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Beacon Roofing Supply Reports First Quarter 2019 Results

Press Releases

Feb 7, 2019
  • Record first quarter net sales of $1.72 billion (53.4% growth year-over-year)
  • First quarter gross margins increased 130 bps to 25.3% reflecting existing market improvement and benefits from the Allied integration
  • First quarter net income (loss) of $(0.9) million vs. $67.6 million in the prior year; Adjusted Net Income (Loss) of $46.5 million vs. $67.6 million in the prior year
  • First quarter EPS of ($0.10) vs. $0.98 in the prior year; Adjusted EPS of $0.60 vs. $0.68 in the prior year
  • Record first quarter Adjusted EBITDA of $121.7 million vs. $86.0 million in the prior year

HERNDON, Va.--(BUSINESS WIRE)--Feb. 7, 2019-- Beacon Roofing Supply, Inc. (Nasdaq:BECN) (“Beacon” or the “Company”) announced results today for its first quarter ended December 31, 2018 (“2019”).

Paul Isabella, the Company's President and Chief Executive Officer, stated: “The first quarter of fiscal year 2019 was headlined by achieving record first quarter highs in both sales and Adjusted EBITDA. Consolidated net sales increased by more than 50% over the prior year, and we saw stabilizing organic net sales trends relative to the previous quarter. Our gross margins showed continued strength, improving by 130 bps and reflecting benefits from the Allied integration as well as disciplined Company and industry pricing behavior. Q1 2019 represented the third consecutive quarter we have produced a positive price-cost relationship, contributing to our highest first quarter gross margin percentage as a public company. We are excited to have reached the one-year anniversary of the acquisition of Allied; the integration continues to go well, and cost synergies remain on track with current expectations. These positive outcomes are underpinned by the fact that our business remains composed of 70-75% repair and remodeling, which is largely demand that is a non-discretionary in nature. We remain focused on returning to positive organic sales growth during 2019 by leveraging our industry leading digital platform and key growth initiatives to drive market outperformance.”

First Quarter

Net sales increased 53.4% to $1.72 billion, up from $1.12 billion in the comparative 2018 period. Residential roofing product sales increased 24.4%, non-residential roofing product sales increased 27.6% and complementary product sales increased 178.9% over the prior year. Existing markets net sales, excluding acquisitions, decreased 1.9% compared to the prior year period, primarily due to weather-related events. The first quarter of fiscal years 2019 and 2018 had 62 and 61 business days, respectively.

Net income (loss) attributable to common shareholders was $(6.9) million, compared to $67.6 million in 2018. Net income (loss) per share (“EPS”) was $(0.10), compared to $0.98 in 2018. First quarter results were positively impacted by price gains across all product lines and improved gross margin performance. First quarter results were negatively impacted by higher operating expenses and an increase in interest expense and preferred dividend payments that were both primarily related to the acquisition of Allied. In addition, 2018 results include a $46.5 million non-recurring net tax benefit resulting from the enactment of the Tax Cuts and Jobs Act of 2017.

Adjusted Net Income (Loss) was $46.5 million, compared to $46.7 million in 2018. Adjusted EPS was $0.60, compared to $0.68 in 2018. Adjusted EBITDA was $121.7 million, compared to $86.0 million in 2018. Please see the included financial tables for a reconciliation of “Adjusted” financial measures to the most directly comparable GAAP financial measures as well as further detail on the components driving the net changes over the comparative periods).

The Company will host a webcast and conference call today at 5:00 p.m. ET to discuss these results. The webcast link and call-in details are as follows:

                   
            What:     Beacon Roofing Supply First Quarter 2019 Earnings Conference Call
            When     Thursday, February 7, 2019
            Time:     5:00 p.m. ET
            Webcast:    

http://ir.beaconroofingsupply.com/events.cfm (live and replay)

            Live Call:     720-634-9063; Conf. ID #7106649
                   

To assure timely access, conference call participants should dial in prior to the 5:00 p.m. ET start time.

Forward-Looking Statements:

This release contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the "Risk Factors" section of the Company's latest Form 10-K. In addition, the forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point, the Company specifically disclaims any obligation to do so, other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this press release.

About Beacon Roofing Supply

Founded in 1928, Beacon Roofing Supply, Inc. is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating over 500 branches throughout all 50 states in the U.S. and 6 provinces in Canada. To learn more about Beacon and its family of regional brands, please visit www.becn.com.

       
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Operations
(Unaudited; In thousands, except share and per share amounts)
       
    Three Months Ended December 31,
    20181  

% of
Net Sales

  20172  

% of
Net Sales

Net sales   $ 1,721,676       100.0 %   $ 1,121,979       100.0 %
Cost of products sold     1,286,107       74.7 %     852,226       76.0 %
Gross profit     435,569       25.3 %     269,753       24.0 %
Operating expense:                                
Selling, general and administrative     327,693       19.1 %     193,753       17.3 %
Depreciation     17,601       1.0 %     8,709       0.8 %
Amortization     52,021       3.1 %     18,195       1.6 %
Total operating expense     397,315       23.2 %     220,657       19.7 %
Income (loss) from operations     38,254       2.1 %     49,096       4.3 %
Interest expense, financing costs, and other     38,361       2.2 %     22,568       2.0 %
Income (loss) before provision for income taxes     (107 )     (0.1 %)     26,528       2.3 %
Provision for (benefit from) income taxes     786       0.0 %     (41,068 )     (3.7 %)
Net income (loss)     (893 )     (0.1 %)     67,596       6.0 %
Dividends on preferred shares3     6,000       0.3 %     -       0.0 %
Net income (loss) attributable to common shareholders   $ (6,893 )     (0.4 %)   $ 67,596       6.0 %
                                 
Weighted-average common stock outstanding:                                
Basic     68,248,020               67,825,430          
Diluted     68,248,020               69,244,678          
                                 
Net income (loss) per share4:                                
Basic   $ (0.10 )           $ 1.00          
Diluted   $ (0.10 )           $ 0.98          
                                 
 
1   Operating expense includes $8.9 million ($6.6 million, net of taxes) of non-recurring acquisition costs. Interest expense, financing costs, and other includes $3.0 million ($2.2 million, net of taxes) of non-recurring acquisition costs.
     
2   Operating expense includes $5.6 million ($4.0 million, net of taxes) of non-recurring acquisition costs. Interest expense, financing costs, and other includes $12.3 million ($8.7 million, net of taxes) of non-recurring acquisition costs. Provision for (benefit from) income taxes includes a $46.5 million non-recurring net tax benefit resulting from the enactment of the 2017 Tax Cuts and Jobs Act.
     
3   Three months ended December 31, 2018 amount is composed of $5.0 million in undeclared cumulative Preferred Stock dividends as well as an additional $1.0 million of Preferred Stock dividends that had been declared and paid as of period end.
     
4   Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents or the conversion of Preferred Stock. Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock unit awards. Diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by the fully diluted weighted-average number of common shares outstanding during the period. The following table presents the components and calculations of basic and diluted net income (loss) per share for each period presented (in thousands, except share and per share amounts):
     
     
    Three Months Ended December 31,
    2018     2017
Net income (loss)   $ (893 )   $ 67,596
Dividends on preferred shares     (6,000 )     -
Net income (loss) attributable to common shareholders   $ (6,893 )   $ 67,596
Undistributed income allocated to participating securities     -       -
Net income (loss) attributable to common shareholders - basic and diluted   $ (6,893 )   $ 67,596
               
Weighted-average common shares outstanding - basic     68,248,020       67,825,430
Effect of common share equivalents     -       1,419,248
Weighted-average common shares outstanding - diluted     68,248,020       69,244,678
               
Net income (loss) per share - basic   $ (0.10 )   $ 1.00
Net income (loss) per share - diluted   $ (0.10 )   $ 0.98
               
                   
BEACON ROOFING SUPPLY, INC.
Consolidated Balance Sheets
(Unaudited; In thousands)
                   
    December 31,     September 30,     December 31,  
    2018     2018     2017  
Assets                        
Current assets:                        
Cash and cash equivalents   $ 18,423     $ 129,927     $ 63,827  
Restricted cash     -       -       1,300,000  
Accounts receivable, net     881,749       1,090,533       552,703  
Inventories, net     1,025,310       936,047       603,793  
Prepaid expenses and other current assets     375,598       244,360       218,718  
Total current assets     2,301,080       2,400,867       2,739,041  
Property and equipment, net     273,742       280,407       154,687  
Goodwill     2,489,730       2,491,779       1,251,825  
Intangibles, net     1,282,242       1,334,366       410,857  
Other assets, net     1,243       1,243       8,868  
Total assets   $ 6,348,037     $ 6,508,662     $ 4,565,278  
                         
Liabilities and Stockholders' Equity                        
Current liabilities:                        
Accounts payable   $ 551,940     $ 880,872     $ 315,442  
Accrued expenses     375,672       611,539       266,049  
Current portions of long-term debt/obligations     20,315       19,661       14,239  
Total current liabilities     947,927       1,512,072       595,730  
Borrowings under revolving lines of credit, net     503,216       92,442       -  
Long-term debt, net     2,497,123       2,494,725       2,000,059  
Deferred income taxes, net     110,179       106,994       93,451  
Long-term obligations under equipment financing and other, net     10,689       13,639       20,951  
Other long-term liabilities     5,532       5,290       2,743  
Total liabilities   $ 4,074,666     $ 4,225,162     $ 2,712,934  
                         
Convertible preferred stock   $ 399,195     $ 399,195     $ -  
                         
Stockholders' equity:                        
Common stock   $ 684     $ 681     $ 679  
Undesignated preferred stock     -       -       -  
Additional paid-in capital     1,067,711       1,067,040       1,050,389  
Retained earnings     826,941       833,834       815,782  
Accumulated other comprehensive income (loss)     (21,160 )     (17,250 )     (14,506 )
Total stockholders' equity     1,874,176       1,884,305       1,852,344  
Total liabilities and stockholders' equity   $ 6,348,037     $ 6,508,662     $ 4,565,278  
                         
         
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Cash Flows
(Unaudited; In thousands)
         
    Three Months Ended December 31,  
    2018     2017  
Operating Activities                
Net income (loss)   $ (893 )   $ 67,596  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     69,622       26,904  
Stock-based compensation     3,457       3,459  
Certain interest expense and other financing costs     3,024       707  
Beneficial lease amortization     572       -  
Gain on sale of fixed assets     (265 )     (319 )
Deferred income taxes     3,201       (44,923 )
Changes in operating assets and liabilities, net of the effects of businesses acquired:     -       -  
Accounts receivable     207,119       151,365  
Inventories     (90,712 )     (52,024 )
Prepaid expenses and other assets     (131,638 )     (1,421 )
Accounts payable and accrued expenses     (400,616 )     (191,800 )
Other liabilities     246       -  
Net cash provided by (used in) operating activities     (336,883 )     (40,456 )
                 
Investing Activities                
Purchases of property and equipment     (11,688 )     (7,416 )
Acquisition of businesses, net     (163,973 )     -  
Proceeds from the sale of assets     401       413  
Net cash provided by (used in) investing activities     (175,260 )     (7,003 )
                 
Financing Activities                
Borrowings under revolving lines of credit     1,298,654       17,402  
Repayments under revolving lines of credit     (888,225 )     (20,548 )
Borrowings under senior notes     -       1,300,000  
Payment of debt issuance costs     -       (21,917 )
Repayments under equipment financing facilities and other     (1,465 )     (1,968 )
Payment of stock issuance costs     -       (429 )
Payment of dividends on preferred stock     (6,000 )     -  
Proceeds from issuance of common stock related to equity awards     834       3,781  
Taxes paid related to net share settlement of equity awards     (3,617 )     (3,925 )
Net cash provided by (used in) financing activities     400,181       1,272,396  
                 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash     458       640  
                 
Net increase (decrease) in cash, cash equivalents, and restricted cash     (111,504 )     1,225,577  
Cash, cash equivalents, and restricted cash, beginning of period     129,927       138,250  
Cash, cash equivalents, and restricted cash, end of period   $ 18,423     $ 1,363,827  
                 
   
BEACON ROOFING SUPPLY, INC.
Consolidated Sales by Product Line
(Unaudited; In thousands)
   
Consolidated Sales by Product Line  
    Three Months Ended December 31,                  
    2018     2017     Change  
    Net Sales     Mix %     Net Sales     Mix %     $     %  
Residential roofing products   $ 732,190       42.5 %   $ 588,782       52.5 %   $ 143,408       24.4 %
Non-residential roofing products     419,909       24.4 %     328,971       29.3 %     90,938       27.6 %
Complementary building products     569,577       33.1 %     204,226       18.2 %     365,351       178.9 %
    $ 1,721,676       100.0 %   $ 1,121,979       100.0 %   $ 599,697       53.4 %
                                                 
                                                 
                                                 
Consolidated Sales by Product Line for Existing Markets1  
    Three Months Ended December 31,                  
    2018     2017     Change  
    Net Sales     Mix %     Net Sales     Mix %     $     %  
Residential roofing products   $ 515,896       51.7 %   $ 525,115       51.7 %   $ (9,219 )     (1.8 %)
Non-residential roofing products     296,700       29.8 %     302,882       29.8 %     (6,182 )     (2.0 %)
Complementary building products     184,413       18.5 %     188,631       18.5 %     (4,218 )     (2.2 %)
    $ 997,009       100.0 %   $ 1,016,628       100.0 %   $ (19,619 )     (1.9 %)
                                                 
                                                 
                                                 
Existing Market1 Sales by Business Day2  
    Three Months Ended December 31,                  
    2018     2017     Change  
    Net Sales     Mix %     Net Sales     Mix %     $     %  
Residential roofing products   $ 8,321       51.7 %   $ 8,608       51.6 %   $ (287 )     (3.3 %)
Non-residential roofing products     4,785       29.8 %     4,965       29.8 %     (180 )     (3.6 %)
Complementary building products     2,974       18.5 %     3,092       18.6 %     (118 )     (3.8 %)
    $ 16,080       100.0 %   $ 16,665       100.0 %   $ (585 )     (3.5 %)
                                                 
     
1   Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of the first quarter of fiscal year 2019.
     
2   There were 62 and 61 business days in the quarters ended December 31, 2018 and 2017, respectively.
     
             
BEACON ROOFING SUPPLY, INC.

Adjusted Net Income (Loss) and Adjusted EPS1

(Unaudited; In thousands, except per share amounts)
             
    Three Months Ended December 31,  
    2018     2017  
    Amount    

Per
Share2

    Amount    

Per
Share2

 
Net income (loss)   $ (893 )   $ (0.01 )   $ 67,596     $ 0.98  
Acquisition costs3     47,393       0.61       25,633       0.37  
Effects of tax reform4     -       -       (46,492 )     (0.67 )
Adjusted Net Income (Loss)   $ 46,500     $ 0.60     $ 46,737     $ 0.68  
                                 
 
1   Adjusted Net Income (Loss) is defined as net income that excludes non-recurring acquisition costs, the amortization of intangibles, business restructuring costs, and the non-recurring effects of tax reform. Adjusted net income per share or "Adjusted EPS" is calculated by dividing the Adjusted Net Income (Loss) for the period by the weighted-average diluted shares outstanding for the period after assuming the full conversion of the participating Preferred Stock.
     
2   The weighted-average share count utilized in the calculation of Adjusted EPS for the three months ended December 31, 2018 is 77,942,639. This amount is the 68,248,020 diluted weighted-average shares outstanding plus the assumed conversion of 9,694,619 weighted-average shares of participating Preferred Stock, which were excluded from the GAAP net income (loss) per share calculation for the period due to their anti-dilutive nature. The weighted-average share count utilized in the calculation of Adjusted EPS for the three months ended December 31, 2017 is 69,244,678.
     
3   Three months ended December 31, 2018 amount is composed of $11.9 million of non-recurring acquisition costs ($8.8 million, net of tax) and $52.0 million of amortization expense related to intangibles ($38.5 million, net of tax). Three months ended December 31, 2017 amount is composed of $17.8 million of non-recurring acquisition costs ($12.7 million, net of tax) and $18.2 million of amortization expense related to intangibles ($12.9 million, net of tax).
     
4   Impact of the Tax Cuts and Jobs Act of 2017.
     

We use Adjusted Net Income (Loss) and Adjusted EPS to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute Adjusted Net Income (Loss) and Adjusted EPS consistently using the same methods each period.

 

We believe that Adjusted Net Income (Loss) and Adjusted EPS are useful measures because they permit investors to better understand changes in underlying operating performance over comparative periods by providing financial results that are unaffected by cyclical variances that can be driven by items such as investment activity or purchase accounting adjustments.

 

While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful to investors when evaluating our business, they are not prepared and presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), and therefore should be considered supplemental in nature. You should not consider Adjusted Net Income (Loss) or Adjusted EPS in isolation or as a substitute for net income and net income per share or diluted earnings per share calculated in accordance with GAAP. In addition, Adjusted Net Income (Loss) and Adjusted EPS may have material limitations and may differ from similarly titled measures presented by other companies.

 
         
BEACON ROOFING SUPPLY, INC.

Adjusted EBITDA1

(Unaudited; In thousands)
         

 

 

Three Months Ended December 31,

 
    2018     2017  
Net income (loss)   $ (893 )   $ 67,596  
Acquisition costs2     8,917       5,569  
Interest expense, net     39,816       23,516  
Income taxes     786       (41,068 )
Depreciation and amortization     69,622       26,904  
Stock-based compensation     3,457       3,459  
Adjusted EBITDA   $ 121,705     $ 85,976  
               
Adjusted EBITDA as a % of net sales     7.1 %     7.7 %
                 
     
1   Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, non-recurring acquisition costs, and business restructuring costs. EBITDA is a measure commonly used in the distribution industry, and we present Adjusted EBITDA to enhance your understanding of our operating performance.
     
2   Represents non-recurring acquisition costs (excluding the impact of tax) that are included in operating expense and not embedded in other balances of the table.
     

We use Adjusted EBITDA to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute Adjusted EBITDA consistently using the same method each period.

 

We believe that Adjusted EBITDA is a useful measure because it permits investors to better understand changes in underlying operating performance over comparative periods by providing financial results that are unaffected by cyclical variances that can be driven by items such as investment activity or purchase accounting adjustments.

 

While we believe Adjusted EBITDA is useful to investors when evaluating our business, it is not prepared and presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), and therefore should be considered supplemental in nature. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, Adjusted EBITDA may have material limitations and may differ from similarly titled measures presented by other companies.

 

 

Source: Beacon Roofing Supply, Inc.

Beacon Roofing Supply, Inc.
Joseph Nowicki, Executive VP & CFO
571-323-3939
JNowicki@becn.com

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About Beacon Roofing Supply

  • North America’s largest publicly traded roofing distributor, with annual sales of more than $7 Billion
  • 500+ locations across all 50 U.S. states and 6 Canadian provinces
  • A FORTUNE 500 Company
  • NASDAQ Traded under the symbol “BECN”