Beacon Roofing Supply Reports Second Quarter 2014 Results

Beacon Roofing Supply, Inc. (the "Company") (NASDAQ: BECN) announced results today for its second quarter and first half ended March 31, 2014 (“2014”) of the fiscal year ended September 30, 2014 (“Fiscal 2014”).

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Severe winter weather that ranked among the 10 coldest on record in many states across the upper Midwest to the Southeast had a significant impact on our results this quarter. Multiple winter storms that brought record snowfall and freezing rain delayed both residential and commercial roofing projects across our core markets. However, during this period of soft demand we utilized the strength of our balance sheet to make strategic investments in equipment and inventory to grow our business. We believe these investments, along with employee training and our greenfield expansion, will help us maximize our opportunity related to re-roof growth, which is the bulk of our core business. We are especially excited about opening our eighth new branch of the year and are planning on as many as 25 for the full year. Finally, we remained focused on our long standing culture of cost control and leveraging of our operating expenses. All these actions have us well positioned to take advantage of the traditionally high seasonal demand in the second half of the year. We believe the second half of the year volume will be strong for both our residential and commercial markets.”

Second Quarter

Total sales decreased 7.5% to $384.9 million in 2014 from $416.3 million in 2013. On an overall consolidated basis, residential roofing product sales decreased 12.1%, non-residential roofing product sales decreased 2.3%, and complementary product sales decreased 4.1%. During the second quarter, the company had no branches classified as acquired markets and as such, consolidated sales are representative of existing market sales. In addition, the second quarter of 2014 and 2013 both had the same number of business days.

The net loss for the second quarter was $12.1 million, compared to a net loss of $0.2 million in 2013. The second quarter loss per share was $0.25, compared to a net loss per share of $0.00 in 2013. The increase in net loss for the second quarter was due to a combination of reduced sales as a result of the extended duration and severity of the colder temperatures and winter weather through many of our operating regions, reduced selling prices as a result of soft demand, and an unfavorable shift in sales mix to lower margin direct shipment and commercial business. In addition, the company incurred increased operating expenses of $3.9 million this quarter related to new stores (greenfield locations not open last year) as the company continued to expand its footprint in existing and new markets.

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which are reconciled to the net loss in this press release, were ($7.3) million in 2014 compared to $11.6 million in 2013, driven primarily by the larger net loss.

First Half

Total sales increased 0.8% to $937.0 million in 2014 from $930.0 million in 2013. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s first quarter, decreased 1.5%. The first half of 2014 and 2013 both had the same number of business days. In existing markets, residential roofing product sales decreased 5.4%, non-residential roofing product sales increased 3.8%, and complementary product sales decreased 1.7%.

Net income for the first half of 2014 was $2.8 million compared to $18.0 million in 2013. First half of 2014 diluted net income per share was $0.06 compared to $0.37 in 2013. The lower net income was due to the same set of factors mentioned above for the second quarter decline in net income. First half of 2014 diluted net income per share was $0.06, compared to an adjusted diluted net income per share of $0.35 in 2013. The first half of 2013 included a $2.6 million credit to interest expense ($1.5 million, net of taxes), $0.03 per share, resulting from adjustments in the fair values of certain interest rate derivatives, and a $0.9 million charge ($0.5 million, net of taxes), $0.01 per share, for termination benefits.

Adjusted EBITDA for the first half was $30.2 million in 2014, compared to $53.4 million in 2013, a decrease of 43.5% due primarily to lower net income.

Cash flow from operations was $36.1 million in 2014 compared to $20.6 million in 2013. This increase in operating cash flows was influenced primarily by improvements in working capital requirements from strong receivable collections and increased inventory purchases with extended payable terms. Cash on hand increased by $17.3 million to $34.0 million at March 31, 2014, compared to $16.7 million at March 31, 2013. This increase was due primarily to continued robust operating cash flow and a reduction of cash used in investing activities in 2014, compared to 2013. As of March 31, 2014, we had available borrowings under our revolving lines of credit of $331.6 million.

The Company will host a webcast and conference call today at 10:00 a.m. (EST) 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 719-457-2085. 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, currently operating 249 branches in 39 states in the United States and six provinces in 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

News Provided by Acquire Media
 
 

BEACON ROOFING SUPPLY, INC

Consolidated Statements of Operations

(unaudited; in thousands, except share and per share amounts)
                               
Three Months Ended

March 31,
Six Months Ended

March 31,
2014

% of NetSales
2013

% of NetSales
2014

% of NetSales
2013

% of NetSales
Net sales $ 384,885 100.0 % $ 416,277 100.0 % $ 937,014 100.0 % $ 929,987 100.0 %
Cost of products sold   298,093   77.4 %   316,626   76.1 %   723,317 77.2 %   703,582 75.7 %
Gross profit 86,792 22.6 % 99,651 23.9 % 213,697 22.8 % 226,405 24.3 %
 
Operating expenses   104,004   27.0 %   97,705   23.5 %   203,822 21.8 %   192,208 20.7 %
 
Income from operations (17,212 ) -4.5 % 1,946 0.5 % 9,875 1.1 % 34,197 3.7 %
 
Interest expense, financing costs and other   2,532   0.7 %   1,986   0.5 %   5,197 0.6 %   3,896 0.4 %
 
Income before provision for income taxes (19,744 ) -5.1 % (40 ) 0.0 % 4,678 0.5 % 30,301 3.3 %
Provision for income taxes   (7,627 ) -2.0 %   121   0.0 %   1,838 0.2 %   12,256 1.3 %
 

Net income (loss)
$ (12,117 ) -3.1 % $ (161 ) 0.0 % $ 2,840 0.3 % $ 18,045 1.9 %
 

Net income (loss) per share:
Basic $ (0.25 ) $ - $ 0.06 $ 0.37
Diluted $ (0.25 ) $ - $ 0.06 $ 0.37
 

Weighted average shares used in computing net income (loss) per share:
Basic 49,260,044 48,496,554 49,120,893 48,174,085
Diluted 49,260,044 48,496,554 49,956,072 49,148,923
 
 
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(in thousands)
           
March 31, 2014 September 30, 2013 March 31, 2013
ASSETS (unaudited) (audited) (unaudited)
Current assets:
Cash and cash equivalents $ 34,041 $ 47,027 $ 16,728
Accounts receivable, net 230,379 329,673 227,810
Inventories 421,756 251,370 322,939
Prepaid expenses and other assets 105,401 62,422 72,799
Deferred income taxes   14,226     14,591     15,576
Total current assets 805,803 705,083 655,852
 
Property and equipment, net 70,759 67,659 61,576
Goodwill 466,658 469,203 469,587
Other assets, net   88,327     96,751     105,026
 
TOTAL ASSETS $ 1,431,547   $ 1,338,696   $ 1,292,041
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 308,209 $ 182,914 $ 185,134
Accrued expenses 72,445 68,298 68,624
Borrowings under revolving lines of credit - 47,426 61,000
Current portion of long-term obligations   15,346     15,098     15,171
Total current liabilities 396,000 313,736 329,929
 
Senior notes payable, net of current portion 191,250 196,875 202,500
Deferred income taxes 60,350 61,003 58,005

Long-term obligations under equipment financing and other, net of current portion
  20,591     12,726     11,494
Total liabilities   668,191     584,340     601,928
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 492 488 487
Undesignated preferred stock - - -
Additional paid-in capital 324,504 312,962 302,496
Retained earnings 444,122 441,282 386,720
Accumulated other comprehensive income (loss)   (5,762 )   (376 )   410
Total stockholders' equity   763,356     754,356     690,113
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,431,547   $ 1,338,696   $ 1,292,041
 
 
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(unaudited; in thousands)
       
Six Months Ended

March 31,
2014 2013
Operating activities:

Net income (loss)
$ 2,840 $ 18,045

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,281 14,595
Stock-based compensation 5,489 4,656
Certain interest expense and other financing costs 545 (2,169 )
Gain on sale of fixed assets (480 ) (576 )
Deferred income taxes (1,418 ) 527
Other (3 ) -
Changes in assets and liabilities, net of the effects of businesses acquired:
Accounts receivable 97,706 78,951
Inventories (171,748 ) (87,308 )
Prepaid expenses and other assets (43,252 ) (2,095 )
Accounts payable and accrued expenses   131,113     (4,035 )
Net cash provided by operating activities   36,073     20,591  
 
Investing activities:
Purchases of property and equipment (11,773 ) (10,778 )
Acquisition of businesses - (64,484 )
Proceeds from sales of assets   394     687  
Net cash used in investing activities   (11,379 )   (74,575 )
 
Financing activities:
(Repayments) borrowings under revolving lines of credit, net (47,398 ) 19,700
Repayments under term loan (5,625 ) (5,625 )
Borrowings (repayments) under equipment financing facilities, net 8,530 (2,417 )
Proceeds from exercises of options 6,057 15,123
Excess tax benefit from equity-based compensation   876     3,151  
Net cash (used in) provided by financing activities   (37,560 )   29,932  
Effect of exchange rate changes on cash   (120 )   575  
Net decrease in cash and cash equivalents (12,986 ) (23,477 )
Cash and cash equivalents at beginning of period   47,027     40,205  
Cash and cash equivalents at end of period $ 34,041   $ 16,728  
 
 
BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
                       
Consolidated Sales by Product Line
Three Months Ended
 
March 31, 2014 March 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 186.1 48.3 % $ 211.6 50.8 % $ (25.5 ) -12.1 %
Non-residential roofing products 135.8 35.3 % 139.0 33.4 % (3.2 ) -2.3 %
Complementary building products   63.0 16.4 %   65.7 15.8 %   (2.7 ) -4.1 %
 
$ 384.9 100.0 % $ 416.3 100.0 % $ (31.4 ) -7.5 %
 
Consolidated Sales by Product Line for Existing Markets*
Three Months Ended
 
March 31, 2014 March 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 186.1 48.3 % $ 211.6 50.8 % $ (25.5 ) -12.1 %
Non-residential roofing products 135.8 35.3 % 139.0 33.4 % (3.2 ) -2.3 %
Complementary building products   63.0 16.4 %   65.7 15.8 %   (2.7 ) -4.1 %
 
$ 384.9 100.0 % $ 416.3 100.0 % $ (31.4 ) -7.5 %
 
Existing Market Sales By Business Day**
Three Months Ended
 
March 31, 2014 March 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 2.954 48.3 % $ 3.359 50.8 % $ (0.405 ) -12.1 %
Non-residential roofing products 2.156 35.3 % 2.206 33.4 % (0.050 ) -2.3 %
Complementary building products   1.000 16.4 %   1.043 15.8 %   (0.043 ) -4.1 %
 
$ 6.109 100.0 % $ 6.608 100.0 % $ (0.498 ) -7.5 %
 
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 2014.
**There were 63 business days in each of the quarters ended March 31, 2014 and 2013.
 
 
BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
                       
Consolidated Sales by Product Line
Six Months Ended
 
March 31, 2014 March 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 437.4 46.7 % $ 453.2 48.7 % $ (15.8 ) -3.5 %
Non-residential roofing products 354.9 37.9 % 335.2 36.0 % 19.7 5.9 %
Complementary building products   144.7 15.4 %   141.6 15.2 %   3.1   2.2 %
 
$ 937.0 100.0 % $ 930.0 100.0 % $ 7.0   0.8 %
 
Consolidated Sales by Product Line for Existing Markets*
Six Months Ended
 
March 31, 2014 March 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 418.7 47.4 % $ 442.6 49.3 % $ (23.9 ) -5.4 %
Non-residential roofing products 337.6 38.2 % 325.1 36.2 % 12.5 3.8 %
Complementary building products   127.6 14.4 %   129.8 14.5 %   (2.2 ) -1.7 %
 
$ 883.9 100.0 % $ 897.5 100.0 % $ (13.7 ) -1.5 %
 
Existing Market Sales By Business Day**
Six Months Ended
 
March 31, 2014 March 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 3.349 47.4 % $ 3.540 49.3 % $ (0.191 ) -5.4 %
Non-residential roofing products 2.700 38.2 % 2.601 36.2 % 0.100 3.8 %
Complementary building products   1.021 14.4 %   1.039 14.5 %   (0.018 ) -1.7 %
 
$ 7.071 100.0 % $ 7.180 100.0 % $ (0.109 ) -1.5 %
 
Note: Some totals above may not foot due to rounding.
*Excludes branches acquired during the four quarters prior to the start of Fiscal 2014.
**There were 125 business days in each of the six months ended March 31, 2014 and 2013.
 
 
BEACON ROOFING SUPPLY, INC.
Earnings Before Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation ("Adjusted EBITDA")
(unaudited; in thousands)
    Three Months Ended

March 31,
    Six Months Ended

March 31,
2014     2013 2014     2013

Net income (loss)
$ (12,117 ) $ (161 ) $ 2,840 $ 18,045
Interest expense, net 2,372 1,986 4,766 3,896
Income taxes (7,627 ) 121 1,838 12,256
Depreciation and amortization 7,141 7,538 15,281 14,595
Stock-based compensation   2,957     2,132     5,489   4,656
 
Adjusted EBITDA (1) $ (7,274 ) $ 11,616   $ 30,214 $ 53,448
 
 

(1) Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to 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. 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.

BEACON ROOFING SUPPLY INC

Adjusted Diluted Net Income (loss) per Share ("Adjusted Earnings per Share")
(unaudited; in thousands except per share amounts)
    Three Months Ended

March 31,
    Six Months Ended

March 31,
2014     EPS     2013     EPS 2014     EPS     2013     EPS

Net income (loss)
$ (12,117 )     $ (0.25 ) $ (161 )     $ - $ 2,840     $ 0.06 $ 18,045     $ 0.37
Company adjustments, net of income taxes:

Fair value of certain interest rate derivatives and charge associated with refinancing
- - (767 ) (0.02 ) - - (1,536 ) (0.03 )
Termination benefits   -     -     -     -     -   -   542     0.01  
 

Adjusted net income (loss) per share
$ (12,117 ) $ (0.25 ) $ (928 ) $ (0.02 ) $ 2,840 $ 0.06 $ 17,051   $ 0.35  
 
 

Note: Some totals above may not sum due to rounding.

The Company’s management believes that "Adjusted Earnings per Share," which excludes certain events such as the recognition of changes in the fair value of certain interest rate derivatives and termination benefits is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance.

The majority of the above termination benefits are associated with the retirement of our former CFO. While management believes Adjusted Earnings per Share (EPS) is a useful measure for investors, it is not a measurement presented in accordance with United States generally accepted accounting principles (GAAP). You should not consider Adjusted Earnings per Share in isolation or as a substitute for net loss per share or diluted earnings per share calculated in accordance with GAAP.

Copyright Business Wire 2010

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