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Beacon Roofing Supply Reports First Quarter 2015 Results

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Beacon Roofing Supply, Inc. (the “Company”) (NASDAQ:BECN) announced results today for its first quarter ended December 31, 2014 of the fiscal year ending September 30, 2015 (“Fiscal 2015″).

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Fiscal 2015 is off to a solid start, as we drove record sales. We are particularly pleased with the growth of our residential product line which was up 11.2% over the prior year, aided by the 26 new branches opened in the prior fiscal year. Complementary sales were also a bright spot in the quarter, up 18.5%. The sales gains in these two particular product lines as well as stronger warehouse sales led to higher gross margins over prior year and over prior quarter. The combination of sales and margin growth led to EPS that was in line with our expectations and positions us well as we move through the second quarter and the balance of the year. Acquisition activity remains robust, as we added both Applicators Sales and Services in New England and Wholesale Roofing Supply in Texas during the quarter. Increases in operating costs were primarily a result of our continued investment in our growth strategy through acquisitions and new branches. Looking forward, we are confident that the recent acquisitions combined with our new locations will continue to fuel our top line growth and provide leverage to our cost structure.”

Total sales increased 8.0% to a first quarter record $596.0 million in 2015, from $552.1 million in 2014. On an overall consolidated basis, residential roofing product sales increased 11.2%, non-residential roofing product sales increased 0.2%, and complementary product sales increased 18.5% over the prior year. During the first quarter, the Company completed two acquisitions adding six new branches which drove $19.7 million of sales in the quarter. Sales from greenfield branches opened in fiscal 2014 totaled $23.0 million. The first quarters of 2015 and 2014 both had the same number of business days.

Net income for the first quarter was $12.9 million, compared to $15.0 million in 2014. First quarter diluted net income per share was $0.26, compared to $0.30 in 2014. Net income for the quarter was favorably impacted by gross margins which improved by 10 bps over the prior year, and unfavorably impacted by increased operating expenses which were primarily driven by the incremental costs associated with the 26 greenfields opened in fiscal 2014.

Cash flow from operations was $40.2 million in 2015, compared to $54.2 million in 2014. This decrease in operating cash flows was primarily impacted by changes in working capital and lower net income in the current year. Cash on hand decreased by $33.1 million due primarily to an increase in cash used for acquisition activities in 2015. As of December 31, 2014, we had available borrowings under our revolving lines of credit of $306.5 million.

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 719-457-2645. 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. is a leading distributor of residential and commercial roofing materials and complementary building products, with sales for the Company’s 2014 fiscal year exceeding $2.3 billion. As of December 31, 2014, Beacon operated 268 branches in 42 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.

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
December 31,

2014

% of Net
Sales

2013

% of Net
Sales

Net sales $ 596,042 100.0 % $ 552,129 100.0 %
Cost of products sold 458,477 76.9 % 425,224 77.0 %
Gross profit 137,565 23.1 % 126,905 23.0 %
Operating expenses 113,745 19.1 % 99,818 18.1 %
Income from operations 23,820 4.0 % 27,087 4.9 %
Interest expense, financing costs and other 2,655 0.4 % 2,665 0.5 %
Income before provision for income taxes 21,165 3.6 % 24,422 4.4 %
Provision for income taxes 8,258 1.4 % 9,465 1.7 %
Net income $ 12,907 2.2 % $ 14,957 2.7 %
Net income per share:
Basic $ 0.26 $ 0.31
Diluted $ 0.26 $ 0.30
Weighted average shares used in computing net income per share:
Basic 49,428,842 48,984,767
Diluted 50,012,881 49,884,611
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(in thousands)
December 31, 2014 September 30, 2014 December 31, 2013
ASSETS (unaudited) (audited) (unaudited)
Current assets:
Cash and cash equivalents $ 23,337 $ 54,472 $ 56,399
Accounts receivable, net 269,383 360,802 243,752
Inventories, net 314,670 301,626 308,660
Prepaid expenses and other assets 76,975 66,828 96,730
Deferred income taxes 14,629 14,610 14,380
Total current assets 698,994 798,338 719,921
Property and equipment, net 88,303 88,565 68,321
Goodwill 489,325 466,206 468,032
Other assets, net 110,345 80,787 92,469
TOTAL ASSETS $ 1,386,967 $ 1,433,896 $ 1,348,743
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 163,367 $ 220,834 $ 213,557
Accrued expenses 72,738 80,285 73,324
Borrowings under revolving lines of credit 23,289 18,514
Current portion of long-term obligations 16,689 16,602 15,440
Total current liabilities 276,083 336,235 302,321
Senior notes payable, net of current portion 182,813 185,625 194,063
Deferred income taxes 64,165 64,100 61,108
Long-term obligations under equipment financing and other,
net of current portion 34,112 30,835 18,582
Total liabilities 557,173 616,795 576,074
Commitments and contingencies
Stockholders’ equity:
Common stock 494 493 491
Undesignated preferred stock
Additional paid-in capital 331,068 328,059 318,473
Retained earnings 508,035 495,128 456,239
Accumulated other comprehensive income (loss) (9,803 ) (6,579 ) (2,534 )
Total stockholders’ equity 829,794 817,101 772,669
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,386,967 $ 1,433,896 $ 1,348,743
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(unaudited; in thousands)

Three Months Ended
December 31,

2014 2013
Operating activities:
Net income $ 12,907 $ 14,957
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 8,257 8,140
Stock-based compensation 2,348 2,532
Certain interest expense and other financing costs 271 272
Gain on sale of fixed assets (126 ) (374 )
Deferred income taxes 47 156
Adjustment of liability for contingent consideration and other (64 ) (3 )
Changes in assets and liabilities, net of the effects of
businesses acquired:
Accounts receivable 99,643 85,006
Inventories (861 ) (57,967 )
Prepaid expenses and other assets (1,369 ) (35,511 )
Accounts payable and accrued expenses (80,864 ) 36,942
Net cash provided by operating activities 40,189 54,150
Investing activities:
Purchases of property and equipment (3,138 ) (5,390 )
Acquisition of businesses (69,746 )
Proceeds from sales of assets 115 268
Net cash used in investing activities (72,769 ) (5,122 )
Financing activities:
Borrowings under revolving lines of credit, net of repayments 5,067 (47,398 )
Borrowings under equipment financing facilities and other 7,614
Repayments under equipment financing facilities and other (1,412 ) (1,415 )
Repayments under senior term loan (2,812 ) (2,812 )
Proceeds from exercises of options 662 3,961
Excess tax benefit from stock-based compensation 53 192
Net cash (used in) provided by financing activities 1,558 (39,858 )
Effect of exchange rate changes on cash (113 ) 202
Net increase (decrease) in cash and cash equivalents (31,135 ) 9,372
Cash and cash equivalents at beginning of period 54,472 47,027
Cash and cash equivalents at end of period $ 23,337 $ 56,399
BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
Consolidated Sales by Product Line
Three Months Ended
December 31, 2014 December 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 279.7 46.9 % $ 251.4 45.5 % $ 28.3 11.2 %
Non-residential roofing products 218.5 36.7 % 218.2 39.5 % 0.3 0.1 %
Complementary building products 97.8 16.4 % 82.5 14.9 % 15.3 18.6 %
$ 596.0 100.0 % $ 552.1 100.0 % $ 43.9 8.0 %

Consolidated Sales by Product Line for Existing Markets*
Three Months Ended
December 31, 2014 December 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 269.8 46.8 % $ 251.4 45.5 % $ 18.4 7.3 %
Non-residential roofing products 217.5 37.7 % 218.2 39.5 % (0.7 ) -0.3 %
Complementary building products 89.0 15.4 % 82.5 14.9 % 6.6 7.9 %
$ 576.4 100.0 % $ 552.1 100.0 % $ 24.2 4.4 %
Existing Market Sales By Business Day**
Three Months Ended
December 31, 2014 December 31, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 4.352 46.8 % $ 4.055 45.5 % $ 0.297 7.3 %
Non-residential roofing products 3.508 37.7 % 3.520 39.5 % (0.012 ) -0.3 %
Complementary building products 1.436 15.4 % 1.331 14.9 % 0.106 7.9 %
$ 9.297 100.0 % $ 8.905 100.0 % $ 0.391 4.4 %
Note: Some totals above may not foot due to rounding.
*Excludes branches acquired during the four quarters prior to the start of the first quarter of Fiscal 2015.
**There were 62 business days in each of the quarters ended December 31, 2014 and 2013.

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