becn-8k_20180208.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 8, 2018

 

BEACON ROOFING SUPPLY, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

000-50924

36-417337

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

505 Huntmar Park Drive, Suite 300

Herndon, VA

 

20170

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (571) 323-3939

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. 

 

 

 

 


Item 2.02

Results of Operations and Financial Condition

On February 8, 2018, Beacon Roofing Supply, Inc. (the “Company”) issued a press release providing information regarding earnings for the first quarter ended December 31, 2017. A copy of the press release is attached hereto as Exhibit 99.1.

On February 8, 2018, the Company delivered a presentation as part of the webcast for the earnings conference call for the first quarter ended December 31, 2017. A copy of the presentation is attached hereto as Exhibit 99.2.

The information including Exhibit 99.1 and Exhibit 99.2 in this Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, except as shall otherwise be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits

 

Exhibit Index

Exhibit

Number

 

Description

99.1

 

Beacon Roofing Supply, Inc. press release dated February 8, 2018

99.2

 

Beacon Roofing Supply, Inc. FY 2018 first quarter earnings presentation dated February 8, 2018

 

 

 


SIGNATURES

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

 

 

 

BEACON ROOFING SUPPLY, INC.

 

 

 

 

Date: February 8, 2018

 

By:

/s/ JOSEPH M. NOWICKI

 

 

 

JOSEPH M. NOWICKI

 

 

 

Executive Vice President & Chief Financial Officer

 

 

becn-ex991_7.htm

Exhibit 99.1

 

February 8, 2018

 

Beacon Roofing Supply Reports First Quarter 2018 Results

 

Record first quarter net sales of $1.12 billion (12.0% growth year-over-year)

 

First quarter EPS of $0.98 ($0.68 Adjusted) vs. $0.33 ($0.56 Adjusted) in the prior year

 

First quarter net income of $67.6 million ($46.7 million Adjusted) vs. $20.4 million ($34.4 million Adjusted) in the prior year

 

First quarter Adjusted EBITDA grew 7.4% to $86.0 million vs. $80.0 million in the prior year

 

Successfully closed on the acquisition of Allied Building Products for $2.625 billion on January 2, 2018

HERNDON, VA. — (BUSINESS WIRE) — Beacon Roofing Supply, Inc. (Nasdaq:BECN) announced results today for its first quarter ended December 31, 2017 of the fiscal year ending September 30, 2018 (“2018” or “Fiscal 2018”).

 

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Fiscal 2018 is off to an excellent start, highlighted by strong first quarter sales growth. We delivered 8.3% organic sales growth, boosted by post-hurricane rebuilding efforts in Florida and Texas, and strong sales results from our acquired businesses. Importantly, overall product pricing was a positive contributor to first quarter sales growth. In our existing markets, residential roofing posted its 15th consecutive quarter of positive growth, with a 9.6% increase. Complementary products represented our best performing category, with 11.7% organic growth; the result of our focused efforts and a favorable economic backdrop. Commercial roofing also contributed positively, with a second straight quarter of mid-single digit existing market growth. Our first quarter produced record Adjusted EBITDA, driven by strong sales and excellent operating cost controls. The recently announced tax reform also provided a meaningful benefit to first quarter results. Current and future tax savings will be utilized to further improve our balance sheet, pursue additional growth avenues and invest in our core business, including our 8,500+ employees. Lastly, on January 2, 2018 we announced the closing of the Allied acquisition. This adds approximately $2.6 billion in pro forma revenue, a network of more than 200 branches and an outstanding workforce to our organization. The Allied integration process is proceeding very well, and we anticipate a smooth combination with expected synergies that are consistent with our previously announced plans. Beacon’s near term and long term outlook is bright, and we remain committed to delivering strong growth and operating performance for our shareholders.”  

First Quarter

 

Total sales increased 12.0% to a first quarter record of $1.12 billion in fiscal 2018, from $1.00 billion in 2017. Residential roofing product sales increased 11.1%, non-residential roofing product sales increased 5.4% and complementary product sales increased 27.5% over the prior year. Existing markets sales, excluding acquisitions, increased 8.3% for the quarter. The first quarter of fiscal years 2018 and 2017 each had 61 business days.

 

Net income for the first quarter was $67.6 million, compared to $20.4 million in 2017. First quarter EPS was $0.98, compared to $0.33 in 2017. Adjusted Net Income (Loss), after removing the impact of acquisition related costs and the net benefit from one-time tax items, was $46.7 million in the first quarter of 2018, compared to $34.4 million in 2017. First quarter Adjusted EPS was $0.68, compared to $0.56 in 2017. (See included financial tables for a reconciliation of “Adjusted” financial measures to the most directly comparable GAAP financial measures). First quarter results were positively impacted by strong net sales growth, attractive operating expense leverage and beneficial tax adjustments. Compared to the prior year, fiscal year 2018 EPS was negatively impacted by lower gross margins and increased interest expense. Furthermore, additional shares outstanding from a September 2017 secondary offering of our common stock had an approximate $0.08 dilutive impact on first quarter 2018 EPS.

 

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law. During the first quarter of fiscal year 2018, there were three primary impacts from this change: a one-time benefit of $0.68 related to the revaluation of deferred tax assets and liabilities, one-time costs of $0.01 tied to the repatriation tax of foreign earnings and profits and benefits from a lower federal corporate income tax rate. Our Adjusted EPS disclosures remove the net benefit from the initial two items. The overall impact of tax reform raised first quarter EPS by $0.71 and Adjusted EPS by $0.09. For fiscal year 2018, we anticipate our effective tax rate will be approximately 29-30%.  

 


 

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 2018 Earnings Results Webcast and Conference Call

When

Thursday, February 8, 2018

Time:

5:00 p.m. ET

Webcast:

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

Live Call:

720-634-9063; Conf. ID #4797648

 

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 590 branches throughout 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.

 

BECN-F

 

Beacon Roofing Supply, Inc.
Joseph Nowicki, Executive VP & CFO

571-323-3940
JNowicki@becn.com

 



BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

 

 

Three Months Ended December 31,

 

 

 

20171

 

 

% of

Net Sales

 

 

20162

 

 

% of

Net Sales

 

Net sales

 

$

1,121,979

 

 

 

100.0

%

 

$

1,002,184

 

 

 

100.0

%

Cost of products sold

 

 

852,226

 

 

 

76.0

%

 

 

751,117

 

 

 

74.9

%

Gross profit

 

 

269,753

 

 

 

24.0

%

 

 

251,067

 

 

 

25.1

%

Operating expense

 

 

220,657

 

 

 

19.7

%

 

 

204,110

 

 

 

20.4

%

Income from operations

 

 

49,096

 

 

 

4.3

%

 

 

46,957

 

 

 

4.7

%

Interest expense, financing costs, and other

 

 

22,568

 

 

 

2.0

%

 

 

13,574

 

 

 

1.4

%

Income before provision for income taxes

 

 

26,528

 

 

 

2.3

%

 

 

33,383

 

 

 

3.3

%

Provision for (benefit from) income taxes

 

 

(41,068

)

 

 

(3.7

%)

 

 

12,953

 

 

 

1.3

%

Net income

 

$

67,596

 

 

 

6.0

%

 

$

20,430

 

 

 

2.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

67,825,430

 

 

 

 

 

 

 

59,943,264

 

 

 

 

 

Diluted

 

 

69,244,678

 

 

 

 

 

 

 

60,993,080

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.00

 

 

 

 

 

 

$

0.34

 

 

 

 

 

Diluted

 

$

0.98

 

 

 

 

 

 

$

0.33

 

 

 

 

 

 

¹   The first quarter 2018 operating results include $5.6 million ($4.0 million, net of taxes) of non-recurring charges, $18.2 million ($12.9 million, net of taxes) of amortization for acquired intangibles, and $12.3 million ($8.7 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to acquisitions. The first quarter 2018 also includes a $46.5 million net non-recurring tax benefit. See “Adjusted Net Income (Loss) and Adjusted EPS” table for further details.

² The first quarter 2017 operating results include $1.2 million ($0.7 million, net of taxes) of non-recurring charges, $20.1 million ($12.3 million, net of taxes) of amortization for acquired intangibles, and $1.6 million ($1.0 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to acquisitions. See “Adjusted Net Income (Loss) and Adjusted EPS” table for further details.

 

 



BEACON ROOFING SUPPLY, INC.

Consolidated Balance Sheets  

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

 

September 30, 2017

 

 

December 31, 2016

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

63,827

 

 

$

138,250

 

 

$

73,271

 

 

Restricted cash

 

1,300,000

 

 

 

-

 

 

 

-

 

 

Accounts receivable, net

 

552,703

 

 

 

704,527

 

 

 

489,898

 

 

Inventories

 

603,793

 

 

 

551,924

 

 

 

528,709

 

 

Prepaid expenses and other current assets

 

218,718

 

 

 

209,138

 

 

 

209,651

 

 

Total current assets

 

2,739,041

 

 

 

1,603,839

 

 

 

1,301,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

154,687

 

 

 

156,129

 

 

 

147,340

 

 

Goodwill

 

1,251,825

 

 

 

1,251,986

 

 

 

1,197,550

 

 

Intangibles, net

 

410,857

 

 

 

429,069

 

 

 

444,210

 

 

Other assets, net

 

8,868

 

 

 

8,534

 

 

 

1,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

4,565,278

 

 

$

3,449,557

 

 

$

3,092,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

315,442

 

 

$

503,697

 

 

$

336,837

 

 

Accrued expenses

 

266,049

 

 

 

261,297

 

 

 

166,479

 

 

Current portion of long-term obligations

 

14,239

 

 

 

14,141

 

 

 

14,610

 

 

Total current liabilities

 

595,730

 

 

 

779,135

 

 

 

517,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving lines of credit, net

 

-

 

 

 

3,205

 

 

 

332,679

 

 

Long-term debt, net

 

2,000,059

 

 

 

721,268

 

 

 

722,516

 

 

Deferred income taxes, net

 

93,451

 

 

 

138,383

 

 

 

136,260

 

 

Long-term obligations under equipment financing and other, net

 

23,694

 

 

 

25,760

 

 

 

32,915

 

 

Total  liabilities

 

2,712,934

 

 

 

1,667,751

 

 

 

1,742,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

679

 

 

 

677

 

 

 

600

 

 

Undesignated preferred stock

 

-

 

 

 

-

 

 

 

-

 

 

Additional paid-in capital

 

1,050,389

 

 

 

1,047,506

 

 

 

701,542

 

 

Retained earnings

 

815,782

 

 

 

748,186

 

 

 

667,752

 

 

Accumulated other comprehensive loss

 

(14,506

)

 

 

(14,563

)

 

 

(20,050

)

 

Total stockholders' equity

 

1,852,344

 

 

 

1,781,806

 

 

 

1,349,844

 

 

Total Liabilities and Stockholders' Equity

$

4,565,278

 

 

$

3,449,557

 

 

$

3,092,140

 

 

 



BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Cash Flows

(In thousands)

 

Three Months Ended December 31,

 

 

2017

 

 

2016

 

Operating activities:

 

 

 

 

 

 

 

Net income

$

67,596

 

 

$

20,430

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

26,904

 

 

 

28,425

 

Stock-based compensation

 

3,459

 

 

 

3,816

 

Certain interest expense and other financing costs

 

707

 

 

 

1,418

 

Gain on sale of fixed assets

 

(319

)

 

 

(312

)

Deferred income taxes

 

(44,923

)

 

 

788

 

Changes in operating assets and liabilities, net of the effects of businesses acquired:

 

 

 

 

 

 

 

   Accounts receivable

 

151,365

 

 

 

136,895

 

   Inventories

 

(52,024

)

 

 

(48,019

)

   Prepaid expenses and other assets

 

(1,421

)

 

 

(46,594

)

   Accounts payable and accrued expenses

 

(191,800

)

 

 

(18,724

)

Net cash provided by (used in) operating activities

 

(40,456

)

 

 

78,123

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(7,416

)

 

 

(7,280

)

Acquisition of businesses

 

-

 

 

 

(1,850

)

Proceeds from sales of assets

 

413

 

 

 

400

 

Net cash used in investing activities

 

(7,003

)

 

 

(8,730

)

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

Borrowings under revolving lines of credit, net of repayments

 

(3,146

)

 

 

(27,338

)

Borrowings under term loan, net of repayments

 

-

 

 

 

(1,125

)

Borrowings under Senior Notes

 

1,300,000

 

 

 

-

 

Payment of debt issuance costs

 

(21,917

)

 

 

-

 

Repayments under equipment financing facilities and other

 

(1,968

)

 

 

(2,405

)

Payment of issuance costs from secondary offering of common stock

 

(429

)

 

 

-

 

Proceeds from issuance of common stock related to equity awards

 

3,781

 

 

 

3,460

 

Taxes paid related to net share settlement of equity awards

 

(3,925

)

 

 

(297

)

Net cash provided by (used in) financing activities

 

1,272,396

 

 

 

(27,705

)

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

640

 

 

 

197

 

 

 

 

 

 

 

 

 

Net increase in cash, cash equivalents, and restricted cash

 

1,225,577

 

 

 

41,885

 

Cash, cash equivalents, and restricted cash, beginning of period

 

138,250

 

 

 

31,386

 

Cash, cash equivalents, and restricted cash, end of period

$

1,363,827

 

 

$

73,271

 

 

 



BEACON ROOFING SUPPLY, INC.

Consolidated Sales by Product Line

(Dollars in thousands)

 

 

Consolidated Sales by Product Line

 

 

Three Months Ended December 31,

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

Net Sales

 

 

Mix %

 

 

Net Sales

 

 

Mix %

 

 

$

 

 

%

 

Residential roofing products

$

588,782

 

 

 

52.5

%

 

$

529,929

 

 

 

52.9

%

 

$

58,853

 

 

 

11.1

%

Non-residential roofing products

 

328,971

 

 

 

29.3

%

 

 

312,025

 

 

 

31.1

%

 

 

16,946

 

 

 

5.4

%

Complementary building products

 

204,226

 

 

 

18.2

%

 

 

160,230

 

 

 

16.0

%

 

 

43,996

 

 

 

27.5

%

 

$

1,121,979

 

 

 

100.0

%

 

$

1,002,184

 

 

 

100.0

%

 

$

119,795

 

 

 

12.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Sales by Product Line for Existing Markets1

 

 

Three Months Ended December 31,

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

Net Sales

 

 

Mix %

 

 

Net Sales

 

 

Mix %

 

 

$

 

 

%

 

Residential roofing products

$

580,649

 

 

 

53.6

%

 

$

529,851

 

 

 

53.0

%

 

$

50,798

 

 

 

9.6

%

Non-residential roofing products

 

323,765

 

 

 

29.9

%

 

 

310,288

 

 

 

31.0

%

 

 

13,477

 

 

 

4.3

%

Complementary building products

 

178,797

 

 

 

16.5

%

 

 

160,132

 

 

 

16.0

%

 

 

18,665

 

 

 

11.7

%

 

$

1,083,211

 

 

 

100.0

%

 

$

1,000,271

 

 

 

100.0

%

 

$

82,940

 

 

 

8.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Existing Market1 Sales By Business Day2

 

 

Three Months Ended December 31,

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

Net Sales

 

 

Mix %

 

 

Net Sales

 

 

Mix %

 

 

$

 

 

%

 

Residential roofing products

$

9,519

 

 

 

53.6

%

 

$

8,686

 

 

 

53.0

%

 

$

833

 

 

 

9.6

%

Non-residential roofing products

 

5,308

 

 

 

29.9

%

 

 

5,087

 

 

 

31.0

%

 

 

221

 

 

 

4.3

%

Complementary building products

 

2,931

 

 

 

16.5

%

 

 

2,625

 

 

 

16.0

%

 

 

306

 

 

 

11.7

%

 

$

17,758

 

 

 

100.0

%

 

$

16,398

 

 

 

100.0

%

 

$

1,360

 

 

 

8.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

¹

Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of fiscal year 2018.

2

There were 61 business days in each of the quarters ended December 31, 2017 and 2016.

 

 



BEACON ROOFING SUPPLY, INC.

Adjusted Net Income (Loss) and Adjusted EPS1

(In thousands, except per share amounts)

 

 

Three Months Ended December 31,

 

 

2017

 

 

2016

 

 

Amount

 

 

Per

Share

 

 

Amount

 

 

Per

Share

 

Net income

$

67,596

 

 

$

0.98

 

 

$

20,430

 

 

$

0.33

 

Company adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs2

 

25,633

 

 

 

0.37

 

 

 

13,970

 

 

 

0.23

 

Effects of tax reform3

 

(46,492

)

 

 

(0.67

)

 

 

-

 

 

 

-

 

Adjusted Net Income (Loss)

$

46,737

 

 

$

0.68

 

 

$

34,400

 

 

$

0.56

 

 

¹

Adjusted Net Income (Loss) is defined as net income excluding non-recurring costs related to acquisitions and the amortization of intangibles, as well as the non-recurring effects of tax reform. We believe that Adjusted Net Income (Loss) is an operating performance metric that is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. 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 (see Consolidated Statements of Operations for amounts).

2

Acquisition costs for the three months ended December 31, 2017 include $17.8 million of non-recurring charges related to acquisitions and $18.2 million of amortization expense related to intangibles, both net of $10.4 million in tax in total. Acquisition costs for the three months ended December 31, 2016 include $2.7 million of non-recurring charges related to acquisitions and $20.1 million of amortization expense related to intangibles, both net of $8.9 million in tax in total.

3

The non-recurring impact of deferred tax asset revaluation and a recognized provisional expense related to the repatriation of earnings and profits of our foreign subsidiary, Beacon Roofing Supply Canada Company.

 

 

 

While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”). 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


BEACON ROOFING SUPPLY, INC.

Adjusted EBITDA1

(In thousands)

 

 

 

Three Months Ended December 31,

 

 

 

2017

 

 

2016

 

Net income

 

$

67,596

 

 

$

20,430

 

Acquisition costs2

 

 

5,569

 

 

 

1,160

 

Interest expense, net

 

 

23,516

 

 

 

13,239

 

Income taxes

 

 

(41,068

)

 

 

12,953

 

Depreciation and amortization

 

 

26,904

 

 

 

28,425

 

Stock-based compensation

 

 

3,459

 

 

 

3,816

 

Adjusted EBITDA

 

$

85,976

 

 

$

80,023

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA as a % of net sales

 

7.7%

 

 

8.0%

 

 

¹

Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, and non-recurring acquisition costs. EBITDA is a measure commonly used in the distribution industry, and we present Adjusted EBITDA to enhance your understanding of our operating performance. Adjusted EBITDA is used in our bank covenants and we use Adjusted EBITDA as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Further, we believe that Adjusted EBITDA is a useful measure because it improves comparability of results of operations, since purchase accounting used for acquisitions can render depreciation and amortization non-comparable between periods. We use these supplemental measures to evaluate performance period over period and to analyze the underlying trends in our business and establish operational goals and forecasts that are used in allocating resources. We expect to compute Adjusted EBITDA using the same consistent method from quarter-to-quarter and year-to-year.

 

2

Acquisition costs reflect all non-recurring charges related to acquisitions (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation.

 

 

 

While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with GAAP. You should not consider Adjusted EBITDA 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 has inherent material limitations as a performance measure. It does not include interest expense. Because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITDA also does not include stock-based compensation, which is a necessary element of our costs since we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, stock-based compensation expense, and income tax expense. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

 

becn-ex992_6.pptx.htm

Slide 1

2018 First Quarter Earnings Call February 8, 2018 Exhibit 99.2

Slide 2

Forward Looking Statements / Non-GAAP Measures This presentation 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 presentation represent the Company's views as of the date of this presentation 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 presentation. This presentation contains references to certain financial measures that are not presented in accordance with Generally Accepted Accounting Principles (“GAAP"). The Company utilizes non-GAAP financial measures to analyze and report operating results that are unaffected by differences in capital structures, capital investment cycles, and varying ages of related assets. Although the Company believes these measures provide a useful representation of performance, non-GAAP financial measures should not be considered in isolation or as a substitute for any items calculated in accordance with GAAP. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure can be found in the Appendix to this presentation as well as Company’s latest Form 8-K, filed with the SEC on February 8, 2018. www.BECN.com

Slide 3

First Quarter 2018 Highlights and Outlook Record first quarter net sales of $1.1 billion; existing markets same day sales growth of 8.3% Strong organic sales performance across all three segments. Positive residential growth for 15 consecutive quarters. Commercial has produced two consecutive quarters of mid-single digit growth. Complementary was our top performer, increasing 11.7% vs. prior year. Customer pricing turned positive (up 0.5-1.0%), a significant shift from recent trends Solid Q1 expense leverage; existing market operating expense as a percent of sales improved 100 bps First quarter net income of $67.6 million ($46.7 million Adjusted)1 vs. $20.4 million ($34.4 million Adjusted)1 in prior year Q1 EPS $0.98 ($0.68 Adjusted)1 vs. EPS of $0.33 ($0.56 Adjusted)1 in prior year; Q1’18 impacted by $0.08 dilution from secondary common stock offering U.S. tax reform had a favorable impact on Q1 results, adding $0.71 to EPS ($0.09 Adjusted) Record first quarter Adjusted EBITDA of $86.0 million2 (7.7% of net sales) Net Debt Leverage remains below 3.0x at 2.8x3 excluding net proceeds from September 2017 secondary common stock offering Closed on the acquisition of Allied Building Products on January 2 Raising 2018 EPS outlook from $2.95-$3.25 range to $3.40-$3.70, driven by tax reform and strong Q1 www.BECN.com 1,2,3 See reconciliation on slides 12, 14 and 13, respectively

Slide 4

Quarterly Results – Net Sales & Gross Margin www.BECN.com Existing Market Sales, Gross Profit and Gross Margin 23.2% Existing Market results above exclude results from acquired branches until they have been under ownership for at least four full fiscal quarters at the start of the fiscal reporting period Existing Market Product Mix Total 8.3% Northeast 2.9% Mid-Atlantic (1.4%) Southeast 24.0% Southwest (1.0%) Midwest 8.3% West 25.2% Canada 9.0% Existing Market Daily Sales Growth by Region* $ in millions *Same Days

Slide 5

Quarterly Results – Operating Expense www.BECN.com Existing Market results above exclude results from acquired branches until they have been under ownership for at least four full fiscal quarters at the start of the fiscal reporting period *See slide 15 for reconciliation table Existing Market Operating Expense GAAP Adjusted Payroll – volume related $9.8 $10.5 Warehouse and G&A 0.5 (3.9) Other 0.2 (0.6) Amortization (3.6) -- Subtotal $6.9 $6.0 FY18 vs. FY17 OpEx Increase (Decrease) $ in millions

Slide 6

Anticipated Impact from U.S. Tax Reform www.BECN.com Adjusted Effective Tax Rate Summary by Period Q1’18 Q2’18 Q3’18 Q4’18 FY 2018 FY 2019 Effective Rate 25.3%* ~30% ~30% ~30% 29-30% 26-27% *Q1’18 was impacted by certain discrete items, the largest of which relates to adoption of ASU 2016-09 for share-based payment accounting FY 2018 tax rate reflects one-quarter under the previous Federal tax rate, and three quarters within the new rate structure. The result creates a blended base quarterly effective tax rate estimate of 29-30%. One-Time Q1’18 Tax Benefits (Costs) Excluded from Adjusted EPS Tax Impact Adjusted EPS Revaluation of deferred tax assets and liabilities $47.4 million $0.68 Repatriation tax of foreign earnings/profits ($0.9 million) (0.01)

Slide 7

Cash Flow from Operations www.BECN.com Year-to-Date Results Net Income Non-Cash and Working Capital Adjustments Operational Cash Flow FY 2018 $67.6 ($108.1) ($40.5) FY 2017 $20.4 $57.7 $78.1 $ in millions $ in millions

Slide 8

www.BECN.com 23.2% (2)Excludes proceeds from September 2017 secondary common stock offering; see slide 14 for detail Fiscal Year Fiscal Year (2) (2) Key Balance Sheet Metrics (1)Includes opening working capital balances for RSG transaction (1)

Slide 9

Fiscal 2018 Outlook Summary www.BECN.com *See definitions in the Appendix of this presentation 2018 Current 2018 Previous Revenue $6.6 - $6.9 billion $6.6 - $6.9 billion Adjusted EBITDA* $560 - $600 million $560 - $600 million Adjusted EPS* $3.40 - $3.70 $2.95 - $3.25 Effective Tax Rate 29% - 30% 38% - 39%

Slide 10

EPS Contribution from Convertible Preferred www.BECN.com Convertible Preferred Accounting Method for EPS Calculations Q2’18* Q3’18 Q4’18 FY2018 After-Tax Dividend ($6.0mm) ---- ---- ---- Diluted Shares ~69 million ~79 million ~79 million ~76 million** *Given the seasonality of our business and related impact on Beacon’s historical winter profitability, the Q2 approach demonstrated above is likely to be the most dilutive EPS calculation method for second quarters in future years, as well. **Full-year share count would substitute 79 million shares outstanding for the Q2 actual when calculating year average shares, and the after-tax dividend would be removed for EPS calculations

Slide 11

Appendix www.BECN.com

Slide 12

Reconciliation: Adjusted Net Income /Adjusted EPS Quarter-To-Date www.BECN.com Note: Adjusted Net Income (Loss) is defined as net income excluding non-recurring costs related to acquisitions and the amortization of intangibles, as well as the non-recurring effects of tax reform. We believe that Adjusted Net Income (Loss) is an operating performance metric that is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. 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 (see Consolidated Statements of Operations for amounts). While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”). You should not consider Adjusted Net Income (Loss) or Adjusted EPS in isolation or as a substitute for net income and net loss per share or diluted earnings per share calculated in accordance with GAAP.

Slide 13

Reconciliation: Net Debt Leverage Ratio www.BECN.com

Slide 14

Reconciliation: Adjusted EBITDA www.BECN.com Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation and non-recurring acquisition costs. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies.   Acquisition costs reflect all non-recurring charges related to acquisitions (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation.   While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance GAAP. You should not consider Adjusted EBITDA 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 has inherent material limitations as a performance measure. It does not include interest expense. Because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITDA also does not include stock-based compensation, which is a necessary element of our costs because we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, stock-based compensation expense, and income tax expense. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Slide 15

Reconciliation of Existing Markets Operating Expense to Adjusted Operating Expense: www.BECN.com Note: FY18 operating expense adjustments include: Acquisition costs $5.6 million and Amortization $16.5 million. FY17 operating expense adjustments include: Acquisition costs of $1.2 million and Amortization of $20.1 million

Slide 16

2018 Guidance Reconciliations $ in millions Low High GAAP Net Income $150 - $160 Acquisition Costs (SG&A) $70 - $80 Interest Expense, net $135 - $145 Income Taxes $5 - ($5) Depreciation $55 - $60 Amortization $130 - $140 Stock Compensation $15 - $20 Adjusted EBITDA $560 - $600 $ in millions Low High GAAP Net Income $150 - $160 One-time tax items ($45) - ($45) Acquisition Costs (post-tax) $65 $70 Amortization (post-tax) $90 - $100 Adjusted Net Income $260 - $285 Avg Diluted Shares Outstanding 76 - 76 Adjusted Diluted EPS $3.40 - $3.70 www.BECN.com Adjusted EBITDA 2018 Outlook Adjusted EPS 2018 Outlook