EX-99.1 2 v445717_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

 

Beacon Roofing Supply Reports Third Quarter 2016 Results

 

·Record third quarter net sales of $1.15 billion (over 60% growth), the Company’s first billion dollar quarter

 

·Organic growth of 8.7% in existing markets (13.2% growth in residential roofing)

 

·Record third quarter EPS of $0.68 ($0.77 Adjusted) vs. $0.56 in prior year

 

·Third quarter net income grew to $41.1 million from $28.3 million in the prior year

 

·Third quarter Adjusted EBITDA grew to $109.6 million from $60.0 million in the prior year

 

·Record nine month net sales of $2.95 billion vs. $1.73 billion in prior year (71% growth)

 

·Four acquisitions in the quarter, increasing U.S. presence to 46 states.

 

HERNDON, VA. — (BUSINESS WIRE) — August 2, 2016 — Beacon Roofing Supply, Inc. (NASDAQ: BECN) announced results today for its third quarter ended June 30, 2016 and nine months ended June 30, 2016 of the fiscal year ending September 30, 2016 ("Fiscal 2016").

 

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “I am excited to announce another record breaking quarter and continued strong results for the year. In the third quarter Beacon achieved a milestone with our first ever billion dollar quarter. Sales grew over 60 percent in the quarter, mainly from the RSG and the seven additional acquisitions made this year. Organic sales grew 8.7 percent in the quarter, driven by our greenfield investments over the last four years and the increased storm activity in the Dallas metropolitan area. Aided by the continued shift to more residential sales, our gross margin grew to 24.5 percent of sales, up 90 basis points over the prior year and 70 basis points over the second quarter. We are continuing to see margin and operating expense benefit from the RSG synergies. Our balance sheet remains strong as our net debt leverage ratio remained at 3.6 times during our seasonal working capital peak. I am also pleased with the management of inventory at our branches as inventory turns have increased to 4.8 times vs. 4.3 times in the prior year. Adjusted EPS of $0.77 is another record and represents over 35 percent growth from the prior year. We continued our acquisition strategy by closing on four deals in the quarter and our pipeline remains robust. In order to finish our year strong we will continue executing on the core deliverables of customer service excellence, strategic growth and superior financial results.”

 

Third Quarter

 

Total sales increased 60.5% to a third quarter record of $1.15 billion in Fiscal 2016, from $718.2 million in 2015. Residential roofing product sales increased 73.0%, non-residential roofing product sales increased 43.9%, and complementary product sales increased 57.8% over the prior year. Existing market sales, excluding acquisitions, increased 8.7% for the quarter. The third quarter of Fiscal 2016 and 2015 each had 64 business days.

 

Net income for the third quarter was $41.1 million, compared to $28.3 million in 2015. Third quarter EPS was $0.68, compared to $0.56 in 2015. Adjusted Net Income, after removing the impact of non-recurring RSG acquisition-related costs and other current year acquisition costs, was $46.6 million in the third quarter 2016, with Adjusted EPS of $0.77 (see included financial tables for a definition and reconciliation of “Adjusted”). Net income for the quarter was favorably impacted by higher volumes and gross margins which improved by 90 basis points over the prior year. This was offset by increased operating expenses driven by the incremental costs associated with the RSG acquisition made this fiscal year.

 

Nine Months

 

Total sales increased 70.9% to a nine month record of $2.95 billion in Fiscal 2016, from $1.73 billion in 2015. Residential roofing product sales increased 83.4%, non-residential roofing product sales increased 61.0%, and complementary product sales increased 54.7% over the prior year. Existing market sales, excluding acquisitions, increased 13.9% year to date. The nine months of Fiscal 2016 and 2015 had 190 and 189 business days, respectively.

 

Net income for the nine months was $42.5 million, compared to $31.5 million in 2015. The nine month EPS was $0.71, compared to $0.63 in 2015. Adjusted Net Income, after removing the impact of non-recurring RSG acquisition-related costs and other current year acquisition costs, was $72.9 million year to date, with Adjusted EPS of $1.21 (see included financial tables for a definition and reconciliation of “Adjusted”). Net income for the nine months was favorably impacted by warmer weather in our second quarter and higher volume and gross margins which improved by 70 basis points over the prior year. This was offset by increased operating expenses driven by the incremental costs associated with the RSG acquisition made this fiscal year.

 

 

 

The Company will host a webcast and conference call today at 5:00 p.m. (EST) to discuss these results. The webcast link and call-in details are as follows:

 

  What: Beacon Roofing Supply Third Quarter 2016 Earnings Results Webcast and Conference Call
     
  When: Tuesday, August 2, 2016
     
  Time: 5:00 p.m. EST
     
  Webcast: http://ir.beaconroofingsupply.com/events.cfm (live and replay)
     
  Live Call: 720-634-9063

 

To assure timely access, conference call participants should call in prior to the 5:00pm start time.

 

Forward-Looking Statements

 

This release contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the "Risk Factors" section of the Company's latest Form 10-K. In addition, the forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point, the Company specifically disclaims any obligation to do so, other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this press release.

 

About Beacon Roofing Supply

 

Founded in 1928, Beacon Roofing Supply, Inc. is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating 369 branches throughout 46 states in the U.S. and six provinces in Canada. To learn more about Beacon and its family of regional brands, please visit www.becn.com.

 

BECN-F

 

Beacon Roofing Supply, Inc.
Joseph Nowicki, Executive VP & CFO

571-323-3940
JNowicki@becn.com

 

 

 

BEACON ROOFING SUPPLY, INC

Consolidated Statements of Operations

(Unaudited; In thousands, except share and per share amounts)

 

   Three Months Ended June 30,   Nine Months Ended June 30, 
   20161   % of
Net Sales		   2015   % of
Net Sales		   20161   % of
Net Sales		   2015   % of
Net Sales		 
Net sales  $1,152,726    100.0%  $718,214    100.0%  $2,952,743    100.0%  $1,727,440    100.0%
Cost of products sold   870,651    75.5%   548,778    76.4%   2,241,716    75.9%   1,323,666    76.6%
Gross profit   282,075    24.5%   169,436    23.6%   711,027    24.1%   403,774    23.4%
Operating expense   203,696    17.7%   121,445    16.9%   601,921    20.4%   345,852    20.0%
Income from operations   78,379    6.8%   47,991    6.7%   109,106    3.7%   57,922    3.4%
Interest expense, financing costs and other   12,226    1.1%   2,494    0.3%   41,508    1.4%   7,988    0.5%
Income before provision for income taxes   66,153    5.7%   45,497    6.4%   67,598    2.3%   49,934    2.9%
Provision for income taxes   25,027    2.2%   17,148    2.4%   25,073    0.8%   18,464    1.1%
Net income  $41,126    3.5%  $28,349    4.0%  $42,525    1.5%  $31,470    1.8%
                                         
Weighted-average common stock outstanding:                                        
Basic   59,615,121         49,638,251         59,293,500         49,526,436      
Diluted   60,619,809         50,199,126         60,276,695         50,089,987      
                                         
Net income per share:                                        
Basic  $0.69        $0.57        $0.72        $0.64      
Diluted  $0.68        $0.56        $0.71        $0.63      

 

(1)The third quarter 2016 Consolidated Statements of Operations includes $2.2 million ($1.6 million, net of taxes) of non-recurring charges, $5.7 million ($3.6 million, net of taxes) of additional amortization for acquired intangibles, and $0.4 million ($0.3 million, net of taxes) of interest expense, financing costs and other for the recognition of certain costs related to the RSG acquisition and all other acquisitions made in Fiscal 2016. For the nine months ended June 30, 2016 Consolidated Statement of Operations includes $27.6 million ($16.7 million, net of taxes) of non-recurring charges, $17.1 million ($10.4 million, net of taxes) of additional amortization for acquired intangibles, and $5.5 million ($3.3 million, net of taxes) of interest expense, financing costs and other for the recognition of certain costs related to the RSG acquisition and all other Fiscal 2016 acquisitions. See “Adjusted Net Income and Adjusted EPS” table for further details.

 

 

 

BEACON ROOFING SUPPLY, INC

Consolidated Balance Sheets

(In thousands)

 

   June 30,
 2016		   September 30,
2015		   June 30,
2015		 
   (unaudited)   (audited)   (unaudited) 
Assets               
Current assets               
Cash and cash equivalents  $36,536   $45,661   $17,594 
Accounts receivable, net   640,101    399,732    389,499 
Inventories   620,908    320,999    386,812 
Prepaid expenses and other current assets   205,073    97,928    99,505 
Total current assets   1,502,618    864,320    893,410 
                
Property and equipment, net   153,389    90,405    88,868 
Goodwill   1,200,206    496,415    498,499 
Intangible assets, net   477,250    87,055    91,419 
Other assets, net   1,430    1,233    1,233 
Total Assets  $3,334,893   $1,539,428   $1,573,429 
                
Liabilities and Stockholders' Equity               
Current liabilities:               
Accounts payable  $563,332   $244,891   $257,656 
Accrued expenses   205,412    124,794    105,756 
Borrowings under revolver lines of credit   -    11,240    74,110 
Current portion of long-term obligations   12,605    16,320    16,474 
Total current liabilities   781,349    397,245    453,996 
                
Borrowings under revolving lines of credit   416,207    -    - 
Long-term debt, net of current   721,630    170,200    175,278 
Deferred income taxes   106,337    66,500    68,099 
Long-term obligations under equipment financing and other, net of current   39,720    22,367    23,602 
Total liabilities   2,065,243    656,312    720,975 
                
Commitments and contingencies               
                
Stockholders' equity:               
Common stock   597    497    496 
Undesignated preferred stock   -    -    - 
Additional paid-in capital   686,943    345,934    340,468 
Retained earnings   599,930    557,405    526,598 
Accumulated other comprehensive loss   (17,820)   (20,720)   (15,108)
Total stockholders' equity   1,269,650    883,116    852,454 
Total Liabilities and Stockholders' Equity  $3,334,893   $1,539,428   $1,573,429 

 

 

 

BEACON ROOFING SUPPLY, INC

Consolidated Statements of Cash Flows

(Unaudited; In thousands)

 

   Nine Months Ended June 30, 
   2016   2015 
Operating activities:          
Net income  $42,525   $31,470 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   73,027    25,920 
Stock-based compensation   14,070    7,305 
Certain interest expense and other financing costs   5,113    814 
Gain on sale of fixed assets   (838)   (609)
Deferred income taxes   1,460    (589)
Adjustment of liability for contingent consideration and other   (359)   286 
Changes in assets and liabilities, net of the effects of businesses acquired:          
 Accounts receivable   (43,060)   (20,581)
 Inventories   (96,363)   (73,717)
 Prepaid expenses and other assets   (56,764)   (7,168)
 Accounts payable and accrued expenses   135,548    48,091 
Net cash provided by operating activities   74,359    11,222 
           
Investing activities:          
Purchases of property and equipment   (21,553)   (13,787)
Acquisition of businesses   (1,018,658)   (85,301)
Proceeds from sales of assets   969    804 
Net cash used in investing activities   (1,039,242)   (98,284)
           
Financing activities:          
Borrowings under revolving lines of credit, net of repayments   403,052    56,778 
Borrowings under term loan, net of repayments   261,000    (8,438)
Borrowings under Senior Notes   300,000    - 
Repayments under equipment financing facilities and other   (3,847)   (4,114)
Payment of deferred financing costs   (27,813)   - 
Proceeds from exercise of options   20,213    5,107 
Excess tax benefit from stock-based compensation   4,024    1,245 
Net cash provided by financing activities   956,629    50,578 
           
Effect of exchange rate changes on cash   (871)   (394)
           
Net decrease in cash and cash equivalents   (9,125)   (36,878)
Cash and cash equivalents, beginning of period   45,661    54,472 
Cash and cash equivalents, end of period  $36,536   $17,594 

 

 

 

BEACON ROOFING SUPPLY, INC

Consolidated Sales by Product Line

(Unaudited; Dollars in thousands)

 

Consolidated Sales by Product Line
   Three Months Ended June 30,         
   2016   2015   Change 
   Net Sales   Mix %   Net Sales   Mix %   $   % 
Residential roofing products  $621,742    53.9%  $359,455    50.0%  $262,287    73.0%
Non-residential roofing products   363,675    31.5%   252,718    35.2%   110,957    43.9%
Complementary building products   167,309    14.6%   106,041    14.8%   61,268    57.8%
   $1,152,726    100.0%  $718,214    100.0%  $434,512    60.5%

 

 Consolidated Sales by Product Line for Existing Markets1
   Three Months Ended June 30,         
   2016   2015   Change 
   Net Sales   Mix %   Net Sales   Mix %   $   % 
Residential roofing products  $379,987    52.4%  $335,713    50.3%  $44,274    13.2%
Non-residential roofing products   236,984    32.7%   229,982    34.5%   7,002    3.0%
Complementary building products   108,242    14.9%   101,235    15.2%   7,007    6.9%
   $725,213    100.0%  $666,930    100.0%  $58,283    8.7%

 

Existing Market Sales By Business Day2
   Three Months Ended June 30,         
   2016   2015   Change 
   Net Sales   Mix %   Net Sales   Mix %   $   % 
Residential roofing products  $5,937    52.4%  $5,246    50.3%  $691    13.2%
Non-residential roofing products   3,703    32.7%   3,593    34.5%   110    3.0%
Complementary building products   1,691    14.9%   1,582    15.2%   109    6.9%
   $11,331    100.0%  $10,421    100.0%  $910    8.7%

 

1 Excludes branches acquired during the four quarters prior to the start of the third quarter of Fiscal 2016
2 There were 64 business days in the quarters ended June 30, 2016 and 2015, respectively

 

 

 

BEACON ROOFING SUPPLY, INC

Consolidated Sales by Product Line

(Unaudited; Dollars in thousands)

 

Consolidated Sales by Product Line
   Nine Months Ended June 30,         
   2016   2015   Change 
   Net Sales   Mix %   Net Sales   Mix %   $   % 
Residential roofing products  $1,547,483    52.4%  $843,805    48.8%  $703,678    83.4%
Non-residential roofing products   980,910    33.2%   609,379    35.3%   371,531    61.0%
Complementary building products   424,350    14.4%   274,256    15.9%   150,094    54.7%
   $2,952,743    100.0%  $1,727,440    100.0%  $1,225,303    70.9%

 

 Consolidated Sales by Product Line for Existing Markets1
   Nine Months Ended June 30,         
   2016   2015   Change 
   Net Sales   Mix %   Net Sales   Mix %   $   % 
Residential roofing products  $909,287    50.3%  $772,425    48.6%  $136,862    17.7%
Non-residential roofing products   607,933    33.6%   552,462    34.8%   55,471    10.0%
Complementary building products   291,555    16.1%   263,225    16.6%   28,330    10.8%
   $1,808,775    100.0%  $1,588,112    100.0%  $220,663    13.9%

 

Existing Market Sales By Business Day2
   Nine Months Ended June 30,         
   2016   2015   Change 
   Net Sales   Mix %   Net Sales   Mix %   $   % 
Residential roofing products  $4,786    50.3%  $4,087    48.6%  $699    17.1%
Non-residential roofing products   3,200    33.6%   2,923    34.8%   277    9.5%
Complementary building products   1,535    16.1%   1,393    16.6%   142    10.2%
   $9,521    100.0%  $8,403    100.0%  $1,118    13.3%

 

1 Excludes branches acquired during the four quarters prior to the start of Fiscal 2016
2 There were 190 and 189 business days for the nine months ended June 30, 2016 and 2015, respectively

 

 

 

BEACON ROOFING SUPPLY, INC

Adjusted Net Income1 and Adjusted EPS2

(Unaudited; In thousands except per share amounts)

 

   Three Months Ended June 30,   Nine Months Ended June 30, 
   2016   2015   2016   2015 
   Amount   Per
Share		   Amount   Per
Share		   Amount   Per
Share		   Amount   Per
Share		 
Net income  $41,126   $0.68   $28,349   $0.56   $42,525   $0.71   $31,470   $0.63 
Company adjustments, net of income taxes:                                        
Acquisition costs3   5,444    0.09    -    -    30,405    0.50    -    - 
Adjusted Net Income  $46,570   $0.77   $28,349   $0.56   $72,930   $1.21   $31,470   $0.63 

 

(1)The Company’s management believes that “Adjusted Net Income”, which excludes non-recurring costs related to the RSG acquisition and the other acquisitions made in Fiscal 2016, and incremental amortization of acquired intangibles, is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance.

 

(2)Adjusted Net Income Per Share (“Adjusted Earnings Per Share” or “Adjusted EPS”) is calculated by dividing the Adjusted Net Income for the period by the weighted-average diluted shares outstanding for the period (see “Consolidated Statements of Operations” for amounts).

 

(3)Acquisition costs in fiscal year 2015 were immaterial

 

While we believe Adjusted Net Income and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States generally accepted accounting principles (“GAAP”). You should not consider Adjusted Net Income or Adjusted EPS in isolation or as a substitute for net income (loss) or diluted net income per share calculated in accordance with GAAP.

 

 

 

BEACON ROOFING SUPPLY, INC

Adjusted EBITDA1

(Unaudited; In thousands)

 

   Three Months Ended June 30,   Nine Months Ended June 30, 
   2016   2015   2016   2015 
Net Income  $41,126   $28,349   $42,525   $31,470 
Acquisition costs2   2,157    -    23,310    - 
Interest expense, net   12,508    2,476    41,836    7,760 
Income taxes   25,027    17,148    25,073    18,464 
Depreciation and amortization   25,375    9,490    73,019    25,920 
Stock-based compensation   3,374    2,561    14,070    7,305 
Adjusted EBITDA  $109,567   $60,024   $219,833   $90,919 

 

(1)Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation and RSG and other Fiscal 2016 non-recurring acquisitions costs. EBITDA is a measure commonly used in the distribution industry, and we present Adjusted EBITDA to enhance your understanding of our operating performance. Adjusted EBITDA is used in our bank covenants and we use Adjusted EBITDA as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Further, we believe that Adjusted EBITDA is a useful measure because it improves comparability of results of operations, since purchase accounting used for acquisitions can render depreciation and amortization non-comparable between periods. We use these supplemental measures to evaluate performance period over period and to analyze the underlying trends in the Company’s business and to establish operational goals and forecasts that are used in allocating resources. We expect to compute our non-GAAP financial measures using the same consistent method from quarter to quarter and year to year.

 

(2)RSG and other Fiscal 2016 acquisition costs reflect all non-recurring charges related to the acquisition (excluding the impact of tax) that are not embedded in other balances of the table.  Additional RSG and other Fiscal 2016 acquisition costs are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation in the table above. Acquisition costs in fiscal year 2015 were immaterial.

 

While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance GAAP. You should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, Adjusted EBITDA has inherent material limitations as a performance measure. It does not include interest expense, because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITDA also does not include stock-based compensation, which is a necessary element of our costs since we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, and income tax expense. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.