Beacon Roofing Supply Reports First Quarter 2012 Results

Beacon Roofing Supply, Inc. (the “Company”) (NASDAQ: BECN) announced results today for its first quarter ended December 31, 2011 (“2012”) of the fiscal year ending September 30, 2012 (“fiscal 2012”).

Paul Isabella, the Company’s President & Chief Executive Officer, stated: “We began fiscal 2012 with a very strong first quarter. Most of our geographic regions exceeded our expectations by achieving double-digit sales percentage increases and significant operating income growth. Once again our company-wide residential and non-residential product sales both showed double-digit percentage increases for the quarter, while our complementary product sales were down slightly. Our roofing businesses continued to benefit from higher volume, including sales from increased residential re-roofing activities in all of our geographic regions, and from industry-wide price increases that mostly occurred during the second half of last year. Our commercial business has been consistently strong since the third quarter of 2010. Our gross margin and operating margin continued to improve and we were able to increase our cash holdings since our 2011 year-end, even after the cash used to complete our first-quarter acquisitions. We continue aggressively to seek quality companies that fit our target acquisition profile, such as Fowler & Peth, which we acquired in the first quarter. We are encouraged by our strong start to fiscal 2012 and expect to continue our steady growth.”

Total sales increased 21.0% to $489.9 million in 2012 from $404.8 million in 2011. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s first quarter, increased 17.0%. In existing markets, residential and non-residential roofing product sales increased 25.4% and 15.5%, respectively, while complementary product sales declined 2.6%. Our first-quarter roofing sales this year were favorably impacted by increased re-roofing activities, including the impact from improved weather conditions and stronger business in several markets that experienced significant storms subsequent to last year’s first quarter, and higher average selling prices.

Net income for the first quarter was $19.1 million compared to $10.1 million in 2011, an improvement of 90.2%. This year’s net income included a benefit of $1.0 million, $0.02 per share, from a reduction in a liability for contingent consideration that was established last year for the acquisition of Enercon Products. First-quarter diluted net income per share was $0.41 compared to $0.22 in 2011. The higher net income was due to the higher sales and gross margin rate, partially offset by the impact from higher operating expenses and a higher income tax provision.

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 $41.1 million in 2012 compared to $27.7 million in 2011, an increase of 48.0%. Adjusted EBITDA for 2012 excludes the $1.0 million benefit mentioned above.

Cash flow from operations was $59.0 million compared to $57.5 million in 2011. This year’s operating cash flows were influenced mostly by the higher operating income, partially offset by the impact from less favorable changes in working capital this year. Cash on hand decreased by $20.5 million to $155.2 million at December 31, 2011 compared to $175.7 million at December 31, 2010, but increased $12.1 million compared to $143.0 million at September 30, 2011.

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 719-325-2340. 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 192 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.

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

% of Net Sales
December 31, 2010 % of Net Sales
 
 
Net sales $ 489,850 100.0 % $ 404,793 100.0 %
Cost of products sold   372,525 76.0 %  

309,983
76.6 %
Gross profit 117,325 24.0 % 94,810 23.4 %
 
Operating expenses   82,985 16.9 %   74,970 18.5 %
 
Income from operations 34,340 7.0 % 19,840 4.9 %
 
Interest expense   3,280 0.7 %   3,469 0.9 %
 
Income before income taxes 31,060 6.3 % 16,371 4.0 %
Income tax expense   11,945 2.4 %   6,319 1.6 %
 
Net income $ 19,115 3.9 % $ 10,052 2.5 %
 
Net income per share:
Basic $ 0.41 $ 0.22
Diluted $ 0.41 $ 0.22
 

Weighted average shares used in computing net income per share:
Basic   46,190,888   45,754,466
Diluted   46,830,178   46,167,814
 
 
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Balance Sheets
       
 

Unaudited

(Dollars in thousands)
December 31, 2011 December 31, 2010 September 30, 2011
 
Assets
Current assets:
Cash and cash equivalents $ 155,171 $ 175,674 $ 143,027
Accounts receivable, net 221,665 184,546 280,322
Inventories 193,020 155,190 202,474
Prepaid expenses and other assets 57,083 49,152 37,573
Deferred income taxes   14,881   16,680   15,469  
Total current assets 641,820 581,242 678,865
 
Property and equipment, net 48,537 44,746 47,427
Goodwill 400,140 365,650 380,916
Other assets, net   61,008   48,927   49,756  
 
Total assets $ 1,151,505 $ 1,040,565 $ 1,156,964  
 
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 149,699 $ 128,121 $ 182,523
Accrued expenses 73,101 49,876 69,906
Current portion of long-term obligations   15,201   16,058   15,605  
Total current liabilities 238,001 194,055 268,034
 
Senior notes payable and other obligations, net of current portion 309,632 322,364 311,511
Deferred income taxes 39,145 39,885 38,992
 
Stockholders' equity:
Common stock 463 458 462
Additional paid-in capital 251,623 238,778 248,260
Retained earnings 312,225 243,942 293,110
Accumulated other comprehensive income (loss)   416   1,083   (3,405 )
Total stockholders' equity   564,727   484,261   538,427  
 
Total liabilities and stockholders' equity $ 1,151,505 $ 1,040,565 $ 1,156,964  
 
 
BEACON ROOFING SUPPLY, INC
Condensed Consolidated Statements of Cash Flows
   
 
Three Months Ended

Unaudited

(In thousands)
December 31, 2011 December 31, 2010
 
Operating activities:
Net income $ 19,115 $ 10,052

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6,055 6,453
Stock-based compensation 1,747 1,446
Adjustment of liability for contingent consideration (1,000 ) -
Gain on sale of assets (209 ) (325 )
Deferred income taxes (662 ) (541 )

Changes in assets and liabilities, net of the effects of businesses acquired:
Accounts receivable 71,446 57,367
Inventories 20,805 3,528
Prepaid expenses and other assets (19,126 ) (5,282 )
Accounts payable and accrued expenses   (39,195 )   (15,185 )
Net cash provided by operating activities   58,976     57,513  
 
Investing activities:
Purchases of property and equipment (2,434 ) (862 )
Acquisition of business (44,396 ) -
Proceeds from sales of assets   223     923  
Net cash provided (used) by investing activities   (46,607 )   61  
 
Financing activities:
Repayments under revolving lines of credit, net (13 ) (6 )
Repayments under senior notes payable and other, net (2,315 ) (359 )
Proceeds from exercises of options 1,534 1,109

Income tax benefit from stock-based compensation deductions in excess of the associated compensation costs
  82     88  
Net cash provided (used) by financing activities (712 ) 832
 
Effect of exchange rate changes on cash   487     132  
Net increase in cash and cash equivalents 12,144 58,538
Cash and cash equivalents at beginning of period   143,027     117,136  
Cash and cash equivalents at end of period $ 155,171   $ 175,674  
 
 
BEACON ROOFING SUPPLY, INC
           
Unaudited
Consolidated Sales by Product Line
 
For the Three Months Ended:
 
December 31, 2011 December 31, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
 
Residential roofing products $ 233.5 47.7 % $ 175.5 43.4 % $ 58.0 33.0 %
Non-residential roofing products 194.2 39.6 % 166.7 41.2 % 27.5 16.5 %
Complementary building products   62.2 12.7 %   62.6 15.5 %   (0.4 ) -0.6 %
 
$ 489.9 100.0 % $ 404.8 100.0 % $ 85.1   21.0 %
 
 
Consolidated Sales by Product Line for Existing Markets*
 
For the Three Months Ended:
 
December 31, 2011 December 31, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
 
Residential roofing products $ 220.1 46.5 % $ 175.4 43.3 % $ 44.7 25.4 %
Non-residential roofing products 192.6 40.7 % 166.7 41.2 % 25.9 15.5 %
Complementary building products   61.0 12.9 %   62.6 15.5 %   (1.5 ) -2.6 %
 
$ 473.7 100.0 % $ 404.8 100.0 % $ 69.1   17.0 %
 
 
Existing Market Sales By Business Day during the Three Months Ended:
 
December 31, 2011 December 31, 2010
(dollars in millions) Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 3.668 46.5 % $ 2.829 43.3 % $ 0.839 29.7 %
Non-residential roofing products 3.210 40.7 % 2.689 41.2 % 0.521 19.4 %
Complementary building products   1.017 12.9 %   1.010 15.5 %   0.007   0.7 %
 
$ 7.895 100.0 % $ 6.528 100.0 % $ 1.367   20.9 %
 
*Excludes branches acquired during the four quarters prior to the start of the first quarter of fiscal 2012.
Note: Some totals above may not foot due to rounding.
 
 
BEACON ROOFING SUPPLY, INC.
Earnings Before Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation ("Adjusted EBITDA")
Unaudited
(Dollars in thousands)
   
Three Months Ended December 31,
  2011     2010
 
 
 
Net income $ 19,115 $ 10,052
Interest expense 3,280 3,469
Income taxes 11,945 6,319
Depreciation and amortization 6,055 6,453
Adjustment of liability for contingent consideration (1,000 ) -
Stock-based compensation   1,747     1,446
 
Adjusted EBITDA (1) $ 41,142   $ 27,739
 

(1) Adjusted EBITDA is defined as net income (loss) plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustment of liability for contingent consideration, 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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