Beacon Roofing Supply Reports Third Quarter 2015 Results

August 6, 2015 8:00 AM

HERNDON, Va.--(BUSINESS WIRE)-- Beacon Roofing Supply, Inc. (the "Company") (NASDAQ: BECN) announced results today for its third quarter ended June 30, 2015 of the fiscal year ending September 30, 2015 (“Fiscal 2015”).

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Today’s record third quarter earnings release continues the tremendous momentum from our July 27 announcement of Beacon’s agreement to acquire RSG. I look forward to the anticipated October 1, 2015 closing of the RSG acquisition and to have RSG’s 83 branches and talented and experienced workforce join Beacon and help deliver even greater service and product offerings to our customers. Until then, we will remain focused on driving growth and enhanced profitability across our 274 branches, which we accomplished in our third quarter. We delivered 8.3% sales growth in the quarter and 7.9% sales growth year-to-date, which resulted in record revenues for the third quarter and nine months. All three product lines grew compared to last year with residential and complementary leading the way with 13.2% and 9.8% growth, respectively. This marks the fifth consecutive quarter in which all three product lines grew, demonstrating the strength of our diversified portfolio. Also encouraging is that our growth pace accelerated solidly through the quarter after difficult weather conditions in April and early May, particularly in our West Division. Sales grew in six of our seven regions, with three regions recording double-digit gains. Gross margins improved by 90 basis points, mainly driven from a mix shift into higher margin residential and complementary business. As we look towards the fourth quarter, and the exciting closing of the RSG acquisition at the start of next year, we are confident that we will build upon the third quarter’s solid performance to finish the year strongly and deliver superior value to our customers and shareholders.”

Third Quarter

Total sales increased 8.3% to $718.2 million in 2015, from $663.4 million in 2014. On an overall consolidated basis, residential roofing product sales increased 13.2%, non-residential roofing product sales increased 1.3%, and complementary product sales increased 9.8% over the prior year. Existing market sales, excluding acquisitions, increased 4.9% for the quarter. The third quarter of 2015 and 2014 both had the same number of business days.

Net income for the third quarter was $28.3 million, compared to $26.8 million in 2014. The third quarter net income per share was $0.56, compared to $0.54 in 2014. The net income for the quarter was favorably impacted by gross margins which improved by 90 basis points over the prior year. This was partially offset by increased operating expenses driven by the incremental costs associated with the three acquisitions made this fiscal year and the greenfields opened in the last 21 months.

Nine Months

Total sales increased 7.9% to a nine month record of $1,727.4 million in 2015, from $1,600.4 million in 2014. On an overall consolidated basis, residential roofing product sales increased 11.7%, non-residential roofing product sales increased 0.8%, and complementary product sales increased 14.2% over the prior year. Existing market sales, excluding acquisitions, increased 4.6% year to date. The nine months of 2015 and 2014 both had the same number of business days.

Net income for the nine months was $31.5 million, compared to $29.6 million in 2014. The nine months diluted net income per share was $0.63, compared to $0.59 in 2014. Net income for the nine months was favorably impacted by gross margins which improved by 60 bps over the prior year, and unfavorably impacted by increased operating expenses which were primarily driven by the incremental costs associated with the three acquisitions made this fiscal year and the greenfields opened in the last 21 months.

Cash flow from operations was $11.2 million in 2015, compared to ($46.8) million in 2014. This increase in operating cash flow was primarily impacted by changes in working capital and higher net income in the current year. Cash on hand decreased by $8.8 million due primarily to an increase in cash used for acquisition activities in 2015. Through positive working capital management and higher net income, the Company was able to fund three acquisitions, while improving its leverage ratio from 2.04 as compared to 2.26 at the end of the third quarter 2014.

The Company will host a webcast and conference call today at 10:00 a.m. (EST) to discuss these results. The live webcast of the call, along with a webcast replay after the call, can be accessed at http://ir.beaconroofingsupply.com/events.cfm (the “Events & Presentations” page of the “Investor Relations” section of the Company’s web site). There will be a slide presentation of the results available on that page of the website as well. For those unable to connect to the Internet or who may wish to ask questions, the conference call dial-in number is 719-325-2308. To assure timely access, call participants should call in before 10:00 a.m.

About Beacon Roofing Supply

Founded in 1928, Beacon Roofing Supply, Inc. (NASDAQ: BECN) is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating 274 branches throughout 42 states in the U.S. and six provinces in Canada. In fiscal 2014, Beacon had sales of $2.3 billion. The company employs more than 3,000 associates. To learn more about Beacon and its family of regional brands, please visit www.becn.com.

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

BECN-F

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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,

2015

% of NetSales

2014

% of NetSales

2015

% of NetSales

2014

% of NetSales

Net sales $ 718,214 100.0 % $ 663,397 100.0 % $ 1,727,440 100.0 % $ 1,600,411 100.0 %
Cost of products sold 548,778 76.4 % 512,584 77.3 % 1,323,666 76.6 % 1,235,901 77.2 %
Gross profit 169,436 23.6 % 150,813 22.7 % 403,774 23.4 % 364,510 22.8 %
Operating expenses 121,445 16.9 % 105,004 15.8 % 345,852 20.0 % 308,826 19.3 %
Income from operations 47,991 6.7 % 45,809 6.9 % 57,922 3.4 % 55,684 3.5 %
Interest expense, financing costs and other 2,494 0.3 % 2,510 0.4 % 7,988 0.5 % 7,707 0.5 %
Income before provision for income taxes 45,497 6.3 % 43,299 6.5 % 49,934 2.9 % 47,977 3.0 %
Provision for income taxes 17,148 2.4 % 16,500 2.5 % 18,464 1.1 % 18,338 1.1 %
Net income $ 28,349 3.9 % $ 26,799 4.0 % $ 31,470 1.8 % $ 29,639 1.9 %
Net income per share:
Basic $ 0.57 $ 0.54 $ 0.64 $ 0.60
Diluted $ 0.56 $ 0.54 $ 0.63 $ 0.59

Weighted average shares used in computing net income per share:

Basic 49,638,251 49,315,892 49,526,436 49,185,893
Diluted 50,199,126 50,027,240 50,089,987 49,946,381
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(in thousands)

June 30, 2015

September 30, 2014

June 30, 2014

ASSETS (unaudited) (audited) (unaudited)
Current assets
Cash and cash equivalents $ 17,594 $ 54,472 $ 26,405
Accounts receivable, net 389,499 360,802 352,554

Inventories, net

386,812 301,626 399,619
Prepaid expenses and other current assets 99,505 66,828 72,048
Deferred income taxes - 14,610 14,376
Total current assets 893,410 798,338 865,002
Property and equipment, net 88,868 88,565 81,433
Goodwill 498,499 466,206 467,916
Intangible assets, net 91,419 72,266 77,747
Other assets, net 3,143 8,521 7,094
TOTAL ASSETS $ 1,575,339 $ 1,433,896 $ 1,499,192
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 257,656 $ 220,834 $ 227,630
Accrued expenses 105,756 80,285 102,539
Borrowings under revolver lines of credit 74,110 18,514 88,331
Current portion of long-term obligations 16,474 16,602 15,466
Total current liabilities 453,996 336,235 433,966
Senior term loan, net of current portion 177,188 185,625 188,438
Deferred income taxes 68,099 64,100 60,024
Long-term obligations under equipment financing and other,
net of current portion 23,602 30,835 23,152
Total liabilities 722,885 616,795 705,580
Commitments and contingencies
Stockholders' equity:
Common stock 496 493 493
Undesignated preferred stock - - -
Additional paid-in capital 340,468 328,059 325,086
Retained earnings 526,598 495,128 470,921
Accumulated other comprehensive loss (15,108 ) (6,579 ) (2,888 )
Total stockholders' equity 852,454 817,101 793,612
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,575,339 $ 1,433,896 $ 1,499,192
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(unaudited; in thousands)

Nine Months EndedJune 30,

2015 2014
Operating activities:
Net income $ 31,470 $ 29,639
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 25,920 22,609
Stock-based compensation 7,305 5,239
Certain interest expense and other financing costs 814 816
Gain on sale of fixed assets (609 ) (660 )
Deferred income taxes (589 ) 793
Adjustment of liability for contingent consideration and other 286 177
Changes in assets and liabilities, net of the effects of
businesses acquired:
Accounts receivable (20,581 ) (23,789 )
Inventories (73,717 ) (148,384 )
Prepaid expenses and other assets (7,168 ) (12,697 )
Accounts payable and accrued expenses 48,091 79,475
Net cash provided by (used in) operating activities 11,222 (46,782 )
Investing activities:
Purchases of property and equipment (13,787 ) (26,090 )
Acquisition of businesses (85,301 ) -
Proceeds from sales of assets 804 760
Net cash used in investing activities (98,284 ) (25,330 )
Financing activities:
Repayments under revolving lines of credit, net of repayments 56,778 40,647
Borrowings/(Repayments) under equipment financing facilities and other (4,114 ) 11,450
Repayments under senior term loan (8,438 ) (8,437 )
Proceeds from exercise of options 5,107 6,890
Excess tax benefit from stock-based compensation 1,245 949
Net cash used in financing activities 50,578 51,499
Effect of exchange rate changes on cash (394 ) (9 )
Net decrease in cash and cash equivalents (36,878 ) (20,622 )
Cash and cash equivalents, beginning of period 54,472 47,027
Cash and cash equivalents, end of period $ 17,594 $ 26,405
BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
Consolidated Sales by Product Line
Three Months Ended
June 30, 2015 June 30, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 359.5 50.1 % $ 317.5 47.9 % $ 42.0 13.2 %
Non-residential roofing products 252.7 35.2 % 249.4 37.6 % 3.3 1.3 %
Complementary building products 106.0 14.7 % 96.5 14.5 % 9.5 9.8 %
$ 718.2 100.0 % $ 663.4 100.0 % $ 54.8 8.3 %
Consolidated Sales by Product Line for Existing Markets*
Three Months Ended
June 30, 2015 June 30, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 346.8 49.8 % $ 317.5 47.9 % $ 29.2 9.2 %
Non-residential roofing products 252.0 36.2 % 249.4 37.6 % 2.6 1.1 %
Complementary building products 97.1 14.0 % 96.5 14.5 % 0.6 0.6 %
$ 695.9 100.0 % $ 663.4 100.0 % $ 32.5 4.9 %
Existing Market Sales By Business Day**
Three Months Ended
June 30, 2015 June 30, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 5.419 49.8 % $ 4.961 47.9 % $ 0.458 9.2 %
Non-residential roofing products 3.938 36.2 % 3.896 37.6 % 0.042

1.1

%
Complementary building products 1.517 14.0 % 1.508 14.5 % 0.009 0.6 %
$ 10.874 100.0 % $ 10.366 100.0 % $ 0.509 4.9 %

Note: Some totals above may not foot due to rounding.*Excludes branches acquired during the four quarters prior to the start of the third quarter of Fiscal 2015.**There were 64 business days in each of the quarters ended June, 2015 and 2014.

BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
Consolidated Sales by Product Line
Nine Months Ended
June 30, 2015 June 30, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 843.7 48.8 % $ 755.6 47.2 % $ 88.1 11.7 %
Non-residential roofing products 609.4 35.3 % 604.7 37.8 % 4.7 0.8 %
Complementary building products 274.3 15.9 % 240.1 15.0 % 34.2 14.2 %
$ 1,727.4 100.0 % $ 1,600.4 100.0 % $ 127.0 7.9 %
Consolidated Sales by Product Line for Existing Markets*
Nine Months Ended
June 30, 2015 June 30, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 814.0 48.6 % $ 755.6 47.2 % $ 58.4 7.7 %
Non-residential roofing products 607.1 36.3 % 604.7 37.8 % 2.4 0.4 %
Complementary building products 252.8 15.1 % 240.1 15.0 % 12.7 5.3 %
$ 1,673.9 100.0 % $ 1,600.4 100.0 % $ 73.5 4.6 %
Existing Market Sales By Business Day**
Nine Months Ended
June 30, 2015 June 30, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 4.307 48.6 % $ 3.998 47.2 % $ 0.309 7.7 %
Non-residential roofing products 3.212 36.3 % 3.199 37.8 % 0.013 0.4 %
Complementary building products 1.338 15.1 % 1.271 15.0 % 0.067

5.3

%
$ 8.857 100.0 % $ 8.468 100.0 % $ 0.389 4.6 %

Note: Some totals above may not foot due to rounding.*Excludes branches acquired during the four quarters prior to the start of the third quarter of Fiscal 2015.**There were 189 business days in each of the nine months ended June 30, 2015 and 2014.

Beacon Roofing Supply, Inc.

Joseph Nowicki, 571-323-3940

Executive Vice President & Chief Financial Officer

JNowicki@becn.com

Source: Beacon Roofing Supply, Inc.

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