PEABODY, Mass.--(BUSINESS WIRE)--May 8, 2007--Beacon Roofing Supply, Inc. ("Beacon" or the "Company") (Nasdaq: BECN) announced results today for its fiscal 2007 second quarter and six months(first half) ended March 31, 2007.
Second Quarter
Sales declined 11.0% to $286.9 million in 2007 from $322.4 million in the second quarter of last year that ended March 31, 2006, reflecting a decline of 13.9% in internal ("existing market") sales. This decline was partially offset by the positive impact from acquisitions made since the second quarter of last year. Declines occurred across all three major product lines, residential, non-residential and complementary products, although complementary product sales declined only 5.1%. The existing market sales decline can be attributed to harsher winter conditions this year in the Northeast, Midwest and Canada, reduced new home construction activity in certain markets, and a flattening of inflation. In addition, there has been a significant slowdown in reconstruction and reroofing activities in the markets that experienced damages from Hurricanes Katrina and Rita.
Existing markets include new branches opened in existing markets but exclude branches acquired in the four quarters prior to the start of the reporting period. During the fiscal year ended September 30, 2006, Beacon made several major acquisitions, including the October 2005 purchase of Shelter Distribution, Inc. ("Shelter"), which currently operates 57 branches. In the second quarter of 2007, Beacon opened two new branches and has opened seven new branches since the second quarter of 2006. Shelter is included in existing markets for the second quarter but in acquired markets for the first half.
Gross profit in the second quarter decreased 14.9% to $66.2 million from $77.8 million a year ago, while the gross margin rate was 23.1% compared to 24.1% last year. The existing market gross margin rate declined to 23.0% in 2007 from 24.2% in 2006. The declines in the gross margin rates were primarily caused by an increase in competitive conditions due to the business slowdown in the industry. The overall gross margin rate was also impacted by a slightly higher gross margin rate in acquired markets compared to existing markets.
Operating expenses increased $5.0 million, or 7.6%, compared to last year's second quarter, due to the impact of the 2006 acquired companies, partially offset by the impact of the lower sales on expenses (e.g. lower transportation and overtime costs) and cost-saving steps implemented as a result of the sales slowdown. As a percentage of net sales, overall operating expenses increased to 24.5% from 20.3%, mostly due to the lower sales and the relatively fixed nature of the Company's expenses. In addition, the acquired markets had higher expenses as a rate of their sales.
Existing market operating expenses increased $0.2 million, or 0.3%, due primarily to increases in bad debt and warehouse expenses, mostly offset by lower payroll and related costs and lower other general & administrative and selling expenses, despite the seven new branches. Stock-based compensation (option) expense increased $0.5 million in 2007 from 2006. As a percentage of net sales, existing market operating expenses increased to 23.7% from 20.4% due primarily to the lower sales and the relatively fixed nature of the Company's expenses.
The Company incurred an operating loss of $4.2 million in 2007 compared to an operating income of $12.4 million in 2006 due to all of the factors mentioned above. As a percentage of net sales, the operating loss was 1.5% compared to the prior-year operating income rate of 3.8%. The existing market operating loss was 0.7% of net sales compared to an operating income rate of 3.8% in 2006.
Interest expense increased $2.1 million due primarily to the additional borrowings associated with the acquisitions. In addition,the Company refinanced its credit facilities in fiscal 2007, which also increased its debt level while providing additional funds for future acquisitions and working capital requirements. The new credit facility also provides the Company with lower interest rates than the prior credit facilities.
The Company's net loss for the second quarter was $6.3 million compared to net income of $4.8 million in 2006. The net loss per share was $0.14 compared to a diluted net income per share of $0.11 in 2006. An income tax benefit of $4.3 million, reflecting an effective tax rate of 40.2%, was recorded in the second quarter of 2007 compared to an income tax expense of $3.3 million, an effective income tax rate of 40.8%, last year.
First Half
Year-to-date (first-half) sales increased 0.7% to $667.2 million in 2007 from $662.3 million in 2006, reflecting the positive impact from acquisitions, mostly offset by a decline of 8.8% in existing market sales, with especially large decreases in residential roofing and complementary building product sales. The existing market sales decline in the first half can be attributed to the same factors mentioned above for the second-quarter decline along with five fewer business days in the first quarter of 2007. When calculated on a per business day basis, first-half existing market sales declined 5.1% in 2007 from 2006.
First-half gross profit decreased 2.2% to $157.9 million in 2007 from $161.5 million in 2006. Gross margin declined from 24.4% to 23.7%, due primarily to an increase in competitive conditions. The Company's gross margin in existing markets declined from 24.2% to 23.6% for the same reason.
First-half operating expenses increased $17.7 million, or 14.3%, reflecting an increase of $20.0 million from the acquired companies, partially offset by a decrease of $2.3 million, or 2.8%, in existing markets. The existing market decrease was primarily due to lower payroll and related costs, lower transportation costs, and lower other general & administrative expenses associated with the sales decline and cost-saving steps. Stock option expense increased $1.3 million.
As a percentage of net sales, operating expenses increased to 21.1% from 18.6% due primarily to the lower sales and a higher expense rate from the acquired companies. The operating expense rate in existing markets increased to 18.1% from 17.0% due to the lower sales, partially offset by cost-saving measures.
First-half operating income fell 55.8% to $16.8 million in 2007 from $38.1 million in 2006. As a percentage of net sales, operating income declined to 2.5% from 5.8%, reflecting the lower gross margin rate and higher expense rate, especially from the acquired companies.Existing market operating margin fell to 5.5% from 7.2%.
First-half interest expense increased $4.4 million to $12.7 million in 2007 due primarily to the additional borrowings associated with the acquisitions made during fiscal 2006.
The first-half net income was $2.5 million in 2007, down from $17.7 million in 2006, a decrease of 86.1%. Diluted net income per share for the first half was $0.05 in 2007 compared to $0.41 per share in 2006, a drop of 87.8%. An income tax expense of $1.7 million was recorded in the first half of 2007 compared to $12.1 million in 2006. The Company has estimated an annual income tax rate of 40.2% for 2007 compared to a rate of 40.6% estimated last year for 2006.
Cash flow from operations was $10.1 million in the first half of 2007 compared to $35.7 million in 2006. This decrease was primarily due to the lower operating income and a decrease in accounts payable and accrued expenses, mostly resulting from curtailed purchases due to the sales slowdown, early payment discounts offered to the Company in 2007, and expense reductions. A larger drop in accounts receivable in 2007 partly offset these factors.
Robert Buck, the Company's President & Chief Executive Officer, stated, "Although we experienced slightly higher total sales in the first half of 2007, we are disappointed that we could not achieve better results for our shareholders to this point in our fiscal year. Our performance was adversely affected by the severe winter conditions, substantially reduced new home construction activity in certain markets, a flattening of inflation, and the slowdown in activity in the markets that experienced damages from Hurricanes Katrina and Rita. The winter is now behind us and our existing market sales for April essentially equaled those of last April, which was an improvement in our sales trend compared to the first half of this year. We will work hard to continue this improvement and we are confident that we will achieve our long-term growth and profit objectives."
The Company will be hosting a conference call this morning at 10:00 a.m. (EDT) to discuss its earnings results for the second quarter and first half. The conference call dial-in-number is 866-791-6252 (international dial-in-number 913-643-4242). To assure timely access, participants should call in before 10:00.
Within two hours after the call, a replay of the conference call will be available at 888-203-1112 (participant passcode 2352347) (international dial-in-number 719-457-0820) for a week following the call. Within two days following the call, a recording will be available on the "Events & Presentations" page of the "Investors" section of the Company's web site at www.beaconroofingsupply.com.
About Beacon Roofing Supply, Inc.:
Beacon Roofing Supply, Inc. is a leading distributor of roofing materials and complementary building products operating 174 branches in 34 states in the United States and 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
Condensed Consolidated Statements of Operations
Second Quarter Ended
-------------------------------------------
(Dollars in thousands, March 31, % of Net March 31, % of Net
except per share data) 2007 Sales 2006 Sales
------------ -------- ------------ --------
Net sales $ 286,945 100.0% $ 322,396 100.0%
Cost of products sold 220,777 76.9% 244,637 75.9%
------------ -------- ------------ --------
Gross profit 66,168 23.1% 77,759 24.1%
Operating expenses 70,394 24.5% 65,403 20.2%
------------ -------- ------------ --------
Income (loss) from
operations (4,226) -1.5% 12,356 3.8%
Interest expense 6,381 2.1% 4,294 1.3%
------------ -------- ------------ --------
Income (loss) before
income taxes (10,607) -3.7% 8,062 2.5%
Income taxes (4,268) -1.5% 3,286 1.0%
------------ -------- ------------ --------
Net income (loss) $ (6,339) -2.2% 4,776 1.5%
============ ======== ============ ========
Net income (loss) per
share:
Basic $ (0.14) $ 0.11
============ ============
Diluted $ (0.14) $ 0.11
============ ============
Weighted average shares
used in computing net
income (loss) per share:
Basic 43,927,745 43,580,814
============ ============
Diluted 43,927,745 44,809,777
============ ============
Six Months Ended
-------------------------------------------
(Dollars in thousands, March 31, % of Net March 31, % of Net
except per share data) 2007 (a) Sales 2006 Sales
------------ -------- ------------ --------
Net sales $ 667,154 100.0% $ 662,282 100.0%
Cost of products sold 509,252 76.3% 500,815 75.6%
------------ -------- ------------ --------
Gross profit 157,902 23.7% 161,467 24.4%
Operating expenses 141,066 21.1% 123,399 18.6%
------------ -------- ------------ --------
Income (loss) from
operations 16,836 2.5% 38,068 5.8%
Interest expense 12,709 1.9% 8,312 1.3%
------------ -------- ------------ --------
Income (loss) before
income taxes 4,127 0.6% 29,756 4.5%
Income taxes 1,661 0.2% 12,071 1.8%
------------ -------- ------------ --------
Net income (loss) 2,466 0.4% 17,685 2.7%
============ ======== ============ ========
Net income (loss) per
share:
Basic $ 0.06 $ 0.42
============ ============
Diluted $ 0.05 $ 0.41
============ ============
Weighted average shares
used in computing net
income (loss) per share:
Basic 43,898,332 42,017,658
============ ============
Diluted 44,874,694 43,386,520
============ ============
(a) The first half of fiscal year 2007 had five fewer business days as
compared to the first half of fiscal year 2006.
Note: All share and per share data reflect the June 2006 three-for-two
stock split.
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Balance Sheets
March 31, March 31, September 30,
2007 2006 2006
(Dollars in thousands)
------------------------------------ --------- --------- -------------
Assets
Current assets:
Cash and cash equivalents $ 43,315 $ - $ 1,847
Accounts receivable, net 152,318 160,807 210,676
Inventories 178,804 178,494 164,285
Prepaid expenses and other
assets 32,034 35,346 38,133
Deferred income taxes 12,046 10,983 10,704
--------- --------- -------------
Total current assets 418,517 385,630 425,645
Property and equipment, net 68,211 52,862 59,291
Goodwill 288,816 258,445 289,282
Other assets, net 60,887 61,298 65,672
--------- --------- -------------
Total assets $836,431 $758,235 $ 839,890
========= ========= =============
Liabilities and stockholders' equity
Current liabilities:
Cash overdraft $ - $ 1,257 $ -
Accounts payable 106,925 135,789 154,878
Accrued expenses 47,920 48,467 58,719
Current portion of long-term
obligations 6,454 28,370 6,657
--------- --------- -------------
Total current liabilities 161,299 213,883 220,254
Borrowings under revolving lines of
credit - 208,605 229,752
Senior notes payable and other
obligations, net of current portion 358,528 59,510 79,892
Deferred income taxes 19,009 20,473 18,823
Stockholders' equity:
Common stock 442 441 439
Additional paid-in capital 208,914 201,221 203,433
Treasury stock - (515) -
Retained earnings 83,827 49,735 81,361
Accumulated other comprehensive
income 4,412 4,882 5,936
--------- --------- -------------
Total stockholders' equity 297,595 255,764 291,169
--------- --------- -------------
Total liabilities and stockholders'
equity $836,431 $758,235 $ 839,890
========= ========= =============
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Statements of Cash Flows
Six Months Ended
-----------------------------
March 31, 2007 March 31, 2006
(In thousands)
-----------------------------
Operating activities:
Net income $ 2,466 $ 17,685
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 13,878 10,816
Stock-based compensation 2,605 1,333
Unrealized (gain) loss on interest
rate collars - (286)
Deferred income taxes (860) 289
Changes in assets and liabilities, net
of the effects of acquisitions:
Accounts receivable 57,769 24,099
Inventories (14,864) (32,768)
Prepaid expenses and other assets 7,995 (1,130)
Accounts payable and accrued expenses (58,887) 15,666
-----------------------------
Net cash provided by operating
activities 10,102 35,704
-----------------------------
Investing activities:
Purchases of property and equipment (17,319) (7,678)
Acquisition of businesses, net of cash
acquired 86 (279,588)
-----------------------------
Net cash used in investing activities (17,233) (287,266)
-----------------------------
Financing activities:
Borrowings (repayments) under revolving
lines of credit (229,752) 144,825
Borrowings under senior notes & other 278,641 55,813
Net proceeds from sale of common stock - 51,576
Proceeds from exercise of options 1,034 1,421
Deferred financing costs (2,954) (2,167)
Income tax benefit from stock-based
compensation deductions in excess of
the associated recognized compensation
cost 1,845 4,890
-----------------------------
Net cash provided by financing
activities 48,814 256,358
Effect of exchange rate changes on cash (215) 54
-----------------------------
Net increase in cash and cash
equivalents 41,468 4,850
Cash and cash equivalents (overdraft) at
beginning of period 1,847 (6,107)
-----------------------------
Cash and cash equivalents (overdraft) at
end of period $ 43,315 $ (1,257)
=============================
Non-cash financing and investing
activities:
Conversion of senior notes payable to
new senior notes $ 66,839 $ 25,160
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line
For the Second Quarter Ended:
March 31, 2007 March 31, 2006
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
--------- ------ --------- ------ --------------
Residential roofing
products $ 134.8 47.0% $ 157.9 49.0% $(23.1) -14.6%
Non-residential
roofing products 82.1 28.6% 91.4 28.3% (9.3) -10.2%
Complementary
building products 70.0 24.4% 73.1 22.7% (3.1) -4.2%
--------- ------ --------- ------ -------
$ 286.9 100.0% $ 322.4 100.0% $(35.5) -11.0%
========= ====== ========= ====== =======
Consolidated Sales by Product Line for Existing Markets(1)
For the Second Quarter Ended:
March 31, 2007 March 31, 2006
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
--------- ------ --------- ------ --------------
Residential roofing
products $ 118.3 45.8% $ 144.0 48.0% $(25.7) -17.8%
Non-residential
roofing products 73.6 28.5% 85.9 28.6% (12.3) -14.3%
Complementary
building products 66.6 25.8% 70.2 23.4% (3.6) -5.1%
--------- ------ --------- ------ -------
$ 258.5 100.0% $ 300.1 100.0% $(41.6) -13.9%
========= ====== ========= ====== =======
(1) Excludes branches acquired during the four quarters prior to the
start of the second quarter of fiscal 2007.
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line
For the Six Months Ended:
March 31, 2007 (a) March 31, 2006
(dollars in
millions) Net Sales Mix % Net Sales Mix % Change
----------- ------ --------- ------ ---------------
Residential
roofing products $ 313.8 47.0% $ 317.6 48.0% $ (3.8) -1.2%
Non-residential
roofing products 202.5 30.4% 199.0 30.0% 3.5 1.8%
Complementary
building products 150.9 22.6% 145.7 22.0% 5.2 3.6%
----------- ------ --------- ------ --------
$ 667.2 100.0% $ 662.3 100.0% $ 4.9 0.7%
=========== ====== ========= ====== ========
Consolidated Sales by Product Line for Existing Markets(1)
For the Six Months Ended:
March 31, 2007 (a) March 31, 2006
(dollars in
millions) Net Sales Mix % Net Sales Mix % Change
----------- ------ --------- ------ ---------------
Residential
roofing products $ 183.2 42.0% $ 207.7 43.5% $ (24.5) -11.8%
Non-residential
roofing products 156.3 35.9% 159.4 33.4% (3.1) -1.9%
Complementary
building products 96.2 22.1% 110.5 23.1% (14.3) -12.9%
----------- ------ --------- ------ --------
$ 435.7 100.0% $ 477.6 100.0% $ (41.9) -8.8%
=========== ====== ========= ====== ========
Existing Market Sales By Business Day (b) during the Six Months Ended:
March 31, 2007 March 31, 2006
(dollars in
millions) Net Sales Mix % Net Sales Mix % Change
----------- ------ --------- ------ ---------------
Residential
roofing products $ 1.466 42.1% $ 1.598 43.5% $(0.132) -8.3%
Non-residential
roofing products 1.251 35.9% 1.226 33.4% 0.025 2.0%
Complementary
building products 0.769 22.1% 0.850 23.1% (0.081) -9.5%
----------- ------ --------- ------ --------
$ 3.486 100.0% $ 3.674 100.0% $(0.188) -5.1%
=========== ====== ========= ====== ========
(1) Excludes branches, such as Shelter branches, acquired during
fiscal 2006.
(a) The first half of fiscal year 2007 had five fewer business days as
compared to the first half of fiscal year 2006.
(b) Calculated by dividing the total first-half existing market sales
above by the number of business days in the respective six months.
This table is being presented since there was a significant
difference in the number of business days between this year and last
year's first half and we therefore believe this information may be
useful to investors.
CONTACT:
Beacon Roofing Supply, Inc.
Dave Grace, CFO, 978-535-7668 x14
dgrace@beaconroofingsupply.com