10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2005
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM              TO             .

COMMISSION FILE NO.: 000-50924

BEACON ROOFING SUPPLY, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	36-4173371
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Lakeland Park Drive,
Peabody, Massachusetts	01960
(Address of principal executive offices)	(Zip Code)

978-535-7668

(Registrant’s telephone number, including area code)

(former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ý    NO  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (Check one):

Large Accelerated Filer  o                Accelerated Filer  ý        Non-Accelerated Filer  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES  o    NO  ý

As of February 1, 2006, there were 28,929,985 outstanding shares of the registrant’s common stock, $.01 par value per share.

BEACON ROOFING SUPPLY, INC.

Form 10-Q

For the Quarter Ended December 31, 2005

INDEX

Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets
	Consolidated Statements of Operations
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition And Results of Operations
	Overview
	Results of Operations
	Seasonality and Quarterly Fluctuations
	Liquidity and Capital Resources
	Cautionary Statement
Item 3.	Quantitative and Qualitative Disclosures about Market Risk
	Interest Rate Risk
	Foreign Exchange Risk
Item 4.	Controls and Procedures
Part II.	Other Information
Item 6.	Exhibits
Signature Page
Index to Exhibits

2

BEACON ROOFING SUPPLY, INC.

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Consolidated Balance Sheets

	(Unaudited)			(Unaudited)			(Note)
	December 31, 2005			December 31, 2004			September 24, 2005
	(Dollars in thousands)
Assets
Current assets:
Cash	$	7,262		$	4,900		$	—
Accounts receivable, less allowance of $9,279 at December 31, 2005, $3,511 at December 31, 2004, and $4,104 at September 24, 2005 for doubtful accounts	155,414			93,194			123,345
Inventories	152,376			82,750			82,423
Prepaid expenses and other assets	35,367			22,140			20,106
Deferred income taxes	10,686			3,228			4,339
Total current assets	361,105			206,212			230,213
Property and equipment, net	48,826			27,367			31,767
Goodwill, net	182,333			104,375			108,553
Other assets	42,242			13,196			13,904
Total assets	$	634,506		$	351,150		$	384,437
Liabilities and stockholders’ equity
Current liabilities:
Cash overdraft	$	—		$	—		$	3,557
Borrowings under revolving lines of credit	—			52,178			—
Accounts payable	109,541			73,723			70,158
Accrued expenses	54,013			36,359			29,146
Current portions of long-term debt and capital lease obligations	24,823			6,158			6,348
Total current liabilities	188,377			168,418			109,209
Borrowings under revolving lines of credit	118,981			—			63,769
Senior notes payable and other obligations, net of current portion	56,167			21,825			20,156
Deferred income taxes	20,149			8,819			10,890
Long-term obligations under capital leases, net of current portion	4,334			895			1,668
Commitments and contingencies
Stockholders’ equity:
Common stock (voting); $.01 par value; 100,000,000 shares authorized; 29,150,409 issued in December of 2005, 26,591,988 issued in December of 2004 and 26,911,573 issued in September of 2005	292			266			269
Undesignated preferred stock; 5,000,000 shares authorized, none issued or outstanding	—			—			—
Additional paid-in capital	196,807			140,067			142,173
Deferred compensation	—			(517		)	—
Treasury stock (232,861 shares in December of 2005, December of 2004 and September of 2005)	(515		)	(515		)	(515		)
Retained earnings	44,958			7,876			32,050
Accumulated other comprehensive income	4,956			4,016			4,768
Total stockholders’ equity	246,498			151,193			178,745
Total liabilities and stockholders’ equity	$	634,506		$	351,150		$	384,437

Note: The balance sheet at September 24, 2005

has been derived from the audited financial statements at that date.

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Operations

Unaudited	Three Months Ended December 31,
(Dollars in thousands, except per share data)	2005		2004
Net sales	$	339,885	$	199,190
Cost of products sold	256,178		148,844
Gross profit	83,707		50,346
Operating expenses (include stock-based compensation expense of $598 in 2005 and $173 in 2004)	57,995		33,013
Income from operations	25,712		17,333
Other expense:
Interest expense	4,019		892
Loss on early retirement of debt	—		915
	4,019		1,807
Income before income taxes	21,693		15,526
Income taxes	8,785		6,783
Net income	$	12,908	$	8,743
Net income per share:
Basic	$	0.48	$	0.33
Diluted	$	0.46	$	0.32
Weighted average shares used in computing net income per share:
Basic	27,054,738		26,359,127
Diluted	27,947,550		27,303,725

The accompanying Notes are an integral part of the Consolidated Financial Statements.

4

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Cash Flows

	Three Months ended December 31,
	2005			2004
	Unaudited
	(In thousands)
Operating activities:
Net income	$	12,908		$	8,743
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,708			1,810
Stock-based compensation	598			173
Loss on early retirement of debt	—			915
Unrealized loss on interest rate collar	244			—
Deferred income taxes	258			—
Changes in assets and liabilities, net of the effects of businesses acquired:
Accounts receivable	18,558			12,215
Inventories	(15,591		)	(7,167		)
Prepaid expenses and other assets	(4,807		)	(3,526		)
Accounts payable and accrued expenses	6,004			(408		)
Net cash provided by operating activities	22,880			12,755
Investing activities:
Purchases of property and equipment, net of sales proceeds	(184		)	(910		)
Acquisition of businesses, net of cash acquired	(173,130		)	(30,357		)
Net cash used in investing activities	(173,314		)	(31,267		)
Financing activities:
Borrowings under revolving lines of credit	55,182			7,278
Borrowings (repayments) under senior notes payable, and other	53,861			(912		)
Repurchase of warrants	—			(34,335		)
Repayments of junior subordinated notes	—			(17,986		)
Repayments of subordinated notes payable to related parties	—			(29,442		)
Net proceeds from sale of common stock	51,569			102,765
Proceeds from exercises of options	754			—
Deferred financing costs	(1,856		)	(238		)
Income tax benefit from stock-based compensation deductions in excess of recognized compensation cost	1,736			—
Net cash provided by financing activities	161,246			27,130
Effect of exchange rate changes on cash	7			(24		)
Net increase in cash	10,819			8,594
Cash (overdraft) at beginning of year	(3,557		)	(3,694		)
Cash at end of period	$	7,262		$	4,900
Non-cash transactions
Capital lease additions	$	3,251		$	—

The accompanying Notes are an integral part of the Consolidated Financial Statements

5

BEACON ROOFING SUPPLY, INC.

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

Beacon Roofing Supply, Inc. (the Company, which may be referred to as we, us or our) prepared the consolidated financial statements following accounting principles generally accepted in the United States (GAAP) for interim financial information and the requirements of the Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. The balance sheet as of December 31, 2004 has been presented for a better understanding of the impact of seasonal fluctuations on our financial condition.

In management’s opinion, the financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. The results for the three-month period ended December 31, 2005 are not necessarily indicative of the results to be expected for the twelve months ending September 30, 2006 (“2006”).

The Company’s fiscal year ends on the close of business on the last Saturday in September of each year. Except for the fourth quarter of 2005, each of the Company’s 2006 and 2005 quarters ends on the last day of the respective third calendar month.

We completed our initial public offering (“IPO”) on September 22, 2004 and received the net IPO proceeds on September 28, 2004. In connection with the associated early retirement of debt paid with the proceeds, we recorded a $0.9 million loss in the first quarter of 2005.

On December 16, 2005, the Company sold two million shares of common stock at $27.50 per share in a public offering. Selling stockholders also sold shares in the offering. The net proceeds to the Company from this offering, after all associated expenses, totaled approximately $51.6 million and were used for the pay down of revolver borrowings. The Company did not receive any proceeds from the sales by the selling stockholders.

You should also read the financial statements and notes included in our 2005 Annual Report on Form 10-K. The accounting policies used in preparing these financial statements are the same as those described in that Annual Report.

2. Earnings Per Share

We calculate basic income per share by dividing the net income by the weighted average number of common shares outstanding. Diluted net income per share includes the dilutive effects of stock awards. As discussed in Note 1, the Company sold two million additional shares of common stock in December 2005.

The following table reflects the calculation of weighted-average shares outstanding for each period presented:

	Three Months Ended December 31,
	2005	2004
Weighted-average common shares outstanding for basic	27,054,738	26,359,127
Dilutive effect of employee stock options	892,812	944,598
Weighted-average shares assuming dilution	27,947,550	27,303,725

6

3. Stock-Based Compensation

Effective September 25, 2005, the Company adopted Statement of Financial Accounting Standards (“SFAS”) 123R, Share-Based Payments, using the modified prospective transition method.  Prior to 2006, the Company accounted for stock awards granted to employees under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations.  As a result, no compensation expense was previously recognized for stock options granted to employees after the Company’s IPO because all such stock options granted had exercise prices equal to the market value of the Company’s stock on the date of the grant.

Under the modified prospective transition method, compensation expense recognized in the first quarter included: (a) compensation cost for all unvested share-based awards granted prior to September 25, 2005, based on the grant date fair value estimated in accordance with SFAS 123, Accounting For Stock-Based Compensation, and (b) compensation cost for all share-based awards granted subsequent to September 24, 2005, based on the grant date fair value estimated in accordance with SFAS 123R. Results of prior periods have not been restated. SFAS 123R also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation.  In addition, SFAS 123R requires the Company to reflect the benefits of tax deductions in excess of recognized compensation cost to be reported as both a financing cash inflow and an operating cash outflow upon adoption. The excess tax benefit classified as a financing activity would have been classified as an operating inflow if the company had not adopted SFAS 123R.

Compensation cost arising from stock options granted to employees and non-employee directors is recognized as expense using the straight-line method over the vesting period. As of December 31, 2005, there was $5.8 million of total unrecognized compensation cost related to stock options.  That cost is expected to be recognized over a period of 2.8 years.  For the three months ended December 31, 2005, the Company’s total stock-based compensation expense was $0.6 million ($0.4 million net of tax).  Included in this total stock-based compensation expense was incremental expense of $0.2 million ($0.1 million net of tax) for options granted during the quarter ended December 31, 2005. The effect of adopting SFAS 123R on net income and net income per share was not material.

The following table illustrates the effect (in thousands, except per share amounts) on net income and earnings per share for the three months ended December 31, 2004 as if the Company’s stock-based compensation had been determined based on the fair value at the grant dates for awards made prior to 2006, under those plans and consistent with SFAS 123R:

Unaudited (Dollars in thousands, except per share data)	Three Months Ended December 31, 2004
Net income, as reported	$	8,743
Add: stock-based compensation, net of tax	104
Less: stock-based compensation expense determined under fair value method, net of tax	(271		)
Pro forma net income	$	8,576
Basic earnings per share:
As reported	$	0.33
Pro forma	$	0.33
Diluted earnings per share:
As reported	$	0.32
Pro forma	$	0.31

7

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants issued in the first quarter of 2006 and 2005:

	Three Months Ended December 31,
	2005		2004
Risk free interest rate	4.49	%	3.70	%
Expected life	5.0 years		5.0 years
Expected volatility	45.0	%	45.0	%
Expected dividend yield	0	%	0	%

Expected life of the options granted and expected volatilities are based on the expected life and historical volatilities of the stocks of comparable public companies and other factors.  An estimated annual forfeiture rate of 8.0% was utilized in valuing the options granted in the first quarter of 2006 and 2005.

The following table summarizes stock options outstanding as of December 31, 2005 as well as activity during the three months then ended:

	Shares		Range of Exercise Prices	Weighted- Average Exercise Price
Outstanding at September 24, 2005	1,967,999		$0.44 - $21.27	$	5.74
Granted	374,125		27.95	27.95
Exercised	(238,836	)	0.44 - 17.80	3.16
Forfeited	(1,333	)	17.80 - 27.95	20.40
Outstanding at December 31, 2005	2,101,955		$0.44 - 27.95	$	9.99
Exercisable at December 31, 2005	1,457,396		$0.44 - 17.80	$	3.80

At December 31, 2005, the weighted-average remaining contractual life of options outstanding and exercisable was 7.6 years and 6.7 years, respectively.

At December 31, 2005, the aggregate intrinsic value of options outstanding and options exercisable was $39.4 million and $36.3 million, respectively.  (The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.)  The weighted-average grant date fair value of stock options granted during the three months ended December 31, 2005 and 2004 was $12.67 and $7.85, respectively.  The intrinsic value of stock options exercised during the three months ended December 31, 2005 was $5.6 million.  There were no options exercised during the three months ended December 31, 2004. At December 31, 2005, the Company had $4.1 million of excess tax benefits available for deferred tax write-offs related to option accounting.

4. Comprehensive Income

Comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income In our case, these consist of foreign currency translation gains or losses as follows:

Unaudited	Three Months Ended December 31,
(Dollars in thousands, except per share data)	2005		2004
Net income	$	12,908	$	8,743
Foreign currency translation adjustment	188		1,267
Comprehensive income	$	13,096	$	10,010

8

5. Acquisitions

SDI Holding, Inc.

On October 14, 2005, we purchased 100% of the outstanding stock of SDI Holding, Inc. (“Shelter”), a distributor of roofing and other building products with 51 branches in 14 states at the time of the acquisition. This purchase was funded through our U.S. revolving line of credit.Based upon Shelter’s final performance for the 2005 calendar year, the sellers may also qualify for an earn-out payment of up to $10 million, which would be payable during the second quarter of the Company’s 2006 fiscal year. Shelter had net sales of $342.4 million (unaudited) for the year ended December 31, 2005. We have included the results of operations for Shelter from the date of acquisition and applied preliminary purchase accounting as of the date of acquisition, which resulted in recorded goodwill of $71.4 million as follows (in 000’s):

Net assets	$	68,771
Non-compete	842
Customer relationships	25,852
Goodwill	71,407
Purchase price	$	166,872

Supplemental Pro Forma Information - Unaudited

The unaudited pro forma summary information below for the quarters ended December 31, 2005 and December 31, 2004,  gives effect to the acquisition of Shelter as if the acquisition had occurred at the beginning of those periods and is after giving effect to certain adjustments, including amortization of the intangibles subject to amortization and related income taxes. The unaudited pro forma summary information is not necessarily indicative of the financial results that would have occurred if the Shelter acquisition had been consummated at the beginning of those quarters, nor is it necessarily indicative of the financial results which may be attained in the future.

The proforma summary information is based upon available information and upon certain assumptions that the Company’s management believes are reasonable. As mentioned above, the Shelter acquisition is being accounted for using the purchase method of accounting. The allocation of the purchase price is preliminary. Final amounts could differ from those reflected in the pro forma summary information and such differences could be significant.

(000’s omitted, except per share data)

(Unaudited)

	Three Months Ended
	December 31, 2005		December 31, 2004
Net sales	$	355,708	$	265,062
Net income	$	12,368	$	7,752
Net income per common share:
Basic	$	0.46	$	0.29
Diluted	$	0.44	$	0.28

Easton Wholesale, Inc.

On November 23, 2005, we purchased certain assets of Easton Wholesale, Inc. (“Easton”), a distributor of building products located in Easton, Maryland.  This purchase was funded through our U.S. revolving line of credit. Easton had net sales of $9.3 million (unaudited) for the year ended December 31, 2004. We have included the results of operations for Easton from the date of acquisition and applied preliminary purchase accounting as of the date of acquisition, which resulted in recorded goodwill of $2.2 million and $1.3 million of other intangible assets.

Commercial Supply, Inc.

On September 1, 2005, we purchased certain assets of Commercial Supply, Inc. (“CSI”), a distributor of building products located in western Massachusetts.  This purchase was funded through our U.S. revolving line of credit. CSI had net sales of $1.4 million (unaudited) for the year ended December 31, 2004. We have included the results of operations for CSI from the date of acquisition and applied preliminary purchase accounting as of the date of acquisition, which resulted in recorded goodwill of $421 and $314 of other intangible assets.

9

Insulation Systems, Inc. of Virginia

On April 26, 2005, we purchased certain assets of Insulation Systems, Inc. of Virginia (“ISI”), a distributor of roofing and other building products with two branches in Virginia. This purchase was funded through our U.S. revolving line of credit. ISI had net sales of $19 million (unaudited) for the year ended December 31, 2004. We have included the results of operations for ISI from the date of acquisition and applied preliminary purchase accounting as of the date of acquisition, which resulted in recorded goodwill of $3.3 million and $1.3 million of other intangible assets.

JGA Corp.

On December 15, 2004, we purchased 100% of the outstanding stock of JGA Corp. (“JGA”), a distributor of roofing and other building products with eight branches in Georgia and Florida at the time of our acquisition. This purchase was funded through our U.S. revolving line of credit. JGA had net sales of $74 million (unaudited) for the year ended December 31, 2003. We have included the results of operations for JGA from the date of acquisition and applied purchase accounting as of the date of acquisition, which resulted in recorded goodwill of $9.7 million and $11.4 million of other intangible assets.

10

6. Stock Options

During the first three months of 2006, we granted options to purchase 374,125 shares of common stock under our 2004 Stock Plan at a closing price of $27.95 per share on the date of the grant (see also Note 3).  We also issued 128,447, 100,000 and 10,389 shares of common stock under exercises of options under our 1998 Stock Plan, special CEO option agreement and 2004 Stock Plan, respectively. As of December 31, 2005, there were remaining options to purchase 1,412,058 shares of common stock available for grant under the 2004 Stock Plan.

7. Debt

Effective October 14, 2005, the Company and its lenders in connection with the purchase of Shelter (Note 5) amended and restated the senior secured credit facilities (revolving lines of credit and term loans). The amendment extends the maturity date of the facilities to October 14, 2010, lowers the interest rates charged, increases the revolving lines of credit and term loans to totals of $230 and $80 million, respectively, and extends the installment schedule of the term loans so that the final payment is due on October 14, 2010. In addition, the amendment expands the criteria for acquisitions which do not require lender consent and includes an option of increasing the revolving lines of credit by an additional $50 million (see Note 10). The amendment also increased the amount of allowed annual capital expenditures to 1.5% of net sales.

The borrowings under the amended facilities continue to be collateralized by substantially all of the Company’s assets and are subject to certain operating and financial covenants, which, among other things, restrict the payment of dividends. The senior secured credit facilities have numerous restrictive covenants, including required fixed charge coverage ratios.

8. Foreign Sales

Foreign (Canadian) sales totaled $25.5 million in the three months ended December 31, 2005 and $25.2 million in the three months ended December 31, 2004.

9. Financial Derivatives

The Company enters into interest rate derivative agreements, commonly referred to as swaps or collars, with the objective of reducing volatility in our borrowing costs.  At December 31, 2005, we had one interest rate collar effectively converting the variable LIBOR component on a portion of our term loans to a fixed rate.  That collar has a notional amount of $75 million, expires in November 2008, and has a floor rate of 4.33% and a cap rate of 5.85%.  The fair market value of the agreement resulted in a liability of approximately $0.2 million at December 31, 2005, which was determined based on current interest rates and expected trends.  Since these instruments do not quality as hedges, changes in the unrealized gain or loss are recorded in interest expense.  The differentials to be paid or received under the terms of the agreement are accrued as interest rates change and are recognized as an adjustment to interest expense related to the debt.  In January 2006, we entered into another interest rate collar with a notional amount of $75 million that expires in January 2008 and has a floor rate of 4.54% and cap rate of 5.09%.

10. Subsequent Events

In January 2006, the Company purchased certain assets of C&S Roofing Materials, Inc., doing business as Pacific Supply Company (“Pacific”), a west coast distributor of roofing and other building products, and Mississippi Roofing Supply, Inc. (“MRS”) and Alabama Roofing Supply, LLC (“ARS”), affiliated companies which distribute roofing and other building products, primarily in Mississippi and Alabama. The combined purchase price of these two separate acquisitions was approximately $104 million and was funded through our U.S. revolving line of credit. Pacific had net sales of $53 million (unaudited) for the year ended December 31, 2005 and MRS and ARS together generated net sales of $76 million (unaudited) for the year ended December 31, 2005. The Company will include the results of operations of Pacific, MRS and ARS in its financial results from the date of the acquisitions and apply purchase accounting as of the dates of the acquisitions.

In January 2006, the Company and its lenders agreed to increase the revolving lines of credit by an additional $50 million and amend the term loans to provide for additional loans totaling $10 million that were added to our current term loans. The lenders also agreed to waive certain minimum availability levels related to the January 2006 acquisitions. None of the other terms of the revolving lines of credit and term loans were changed.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with Management’s Discussion and Analysis included in our 2005 Annual Report on Form 10-K. Unless otherwise specifically indicated, all references to “2006” refer to the three months (first quarter) ended December 31, 2005 of our fiscal year ending September 30, 2006 and all references to “2005” refer to the three months (first quarter) ended December 31, 2004 of our fiscal year ended September 24, 2005.

Overview

We are one of the largest distributors of residential and non-residential roofing materials in the United States and Canada. We are also a distributor of other complementary building products, including siding, windows, specialty lumber products and waterproofing systems for residential and non-residential building exteriors. We purchase products from a large number of manufacturers and then distribute these goods to a customer base consisting of contractors and, to a lesser extent, general contractors, retailers and building material suppliers.

As of December 31, 2005, we distributed up to 8,500 SKUs through 138 branches in the United States and Canada.  We had approximately 2,160 employees at that time, including our sales and marketing team of approximately 540 employees. In fiscal year 2005, approximately 90% of our net sales were in the United States. We stock one of the most extensive assortments of high-quality branded products in the industry, enabling us to deliver products to our customers on a timely basis.

Execution of the operating plan at each of our branches drives our financial results. Revenues are impacted by the relative strength of the residential and non-residential roofing markets we serve. We allow each of our branches to develop its own marketing plan and mix of products based upon its local market. We differentiate ourselves from the competition by providing customer services, including job site delivery, tapered insulation layouts and design and metal fabrication, and by providing credit. We consider customer relations and our employees’ knowledge of roofing and exterior building materials to be very important to our ability to increase customer loyalty and maintain customer satisfaction. We invest significant resources in training our employees in sales techniques, management skills and product knowledge. While we consider these attributes important drivers of our business, we continually pay close attention to controlling operating costs.

Our growth strategy includes both internal growth (opening branches, growing sales with existing customers and introducing new products) and acquisition growth.  Our main acquisition strategy is to target market leaders in geographic areas that we presently do not service. Our October 2005 acquisition of SDI Holding, Inc. (“Shelter”) reflects this approach. Shelter is a leading distributor of roofing and other building materials, currently with 53 branches in the Southeast, Midwest and Central Plains regions of the United States, growing areas targeted by us for expansion.  In addition, we also acquire smaller companies to supplement branch openings within existing markets. Our November 2005 acquisition of Easton Wholesale Company, Inc. (“EWI”), which was integrated into our region in the Mid-Atlantic, is an example of such an acquisition.

Results of Operations

The following table shows, for the periods indicated, information derived from our consolidated statements of operations, expressed as a percentage of net sales for the periods presented.

	Three Months Ended December 31,
	2005		2004
Net sales	100.0	%	100.0	%
Cost of products sold	75.3		74.7
Gross profit	24.7		25.3
Operating expenses	17.1		16.6
Income from operations	7.6		8.7
Interest expense	(1.2	)	(0.4	)
Loss on early retirement of debt	—		(0.5	)
Income before income taxes	6.4		7.8
Income taxes	(2.6	)	(3.4	)
Net income	3.8	%	4.4	%

12

In managing our business, we consider all growth, including branch expansion, to be internal growth unless it results from an acquisition. When we refer to growth in existing markets in our discussion and analysis of financial condition and results of operations, we include growth from existing and newly-opened branches but exclude growth from acquired branches until they have been under our ownership for at least one full fiscal year. At December 31, 2005, 72 branches were included in our existing market calculations and 66 branches were excluded because they were acquired during or after fiscal year 2005. Acquired markets (Note 5) for 2006 include Shelter, EWI, JGA, ISI and CSI, while acquired markets for 2005 represent only a partial month’s operations for JGA.

Three Months Ended December 31, 2005 (“2006”) Compared to the Three Months Ended December 31, 2004 (“2005”)

Existing and Acquired Markets

For the Three Months Ended

	Existing Markets December 31,							Acquired Markets December 31,							Consolidated December 31,
(In 000’s)	2005				2004			2005				2004			2005				2004
Net sales	$	223,167			$	195,257		$	116,718			$	3,933		$	339,885			$	199,190
Gross profit	57,505				49,772			26,202				574			83,707				50,346
Gross margin	25.8			%	25.5		%	22.4			%	14.6		%	24.6			%	25.3			%
Operating expenses	36,126				32,374			21,869				639			57,995				33,013
Operating expenses as a % of net sales	16.2			%	16.6		%	18.7			%	16.2		%	17.1			%	16.6			%
Operating income (loss)	$		21,379		$	17,398		$		4,333		$	(65	)	$		25,712		$		17,333
Operating margin	9.6			%	8.9		%	3.7			%	-1.7		%	7.6			%	8.7			%

Net Sales

Consolidated net sales increased $140.7 million, or 70.6%, to $339.9 million in 2006 from $199.2 million in 2005. Existing markets saw internal growth of $27.9 million or 14.3%, while acquired markets contributed the remaining increase of $112.8 million. We did not open any new branches in existing markets during 2006 or 2005, but we did open two new branches in acquired markets in 2006.  For 2006, our acquired markets had combined product group sales of $70.7, $16.2 and $29.8 million in residential roofing products, non-residential roofing products and complementary building products, respectively, while the product group sales for our existing markets were as follows:

For the Three Months Ended

	December 31, 2005				December 31, 2004				Growth
	(dollars in millions)
Residential roofing products	$	90.7	40.7	%	$	78.7	40.3	%	$	12.0	15.2	%
Non-residential roofing products	81.8		36.6		71.2		36.5		10.6		14.9
Complementary building products	50.7		22.7		45.4		23.2		5.3		11.7
	$	223.2	100.0	%	$	195.3	100.0	%	$	27.9	14.3	%

Note: Total 2006 existing market sales of $223.2 million plus 2006 sales from acquired markets of $116.7 million equal $339.9 million of total 2006 sales. Total 2005 existing market sales of $195.3 million plus 2005 sales from JGA of $3.9 million equal the total 2005 sales of $199.2 million.  We believe the existing market information is useful to investors because it helps explain organic growth.

Our first-quarter existing market growth was due primarily to the following factors:

•overall estimated price increases of approximately 6%-8% compared to 2005;

•strong residential roofing demand, especially in the southeast and Gulf areas;

•five new branches opened in existing markets since December 31, 2004;

•strong non-residential roofing demand, although not at the level experienced in the prior year; and

•continued high home remodeling demand.

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Gross Profit

For the Three Months Ended

	December 31, 2005			December 31, 2004			Change
	(dollars in millions)
Gross profit	$	83.7		$	50.3		$	33.4			66.4	%
Gross margin	24.6		%	25.3		%			-0.7	%

Our existing markets’ gross profit grew 15.5% and contributed $7.7 million to the total gross profit increase, while acquired markets accounted for the remaining $25.7 million increase.  Existing markets’ gross margin was 25.8% in 2006 compared to 25.5% in 2005, as we saw a slight increase in vendor incentive rebates and improved pricing in certain regions.  Due to their product mix, JGA and ISI have lower gross margins than our existing markets and this has lowered our overall consolidated gross margin. We expect our future quarterly gross margins to fluctuate from 24% to 26% depending primarily on our product mix.

Operating Expenses

For the Three Months Ended

	December 31, 2005			December 31, 2004			Change
	(dollars in millions)
Operating expenses	$	58.0		$	33.0		$	25.0			75.8	%
Operating expenses as a % of sales	17.1		%	16.6		%			0.5	%

Our existing markets’ operating expenses increased $3.8 million, or 11.6%, to $36.1 million in 2006 from $32.4 million in 2005, while acquired markets accounted for the remaining $21.2 million increase. The existing markets’ operating expense increase was due primarily to increased payroll and related costs of $1.8 million and a higher provision for bad debts of $0.8 million. Most of the increase in payroll costs was driven by our increased sales volume and five new branches opened in existing markets since December 31, 2004. Existing markets’ transportation costs increased $0.5 million in 2006 compared to 2005, as a result of the higher sales volume and higher fuel costs. Selling expenses in our existing markets, excluding depreciation and payroll costs, increased by $0.8 million due to the additional branches and increased sales volume.  Depreciation expense increased by $0.4 million from 2005 to 2006.

As a percentage of net sales, overall operating expenses increased to 17.1% in 2006 from 16.6% in 2005, primarily due to Shelter’s higher operating expenses as a percentage of sales. Existing markets’ operating expenses as a percentage of net sales dropped to 16.2% from 16.6%, primarily due to the leveraging of our fixed costs over the higher sales volume.

Interest Expense

Interest expense increased $3.1 million to $4.0 million in 2006 from $0.9 million in 2005. We amended our revolving lines of credit and term loans in connection with the Shelter acquisition and increased our borrowings accordingly. Interest rates also increased from the prior year.

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Loss on Early Retirement of Debt

On September 28, 2004, we used a portion of the proceeds from our IPO to pay off the remaining junior subordinated notes.  In connection with the associated early retirement of debt, we recorded a $0.9 million loss in 2005.

Income Taxes

Income tax expense was $8.8 million in 2006 compared to $6.8 million in 2005. We have estimated our fiscal 2006 effective income tax rate to be 40.5%, while our effective income tax rate was 43.7% for the first quarter of fiscal 2005.   The decrease is due to the strong earnings from our Canadian subsidiary, which has enabled us to use a more favorable tax credit for foreign taxes. In addition, due to the strong earnings throughout our domestic regions and having no unusable losses in any state, we experienced a drop in our overall effective state income tax rate.

Seasonality and quarterly fluctuations

In general, sales and net income are highest during our first, third and fourth fiscal quarters, which represent the peak months of construction, especially in our branches in the northeastern U.S. and in Canada. Our sales are substantially lower during the second quarter, when we historically have incurred low net income levels or net losses. These quarterly fluctuations have diminished as we have diversified into the southern regions of the United States.

We generally experience an increase of inventory, accounts receivable and accounts payable during the first, third and fourth quarters of the year as a result of the seasonality of our business. Our peak borrowing level generally occurs during the third quarter, primarily because dated accounts payable offered by our suppliers typically are payable in April, May and June, while our peak accounts receivable collections typically occur from June through November.

We generally experience a slowing of collections of our accounts receivable during our second quarter, mainly due to the inability of some of our customers to conduct their businesses effectively in inclement weather in certain of our regions. We continue to attempt to collect those receivables, which require payment under our standard terms. We do not provide any concessions to our customers during this quarter of the year, although we may take advantage of seasonal concessions and incentives from our vendors. Also during the second quarter, we generally experience our lowest availability under our senior secured credit facilities, which are asset-based lending facilities.

Certain quarterly financial data

The following table sets forth certain unaudited quarterly data for the fiscal years 2006 and 2005 which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of this data. Results of any one or more quarters are not necessarily indicative of results for an entire fiscal year or of continuing trends.

(dollars in millions, except per share data)	Fiscal 2006		Fiscal 2005
(unaudited)	Qtr 1		Qtr 1			Qtr 2			Qtr 3			Qtr 4
Net sales	$	339.9	$	199.2		$	172.1		$	248.5		$	231.2
Gross profit	83.7		50.3			41.4			59.7			55.8
Income from operations		25.7	17.3			5.5			20.2			17.7
Net income	$	12.9	$	8.7		$	2.4		$	11.3		$	10.4
Quarterly sales as % of year’s sales	—		23.4		%	20.2		%	29.2		%	27.2		%
Quarterly gross profit as % of year’s gross profit	—		24.3			20.0			28.8			26.9
Quarterly income from operations as % of year’s income from operations	—		28.5		%	9.1		%	33.3		%	29.2		%

Liquidity and capital resources

We had cash of $7.3 million at December 31, 2005, compared to cash of $4.9 million at December 31, 2004 and a cash overdraft of $3.6 million at September 24, 2005. Our working capital was $172.7 million at December 31, 2005 compared to working capital of $37.8 million at December 31, 2004 and $121.0 million at September 24, 2005.

2006 compared to 2005

Our net cash provided by operating activities was $22.9 million for 2006 compared to $12.8 million for 2005. Our sales growth drove our income from operations to $25.7 million in 2006 from $17.3 million in 2005. Inventory levels, exclusive of the effects of businesses acquired, increased by $15.6 million, mostly due to eight new branches opened (including three opened in acquired markets) since December 31, 2004 and anticipation of a continued strong sales growth rate. Inventory turns stayed relatively constant in 2006 compared to 2005. The cash impact from the growth in inventory was more than offset by a seasonal decrease in accounts receivable, exclusive of the effects of businesses acquired. The number of days outstanding for accounts receivable, based upon sales for the first quarter, declined slightly in 2006.

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Net cash used in investing activities in 2006 was $173.3 million compared to $31.3 million in 2005 due primarily to the acquisition of Shelter for an aggregate net purchase price of $166.9 million. Net capital expenditures declined in 2006 due to the use of new capital lease financings of $3.3 million for new transportation and warehouse equipment to service our growth.

Net cash provided by financing activities was $161.2 million in 2006 compared to $27.1 million in 2005. The net cash provided by financing activities in 2006 reflects borrowings under our revolving lines of credit and term loans, primarily for the Shelter acquisition, and net proceeds of $51.6 million from the public sale of two million shares of common stock in December 2005 (Note 1). The net cash provided by financing activities in 2005 primarily reflected the proceeds from our IPO less the associated warrant redemption and debt payments.

Capital Resources

Our principal source of liquidity at December 31, 2005, was our available borrowings of $97.7 million under revolving lines of credit. Our borrowing base availability is determined primarily by trade accounts receivable and product inventory levels. Borrowings outstanding under the revolving lines of credit in the accompanying balance sheets at December 31, 2005 and September 24, 2005 were classified as long-term liabilities and at December 31, 2004 as current liabilities in accordance with EITF Issue 95-22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Arrangements that include both a Subjective Acceleration Clause and a Lock-Box Arrangement.

Liquidity is defined as the ability to generate adequate amounts of cash to meet the current need for cash. We assess our liquidity in terms of our ability to generate cash to fund our operating activities, taking into consideration the seasonal nature of our business. Significant factors which could affect liquidity include the following:

•the adequacy of available bank lines of credit;

•the ability to attract long-term capital with satisfactory terms;

•cash flows generated from operating activities;

•acquisitions; and

•capital expenditures.

Our primary capital needs are for working capital obligations and other general corporate purposes, including acquisitions and capital expenditures. Our primary sources of working capital are cash from operations supplemented by bank borrowings. In the past, we have financed acquisitions initially through increased bank borrowings, the issuance of common stock and other borrowings, then repaying any such borrowings with cash flows from operations. We have funded our capital expenditures through increased bank borrowings or through capital leases and then have reduced these obligations with cash flows from operations.

We believe we have adequate availability of capital to fund our present operations, meet our commitments on our existing debt, and fund anticipated growth, including expansion in existing and targeted market areas. We continually seek potential acquisitions and from time to time hold discussions with acquisition candidates. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our financial position and earnings history provide a strong base for obtaining additional financing resources at competitive rates and terms. Additionally, we may issue additional shares of common or preferred stock to raise funds, which we did in December 2005. We made two acquisitions in January 2006 for a combined price of approximately $104 million. In connection with these acquisitions, we requested an increase of $50 million in our revolving lines of credit and an additional $10 million of term loans. These requests were approved by our lenders in January 2006.

Indebtedness

We currently have the following credit facilities:

•a senior secured credit facility in the U.S.;

•a Canadian senior secured credit facility; and

•a capital lease facility.

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Senior secured credit facilities

The credit facilities, as amended and restated on October 14, 2005, mature on October 14, 2010 and consist of a $230 million United States revolving line of credit and a CDN $15 million Canadian revolving line of credit, commonly referred to as revolvers, and term loans totaling $80.0 million outstanding at December 31, 2005. The facilities include an option of increasing the revolving lines of credit by an additional $50 million, which we requested and which was approved in January 2006 along with additional term loans totaling $10 million. The lenders also waived certain minimum availability levels related to our acquisitions in January 2006. None of the other terms of the revolving lines of credit and term loans were changed.

The facilities provide for a cash receipts lockbox arrangement that gives us sole control over the funds in our lockbox accounts, unless excess availability is less than $10 million or an event of default occurs, in which case the senior secured lenders have the right to take control over such funds and to apply such funds to repayment of the senior debt. The lockbox arrangement is operational and the revolver borrowings outstanding as of December 31, 2005 and September 24, 2005 have been classified as long-term-debt for amounts expected to be outstanding for greater than one year.

As of December 31, 2005, there was $119.0 million outstanding and $97.7 million available for borrowing under the revolvers, subject to changes in our borrowing base availability determined primarily by trade accounts receivable and product inventories levels. We also had $4.0 million of outstanding standby letters of credit.

Interest on borrowings under the U.S. facilities is payable at our election at either of the following rates:.

•an index rate (that is the higher of (a) the base rate for corporate loans quoted in The Wall Street Journal or (b) the Federal Reserve overnight rate plus 1/2 of 1%) plus a margin of 0.25% to 1.50%, or

•the current LIBOR Rate plus a margin ranging from 1.50% to 2.75%.

Interest under the Canadian facility is payable at our election at either of the following rates:

•an index rate (that is the higher of (1) the Canadian prime rate as quoted in the Globe and Mail and (2) the 30-day BA Rate plus 1.25%) plus 0.50%, or

•the BA rate as described in the Canadian facility plus 1.75%.

Substantially all of our assets, including the capital stock and assets of our wholly-owned subsidiaries, secure our obligations under these senior secured credit facilities. The senior secured credit facilities have numerous restrictive covenants, including a required fixed charge coverage of 1.20 to 1, a senior indebtedness to EBITDA ratio of 3.50 to 1 and a total indebtedness to EBITDA ratio of 4.75 to 1, in each case determined on a trailing twelve-month basis at the end of each quarter. In addition, in any fiscal year capital expenditures may not exceed 1.5% of gross revenues and annual rental payments under operating leases may not exceed $22.0 million. There are also certain minimum availability levels that must be maintained. As of December 31, 2005, we were in compliance with all covenants and financial ratio requirements.

Capital lease facilities

Our capital lease facilities allow us to finance a portion of our transportation and warehouse equipment. The facilities provide us with $11 million of availability, of which $5.3 million was outstanding at December 31, 2005, with fixed interest rates ranging from 4.7% to 6.7%.

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Our disclosure and analysis in this report contains forward-looking information that involves risks and uncertainties. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management’s plans and objectives, future contracts, and forecasts of trends and other matters. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate”, “estimate”, “expect”, “believe,” “will likely result,” “outlook,” “project” and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.

Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include those set forth under the heading “Risk Factors” in our Form 10-K for the fiscal year ended September 24, 2005.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

There have been no material changes other than the financial derivatives disclosed below from what we reported in our Form 10-K for the year ended September 24, 2005.

Financial Derivatives

We enter into interest rate derivative agreements, commonly referred to as swaps or collars, with the objective of reducing volatility in our borrowing costs. At December 31, 2005, we had one interest rate collar effectively converting the variable LIBOR component on a portion of our senior credit facility term debt to a fixed rate. That collar has a notional amount of $75 million, expires in November 2008, and has a floor rate of 4.33% and a cap rate of 5.85%. The fair market value of the agreement resulted in a liability of approximately $0.2 million at December 31, 2005, which was determined based on current interest rates and expected trends. Since these instruments do not qualify as hedges, changes in the unrealized gain or loss are recorded in interest expense. The differentials to be paid or received under the terms of the agreement are accrued as interest rates change and are recognized as an adjustment to interest expense related to the debt. In January 2006, we entered into another interest rate collar with a notional amount of $75 million that expires in January 2008 and has a floor rate of 4.54% and cap rate of 5.09%

Foreign Exchange Risk

There have been no material changes from what we reported in our Form 10-K for the year ended September 24, 2005.

Item 4. Controls and Procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Act). The rules refer to the controls and other procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Act is recorded, processed, summarized and reported within the time periods specified. As of December 31, 2005, management, including the CEO and CFO, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the CEO and CFO, concluded that as of December 31, 2005, our disclosure controls and procedures were effective at ensuring that material information related to us or our consolidated subsidiaries is made known to them and is disclosed on a timely basis in our reports filed under the Act.

We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Based on the most recent evaluation, we have concluded that no significant changes in our internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Items 1- 5 are not applicable and have been omitted.

Item 6. Exhibits

(a) Exhibits required by Item 601 of Regulation S-K

Exhibit Number	Document Description
10.1	First Amendment, dated December 23, 2005, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Sales Acquisition, Inc., the Domestic Subsidiaries of Beacon Sales Acquisition, Inc. named therein, General Electric Capital Corporation and the lenders party thereto.
10.2	First Amendment, dated December 23, 2005, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Roofing Supply Canada Company and GE Canada Finance Holding Company and the lenders party thereto.
10.3	Increased Commitment Agreement, dated January 27, 2006, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Sales Acquisition, Inc., the Domestic Subsidiaries of Beacon Sales Acquisition, Inc. named therein, General Electric Capital Corporation and the lenders party thereto.
10.4	Second Amendment, dated January 31, 2006, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Sales Acquisition, Inc., the Domestic Subsidiaries of Beacon Sales Acquisition, Inc. named therein, General Electric Capital Corporation and the lenders and Canadian facility lenders thereto.
31.1	Certification by Robert R. Buck pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by David R. Grace pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Robert R. Buck and David R. Grace pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Signature Page

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 9, 2006.

BEACON ROOFING SUPPLY, INC.
BY:	/s/ David R. Grace
	David R. Grace, Chief Financial Officer, and duly authorized signatory on behalf of the Registrant

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Index to Exhibits

Exhibit Number	Document Description
10.1	First Amendment, dated December 23, 2005, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Sales Acquisition, Inc., the Domestic Subsidiaries of Beacon Sales Acquisition, Inc. named therein, General Electric Capital Corporation and the lenders party thereto.
10.2	First Amendment, dated December 23, 2005, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Roofing Supply Canada Company and GE Canada Finance Holding Company and the lenders party thereto.
10.3	Increased Commitment Agreement, dated January 27, 2006, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Sales Acquisition, Inc., the Domestic Subsidiaries of Beacon Sales Acquisition, Inc. named therein, General Electric Capital Corporation and the lenders party thereto.
10.4	Second Amendment, dated January 31, 2006, to Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005, among Beacon Sales Acquisition, Inc., the Domestic Subsidiaries of Beacon Sales Acquisition, Inc. named therein, General Electric Capital Corporation and the lenders and Canadian facility lenders thereto.
31.1	Certification by Robert R. Buck pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by David R. Grace pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Robert R. Buck and David R. Grace pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-10.1

EXHIBIT 10.1

FIRST AMENDMENT TO

THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated as of December 23, 2005, and is entered into by and among BEACON SALES ACQUISITION, INC. (“Borrower”) and the Domestic Subsidiary Guarantors which are signatories hereto (together with Borrower, “Obligors”); GENERAL ELECTRIC CAPITAL CORPORATION (“GE Capital”), for itself as a Lender, as L/C Issuer and as Agent; and the Lenders which are signatories hereto.

WHEREAS, Agent, Lenders and Obligors are parties to a certain Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005 (as such agreement has been or may hereafter be from time to time amended, supplemented or otherwise modified, the “Loan Agreement”); and

WHEREAS, Borrower has requested that GE Capital, as a Lender, enter into letters of credit or other credit enhancement to support the payment obligations of Borrower under any interest rate protection or hedging agreement as described herein; and

WHEREAS, the parties desire to amend the Loan Agreement to provide for such letters of credit or other credit enhancement as hereinafter set forth.

NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions.  Capitalized terms used in this Agreement, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1Section 2.1 of the Loan Agreement is hereby amended by inserting the following as (J) thereof:

“(J)Swap Related Reimbursement Obligations.

(1)Borrower agrees to reimburse GE Capital in immediately available funds in the amount of any payment made by GE Capital under a Swap Related L/C (such reimbursement obligation, whether contingent upon payment by GE Capital under the Swap Related L/C or otherwise, being herein called a “Swap Related Reimbursement Obligation”).  No Swap Related Reimbursement Obligation for any Swap Related L/C may exceed the amount of the payment

obligations owed by Borrower under the interest rate protection or hedging agreement or transaction supported by the Swap Related L/C.

(2)A Swap Related Reimbursement Obligation shall be due and payable by Borrower within one (1) Business Day after the date on which the related payment is made by GE Capital under the Swap Related L/C.

(3)Any Swap Related Reimbursement Obligation shall, during the period in which it is unpaid, bear interest at the rate per annum equal to LIBOR plus one percent (1%), as if the unpaid amount of the Swap Related Reimbursement Obligation were a LIBOR Loan, and not at any otherwise applicable Default Rate.  Such interest shall be payable upon demand.  The following additional provisions apply to the calculation and charging of interest by reference to LIBOR:

(a)LIBOR shall be determined for each successive one-month LIBOR Period during which the Swap Related Reimbursement Obligation is unpaid, notwithstanding the occurrence of any Event of Default and even if the LIBOR Period were to extend beyond the Termination Date.

(b)If a Swap Related Reimbursement Obligation is paid during a monthly period for which LIBOR is determined, interest shall be pro-rated and charged for the portion of the monthly period during which the Swap Related Reimbursement Obligation was unpaid.  Section 2.9(B) and any other provision relating to the indemnification by Borrower of losses, costs and expenses relating to LIBOR Loans shall not apply to any payment of a Swap Related Reimbursement Obligation during the monthly period.

(c)Notwithstanding the last paragraph of the definition of “LIBOR”, if LIBOR is no longer available from Telerate News Service, LIBOR shall be determined by GE Capital from such financial reporting service or other information available to GE Capital as in GE Capital’s reasonable discretion indicates GE Capital’s cost of funds.

(4)Except as provided in the foregoing provisions of this Section 2.1(J) and in Section 10.1, Borrower shall not be obligated to pay to GE Capital or any of its Affiliates any fees with respect to Letters of Credit, or any other fees, charges or expenses, in respect of a Swap Related L/C or arranging for any interest rate protection or hedging agreement or transaction supported by the Swap Related L/C.  GE Capital and its Affiliates shall look to the beneficiary of a Swap Related L/C for payment of any such letter of credit fees or other fees, charges or expenses and such beneficiary may factor such fees, charges, or expenses into the pricing of any interest rate protection or hedging agreement or transaction supported by the Swap Related L/C.

2

(5)If any Swap Related L/C is revocable prior to its scheduled expiry date, GE Capital agrees not to revoke the Swap Related L/C unless the Termination Date or an Event of Default has occurred.

(6)GE Capital or any of its Affiliates shall be permitted to (i) provide confidential or other information furnished to it by any of the Credit Parties (including, without limitation, copies of any documents and information in or referred to in Schedule 3.1, financial statements and other reports contained in the Reporting Rider and Compliance Certificates) to a beneficiary or potential beneficiary of a Swap Related L/C and (ii) receive confidential or other information from the beneficiary or potential beneficiary relating to any agreement or transaction supported or to be supported by the Swap Related L/C.  However, no confidential information shall be provided to any Person under this paragraph unless the Person has agreed to comply with the covenant substantially as contained in Section 10.18 of this Agreement.”

2.2Section 7.2(B) of the Loan Agreement is hereby amended to read as follows:

(B)Swap Related Reimbursement Obligations and those resulting from Currency Rate Agreements and Interest Rate Agreements entered into by Borrower with any Lender (or Affiliate of a Lender) upon prior or contemporaneous written notice to Agent or otherwise with Agent’s prior written approval, including the Interest Rate Agreement in effect on the Closing Date between Borrower and LaSalle Bank National Association;

2.3Section 8.7(b) of the Loan Agreement is hereby amended to read as follows:

“(b) in the absence of a specific determination by Agent with respect thereto, the proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied: first, to all fees, costs and expenses incurred by or owing to Agent and then any Lender with respect to this Agreement, the other Loan Documents or the Collateral; second, to accrued and unpaid interest on the Loans, on unpaid Swap Related Reimbursement Obligations and on unpaid Obligations under Interest Rate Agreements and Currency Rate Agreements (including any interest which but for the provisions of any bankruptcy or insolvency law would have accrued on such amounts), ratably in proportion to the interest accrued as to each Loan, unpaid Swap Related Reimbursement Obligation and unpaid Obligations under each Interest Rate Agreement and Currency Rate Agreement, as applicable; third, to the principal amounts of the Loans, unpaid Swap Related Reimbursement Obligations and unpaid Obligations under Interest Rate Agreements and Currency Rate Agreements, and the Letter of Credit Obligations outstanding, ratably to the aggregate combined principal balance of the Loans, unpaid Swap Related Reimbursement Obligations, unpaid Obligations under each Interest Rate Agreement and Currency Rate Agreement, and outstanding Letter of Credit Obligations; and fourth, to any other Obligations of Borrower owing to Agent or any Lender under the Loan Documents or in respect of any Banking Services”.

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2.4The last proviso of the first sentence of Section 9.4(A)of the Loan Agreement is hereby amended to read as follows:

“; provided, further, no amendment, modification, termination or waiver affecting the rights or duties of Agent or L/C Issuer, or of GE Capital in respect of any Swap Related Reimbursement Obligations, under this Agreement or any other Loan Document including any release of any guaranty or Collateral requiring a writing signed by all Lenders,  shall in any event be effective unless in writing and signed by Agent or L/C Issuer or GE Capital, as the case may be, in addition to Lenders required to take such action”.

2.5Section 9.5 of the Loan Agreement is hereby amended by inserting the following as (F) thereof:

“(F)Nothing contained in this Section 9 shall require the consent of any party for GE Capital to assign any of its rights in respect of any Swap Related Reimbursement Obligation.”

2.6Subsection 11.1 of the Loan Agreement is hereby amended by inserting the following new definitions in their proper alphabetical order:

““Swap Related L/C” means a letter of credit or other credit enhancement provided by GE Capital to the extent supporting the payment obligations by Borrower under an interest rate protection or hedging agreement or transaction (including, but not limited to, interest rate swaps, caps, collars, floors and similar transactions) designed to protect or manage exposure to the fluctuations in the interest rates applicable to any of the Loans, and which agreement or transaction Borrower entered into as the result of a specific referral pursuant to which GE Capital, GE Corporate Financial Services, Inc. or any other Affiliate of GE Capital had arranged for Borrower to enter into such agreement or transaction.  The term includes a Swap Related L/C as it may be increased from time to time fully to support Borrower’s payment obligations under any and all such interest rate protection or hedging agreements or transactions.”

““Swap Related Reimbursement Obligation” has the meaning ascribed to it in Section 2.1(J).”

2.7The definitions of “Letters of Credit”, “Obligations”, “Permitted Small Acquisitions” and “Reserves” set forth in subsection 11.1 of the Loan Agreement are hereby amended to read as follows:

““Letters of Credit” means documentary or standby letters of credit issued for the account of Borrower by any L/C Issuer, and bankers’ acceptances issued by Borrower, for which Agent and Lenders have incurred Letter of Credit Obligations.  The term does not include a Swap Related L/C.”

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““Obligations” means all obligations, liabilities and indebtedness of every nature of each Loan Party from time to time owed to Agent or to any Lender (or any Affiliate of any Lender) under the Loan Documents (whether incurred before or after the Termination Date) including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable including, without limitation, all interest, fees, cost and expenses accrued or incurred after the filing of any petition under any bankruptcy or insolvency law whether or not allowed in such proceeding.  Obligations shall also include (i) all obligations of the Loan Parties to any Lender (or any Affiliate of any Lender) in respect of Banking Services and (ii) all obligations of the Loan Parties in respect of Swap Related Reimbursement Obligations.”

““Permitted Small Acquisition” means a Permitted Acquisition for which the purchase price payable in connection therewith (together with all transaction costs incurred in connection therewith) does not exceed $7,000,000.”

““Reserves” means, with respect to the Borrowing Base (a) the Credit Memoranda Reserve and the Dilution Reserve, (b) a reserve in the amount of the outstanding amount of Swap Related Reimbursement Obligations and Obligations under Interest Rate and Currency Rate Agreements marked-to-market on a monthly basis, and (c) other reserves against Eligible Accounts, Eligible Inventory or Consolidated Borrowing Base that Agent may, in its reasonable credit judgment, establish from time to time, with prior or contemporaneous notice to Borrower.”

3.Conditions.  The effectiveness of this Agreement is subject to the following conditions precedent (unless specifically waived in writing by Agent and Lenders):

(a)Obligors, Agent and Lenders shall have executed and delivered this Agreement; provided, that the amendment to the definition of “Permitted Small Acquisition” set forth in Section 2.6 herein shall become effective upon the execution of this Agreement by the Obligors, Agent and Requisite Lenders;

(b)Borrower shall have delivered such other documents as Agent may have reasonably requested;

(c)No Default or Event of Default shall have occurred and be continuing; and

(d)Beacon Canada, Canadian Facility Agent and Canadian Facility Lenders shall have entered into an amendment to the Canadian Facility Credit Agreement and the Canadian Facility Intercreditor Agreement in form and substance satisfactory to Agent, together with a reaffirmation by Holdings and by each Obligor of their respective obligations under the Canadian Facility Loan Documents to which it is a party.

4.Representations and Warranties.  To induce Agent and Lenders to enter into this Agreement, Obligors represent and warrant to Agent and Lenders:

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(a)that the Loan Parties have all requisite organizational power and authority to enter into, and carry out the transactions contemplated by, this Agreement and all other agreement and documents executed in connection therewith to which such Loan Parties are parties.

(b)that the execution, delivery and performance of this Agreement and all other agreements and documents executed in connection therewith have been duly authorized by all requisite action on the part of the Loan Parties which are parties thereto and that this Agreement has been duly executed and delivered by Borrower;

(c)that each of the representations and warranties set forth in Section 4 of the Loan Agreement (other than those which, by their terms, specifically are made as of certain date prior to the date hereof) are true and correct in all material respects as of the date hereof; and

(d)that, after giving effect to this Agreement, no Default or Event of Default has occurred and is continuing.

5.Severability.  Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

6.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument.

7.Ratification.  Except as expressly set forth herein, the terms and provisions set forth in this Agreement shall not be deemed to be a modification or waiver of any term or condition of the Loan Agreement.  The terms and provisions of the Loan Agreement, as amended hereby, and the other Loan Documents are ratified and confirmed and shall continue in full force and effect and all Collateral encumbered by any of the Loan Documents will continue to secure, to the fullest extent possible, the payment and performance of all Obligations under or in respect of the Loan Agreement or any of the other Loan Documents.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above

BEACON SALES ACQUISITION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
QUALITY ROOFING SUPPLY
COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEACON CANADA, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEST DISTRIBUTING CO.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
THE ROOF CENTER, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
WEST END LUMBER COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
J.G.A. BEACON, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

SDI HOLDING, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SDI ACQUISITION GUARANTOR, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SHELTER DISTRIBUTION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent, an L/C Issuer and a Lender
	By: /s/ Ken A. Brown
	Its Authorized Signatory

BANK OF AMERICA, N.A.
as a Lender
	By: /s/ Jason Riley
	Title: Vice President

THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender
	By: /s/ Chad Ramsey
	Title: Vice President

LASALLE BANK NATIONAL
ASSOCIATION, a national banking
association, as a Lender
	By: /s/ Andrew Heinz
	Title: Vice President

JP MORGAN CHASE BANK, N.A., as a Lender
	By: /s/ Stephen Christ
	Title: Account Executive

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as a Lender
	By: /s/ Vicky Geist
	Title: Vice President

UPS CAPITAL CORPORATION, as a Lender
	By: /s/ John P. Holloway
	Title: Director of Portfolio Management

FIFTH THIRD BANK, as a Lender
	By: /s/ John T. Penny
	Title: Vice President

ANTARES CAPITAL CORPORATION,
as a Lender
	By: /s/ Chester R. Zara
	Title: Director

CONSENT AND REAFFIRMATION (HOLDINGS)

The undersigned hereby (i) acknowledges receipt of a copy of the foregoing First Amendment to Third Amended and Restated Loan and Security Agreement; (ii) consents to Obligors’ execution and delivery thereof; and (iii) affirms that nothing contained therein shall modify in any respect whatsoever its guaranty of the obligations of Borrower to Agent and Lenders pursuant to the terms of that certain Guaranty dated as of March 12, 2004 (the “Holdings Guaranty”) and reaffirms that the Holdings Guaranty is and shall continue to remain in full force and effect and that each Loan Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible, the payment and performance of all obligations under or in respect of the Holdings Guaranty and such other Loan Documents.  Although the undersigned has been informed of the matters set forth herein and has acknowledged and consented to same, the undersigned understands that Agent and Lenders have no obligation to inform it of such matters in the future or to seek its acknowledgment or consent to future agreements or waivers, and nothing herein shall create such a duty.

IN WITNESS WHEREOF, the undersigned has executed this Consent and Reaffirmation on and as of the date of such Agreement.

BEACON ROOFING SUPPLY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

EX-10.2

EXHIBIT 10.2

FIRST AMENDMENT TO

THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated as of December 23, 2005, and is entered into by and among BEACON ROOFING SUPPLY CANADA COMPANY (“Borrower”); GE CANADA FINANCE HOLDING COMPANY (“GE Canada Finance”), for itself as a Lender and as Agent, and the Lenders which are signatories hereto.

WHEREAS, Agent, Lenders and Borrower are parties to a certain Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005 (as such agreement has been or may hereafter be from time to time amended, supplemented or otherwise modified, the “Loan Agreement”); and

WHEREAS, Borrower has requested that GE Canada Finance, as a Lender, enter into letters of credit or other credit enhancement to support the payment obligations of Borrower under any interest rate protection or hedging agreement as described herein; and

WHEREAS, the parties desire to amend the Loan Agreement to provide for such letters of credit or other credit enhancement as hereinafter set forth.

NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions.  Capitalized terms used in this Agreement, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1Section 2.1 of the Loan Agreement is hereby amended by inserting the following as (F) thereof:

“(F)Swap Related Reimbursement Obligations.

(1)Borrower agrees to reimburse GE Canada Finance in immediately available funds in the amount of any payment made by GE Canada Finance under a Swap Related L/C (such reimbursement obligation, whether contingent upon payment by GE Canada Finance under the Swap Related L/C or otherwise, being herein called a “Swap Related Reimbursement Obligation”).  No Swap Related Reimbursement Obligation for any Swap Related L/C may exceed the amount of the payment obligations owed by Borrower under the interest rate protection or hedging agreement or transaction supported by the Swap Related L/C.

(2)A Swap Related Reimbursement Obligation shall be due and payable by Borrower within one (1) Business Day after the date on which the related payment is made by GE Canada Finance under the Swap Related L/C.

(3)Any Swap Related Reimbursement Obligation shall, during the period in which it is unpaid, bear interest at the rate per annum equal to the BA Rate plus one percent (1%), as if the unpaid amount of the Swap Related Reimbursement Obligation were a BA Rate Loan, and not at any otherwise applicable Default Rate.  Such interest shall be payable upon demand.  The following additional provisions apply to the calculation and charging of interest by reference to the BA Rate:

(a)The BA Rate shall be determined for each successive thirty (30) day BA Period during which the Swap Related Reimbursement Obligation is unpaid, notwithstanding the occurrence of any Event of Default and even if the BA Period were to extend beyond the Termination Date.

(b)If a Swap Related Reimbursement Obligation is paid during a thirty (30) day period for which the BA Rate is determined, interest shall be pro-rated and charged for the portion of the thirty (30) day period during which the Swap Related Reimbursement Obligation was unpaid.  Section 2.9(B) and any other provision relating to the indemnification by Borrower of losses, costs and expenses relating to BA Rate Loans shall not apply to any payment of a Swap Related Reimbursement Obligation during the thirty (30) day period.

(4)Except as provided in the foregoing provisions of this Section 2.1(F) and in Section 10.1, Borrower shall not be obligated to pay to GE Canada Finance or any of its Affiliates any fees with respect to Letters of Credit, or any other fees, charges or expenses, in respect of a Swap Related L/C or arranging for any interest rate protection or hedging agreement or transaction supported by the Swap Related L/C.  GE Canada Finance and its Affiliates shall look to the beneficiary of a Swap Related L/C for payment of any such letter of credit fees or other fees, charges or expenses and such beneficiary may factor such fees, charges, or expenses into the pricing of any interest rate protection or hedging agreement or transaction supported by the Swap Related L/C.

(5)If any Swap Related L/C is revocable prior to its scheduled expiry date, GE Canada Finance agrees not to revoke the Swap Related L/C unless the Termination Date or an Event of Default has occurred.

(6)GE Canada Finance or any of its Affiliates shall be permitted to (i) provide confidential or other information furnished to it by any of the Loan Parties (including, without limitation, copies of any documents and information in or referred to in the Conditions Rider, financial statements and other reports

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contained in the Reporting Rider and Compliance Certificates) to a beneficiary or potential beneficiary of a Swap Related L/C and (ii) receive confidential or other information from the beneficiary or potential beneficiary relating to any agreement or transaction supported or to be supported by the Swap Related L/C.  However, no confidential information shall be provided to any Person under this paragraph unless the Person has agreed to comply with the covenant substantially as contained in Section 10.20 of this Agreement.”

2.2Section 7.2(a) of the Loan Agreement is hereby amended to read as follows:

(a)Swap Related Reimbursement Obligations and those resulting from Currency Rate Agreements and Interest Rate Agreements entered into by Borrower with any Lender (or Affiliate of a Lender) upon prior or contemporaneous written notice to Agent or otherwise with Agent’s prior written approval;

2.3Section 8.9(b) of the Loan Agreement is hereby amended to read as follows:

“(b) subject to the Intercreditor Agreement, in the absence of a specific determination by Agent with respect thereto, the proceeds of any sale of, or other realization upon, all or any part of the Collateral shall be applied: first, to all fees, costs and expenses incurred by or owing to Agent and then any Lender with respect to this Agreement, the other Loan Documents or the Borrower Collateral; second, to accrued and unpaid interest on the Loans, on unpaid Swap Related Reimbursement Obligations and on unpaid Obligations under Interest Rate Agreements and Currency Rate Agreements (including any interest which but for the provisions of any bankruptcy or insolvency law would have accrued on such amounts), ratably in proportion to the interest accrued as to each Loan and unpaid Swap Related Reimbursement Obligation and unpaid Obligation under each Interest Rate Agreement and Currency Rate Agreement, as applicable; third, to the principal amounts of the Loans, unpaid Swap Related Reimbursement Obligations and unpaid Obligations under Interest Rate Agreements and Currency Rate Agreements, ratably to the aggregate combined principal balance of the Loans, unpaid Swap Related Reimbursement Obligations and unpaid Obligations under each Interest Rate Agreement and Currency Rate Agreement; and fourth, to any other Obligations or obligations or indebtedness of Borrower owing to Agent or any Lender under the Loan Documents or in respect of any Banking Services”.

2.4The last proviso of the first sentence of Section 9.4(A) of the Loan Agreement is hereby amended to read as follows:

“; provided, further, no amendment, modification, termination or waiver affecting the rights or duties of Agent, or of GE Canada Finance in respect of any Swap Related Reimbursement Obligations, under this Agreement or any other Loan Document including any release of any guaranty or Collateral requiring a writing signed by all Lenders, shall in any event be effective unless in writing and signed

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by Agent or GE Canada Finance, as the case may be, in addition to Lenders required to take such action”.

2.5Section 9.5 of the Loan Agreement is hereby amended by inserting the following as (F) thereof:

“(F)Nothing contained in this Section 9 shall require the consent of any party for GE Canada Finance to assign any of its rights in respect of any Swap Related Reimbursement Obligation.”

2.6Subsection 11.1 of the Loan Agreement is hereby amended by inserting the following new definitions in their proper alphabetical order:

“ “Swap Related L/C” means a letter of credit or other credit enhancement provided by GE Canada Finance to the extent supporting the payment obligations by Borrower under an interest rate protection or hedging agreement or transaction (including, but not limited to, interest rate swaps, caps, collars, floors and similar transactions) designed to protect or manage exposure to the fluctuations in the interest rates applicable to any of the Loans, and which agreement or transaction Borrower entered into as the result of a specific referral pursuant to which GE Canada Finance, GE Corporate Financial Services, Inc. or any Affiliate of GE Canada Finance had arranged for Borrower to enter into such agreement or transaction.  The term includes a Swap Related L/C as it may be increased from time to time fully to support Borrower’s payment obligations under any and all such interest rate protection or hedging agreements or transactions.”

“ “Swap Related Reimbursement Obligation” has the meaning ascribed to it in Section 2.1(F).”

2.7The definitions of “Obligations” and “Reserves” set forth in subsection 11.1 of the Loan Agreement are hereby amended to read as follows:

“ “Obligations” means all obligations, liabilities and indebtedness of every nature of each Loan Party from time to time owed to Agent or to any Lender (or any Affiliate of any Lender) under the Loan Documents (whether incurred before or after the Termination Date) including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable including, without limitation, all interest, fees, cost and expenses accrued or incurred after the filing of any petition under any bankruptcy or insolvency law whether or not allowed in such proceeding.  Obligations shall also include (i) all obligations of the Loan Parties to any Lender (or any Affiliate of any Lender) in respect of Banking Services and (ii) all obligations of the Loan Parties in respect of Swap Related Reimbursement Obligations.”

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“ “Reserves” means, with respect to the Canadian Borrowing Base (a) the Credit Memoranda Reserve and the Dilution Reserve, (b) a reserve in the amount of the outstanding amount of Swap Related Reimbursement Obligations and Obligations under Interest Rate and Currency Rate Agreements marked-to-market on a monthly basis, and (c) other reserves against Eligible Accounts, Eligible Inventory or the Canadian Borrowing Base that Agent may, in its reasonable credit judgment, establish from time to time, with prior or contemporaneous notice to Borrower.”

3.Conditions.  The effectiveness of this Agreement is subject to the following conditions precedent (unless specifically waived in writing by Agent and Lenders):

(a)Borrower, Agent and Lenders shall have executed and delivered this Agreement;

(b)Borrower shall have delivered such other documents as Agent may have reasonably requested;

(c)no Default or Event of Default shall have occurred and be continuing; and

(d)US Obligors, US Facility Agent and US Facility Lenders shall have entered into an amendment to the US Facility Loan Agreement and the Intercreditor Agreement in form and substance satisfactory to Agent, together with a reaffirmation by Holdings of its obligations under the Loan Documents to which it is a party.

4.Representations and Warranties.  To induce Agent and Lenders to enter into this Agreement, Borrower represents and warrants to Agent and Lenders:

(a)that the Loan Parties have all requisite organizational power and authority to enter into, and carry out the transactions contemplated by, this Agreement and all other agreements and documents executed in connection therewith to which such Loan Parties are parties;

(b)that the execution, delivery and performance of this Agreement and all other agreements and documents executed in connection therewith have been duly authorized by all requisite action on the part of the Loan Parties which are parties thereto and that this Agreement has been duly executed and delivered by Borrower;

(c)that each of the representations and warranties set forth in Section 4 of the Loan Agreement (other than those which, by their terms, specifically are made as of certain dates prior to the date hereof) are true and correct in all material respects as of the date hereof; and

(d)that, after giving effect to this Agreement, no Default or Event of Default has occurred and is continuing.

5.Severability.  Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this

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Agreement and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

6.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument.

7.Ratification.  Except as expressly set forth herein, the terms and provisions set forth in this Agreement shall not be deemed to be a modification or waiver of any term or condition of the Loan Agreement.  The terms and provisions of the Loan Agreement, as amended hereby, and the other Loan Documents are ratified and confirmed and shall continue in full force and effect and all Collateral encumbered by any of the Loan Documents will continue to secure, to the fullest extent possible, the payment and performance of all Obligations under or in respect of the Loan Agreement or any of the other Loan Documents.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above.

BEACON ROOFING SUPPLY CANADA COMPANY
	By: /s/ David R. Grace
	Title: Chief Financial Officer

GE CANADA FINANCE HOLDING COMPANY, as Agent and a Lender
	By: /s/ Ellis Gaston
	Its Authorized Signatory
	Vice President
	GE Canada Finance Holding Company

CONSENT AND REAFFIRMATION

Each of the undersigned hereby (i) acknowledges receipt of a copy of the foregoing First Amendment to Third Amended and Restated Loan and Security Agreement; (ii) consents to Borrower’s execution and delivery thereof; and (iii) affirms that nothing contained therein shall modify in any respect whatsoever its guaranty of the obligations of Borrower to Agent and Lenders pursuant to the terms of certain of the Loan Documents to which it is a party and reaffirms that each Loan Document to which it is a party or otherwise bound and all Collateral encumbered thereby remain in full force and effect and will continue to guaranty or secure, as the case may be, to the fullest extent possible, the payment and performance of all obligations under or in respect of such Loan Documents.  Although each of the undersigned has been informed of the matters set forth herein and has acknowledged and consented to same, each of the undersigned understands that Agent and Lenders have no obligation to inform it of such matters in the future or to seek its acknowledgment or consent to future agreements or waivers, and nothing herein shall create such a duty.

IN WITNESS WHEREOF, each of the undersigned has executed this Consent and Reaffirmation on and as of the date of such Agreement.

BEACON ROOFING SUPPLY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEACON SALES ACQUISITION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
QUALITY ROOFING SUPPLY COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

BEACON CANADA, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEST DISTRIBUTING CO.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
THE ROOF CENTER, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
WEST END LUMBER COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
J.G.A. BEACON, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SDI HOLDING, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

SDI ACQUISITION GUARANTOR, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SHELTER DISTRIBUTION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

EX-10.3

Exhibit 10.3

INCREASED COMMITMENT AGREEMENT

Reference is made to the Third Amended and Restated Loan and Security Agreement, dated as of October 14, 2005 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Beacon Sales Acquisition, Inc., a Delaware corporation (“Borrower”), each of Quality Roofing Supply Company, Inc., a Delaware corporation (“Quality”), Beacon Canada, Inc., a Delaware corporation (“Beacon Canada Holdings”), Best Distributing Co, a North Carolina corporation (“Best Distribution”), The Roof Center, Inc., a Delaware corporation (“RFC”), West End Lumber Company, Inc., a Delaware corporation (“West End”), J.G.A. Beacon, Inc., a Delaware corporation (“JGA”), SDI Holding, Inc., a Delaware corporation (“SDI Holding”), SDI Acquisition Guarantor, Inc., a Delaware corporation (“SDI Guarantor”), Shelter Distribution, Inc. a Delaware corporation, and Beacon Pacific, Inc., a Delaware corporation (“Pacific”) (each individually a “Domestic Subsidiary Guarantor” and collectively “Domestic Subsidiary Guarantors” and together with Borrower and each other domestic Subsidiary of Borrower which thereafter becomes a party to the Loan Agreement, each individually an “Obligor” and collectively “Obligors”), the financial institutions listed on the signature pages thereto, and their respective successors and Eligible Assignees (each individually a “Lender” and collectively “Lenders”), and General Electric Capital Corporation, a Delaware corporation (in its individual capacity, “GE Capital”), for itself as a Lender, as the initial L/C Issuer and as Agent (“Agent”).  Unless otherwise defined herein, capitalized terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

WHEREAS, Borrower has proposed that the Revolving Loan Commitment be increased by the amount of $50,000,000 (the “Additional Revolving Loan Commitment”) and that any Revolving Loan advanced under the Additional Revolving Loan Commitment bear interest at the interest rates applicable to the existing Revolving Loan;

WHEREAS, the undersigned Lenders (each an “Increasing Lender” and, collectively, the “Increasing Lenders”) have agreed to increase their Revolving Loan Commitments by an aggregate amount equal to the amount of the Additional Revolving Loan Commitment upon the terms and subject to the conditions set forth herein and in the Loan Agreement;

NOW, THEREFORE, the Increasing Lenders and Obligors hereby agree as follows:

1.Increased Revolving Loan Commitments.  Upon the Effective Date, (as defined below), the Revolving Loan Commitment of each Increasing Lender shall be increased to the amount set forth below such Increasing Lender’s signature on the signature pages hereto (the aggregate amount of such increases in the Increasing Lenders’ Revolving Loan Commitments being referred to as the “Additional Revolving Loan Commitment”).  The effect of the foregoing increases in the Increasing Lenders’ Revolving Loan Commitments shall be to increase the Revolving Loan Commitment from $230,000,000 to $280,000,000 on the Effective Date.  All advances made pursuant to the Additional Revolving Loan Commitment shall constitute Revolving Advances bearing interest at the applicable rates set forth in Section 2.2 of the Credit Agreement, shall constitute Obligations, shall be secured by the Collateral and shall be repaid

(except as otherwise provided in Paragraph (F) of Section 2.16 of the Loan Agreement) as required for Revolving Loans.

2.Representations and Warranties.  Obligors hereby represent and warrant to Agent and Lenders that no Default or Event of Default has occurred and is continuing as of the Effective Date and that no Default or Event of Default will arise from the Additional Revolving Loan Commitment or the making of any Revolving Loan thereunder.

3.Effective Date; Closing Fee.  Following the execution of this Increased Commitment Agreement by the Increasing Lenders and the Obligors, it will be delivered to the Agent for acceptance by it and recording by the Agent pursuant to the Loan Agreement, whereupon the effective date (the “Effective Date”) of this Increased Commitment Agreement shall be deemed to have occurred.  Subject to the occurrence of the Effective Date, Borrower hereby agrees to pay to Agent the fees set forth in that supplemental fee letter of even date herewith.

4.New Notes.  Borrower shall execute and deliver to Agent New Notes in favor of each Increasing Lender to reflect its increased Revolving Loan Commitment.

5.New Lenders.  Each Increasing Lender that is not an existing Lender:

(a)agrees that, upon the effectiveness of this Agreement, it shall be a party to the Loan Agreement and shall have all of the rights and obligations under the Loan Documents, and shall be deemed to have made all of the covenants and agreements contained in the Loan Documents, arising out of or otherwise related to its Loans and Commitments.  Without limiting the generality of the foregoing, such Increasing Lender acknowledges and agrees that, upon the effectiveness of this Agreement, it shall be deemed a Lender under, and bound by, the Canadian Facility Intercreditor Agreement;

(b)represents and warrants that it satisfies any eligibility requirements to be a Lender under the Loan Agreement; that it is not a foreign person (i.e., a person other than a United States person for United States Federal income tax purposes) or, if it is a foreign person, that it has delivered to Agent the documentation required by Section 2.10 of the Loan Agreement; that it has experience and expertise in the making or the purchasing of loans such as the Loans; and that it has received, reviewed and approved a copy of the Loan Agreement (including all Exhibits and Schedules thereto) and copies of all other Loan Documents which it has requested; and

(c)represents and warrants that it has received such financial information regarding Borrower and the other Loan Parties as it has requested, that it has made its own independent investigation of the financial condition and affairs of Borrower and the other Loan Parties in connection with this Agreement, and that it has made and shall continue to make its own appraisal of the creditworthiness of Borrower and the other Loan Parties.

6.Severability.  Whenever possible, each provision of this Increased Commitment Agreement will be interpreted in such manner as to be effective and valid under applicable law.  In the event any provision of this Increased Commitment Agreement is or is held to be invalid, illegal, or unenforceable under applicable law, such provision will be ineffective only to the

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extent of such invalidity, illegality, or unenforceability, without invalidating the remainder of such provision or the remaining provisions of the this Increased Commitment Agreement.  In addition, in the event any provision of or obligation under this Increased Commitment Agreement is or is held to be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality, and enforceability of the remaining provisions or obligations in any other jurisdictions will not in any way be affected or impaired thereby.

7.Section Titles.  Section and Subsection titles in this Increased Commitment Agreement are included for convenience of reference only, do not constitute a part of this Increased Commitment Agreement for any other purpose, and have no substantive effect.

8.Successors and Assigns.  This Increased Commitment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

9.Applicable Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

10.Counterparts.  This Increased Commitment Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, will be deemed an original and all of which shall together constitute one and the same instrument.

11.Ratification.  Except as expressly set forth herein, the terms and provisions set forth in this Agreement shall not be deemed to be a modification or waiver of any term or condition of the Loan Agreement.  The terms and provisions of the Loan Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect and shall continue to guarantee or secure, as the case may be, to the fullest extent possible, the payment and performance of all Obligations under or in respect of the Loan Agreement or any of the other Loan Documents and all Collateral encumbered by any of the Loan Documents will continue to secure, to the fullest extent possible, the payment and performance of all Obligations under or in respect of the Loan Agreement or any of the other Loan Documents.

 [Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Increased Commitment Agreement to be executed as of the date first above written by their respective duly authorized officers.

INCREASING LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and a Lender
	By: /s/ Ken A. Brown
	Its Duly Authorized Signatory
Revolving Loan Commitment: $6,083,334.00

BANK OF AMERICA, N.A.
as a Lender
	By: /s/ Sandra Evans
	Title: Senior Vice President
Revolving Loan Commitment: $9,416,666.00

THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender
	By: /s/ Chad Ramsey
	Title: Vice President
Revolving Loan Commitment: $12,250,000.00

JPMORGAN CHASE BANK, N.A., as a Lender
	By: /s/ Beverly J. Gray
	Title: Regional Portfolio Manager
Revolving Loan Commitment: $6,583,333.00

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as a Lender
	By: /s/ Vicky Best
	Title: Vice President
Revolving Loan Commitment: $7,500,000.00

UPS CAPITAL CORPORATION, as a Lender
	By: /s/ John P. Holloway
	Title: Director of Portfolio Management
Revolving Loan Commitment: $2,333,333.00

FIFTH THIRD BANK, as a Lender
	By: /s/ John T. Penny
	Title: Vice President
Revolving Loan Commitment: $5,833,334.00

OBLIGORS:
BEACON SALES ACQUISITION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
QUALITY ROOFING SUPPLY
COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEACON CANADA, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Office
BEST DISTRIBUTING CO.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
THE ROOF CENTER, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
WEST END LUMBER COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

J.G.A. BEACON, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SDI HOLDING, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SDI ACQUISITION GUARANTOR, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SHELTER DISTRIBUTION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEACON PACIFIC, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

EX-10.4

EXHIBIT 10.4

SECOND AMENDMENT TO

THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated as of January 31, 2006, and is entered into by and among BEACON SALES ACQUISITION, INC. (“Borrower”) and the Domestic Subsidiary Guarantors which are signatories hereto (together with Borrower, “Obligors”); GENERAL ELECTRIC CAPITAL CORPORATION (“GE Capital”), for itself as a Lender, as L/C Issuer and as Agent; and the Lenders and Canadian Facility Lenders which are signatories hereto.

WHEREAS, Agent, Lenders and Obligors are parties to a certain Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005 (as such agreement has been or may hereafter be from time to time amended, supplemented or otherwise modified, the “Loan Agreement”); and

WHEREAS, Borrower has requested that each of the Term Loan A Commitment and Term Loan B Commitment be increased by $5,000,000 and that such increases be funded on the effective date of this Agreement; and

WHEREAS, the parties desire to amend the Loan Agreement to provide for such increases in the Term Loan A Commitment and Term Loan B Commitment on the terms set forth.

NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Definitions.  Capitalized terms used in this Agreement, unless otherwise defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1On the effective date of this Agreement (the “Second Amendment Date”), the Term Loan A Commitment and/or Term Loan B Commitment, as applicable, of each Lender designated as an “Increasing Lender” on the signature pages hereto (each such Lender an “Increasing Lender”) shall be increased by the amount set forth below such Lender’s signature (such amount being referred to as such Increasing Lender’s “Incremental Term Loan A Commitment” or “Incremental Term Loan B Commitment, as applicable).  Advances under the Incremental Term Loan A Commitments shall be funded in one drawing on the Second Amendment Date and shall constitute part of Term Loan A.  Advances under the Incremental Term Loan B Commitments shall be funded in one drawing on the Second Amendment Date and shall constitute part of Term Loan B.

2.2The definition of “Scheduled Installment” set forth in Section 2.1(A)(1) of the Loan Agreement is hereby amended to read as follows:

“Scheduled Installment” of the Term Loan A means, for each date set forth below, the amount set forth opposite such date.

Date	Scheduled Installment
December 31, 2005	$	750,000
March 31, 2006	$	904,639
June 30, 2006	$	904,639
September 30, 2006	$	904,639
December 31, 2006	$	904,639
March 31, 2007	$	904,639
June 30, 2007	$	904,639
September 30, 2007	$	904,639
December 31, 2007	$	904,639
March 31, 2008	$	904,639
June 30, 2008	$	904,639
September 30, 2008	$	904,639
December 31, 2008	$	904,639
March 31, 2009	$	904,639
June 30, 2009	$	904,639
September 30, 2009	$	904,639
December 31, 2009	$	904,639
March 31, 2010	$	904,639
June 30, 2010	$	904,639
October 14, 2010	$	12,966,498

2.3The definition of “Scheduled Installment” set forth in Section 2.1(A)(2) of the Loan Agreement is hereby amended to read as follows:

“Scheduled Installment” of Term Loan B means, for each date set forth below, the amount set forth opposite such date.

Date	Scheduled Installment
December 31, 2005	$	4,583,333
March 31, 2006	$	5,037,879
June 30, 2006	$	5,037,879
September 30, 2006	$	5,037,879
December 31, 2006	$	5,037,879
March 31, 2007	$	5,037,879
June 30, 2007	$	5,037,879
September 30, 2007	$	5,037,879
December 31, 2007	$	5,037,879
March 31, 2008	$	5,037,879

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Date	Scheduled Installment
June 30, 2008	$	5,037,879
September 30, 2008	$	5,037,877

3.Conditions.  The effectiveness of this Agreement is subject to the following conditions precedent (unless specifically waived in writing by Agent, Lenders and Canadian Facility Lenders):

(a)Obligors, Agent, Lenders and Canadian Facility Lenders shall have executed and delivered this Agreement;

(b)Borrower shall have executed and delivered to Agent replacement Notes in favor of each Increasing Lender to reflect its Incremental Term Loan A Commitment and/or Incremental Term Loan B Commitment, as applicable;

(c)Borrower shall have delivered such other documents as Agent may have reasonably requested;

(d)Borrower shall have paid to Agent the fees set forth in that supplemental fee letter of even date herewith; and

(e)No Default or Event of Default shall have occurred and be continuing.

4.Representations and Warranties.  To induce Agent, Lenders and Canadian Facility Lenders to enter into this Agreement, Obligors represent and warrant to Agent, Lenders and Canadian Facility Lenders:

(a)that the Loan Parties have all requisite organizational power and authority to enter into, and carry out the transactions contemplated by, this Agreement and all other agreement and documents executed in connection therewith to which such Loan Parties are parties.

(b)that the execution, delivery and performance of this Agreement and all other agreements and documents executed in connection therewith have been duly authorized by all requisite action on the part of the Loan Parties which are parties thereto and that this Agreement has been duly executed and delivered by Borrower;

(c)that each of the representations and warranties set forth in Section 4 of the Loan Agreement (other than those which, by their terms, specifically are made as of certain date prior to the date hereof) are true and correct in all material respects as of the date hereof; and

(d)that, after giving effect to this Agreement, no Default or Event of Default has occurred and is continuing.

5.New Lenders.  Each Increasing Lender that is not an existing Lender:

3

(a)agrees that, upon the effectiveness of this Agreement, it shall be a party to the Loan Agreement and shall have all of the rights and obligations under the Loan Documents, and shall be deemed to have made all of the covenants and agreements contained in the Loan Documents, arising out of or otherwise related to its Loans and Commitments.  Without limiting the generality of the foregoing, such Increasing Lender acknowledges and agrees that, upon the effectiveness of this Agreement, it shall be deemed a Lender under, and bound by, the Canadian Facility Intercreditor Agreement;

(b)represents and warrants that it satisfies any eligibility requirements to be a Lender under the Loan Agreement; that it is not a foreign person (i.e., a person other than a United States person for United States Federal income tax purposes) or, if it is a foreign person, that it has delivered to Agent the documentation required by Section 2.10 of the Loan Agreement; that it has experience and expertise in the making or the purchasing of loans such as the Loans; and that it has received, reviewed and approved a copy of the Loan Agreement (including all Exhibits and Schedules thereto) and copies of all other Loan Documents which it has requested; and

(c)represents and warrants that it has received such financial information regarding Borrower and the other Loan Parties as it has requested, that it has made its own independent investigation of the financial condition and affairs of Borrower and the other Loan Parties in connection with this Agreement, and that it has made and shall continue to make its own appraisal of the creditworthiness of Borrower and the other Loan Parties.

6.Mortgage Modifications.  Upon the request of Agent, Borrower shall deliver to Agent modifications to the Mortgages to reflect the increase in the Term Loans provided for herein and the increase in the Revolving Loan Commitment provided for under that certain Increased Commitment Agreement to be entered into on or about the Second Amendment Date.

7.Severability.  Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

8.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument.

9.Ratification.  Except as expressly set forth herein, the terms and provisions set forth in this Agreement shall not be deemed to be a modification or waiver of any term or condition of the Loan Agreement.  The terms and provisions of the Loan Agreement, as amended hereby, and the other Loan Documents are ratified and confirmed and shall continue in full force and effect and shall continue to guarantee or secure, as the case may be, to the fullest extent possible, the payment and performance of all Obligations under or in respect of the Loan Agreement or any of the other Loan Documents and all Collateral encumbered by any of the Loan Documents will continue to secure, to the fullest extent possible, the payment and performance of all Obligations under or in respect of the Loan Agreement or any of the other Loan Documents.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above.

BEACON SALES ACQUISITION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
QUALITY ROOFING SUPPLY
COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEACON CANADA, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEST DISTRIBUTING CO.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
THE ROOF CENTER, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
WEST END LUMBER COMPANY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
J.G.A. BEACON, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

SDI HOLDING, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SDI ACQUISITION GUARANTOR, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
SHELTER DISTRIBUTION, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer
BEACON PACIFIC, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

GENERAL ELECTRIC CAPITAL CORPORATION, as Agent, an L/C Issuer, a Lender and an Increasing Lender
	By: /s/ John M. Steidle
	Its Authorized Signatory
Incremental Term Loan A Commitment: $191,665.00
Incremental Term Loan B Commitment: $191,665.00

BANK OF AMERICA, N.A.
as a Lender
	By: /s/ Jason Riley
	Title: Vice President
Incremental Term Loan A Commitment: $941,666.00
Incremental Term Loan B Commitment: $941,668.00

THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender
	By: /s/ Chad Ramsey
	Title: Vice President
Incremental Term Loan A Commitment: $1,225,000.00
Incremental Term Loan B Commitment: $1,225,000.00

LASALLE BANK NATIONAL ASSOCIATION, a national banking association, as a Lender
	By: /s/ Andrew Heinz
	Title: Vice President
Incremental Term Loan A Commitment: $416,666.00
Incremental Term Loan B Commitment: $416,666.00

JPMORGAN CHASE BANK, N.A., as a Lender
	By: /s/ Stephen Christ
	Title: Account Executive
Incremental Term Loan A Commitment: $658,333.00
Incremental Term Loan B Commitment: $658,334.00

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as a Lender
	By: /s/ Vicky Geist
	Title: Vice President
Incremental Term Loan A Commitment: $750,000.00
Incremental Term Loan B Commitment: $750,000.00

UPS CAPITAL CORPORATION, as a Lender
	By: /s/ John P. Holloway
	Title: Director of Portfolio Management
Incremental Term Loan A Commitment: $233,333.00
Incremental Term Loan B Commitment: $233,333.00

FIFTH THIRD BANK, as a Lender
	By: /s/ John T. Penny
	Title: Vice President
Incremental Term Loan A Commitment: $583,333.00
Incremental Term Loan B Commitment: $583,333.00

ANTARES CAPITAL CORPORATION,
as a Lender
	By: /s/ John M. Seidle
	Title: Duly Authorized Signatory

GE CANADA FINANCE HOLDING COMPANY, as the sole Canadian Facility Lender
	By: /s/ Jack Morrone
	Title: Senior Vice President

CONSENT AND REAFFIRMATION (HOLDINGS)

The undersigned hereby (i) acknowledges receipt of a copy of each of the Second Amendment to Third Amended and Restated Loan and Security Agreement and the Increased Commitment Agreement (together, the “Agreements”); (ii) consents to Obligors’ execution and delivery thereof; and (iii) affirms that nothing contained therein shall modify in any respect whatsoever its guaranty of the obligations of the undersigned to Agent and Lenders pursuant to the terms of that certain Guaranty dated as of March 12, 2004 (the “Holdings Guaranty”) and reaffirms that the Holdings Guaranty is and shall continue to remain in full force and effect and that each Loan Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible, the payment and performance of all obligations under or in respect of the Holdings Guaranty and such other Loan Documents.  Although the undersigned has been informed of the matters set forth herein and has acknowledged and consented to same, the undersigned understands that Agent and Lenders have no obligation to inform it of such matters in the future or to seek its acknowledgment or consent to future agreements or waivers, and nothing herein shall create such a duty.

IN WITNESS WHEREOF, the undersigned has executed this Consent and Reaffirmation on and as of the date of the Agreements.

BEACON ROOFING SUPPLY, INC.
	By: /s/ David R. Grace
	Title: Chief Financial Officer

CONSENT AND REAFFIRMATION (BEACON CANADA)

The undersigned hereby (i) acknowledges receipt of a copy of each of the Second Amendment to Third Amended and Restated Loan and Security Agreement and the Increased Commitment Agreement (together, the “Agreements”); (ii) consents to the terms and conditions of the Agreements and the execution and delivery of the Agreements by the Obligors; and (iii) confirms and ratifies the terms of the Amended and Restated Guarantee dated as of June 8, 2001 given by the undersigned in favour of Agent, as acknowledged, confirmed and amended pursuant to the Acknowledgement and Confirmation dated October 14, 2005 between the undersigned, Beacon Canada, Inc. and Agent (as further amended, restated, supplemented or otherwise modified from time to time, the “Beacon Canada Guarantee”) and reaffirms that the Beacon Canada Guarantee is not released or discharged by the execution and delivery of the Agreements and is and shall continue to remain in full force and effect and that each Loan Document to which the undersigned is a party or otherwise bound and all Collateral encumbered thereby will continue to guarantee or secure, as the case may be, to the fullest extent possible, the payment and performance of all obligations under or in respect of the Beacon Canada Guarantee and such other Loan Documents.  Although the undersigned has been informed of the matters set forth herein and has acknowledged and consented to same, the undersigned understands that Agent and Lenders have no obligation to inform it of such matters in the future or to seek its acknowledgement or consent to future agreements or waivers, and nothing herein shall create such a duty.

Capitalized terms used in this Consent and Reaffirmation, unless otherwise defined herein, shall have the meanings given to them in that certain Third Amended and Restated Loan and Security Agreement dated as of October 14, 2005 among Beacon Sales Acquisition, Inc., Quality Roofing Supply Company, Inc., Beacon Canada, Inc., Best Distributing Co., The Roof Center, Inc., West End Lumber Company, Inc., J.G.A. Beacon, Inc., SDI Holding, Inc., SDI Acquisition Guarantor, Inc., Shelter Distribution, Inc., and Beacon Pacific, Inc., the financial institutions party thereto, and General Electric Capital Corporation.

IN WITNESS WHEREOF, the undersigned has executed this Consent and Reaffirmation on and as of the date of the Agreements.

BEACON ROOFING SUPPLY CANADA COMPANY
	By: /s/ David R. Grace
	Title: Chief Financial Officer

EX-31.1

EXHIBIT 31.1

I, Robert R. Buck, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Beacon Roofing Supply, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2006	/s/ Robert R. Buck
	Robert R. Buck President & Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, David R. Grace, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Beacon Roofing Supply, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2006	/s/ David R. Grace
	David R. Grace Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report on Form 10-Q of Beacon Roofing Supply, Inc. (the “Company”) for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert R. Buck, as President & Chief Executive Officer of the Company, and David R. Grace, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 9, 2006

/s/ Robert R. Buck

Robert R. Buck

President and
Chief Executive Officer

/s/ David R. Grace

David R. Grace

Chief Financial Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.