Beacon Roofing Supply Reports Second Quarter 2013 Results

PEABODY, Mass.--(BUSINESS WIRE)--

Beacon Roofing Supply, Inc. (the “Company”) (BECN) announced results today for its second quarter and first half ended March 31, 2013 of the fiscal year ending September 30, 2013 (“fiscal 2013”).

Paul Isabella, the Company’s President & Chief Executive Officer, stated: “The second quarter of fiscal 2013 was challenging for us as we experienced harsh weather conditions in many of our markets and we were up against a very strong second quarter last year when our existing market sales were up 28%. Our total sales benefited from the positive impact of several acquisitions made since the start of last year and our gross margin continued to improve over the prior year. In addition, the trend of our residential roofing sales was more favorable in the second quarter compared to the first quarter. During the first half, we took advantage of our financial capacity and flexibility to purchase key products ahead of announced industry-wide price increases. We believe we are well positioned for a successful back half of fiscal 2013 and expect to experience a business rebound following the tough Winter and early Spring conditions.”

Second Quarter

Total sales increased 5.3% to $416.3 million in 2013 from $395.2 million in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s second quarter, declined 5.1%. There was one less business day in this year’s second quarter. In existing markets, residential and non-residential roofing product sales decreased 1.4% and 11.2%, respectively, while complementary product sales decreased 3.2%. The 2013 sales performance was unfavorably affected by adverse weather conditions this year, especially compared to last year’s mild weather that boosted sales during the normal slow Winter period.

The net loss for the second quarter was $0.2 million compared to net income of $3.1 million in 2012. The second quarter loss per share was $0.00 compared to diluted income per share of $0.07 in 2012. The decline in net income was due to higher operating expenses, including acquired branch expenses, partially offset by the impact from higher gross profit and lower interest expense. The second quarter adjusted loss per share was $0.02 after consideration of the $1.3 million credit to interest expense ($0.8 million net of taxes) resulting from adjustments in the fair values of certain interest rate derivatives.

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which is reconciled to the net income in this press release, was $11.6 million in 2013 compared to $17.8 million in 2012, a decrease of 34.6%.

First Half

Total sales increased 5.1% to $930.0 million in 2013 from $885.0 million in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year, declined 4.5%. There was one additional business day in this year’s first half. In existing markets, residential and non-residential roofing product sales decreased 3.5% and 8.2%, respectively, while complementary product sales increased 2.0%. The comparison of the 2013 first half sales to 2012 was unfavorably affected by last year’s very high level of re-roofing activities, including the beneficial impact from mild weather in 2012 and strong business in several markets in the first quarter of 2012 that experienced significant storms in 2011.

Net income for the first half was $18.0 million compared to $22.3 million in 2012, a decrease of 18.9%. First half diluted net income per share was $0.37 compared to $0.47 in 2012. The lower net income was due to the same factors mentioned above for the second quarter decline in net income. First half adjusted diluted net income per share was $0.35 compared to an adjusted $0.45 in 2012. The first half of this year 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. Last year’s net income included a benefit of $1.0 million, $0.02 per share, from a reduction in a liability for contingent consideration related to the acquisition of Enercon Products.

Adjusted EBITDA for the first half was $53.4 million in 2013 compared to $58.9 million in 2012, a decrease of 9.3%.

Cash flow from operations was $20.6 million compared to $80.3 million in 2012. This comparison in operating cash flows was influenced mostly by less favorable changes in working capital, including additional inventory purchases made in 2013 ahead of announced price increases. Cash on hand decreased by $154.4 million to $16.7 million at March 31, 2013 compared to $171.1 million at March 31, 2012, due primarily to a significant paydown of debt (net of new borrowings) since last year’s second quarter and the costs of the acquisitions made since that time.

The Company will host a webcast and conference call today at 10:00 a.m. ET 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 719-785-1765. 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, operating 229 branches in 38 states in the United States and across Canada.

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.

(1) Adjusted EBITDA is defined as net income plus interest expense and other financing costs (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, and stock-based compensation. 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. Management uses 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.

While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with United States generally accepted accounting principles, or 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 and other financing costs and, 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. The Company’s management separately monitors 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.

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

* This adjustment was not considered to be taxable and was recorded as a permanent difference for income tax reporting purposes.

Note: The Company’s management believes that "Adjusted Earnings per Share," which excludes certain events such as the recognition of the fair value of certain interest rate derivatives in interest expense and other financing costs, termination benefits, and the decrease in the liability for consideration due for the Enercon acquisition, is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. 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.

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