Beacon Roofing Supply Reports Second Quarter Results

May 9, 2011

  • Second quarter net sales of $296 million vs. $285 million.
  • Second quarter net loss per share of $0.13 vs. $0.14.
  • First half existing market sales up 3.8%.
  • Cash on hand builds to $178 million.

PEABODY, Mass.--(BUSINESS WIRE)-- Beacon Roofing Supply, Inc. (the "Company") (NASDAQ: BECN) announced results today for its fiscal 2011 second quarter and first half ended March 31, 2011.

Paul Isabella, the Company's President & Chief Executive Officer, stated: "Despite an even harsher winter in most of the northern U.S., we managed to beat last year's results. Our second quarter 2011 results did fall short of our expectations, but our first half results tracked close to our fiscal year 2011 plan and also ahead of last year's first half. We are encouraged because our gross margin continues to improve from last year and we again increased our cash holdings. Our commercial and complementary businesses continued to perform well but most of our regions experienced declines in their residential re-roofing businesses, which included the negative impact of a drop in average shingle prices. In addition, our operating income was unfavorably affected by an increase in our bad debt provision and by higher operating losses in our acquired markets. We feel we are well-positioned to benefit from an expected pick-up in volume and price increases in the second half of our fiscal year, and we remain comfortable with our full year expectations."

Second Quarter

Total sales increased 3.8% to $296.3 million in 2011 from $285.4 million in 2010, while existing market (organic) sales increased 0.2%. Existing market results exclude seven branches acquired subsequent to the beginning of last year's second quarter. In existing markets, non-residential roofing and complementary product sales increased 13.7% and 6.9%, respectively, while residential roofing sales decreased 11.1%. Residential roofing sales continued to be especially weak in markets affected by storms in 2009 and were also affected by continued historically low levels of new home construction.

The net loss for the second quarter was $6.2 million compared to $6.5 million in 2010, an improvement of 4.3%. Net loss per share was $0.13 compared to $0.14 in 2010. The lower net loss was due to the higher sales and gross margin rate and lower interest expense, partially offset by the impact from higher operating expenses and a lower income tax benefit.

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation ("Adjusted EBITDA"), which are reconciled to the net loss and income in this press release, were $0.9 million in 2011 compared to $2.1 million in 2010, a decline of 58%.

First Half

Total sales increased 7.4% to $701.1 million in 2011 from $653.1 million in 2010, while existing market (organic) sales increased 3.8%. Existing market results exclude eight branches acquired subsequent to the start of fiscal year 2010. In existing markets, non-residential roofing and complementary product sales increased 13.5% and 10.1%, respectively, while residential roofing sales decreased 5.5%.

Net income for the first half was $3.9 million compared to $1.4 million in 2010, an improvement of 183%. Diluted net income per share was $0.08 compared to $0.03 in 2010. The higher net income was due to the higher sales and lower interest expense, partially offset by the impact from higher operating expenses and a higher income tax provision.

Adjusted EBITDA was $28.6 million in 2011 compared to $29.1 million in 2010, a decline of 2%.

Cash flow from operations was $68.8 million compared to $25.3 million in 2010. This year's cash flows were influenced mostly by a lower reduction in accounts payable and accrued expenses compared to last year, partially offset by an unfavorable impact from a larger increase in inventories this year. Cash on hand increased by $61.3 million to $178.4 million at March 31, 2011 compared to $117.1 million at September 30, 2010.

The Company will host a webcast and conference call today at 10:00 a.m. ET to discuss these results. The live webcast of the call, along with a webcast replay after the call, can be accessed at http://ir.beaconroofingsupply.com/events.cfm (the "Events & Presentations" page of the "Investor Relations" section of the Company's web site). There will be a slide presentation of the results available on that page of the website as well. For those unable to connect to the Internet or who may wish to ask questions, the conference call dial-in number is 720-545-0063. To assure timely access, call participants should call in before 10:00 a.m.

Beacon Roofing Supply, Inc. is a leading distributor of roofing materials and complementary building products, operating 179 branches in 37 states in the United States and in three provinces 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.

BECN-F

 
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Statements of Operations
               
 
Unaudited Three Months Ended Six Months Ended
(Dollars in thousands, except per share data) March 31, 2011

% of Net
Sales

March 31, 2010

% of Net
Sales

March 31, 2011

% of Net Sales

March 31, 2010

% of Net Sales

 
 
Net sales $ 296,321 100.0 % $ 285,366 100.0 % $ 701,114 100.0 % $ 653,087 100.0 %
Cost of products sold   231,094   78.0 %   224,302   78.6 %   541,077 77.2 %  

503,682

77.1 %
Gross profit 65,227 22.0 % 61,064 21.4 % 160,037 22.8 % 149,405 22.9 %
 
Operating expenses   72,059   24.3 %   67,051   23.5 %   147,029 21.0 %   136,880 21.0 %
 
Income (loss) from operations (6,832 ) -2.3 % (5,987 ) -2.1 % 13,008 1.9 % 12,525 2.0 %
 
Interest expense   3,186   1.1 %   5,499   1.9 %   6,655 0.9 %   11,086 1.7 %
 
Income (loss) before income taxes (10,018 ) -3.4 % (11,486 ) -4.0 % 6,353 0.9 % 1,439 0.2 %
Income tax expense   (3,841 ) -1.3 %   (5,030 ) -1.8 %   2,478 0.4 %   68 0.0 %
 
Net income (loss) $ (6,177 ) -2.1 %   (6,456 ) -2.3 % $ 3,875 0.6 % $ 1,371 0.2 %
 
Net income (loss) per share:
Basic $ (0.13 ) $ (0.14 ) $ 0.08 $ 0.03
Diluted $ (0.13 ) $ (0.14 ) $ 0.08 $ 0.03
 
Weighted average shares used in computing
net income (loss) per share:
Basic   45,855,777     45,397,905     45,777,187   45,338,943
Diluted   45,855,777     45,397,905     46,402,586   45,830,171
 
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Balance Sheets
     
 
Unaudited March 31, 2011 March 31, 2010 September 30, 2010

(Dollars in thousands)

 
Assets
Current assets:
Cash and cash equivalents $ 178,422 $ 89,869 $ 117,136
Accounts receivable, net 177,825 162,080 241,341
Inventories 209,569 220,163 158,774
Prepaid expenses and other assets 52,248 55,835 43,115
Deferred income taxes   15,200   16,342   17,178  
Total current assets 633,264 544,289 577,544
 
Property and equipment, net 44,097 48,329 47,751
Goodwill 366,117 358,749 365,061
Other assets, net   46,513   52,350   51,833  
 
Total assets $ 1,089,991 $ 1,003,717 $ 1,042,189  
 
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 171,343 $ 130,012 $ 144,064
Accrued expenses 65,800 60,750 50,132
Current portion of long-term obligations   9,048   8,639   15,734  
Total current liabilities 246,191 199,401 209,930
 
Senior notes payable and other obligations, net of current portion 321,407 333,826 323,681
Deferred income taxes 39,696 36,034 39,734
 
Stockholders' equity:
Common stock 459 455 457
Additional paid-in capital 242,285 231,690 236,136
Retained earnings 237,765 200,735 233,890
Accumulated other comprehensive income (loss)   2,188   1,576   (1,639 )
Total stockholders' equity   482,697   434,456   468,844  
 
Total liabilities and stockholders' equity $ 1,089,991 $ 1,003,717 $ 1,042,189  
 
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Statements of Cash Flows
   
 
Six Months Ended
Unaudited March 31, 2011 March 31, 2010
(In thousands)
 
Operating activities:
Net income $ 3,875 $ 1,371
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 12,636 14,015
Stock-based compensation 2,969 2,607
Gain on sale of assets (490 ) (244 )
Deferred income taxes (1,057 ) (406 )
Changes in assets and liabilities, net of the effects of
businesses acquired:
Accounts receivable 64,529 66,904
Inventories (50,444 ) (23,469 )
Prepaid expenses and other assets (8,077 ) (2,657 )
Accounts payable and accrued expenses   44,902     (32,795 )
Net cash provided by operating activities   68,843     25,326  
 
Investing activities:
Purchases of property and equipment (4,063 ) (3,362 )
Acquisition of businesses - (6,618 )
Proceeds from sale of assets   1,195     342  
Net cash used in investing activities   (2,868 )   (9,638 )
 
Financing activities:
Repayments under revolving lines of credit, net (59 ) 64
Repayments under senior notes payable and other, net (8,070 ) (11,063 )
Proceeds from exercises of options 2,804 1,812
Income tax benefit from stock-based compensation deductions
in excess of the associated compensation costs   379     480  
Net cash used by financing activities (4,946 ) (8,707 )
 
Effect of exchange rate changes on cash   257     146  
Net increase in cash and cash equivalents 61,286 7,127
Cash and cash equivalents at beginning of period   117,136     82,742  
Cash and cash equivalents at end of period $ 178,422   $ 89,869  
 
BEACON ROOFING SUPPLY, INC
Unaudited
Consolidated Sales by Product Line
         
For the Second Quarter Ended:
 
March 31, 2011 March 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 129.9 43.8 % $ 143.2 50.2 % $ (13.3 ) -9.3 %
Non-residential roofing products 117.3 39.6 % 96.9 34.0 % 20.4 21.1 %
Complementary building products   49.1 16.6 %   45.3 15.9 %   3.8   8.4 %
 
$ 296.3 100.0 % $ 285.4 100.0 % $ 10.9   3.8 %
 
 
Consolidated Sales by Product Line for Existing Markets*
 
For the Second Quarter Ended:
 
March 31, 2011 March 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 126.4 44.4 % $ 142.1 50.0 % $ (15.7 ) -11.0 %
Non-residential roofing products 109.8 38.6 % 96.6 34.0 % 13.2 13.7 %
Complementary building products   48.4 17.0 %   45.3 16.0 %   3.1   6.8 %
 
$ 284.7 100.0 % $ 284.0 100.0 % $ 0.6   0.2 %
 
 
Sales By Business Day by Product Line for Existing Markets*
 
For the Second Quarter Ended:
 
Net Sales Net Sales
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 1.975 44.4 % $ 2.256 50.0 % $ (0.281 ) -12.5 %
Non-residential roofing products 1.716 38.6 % 1.533 34.0 % 0.183 11.9 %
Complementary building products   0.757 17.0 %   0.719 15.9 %   0.038   5.3 %
 
$ 4.448 100.0 % $ 4.508 100.0 % $ (0.060 ) -1.3 %
 
 
Note: Some totals above may not foot due to rounding.
*Excludes branches acquired during the four quarters prior to the start of the second quarter of fiscal 2011.
 
BEACON ROOFING SUPPLY, INC
Unaudited
Consolidated Sales by Product Line
         
For the Six Months Ended:
 
March 31, 2011 March 31, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
 
Residential roofing products $ 305.3 43.5 % $ 316.7 48.5 % $ (11.4 ) -3.6 %
Non-residential roofing products 284.2 40.5 % 236.1 36.2 % 48.1 20.4 %
Complementary building products   111.6 15.9 %   100.3 15.4 %   11.3   11.3 %
 
$ 701.1 100.0 % $ 653.1 100.0 % $ 48.0   7.3 %
 
 
Consolidated Sales by Product Line for Existing Markets*
 
For the Six Months Ended:
 
March 31, 2011 March 31, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
 
Residential roofing products $ 298.0 44.1 % $ 315.5 48.4 % $ (17.5 ) -5.4 %
Non-residential roofing products 267.7 39.6 % 235.8 36.2 % 31.9 13.5 %
Complementary building products   110.4 16.3 %   100.3 15.4 %   10.2   10.1 %
 
$ 676.1 100.0 % $ 651.6 100.0 % $ 24.6   3.8 %
 
 
Sales By Business Day by Product Line for Existing Markets*
 
For the Six Months Ended:
 
March 31, 2011 March 31, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 2.365 44.1 % $ 2.524 48.4 % $ (0.159 ) -6.3 %
Non-residential roofing products 2.125 39.6 % 1.886 36.2 % 0.239 12.7 %
Complementary building products   0.877 16.3 %   0.802 15.4 %   0.075   9.4 %
 
$ 5.367 100.0 % $ 5.212 100.0 % $ 0.155   3.0 %
 
 
*Excludes branches acquired during the four quarters prior to the start of fiscal year 2011.
Note: Some totals above may not foot due to rounding.
 
Earnings Before Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation ("Adjusted EBITDA")
Unaudited
       
(Dollars in thousands)
 
Three Months Ended March 31, Six Months Ended March 31,
2011 2010 2011 2010
 
 
 
Net income (loss) $ (6,177 ) $ (6,456 ) $ 3,875 $ 1,371
Interest expense 3,186 5,499 6,655 11,086
Income taxes (3,841 ) (5,030 ) 2,478 68
Depreciation and amortization 6,183 6,886 12,636 14,015
Stock-based compensation   1,523     1,180     2,969   2,607
 
Adjusted EBITDA (1) $ 874   $ 2,079   $ 28,613 $ 29,147

(1) Adjusted EBITDA is defined as net income (loss) plus interest expense (net of interest income), income taxes, depreciation and amortization and stock-based compensation (i.e. stock option expense). 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. Management uses these supplemental measures to evaluate performance period over period and to analyze the underlying trends in the Company's business and to 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. While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with United States generally accepted accounting principles, or 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 and, 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 provide 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. The Company's management separately monitors capital expenditures, which impact depreciation expense, as well as amortization expense, interest 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.
Dave Grace, CFO, 978-535-7668 x14
dgrace@beaconroofingsupply.com

Source: Beacon Roofing Supply, Inc.

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