Beacon Roofing Supply Reports Fourth Quarter And Annual 2011 Results

Beacon Roofing Supply, Inc. (the “Company”) (NASDAQ: BECN) announced results today for its fourth quarter and fiscal year ended September 30, 2011.

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “We had record fourth quarter and fiscal year results. Most of our regions achieved double-digit sales percentage increases in the fourth quarter and substantially exceeded our fourth-quarter and full-year sales and income expectations. Once again both our residential and non-residential product sales showed double-digit percentage increases for the quarter. Our complementary product sales were down only one percent. Our roofing businesses have benefited both from a pick-up in volume, including some storm business, and from industry-wide price increases mostly during the second half of the year. Our commercial business has remained consistently strong throughout this year. We were able to use our strong financial position to increase inventories ahead of some vendor price increases, which enabled us to achieve gross margins that were significantly above last year’s rates. We continued to exercise prudent expense controls to further improve our operating margin and our cash holdings have increased since last year even after this year’s third-quarter purchase of Enercon Products. We continue to aggressively seek quality companies that fit our target acquisition profile, such as Denver-based Fowler & Peth acquired in the first quarter of fiscal 2012. We believe there are many favorable long-term growth factors in our industry, so we expect to continue expanding our geographic reach in 2012.”

Fourth Quarter

Total sales increased 19.3% to $575.6 million in 2011 from $482.6 million in 2010. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s fourth quarter, increased 15.6%. In existing markets, residential and non-residential roofing product sales increased 25.7% and 10.8%, respectively, while complementary product sales declined only 1.0%. Our fourth quarter roofing sales this year were favorably impacted by higher average selling prices and by increased business in several markets that experienced significant spring hail storms.

Net income for the fourth quarter, which included a one-time income tax benefit of $5.1 million, was $31.3 million compared to $16.9 million in 2010, an improvement of 85.3%. This year’s fourth-quarter net income, even prior to the tax benefit, represented a record for any prior quarter. Diluted net income per share was $0.67, including $0.11 per share for the one-time tax benefit, compared to $0.37 in 2010. The higher net income was due to the higher sales and gross margin rate, as well as lower interest expense, partially offset by the impact from higher operating expenses and a higher income tax provision (even after the tax benefit).

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which are reconciled to the net income in this press release, were $55.4 million in 2011 compared to $38.9 million in 2010, an increase of 42.5%.

Fiscal Year

Sales increased 12.9% to a record $1.82 billion in 2011 from $1.61 billion in 2010, while existing market sales increased 9.3% (8.8% based on the same number of business days). The annual existing market results exclude branches acquired during 2011 and 2010. In existing markets, residential and non-residential roofing product sales were up strongly at 8.8% and 12.8%, respectively, while complementary product sales increased 1.7%. Our annual roofing sales this year were favorably impacted by the same factors mentioned above for the fourth quarter, especially in the second half of the year.

Net income was $59.2 million compared to $34.5 million in 2010, an increase of 71.5%. Diluted net income per share was $1.27, including the $0.11 per share for the one-time tax benefit, compared to $0.75 in 2010, an increase of 69.3%. The higher net income was due to the same factors mentioned above for the fourth quarter.

Adjusted EBITDA was $134.9 million in 2011 compared to $106.3 million in 2010, an increase of 26.9%.

Cash flow from operations was $79.3 million compared to $73.9 million in 2010. This year’s operating cash flows were influenced mostly by the higher operating income and a higher increase in accounts payable and accrued expenses compared to last year, partially offset by an unfavorable impact from larger increases in inventories and accounts receivable this year. Cash on hand increased by $25.9 million to $143.0 million at September 30, 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 719-325-2186. 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 194 branches in 38 states in the United States and across 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
(Dollars in thousands, except per share data)                
Fourth Quarter Ended Fiscal Year Ended
September 30, 2011  

% of NetSales
September 30, 2010  

% of NetSales
September 30, 2011  

% of NetSales
September 30, 2010  

% of NetSales
 
Net sales $ 575,562 100.0 % $ 482,603 100.0 % $ 1,817,423 100.0 % $ 1,609,969 100.0 %
Cost of products sold   442,691   76.9 %   376,196   78.0 %   1,397,798   76.9 %   1,249,869   77.6 %
Gross profit 132,871 23.1 % 106,407 22.0 % 419,625 23.1 % 360,100 22.4 %
 
Operating expenses   85,269   14.8 %   75,647   15.7 %   315,883   17.4 %   286,583   17.8 %
 
Income from operations 47,602 8.3 % 30,760 6.4 % 103,742 5.7 % 73,517 4.6 %
 
Interest expense   3,383   0.6 %   3,528   0.7 %   13,364   0.7 %   18,210   1.1 %
 
Income before income taxes 44,219 7.7 % 27,232 5.6 % 90,378 5.0 % 55,307 3.4 %
Income taxes   12,962   2.3 %   10,368   2.1 %   31,158   1.7 %   20,781   1.3 %
 
Net income $ 31,257   5.4 % $ 16,864   3.5 % $ 59,220   3.3 % $ 34,526   2.1 %
 
Net income per share:
Basic $ 0.68 $ 0.37 $ 1.29 $ 0.76
Diluted $ 0.67 $ 0.37 $ 1.27 $ 0.75
 

Weighted average shares used in computing net income per share:
Basic   46,129,848   45,655,108   45,919,198   45,480,922
Diluted   46,959,634   46,092,099   46,753,152   46,031,593
 
 

Beacon Roofing Supply, Inc.
Condensed Consolidated Balance Sheets
   

(In thousands)
September 30, 2011 September 30, 2010
 
Assets
Current assets:
Cash and cash equivalents $ 143,027 $ 117,136
Accounts receivable, net 280,322 241,341
Inventories 202,474 158,774
Prepaid expenses and other assets 37,573 43,115
Deferred income taxes   15,469     17,178  
Total current assets 678,865 577,544

 
Property and equipment, net 47,427 47,751
Goodwill 380,916 365,061
Other assets, net   49,756     51,833  
 
Total assets $ 1,156,964   $ 1,042,189  
 
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 182,523 $ 144,064
Accrued expenses   85,511     65,866  
Total current liabilities 268,034 209,930
 
Senior notes payable and other obligations, net of current portion 311,511 323,681
Deferred income taxes 38,992 39,734
 
Common stock 462 457
Additional paid-in capital 248,260 236,136
Retained earnings 293,110 233,890
Accumulated other comprehensive loss   (3,405 )   (1,639 )
Total stockholders' equity   538,427     468,844  
 
Total liabilities and stockholders' equity $ 1,156,964   $ 1,042,189  
 
 
Beacon Roofing Supply, Inc.
Condensed Consolidated Cash Flows
   
Fiscal Year Ended
 

(In thousands)
September 30, 2011 September 30, 2010
 
Operating activities:
Net income $ 59,220 $ 34,526

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 25,060 27,773
Stock-based compensation 6,073 5,001
Gain on sale of fixed assets (750 ) (587 )
Deferred income taxes (465 ) 3,060
Changes in assets and liabilities, excluding the effects of acquisitions:
Accounts receivable (35,314 ) (6,486 )
Inventories (35,016 ) 40,952
Prepaid expenses and other assets 7,470 8,723
Accounts payable and accrued expenses   53,012     (39,051 )
Net cash provided by operating activities   79,290     73,911  
 
Investing activities:
Purchases of property and equipment (14,433 ) (10,268 )
Acquisition of businesses, net of cash acquired (34,942 ) (19,328 )
Proceeds from sales of assets   1,543     748  
Net cash used in investing activities   (47,832 )   (28,848 )
 
Financing activities:
Borrowings (repayments) under revolving lines of credit (50 ) 67
Repayments under senior notes & other (11,053 ) (15,193 )
Proceeds from exercise of options 5,302 3,561

Income tax benefit from stock-based compensation deductions in excess of the associated compensation cost
  756     786  
Net cash used by financing activities (5,045 ) (10,779 )
 
Effect of exchange rate changes on cash   (522 )   110  
Net increase in cash and cash equivalents 25,891 34,394
Cash and cash equivalents at beginning of period   117,136     82,742  
Cash and cash equivalents at end of period $ 143,027   $ 117,136  
 
BEACON ROOFING SUPPLY, INC
Unaudited
Consolidated Sales by Product Line
           
For the Fourth Quarters Ended:
 
September 30, 2011 September 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 278.3 48.3 % $ 210.2 43.6 % $ 68.1 32.4 %
Non-residential roofing products 229.3 39.8 % 203.9 42.3 % 25.3 12.4 %
Complementary building products   68.0 11.8 %   68.4 14.2 %   (0.4 ) -0.6 %
 
$ 575.6 100.0 % $ 482.6 100.0 % $ 93.0   19.3 %
 
Consolidated Sales by Product Line for Existing Markets*
 
For the Fourth Quarters Ended:
 
September 30, 2011 September 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 262.0 47.2 % $ 208.4 43.4 % $ 53.6 25.7 %
Non-residential roofing products 225.6 40.6 % 203.6 42.4 % 22.0 10.8 %
Complementary building products   67.7 12.2 %   68.4 14.2 %   (0.7 ) -1.0 %
 
$ 555.3 100.0 % $ 480.4 100.0 % $ 74.9   15.6 %
 
*Excludes branches acquired during the four quarters prior to the start of the fourth quarter of fiscal 2011.
Note: Some amounts and percentages may not add down or across due to rounding.
 
 
BEACON ROOFING SUPPLY, INC
Unaudited
Consolidated Sales by Product Line
           
For the Fiscal Years Ended:
 
September 30, 2011 September 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 845.6 46.5 % $ 748.0 46.5 % $ 97.6 13.0 %
Non-residential roofing products 723.6 39.8 % 619.3 38.5 % 104.3 16.8 %
Complementary building products   248.2 13.7 %   242.6 15.1 %   5.6 2.3 %
 
$ 1,817.4 100.0 % $ 1,609.9 100.0 % $ 207.5 12.9 %
 
Consolidated Sales by Product Line for Existing Markets*
 
For the Fiscal Years Ended:
 
September 30, 2011 September 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 801.7 46.3 % $ 736.9 46.5 % $ 64.8 8.8 %
Non-residential roofing products 683.9 39.5 % 606.3 38.3 % 77.6 12.8 %
Complementary building products   244.7 14.1 %   240.5 15.2 %   4.2 1.7 %
 
$ 1,730.3 100.0 % $ 1,583.7 100.0 % $ 146.6 9.3 %
 
Existing Market Sales By Business Day (a) During the Fiscal Years Ended:
 
September 30, 2011 September 30, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 3.156 46.3 % $ 2.913 46.5 % $ 0.244 8.4 %
Non-residential roofing products 2.693 39.5 % 2.396 38.3 % 0.296 12.4 %
Complementary building products   0.963 14.1 %   0.951 15.2 %   0.013 1.3 %
 
$ 6.812 100.0 % $ 6.260 100.0 % $ 0.553 8.8 %
 
*Excludes branches acquired during fiscal years 2011 and 2010.

(a) There were 254 business days in 2011 compared to 253 in 2010.
Note: Some amounts and percentages may not add down or across due to rounding.
 
 
BEACON ROOFING SUPPLY, INC
Results in Existing Markets-Unaudited
             
For the Fourth Quarter Ended:
 
Existing Markets Acquired Markets Consolidated
September 30, September 30, September 30,
(in thousands)     2011     2010     2011     2010     2011     2010  
 
Net Sales $ 555,303 $ 480,442 $ 20,259 $ 2,161 $ 575,562 $ 482,603
 
Gross Profit 127,173 105,316 5,698 1,091 132,871 106,407
Gross Margin 22.9 % 21.9 % 28.1 % 50.5 % 23.1 % 22.0 %
 
Operating Expenses 81,286 74,825 3,983 822 85,269 75,647
Operating Expenses as a % of Net Sales 14.6 % 15.6 % 19.7 % 38.0 % 14.8 % 15.7 %
 
Operating Income $ 45,887 $ 30,491 $ 1,715 $ 269 $ 47,602 $ 30,760
Operating Margin 8.3 % 6.3 % 8.5 % 12.4 % 8.3 % 6.4 %
 
 
Beacon Roofing Supply, Inc.
Earnings Before Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation ("Adjusted EBITDA")
Unaudited
(Dollars in thousands, except per share data)
       
Three Months Ended September 30, Fiscal Year Ended September 30,
  2011   2010   2011   2010
Net income $ 31,257 $ 16,864 $ 59,220 $ 34,526
Interest expense 3,383 3,528 13,364 18,210
Income taxes 12,962 10,368 31,158 20,781
Depreciation and amortization 6,265 6,939 25,060 27,773
Stock-based compensation   1,562   1,202   6,073   5,001
 
Adjusted EBITDA (1) $ 55,429 $ 38,900 $ 134,875 $ 106,291
 

(1) Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization and stock-based compensation. 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 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. 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.

BECN-F

Copyright Business Wire 2010

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