News Column

Beacon Roofing Supply Reports Third Quarter 2014 Results

August 8, 2014

  • Record third quarter sales up 5.8% to $663.4 million vs. $627.2 million in prior year
  • Third quarter diluted EPS of $0.54 vs. $0.55 in prior year
  • Record nine month sales of $1.60 billion vs. $1.56 billion in prior year
  • Nine month diluted EPS of $0.59 vs. $0.92 in prior year ($0.90 adjusted)
  • 17 new greenfield openings in fiscal 2014 YTD and 24 new greenfield openings in the last twelve months

    HERNDON, Va.--(BUSINESS WIRE)-- Beacon Roofing Supply, Inc. (the "Company") (NASDAQ: BECN) announced results today for its third quarter and nine months ended June 30, 2014 (“2014”) of the fiscal year ending September 30, 2014 (“Fiscal 2014”).

    Paul Isabella, the Company’s President and Chief Executive Officer, stated: “We delivered a solid 5.8% growth for the quarter, even in the face of continued soft residential roofing demand. Our diversified product offering allowed us to take advantage of the strength of the current commercial roofing market. In addition, our investment in new branch openings continues to fuel our growth. Approximately half of our growth in the quarter came from new branch openings and we expect these to add even more volume in the future. Although our gross margins improved slightly from the second quarter, they still are down from the prior year and continue to be our challenge. The soft residential market, coupled with heightened competition, has driven pricing down. Our gross margins this quarter also were unfavorably impacted by our increased percentage of commercial and direct ship business that typically have lower margins. We maintained our focus on cost control and managed our operating expenses to a flat percentage of sales with the prior year, even while investing almost $5 million in our new branches. We believe we are well positioned to capitalize on the high seasonal demand this time of the year, in addition to continuing to make the right investments to support our long term growth strategy.”

    Third Quarter

    Total sales increased 5.8% to a third quarter record $663.4 million in 2014 from $627.2 million in 2013. On an overall consolidated basis, residential roofing product sales increased 2.7%, non-residential roofing product sales increased 9.7%, and complementary product sales increased 6.4% over the prior year. During the third quarter, the Company had no branches classified as acquired markets and as such, consolidated sales are representative of existing market sales. In addition, the third quarters of 2014 and 2013 both had the same number of business days.

    Net income for the third quarter was $26.8 million, compared to net income of $27.2 million in 2013. The third quarter diluted income per share was $0.54, compared to $0.55 in 2013. This decline was due primarily to lower gross margins from reduced selling prices as a result of a soft demand environment, and a continued unfavorable shift in sales mix to lower margin direct shipment and commercial business. Although operating expenses were up in total, they were level as a percentage of sales, reflecting continued cost controls and sales base growth. In addition, the Company incurred increased operating expenses of $4.9 million this quarter related to new stores (greenfield locations not open last year) as the Company continued to expand its footprint in existing and new markets.

    Nine Months

    Total sales increased 2.8% to a nine month record $1.60 billion in 2014 from $1.56 billion in 2013. Existing market (organic) sales, which exclude branches acquired after the beginning of last year, increased 1.5%. The nine months of 2014 and 2013 both had the same number of business days. In existing markets, residential roofing product sales decreased 2.3%, non-residential roofing product sales increased 6.3%, and complementary product sales decreased 2.0%. While our sales results were much stronger during the third quarter of 2014, the comparison of the 2014 nine months sales to 2013 was unfavorably impacted by the severity of winter storms and prolonged colder temperatures in most of our markets during the first half of 2014.

    Net income for the nine months of 2014 was $29.6 million compared to $45.2 million in 2013, a decrease of 34.4%. Diluted net income per share for the nine months of 2014 was $0.59, compared to $0.92 in 2013. Adjusted net income, after removing the impact of certain non-recurring items, was $44.2 million in 2013, with adjusted diluted net income per share of $0.90 (see included financial tables for a reconciliation of adjusted net income and adjusted earnings per share). The lower net income was due to continued lower overall gross margins which were pressured by a difficult first half of 2014 due to the adverse and extended weather conditions we experienced which has resulted in softer overall demand, compounded by an unfavorable shift in sales mix during the nine months of 2014. In addition, the Company incurred incremental operating expenses of $9.7 million for the nine months of 2014 related to new stores (greenfield locations not open last year) as the Company continued to expand its footprint in existing and new markets. The nine months of 2013 included a $2.6 million credit to interest expense ($1.5 million, net of taxes), $0.03 per share, resulting from adjustments in the fair values of certain interest rate derivatives, and a $0.9 million charge ($0.5 million, net of taxes), $0.01 per share, for termination benefits.

    Cash flow from operations was a net use of $46.8 million for the nine months of 2014 compared to cash source of $49.4 million in 2013. This decrease in operating cash flows was influenced primarily by seasonal increases in our accounts receivable balances driven by the increased sales during the third quarter of 2014, as well as increased inventory levels. While cash on hand was the same at $26.4 million as of June 30, 2014 and June 30, 2013, our net working capital has improved $71.2 million since June 30, 2013, to $431.0 million as of June 30, 2014. This increase was due primarily to continued robust operating cash flow and a reduction of cash used in investing activities over the past four quarters. As of June 30, 2014, we had available borrowings under our revolving credit facilities of $242.6 million.

    The Company will host a webcast and conference call today at 10:00 a.m. (EDT) 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) 325-2420. To assure timely access, call participants should call in before 10:00 a.m.

    Beacon Roofing Supply, Inc. is a leading distributor of roofing materials and complementary building products, with 254 branches in 40 states in the United States and six provinces in Canada as of June 30, 2014.

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

    BECN-F

    News Provided by Acquire Media

     
     

    BEACON ROOFING SUPPLY, INC

    Consolidated Statements of Operations

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

     
            Three Months Ended

    June 30,

            Nine Months Ended

    June 30,

      2014       % of Net Sales         2013       % of Net Sales   2014       % of Net Sales         2013       % of Net Sales
     
    Net sales $ 663,397 100.0 % $ 627,168 100.0 % $ 1,600,411 100.0 %   $ 1,557,155 100.0 %
    Cost of products sold   512,584 77.3 %   479,835 76.5 %   1,235,901 77.2 %   1,183,417 76.0 %
    Gross profit 150,813 22.7 % 147,333 23.5 % 364,510 22.8 % 373,738 24.0 %
     
    Operating expenses   105,004 15.8 %   99,380 15.8 %   308,826 19.3 %   291,588 18.7 %
     
    Income from operations 45,809 6.9 % 47,953 7.6 % 55,684 3.5 % 82,150 5.3 %
     
    Interest expense, financing costs and other   2,510 0.4 %   2,701 0.4 %   7,707 0.5 %   6,597 0.4 %
     
    Income (loss) before provision for income taxes 43,299 6.5 % 45,252 7.2 % 47,977 3.0 % 75,553 4.9 %
    Provision (benefit) for income taxes   16,500 2.5 %   18,094 2.9 %   18,338 1.1 %   30,350 1.9 %
     
    Net income (loss) $ 26,799 4.0 % $ 27,158 4.3 % $ 29,639 1.9 % $ 45,203 2.9 %
     
    Net income (loss) per share:
    Basic $ 0.54 $ 0.56 $ 0.60 $ 0.93
    Diluted $ 0.54 $ 0.55 $ 0.59 $ 0.92
     
    Weighted average shares used in computing net income (loss) per share:
    Basic 49,315,892 48,717,686 49,185,893 48,355,285
    Diluted 50,027,240 49,585,152 49,946,381 49,298,902
     
     
     

    BEACON ROOFING SUPPLY, INC

    Consolidated Balance Sheets

    (in thousands)

          June 30, 2014      

    September 30, 2013

          June 30, 2013
    ASSETS(unaudited)(audited)(unaudited)
    Current assets:
    Cash and cash equivalents $ 26,405 $ 47,027 $ 26,375
    Accounts receivable, net 352,554 329,673 313,698
    Inventories 399,619 251,370 335,438
    Prepaid expenses and other assets 72,048 62,422 82,166
    Deferred income taxes   14,376     14,591     14,424  
    Total current assets 865,002 705,083 772,101
     
    Property and equipment, net 81,433 67,659 64,022
    Goodwill 467,916 469,203 468,388
    Other assets, net   84,841     96,751     100,852  
     
    TOTAL ASSETS $ 1,499,192   $ 1,338,696   $ 1,405,363  
     
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable $ 227,630 $ 182,914 $ 253,262
    Accrued expenses 102,539 68,298 98,425
    Borrowings under revolving lines of credit 88,331 47,426 45,006
    Current portion of long-term obligations   15,466     15,098     15,585  
    Total current liabilities 433,966 313,736 412,278
     
    Senior notes payable, net of current portion

    188,438

    196,875 199,688
    Deferred income taxes 60,024 61,003 57,618

    Long-term obligations under equipment financing and other,

    net of current portion

     

     

    23,152

        12,726     13,930  
    Total liabilities   705,580     584,340     683,514  
     
    Commitments and contingencies
     
    Stockholders' equity:
    Common stock 493 488 488
    Undesignated preferred stock - - -
    Additional paid-in capital 325,086 312,962 308,422
    Retained earnings 470,921 441,282 413,876
    Accumulated other comprehensive income (loss)   (2,888 )   (376 )   (937 )
    Total stockholders' equity   793,612     754,356     721,849  
     
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $

    1,499,192

      $ 1,338,696   $ 1,405,363  
     
     
     
    BEACON ROOFING SUPPLY, INC
    Consolidated Statements of Cash Flows
    (unaudited; in thousands)
               
    Nine Months Ended

    June 30,

    2014   2013  
    Operating activities:
    Net income $ 29,639 $ 45,203

    Adjustments to reconcile net income to net cash (used in) provided by operating activities:

    Depreciation and amortization 22,609 22,429
    Stock-based compensation 5,239 6,886
    Certain interest expense and other financing costs 816 (1,816 )
    Gain on sale of fixed assets (660 ) (729 )
    Deferred income taxes 793 1,441
    Other 177 -
    Changes in assets and liabilities, net of the effects of businesses acquired:
    Accounts receivable (23,789 ) (7,485 )
    Inventories (148,384 ) (102,893 )
    Prepaid expenses and other assets

    (12,697

    ) (10,041 )
    Accounts payable and accrued expenses   79,475     96,399  
    Net cash (used in) provided by operating activities  

    (46,782

    )   49,394  
         
    Investing activities:
    Purchases of property and equipment (26,090 ) (17,933 )
    Acquisition of businesses - (64,484 )
    Proceeds from sales of assets  

    760

        885  
    Net cash used in investing activities  

    (25,330

    )   (81,532 )
     
    Financing activities:
    Borrowings under revolving lines of credit, net of repayments 40,647 3,706
    Repayments under term loan (8,437 ) (8,437 )
    Borrowings under equipment financing facilities, net of repayments 11,450 525
    Proceeds from exercises of options 6,890 17,259
    Excess tax benefit from equity-based compensation   949     4,093  
    Net cash provided by financing activities   51,499     17,146  
    Effect of exchange rate changes on cash   (9 )   1,162  
    Net decrease in cash and cash equivalents (20,622 ) (13,830 )

    Cash and cash equivalents at beginning of period

      47,027     40,205  

    Cash and cash equivalents at end of period

    $ 26,405   $ 26,375  
     
     
     

    BEACON ROOFING SUPPLY, INC

    (unaudited; dollars in millions)

     

    Consolidated Sales by Product Line

    Three Months Ended
                                       
    June 30, 2014June 30, 2013
    Net SalesMix %Net SalesMix %Change
    Residential roofing products $ 317.5 47.9 % $ 309.2 49.3 % $ 8.3 2.7 %
    Non-residential roofing products 249.4 37.6 % 227.2 36.2 % 22.1 9.7 %
    Complementary building products   96.5 14.5 %   90.7 14.5 %   5.8 6.4 %
     
    $ 663.4 100.0 % $ 627.2 100.0 % $ 36.2 5.8 %
     
    Consolidated Sales by Product Line for Existing Markets*
    Three Months Ended
     
    June 30, 2014June 30, 2013
    Net SalesMix %Net SalesMix %Change  
    Residential roofing products $ 317.5 47.9 % $ 309.2 49.3 % $ 8.3 2.7 %
    Non-residential roofing products 249.4 37.6 % 227.2 36.2 % 22.1 9.7 %
    Complementary building products   96.5 14.5 %   90.7 14.5 %   5.8 6.4 %
     
    $ 663.4 100.0 % $ 627.2 100.0 % $ 36.2 5.8 %
     
    Existing Market Sales By Business Day**
    Three Months Ended
     
    June 30, 2014June 30, 2013
    Net SalesMix %Net SalesMix %Change  
    Residential roofing products $ 4.961 47.9 % $ 4.832 49.3 % $ 0.130 2.7 %
    Non-residential roofing products 3.896 37.6 % 3.551 36.2 % 0.346 9.7 %
    Complementary building products   1.508 14.5 %   1.417 14.5 %   0.091 6.4 %
     
    $ 10.366 100.0 % $ 9.800 100.0 % $ 0.566 5.8 %
     
     


    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 2014.

    **There were 64 business days in each of the quarters ended June 30, 2014 and 2013.

     
     

    BEACON ROOFING SUPPLY, INC

    (unaudited; dollars in millions)

     

    Consolidated Sales by Product Line

    Nine Months Ended
                                       
    June 30, 2014June 30, 2013
    Net SalesMix %Net SalesMix %Change  
    Residential roofing products $ 755.6 47.2 % $ 763.6 49.0 % $ (8.0 ) -1.1 %
    Non-residential roofing products 604.7 37.8 % 563.0 36.2 % 41.7 7.4 %
    Complementary building products   240.1 15.0 %   230.5 14.8 %   9.6   4.2 %
     
    $ 1,600.4 100.0 % $ 1,557.2 100.0 % $ 43.3   2.8 %
     
    Consolidated Sales by Product Line for Existing Markets*
    Nine Months Ended
     
    June 30, 2014June 30, 2013
    Net SalesMix %Net SalesMix %Change  
    Residential roofing products $ 724.5 47.9 % $ 741.2 49.8 % $ (16.7 ) -2.3 %
    Non-residential roofing products 574.1 38.0 % 540.0 36.2 % 34.1 6.3 %
    Complementary building products   212.8 14.1 %   208.6 14.0 %   4.3   2.0 %
     
    $ 1,511.4 100.0 % $ 1,489.8 100.0 % $

    21.6

     

    1.5

    %
     
    Existing Market Sales By Business Day**
    Nine Months Ended
     
    June 30, 2014June 30, 2013
    Net SalesMix %Net SalesMix %Change  
    Residential roofing products $ 3.833 47.9 % $ 3.922 49.8 % $ (0.089 ) -2.3 %
    Non-residential roofing products 3.038 38.0 % 2.857 36.2 % 0.180 6.3 %
    Complementary building products   1.126 14.1 %   1.103 14.0 %   0.022   2.0 %
     
    $ 7.997 100.0 % $ 7.882 100.0 % $ 0.114   1.5 %
     
     

     



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

    *Excludes branches acquired during the four quarters prior to the start of Fiscal 2014.

    **There were 189 business days in each of the nine months ended June 30, 2014 and 2013.

     
     
    BEACON ROOFING SUPPLY INC

    Adjusted Diluted Net Income per Share ("Adjusted Earnings per Share")

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

    June 30,

              Nine Months Ended

    June 30,

    2014     EPS       2013     EPS2014     EPS       2013       EPS
    Net income & diluted earnings per share $ 26,799     $ 0.54 $ 27,158     $ 0.55 $ 29,639     $ 0.59 $ 45,203     $ 0.92
    Company adjustments, net of income taxes:

    Fair value of certain interest rate derivatives and charge associated with refinancing

     

    - - - - - - (1,536 ) (0.03 )
    Termination benefits   -   -   -   -   -   -   542     0.01  
     

    Adjusted net income & diluted earnings per share

    $ 26,799 $ 0.54 $ 27,158 $ 0.55 $ 29,639 $ 0.59 $ 44,209   $ 0.90  
     
    Note: Some totals above may not foot due to rounding.
     
     


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

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




    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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