills would be deemed a variable interest entity, but that it does not have the power to direct the principal activities most impacting the economic performance of Seven Hills, and is thus not the primary beneficiary. As such, the Company accounts for this investment in Seven Hills under the equity method of accounting.

Paperboard liner purchased from Seven Hills was $14.8 million and $26.8 million for the three and six months ended June 30, 2017, respectively, compared to $11.1 million and $22.9 million for the three and six months ended June 30, 2016, ~~respectively, compared to $11.3 million and $22.4 million for the three and six months ended June 30, 2015,~~ respectively. As of June 30, ~~2016,~~2017, the Company had certain purchase commitments for paper totaling ~~$36.3~~$35.6 million through ~~2019.~~2020.

~~12.~~8. ACCRUED AND OTHER LIABILITIES



Table 8: Details of Accrued and Other Liabilities
	June 30, 2017		December 31, 2016
	(in thousands)
Employee-related costs	$	4,830	$	9,595
Income taxes	1,568		—
Other taxes	3,013		2,088
Other	917		638
Accrued and other liabilities	$	10,328	$	12,321

9. DEBT


F12.1: Details of Debt
Table 9.1: Details of Debt							Table 9.1: Details of Debt
	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(in thousands)						(in thousands)
First Lien Credit Agreement maturing on August 28, 2020; interest rate of LIBOR (with a 1% floor) plus 3.00% at June 30, 2016 and December 31, 2015	$	271,988		$	296,988
First Lien Credit Agreement (a)							$	272,257		$	273,625
Less: Original issue discount (net of amortization)	(2,110		)	(2,372		)	(1,810		)	(1,946		)
Less: Debt issuance costs	(7,262		)	(8,073		)	(4,951		)	(5,317		)
Total debt	262,616			286,543			265,496			266,362
Less: Current portion of long-term debt	—			—			(1,720		)	(1,742		)
Long-term debt	$	262,616		$	286,543		$	263,776		$	264,620


(a)	As of June 30, 2017, the Amended and Restated Credit Agreement, as amended, had a maturity date of August 18, 2023 and an interest rate of LIBOR (with a 0.75% floor) plus 2.50%, compared to as of December 31, 2016, at which time the First Lien Credit Agreement had the same maturity date and an interest rate of LIBOR (with a 0.75% floor) plus 2.75%.

In connection with the Acquisition, the Company purchased certain assets from Lafarge N.A. with cash. In order to finance a portion of the consideration payable to Lafarge N.A., the Company and its subsidiary Continental Building Products Operating Company, LLC ("OpCo") entered into a first lien credit agreement with Credit Suisse AG, as administrative agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners, and Royal Bank of Canada, as syndication agent (as amended on December 2, 2013, the "First Lien Credit Agreement") and a second lien credit agreement with Credit Suisse AG, as administrative agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners, and Royal Bank of Canada, as syndication agent for term loan borrowings of $320 million and $120 million, respectively, and drew $25 million under a $50 million revolving credit facility ~~(the "Revolver") as part of~~under the First Lien Credit Agreement. The available amount under the First Lien Credit Agreement term loan was subsequently increased to ~~$415.0 million (the "First Lien Term Loan").~~$415 million. In conjunction with the initial issuance of this debt, the Company incurred $15.3 million of debt issuance costs

which ~~are~~were being amortized using the effective interest rate method or the straight-line method which approximates the effective interest rate method, over the estimated life of the related debt.

Interest under the First Lien Credit Agreement iswas floating. The interest rate spread over LIBOR, which has a 1% floor, was reduced by 50 basis points in May 2014, from 3.75% to 3.25%, as a result of the Company achieving a total leverage ratio of less than four times net debt to the trailing twelve months adjusted earnings before interest, depreciation and amortization, as of March 31, 2014, as calculated pursuant to the First Lien Credit Agreement. This reduced interest rate for the First Lien Credit Agreement will be in effect for as long as the leverage ratio remains below four. The margin applicable to the borrowing was ~~further~~ reduced in the third quarter 2014 ~~by 25 basis points~~ to 3.00% after the Company achieved a B2 rating with a stable outlook by ~~Moody’s~~Moody’s.

On August 18, 2016, the Company, OpCo and Continental Building Products Canada Inc. and the lenders party thereto and Credit Suisse, as Administrative Agent, entered into an Amended and Restated Credit Agreement amending and restating the First Lien Credit Agreement (the "Amended and Restated Credit Agreement"). The Amended and Restated Credit Agreement provides for a $275 million senior secured first lien term loan facility and a $75 million senior secured revolving credit facility (the "Revolver"), which mature on August 18, 2023 and August 18, 2021, respectively. Related to this debt refinancing, the Company incurred $4.7 million of discount and debt issuance costs, of which $2.5 million was recorded in Other expense, net on the Consolidated Statements of Operations, and $2.2 million will ~~remain~~be amortized over the term of the Amended and Restated Credit Agreement. Upon completion of this debt refinancing, the Company recognized an additional expense of $3.3 million related to losses resulting from debt extinguishment which is also reported in ~~effect as long as this rating~~Other expense, net on the Consolidated Statements of Operations. The interest rate under the Amended and ~~outlook are maintained or better.~~Restated Credit Agreement remained floating but was reduced to a spread over LIBOR of 2.75% and floor of 0.75%.

On February 21, 2017, the Company repriced its term loan under the Amended and Restated Credit Agreement lowering its interest rate by a further 25 basis points to LIBOR plus 2.50% thereby reducing its estimated interest expense by approximately $0.8 million per annum. All other terms and conditions under the Amended and Restated Credit Agreement remained the same. In connection with the debt repricing, the Company incurred $0.7 million of debt issuance costs, which was recorded in Other expense, net on the Consolidated Statements of Operations.

The First Lien Credit Agreement was, and the Amended and Restated Credit Agreement is, secured by the underlying property and equipment of the Company. During the six months ended June 30, ~~2016 and 2015,~~2017, the Company ~~pre-paid~~made no voluntary prepayment of principal, compared to $25.0 million ~~and $20.0 million, respectively,~~ of ~~principal payments and no further quarterly mandatory principal payments are required until~~voluntary prepayments in the ~~final payment~~same period of ~~$272.0 million due on August 28, 2020.~~2016. As of June 30, ~~2016,~~2017, the annual effective interest rate on the ~~First Lien~~Amended and Restated Credit Agreement, including original issue discount and amortization of debt issuance costs, was ~~4.9%~~4.1%.

There were no amounts outstanding under the Revolver as of June 30, ~~2016~~2017 or December 31, ~~2015.~~2016. During the six months ended June 30, ~~2016~~2017 the Company ~~borrowed and repaid in full $22.0 million~~did not have any draws under the Revolver, compared to ~~$10.0~~$22.0 million which the Company borrowed and repaid in full during the six months ended June 30, ~~2015.~~2016 under the applicable revolving credit facility. Interest under the Revolver is floating, based on LIBOR ~~(with a floor of 1%),~~ plus 225 basis points. In addition, ~~CBP~~the Company pays a facility fee of 50 basis points per annum on the total ~~Revolver facility.~~capacity under the Revolver. Availability under the Revolver as of June 30, ~~2016,~~2017, based on draws and outstanding letters of credit and absence of violations of covenants, was ~~$47.9~~$73.4 million.

Total interest paid for the three and six months ended June 30, 2016 was $2.9 million and $5.9 million, respectively, compared to $3.5 million and $7.0 million for the three and six months ended June 30, 2015, respectively.


F12.2: Future Minimum Principal Payments Due Under the Credit Agreements
Table 9.2: Future Minimum Principal Payments Due Under the Amended and Restated Credit Agreements			Table 9.2: Future Minimum Principal Payments Due Under the Amended and Restated Credit Agreements
	Amount Due		Amount Due
	(in thousands)		(in thousands)
2016	$	—
2017	—
July 1, 2017 through December 31, 2017			$	1,368
2018	—		2,736
2019	—		2,736
2020	$	271,988	2,736
2021			2,736
Thereafter			259,945
Total Payments			$	272,257

Under the terms of the ~~First Lien~~Amended and Restated Credit Agreement, the Company is required to comply with certain covenants, including among others, the limitation of indebtedness, limitation on liens, and limitations on certain cash distributions. One single financial covenant governs all of the Company’s debt and only applies if the outstanding borrowings of the Revolver plus outstanding letters of credit are greater than ~~$12.5~~$22.5 million as of the end of the quarter. The financial covenant is a total leverage ratio calculation, in which total debt less outstanding cash is divided by adjusted earnings before interest, depreciation and amortization. As the sum of outstanding borrowings under the Revolver and outstanding letters of credit were less than ~~$12.5~~$22.5 million at June 30, ~~2016,~~2017, the total leverage ratio of no greater than ~~5.5 per~~5.0 under the financial covenant was not applicable at June 30, ~~2016.~~2017.

~~13.~~10. DERIVATIVE INSTRUMENTS

The Company uses derivative instruments to manage selected commodity price and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes, and typically does not hedge beyond one ~~year.~~year for commodity derivative instruments. Cash flows from derivative instruments are included in net cash provided by operating activities in the consolidated statements of cash flows.

Commodity Derivative Instruments

As of June 30, ~~2016,~~2017, the Company had ~~465~~2,420 thousand millions of British Thermal Units ("mmBTUs") in aggregate notional amount outstanding natural gas swap contracts to manage commodity price exposures. All of these contracts mature by ~~October~~July 31, ~~2016.~~2018. The Company elected to designate these derivative instruments as cash flow hedges in accordance with FASB Accounting Standards Codification ("ASC") 815-20, Derivatives – Hedging. For derivative contracts designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to accumulated other comprehensive income, and is reclassified to earnings when the underlying forecasted transaction affects earnings. The ineffective portion of changes in the fair value of the derivative is recorded in cost of goods sold. The net unrealized ~~gain~~loss that remained in accumulated other comprehensive loss as of June 30, 2017 was $0.1 million which is net of a tax amount of $0.1 million. The net unrealized gain that remained in accumulated other comprehensive loss as of December 31, 2016 was ~~$0.1~~$0.2 million which is net of a tax amount of $0.1 million. No ineffectiveness was recorded on these contracts during the three and six months ended June 30, ~~2016~~2017 and ~~2015.~~2016. The Company reassesses the probability of the underlying forecasted transactions occurring on a quarterly basis.

For the three and six months ended June 30, 2017, approximately $0.3 million of loss, net of $0.1 million of tax and $0.3 million of loss, net of $0.2 million of tax, respectively, were recognized in other comprehensive income for the commodity contracts. For both the three and six months ended June 30, 2017, the amount of gain reclassified from accumulated other comprehensive loss into income was $0.1 million. As of June 30, 2017, there was $0.1 million recorded in other current assets and $0.2 million was recorded in other current liabilities. For the three and six months ended June 30, 2016, approximately $0.3 million of ~~gains,~~gain, net of $0.2 million of tax expense, and $0.2 million of ~~gains,~~gain, net of $0.1 million of tax expense, respectively, were recognized in other comprehensive income for the commodity contracts. For the three and six months ended June 30, 2016, the amount of loss reclassified from accumulated other comprehensive ~~income~~loss into income was $0.2 million and $0.4 million, respectively. As of June 30, 2016, there was no amount recorded in other current liabilities and $0.2 million was recorded in other current assets. For the three and six months ended June 30, 2015, approximately $0.4 million of gains, net of $0.2 million of tax expenses and $0.5 million of gains, net of $0.3 million of tax expenses, respectively, were recognized in other comprehensive income for the commodity contracts. For the same periods, the amount of gain reclassified from accumulated other comprehensive income into income was nominal. As of December 31, ~~2015, $0.3 million was recorded in other current liabilities and $0.2~~2016, $0.4 million was recorded in other current assets.

Interest Rate Derivative Instrument

~~The~~In September 2016, the Company ~~had an~~entered into interest rate ~~cap~~swap agreements for a combined notional amount of $100.0 million with a term of four years, which hedged the floating LIBOR on ~~three month U.S. Dollar LIBOR of 2% for~~ a portion of the ~~principal amount outstanding~~term loan under the ~~First Lien~~Amended and Restated Credit Agreement ~~that expired March 31, 2016.~~to an average fixed rate of 1.323% and LIBOR floor of 0.75%. The ~~hedge was being accounted for~~Company elected to designate these interest rate swaps as a cash flow ~~hedge. Changes~~hedges for accounting purposes. The net unrealized gain that remained in ~~the time value~~accumulated other comprehensive loss as of ~~the interest rate cap are reflected directly~~June 30, 2017 was $1.0 million which is net of a tax amount of $0.5 million. The net unrealized gain that remained in ~~earnings through “other income / expense” in non-operating income. CBP recorded nominal amounts in~~accumulated other comprehensive loss as of December 31, 2016 was $1.2 million which is net of a tax amount of $0.6 million. For the three ~~months ended March 31, 2016~~ and ~~2015 and the~~ six months ended June 30, ~~2015.~~2017, the amount of loss reclassified from accumulated other comprehensive loss into income was $44,000 and $0.1 million, respectively. For the three and six months ended June 30, 2017, approximately $0.3 million of loss, net of tax expense of $0.2 million and $0.2 million of loss, net of tax expense of $0.1 million, respectively, were recognized in other comprehensive income for the interest rate swaps. As of June 30, 2017, there was $1.5 million recorded in other current assets. No ~~new arrangement~~ineffectiveness was ~~entered into following expiration~~recorded on ~~March 31, 2016.~~these contracts during the three and six months ended June 30, 2017.

Counterparty Risk

The Company is exposed to credit losses in the event of nonperformance by the counterparties to the Company’s derivative instruments. As of June 30, ~~2016,~~2017, the Company’s derivatives were in a ~~$0.2~~$1.3 million net asset position. All of the Company’s counterparties have investment grade credit ratings; accordingly, the Company anticipates that the counterparties will be able to fully satisfy their obligations under the contracts. The Company’s agreements outline the conditions upon which it or the counterparties are required to post collateral. As of June 30, ~~2016,~~2017, the Company had no collateral posted with its counterparties related to the derivatives.

11. TREASURY STOCK

On November 4, 2015, the Company announced that the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $50 million of its common stock, at such times and prices as determined by management as market conditions warrant, through December 31, 2016. Pursuant to this authorization, on March 18, 2016, the Company repurchased 900,000 shares of its common stock from LSF8 in a private transaction at a price per share of $16.10, or an aggregate of approximately $14.5 million, pursuant to a stock purchase agreement dated March 14, 2016. The Company has also repurchased shares of its common stock in the open market under this authorization. On August 3, 2016, the Company announced the Board of Directors had approved an expansion of its stock repurchase program by $50 million, increasing the aggregate authorization from up to $50 million to up to $100 million. The program was also extended from the end of 2016 to the end of 2017.

On February 21, 2017, the Board of Directors further expanded the Company's share repurchase program up to a total of $200 million of its common stock and extended the expiration date to December 31, 2018.

All repurchased shares are held in treasury, reducing the number of shares of common stock outstanding and used in the Company’s earnings per share calculation.



Table 11: Treasury Stock Activity
	June 30, 2017					June 30, 2016
	Shares	Amount (a)		Average Share Price (a)		Shares	Amount (a)		Average Share Price (a)
	(in thousands, except share data)
For the Three Months Ended:
Beginning Balance	4,716,778	$	93,993	$	19.93	3,446,208	$	65,505	$	19.01
Repurchases on open market	932,000	22,599		24.25		231,980	4,984		21.48
Ending Balance	5,648,778	$	116,592	$	20.64	3,678,188	$	70,489	$	19.16

For the Six Months Ended:
Beginning Balance	4,499,655	$	88,756	$	19.73	2,395,049	$	48,479	$	20.24
Repurchases on open market	1,149,123	27,836		24.22		383,139	7,520		19.63
Repurchase from LSF8 in private transaction	—	—		—		900,000	14,490		16.10
Ending Balance	5,648,778	$	116,592	$	20.64	3,678,188	$	70,489	$	19.16

(a) Includes commissions paid for repurchases on open market.

12. SHARE-BASED COMPENSATION

Stock options, Restricted Stock Awards, Restricted Stock Units and Performance Restricted Stock Units

On May 1, 2017, the Company granted one employee 1,701 Restricted Share Units ("RSUs") that vest ratably over four years from the grant date. The market price on the date of grant was $24.30.

On May 1, 2017, the Company also granted one employee 1,702 Performance Based RSUs ("PRSUs"). The PRSUs vest on December 31, 2019, with the exact number of PRSUs vesting subject to the achievement of certain performance conditions through December 31, 2018. The number of PRSUs earned will vary from 0% to 200% of the number of PRSUs awarded, depending on the Company’s performance relative to a cumulative two year EBITDA target for fiscal years 2017 and 2018. The market price on the date of grant was $24.30.

For the three and six months ended June 30, 2017, the Company recognized share-based compensation expenses of $0.8 million and $1.5 million, respectively, compared to $0.8 million and $1.2 million for the three and six months ended June 30, 2016, respectively. The expenses related to share-based compensation awards were recorded in selling and administrative expenses. As of June 30, 2017, there was $5.8 million of total unrecognized compensation cost related to non-vested stock options, restricted stock awards, RSUs and PRSUs. This cost is expected to be recognized over a weighted-average period of 2.5 years.

13. ACCUMULATED OTHER COMPREHENSIVE LOSS



Table 13: Changes in Accumulated Other Comprehensive Loss by Category
	Foreign currency translation adjustment			Net unrealized gain on derivatives, net of tax			Total
	(in thousands)
Balance as of December 31, 2016	$	(4,778	)	$	1,369		$	(3,409	)
Other comprehensive income/(loss) before reclassifications	564			(793		)	(229		)
Amounts reclassified from AOCI	—			215			215
Net current period other comprehensive income/(loss)	564			(578		)	(14		)
Balance as of June 30, 2017	$	(4,214	)	$	791		$	(3,423	)

14. INCOME TAXES

The Company’s annual estimated effective tax rate is approximately 33.43%. The Company is subject to audit examinations at federal, state and local levels by tax authorities in those jurisdictions. In addition, the Canadian operations are subject to audit examinations at federal and provincial levels by tax authorities in those jurisdictions. The tax matters challenged by the tax authorities are typically complex; therefore, the ultimate outcome of any challenges would be subject to uncertainty. The Company has not identified any issues that did not meet the recognition threshold or would be impacted by the measurement provisions of the uncertain tax position guidance.

15. EARNINGS PER SHARE

The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of potentially dilutive securities. Potentially dilutive common stock has no effect on income available to common stockholders. For the three and six months ended June 30, 2017, approximately, 1,000 and 43,000 share-based compensation awards, respectively, were excluded from the weighted average shares outstanding because their impact would be anti-dilutive in the computation of dilutive earnings per share. Awards excluded for the same periods in 2016 were 165 and 77,000, respectively.



Table 15: Basic and Dilutive Earnings Per Share
	For the Three Months Ended				For the Six Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
	(dollars in thousands, except for per share amounts)
Net income	$	12,398	$	12,722	$	24,625	$	25,223

Weighted average number of shares outstanding - basic	39,125,571		40,670,650		39,349,674		41,097,472
Effect of dilutive securities:
Restricted stock awards	5,880		7,449		7,971		7,236
Restricted stock units	39,988		25,095		57,169		15,789
Performance restricted stock units	17,837		—		17,180		—
Stock options	20,943		13,968		22,934		7,969
Total effect of dilutive securities	84,648		46,512		105,254		30,994
Weighted average number of shares outstanding - diluted	39,210,219		40,717,162		39,454,928		41,128,466

Basic earnings per share	$	0.32	$	0.31	$	0.63	$	0.61
Diluted earnings per share	$	0.32	$	0.31	$	0.62	$	0.61

16. COMMITMENTS AND CONTINGENCIES

Commitments

The Company leases certain buildings and equipment. The Company’s facility and equipment leases may provide for escalations of rent or rent abatements and payment of pro rata portions of building operating expenses. Minimum lease payments are recognized on a straight-line basis over the minimum lease term. The total expenses under operating leases for the three and six months ended June 30, 2017 was $0.9 million and $1.7 million, respectively, compared to $1.1 million and $2.1 million for the same periods in 2016, respectively. The Company also has non-capital purchase commitments that primarily relate to gas, gypsum, paper and other raw materials. The total amounts purchased under such commitments were $21.7 million and $42.8 million for the three and six months ended June 30, 2017, respectively, compared to $15.5 million and $33.1 million for the three and six months ended June 30, 2016, respectively.



Table 16: Future Minimum Lease Payments Due Under Noncancellable Operating Leases and Purchase Commitments
	Future Minimum Lease Payments		Purchase Commitments
	(in thousands)
July 1, 2017 through December 31, 2017	$	556	$	22,857
2018	616		26,979
2019	1,494		26,718
2020	—		17,442
2021	—		5,237
Thereafter	—		64,256
Total	$	2,666	$	163,489

Contingent obligations

Under certain circumstances, the Company provides letters of credit related to its natural gas and other supply purchases. As of June 30, 2017 and December 31, 2016, the Company had outstanding letters of credit of approximately $1.6 million and $2.1 million, respectively.

Legal Matters

In the ordinary course of business, the Company executes contracts involving indemnifications standard in the industry. These indemnifications might include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, it is the opinion of management that these guarantees and indemnifications are not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

In the ordinary course of business, the Company is involved in certain legal actions and claims, including proceedings under laws and regulations relating to environmental and other matters. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the total liability for these legal actions and claims cannot be determined with certainty. When the Company determines that it is probable that a liability for environmental matters, legal actions or other contingencies has been incurred and the amount of the loss is reasonably estimable, an estimate of the costs to be incurred is recorded as a liability in the financial statements. As of June 30, 2017 and December 31, 2016, such liabilities were not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity. While management believes its accruals for such liabilities are adequate, the Company may incur costs in excess of the amounts provided. Although the ultimate amount of liability that may result from these matters or actions is not ascertainable, any amounts exceeding the recorded accruals are not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

17. SEGMENT REPORTING

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 products and geographic areas. The Company’s primary reportable segment is wallboard, which represented approximately 97.2% and 96.9% of the Company's revenues for the three and six months ended June 30, 2017, respectively, compared to 97.0% and 96.8% of the Company's revenues for the three and six months ended June 30, 2016, ~~respectively, compared to 96.9% and 96.6% of the Company’s revenues for the three and six months ended June 30, 2015,~~ respectively. This segment produces wallboard for the commercial and residential construction sectors. The Company also ~~operates other business activities, primarily~~manufactures finishing products, which complement the Company’s full range of wallboard products.

Revenues from the major products sold to external customers include gypsum wallboard and finishing products.

The Company’s two geographic areas consist of the United States and Canada for which it reports net sales, fixed assets and total assets.

The Company evaluates operating performance based on profit or loss from operations before certain adjustments as shown below. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. The Company did not provide asset information by segment as its Chief Operating Decision Maker does not use such information for purposes of allocating resources and assessing segment performance.


F14.1: Segment Reporting
Table 17.1: Segment Reporting													Table 17.1: Segment Reporting
	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	(in thousands)												(in thousands)
Net Sales:
Wallboard	$	113,593		$	107,569		$	221,192		$	196,312		$	117,194		$	113,593		$	233,670		$	221,192
Other	3,522			3,427			7,408			6,860			3,436			3,522			7,575			7,408
Total net sales	117,115			110,996			228,600			203,172			$	120,630		$	117,115		$	241,245		$	228,600
Operating income:
Wallboard	23,216			4,418			45,620			12,196			$	21,819		$	23,216		$	43,411		$	45,620
Other	(8		)	(143		)	158			(19		)	(199		)	(8		)	(104		)	158
Total operating income	23,208			4,275			45,778			12,177			$	21,620		$	23,208		$	43,307		$	45,778
Adjustments:
Interest Expense	(3,648		)	(4,184		)	(7,346		)	(8,405		)
Loss from equity investment	(240		)	(311		)	(435		)	(252		)
Other income/(expense), net	6			31			160			(417		)
Income/(loss) before (provision for)/benefit from income taxes	19,326			(189		)	38,157			3,103
Interest expense													$	(3,062	)	$	(3,648	)	$	(5,978	)	$	(7,346	)
Income/(losses) from equity investment													345			(240		)	175			(435		)
Other (expense)/income, net													(135		)	6			(779		)	160
Income before provision for income taxes													$	18,768		$	19,326		$	36,725		$	38,157
Depreciation and Amortization:
Wallboard	11,566			12,847			23,240			25,682			$	12,177		$	11,566		$	23,199		$	23,240
Other	276			294			548			588			297			276			561			548
Total depreciation and amortization	$	11,842		$	13,141		$	23,788		$	26,270		$	12,474		$	11,842		$	23,760		$	23,788


F14.2: Net Sales By Geographic Region
Table 17.2: Net Sales By Geographic Region									Table 17.2: Net Sales By Geographic Region
	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended				For the Six Months Ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015		June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
	(in thousands)								(in thousands)
United States	$	107,694	$	101,095	$	211,336	$	184,751	$	113,665	$	107,694	$	224,051	$	211,336
Canada	9,421		9,901		17,264		18,421		6,965		9,421		17,194		17,264
Net sales	$	117,115	$	110,996	$	228,600	$	203,172	$	120,630	$	117,115	$	241,245	$	228,600


F14.3: Assets By Geographic Region
Table 17.3: Assets By Geographic Region									Table 17.3: Assets By Geographic Region
	Fixed Assets				Total Assets				Fixed Assets				Total Assets
	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
	(in thousands)								(in thousands)
United States	$	308,923	$	323,361	$	597,467	$	617,878	$	294,561	$	304,807	$	610,355	$	617,050
Canada	3,199		3,046		18,743		17,090		3,370		3,031		18,470		17,699
Total	$	312,122	$	326,407	$	616,210	$	634,968	$	297,931	$	307,838	$	628,825	$	634,749

~~15. TREASURY STOCK~~

On May 15, 2015, the Company repurchased 913,200 shares of its common stock from LSF8 in a private transaction at a price per share of $21.90, or an aggregate of approximately $20.0 million, pursuant to a stock purchase agreement dated May 11, 2015. On September 16, 2015, the Company repurchased an additional 1,007,500 shares of its common stock from LSF8 in a private transaction at a price per share of $19.85, or an aggregate of approximately $20.0 million, pursuant to a stock purchase agreement dated September 10, 2015. On March 18, 2016, the Company repurchased an additional 900,000 shares of its common stock from LSF8 in a private transaction at a price per share of $16.10, or an aggregate of approximately $14.5 million, pursuant to a stock purchase agreement dated March 14, 2016.

On November 4, 2015, the Company announced that the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $50.0 million of its common stock, at such times and prices as determined by management as market conditions warrant, through December 31, 2016. Pursuant to this authorization, the Company has repurchased shares of its common stock on the open market and in the March 2016 private transaction with LSF8 described above. On August 3, 2016, the Company announced the Board of Directors has authorized an expansion of its stock repurchase program from up to $50.0 million to up to $100.0 million. The program has also been extended from the end of 2016 to the end of 2017.

~~All repurchased shares are held in treasury, reducing the number of shares of common stock outstanding and used in the Company’s earnings per share calculation.~~

F15: Treasury Stock Activity
June 30, 2016 June 30, 2015
Shares Amount (a) Average Share Price (a) Shares Amount (a) Average Share Price (a)
(in thousands, except share data)
For the Three Months Ended:
Beginning Balance 3,446,208
$ 65,505
$ 19.0079
2,164
$ 37
$ 17.2000
Repurchases on open market 231,980
4,984
21.4828
—
—
—
Repurchase from LSF8 in private transaction —
—
—
913,200
19,999
21.9000
Ending Balance 3,678,188
$ 70,489
$ 19.1640
915,364
$ 20,036
$ 21.8889

For the Six Months Ended:
Beginning Balance 2,395,049
$ 48,479
$ 20.2411
—
$ —
$ —
Repurchases on open market 383,139
7,520
19.6282
2,164
37
17.2000
Repurchase from LSF8 in private transaction 900,000
14,490
16.1000
913,200
19,999
21.9000
Ending Balance 3,678,188
$ 70,489
$ 19.1640
915,364
$ 20,036
$ 21.8889

(a) Includes commissions paid for repurchases on open market

~~16. SHARE-BASED COMPENSATION~~

On May 5, 2016, the Company granted its Chairman of the board directors 1,164 Restricted Stock Units ("RSUs") that vest one year from the grant date, which had a market price on the date of grant of $19.63. On May 16, 2016, the Company granted certain employees 2,227 RSUs that vest evenly over 4 years, which had a market price on the date of grant of $21.10.

For the three and six months ended June 30, 2016, the Company recognized share-based compensation expenses of $0.8 million and $1.2 million, respectively, compared to $0.3 million and $0.4 million for the three and six months ended June 30, 2015, respectively.

~~17. EARNINGS PER SHARE~~

F17: Basic and Dilutive Earnings Per Share
For the Three Months Ended For the Six Months Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
(dollars in thousands, except for per share amounts)
Net income/(loss) $ 12,722
$ (126 ) $ 25,223
$ 1,894

Weighted average number of shares outstanding- basic 40,670,650
43,606,410
41,097,472
43,840,105
Effect of dilutive securities:
Restricted stock awards 7,449
—
7,236
5,138
Restricted stock units 25,095
—
15,789
3,393
Performance restricted stock units —
—
—
3,700
Stock options 13,968
—
7,969
24,421
Total effect of dilutive securities 46,512
—
30,994
36,652
Weighted average number of shares outstanding - diluted 40,717,162
43,606,410
41,128,466
43,876,757

Basic earnings per share $ 0.31
$ —
$ 0.61
$ 0.04
Diluted earnings per share $ 0.31
$ —
$ 0.61
$ 0.04

18. FAIR VALUE DISCLOSURES

U.S. GAAP provides a framework for measuring fair value, establishes a fair value hierarchy of the valuation techniques used to measure the fair value and requires certain disclosures relating to fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in a market with sufficient activity.

The three-tier fair value hierarchy, ~~ranks~~which prioritizes the ~~quality and reliability of the information~~inputs used ~~to determine~~in measuring fair ~~values. The hierarchy gives highest priority to unadjusted~~value, is as follows:

Level 1—Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities ~~and~~that a Company has the ~~lowest priority~~ability to ~~unobservable inputs. The standard describes~~access;

Level 2—Inputs, other than the ~~following three levels used to classify fair value measurements:~~quoted market prices included in Level 1, which are observable for the asset or liability, either directly or indirectly; and



~~Level 1~~		~~Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities that a Company has the ability to access;~~

~~Level 2~~		~~Inputs, other than the quoted market prices included in Level 1, which are observable for the asset or liability, either directly or indirectly; and~~

~~Level 3~~		Level 3—Unobservable inputs for the asset or liability which is typically based on an entity’s own assumptions when there is little, if any, related market data available.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by the Company. The fair values of receivables, accounts payable, accrued costs and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments.

The Company estimates the fair value of its debt by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles. These inputs are classified as Level 3 within the fair value hierarchy. As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the carrying value reported in the consolidated balance sheet for the Company’s notes payable approximated its fair value.

The only assets or liabilities the Company had at June 30, ~~2016~~2017 that are recorded at fair value on a recurring basis are the natural gas hedges ~~that~~and interest rate swaps. The natural gas hedges had a ~~positive~~negative fair value of $0.1 million as of June 30, ~~2016,~~2017, net of tax amount of $0.1 million, compared to a ~~negative~~positive fair value of ~~$0.1~~0.2 million, net of tax amount of ~~$0.03~~$0.1 million as of December 31, ~~2015. The~~2016. Interest rate swaps had a positive fair value of $1.0 million as of June 30, 2017, net of tax amount of $0.5 million, compared to a positive fair value of $1.2 million as of December 31, 2016, net of tax amount of $0.6 million. Both the natural gas hedges and interest rate swaps are classified within Level 2 of the fair value hierarchy as they are valued using third party pricing models which contain inputs that are derived from observable market data. Generally, the Company obtains its Level 2 pricing inputs from its counterparties. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Assets and liabilities that are measured at fair value on a non-recurring basis include intangible assets and goodwill. These items are recognized at fair value when they are considered to be impaired.

There were no fair value adjustments for assets and liabilities measured on a non-recurring basis. The Company discloses fair value information about financial instruments for which it is practicable to estimate that value.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with "Risk Factors," "Forward-Looking Statements," "Selected Historical Financial and Operating Data," and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year ~~2015~~2016 filed with the Securities and Exchange Commission on February ~~23, 2016~~24, 2017 (the ~~"2015~~"2016 10-K") and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Overview

We are a leading manufacturer of gypsum wallboard and complementary finishing products in the eastern United States and eastern Canada. We operate highly efficient and automated manufacturing facilities that produce a full range of gypsum wallboard products for our diversified customer base. We sell our products in the new residential, repair and remodel, or R&R, and commercial construction markets. We believe our operating efficiencies, favorable plant locations, manufacturing expertise and focus on delivering superior customer service position us to benefit from an anticipated increase in gypsum wallboard demand as the housing market recovers from historic lows.

Our primary reportable segment is wallboard, which accounted for approximately 97.2% and 96.9% of our net sales for the three and six months ended June 30, 2017, respectively, compared to 97.0% and 96.8% of our net sales infor the three and six months ended June 30, 2016, ~~respectively, compared to 96.9% and 96.6% for the three and six months ended June 30, 2015,~~ respectively. We also operate other business activities, primarily the production of finishing products, which complement our full range of wallboard products. See ~~Part I, Item 1, Financial Information - Notes~~Note 17 to the Consolidated Financial Statements ~~Note 14, Segment Reporting.~~for additional information on our reporting segments.

Factors Affecting Our Results

Market

For the new residential construction market, housing starts are a good indicator of demand for our gypsum products. Installation of our gypsum products into a single family home typically follows a housing start by 90 to 120 days. The R&R market includes renovation of both residential and nonresidential buildings. Many buyers begin to remodel an existing home within two years of purchase. The generally rising levels of existing home sales and home resale values in recent years have contributed to an increase in demand for our products from the R&R market. The commercial construction market encompasses areas such as office, retail, heath care, hospitality, and government projects. Demand for our products from commercial construction typically follows signing of construction contracts by 12 to 18 months.

The rate of recovery in the new residential construction market, R&R market, and the new nonresidential construction market remains uncertain and will depend on broader economic circumstances, including employment, household formation, the home ownership rate, existing home price trends, availability of mortgage financing, interest rates, consumer confidence, job growth and discretionary business investment.

Wallboard pricing can be impacted by overall industry capacity in the United States. Currently, there is excess wallboard production capacity industry-wide in the United States which can lead to downward pressure on wallboard prices. We estimate that industry capacity utilization was approximately 75% and 73% for the three and six months ended June 30, 2017, respectively, and 73% for both the three and six months ended June 30, 2016.

Market Outlook

Most forecasts continue to project moderate growth in housing starts. Industry Analysts’ forecasts for 2017 housing starts in the United States included in the most recent Blue Chip Economic Indicators are 1.19 million to 1.29 million units, based on the average of the bottom ten and top ten forecasts included in the report, respectively. This forecast range represents an increase in the range of 2% and 10% over 2016 housing starts of 1.17 million. We also expect that the R&R and new commercial construction markets will continue to experience moderate growth.

Industry shipments of gypsum wallboard in the United States as reported by the Gypsum Association, were an estimated 6.2 billion and 12.2 billion square feet for the three and six months ended June 30, 2017, respectively. The 6.2 billion square feet is up 3% when compared to the three months ended June 30, 2016, while the 12.2 billion is flat from the same prior year period. We estimate that industry shipments in the United States for all of 2017 will increase mid-single digits from 24.7 billion square feet in 2016.

Manufacturing Costs

Paper and synthetic gypsum are our principal wallboard raw materials. Paper constitutes our most significant input cost and the most significant driver of our variable manufacturing costs. Energy costs, consisting of natural gas and electricity, are the other key input costs. In total, manufacturing cash costs represented ~~61.5%~~64% of our costs of goods sold for both the three and ~~61.8%~~six months ended June 30, 2017, compared to 61% and 62% for the same periods in 2016, respectively. Depreciation and amortization represented 13% of our costs of goods sold for both the three and six months ended June 30, 2017, compared to 14% of our costs of goods sold for the ~~three and six months ended June 30, 2016, respectively, compared to 61.1% and 61.0% for the~~ same periods in 2015, respectively. Depreciation and amortization represented 13.6% and 14.0% of our costs of goods sold for the three and six months ended June 30, 2016, respectively, compared to 15.6% and 16.6% of our costs of goods sold for the three and six months ended June 30, 2015, respectively.2016. Distribution costs to deliver ~~product~~products to our customers represented the remaining portion of our costs of goods sold, or approximately ~~24.9%~~23% of our costs of goods sold for both the three and ~~24.2%~~six months ended June 30, 2017, compared to 25% and 24% of our costs of goods sold for the ~~three and six months ended June 30,~~same periods in 2016, ~~respectively, compared to 23.3% and 22.4% of our costs of goods sold for the three and six months ended June 30, 2015,~~ respectively.

Variable manufacturing costs, including inputs such as paper, gypsum, natural gas, and other raw materials, represented ~~67.4%~~70% and ~~67.9%~~71% of our manufacturing cash costs for the three and six months ended June 30, ~~2016,~~2017, respectively, compared to ~~66.7%~~67% and ~~66.1%~~68% for the same periods in ~~2015,~~2016, respectively. Fixed production costs excluding depreciation and amortization consisted of labor, maintenance, and other costs that represented ~~32.6%~~30% and ~~32.1%~~29% of our manufacturing cash costs for the three and six months ended June 30, ~~2016,~~2017, respectively, compared to ~~33.3%~~33% and ~~33.9% of our manufacturing cash costs~~32% for the ~~three and six months ended June 30, 2015,~~same periods in 2016, respectively.

We currently purchase most of our paperboard liner from Seven Hills, a joint venture between ~~the Company~~us and WestRock ~~Company, formerly known as RockTenn Company ("WestRock").~~Company. Under the joint venture agreement with Seven Hills, the price of paper adjusts based on changes in the underlying costs of production of the paperboard liner, of which the two most significant are recovered waste paper and natural gas. The largest waste paper source used by the operation is old cardboard containers (known as OCC). Seven Hills has the capacity to supply us with approximately 75% of our paper needs at our full capacity utilization and most of our needs at current capacity utilization on market-based pricing terms that we consider favorable. We ~~believe we can~~ also purchase additional paper on the spot market at competitive prices. See ~~Part I, Item 1, Financial Information - Notes~~Note 7 to the Consolidated Financial Statements ~~Note 11, Investment~~for additional information regarding our investment in Seven Hills.

Results of Operations

																									Table M1: Results of Operations
	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	(dollars in thousands, except mill net)												(dollars in thousands, except mill net)
Net Sales	$	117,115		$	110,996		$	228,600		$	203,172		$	120,630		$	117,115		$	241,245		$	228,600
Costs, expenses and other income:
Cost of goods sold	83,744			81,516			163,699			153,191			89,817			83,744			179,441			163,699
Selling and administrative	10,163			9,363			19,123			17,791			9,193			10,163			18,497			19,123
Long Term Incentive Plan funded by Lone Star	—			15,842			—			20,013
Total costs and operating expenses	93,907			106,721			182,822			190,995			99,010			93,907			197,938			182,822
Operating income	23,208			4,275			45,778			12,177			21,620			23,208			43,307			45,778
Other income/(expense), net	6			31			160			(417		)
Other (expense)/income, net													(135		)	6			(779		)	160
Interest expense, net	(3,648		)	(4,184		)	(7,346		)	(8,405		)	(3,062		)	(3,648		)	(5,978		)	(7,346		)
Income before losses from equity method investment and (provision for)/benefit from income taxes	19,566			122			38,592			3,355
Losses from equity method investment	(240		)	(311		)	(435		)	(252		)
Income/(loss) before (provision for)/benefit from income taxes	19,326			(189		)	38,157			3,103
(Provision for)/benefit from income taxes	(6,604		)	63			(12,934		)	(1,209		)
Net income/(loss)	$	12,722		$	(126	)	$	25,223		$	1,894
Income before income/(losses) from equity method investment and provision for income taxes													18,423			19,566			36,550			38,592
Income/(losses) from equity method investment													345			(240		)	175			(435		)
Income before provision for income taxes													18,768			19,326			36,725			38,157
Provision for income taxes													(6,370		)	(6,604		)	(12,100		)	(12,934		)
Net income													$	12,398		$	12,722		$	24,625		$	25,223
Other operating data:
Capital expenditures and software purchased or developed	$	1,854		$	1,270		$	2,121		$	2,287		$	2,843		$	1,854		$	8,203		$	2,121
Wallboard sales volume (million square feet)	643			567			1,260			1,036			647			643			1,297			1,260
Mill net sales price (1)	$	144.86		$	156.85		$	144.74		$	157.13		$	150.32		$	144.86		$	149.11		$	144.74


(1)	Mill net sales price represents average selling price per thousand square feet net of freight and delivery costs.

Three ~~and Six~~Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016 ~~Compared to Three and Six Months Ended June 30, 2015~~

Net Sales.Net sales increased by ~~$6.1~~$3.5 million, up ~~5.5%~~3.0% from ~~$111.0 million for the three months ended June 30, 2015, to~~ $117.1 million for the three months ended June 30, ~~2016.~~2016, to $120.6 million for the three months ended June 30, 2017. The increase was primarily attributable to ~~$14.3~~a favorable impact of $3.2 million due to an increase in the average net selling price for gypsum wallboard at constant exchange rates. In addition, there was a $0.7 million favorable impact of higher wallboard volumes driven by higher demand in the United States. ~~Higher~~The overall increase in net sales was partially offset by unfavorable impact of ~~our non-wallboard products had a~~$0.3 million related to foreign currency exchange rates and $0.1 million ~~positive impact.~~related to non-wallboard products.

Cost of Goods Sold. Cost of goods sold increased $6.1 million, up 7.3% from $83.7 million for the three months ended June 30, 2016, to $89.8 million for the three months ended June 30, 2017. The increase was primarily driven by higher per unit input costs, mainly related to paper, gypsum and natural gas which increased cost of goods sold by $5.6 million. Amortization and depreciation costs and labor costs increased by $0.6 million and $0.4 million, respectively. In addition, higher wallboard volumes increased freight costs and input costs by $0.1 million and $0.2 million, respectively. The overall increase was partially offset by a $0.6 million decrease due to lower per unit freight costs and a $0.2 million increase in other manufacturing costs.

Selling and Administrative Expense. Selling and administrative expense decreased $1.0 million, down 9.8% from $10.2 million for the three months ended June 30, 2016, to $9.2 million for the three months ended June 30, 2017. This decrease was mainly driven by a $0.4 million decrease in professional services, a $0.2 million decrease in bad debt expense, a $0.2 million in warehouse lease expense and a $0.2 million decrease in other selling and administrative expense.

Operating Income. Operating income of $21.6 million for the ~~average net selling price~~three months ended June 30, 2017 decreased by $1.6 million from operating income of $23.2 million for ~~gypsum wallboard had an $7.8 million unfavorable impact on~~the three months ended June 30, 2016. The primary drivers for this decrease were higher input and labor costs, partially offset by higher net sales and ~~foreign currency~~lower freight costs for the second quarter 2017 versus the second quarter 2016.

Other (Expense)/Income, Net.Other (expense)/income, net, was a net expense of $0.1 million for the three months ended June 30, 2017 compared to net income of $6,000 for the three months ended June 30, 2016.

Interest Expense, Net. Interest expense was $3.1 million for the three months ended June 30, 2017, a decrease of $0.5 million from $3.6 million for the three months ended June 30, 2016, reflecting lower average outstanding borrowings during second quarter 2017 compared to second quarter 2016 and the lower interest rate spread over LIBOR following the debt refinancing in August 2016 and repricing in February 2017. This decrease was partially offset by the rise in LIBOR. See Note 9 to the Consolidated Financial Statements for further details on the refinancing and repricing.

Provision for Income Taxes. Provision for income taxes decreased ~~net sales~~$0.2 million from $6.4 million for the three months ended June 30, 2017, compared to $6.6 million in the prior period. The lower provision for income taxes was primarily driven by ~~$0.5 million.~~lower pretax income and a slightly lower annual estimated effective tax rate.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net Sales.Net sales increased by ~~$25.4~~$12.6 million, up ~~12.5%~~5.5% from ~~$203.2 million for the six months ended June 30, 2015, to~~ $228.6 million for the six months ended June 30, ~~2016.~~2016, to $241.2 million for the six months ended June 30, 2017. The increase was primarily attributable to ~~$42.5~~a $6.5 million favorable impact of higher wallboard volumes driven by higher demand in the United ~~States. Higher sales~~States and a favorable impact of ~~our non-wallboard products had a $0.5~~$6.1 million ~~positive impact. The decrease~~due to an increase in the average net selling price for gypsum wallboard at constant exchange ~~rates had an $16.3 million unfavorable impact on net sales and foreign currency decreased net sales by $1.3 million.~~rates.

Cost of Goods Sold. Cost of goods sold increased ~~$2.2~~$15.7 million, up ~~2.7%~~9.6% from $81.5 million for the three months ended June 30, 2015, to $83.7 million for the three months ended June 30, 2016. Approximately $6.6 million of the increase in cost of goods sold was due to higher wallboard volumes. Lower manufacturing costs, primarily due to lower energy prices and better operating performance, and lower freight to customers decreased costs by $2.2 million and $0.4 million, respectively. Lower amortization and change in foreign exchange rates reduced costs by an additional $1.3 million and $0.5 million, respectively.

~~Cost of goods sold increased $10.5 million, up 6.9% from $153.2 million for the six months ended June 30, 2015, to~~ $163.7 million for the six months ended June 30, ~~2016. Approximately $19.8~~2016, to $179.4 million for the six months ended June 30, 2017. Higher per unit input costs, mainly related to paper, gypsum and ~~$0.5 million of the increase in~~natural gas increased cost of goods sold by $10.6 million and higher per unit freight costs increased $0.3 million. In addition, higher wallboard volumes increased input costs and freight costs by and $1.9 million and $1.1 million, respectively. Furthermore, labor costs increased by $1.3 million. The remaining increase of $0.5 million was due to ~~higher wallboard and non-wallboard product volumes, respectively. Lower~~other manufacturing costs, primarily lower energy prices and better operating performance, and lower freight to customers decreased costs by $4.3 million and $1.6 million, respectively. Lower amortization reduced costs by $2.5 million. A change in foreign exchange rates decreased costs by $1.4 million.

costs.

Selling and Administrative Expense. Selling and administrative expense ~~increased $0.8~~decreased $0.6 million, up 8.5% to $10.2 million for the three months ended June 30, 2016 compared to $9.4 million for the three months ended June 30, 2015. This increase was driven by a $0.8 million increase in stock compensation and bonus expense for the three months ended June 30, 2016, compared to the same period 2015.

~~Selling and administrative expense increased $1.3 million, up 7.5% to~~down 3.1% from $19.1 million for the six months ended June 30, 2016, ~~compared~~ to ~~$17.8~~$18.5 million for the six months ended June 30, ~~2015.~~2017. This ~~increase~~decrease was ~~primarily~~ driven by a ~~$0.7~~$0.8 million decrease in professional services and a $0.2 million decrease in warehouse lease expenses. The overall decrease was partially offset by a $0.3 million increase in stock compensation ~~expense, $0.2~~and a $0.1 million increase in ~~bonus expense~~other selling and ~~$0.2 million increase in legal expenses and $0.2 million increase in bad debt expense for the six months ended June 30, 2016, compared to the same period 2015.~~

~~Long Term Incentive Plan Funded by Lone Star.~~ Under the LSF8 Gypsum Holdings, L.P. Long Term Incentive Plan ("LTIP"), certain of our officers and the estate of our former CEO were eligible to receive payments from LSF8 Gypsum Holdings, L.P., an affiliate of Lone Star Funds ("LSF8"), in the event of certain monetization events described in greater detail in the 2015 10‑K. LSF8 was responsible for funding any payments under the LTIP. The secondary public offering in March 2015 triggered a monetization event for the first time and resulted in the payment of $4.2 million and the secondary public offering in May 2015 resulted in aggregate payments of $15.8 million. As these payments arose out of employment with the Company, the $15.8 million and $20.0 million expense was recorded on the Company's books for the three and six months ended June 30, 2015, respectively, and was also deductible for tax purposes. The funding of LTIP was recorded as capital contributions from LSF8 in the statement of cash flows under financing activities. No payments were made under the LTIP in the three months and six months ended June 30, 2016 and no further payments will be made under the LTIP.administrative expenses.

Operating Income. Operating income of ~~$23.2~~$43.3 million for the ~~three~~six months ended June 30, ~~2016 increased~~2017 decreased by ~~$18.9~~$2.5 million from operating income of $4.3 million for the three months ended June 30, 2015. The difference was driven mostly by $6.1 million higher net sales and the decrease of the $15.8 million in LTIP expense, partly offset by $2.2 million higher costs of goods sold and $0.8 million higher selling and administrative expense.

~~Operating~~ income of $45.8 million for the six months ended June 30, ~~2016 increased~~2016. The primary drivers for this decrease were higher input, freight and labor costs, partially offset by ~~$33.6 million~~an increase in net sales resulting from ~~operating~~ higher volumes and sales price.

Other (Expense)/Income, Net.Other (expense)/income, net, was a net expense of ~~$12.2~~$0.8 million for the six months ended June 30, 2015. The difference was driven mostly by the $25.4 million higher net sales and the decrease of $20.0 million in LTIP expense, partly offset by $10.5 million higher costs of goods sold and $1.3 million higher selling and administrative expense.

~~Other Income/(Expense), Net.~~ Other income/(expense), net, was net income of $0.01 million for the three months ended June 30, 2016, a decrease from the $0.03 million other expense in the same period of 2015. The decrease is primarily due2017 compared to ~~foreign exchange losses in the second quarter of 2016 as opposed to foreign exchange gains in the prior year quarter.~~

~~For the six months ended June 30, 2016, other income/(expense), net, was a~~ net income of $0.2 million ~~an increase from the $0.4 million expense in the prior year period. The increase is due to foreign exchange gains~~ for the six months ended June 30, ~~2016 compared~~2016. The $1.0 million increase in expense was primarily driven by $0.7 million in additional expenses associated with the debt repricing in the first quarter 2017. See Note 9 to ~~foreign exchange losses~~the Consolidated Financial Statements for further details on the ~~six months ended June 30, 2015.~~repricing.

Interest Expense, Net. Interest expense was ~~$3.6~~$6.0 million for the ~~three~~six months ended June 30, ~~2016,~~2017, a decrease ~~from $4.2~~of $1.3 million for the three months ended June 30, 2015, reflecting lower average outstanding borrowings during the first quarter of 2016. The Company's average gross debt under the First Lien Credit Agreement for the three months ended June 30, 2016 was $282.0 million compared to $338.7 million in prior year period.

~~Interest expense was~~from $7.3 million for the six months ended June 30, 2016, areflecting lower average outstanding borrowings and the lower interest rate spread over LIBOR following the debt refinancing in August 2016 and repricing in February 2017. This decrease was partially offset by the rise in LIBOR. See Note 9 to the Consolidated Financial Statements for further details on the refinancing and repricing.

Provision for Income Taxes. Provision for income taxes decreased $0.8 million from ~~$8.4~~$12.1 million for the six months ended June 30, ~~2015. For the six months ended June 30, 2016, the Company's average gross debt under the First Lien Credit Agreement was $287.8 million~~2017, compared to ~~$343.7 million for the six months ended June 30, 2015.~~

~~(Provision for)/Benefit From Income Taxes.~~ ~~Provision for income taxes was $6.6 million for the three months ended June 30, 2016, compared to a benefit from income taxes of $0.1~~$12.9 million in the prior year period. ~~Higher~~The lower provision for income taxes was primarily driven by ~~higher~~lower pretax ~~income.~~

~~Provision from~~ income, ~~taxes was $12.9~~a slightly lower annual estimated effective tax rate, and a $0.2 million favorable discrete tax item related to excess tax benefits on stock compensation recognized in connection with the adoption of new accounting guidance. See Note 2 to the Consolidated Financial Statements for ~~the six months ended June 30, 2016, compared to a provision for income taxes~~further detail on our adoption of ~~$1.2 million for the six months ended June 30, 2015. Higher provision for income taxes was driven by higher pretax income.~~this share-based compensation accounting guidance.

Non-GAAP Measures

EBITDA ~~and Adjusted EBITDA have~~has been presented in this Quarterly Report on Form 10-Q as a supplemental ~~measures~~measure of financial performance that ~~are~~is not required by, or presented in accordance with, GAAP. We have presented EBITDA ~~and Adjusted EBITDA~~ as a supplemental performance ~~measures~~measure because we believe that ~~they facilitate~~it facilitates a comparative assessment of our operating performance relative to our performance based on our results under GAAP while isolating the effects of some items that vary from period to period without any correlation to core operating performance and ~~eliminate~~eliminates certain charges that we believe do not reflect our operations and underlying operational performance. Management also believes that EBITDA ~~and Adjusted EBITDA are~~is useful to investors because ~~they allow~~it allows investors to view our business through the eyes of management and the board of directors, facilitating comparison of results across historical periods.

EBITDA ~~and Adjusted EBITDA~~ may not be comparable to similarly titled measures of other companies because other companies may not calculate EBITDA ~~and Adjusted EBITDA~~ in the same manner as we do. EBITDA ~~and Adjusted EBITDA are~~is not ~~measurements~~a measurement of our financial performance under GAAP and should not be considered in isolation from or as ~~alternatives~~an alternative to ~~operating~~net income ~~determined~~calculated in accordance with GAAP or any other financial statement data presented as ~~indicators~~an indicator of financial performance or liquidity, ~~each~~ as calculated and presented in accordance with GAAP.

Table M2: Reconciliation of GAAP Net Income/(Loss) to Non-GAAP EBITDA and Adjusted EBITDA
For the Three Months Ended For the Six Months Ended
June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
(in thousands)
Net income/(loss) $ 12,722
$ (126 ) $ 25,223
$ 1,894
Adjustments:
Other (income)/expense, net (6 ) (31 ) (160 ) 417
Interest expense, net 3,648
4,184
7,346
8,405
Losses from equity method investment 240
311
435
252
Provision for/(benefit from) income taxes 6,604
(63 ) 12,934
1,209
Depreciation and amortization 11,842
13,141
23,788
26,270
EBITDA—Non-GAAP Measure 35,050
17,416
69,566
38,447
Long Term Incentive Plan Funded by Lone Star (a) —
15,842
—
20,013
Adjusted EBITDA—Non-GAAP Measure $ 35,050
$ 33,258
$ 69,566
$ 58,460


~~(a)~~	~~Represents expense recognized pursuant to the LTIP funded by LSF8, an affiliate of Lone Star.~~



Table M2: Reconciliation of EBITDA to Net Income
	For the Three Months Ended						For the Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	(in thousands)
Net income	$	12,398		$	12,722		$	24,625		$	25,223
Adjustments:
Other expense/(income), net	135			(6		)	779			(160		)
Interest expense, net	3,062			3,648			5,978			7,346
(Income)/losses from equity method investment	(345		)	240			(175		)	435
Provision for income taxes	6,370			6,604			12,100			12,934
Depreciation and amortization	12,474			11,842			23,760			23,788
EBITDA—Non-GAAP Measure	$	34,094		$	35,050		$	67,067		$	69,566

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash from operations, and borrowings under ~~the~~our debt financing arrangements. We believe these sources will be sufficient to fund our planned operations and capital expenditures. See ~~Part I, Item 1, Financial Information - Notes~~Note 9 to ~~Unaudited~~the Consolidated Financial Statements ~~Note 12, Debt, and the 2015 10-K~~ for a more detailed discussion of our debt financing arrangements.

													Table M3: Net Change in Cash and Cash Equivalents
	For the Six Months Ended						For the Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	49,503		$	22,448		$	42,494		$	49,503
Net cash used in investing activities	(1,991		)	(1,704		)	(8,636		)	(1,991		)
Net cash used in financing activities	(46,990		)	(20,143		)	(29,863		)	(46,990		)
Effect of foreign exchange rates on cash and cash equivalents	475			(389		)	316			475
Net change in cash and cash equivalents	$	997		$	212		$	4,311		$	997

Net Cash Provided byBy Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2017 and 2016 was $42.5 million and $49.5 million, respectively. The decrease of $7.0 million in 2017 compared to ~~$22.4 million for the six months ended June 30, 2015. Higher cash flows from operating activities for the six months ended June 30,~~ 2016 ~~compared to the same period 2015, are~~was primarily ~~the result of~~driven by a ~~$25.4 million increase~~decrease in net ~~sales.~~income and a decrease in cash from changes in working capital.

Net Cash Used In Investing Activities

Net cash used in investing activities for the six months ended June 30, ~~2016~~2017 was ~~$2.0~~$8.6 million, compared to ~~$1.7~~$2.0 million for the six months ended June 30, ~~2015.~~2016. The investing activities for the six months ended June 30, ~~2016 and 2015~~2017 primarily reflect an aggregate of ~~$2.1~~$8.2 million ~~and $2.3 million, respectively,~~ in capital expenditures and software purchased or developed, ~~partially offset~~compared to $2.1 million for the six months ended June 30, 2016. The remaining increase is driven by distributions and contributions related to our equity investment in Seven Hills.

Net Cash Used In Financing Activities

Net cash used in financing activities for the six months ended June 30, ~~2016~~2017 was ~~$47.0~~$29.9 million, compared to ~~$20.1~~$47.0 million for the six months ended June 30, ~~2015.~~2016. During the six months ended June 30, ~~2016~~2017, we repriced the Amended and ~~June 30, 2015,~~Restated Credit Agreement, resulting in a net outflow of $0.6 million. See Note 9 to the ~~Company deployed $22.0~~Consolidated Financial Statements for a more detailed discussion of the repricing. We made principal payments on our outstanding debt of $1.4 million and ~~$20.0 million, respectively, to repurchase common stock. The Company also deployed~~ $25.0 million and $20.0 million during the six months ended June 30, 2016 and June 30, 2015, respectively, to make payments on its long-term debt. For the six months ended June 30, 2015, the Company received $19.9 million of capital contributions from Lone Star. No contributions were received for the six months ended June 30, ~~2016.~~2017 and 2016, respectively. We also deployed $27.8 million and $22.0 million during six months ended June 30, 2017 and 2016, respectively, to repurchase common stock.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires us to make estimates, judgments and assumptions that affect the reported

amounts of assets, liabilities, revenues and expenses during the periods presented. Our ~~2015~~2016 10-K includes a summary of the

critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no

changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities,

revenues or expenses during the six months ended June 30, ~~2016.~~2017.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking ~~statements.”~~statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements are included throughout this Quarterly Report on Form 10-Q, and relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity, capital resources and other financial and operating information. We have used the words "anticipate," "assume," "believe," "contemplate," "continue," "could," "estimate," "expect," "future," "intend," "may," "plan," "potential," "predict," "project," "seek," "should," "target," "will" and similar terms and phrases to identify forward-looking statements in this Quarterly Report on Form 10-Q. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including:

cyclicality in our markets, especially the new residential construction market;

the highly competitive nature of our industry and the substitutability of competitors’ products;

disruptions in our supply of synthetic gypsum due to regulatory changes or coal-fired power plants ceasing or reducing operations or switching to natural gas;

changes to environmental and safety laws and regulations requiring modifications to our manufacturing systems;

potential losses of customers;

changes in affordability of energy and transportation costs;

material disruptions at our facilities or the facilities of our suppliers;

disruptions to our supply of paperboard liner, including termination of the WestRock contract;

changes in, cost of compliance with or the failure or inability to comply with governmental laws and regulations, in particular environmental regulations;

our involvement in legal and regulatory proceedings;

our ability to attract and retain key management employees;

disruptions in our information technology systems;

labor disruptions;

seasonal nature of our business;

~~the effectiveness of our internal controls over financial reporting;~~

~~increased costs and demands on management as a public company;~~

~~our limited public company operating experience;~~ and

additional factors discussed under the sections captioned "Risk Factors," "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and ~~"Business."~~"Business" in our SEC filings.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. We believe that these factors include those described in ~~“Risk Factors.”~~the section captioned "Risk Factors" in the 2016 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates, commodity price risk associated with our input costs and counterparty risk. We use derivative instruments to manage selected commodity price and interest rate exposures.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our outstanding debt, and cash and cash equivalents. As of June 30, ~~2016,~~2017, we had ~~$15.7~~$55.8 million in cash and cash equivalents. The interest expense associated with ~~First Lien Term Loan~~the term loan and ~~any loans~~revolving credit facility under the ~~Revolver~~Amended and Restated Credit Agreement will vary with market rates.

Our exposure to market risk for changes in interest rates related to our outstanding debt is somewhat mitigated as the ~~First Lien Term Loan~~term loan under the Amended and ~~the Revolver have~~Restated Credit Agreement has a LIBOR floor of 1%0.75%. A rise of ~~current~~ interest rate levels ~~to above the 1% floor~~ would ~~be required to~~ increase our interest expense and a reduction in interest rates to the floor would ~~have no impact on~~decrease our interest ~~expense. As~~expense slightly as the LIBOR specified in the calculation of ~~June 30, 2016, we elected to use three month LIBOR with a rate of 0.66%.~~interest during the second quarter was slightly above the floor. A hypothetical 1%1.00% increase in interest rates would have increased interest expense by ~~$0.5~~approximately $0.4 million for the three months ended June 30, ~~2016.~~2017, while a hypothetical 1.00% decrease in interest rate would have decreased interest expense by $0.2 million. We based this sensitivity calculation on the three month LIBOR rate of 1.15% as of March 30, 2017 in accordance with the measurement date specified in the Amended and Restated Credit Agreement.

As of June 30, 2017, we had interest rate swaps with a combined notional amount of $100.0 million and a 3-year remaining term, which swapped the floating interest rate on a portion of the term loan under the Amended and Restated Credit Agreement to an average fixed rate of 1.323%. The fair value of these interest rate swaps was $1.5 million as of June 30, 2017.

The return on our cash equivalents balance was less than ~~one percent.~~1%. Therefore, ~~although~~if investment interest rates ~~may continue to~~ decrease in the future, the corresponding impact to our interest income, and likewise to our income and cash flow, would not be material.

Foreign Currency Risk

Approximately 5.8% and 7.1% of our net sales for the three and six months ended June 30, 2017, respectively, were in Canada, compared to 8.0% and 7.6% of our net sales for the three and six months ended June 30, 2016, ~~respectively, were in Canada, compared to 8.9% and 9.1% of our net sales for the three and six months ended June 30, 2015,~~ respectively. As a result, we are exposed to movements in foreign exchange rates between the U.S. dollar and Canadian dollar. We estimate that a 1% change in the exchange rate between the U.S. and Canadian currencies would impact net sales by approximately $0.1 million based on results for the three months ended June 30, ~~2016.~~2017. This may differ from actual results depending on the level of sales volumes in Canada. During the reported periods we did not use foreign currency hedges to manage this risk.

Commodity Price Risk

Some of our key production inputs, such as paper and natural gas, are commodities whose prices are determined by the market’s supply and demand for such products. Price fluctuations on our key input costs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected by factors such as global economic conditions, changes in or disruptions to industry production capacity, changes in inventory levels and other factors beyond our control. As of June 30, ~~2016,~~2017, the Company ~~has three~~had natural gas swap contracts for a portion of natural gas usage. The contracts mature between July 31, ~~2016, August~~2017 and July 31, ~~2016 and October 31, 2016.~~2018. Other than the natural gas swap contracts described above, we did not manage commodity price risk with derivative instruments. We may in the future enter into derivative financial instruments from time to time to manage our exposure related to these market risks.

Counterparty Risk

The Company is exposed to credit losses in the event of nonperformance by the counterparties to the Company’s derivative instruments. All of the Company’s counterparties have investment grade credit ratings; accordingly, the Company anticipates that the counterparties will be able to fully satisfy their obligations under the contracts. The Company’s agreements outline the conditions upon which it or the counterparties are required to post collateral. As of June 30, ~~2016,~~2017, the Company had no collateral posted with its counterparties related to the derivatives.

Seasonality

Sales of our wallboard products are seasonal, similar to many building products, in that sales are generally slightly higher from spring through autumn when construction activity is greatest in our markets.

Item 4. ~~Controls and Procedures~~CONTROLS AND PROCEDURES

Management's Evaluation of Disclosure Controls and Procedures.

~~Management~~ The Company's management carried out anthe evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act), required by paragraph (b) of Exchange Act Rules 13a-15, under the supervision and with the participation of the ~~Company’s~~Company's Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, the Company's Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act of 1934, as amended (the "Exchange Act")) as of June 30, 2016. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the ~~Company’s~~Company's disclosure controls and procedures were effective as of June 30, ~~2016.~~2017.

Changes in Internal Control Over Financial Reporting. There were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Limitations in Control Systems.The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of their inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

~~Changes in Internal Control Over Financial Reporting.~~

There were no changes in CBP’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, CBP’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we have been, and may in the future become involved in, litigation or other legal proceedings relating to claims arising in the normal course of business. In the opinion of management, there are no pending or threatened legal proceedings which would reasonably be expected to have a material adverse effect on our business or results of operations. We may become involved in material legal proceedings in the future.

~~For~~See Note 16 to the Consolidated Financial Statements for a description of certain legal ~~proceedings, see Part I, Item 1, Financial Information - Notes to Unaudited Consolidated Financial Statements, Note 9, Commitments and Contingencies.~~proceedings.

Item 1A. Risk Factors

There were no material changes during the three months ended June 30, ~~2016~~2017 to the risk factors previously disclosed in the ~~2015~~2016 Form ~~10-K filed with the Securities and Exchange Commission on February 23, 2016.~~10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


~~(a)~~	~~None.~~


~~(b)~~	~~None.~~

~~(c)~~

On November 4, 2015, the Company announced that the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $50.0 million of its common stock, at such times and prices as determined by management as market conditions warrant, through December 31, 2016. On August 3, 2016, the Company announced the Board of Directors has authorized an expansion of its stock repurchase program from up to $50 million to up to $100 million. The program has also been extended from the end of 2016 to the end of 2017.

(a) None

(b) None

(c) On November 4, 2015, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $50 million of our common stock, at such times and prices as determined by management as market conditions warrant, through December 31, 2016. On August 3, 2016, our Board of Directors increased the aggregate authorization from up to $50 million to up to $100 million and extended the expiration date to December 31, 2017. On February 21, 2017, the Board of Directors approved a further expansion of our stock repurchase program, increasing the total amount of our common stock we are authorized to repurchase from $100 million to $200 million and extended the expiration date to December 31, 2018.

Common Stock Repurchase Activity During the Three Months Ended June 30, 2016
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs Maximum Dollar Value That May Yet Be Purchased Under the Plans or Programs (a)
April 1 - April 30, 2016 —
$ —
—
$ 24,529,896
May 1 - May 31, 2016 133,280
21.46
133,280
21,669,845
June 1 - June 30, 2016 98,700
21.52
98,700
19,546,317
Total 231,980
$ 21.48
231,980



Common Stock Repurchase Activity During the Three Months Ended June 30, 2017
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Plans or Programs	Maximum Dollar Value That May Yet Be Purchased Under the Plans or Programs
April 1 - April 30, 2017	269,000	$	24.09	269,000	$	139,560,885
May 1 - May 31, 2017	301,500	24.41		301,500	132,202,100
June 1 - June 30, 2017	361,500	24.23		361,500	123,442,794
Total	932,000	$	24.25	932,000


~~(a)~~	These amounts represent the remaining maximum dollar value that may yet be purchased under the $50.0 million board approval, and based on the August 3, 2016 board approval an additional $50.0 million is available.

Item 3. Defaults Upon Senior Securities

(a) None.

(b) None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a) None.

(b) None.

Item 6. Exhibits



Exhibit No.	Description of Exhibit

10.1#	Continental Building Products, Inc. Amended and Restated 2014 Stock Incentive Plan.	*

10.2#	Form of Grant Notice for 2014 Stock Incentive Plan Performance-Based Restricted Stock Units.	*

10.3#	Form of Grant Notice for 2014 Stock Incentive Plan Restricted Stock Units.	*

10.4#	Continental Building Products, Inc. Amended and Restated Executive Severance and Change in Control Plan.	*

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*

101.INS	XBRL Instance Document.	*

101.SCH	XBRL Taxonomy Extension Schema Document.	*

101.CAL	XBRL Taxonomy Calculation Linkbase Document.	*

101.DEF	XBRL Taxonomy Definition Linkbase Document.	*

101.LAB	XBRL Taxonomy Label Linkbase Document.	*

101.PRE	XBRL Taxonomy Presentation Linkbase Document.	*



*		Filed herewith.
#		Denotes management compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~registrant~~Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



CONTINENTAL BUILDING PRODUCTS, INC.
~~(Registrant)~~

	/s/ James Bachmann	August 4, ~~2016~~2017
By:	James Bachmann
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ Dennis Schemm	August 4, ~~2016~~2017
By:	Dennis Schemm
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

2930



F15: Treasury Stock Activity
	June 30, 2016					June 30, 2015
	Shares	Amount (a)		Average Share Price (a)		Shares	Amount (a)		Average Share Price (a)
	(in thousands, except share data)
For the Three Months Ended:
Beginning Balance	3,446,208	$	65,505	$	19.0079	2,164	$	37	$	17.2000
Repurchases on open market	231,980	4,984		21.4828		—	—		—
Repurchase from LSF8 in private transaction	—	—		—		913,200	19,999		21.9000
Ending Balance	3,678,188	$	70,489	$	19.1640	915,364	$	20,036	$	21.8889

For the Six Months Ended:
Beginning Balance	2,395,049	$	48,479	$	20.2411	—	$	—	$	—
Repurchases on open market	383,139	7,520		19.6282		2,164	37		17.2000
Repurchase from LSF8 in private transaction	900,000	14,490		16.1000		913,200	19,999		21.9000
Ending Balance	3,678,188	$	70,489	$	19.1640	915,364	$	20,036	$	21.8889

(a) Includes commissions paid for repurchases on open market