Beacon Roofing Supply, Inc.
May 4, 2017

Beacon Roofing Supply Reports Second Quarter 2017 Results

HERNDON, Va.--(BUSINESS WIRE)-- Beacon Roofing Supply, Inc. (NASDAQ: BECN) announced results today for its second quarter ended March 31, 2017 and first half ended March 31, 2017 of the fiscal year ending September 30, 2017 ("2017" or "Fiscal 2017").

Paul Isabella, the Company's President and Chief Executive Officer, stated: "I am pleased to announce another record breaking revenue quarter for Beacon which has us positioned for a strong second half of 2017. Most notable is our existing market same day sales growth of 2.4%, which is particularly even more impressive considering the 26% mild weather aided growth we saw in Q2 of 2016. Our existing residential roofing business delivered the 12th consecutive quarter of year-over-year improvement, achieving 9.3% growth in the quarter. Our complementary products business, one of our strategic focus areas, also demonstrated positive growth in the quarter. This is a favorable sign, and we will continue to pursue organic and acquisition growth within this category, as shown by our May 1st acquisition of Lowry's, Inc., a market leader in waterproofing in the western United States. Our second quarter gross margins also remained above the most recent three-year reported average for Q2, and we are confident in sequential improvements during the upcoming quarters. We also expect our non-residential business to rebound in the second half with anticipated stronger demand and more favorable year-over-year comparisons. We will remain intensely focused on producing above-market growth within our core roofing markets and complementary categories, both organically and by acquisition. I am enthusiastic about the remainder of 2017 and our ability to achieve strong full year results."

Second Quarter

Total sales increased 5.7% to a second quarter record of $870.7 million in second quarter 2017, from $823.5 million in 2016. Residential roofing product sales increased 11.8%, non-residential roofing product sales declined 9.4%, and complementary product sales increased 17.6% over the prior year. Existing markets same day sales, excluding acquisitions, increased 2.4% for the quarter. The second quarter 2017 had an identical number of business days as the year ago period (64 vs. 64 days).

The net loss for the second quarter was ($9.4) million, compared to ($5.7) million in 2016. Second quarter EPS was ($0.16), compared to ($0.10) in 2016. Adjusted Net Income (Loss), after removing the impact of certain non-recurring costs related to major acquisitions, was a loss of ($2.6) million in the second quarter 2017, compared to a profit of $1.7 million in 2016. Second quarter Adjusted EPS was a loss of ($0.04) (see included financial tables for a reconciliation of "Adjusted"), compared to $0.03 in 2016. Second quarter results were favorably impacted by attractive volume growth within both residential roofing and complementary products segments. Operating performance was negatively impacted by a decline in non-residential roofing sales and lower gross margins.

First Half

Total sales increased 4.0% to a first half record of $1.87 billion in 2017, from $1.80 billion in 2016. Residential roofing product sales increased 8.4%, non-residential roofing product sales decreased 9.9%, and complementary product sales increased 22.2% over the prior year. Existing market same day sales, excluding acquisitions, increased 0.9% for the first half. The first half of fiscal 2017 and 2016 had 125 and 126 business days, respectively.

Net income for the first half was $11.1 million, compared to $1.4 million in 2016. First half EPS was $0.18, compared to $0.02 in 2016. Adjusted Net Income (Loss), after removing certain non-recurring costs related to major acquisitions, was $24.4 million in the first half 2017, compared to $26.4 million in 2016. First half Adjusted EPS was $0.40 (see included financial tables for a reconciliation of "Adjusted") compared to $0.44 in 2016. The net income for the first half was favorably impacted by existing market growth within residential roofing and complementary products, and improved gross margins. Operating profits were negatively impacted by a decline in non-residential roofing sales and higher expenses.

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 Second Quarter 2017 Earnings Results Webcast and Conference Call
 
When: Thursday, May 4, 2017
 
Time:

5:00 p.m. ET

 
Webcast:

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

 
Live Call: 720-634-9063, Conf. ID #12074415
 

To assure timely access, conference call participants should dial in prior to the 5:00 p.m. 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 384 branches throughout 48 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
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
                                 
 
Three Months Ended March 31, Six Months Ended March 31,

2017(1)

% of

Net Sales

2016(2)

% of

Net Sales

2017(1)

% of

Net Sales

2016(2)

% of

Net Sales

 
Net sales $ 870,724 100.0 % $ 823,537 100.0 % $ 1,872,908 100.0 % $ 1,800,017 100.0 %
Cost of products sold   666,247   76.5 %   627,773   76.2 %   1,417,364   75.7 %   1,371,065   76.2 %
Gross profit 204,477 23.5 % 195,764 23.8 % 455,544 24.3 % 428,952 23.8 %
Operating expense   207,533   23.8 %   191,881   23.3 %   411,643   22.0 %   398,225   22.1 %
Income (loss) from operations (3,056 ) -0.3 % 3,883 0.5 % 43,901 2.3 % 30,727 1.7 %
Interest expense, financing costs, and other   12,268   1.4 %   13,026   1.6 %   25,842   1.4 %   29,282   1.6 %
Income (loss) before provision for income taxes (15,324 )

-1.7

% (9,143 ) -1.1 % 18,059 0.9 % 1,445 0.1 %
Provision for (benefit from) income taxes   (5,968 )

-0.6

%   (3,424 ) -0.4 %   6,985  

0.3

%   46   0.0 %
Net income (loss) $ (9,356 )

-1.1

% $ (5,719 ) -0.7 % $ 11,074  

0.6

% $ 1,399   0.1 %
 
Weighted-average common stock outstanding:
Basic 60,141,580 59,295,990 60,041,332 59,133,569
Diluted 60,141,580 59,295,990 61,069,938 60,077,852
 
Net income (loss) per share:
Basic $ (0.16 ) $ (0.10 ) $ 0.18 $ 0.02
Diluted $ (0.16 ) $ (0.10 ) $ 0.18 $ 0.02
 
 

¹ The second quarter 2017 operating results include $1.6 million ($1.0 million, net of taxes) of non-recurring charges, $7.9 million ($4.8 million, net of taxes) of additional 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 major acquisitions completed in fiscal years 2016 and 2017. The first half 2017 operating results include $2.7 million ($1.7 million, net of taxes) of non-recurring charges, $15.9 million ($9.7 million, net of taxes) of additional amortization for acquired intangibles, and $3.1 million ($1.9 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal years 2016 and 2017. See "Adjusted Net Income and Adjusted EPS" table for further details.

² The second quarter 2016 operating results include $5.5 million ($3.3 million, net of taxes) of non-recurring charges, $5.7 million ($3.4 million, net of taxes) of additional amortization for acquired intangibles, and $1.2 million ($0.7 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal year 2016. The first half 2016 operating results include $25.5 million ($15.2 million, net of taxes) of non-recurring charges, $11.4 million ($6.8 million, net of taxes) of additional amortization for acquired intangibles, and $5.0 million ($3.0 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to major acquisitions completed in fiscal year 2016. See "Adjusted Net Income (Loss) and Adjusted EPS" table for further details.

 
 
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(In thousands)
             

 

March 31,
2017

September 30,
2016

March 31,
2016

 

 

Assets
Current assets
Cash and cash equivalents $ 10,012 $ 31,386 $ 14,841
Accounts receivable, net 506,386 626,965 490,850
Inventories 580,889 480,736 513,750
Prepaid expenses and other current assets   217,389     163,103     164,625  
Total current assets 1,314,676 1,302,190 1,184,066
 
Property and equipment, net 156,380 148,569 147,994
Goodwill 1,228,059 1,197,565 1,160,775
Intangibles, net 439,507 464,024 472,582
Other assets, net 1,511 1,511 1,430
     
Total Assets $ 3,140,133   $ 3,113,859   $ 2,966,847  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 486,328 $ 360,915 $ 417,994
Accrued expenses 131,264 161,113 152,692
Current portion of long-term obligations   14,014     14,811     12,159  
Total current liabilities 631,606 536,839 582,845
 
Borrowings under revolving lines of credit, net 269,124 359,661 295,690
Long-term debt, net 722,101 722,929 722,542
Deferred income taxes, net 137,495 135,482 102,878
Long-term obligations under equipment financing and other, net   30,639     35,121     42,907  
Total liabilities   1,790,965     1,790,032     1,746,862  
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 602 598 595
Undesignated preferred stock - - -
Additional paid-in capital 709,278 694,564 678,748
Retained earnings 658,396 647,322 558,804
Accumulated other comprehensive loss   (19,108 )   (18,657 )   (18,162 )
Total stockholders' equity   1,349,168     1,323,827     1,219,985  
Total Liabilities and Stockholders' Equity $ 3,140,133   $ 3,113,859   $ 2,966,847  
         
 
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(In thousands)
 
 
Six Months Ended March 31,
2017 2016
Operating activities:
Net income $ 11,074 $ 1,399
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 56,955 47,644
Stock-based compensation 7,574 10,696
Certain interest expense and other financing costs 2,703 4,053
Gain on sale of fixed assets (420 ) (411 )
Deferred income taxes 2,020 1,741
Other, net 131 (280 )
Changes in operating assets and liabilities, net of the effects of businesses acquired:
Accounts receivable 123,590 95,150
Inventories (92,072 ) (2,519 )
Prepaid expenses and other assets (53,062 ) (15,815 )
Accounts payable and accrued expenses   91,950     (61,006 )
Net cash provided by operating activities   150,443     80,652  
 
Investing activities:
Purchases of property and equipment (24,231 ) (11,059 )
Acquisition of businesses (58,359 ) (941,156 )
Proceeds from sales of assets   1,285     377  
Net cash used in investing activities   (81,305 )   (951,838 )
 
Financing activities:
Borrowings under revolving lines of credit, net of repayments (91,371 ) 292,273
Borrowings under term loan, net of repayments (1,125 ) 262,125
Borrowings under Senior Notes - 300,000
Borrowings under equipment financing facilities and other, net of repayments (5,278 ) (2,633 )
Payment of deferred financing costs - (27,813 )
Proceeds from exercise of options 7,840 15,391

Taxes paid related to net share settlement of equity awards

(697 ) -
Excess tax benefit from stock-based compensation   -     1,630  
Net cash provided by (used in) financing activities   (90,631 )   840,973  
 
Effect of exchange rate changes on cash 119 (607 )
 
Net decrease in cash and cash equivalents (21,374 ) (30,820 )
Cash and cash equivalents, beginning of period   31,386     45,661  
Cash and cash equivalents, end of period $ 10,012   $ 14,841  
 
 
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line
(Dollars in thousands)
                         
 
Consolidated Sales by Product Line
Three Months Ended March 31,
2017 2016 Change
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 483,928 55.6 % $ 432,774 52.6 % $ 51,154 11.8 %
Non-residential roofing products 243,966 28.0 % 269,270 32.7 % (25,304 ) -9.4 %
Complementary building products   142,830 16.4 %   121,493 14.7 %   21,337   17.6 %
$ 870,724 100.0 % $ 823,537 100.0 % $ 47,187   5.7 %
 
 
 
Consolidated Sales by Product Line for Existing Markets1
Three Months Ended March 31,
2017 2016 Change
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 473,126 56.1 % $ 432,774 52.6 % $ 40,352 9.3 %
Non-residential roofing products 243,482 28.9 % 269,270 32.7 % (25,788 ) -9.6 %
Complementary building products   126,760 15.0 %   121,493 14.7 %   5,267   4.3 %
$ 843,368 100.0 % $ 823,537 100.0 % $ 19,831   2.4 %
 
 
 
Existing Market1 Sales By Business Day2
Three Months Ended March 31,
2017 2016 Change
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 7,393 56.1 % $ 6,762 52.6 % $ 631 9.3 %
Non-residential roofing products 3,804 28.9 % 4,207 32.7 % (403 ) -9.6 %
Complementary building products   1,981 15.0 %   1,898 14.7 %   83   4.3 %
$ 13,178 100.0 % $ 12,867 100.0 % $ 311   2.4 %

¹ Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of the second quarter of fiscal year 2017.
2 There were 64 business days in each of the quarters ended March 31, 2017 and 2016.

 
 
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line
(Dollars in thousands)
                         
 
Consolidated Sales by Product Line
Six Months Ended March 31,
2017 2016 Change
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 1,013,145 54.1 % $ 934,285 51.9 % $ 78,860 8.4 %
Non-residential roofing products 555,974 29.7 % 617,214 34.3 % (61,240 ) -9.9 %
Complementary building products   303,789 16.2 %   248,518 13.8 %   55,271   22.2 %
$ 1,872,908 100.0 % $ 1,800,017 100.0 % $ 72,891   4.0 %
 
 
 
Consolidated Sales by Product Line for Existing Markets1
Six Months Ended March 31,
2017 2016 Change
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 983,115 55.3 % $ 925,484 52.1 % $ 57,631 6.2 %
Non-residential roofing products 553,053 31.1 % 617,096 34.8 % (64,043 ) -10.4 %
Complementary building products   240,453 13.6 %   233,120 13.1 %   7,333   3.1 %
$ 1,776,621 100.0 % $ 1,775,700 100.0 % $ 921   0.1 %
 
 
 
Existing Market1 Sales By Business Day2
Six Months Ended March 31,
2017 2016 Change
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 7,865 55.3 % $ 7,345 52.1 % $ 520 7.1 %
Non-residential roofing products 4,424 31.1 % 4,898 34.8 % (474 ) -9.7 %
Complementary building products   1,924 13.6 %   1,850 13.1 %   74   4.0 %
$ 14,213 100.0 % $ 14,093 100.0 % $ 120   0.9 %

¹ Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of fiscal year 2017.
2 There were 125 and 126 business days for the six months ended March 31, 2017 and 2016, respectively.

 
 
BEACON ROOFING SUPPLY, INC
Adjusted Net Income (Loss) and Adjusted EPS1
(In thousands except per share amounts)
                                 
 
Three Months Ended March 31, Six Months Ended March 31,
2017 2016 2017 2016
Amount Per

Share

Amount Per

Share

Amount Per

Share

Amount Per

Share

Net income (loss) $ (9,356 ) $ (0.16 ) $ (5,719 ) $ (0.10 ) $ 11,074 $ 0.18 $ 1,399 $ 0.02
Company adjustments, net of income taxes:
Acquisition costs2   6,777     0.12     7,401     0.13     13,314   0.22   24,961   0.42
Adjusted Net Income (Loss) $ (2,579 ) $ (0.04 ) $ 1,682   $ 0.03   $ 24,388 $ 0.40 $ 26,360 $ 0.44

¹ Adjusted Net Income (Loss) is defined as net income excluding certain non-recurring costs and the incremental amortization of intangibles related to major acquisitions completed in fiscal years 2016 and 2017. 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 reflect certain non-recurring charges and the incremental amortization of intangibles related to major acquisitions completed in fiscal years 2016 and 2017, net of $4.3 million and $5.0 million in tax for the three months ended March 31, 2017 and 2016, respectively and net of $8.4 million and $16.9 million in tax for the six months ended March 31, 2017 and 2016, respectively.

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.

                 
 
BEACON ROOFING SUPPLY, INC
Adjusted EBITDA1
(In thousands)
 
 
Three Months Ended

March 31,

Six Months Ended

March 31,

2017 2016 2017 2016
Net income (loss) $ (9,356 ) $ (5,719 ) $ 11,074 $ 1,399
Acquisition costs2 1,584 5,451 2,744 21,155
Interest expense, net 13,245 13,128 26,484 29,328
Income taxes (5,968 ) (3,424 ) 6,985 46
Depreciation and amortization 28,530 23,966 56,955 47,637
Stock-based compensation   3,758     3,516     7,574     10,696  
Adjusted EBITDA $ 31,793   $ 36,918   $ 111,816   $ 110,261  
 
Adjusted EBITDA as a % of net sales 3.7 % 4.5 % 6.0 % 6.1 %

¹ Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation, and certain non-recurring costs from major acquisitions completed in fiscal years 2016 and 2017. 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 our non-GAAP financial measures using the same consistent method from quarter-to-quarter and year-to-year.

2 Acquisition costs reflect certain non-recurring charges related to major acquisitions completed in fiscal years 2016 and 2017 (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.

Beacon Roofing Supply, Inc.
Joseph Nowicki, Executive VP & CFO
571-323-3940
JNowicki@becn.com

Source: Beacon Roofing Supply, Inc.

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