PEABODY, Mass.--(BUSINESS WIRE)--Aug. 9, 2006--Beacon Roofing
Supply, Inc. (Nasdaq: BECN) (the "Company") announced today record
performance for its fiscal 2006 third-quarter and year-to-date periods
ended June 30, 2006.
Third Quarter
Sales increased 63.9% to a record $407.1 million in the third
quarter of fiscal 2006 from $248.5 million in the third quarter of
fiscal 2005. This increase reflects the sales from the companies
acquired since last year's third quarter and internal growth of 5.4%.
Strong sales of residential roofing and moderate growth in
complementary building products more than offset a slight decline in
non-residential roofing sales. Our acquired companies, including
Shelter Distribution ("Shelter"), acquired in mid-October 2005,
performed above our expectations. The Company also opened six new
branches since last year's third quarter.
Gross profit increased 68.0% to $100.3 million in 2006 from $59.7
million in 2005. Gross margin increased to 24.6% from 24.0%, boosted
by a 25.0% gross margin from our existing markets, up from 24.2% in
last year's third quarter, and a 24.1% gross margin in our acquired
markets. Existing markets exclude branches acquired in the four
quarters prior to the start of the reporting period. The existing
market gross margin benefited from a product mix shift towards more
residential roofing products, which generally have higher gross
margins inclusive of regular and seasonal vendor buying programs, and
an increase in vendor rebates as a percentage of sales during 2006
resulting mainly from increased buying power from our growth.
Operating expenses increased $28.3 million, or 71.6%, in 2006
compared to 2005, reflecting an increase of $28.9 million from the
acquired companies and a decrease of $0.6 million, or 1.6%, in
existing markets. The existing market expense decline was due, in
part, to lower bad debt expense, insurance costs and professional
fees, partially offset by higher payroll costs and other expenses
associated with the sales volume increase. Stock option expense also
increased $0.7 million in 2006 from 2005.
As a percentage of net sales, overall operating expenses increased
to 16.6% in 2006 from 15.9% in 2005, primarily due to the higher
operating expense rate of our acquired companies, partially offset by
the leveraging of fixed costs over the higher sales volume. The
operating expense rate in existing markets declined to 14.9% from
16.0% as a result of the expense reductions mentioned above and the
leveraging of fixed costs over the higher sales volume.
Operating income increased 60.5% to a record $32.5 million in 2006
from $20.2 million in 2005. As a percentage of net sales, operating
income declined slightly to 8.0% from 8.1%, reflecting the higher
overall operating expense rate, partially offset by the improved gross
margin. Existing market operating margin rose to 10.1% from 8.2% due
to the higher gross margin and lower operating expense rate in our
existing markets discussed above.
Interest expense increased $3.3 million to $4.8 million in 2006,
due primarily to higher borrowings utilized to finance our
acquisitions and higher interest rates. Income tax expense was $10.6
million in 2006, an effective tax rate of 38.3%, compared to $7.4
million in 2005, an effective rate of 39.6%. The reduction in our
third quarter tax rate this year and the lower effective rate for 2005
compared to the year-to-date 2005 rate were due to reversals of
previously accrued income taxes of $0.6 and $0.4 million in 2006 and
2005, respectively. We expect our fiscal 2006 fourth-quarter effective
income tax rate to return to 40.5%.
The Company achieved record third-quarter net income of $17.1
million in 2006 compared to net income of $11.3 million in 2005, an
increase of 50.5%.
Diluted net income per share for the third quarter was $0.38 in
2006 compared to $0.28 per share in 2005, a 35.7% increase.
Year-to-Date
Year-to-date (nine-month) sales increased 72.5% to a record $1.07
billion in 2006 from $619.8 million in 2005, reflecting the sales from
the companies acquired since last year's third quarter and internal
growth of 13.0%, with strong sales of residential roofing and
complementary building products and moderate growth of non-residential
roofing sales. The Company also opened six new branches since last
year's third quarter.
Gross profit increased 72.9% to $261.8 million in 2006 from $151.4
million in 2005. Gross margin increased to 24.5% from 24.4% due to a
higher existing market gross margin, partially offset by a greater
influence from our acquired market gross margin that is lower than our
existing market gross margin. Our gross margin in existing markets
improved to 25.6% from 25.4% in 2005, mostly due to the factors
mentioned above for the quarter.
Operating expenses increased $82.8 million, or 76.4%, in 2006
compared to 2005, reflecting an increase of $78.7 million from our
acquired companies and $4.1 million, or an increase of 4.1%, in
existing markets. The existing market increase was primarily due to
higher payroll costs and other expenses associated with the sales
volume increase. Stock option expense also increased $1.6 million in
2006 from 2005.
As a percentage of net sales, overall operating expenses increased
to 17.9% from 17.5%, due primarily to the higher operating expense
rate of our acquired companies, partially offset by the leveraging of
fixed costs over the higher sales volume. The operating expense rate
in existing markets declined to 16.5% from 18.0%, mostly as a result
of the leveraging of fixed costs over the higher sales volume and
certain expense reductions.
Operating income increased 63.9% to a record $70.5 million in 2006
from $43.0 million in 2005. As a percentage of net sales, operating
income declined to 6.6% from 6.9%, reflecting a higher overall expense
rate from the acquired companies, mostly at Shelter. Existing market
operating margin rose to 9.1% from 7.4%, due to the higher gross
margin and lower operating expense rate discussed above.
Interest expense increased $9.7 million to $13.2 million in 2006,
due principally to higher borrowings and higher interest rates. Income
tax expense was $22.7 million in 2006 compared to $16.1 million in
2005. For year-to-date 2006, our effective income tax rate was
approximately 39.5%, compared to 41.7% for year-to-date 2005, both of
which were impacted by the reversals of tax accruals mentioned above
for the quarter.
The Company achieved record nine-month net income of $34.7 million
in 2006 compared to net income of $22.5 million in 2005, an increase
of 54.5%. Net income in 2005 included a $0.9 million charge for the
early of retirement of debt.
Year-to-date diluted net income per share was $0.79 in 2006
compared to $0.55 per share in 2005, an increase of 43.6%.
Cash flow from operations was $65.8 million in the year-to-date
period of 2006 compared to $9.3 million in 2005. The Company used a
portion of its 2006 cash from operations to increase inventories by
$35.4 million, exclusive of the effects of businesses acquired, in
anticipation of a continued strong sales growth rate.
Robert Buck, the Company's President & Chief Executive Officer,
stated, "Our third-quarter performance continued a streak of record
quarterly results and our operating profit and net profit exceeded our
expectations. We were especially pleased with Shelter's results for
the quarter, which exceeded both our sales and profit expectations.
Due in part to the mild winter during our second quarter and
substantial rainfall during the third quarter, sales growth was
weakest along the East Coast, especially in New England. Of our
product groups, non-residential roofing sales were the weakest in
these areas. In addition, we were up against a non-residential sales
increase of 34% last year. On the other hand, a portion of our
acquired markets continued to benefit from the Gulf Coast rebuilding.
I am encouraged by the improvements in our gross margins as we
continue our rapid growth and our continued expense controls under
challenging circumstances. We will be working to bring the acquired
companies' expense rates more in line with our existing markets, which
continued to improve their profitability."
Beacon Roofing Supply will be holding its investor conference call
today, August 9, 2006, at 11:00 a.m. Eastern Time. The
dial-in-number is 866-383-8003(participant passcode 52651985). Please
call five to ten minutes prior to the scheduled start time to assure
timely access to the call.
About Beacon Roofing Supply Inc.:
Beacon Roofing Supply, Inc. is a leading distributor of roofing
materials and complementary building products operating 148 branches
in 30 states and in Eastern Canada.
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.
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------------------
Three Months Ended
------------------------------------------
(Dollars in thousands, June % June %
except per share 30, of 30, of
data) 2006 Sales 2005 Sales
----------------------------------------------------------------------
Net sales $407,102 100.0% $248,451 100.0%
Cost of products sold 306,794 75.4% 188,738 76.0%
------------------------------------------
Gross profit 100,308 24.6% 59,713 24.0%
Operating expenses (include
stock-based compensation
expense of $833 and $175
for the three months ended
in 2006 and 2005,
respectively) 67,829 16.6% 39,482 15.9%
------------------------------------------
Income from operations 32,479 8.0% 20,231 8.1%
Interest expense 4,845 1.2% 1,459 0.6%
------------------------------------------
Income before income taxes 27,634 6.8% 18,772 7.5%
Income taxes 10,580 2.6% 7,443 2.9%
------------------------------------------
Net income $17,054 4.2% $11,329 4.6%
==========================================
Net income per share:
Basic $0.39 $0.28
=========== ===========
Diluted $0.38 $0.28
=========== ===========
Weighted average shares used
in computing net income
per share:
Basic 43,799,489 39,784,937
=========== ===========
Diluted 45,003,474 41,176,503
=========== ===========
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------------------
Nine Months Ended
------------------------------------------
(Dollars in thousands, June % June %
except per share 30, of 30, of
data) 2006 Sales 2005 Sales
----------------------------------------------------------------------
Net sales $1,069,384 100.0% $619,757 100.0%
Cost of products sold 807,609 75.5% 468,328 75.6%
------------------------------------------
Gross profit 261,775 24.5% 151,429 24.4%
Operating expenses (include
stock-based compensation
expense of $2,166 and $520
for the nine months ended
in 2006 and 2005,
respectively) 191,228 17.9% 108,389 17.5%
------------------------------------------
Income from operations 70,547 6.6% 43,040 6.9%
Interest expense 13,157 1.2% 3,535 0.6%
Loss on early retirement of
debt - - 915 0.1%
------------------------------------------
Income before income taxes 57,390 5.4% 38,590 6.2%
Income taxes 22,651 2.2% 16,099 2.6%
------------------------------------------
Net income $34,739 3.2% $22,491 3.6%
==========================================
Net income per share:
Basic $0.82 $0.57
=========== ===========
Diluted $0.79 $0.55
=========== ===========
Weighted average shares used
in computing net income
per share:
Basic 42,598,829 39,631,596
=========== ===========
Diluted 43,900,509 41,047,854
=========== ===========
BEACON ROOFING SUPPLY, INC.
Condensed Consolidated Balance Sheets
----------------------------------------------------------------------
(Unaud- (Unaud-
ited) ited) Sep-
(Dollars in thousands) June June tember
30, 30, 24,
2006 2005 2005
----------------------------------------------------------------------
Assets
Current assets:
Cash $1,129 $3,224 $-
Accounts receivable, net 189,791 122,412 123,345
Inventories 181,484 99,852 82,423
Prepaid expenses and other assets 39,034 20,893 22,656
Deferred income taxes 11,324 3,226 4,339
---------------------------------
Total current assets 422,762 249,607 232,763
Property and equipment, net 57,950 30,924 31,767
Goodwill, net 270,034 107,631 108,553
Other assets, net 58,735 13,881 13,904
---------------------------------
Total assets $809,481 $402,043 $386,987
=================================
Liabilities and stockholders' equity
Current liabilities:
Cash overdraft $- $- $6,107
Borrowings under revolving lines
of credit - 66,912 -
Accounts payable 154,177 92,147 70,158
Accrued expenses 78,676 39,204 29,146
Current portions of long-term debt
and capital lease obligations 28,271 6,341 6,348
---------------------------------
Total current liabilities 261,124 204,604 111,759
Borrowings under revolving lines of
credit 199,288 - 63,769
Senior notes payable and other
obligations, net of current portion 46,511 20,156 20,156
Deferred income taxes 20,661 9,182 10,890
Long-term obligations under capital
leases and other, net of current portion 6,715 1,782 1,668
Stockholders' equity:
Common stock 441 268 269
Additional paid-in capital 201,993 141,512 142,173
Deferred compensation - (172) -
Treasury stock - (515) (515)
Retained earnings 66,789 21,624 32,050
Accumulated other comprehensive
income 5,959 3,602 4,768
---------------------------------
Total stockholders' equity 275,182 166,319 178,745
---------------------------------
Total liabilities and stockholders'
equity $809,481 $402,043 $386,987
=================================
BEACON ROOFING SUPPLY, INC.
Condensed Consolidated Cash Flows (Unaudited)
----------------------------------------------------------------------
Nine Months
Ended June 30,
(Dollars In thousands) 2006 2005
----------------------------------------------------------------------
Operating activities:
Net income $34,739 $22,491
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 17,143 6,354
Stock-based compensation 2,166 520
Loss on early retirement of debt - 915
Unrealized gain on interest rate collar (709) -
Deferred income taxes 92 381
Changes in assets and liabilities, net
of the effects of businesses acquired:
Accounts receivable (4,481) (17,299)
Inventories (35,359) (22,767)
Prepaid expenses and other assets 293 (64)
Accounts payable and accrued expenses 51,871 18,772
------------------
Net cash provided by operating activities 65,755 9,303
Investing activities:
Purchases of property and equipment, net of sales
proceeds (11,152) (6,974)
Acquisition of businesses, net of cash acquired (285,701) (36,880)
------------------
Net cash used in investing activities (296,853) (43,854)
Financing activities:
Borrowings under revolving lines of credit 135,305 22,114
Borrowings (repayments) under senior notes payable,
and other 47,080 (2,737)
Repurchase of warrants - (34,335)
Repayments of junior subordinated notes - (17,986)
Repayments of subordinated notes payable to related
parties - (29,442)
Proceeds from exercises of options 1,500 -
Net proceeds from sale of common stock 51,576 104,212
Income tax benefit from stock-based
compensation deductions in excess of
recognized compensation cost 5,264 -
Deferred financing costs (2,228) (342)
------------------
Net cash provided by financing activities 238,497 41,484
Effect of exchange rate changes on cash (163) (15)
------------------
Net increase in cash 7,236 6,918
Cash overdraft at beginning of year (6,107) (3,694)
------------------
Cash at end of period $1,129 $3,224
==================
Non-cash transactions:
Capital lease additions $4,951 $1,228
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line
For the Three Months Ended:
June 30, June 30,
2006 2005
-------------- --------------
(dollars in millions) Net Mix Net Mix Growth
Sales % Sales %
----------------------------------- ------ ------- ------ ------------
Residential roofing
products $201.0 49.3% $101.9 41.0% $ 99.1 97.3%
Non-residential roofing
products 118.3 29.1% 89.8 36.1% 28.5 31.7%
Complementary building
products 87.8 21.6% 56.8 22.9% 31.0 54.6%
------- ------ ------- ------ -------
$407.1 100.0% $248.5 100.0% $158.6 63.8%
======= ====== ======= ====== =======
Consolidated Sales by Product Line for Existing Markets(a)
For the Three Months Ended:
June 30, June 30,
2006 2005
-------------- --------------
(dollars in millions) Net Mix Net Mix Growth
Sales % Sales %
------------------------------------ ------ ------- ------ -----------
Residential roofing products $112.6 43.6% $100.7 41.2% $11.9 11.8%
Non-residential roofing
products 86.1 33.4% 87.4 35.7% (1.3)-1.5%
Complementary building
products 59.3 23.0% 56.6 23.1% 2.7 4.8%
------- ------ ------- ------ ------
$258.0 100.0% $244.7 100.0% $13.3 5.4%
======= ====== ======= ====== ======
(a) Excludes branches from markets acquired since the beginning of the
third quarter of fiscal 2005.
Consolidated Sales by Product Line
For the Nine Months Ended:
June 30, June 30,
2006 2005
---------------- --------------
(dollars in millions) Net Mix Net Mix Growth
Sales % Sales %
---------------------------------- ------ ------- ------ -------------
Residential roofing
products $516.9 48.4% $253.7 40.9% $263.2 103.7%
Non-residential roofing
products 316.8 29.6% 218.9 35.3% 97.9 44.7%
Complementary building
products 235.7 22.0% 147.2 23.8% 88.5 60.1%
--------- ------ ------- ------ -------
$1,069.4 100.0% $619.8 100.0% $449.6 72.5%
========= ====== ======= ====== =======
Consolidated Sales by Product Line for Existing Markets(b)
For the Nine Months Ended:
June 30, June 30,
2006 2005
---------------- --------------
(dollars in millions) Net Mix Net Mix Growth
Sales % Sales %
---------------------------------- ------ ------- ------ -------------
Residential roofing
products $258.4 41.1% $219.0 39.4% $ 39.4 18.0%
Non-residential roofing
products 222.3 35.4% 204.4 36.8% 17.9 8.8%
Complementary building
products 147.4 23.5% 132.3 23.8% 15.1 11.4%
--------- ------ ------- ------ -------
$628.1 100.0% $555.7 100.0% $ 72.4 13.0%
========= ====== ======= ====== =======
(b) Excludes branches from markets acquired during fiscal 2006 and
2005.
CONTACT:
Beacon Roofing Supply, Inc.
Dave Grace,
978-535-7668 x14
SOURCE: Beacon Roofing Supply