As filed with the Securities and Exchange Commission on ~~November 8, 2016~~May 5, 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 ~~September 30, 2016~~March 31, 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 ~~November 2, 2016,~~May 3, 2017, the registrant had outstanding ~~39,992,339~~39,220,934 shares of the registrant’s common stock, which amount excludes ~~4,199,031~~5,027,778 shares of common stock held by the registrant as treasury shares.

Table of Contents to ~~Third~~First 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~~	12
	~~11. Investment in Seven Hills~~	12
	~~12. Debt~~Derivative Instruments	13
	11. Treasury Stock	14
	12. Share-Based Compensation	14
	13. ~~Derivative Instruments~~Accumulated Other Comprehensive Loss	15
	14. ~~Segment Reporting~~Income Taxes	15
	15. Earnings Per Share	15
	16. Commitments and Contingencies	16
	~~15. Treasury Stock~~17. Segment Reporting	17
	~~16. Share-Based Compensation~~	18
	~~17. Earnings Per Share~~	18
	18. Fair Value Disclosures	1918
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2019
	Overview	2019
	Results of Operations	2120
	Non-GAAP Measures	2321
	Liquidity and Capital Resources	2422
	Critical Accounting Policies and Estimates	2422
	Forward-Looking Statements	2523
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2624
Item 4.	Controls and Procedures	2725
Part II - Other Information		2826
Item 1.	Legal Proceedings	2826
Item 1A.	Risk Factors	2826
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2826
Item 3.	Defaults Upon Senior Securities	2826
Item 4.	Mine Safety Disclosures	2826
Item 5.	Other Information	2826
Item 6.	Exhibits	2927
	Signatures	3028

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Continental Building Products, Inc.

Consolidated Statements of Operations

(unaudited)


	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			March 31, 2017			March 31, 2016
	(in thousands, except share data and per share amounts)												(in thousands, except share data and per share amounts)
Net sales	$	114,558		$	108,150		$	343,158		$	311,322		$	120,615		$	111,485
Costs, expenses and other income:
Cost of goods sold	86,756			78,151			250,455			231,342			89,624			79,955
Selling and administrative	9,241			9,008			28,364			26,799			9,304			8,960
Long Term Incentive Plan funded by Lone Star	—			9,933			—			29,946
Total costs and operating expenses	95,997			97,092			278,819			288,087			98,928			88,915
Operating income	18,561			11,058			64,339			23,235			21,687			22,570
Other expense, net	(5,900		)	(283		)	(5,740		)	(700		)
Other (expense)/income, net													(644		)	154
Interest expense, net	(3,146		)	(4,154		)	(10,492		)	(12,559		)	(2,916		)	(3,698		)
Income before losses from equity method investment and provision for income tax	9,515			6,621			48,107			9,976			18,127			19,026
Losses from equity method investment	(291		)	(278		)	(726		)	(530		)	(170		)	(195		)
Income before provision for income taxes	9,224			6,343			47,381			9,446			17,957			18,831
Provision for income taxes	(3,014		)	(2,104		)	(15,948		)	(3,313		)	(5,730		)	(6,330		)
Net income	$	6,210		$	4,239		$	31,433		$	6,133		$	12,227		$	12,501

Net income per share:
Basic	$	0.15		$	0.10		$	0.77		$	0.14		$	0.31		$	0.30
Diluted	$	0.15		$	0.10		$	0.77		$	0.14		$	0.31		$	0.30
Weighted average shares outstanding:
Basic	40,318,741			42,999,654			40,836,000			43,556,876			39,576,268			41,524,294
Diluted	40,388,185			43,057,749			40,879,809			43,596,978			39,702,126			41,539,767

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 Nine Months Ended					For the Three Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016		September 30, 2015			March 31, 2017		March 31, 2016
	(in thousands)											(in thousands)
Net income	$	6,210		$	4,239		$	31,433	$	6,133		$	12,227	$	12,501
Foreign currency translation adjustment	(239		)	(1,430		)	884		(2,568		)	124		1,107
Net unrealized gain on derivatives, net of tax	(107		)	292			54		790
Other comprehensive (loss)/income	(346		)	(1,138		)	938		(1,778		)
Net unrealized gains/(losses) on derivatives, net of tax												20		(175		)
Other comprehensive income												144		932
Comprehensive income	$	5,864		$	3,101		$	32,371	$	4,355		$	12,371	$	13,433

See accompanying notes to unaudited consolidated financial statements.

Continental Building Products, Inc.

Consolidated Balance Sheets


	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Assets:
Cash and cash equivalents	$	34,758		$	14,729		$	57,908		$	51,536
Receivables, net	34,531			35,812			41,729			32,473
Inventories	26,965			27,080
Inventories, net							26,534			25,239
Prepaid and other current assets	3,090			6,448			5,522			7,485
Total current assets	99,344			84,069			131,693			116,733
Property, plant and equipment, net	307,443			326,407			303,507			307,838
Customer relationships and other intangibles, net	85,105			94,835			78,405			81,555
Goodwill	119,945			119,945			119,945			119,945
Equity method investment	8,297			9,262			8,160			8,020
Debt issuance costs	704			450			613			658
Total Assets	$	620,838		$	634,968		$	642,323		$	634,749
Liabilities and Shareholders' Equity:
Liabilities:
Accounts payable	$	27,190		$	22,788		$	27,525		$	27,411
Accrued and other liabilities	12,626			12,334			12,385			12,321
Notes payable, current portion	1,746			—			1,727			1,742
Total current liabilities	41,562			35,122			41,637			41,474
Deferred taxes and other long-term liabilities	12,466			12,537			19,610			19,643
Notes payable, non-current portion	265,053			286,543			264,203			264,620
Total Liabilities	319,081			334,202			325,450			325,737
Equity:
Undesignated preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding at September 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 September 30, 2016 and December 31, 2015, respectively; 39,992,339 and 41,750,031 shares outstanding at September 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 March 31, 2017 and December 31, 2016							—			—
Common stock, $0.001 par value per share; 190,000,000 shares authorized; 44,248,712 and 44,191,370 shares issued at March 31, 2017 and December 31, 2016, respectively; 39,531,934 and 39,691,715 shares outstanding at March 31, 2017 and December 31, 2016, respectively							44			44
Additional paid-in capital	321,865			319,817			323,111			322,384
Less: Treasury stock	(81,906		)	(48,479		)	(93,993		)	(88,756		)
Accumulated other comprehensive loss	(4,403		)	(5,341		)	(3,265		)	(3,409		)
Accumulated earnings	66,157			34,725			90,976			78,749
Total Equity	301,757			300,766			316,873			309,012
Total Liabilities and Equity	$	620,838		$	634,968		$	642,323		$	634,749

See accompanying notes to unaudited consolidated financial statements.

Continental Building Products, Inc.

Consolidated Statements of Cash Flows

(unaudited)


	For the Nine Months Ended						For the Three Months Ended
	September 30, 2016			September 30, 2015			March 31, 2017			March 31, 2016
	(in thousands)						(in thousands)
Cash flows from operating activities:
Net income	$	31,433		$	6,133		$	12,227		$	12,501
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,656			38,931			11,286			11,946
Bad debt expense/(recovery)	15			(250		)
Bad debt expense							139			53
Amortization of debt issuance costs and debt discount	1,651			1,742			291			572
Loss on disposal of property, plant and equipment	41			—			13			7
Losses from equity method investment	726			530			170			195
Loss on debt extinguishment	5,802			—			686			—
Stock-based compensation	1,769			730			724			346
Deferred taxes	340			(491		)	92			92
Change in assets and liabilities:
Receivables	1,303			2,654			(9,462		)	(7,602		)
Inventories	242			(2,401		)	(1,279		)	1,941
Prepaid expenses and other current assets	3,147			1,178			1,994			705
Accounts payable	2,942			1,955			1,714			(2,750		)
Accrued and other current liabilities	502			275			87			(984		)
Other long term liabilities	(477		)	(142		)	(146		)	(181		)
Net cash provided by operating activities	85,092			50,844			18,536			16,841
Cash flows from investing activities:
Capital expenditures	(4,797		)	(2,851		)	(5,359		)	(101		)
Software purchased or developed	(386		)	(880		)	(1		)	(166		)
Capital contributions to equity method investment	(259		)	(4		)	(524		)	(97		)
Distributions from equity method investment	498			797			214			142
Net cash used in investing activities	(4,944		)	(2,938		)	(5,670		)	(222		)
Cash flows from financing activities:
Capital contribution from Lone Star Funds	—			29,750
Proceeds from exercise of stock options							168			13
Tax withholdings on share-based compensation							(209		)	—
Proceeds from debt refinancing	275,000			—			273,625			—
Disbursements for debt refinancing	(271,988		)	—			(273,625		)	—
Payments of financing costs	(4,424		)	—			(649		)	—
Proceeds from exercise of stock options	20			—
Principal payments for First Lien Credit Agreement	(25,688		)	(35,000		)
Principal payments for debt							(684		)	(10,000		)
Payments to repurchase common stock	(33,427		)	(40,035		)	(5,237		)	(17,026		)
Net cash used in financing activities	(60,507		)	(45,285		)	(6,611		)	(27,013		)
Effect of foreign exchange rates on cash and cash equivalents	388			(990		)	117			487
Net change in cash and cash equivalents	20,029			1,631			6,372			(9,907		)
Cash, beginning of period	14,729			15,627			51,536			14,729
Cash, end of period	$	34,758		$	17,258		$	57,908		$	4,822

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 Three Months Ended
	March 31, 2017		March 31, 2016
	(in thousands)
Cash paid during the period for:
Interest paid on term loan	$	2,457	$	3,003
Income taxes paid, net	216		3,554
Non-cash activity:
Amounts in accounts payable for capital expenditures	915		877


(d)	Recent Accounting Pronouncements

Recent Adopted Accounting Pronouncements

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.~~

~~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 itsour consolidated financial ~~statements and disclosures.~~statements.

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 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 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 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.

Recent Accounting Pronouncement 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. We will adopt the standard on January 1, 2018. We have identified a project implementation team and have identified our revenue streams. We are in the process of evaluating the various aspects of the standard and how the standard may impact how we recognize revenue. We are also evaluating the potential impact that the new guidance will have on our footnotes to the financial statements. While we have not completed our analysis, we do not anticipate that the new guidance will have a material impact on the Company's revenue accounting.

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 3.1: Detail of Receivables, Net							Table 3.1: Detail of Receivables, Net
	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
	(in thousands)						(in thousands)
Trade receivables, gross	$	35,352		$	37,800		$	42,656		$	33,199
Allowance for cash discounts and doubtful accounts	(821		)	(1,988		)	(927		)	(726		)
Receivables, net	$	34,531		$	35,812		$	41,729		$	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: Composition of Inventories					Table 4: Composition of Inventories
	September 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016
	(in thousands)				(in thousands)
Finished products	$	7,158	$	5,454	$	6,468	$	7,246
Raw materials	12,662		14,557		12,953		10,910
Supplies and other	7,145		7,069		7,113		7,083
Inventories	$	26,965	$	27,080
Inventories, net					$	26,534	$	25,239

5. PROPERTY, PLANT AND EQUIPMENT, NET


F5: Property, Plant and Equipment Details
Table 5: Property, Plant and Equipment Details							Table 5: Property, Plant and Equipment Details
	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
	(in thousands)						(in thousands)
Land	$	12,926		$	12,925		$	12,925		$	12,925
Buildings	112,589			112,121			112,625			112,583
Plant machinery	273,662			272,613			280,819			275,010
Mobile equipment	6,008			3,837			9,790			6,721
Construction in progress	8,832			6,812			9,410			15,016
Property, plant and equipment, at cost	414,017			408,308			425,569			422,255
Accumulated depreciation	(106,574		)	(81,901		)	(122,062		)	(114,417		)
Total property, plant and equipment, net	$	307,443		$	326,407
Property, plant and equipment, net							$	303,507		$	307,838

Depreciation expense was ~~$8.5~~$8.1 million and ~~$25.2~~$8.4 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, ~~respectively, compared to $8.7 million and $26.5 million for the three and nine months ended September 30, 2015,~~ respectively.

6. CUSTOMER RELATIONSHIPS AND OTHER INTANGIBLES, NET

F6: Details of Customer Relationships and Other Intangibles, Net
September 30, 2016 December 31, 2015
(in thousands)
Customer relationships $ 116,410
$ 116,073
Purchased and internally developed software 5,688
5,284
Trademarks 14,801
14,759
Customer relationships and other intangibles, at cost 136,899
136,116
Accumulated amortization (51,794 ) (41,281 )
Customer relationships and other intangibles, net $ 85,105
$ 94,835



Table 6.1: Details of Customer Relationships and Other Intangibles, Net
	March 31, 2017							December 31, 2016
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(in thousands)
Customer relationships	$	116,320	$	(50,707	)	$	65,613	$	116,267	$	(48,243	)	$	68,024
Purchased and internally developed software	5,322		(3,787		)	1,535		5,322		(3,289		)	2,033
Trademarks	14,790		(3,533		)	11,257		14,783		(3,285		)	11,498
Total	$	136,432	$	(58,027	)	$	78,405	$	136,372	$	(54,817	)	$	81,555

Amortization expense was ~~$3.4~~$3.2 million and ~~$10.4~~$3.5 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, ~~respectively, compared to $4.0 million and $12.4 million for the three and nine months ended September 30, 2015,~~ respectively.

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 intangible asset. Trademarks are amortized 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 $1.2 million for the three and nine months ended September 30, 2016, respectively, compared to $0.4 million and $1.1 million for the three and nine months ended September 30, 2015.

~~7. ACCRUED AND OTHER LIABILITIES~~

F7: Details of Accrued and Other Liabilities
September 30, 2016 December 31, 2015
(in thousands)
Employee-related costs $ 7,342
$ 7,621
Income taxes 826
2,482
Other taxes 3,472
1,390
Other 986
841
Accrued and other liabilities $ 12,626
$ 12,334

~~8. INCOME TAXES~~

The Company’s annual estimated effective tax rate is approximately 33.8%. 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.



Table 6.2: Future Amortization Expense of Customer Relationships and Other Intangibles
	As of March 31, 2017
	(in thousands)
April 1, 2017 through December 31, 2017	$	8,790
2018	9,448
2019	8,399
2020	7,612
2021	7,016
Thereafter	37,140
Total	$	78,405

~~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 nine months ended September 30, 2016 was $1.0 million and $3.1 million, respectively, compared to $1.2 million and $3.3 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 $16.4 million and $49.5 million for the three and nine months ended September 30, 2016, respectively, compared to $17.6 million and $50.4 million for the three and nine months ended September 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)
October 1, 2016 through December 31, 2016 $ 363
$ 15,264
2017 1,183
31,292
2018 616
29,463
2019 1,494
19,870
2020 —
14,185
2021 —
3,232
Thereafter —
27,173
Total $ 3,656
$ 140,479

Under certain circumstances, the Company provides letters of credit related to its natural gas and other supply purchases. As of September 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. In September 2016 the Court denied the plaintiffs' motion to Certify Order to Interlocutory appeal, and, based on the Court's order dismissing the case against the Company, the plaintiffs and the Company executed a joint stipulation dismissing the case against the Company, with prejudice. The dismissal of the case against Continental does not limit or restrict the right of the plaintiffs eventually to appeal the Court's order dismissing the case. 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 cooperated fully with the Department of Justice in responding to the subpoena. In September of 2016, the Department of Justice advised the Company that the Company has no further obligations under the subpoena and that nothing further is required from the Company with respect 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.

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 September 30, 2016 and December 31, 2015, 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.

~~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 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 ~~$11.1~~$12.0 million and ~~$34.0~~$11.8 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, ~~respectively, compared to $11.8 million and $34.2 million for the three and nine months ended September 30, 2015,~~ respectively. As of ~~September 30, 2016,~~March 31, 2017, the Company had certain purchase commitments for paper totaling ~~$33.0~~$39.0 million through ~~2019.~~2020.

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



Table 8: Details of Accrued and Other Liabilities
	March 31, 2017		December 31, 2016
	(in thousands)
Employee-related costs	$	3,273	$	9,595
Income taxes	5,245		—
Other taxes	2,975		2,088
Other	892		638
Accrued and other liabilities	$	12,385	$	12,321

9. DEBT


F12.1: Details of Debt
Table 9.1: Details of Debt							Table 9.1: Details of Debt
	September 30, 2016			December 31, 2015			March 31, 2017			December 31, 2016
	(in thousands)						(in thousands)
First Lien Credit Agreement (a)	$	274,313		$	296,988		$	272,941		$	273,625
Less: Original issue discount (net of amortization)	(2,014		)	(2,372		)	(1,877		)	(1,946		)
Less: Debt issuance costs	(5,500		)	(8,073		)	(5,134		)	(5,317		)
Total debt	266,799			286,543			265,930			266,362
Less: Current portion of long-term debt	(1,746		)	—			(1,727		)	(1,742		)
Long-term debt	$	265,053		$	286,543		$	264,203		$	264,620
(a) As of September 30, 2016, the First Lien Credit Agreement, as amended and restated, had a maturity date of August 18, 2023 and an interest rate of LIBOR (with a 0.75% floor) plus 2.75%, compared to as of December 31, 2015, at which time the First Lien Credit Agreement had a maturity date of August 28, 2020 and an interest rate of LIBOR (with a 1.00% floor) plus 3.00%. The First Lien Credit Agreement was amended and restated in August 2016 as discussed below.


(a)	As of March 31, 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 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 was floating. The margin applicable to the borrowing was reduced in the third quarter 2014 to 3.00% after the Company achieved a B2 rating with a stable outlook by Moody’s.

On August 18, 2016, the Company, ~~Opco~~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 Statement of Operations, and $2.2 million will 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 Other expense, net on the Consolidated Statement of Operations.

Interest under the First Lien Credit Agreement was 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. 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. The interest rate under the Amended and Restated Credit Agreement ~~remains~~remained floating ~~with~~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 Statement 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 ~~nine~~three months ended ~~September 30, 2016 and 2015,~~March 31, 2017, the Company ~~pre-paid $25.7 million and $35.0 million, respectively,~~made no voluntary prepayment of principal, ~~payments.~~compared to $10.0 million of voluntary prepayments in the same period 2016. As of ~~September 30, 2016,~~March 31, 2017, the annual effective interest rate on the Amended and Restated Credit Agreement, including original issue discount and amortization of debt issuance costs, was 4.0%.

There were no amounts outstanding under the ~~Company's revolving credit facility~~Revolver as of ~~September 30, 2016~~March 31, 2017 or December 31, ~~2015.~~2016. During the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017 the Company ~~borrowed and repaid in full $22.0 million~~did not have any draws under the ~~applicable revolving credit facility,~~Revolver, compared to ~~$10.0~~$5.0 million which the Company borrowed and repaid in ~~full during~~ the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016 under the applicable revolving credit facility. Interest under the ~~revolving credit facility under the Amended and Restated Credit Agreement (the "Revolver")~~Revolver is floating, based on ~~LIBOR)~~LIBOR plus 225 basis points. In addition, 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 ~~September 30, 2016,~~March 31, 2017, based on draws and outstanding letters of credit and absence of violations of covenants, was ~~$72.9~~$73.4 million.

Total interest paid for the three and nine months ended September 30, 2016 was $2.6 million and $8.5 million, respectively, compared to $3.4 million and $10.3 million for the three and nine months ended September 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	$	688
2017	2,750
April 1, 2017 through December 31, 2017			$	2,052
2018	2,750		2,736
2019	2,750		2,736
2020	2,750		2,736
2021			2,736
Thereafter	262,625		259,945
Total Payments			$	272,941

Under the terms of the 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 $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 $22.5 million at ~~September 30, 2016,~~March 31, 2017, the total leverage ratio of no greater than 5.0 ~~per~~under the financial covenant was not applicable at ~~September 30, 2016.~~March 31, 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 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 ~~September 30, 2016,~~March 31, 2017, the Company had ~~630~~1,180 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 ~~March~~October 31, 2017. 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 ~~loss~~gain that remained in accumulated other comprehensive loss as of ~~September 30, 2016~~March 31, 2017 was ~~$12,000~~$0.2 million which is net of a tax amount of ~~$6,000.~~$0.1 million. No ineffectiveness was recorded on these contracts during the three months ended ~~September 30, 2016 and 2015.~~March 31, 2017. The Company reassesses the probability of the underlying forecasted transactions occurring on a quarterly basis.

For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, approximately ~~$0.2 million~~$60,000 of ~~losses,~~loss, net of ~~$59,000~~$29,000 of tax, ~~benefit and $0.1 million of gains, net of $25,000 of tax expense, respectively, were~~was recognized in other comprehensive income for the commodity contracts. For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, the amount of ~~loss~~gain reclassified from accumulated other comprehensive ~~income~~loss into income was ~~$0.1 million and~~$6,000. As of March 31, 2017, there was $0.3 million ~~respectively. As of September 30, 2016, there was $45,000~~ recorded in other current ~~liabilities~~assets and ~~$27,000 recorded in other current assets. As of December 31, 2015, $0.3 million~~$17,000 was recorded in other current ~~liabilities and $0.2~~liabilities. As of December 31, 2016, $0.4 million was recorded in other current assets.

Interest Rate Derivative Instrument

The Company had an interest rate cap on three month U.S. Dollar LIBOR of 2% for a portion of the principal amount outstanding under the First Lien Credit Agreement that expired March 31, 2016. The hedge was being accounted for as a cash flow hedge. Changes in the time value of the interest rate cap are reflected directly in earnings through “other expense, net” in non-operating income. The Company recorded nominal amounts in the three months ended March 31, 2016 and the nine months ended September 30, 2015.

In September 2016, the Company entered into interest rate swap agreements for a combined notional amount of $100.0 million with a term of 4four years, which ~~swapped~~hedged the floating LIBOR on a portion of the term loan under the Amended and Restated Credit Agreement to an average fixed rate of 1.323% and LIBOR floor of 0.75%. The Company elected to designate these interest rate swaps as cash flow hedges for accounting purposes. The net unrealized gain that remained in accumulated other comprehensive loss as of ~~September 30, 2016~~March 31, 2017 was ~~$8,000~~$1.3 million which is net of a tax amount of ~~$4,000.~~$0.7 million. For ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, the amount of loss reclassified from accumulated other comprehensive loss into income was $0.1 million. For the three months ended March 31, 2017, approximately ~~$8,000~~$80,000 of gains, net of of tax expense of ~~$4,000 were~~$51,000 was recognized in other comprehensive income for the interest rate ~~contracts.~~swaps. As of ~~September 30, 2016,~~March 31, 2017, there was ~~$0.1~~$1.9 million recorded in other current ~~liabilities and $0.1 million~~assets. No ineffectiveness was recorded ~~in other current assets.~~on these contracts during the three months ended March 31, 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 ~~September 30, 2016,~~March 31, 2017, the Company’s derivatives were in a ~~$6,000~~$2.2 million net ~~liability~~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 ~~September 30, 2016,~~March 31, 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 our share repurchase program up to a total of $200 million of our 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
	March 31, 2017					March 31, 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	4,499,655	$	88,756	$	19.73	2,395,049	$	48,479	$	20.24
Repurchases on open market	217,123	5,237		24.12		151,159	2,536		16.78
Repurchase from LSF8 in private transaction	—	—		—		900,000	14,490		16.10
Ending Balance	4,716,778	$	93,993	$	19.93	3,446,208	$	65,505	$	19.01

(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 February 22, 2017, the Company granted certain employees 79,638 Restricted Share Units ("RSUs") that vest ratably over four years and for certain members of the Board of Directors 16,105 RSUs that vest one year from the grant date. All of these grants had a market price on the date of grant of $23.70. Additionally, on March 21, 2017, the Company granted a certain employee and member of the board of directors 279 RSUs and 2,501 RSUs, respectively that vest ratably over a period of four years for the employee and one year from the grant date for the member of the Board of Directors and had a market price on the date of grant of $25.75.

On February 22, 2017, the Company also granted certain employees 47,505 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 date of grant of $23.70.

For the three months ended March 31, 2017 and 2016, the Company recognized $0.7 million and $0.3 million in expenses, respectively, related to share-based compensation awards which were recorded in selling and administrative expenses. As of March 31, 2017, there was $6.7 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 2.6 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 before reclassifications	124			(68		)	56
Amounts reclassified from AOCI	—			88			88
Net current-period other comprehensive income	124			20			144
Balance as of March 31, 2017	$	(4,654	)	$	1,389		$	(3,265	)

14. INCOME TAXES

The Company’s annual estimated effective tax rate is approximately 33.6%. 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. Potential dilutive common stock has no effect on income available to common stockholders. For the three months ended March 31, 2017 and 2016, respectively, approximately, 84,456 and 154,637 share-based compensation awards were excluded from the weighted average shares outstanding because their impact would be anti-dilutive in the computation of dilutive earnings per share.



Table 15: Basic and Dilutive Earnings Per Share
	For the Three Months Ended
	March 31, 2017		March 31, 2016
	(dollars in thousands, except for per share amounts)
Net income	$	12,227	$	12,501

Weighted average number of shares outstanding- basic	39,576,268		41,524,294
Effect of dilutive securities:
Restricted stock awards	10,061		7,022
Restricted stock units	74,349		6,482
Performance restricted stock units	16,523		—
Stock options	24,925		1,969
Total effect of dilutive securities	125,858		15,473
Weighted average number of shares outstanding - diluted	39,702,126		41,539,767

Basic earnings per share	$	0.31	$	0.30
Diluted earnings per share	$	0.31	$	0.30

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 months ended March 31, 2017 and 2016 was $0.8 million and $1.0 million, 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 $17.6 million and $17.5 million for the three months ended March 31, 2017 and 2016.



Table 16: Future Minimum Lease Payments Due Under Noncancellable Operating Leases and Purchase Commitments
	Future Minimum Lease Payments		Purchase Commitments
	(in thousands)
April 1, 2017 through December 31, 2017	$	902	$	25,693
2018	616		26,500
2019	1,494		26,593
2020	—		17,379
2021	—		5,237
Thereafter	—		64,256
Total	$	3,012	$	165,658

Contingent obligations

Under certain circumstances, the Company provides letters of credit related to its natural gas and other supply purchases. As of March 31, 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 March 31, 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%~~96.6% and ~~96.9%~~96.5% of the Company's revenues for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, ~~respectively, compared to 96.7% and 96.7% of the Company’s revenues for the three and nine months ended September 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 Nine Months Ended						For the Three Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			March 31, 2017			March 31, 2016
	(in thousands)												(in thousands)
Net Sales:
Wallboard	$	111,322		$	104,624		$	332,514		$	300,936		$	116,476		$	107,599
Other	3,236			3,526			10,644			10,386			4,139			3,886
Total net sales	114,558			108,150			343,158			311,322			120,615			111,485
Operating income:
Wallboard	18,572			11,122			64,192			23,318			21,592			22,404
Other	(11		)	(64		)	147			(83		)	95			166
Total operating income	18,561			11,058			64,339			23,235			21,687			22,570
Adjustments:
Interest expense	(3,146		)	(4,154		)	(10,492		)	(12,559		)	(2,916		)	(3,698		)
Loss from equity investment	(291		)	(278		)	(726		)	(530		)	(170		)	(195		)
Other expense, net	(5,900		)	(283		)	(5,740		)	(700		)
Other (expense)/income, net													(644		)	154
Income before provision for income taxes	9,224			6,343			47,381			9,446			17,957			18,831
Depreciation and Amortization:
Wallboard	11,595			12,376			34,836			38,058			11,022			11,674
Other	273			285			820			873			264			272
Total depreciation and amortization	$	11,868		$	12,661		$	35,656		$	38,931		$	11,286		$	11,946


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 Nine Months Ended				For the Three Months Ended
	September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015		March 31, 2017		March 31, 2016
	(in thousands)								(in thousands)
United States	$	104,704	$	99,956	$	316,040	$	284,707	$	110,386	$	103,642
Canada	9,854		8,194		27,118		26,615		10,229		7,843
Net sales	$	114,558	$	108,150	$	343,158	$	311,322	$	120,615	$	111,485


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
	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
	(in thousands)								(in thousands)
United States	$	304,352	$	323,361	$	601,906	$	617,878	$	300,342	$	304,807	$	623,625	$	617,050
Canada	3,091		3,046		18,932		17,090		3,165		3,031		18,698		17,699
Total	$	307,443	$	326,407	$	620,838	$	634,968	$	303,507	$	307,838	$	642,323	$	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 had approved an expansion of its stock repurchase program by $50.0 million, increasing the aggregate authorization from up to $50.0 million to up to $100.0 million. The program was also 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
September 30, 2016 September 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 3,678,188
$ 70,489
$ 19.16
915,364
$ 20,036
$ 21.89
Repurchases on open market 520,843
11,417
21.92
—
—
—
Repurchase from LSF8 in private transaction —
—
—
1,007,500
19,999
19.85
Ending Balance 4,199,031
$ 81,906
$ 19.51
1,922,864
$ 40,035
$ 20.82

For the Nine Months Ended:
Beginning Balance 2,395,049
$ 48,479
$ 20.24
—
$ —
$ —
Repurchases on open market 903,982
18,937
20.95
2,164
37
17.20
Repurchase from LSF8 in private transaction 900,000
14,490
16.10
1,920,700
39,998
20.82
Ending Balance 4,199,031
$ 81,906
$ 19.51
1,922,864
$ 40,035
$ 20.82

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

~~16. SHARE-BASED COMPENSATION~~

For the three and nine months ended September 30, 2016, the Company recognized share-based compensation expenses of $0.6 million and $1.8 million, respectively, compared to $0.2 million and $0.6 million for the three and nine months ended September 30, 2015, respectively.

~~17. EARNINGS PER SHARE~~

F17: Basic and Dilutive Earnings Per Share
For the Three Months Ended For the Nine Months Ended
September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
(dollars in thousands, except for per share amounts)
Net income $ 6,210
$ 4,239
$ 31,433
$ 6,133

Weighted average number of shares outstanding- basic 40,318,741
42,999,654
40,836,000
43,556,876
Effect of dilutive securities:
Restricted stock awards 9,926
12,547
8,132
11,489
Restricted stock units 41,575
9,828
24,384
1,056
Performance restricted stock units —
5,349
—
—
Stock options 17,943
30,371
11,293
27,557
Total effect of dilutive securities 69,444
58,095
43,809
40,102
Weighted average number of shares outstanding - diluted 40,388,185
43,057,749
40,879,809
43,596,978

Basic earnings per share $ 0.15
$ 0.10
$ 0.77
$ 0.14
Diluted earnings per share $ 0.15
$ 0.10
$ 0.77
$ 0.14

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 ~~September 30, 2016~~March 31, 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 ~~September 30, 2016~~March 31, 2017 that are recorded at fair value on a recurring basis are the natural gas hedges and interest rate swaps. The natural gas hedges had a ~~negative~~positive fair value of ~~$12,000~~$0.2 million as of ~~September 30, 2016,~~March 31, 2017, net of tax amount of ~~$6,000,~~$0.1 million, compared to a ~~negative~~positive fair value of ~~$0.1~~0.2 million, net of tax amount of ~~$30,000~~$0.1 million as of December 31, ~~2015.~~2016. Interest rate swaps had a positive fair value of ~~$8,000~~$1.3 million as of ~~September 30,~~March 31, 2017, net of tax amount of $0.7 million, compared to a positive fair value of $1.2 million as of December 31, 2016, net of tax amount of ~~less than $4,000.~~$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%~~96.6% and 96.5% of our net sales ~~in both~~for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, ~~respectively, compared to 97% for both the three and nine months ended September 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 segment.

Factors Affecting Our Results

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 ~~64% and 62%~~65% of our costs of goods sold for the three ~~and nine~~ months ended ~~September 30, 2016, respectively,~~March 31, 2017, compared to ~~61%~~63% for the ~~same periods in 2015.~~three months ended March 31, 2016. Depreciation and amortization represented ~~13% and 14%~~12% of our costs of goods sold for the three ~~and nine~~ months ended ~~September 30, 2016, respectively,~~March 31, 2017, compared to ~~16% of our costs of goods sold~~14% for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2015.~~March 31, 2016. Distribution costs to deliver product to our customers represented the remaining portion of our costs of goods sold, or approximately 23% ~~and 24% of our costs of goods sold for the three and nine months ended September 30, 2016, respectively, compared to 23%~~ of our costs of goods sold for both the three ~~and nine~~ months ended ~~September 30, 2015, respectively.~~March 31, 2017 and 2016.

Variable manufacturing costs, including inputs such as paper, gypsum, natural gas, and other raw materials, represented ~~67% and 68%~~71% of our manufacturing cash costs for the three ~~and nine~~ months ended ~~September 30, 2016, respectively,~~March 31, 2017, compared to ~~69% and 67%~~68% for the ~~same periods in 2015, respectively.~~three months ended March 31, 2016. Fixed production costs excluding depreciation and amortization consisted of labor, maintenance, and other costs that represented ~~33% and 32%~~29% of our manufacturing cash costs for the three ~~and nine~~ months ended ~~September 30, 2016, respectively,~~March 31, 2017, compared to ~~31% and 33% of our manufacturing cash costs~~32% for the three ~~and nine~~ months ended ~~September 30, 2015, respectively.~~March 31, 2016.

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 Nine Months Ended						For the Three Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			March 31, 2017			March 31, 2016
	(dollars in thousands, except mill net)												(dollars in thousands, except mill net)
Net Sales	$	114,558		$	108,150		$	343,158		$	311,322		$	120,615		$	111,485
Costs, expenses and other income:
Cost of goods sold	86,756			78,151			250,455			231,342			89,624			79,955
Selling and administrative	9,241			9,008			28,364			26,799			9,304			8,960
Long Term Incentive Plan funded by Lone Star	—			9,933			—			29,946
Total costs and operating expenses	95,997			97,092			278,819			288,087			98,928			88,915
Operating income	18,561			11,058			64,339			23,235			21,687			22,570
Other expense, net	(5,900		)	(283		)	(5,740		)	(700		)
Other (expense)/income, net													(644		)	154
Interest expense, net	(3,146		)	(4,154		)	(10,492		)	(12,559		)	(2,916		)	(3,698		)
Income before losses from equity method investment and provision for income taxes	9,515			6,621			48,107			9,976			18,127			19,026
Losses from equity method investment	(291		)	(278		)	(726		)	(530		)	(170		)	(195		)
Income before provision for income taxes	9,224			6,343			47,381			9,446			17,957			18,831
Provision for income taxes	(3,014		)	(2,104		)	(15,948		)	(3,313		)	(5,730		)	(6,330		)
Net income	$	6,210		$	4,239		$	31,433		$	6,133		$	12,227		$	12,501
Other operating data:
Capital expenditures and software purchased or developed	$	3,062		$	1,444		$	5,183		$	3,731		$	5,360		$	267
Wallboard sales volume (million square feet)	634			567			1,894			1,603			650			617
Mill net sales price (1)	$	144.34		$	153.05		$	144.61		$	155.68		$	147.92		$	144.62


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

Three ~~and Nine~~ Months Ended ~~September 30, 2016~~March 31, 2017 Compared to Three ~~and Nine~~ Months Ended ~~September 30, 2015~~March 31, 2016

Net ~~Sales.~~ Sales .Net sales increased by ~~$6.4~~$9.1 million, up ~~5.9%~~8.2% from ~~$108.2~~$111.5 million for the three months ended ~~September 30, 2015,~~March 31, 2016, to ~~$114.6~~$120.6 million for the three months ended ~~September 30, 2016.~~March 31, 2017. The increase was primarily attributable to ~~$12.4~~a $5.7 million favorable impact of higher wallboard volumes driven by higher demand in the United States. ~~The decrease~~In addition, a favorable impact of $2.8 million due to an increase in the average net selling price for gypsum wallboard at constant exchange rates and a favorable impact of $0.3 million related to foreign currency exchange rates contributed to this overall increase. Our non-wallboard products also had a ~~$5.7~~$0.3 million ~~unfavorable~~favorable impact on net sales. ~~Our non-wallboard products had a $0.3 million negative impact and foreign currency had a nominal positive effect on net sales.~~

Net sales increased by $31.8 million, up 10.2% from $311.3 million for the nine months ended September 30, 2015, to $343.2 million for the nine months ended September 30, 2016. The increase was primarily attributable to $54.7 million favorable impact of higher wallboard volumes driven by higher demand in the United States. The decrease in the average net selling price for gypsum wallboard at constant exchange rates had a $21.9 million unfavorable impact on net sales. Our non-wallboard products had a $0.5 million positive impact and foreign currency had a combined unfavorable impact of $1.5 million.

Cost of Goods Sold. Cost of goods sold increased ~~$8.6~~$9.6 million, up ~~11.0%~~12.0% from ~~$78.2~~$80.0 million for the three months ended ~~September 30, 2015,~~March 31, 2016, to ~~$86.8~~$89.6 million for the three months ended ~~September 30, 2016.~~March 31, 2017. Higher wallboard volumes increased freight costs and input costs by ~~$2.1~~$2.7 million, and ~~$3.6 million, respectively.~~labor costs increased by $0.9 million. In addition, ~~labor and maintenance costs increased collectively by $2.8 million, primarily due to~~ higher ~~volumes. Higher wallboard~~per unit input costs, ~~per thousand square feet ("MSF"), primarily~~mainly related to paper, gypsum and ~~gypsum, resulted in a $1.1 million increase.~~natural gas increased cost of goods sold $5.0 million. Other cost increases related to freight, foreign currency exchange, and other manufacturing costs increased ~~$0.3 million. These increases were partially offset by a decrease of~~$1.8, while amortization and depreciation costs ofdecreased $0.8 ~~million and a decrease in non-wallboard manufacturing costs of $0.4~~ million.

Cost of goods sold increased $19.1 million, up 8.3% from $231.3 million for the nine months ended September 30, 2015, to $250.5 million for the nine months ended September 30, 2016. Higher wallboard volumes increased freight costs and input costs by $9.3 million and $16.1 million, respectively. In addition, labor and maintenance costs increased collectively by $4.3 million primarily due to higher volumes. Lower wallboard input costs per MSF resulted in a $4.2 million decrease. Other

~~manufacturing costs decreased $0.4 million. Amortization and depreciation costs decreased $3.3 million and non-wallboard manufacturing costs decreased $0.1 million.~~

Selling and Administrative Expense. Selling and administrative expense increased ~~$0.2~~$0.3 million, up ~~2.6% to $9.2 million for the three months ended September 30, 2016 compared to~~3.3% from $9.0 million for the three months ended ~~September 30, 2015.~~March 31, 2016, to $9.3 million for the three months ended March 31, 2017. This increase was driven by a ~~$0.3~~$0.4 million increase in stock compensation expense and a $0.2 million increase in payroll and bonus expenses and was partially offset by ~~a net~~$0.3 million decrease ofin other selling and administrative ~~expense of $0.1 million.~~

Selling and administrative expense increased $1.6 million, up 5.8% to $28.4 million for the nine months ended September 30, 2016 compared to $26.8 million for the nine months ended September 30, 2015. This increase was primarily driven by a $1.0 million increase in stock compensation expense, a $0.3 million increase in bonus expense and a $0.3 million increase in bad debt expense for the nine months ended September 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 and September 2015 resulted in aggregate payments of $15.8 million and $9.9 million, respectively. As these payments arose out of employment with the Company, the $9.9 million and $29.9 million expense was recorded on the Company's books for the three and nine months ended September 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 nine months ended September 30, 2016 and no further payments will be made under the LTIP.expense.

Operating Income. Operating income of ~~$18.6~~$21.7 million for the three months ended ~~September 30, 2016 increased~~March 31, 2017 decreased by ~~$7.5~~$0.9 million from operating income of ~~$11.1~~$22.6 million for the three months ended ~~September 30, 2015.~~March 31, 2016. The ~~difference was driven mostly by $6.4 million~~primary drivers for this decrease were higher ~~net sales~~input, freight and ~~the absence of any LTIP expense in the current period, as compared to $9.9 million in LTIP expense in 2015, partly~~labor costs, partially offset by ~~$8.6 million higher costs of goods sold~~an increase in volumes and ~~$0.2 million higher selling and administrative expense.~~

~~Operating income of $64.3 million~~sales price for the nine months ended September 30, 2016 increased by $41.1 million from operating income of $23.2 million for the nine months ended September 30, 2015. The difference was driven mostly by the $31.8 million higher net sales and the absence of any LTIP expense in the current period, as compared to $29.9 million in LTIP expense in 2015, partly offset by $19.1 million higher costs of goods sold and $1.6 million higher selling and administrative expense.first quarter 2017 versus first quarter 2016.

Other ~~Expense,~~(Expense)/Income, Net.Other ~~expense,~~(expense)/income, net, was ~~$5.9~~a net expense of $0.6 million for the three months ended ~~September 30, 2016, an~~March 31, 2017 compared to net income of $0.2 million for the three months ended March 31, 2016. The $0.8 million increase in ~~expenses from the $0.3 million other~~ expense ~~in the same period of 2015. The increase~~ was primarily due to ~~$5.8~~$0.7 million in additional expenses associated with the debt ~~refinancing~~repricing in the ~~third~~first quarter ~~2016.~~2017. See Note 9 to the Consolidated Financial Statements for further details on the repricing.

For the nine months ended September 30, 2016, other expense, net, was a net expense of $5.7 million, an increase in expenses from the $0.7 million expense in the prior year period. The increase was primarily due to $5.8 million in additional expenses associated with the debt refinancing in the the third quarter 2016.

Interest Expense, Net. Interest expense was ~~$3.1~~$2.9 million for the three months ended ~~September 30, 2016,~~March 31, 2017, a decrease of $0.8 million from ~~$4.2~~$3.7 million for the three months ended ~~September 30, 2015,~~March 31, 2016, reflecting lower average outstanding borrowings during ~~the third~~first quarter ~~of 2016~~2017 compared to ~~the same period in 2015~~first quarter 2016 and the lower interest rate following the debt refinancing in August ~~2016.~~

~~Interest expense was $10.5 million for the nine months ended September 30,~~ 2016 ~~a decrease from $12.6 million for the nine months ended September 30, 2015, reflecting lower average outstanding borrowings during the first nine months of 2016 compared~~and repricing in February 2017. See Note 9 to the ~~same period in 2015 and the lower interest rate following the debt refinancing in August 2016. See Part I, Item 1, Financial Information - Notes to~~ Consolidated Financial Statements ~~Note 12, Debt~~ for further details on the ~~refinancing.~~refinancing and repricing.

Provision for Income Taxes. Provision for income taxes ~~was $3.0~~decreased $0.6 million from $5.7 million for the three months ended ~~September 30, 2016,~~March 31, 2017, compared to ~~$2.1~~$6.3 million in the prior ~~year~~ period. ~~Higher~~Lower provision for income taxes was primarily driven by ~~higher~~lower pretax ~~income.~~income, a slightly lower annual estimated effective tax rate of approximately 33.6% and a $0.2 million favorable discrete tax item in the first quarter 2017 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 further detail on our adoption of this share-based compensation accounting guidance.

Provision from income taxes was $15.9 million for the nine months ended September 30, 2016, compared to a provision for income taxes of $3.3 million for the nine months ended September 30, 2015. Higher provision for income taxes was driven by higher pretax income.

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 income determined 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 to Non-GAAP EBITDA and Adjusted EBITDA
For the Three Months Ended For the Nine Months Ended
September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
(in thousands)
Net income $ 6,210
$ 4,239
$ 31,433
$ 6,133
Adjustments:
Other expense, net 5,900
283
5,740
700
Interest expense, net 3,146
4,154
10,492
12,559
Losses from equity method investment 291
278
726
530
Provision for income taxes 3,014
2,104
15,948
3,313
Depreciation and amortization 11,868
12,661
35,656
38,931
EBITDA—Non-GAAP Measure 30,429
23,719
99,995
62,166
Long Term Incentive Plan Funded by Lone Star (a) —
9,933
—
29,946
Adjusted EBITDA—Non-GAAP Measure $ 30,429
$ 33,652
$ 99,995
$ 92,112


~~(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
	March 31, 2017		March 31, 2016
	(in thousands)
Net income	$	12,227	$	12,501
Adjustments:
Other expense/(income), net	644		(154		)
Interest expense, net	2,916		3,698
Losses from equity method investment	170		195
Provision for income taxes	5,730		6,330
Depreciation and amortization	11,286		11,946
EBITDA—Non-GAAP Measure	32,973		34,516

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,~~ for a more detailed discussion of our debt financing arrangements.

													Table M3: Net Change in Cash and Cash Equivalents
	For the Nine Months Ended						For the Three Months Ended
	September 30, 2016			September 30, 2015			March 31, 2017			March 31, 2016
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	85,092		$	50,844		$	18,536		$	16,841
Net cash used in investing activities	(4,944		)	(2,938		)	(5,670		)	(222		)
Net cash used in financing activities	(60,507		)	(45,285		)	(6,611		)	(27,013		)
Effect of foreign exchange rates on cash and cash equivalents	388			(990		)	117			487
Net change in cash and cash equivalents	$	20,029		$	1,631		$	6,372		$	(9,907	)

Net Cash Provided By Operating Activities

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2017 and 2016 was ~~$85.1~~$18.5 million and $16.8 million, respectively. The increase of $1.7 million in 2017 compared to ~~$50.8 million for the nine months ended September 30, 2015. Higher cash flows from operating activities for the nine months ended September 30,~~ 2016 ~~compared to the same period 2015, were~~was primarily ~~the result of a $31.8 million increase~~driven by an improvement in ~~net sales and a $29.9 million LTIP payment in the nine months ended September 30, 2015.~~working capital.

Net Cash Used In Investing Activities

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017 was ~~$4.9~~$5.7 million, compared to ~~$2.9~~$0.2 million for the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016. The investing activities for the ~~nine~~three months ended ~~September 30, 2016 and 2015~~March 31, 2017 primarily reflect an aggregate of ~~$5.2~~$5.4 million ~~and $3.7 million, respectively,~~ in capital expenditures and software purchased or developed, compared to $0.3 million for the three months ended March 31, 2016, partially offset 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 ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017 was ~~$60.5~~$6.6 million, compared to ~~$45.3~~$27.0 million for the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016. During the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2017, we repriced the Amended and ~~September 30, 2015,~~Restated Credit Agreement, resulting in a net outflow of $0.6 million. See Note 9 to the ~~Company deployed $33.4~~Consolidated Financial Statements for a more detailed discussion of the repricing. We made principal payments on our outstanding debt of $0.7 million and ~~$40.0~~$10.0 million for the three months ended March 31, 2017 and 2016, respectively. We also deployed $5.2 million and $17.0 million during three months ended March 31, 2017 and 2016, respectively, to repurchase common stock. The Company also deployed $25.7 million and $35.0 million during the nine months ended September 30, 2016 and September 30, 2015, respectively, to make payments on its long-term debt. For the nine months ended September 30, 2015, the Company received $29.8 million of capital contributions from Lone Star. No contributions were received for the nine months ended September 30, 2016.

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 ~~nine~~three months ended ~~September 30, 2016.~~March 31, 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. 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.” 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 ~~September 30, 2016,~~March 31, 2017, we had ~~$34.8~~$57.9 million in cash and cash equivalents. The interest expense associated with the term loan and revolving credit facility under the 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 term loan under the Amended and Restated Credit Agreement ~~have~~has a LIBOR floor of 0.75%. A rise of interest rate levels ~~to above the 0.75% 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 slightly as the LIBOR specified in the calculation of interest induring the ~~third~~first quarter ~~2016~~ was ~~below~~slightly above the floor. A hypothetical 1.00% increase in interest rates would have increased interest expense by ~~$0.5~~approximately $0.4 million for the three months ended ~~September 30, 2016.~~March 31, 2017, while a hypothetical 1.00% decrease in interest rate would have decreased interest expense by $0.1 million. We based this sensitivity calculation on the three month LIBOR rate of ~~0.63%~~0.1% as of ~~June~~February 28, ~~2016~~2017 in accordance with the measurement date specified in the Amended and Restated Credit Agreement.

As of ~~September 30, 2016, the Company~~March 31, 2017, we had interest rate swaps with a combined notional amount of $100.0 million and ~~with~~ a ~~4 years~~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 ~~$12,000~~$1.9 million as of ~~September 30, 2016.~~March 31, 2017.

The return on our cash equivalents balance was less than ~~one percent.~~1%. Therefore, although 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 ~~8.6%~~8.5% and ~~7.9%~~7.0% of our net sales for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, respectively, were in ~~Canada, compared to 7.6% and 8.5% of our net sales for the three and nine months ended September 30, 2015, respectively.~~Canada. 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 ~~September 30, 2016.~~March 31, 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 ~~September 30, 2016,~~March 31, 2017, the Company had ~~six~~nine natural gas swap contracts for a portion of natural gas usage. The contracts mature ~~October 31, 2016, November~~between April 30, ~~2016, December 31, 2016~~2017 and ~~March~~October 31, 2017. 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 ~~September 30, 2016,~~March 31, 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 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 Company's the ~~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 September 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 ~~September 30, 2016.~~March 31, 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 March 31, 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 the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company'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 ~~September 30, 2016~~March 31, 2017 to the risk factors previously disclosed in the ~~2015~~2016 Form 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 had approved an expansion of its stock repurchase program by $50 million, increasing the aggregate authorization from up to $50.0 million to up to $100.0 million. The program was also 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 September 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)
July 1 - July 31, 2016 65,280
$ 21.51
65,280
$ 18,142,056
August 1 - August 31, 2016 189,600
22.30
189,600
63,913,405
September 1 - September 30, 2016 265,963
21.75
265,963
58,129,495
Total 520,843
$ 21.92
520,843



Common Stock Repurchase Activity During the Three Months Ended March 31, 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 (a)
January 1 - January 31, 2017	136,623	$	23.25	136,623	$	48,102,179
February 1 - February 28, 2017	—	—		—	148,102,179
March 1 - March 31, 2017	80,500	25.59		80,500	146,042,231
Total	217,123	$	24.12	217,123


~~(a)~~	These amounts represent the remaining maximum dollar value that may yet be purchased under the board approval. As of July 31, 2016 this amount is related to the $50.0 million approval made in 2015, and the amounts for August and September have been adjusted to account for the additional $50.0 million approval in August 2016, bringing the total approved amount to $100.0 million.

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~~10.1+	~~Amended and Restated Credit Agreement~~Gypsum Contract (Miami Fort Station) dated as of ~~August 18, 2016~~January 17, 2017 between Dynegy Miami Fort LLC and Continental Silver Grove LLC.	*

10.2+	Gypsum Contract (Zimmer Station) dated as of January 17, 2017 between Dynegy Zimmer LLC and Continental Silver Grove LLC.	*
10.3	Replacement Facility Amendment dated as of February 21, 2017 among ~~Continental Building Products Inc.,~~ Continental Building Products Operating Company, LLC, ~~Continental Building Products Canada, Inc.~~ the ~~lenders party~~Lender Party thereto and Credit Suisse AG as Administrative ~~Agent, filed on August 22, 2016 as Exhibit 10.1 to the Company's Current Report on Form 8-K, and incorporated herein by reference.~~Agent.	*

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.
+		Certain portions of this exhibit have been redacted and separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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	~~November 8, 2016~~May 5, 2017
By:	James Bachmann
	President and Chief Executive Officer
	(Principal Executive Officer)

	/s/ Dennis Schemm	~~November 8, 2016~~May 5, 2017
By:	Dennis Schemm
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

3028



F15: Treasury Stock Activity
	September 30, 2016					September 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	3,678,188	$	70,489	$	19.16	915,364	$	20,036	$	21.89
Repurchases on open market	520,843	11,417		21.92		—	—		—
Repurchase from LSF8 in private transaction	—	—		—		1,007,500	19,999		19.85
Ending Balance	4,199,031	$	81,906	$	19.51	1,922,864	$	40,035	$	20.82

For the Nine Months Ended:
Beginning Balance	2,395,049	$	48,479	$	20.24	—	$	—	$	—
Repurchases on open market	903,982	18,937		20.95		2,164	37		17.20
Repurchase from LSF8 in private transaction	900,000	14,490		16.10		1,920,700	39,998		20.82
Ending Balance	4,199,031	$	81,906	$	19.51	1,922,864	$	40,035	$	20.82

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