Beacon Roofing Supply Reports Third Quarter 2013 Results

Beacon Roofing Supply Reports Third Quarter 2013 Results

  • Record third quarter sales up 12% to $627 million vs. $561 million.
  • Third quarter existing market sales up 1.2%.
  • Third quarter EPS of $0.55 vs. $0.53 ($0.62 adjusted).
  • Record nine month sales up 8% to $1.56 billion vs. $1.45 billion.
  • Nine month EPS of $0.92 ($0.90 adjusted) vs. $1.00 ($1.07 adjusted).
  • 22 new branches (acquisitions and openings) in fiscal 2013 YTD.

PEABODY, Mass.--(BUSINESS WIRE)-- Beacon Roofing Supply, Inc. (the "Company") (NAS: BECN) announced results today for its third quarter and nine months ended June 30, 2013 of the fiscal year ending September 30, 2013 ("fiscal 2013").

Paul Isabella, the Company's President & Chief Executive Officer, stated: "We experienced a challenging demand environment during the third quarter of fiscal 2013, however we still recorded double-digit growth with sales up 12% over last year. Our total sales benefited from the positive impact of several acquisitions made since the start of last year, as well as a 1.2% increase in organic sales in the quarter. In addition to 19 branches acquired so far this year, we also opened two branches in this year's third quarter and three new branches year to date. Our sales growth occurred despite unusually heavy rains and other harsh weather factors in many of our markets that delayed Spring and early Summer roofing activities, as well as the negative impact from fewer hail storms during fiscal 2013 than in the prior year. The soft demand led to pricing pressures that negatively impacted our gross margins, although our continued focus on expense controls enabled us to limit the impact on earnings. Our fourth quarter sales volumes are off to a good start and we will continue to focus on opening new branches, smart acquisition growth and improving our gross margins."

Third Quarter

Total sales increased 11.9% to $627.2 million in 2013 from $560.5 million in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year's third quarter, increased 1.2%. In existing markets, residential and non-residential roofing product sales increased 0.2% and 1.1%, respectively, while complementary product sales increased 5.2%. The 2013 sales performance was unfavorably affected by heavy rains in several regions and fewer hail storms.

Net income for the third quarter was $27.2 million compared to net income of $25.4 million in 2012. The third quarter diluted income per share was $0.55 in 2013 compared to an adjusted $0.62 in 2012. This decline was due primarily to lower gross margins from product cost increases that have not been consistently passed through to customers due to the soft demand environment. Although operating expenses were up in total, they were down as a percentage of sales resulting from continued cost controls and sales base growth. The 2013 diluted income per share was negatively impacted by approximately $.02 per share compared to 2012 by a higher base of shares outstanding. Earnings in the third quarter of fiscal 2012 were impacted by the following charges: $4.9 million ($2.9 million net of taxes), or approximately $0.06 diluted earnings per share, for costs resulting from the Company's refinancing in April 2012; and $1.3 million, or approximately $0.03 diluted earnings per share, from the increase in the liability for consideration due for the Enercon acquisition.

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation ("Adjusted EBITDA"), which is reconciled to the net income in this press release, was $58.0 million in 2013 compared to $60.2 million in 2012, a decrease of 3.6%.

Nine Months

Total sales increased 7.7% to $1.56 billion in 2013 from $1.45 billion in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year, declined 2.0% (2.5% on a same day basis). There was one additional business day in this year's nine months. In existing markets, residential and non-residential roofing product sales decreased 1.6% and 4.8%, respectively, while complementary product sales increased 5.0%. The comparison of the 2013 nine month sales to 2012 was unfavorably affected by last year's high level of re-roofing activities, including the beneficial impact from mild weather in the first half of 2012 and strong business in several markets in the first quarter of 2012 that experienced significant storms in 2011. In addition, as discussed above, this year's third quarter business was negatively affected by numerous rain events.

Net income for the nine months was $45.2 million compared to $47.7 million in 2012, a decrease of 5.2%. Nine month adjusted diluted net income per share was $0.90 compared to an adjusted $1.07 in 2012. The lower net income was due primarily to less favorable weather conditions and the other factors mentioned above for the third quarter decline in comparable net income. This year's nine months 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 prior interest rate derivatives, and a $0.9 million charge ($0.5 million net of taxes), $0.01 per share, for termination benefits. Last year's nine month net income included charges of $4.9 million ($2.9 million net of tax), $0.06 per share, associated with last year's refinancing and an unfavorable $0.3 million year-to-date adjustment, $.01 per share, to the Enercon consideration.

Adjusted EBITDA for the nine months was $111.5 million in 2013 compared to $119.1 million in 2012, a decrease of 6.4%.

Cash flow from operations was $49.4 million compared to $35.3 million in 2012. This comparison in operating cash flows was influenced mostly by a more favorable change in net working capital this year, including building inventory later in the third quarter this year rather than earlier in 2012, resulting in a much higher increase in accounts payable this year. Cash on hand decreased by $4.9 million to $26.4 million at June 30, 2013 compared to $31.2 million at June 30, 2012, due primarily to timing of cash receipts at the end of the periods.

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 (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 719-325-2494. 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 231 branches in 38 states in the United States and across Canada. The Company's fiscal year 2012 sales exceeded $2 billion.

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.


Condensed Consolidated Statements of Operations
UnauditedThree Months EndedNine Months Ended
% of Net% of Net% of Net% of Net
(Dollars in thousands, except per share data)June 30, 2013SalesJune 30, 2012SalesJune 30, 2013SalesJune 30, 2012Sales
Cost of products sold 479,83576.5% 419,79074.9% 1,183,41776.0% 1,093,76075.7%
Gross profit147,33323.5%140,73625.1%373,73824.0%351,77724.3%
Operating expenses 99,38015.8% 89,45916.0% 291,58818.7% 256,40717.7%
Income from operations47,9537.6%51,2779.1%82,1505.3%95,3706.6%
Interest expense 2,7010.4% 8,1581.5% 6,5970.4% 14,7171.0%
Income before income taxes45,2527.2%43,1197.7%75,5534.9%80,6535.6%
Income tax expense 18,0942.9% 17,7043.2% 30,3501.9% 32,9792.3%
Net income$27,1584.3% 25,4154.5%$45,2032.9%$47,6743.3%
Net income per share:
Weighted average shares used in computing
net income per share:
Basic 48,717,686 46,910,336 48,355,285 46,542,158
Diluted 49,585,152 47,897,609 49,298,902 47,485,574
Condensed Consolidated Balance Sheets




(Dollars in thousands)

June 30, 2013

June 30, 2012

September 30, 2012

Cash and cash equivalents$26,375$31,243$40,205
Accounts receivable, net313,698279,304291,456
Prepaid expenses and other assets82,16658,33260,287
Deferred income taxes 14,424 14,258 16,087
Total current assets772,101667,549630,775
Property and equipment, net64,02252,52657,376
Other assets, net 100,852 76,822 85,670
Total assets$1,405,363$1,222,087$1,216,982
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable$253,262$214,865$167,390
Accrued expenses98,42579,45071,627
Borrowings under revolving lines of credit45,00644,90041,300
Current portion of long-term obligations 15,585 15,255 15,632
Total current liabilities412,278354,470295,949
Senior notes payable and other obligations, net of current portion213,618219,205220,875
Deferred income taxes57,61839,94148,196
Stockholders' equity:
Common stock488470477
Additional paid-in capital308,422266,007280,184
Retained earnings413,876340,784368,675
Accumulated other comprehensive income (loss) (937) 1,210 2,626
Total stockholders' equity 721,849 608,471 651,962
Total liabilities and stockholders' equity$1,405,363$1,222,087$1,216,982
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Condensed Consolidated Statements of Cash Flows
Nine Months Ended



(In thousands)

June 30, 2013

June 30, 2012

Operating activities:
Net income$45,203$47,674

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization22,42917,795
Stock-based compensation6,8865,651
Adjustment of liability for contingent consideration-250
Certain interest expense and other financing costs(1,816)5,171
Gain on sale of assets(729)(899)
Deferred income taxes1,441254

Changes in assets and liabilities, net of the effects of businesses acquired:

Accounts receivable(7,485)19,790
Prepaid expenses and other assets(10,041)(19,393)
Accounts payable and accrued expenses 96,399  21,116 
Net cash provided by operating activities 49,394  35,328 
Investing activities: