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Beacon Roofing Supply Reports Second Quarter 2015 Results

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

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “I am pleased to report 7.4% sales growth in the quarter and 7.7% sales growth year-to-date, which resulted in Beacon surpassing the $1 billion mark in first half sales for the first time in Company history. This achievement underscores our continued focus on growth through existing markets, acquisitions and greenfields. We already have opened five new branches in 2015, with more to come this year. Although our second quarter always is challenging due to winter weather conditions, and despite record snowfalls in our Northeast market, we saw growth in our residential product line of 9.7%. Complementary product sales remain a bright spot, with 13.7% growth in the quarter, and commercial product sales also grew in the quarter and year-to-date. Just as important was our 80 basis point improvement in gross margins. Our team also did an excellent job driving cost out of our business. Excluding the incremental costs from greenfields and acquisitions, our operating expense is down year-over-year. This cost reduction positions us well to achieve lower year over year operating expenses as a percentage of sales and greater profitability as demand increases through our third and fourth quarters.”

Second Quarter

Total sales increased 7.4% to $413.2 million in 2015, from $384.9 million in 2014. On an overall consolidated basis, residential roofing product sales increased 9.7%, non-residential roofing product sales increased 1.2%, and complementary product sales increased 13.7% over the prior year. Existing market sales, excluding acquisitions, increased 4.4% for the quarter. The second quarter of 2015 and 2014 both had the same number of business days.

The net loss for the second quarter was $9.8 million, compared to $12.1 million in 2014. The second quarter net loss per share was $0.20, compared to $0.25 in 2014. The net loss for the quarter was favorably impacted by gross margins which improved by 80 basis points over the prior year. This was partially offset by increased operating expenses driven by the incremental costs associated with the two acquisitions made in the first quarter and the greenfields opened in the last 18 months.

First Half

Total sales increased 7.7% to a first half record of $1,009.2 million in 2015, from $937.0 million in 2014. On an overall consolidated basis, residential roofing product sales increased 10.5%, non-residential roofing product sales increased 0.5%, and complementary product sales increased 16.7% over the prior year. Existing market sales, excluding acquisitions, increased 4.4% year to date. The first half of 2015 and 2014 both had the same number of business days.

Net income for the first half was $3.1 million, compared to $2.8 million in 2014. First half diluted net income per share was $0.06, compared to $0.06 in 2014. Net income for the half was favorably impacted by gross margins which improved by 40 bps over the prior year, and unfavorably impacted by increased operating expenses which were primarily driven by the incremental costs associated with the two acquisitions made in the first quarter and the greenfields opened in the last 18 months.

Cash flow from operations was $62.5 million in 2015, compared to $36.1 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 $11.1 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 two acquisitions, while improving its leverage ratio from 1.68 as compared to 1.96 at the end of the first quarter.

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 719-325-2281. 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 271 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

March 31,

Six Months Ended

March 31,

2015 % of Net Sales 2014 % of Net Sales 2015 % of Net Sales 2014 % of Net Sales
Net sales $ 413,184 100.0 % $ 384,885 100.0 % $ 1,009,226 100.0 % $ 937,014 100.0 %
Cost of products sold 316,411 76.6 % 298,093 77.4 % 774,888 76.8 % 723,317 77.2 %
Gross profit 96,773 23.4 % 86,792 22.6 % 234,338 23.2 % 213,697 22.8 %
Operating expenses 110,979 26.9 % 104,004 27.0 % 224,724 22.3 % 203,822 21.8 %
Income (loss) from operations (14,206 ) -3.4 % (17,212 ) -4.4 % 9,614 1.0 % 9,875 1.0 %
Interest expense, financing costs and other 2,522 0.6 % 2,532 0.7 % 5,177 0.5 % 5,197 0.6 %
Income (loss) before provision for income taxes (16,728 ) -4.0 % (19,744 ) -5.1 % 4,437 0.4 % 4,678 0.5 %
Provision (benefit) for income taxes (6,942 ) -1.7 % (7,627 ) -2.0 % 1,316 0.1 % 1,838 0.2 %
Net income (loss) $ (9,786 ) -2.4 % $ (12,117 ) -3.1 % $ 3,121 0.3 % $ 2,840 0.3 %
Net income (loss) per share:
Basic $ (0.20 ) $ (0.25 ) $ 0.06 $ 0.06
Diluted $ (0.20 ) $ (0.25 ) $ 0.06 $ 0.06
Weighted average shares used in computing net income (loss) per share:
Basic 49,513,141 49,260,044 49,470,528 49,120,893
Diluted 49,513,141 49,260,044 50,029,935 49,956,072
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(in thousands)
March 31, 2015 September 30, 2014 March 31, 2014
ASSETS (unaudited) (audited) (unaudited)
Current assets:
Cash and cash equivalents $ 22,956 $ 54,472 $ 34,041
Accounts receivable, net 248,154 360,802 230,379
Inventories, net 361,317 301,626 421,756
Prepaid expenses and other current assets 73,490 66,828 105,401
Deferred income taxes 14,789 14,610 14,226
Total current assets 720,706 798,338 805,803
Property and equipment, net 85,054 88,565 70,759
Goodwill 488,324 466,206 466,658
Intangible assets, net 91,650 72,266 79,207
Other assets, net 4,771 8,521 9,120
TOTAL ASSETS $ 1,390,505 $ 1,433,896 $ 1,431,547
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 202,713 $ 220,834 $ 308,209
Accrued expenses 80,546 80,285 72,445
Borrowings under revolving lines of credit 3,948 18,514
Current portion of long-term obligations 16,612 16,602 15,346
Total current liabilities 303,819 336,235 396,000
Senior notes payable, net of current portion 180,000 185,625 191,250
Deferred income taxes 63,426 64,100 60,350
Long-term obligations under equipment financing and other,
net of current portion 24,779 30,835 20,591
Total liabilities 572,024 616,795 668,191
Commitments and contingencies
Stockholders’ equity:
Common stock 495 493 492
Undesignated preferred stock
Additional paid-in capital 335,972 328,059 324,504
Retained earnings 498,249 495,128 444,122
Accumulated other comprehensive loss (16,235 ) (6,579 ) (5,762 )
Total stockholders’ equity 818,481 817,101 763,356
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,390,505 $ 1,433,896 $ 1,431,547
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(unaudited; in thousands)
Six Months Ended

March 31,

2015 2014
Operating activities:
Net income $ 3,121 $ 2,840
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 16,430 15,281
Stock-based compensation 4,744 5,489
Certain interest expense and other financing costs 543 545
Gain on sale of fixed assets (273 ) (480 )
Deferred income taxes 287 (1,418 )
Other, net 181 (3 )
Changes in assets and liabilities, net of the effects of
businesses acquired:
Accounts receivable 118,564 97,706
Inventories (50,305 ) (171,748 )
Prepaid expenses and other assets (5,007 ) (43,252 )
Accounts payable and accrued expenses (25,800 ) 131,113
Net cash provided by operating activities 62,485 36,073
Investing activities:
Purchases of property and equipment (5,384 ) (11,773 )
Acquisition of businesses (69,745 )
Proceeds from sales of assets 367 394
Net cash used in investing activities (74,762 ) (11,379 )
Financing activities:
Repayments under revolving lines of credit, net of borrowings (13,632 ) (47,398 )
Borrowings under equipment financing facilities and other 10,971
Repayments under equipment financing facilities and other (2,758 ) (2,441 )
Repayments under senior term loan (5,625 ) (5,625 )
Proceeds from exercise of options 3,171 6,057
Excess tax benefit from stock-based compensation 262 876
Net cash used in financing activities (18,582 ) (37,560 )
Effect of exchange rate changes on cash (657 ) (120 )
Net decrease in cash and cash equivalents (31,516 ) (12,986 )
Cash and cash equivalents, beginning of period 54,472 47,027
Cash and cash equivalents, end of period $ 22,956 $ 34,041
BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
Consolidated Sales by Product Line
Three Months Ended
March 31, 2015 March 31, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 204.7 49.5 % $ 186.6 48.5 % $ 18.1 9.7 %
Non-residential roofing products 138.0 33.4 % 136.3 35.4 % 1.7 1.2 %
Complementary building products 70.5 17.1 % 62.0 16.1 % 8.5 13.7 %
$ 413.2 100.0 % $ 384.9 100.0 % $ 28.3 7.4 %
Consolidated Sales by Product Line for Existing Markets*
Three Months Ended
March 31, 2015 March 31, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 197.4 49.1 % $ 186.6 48.5 % $ 10.8 5.8 %
Non-residential roofing products 137.4 34.2 % 136.3 35.4 % 1.1 0.8 %
Complementary building products 66.9 16.7 % 62.0 16.1 % 4.9 7.9 %
$ 401.7 100.0 % $ 384.9 100.0 % $ 16.8 4.4 %
Existing Market Sales By Business Day**
Three Months Ended
March 31, 2015 March 31, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 3.133 49.1 % $ 2.962 48.5 % $ 0.171 5.8 %
Non-residential roofing products 2.181 34.2 % 2.164 35.4 % 0.017 0.8 %
Complementary building products 1.062 16.7 % 0.984 16.1 % 0.078 7.9 %
$ 6.376 100.0 % $ 6.110 100.0 % $ 0.266 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 second quarter of Fiscal 2015.
**There were 63 business days in each of the quarters ended March 31, 2015 and 2014.

BEACON ROOFING SUPPLY, INC
(unaudited; dollars in millions)
Consolidated Sales by Product Line
Six Months Ended
March 31, 2015 March 31, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 484.2 48.0 % $ 438.0 46.7 % $ 46.2 10.5 %
Non-residential roofing products 356.8 35.4 % 354.9 37.9 % 1.9 0.5 %
Complementary building products 168.2 16.6 % 144.1 15.4 % 24.1 16.7 %
$ 1,009.2 100.0 % $ 937.0 100.0 % $ 72.2 7.7 %
Consolidated Sales by Product Line for Existing Markets*
Six Months Ended
March 31, 2015 March 31, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 467.1 47.8 % $ 438.0 46.7 % $ 29.2 6.7 %
Non-residential roofing products 355.2 36.3 % 354.9 37.9 % 0.3 0.0 %
Complementary building products 155.8 15.9 % 144.1 15.4 % 11.6 8.1 %
$ 978.1 100.0 % $ 937.0 100.0 % $ 41.1 4.4 %
Existing Market Sales By Business Day**
Six Months Ended
March 31, 2015 March 31, 2014
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 3.737 47.8 % $ 3.504 46.7 % $ 0.233 6.7 %
Non-residential roofing products 2.842 36.3 % 2.839 37.9 % 0.002 0.0 %
Complementary building products 1.246 15.9 % 1.153 15.4 % 0.093 8.1 %
$ 7.825 100.0 % $ 7.496 100.0 % $ 0.328 4.4 %

Note: Some totals above may not foot due to rounding.
*Excludes branches acquired during the four quarters prior to the start of Fiscal 2015.
**There were 125 business days in each of the six months ended March 31, 2015 and 2014.

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