Beacon Roofing Supply Reports Fourth Quarter and Annual 2014 Results

  • Record fourth quarter sales of $726.5 million vs. $683.6 million in prior year (6.3% growth)
  • Fourth quarter diluted EPS of $0.48 vs. $0.55 ($0.56 adjusted) in prior year
  • Record annual sales of $2.33 billion vs. $2.24 billion in 2013 (3.8% growth)
  • Annual diluted EPS of $1.08 vs. $1.47 ($1.45 adjusted) in 2013
  • 26 new greenfield branches in 2014
  • One acquisition with three branches in 2014

HERNDON, Va.--()--Beacon Roofing Supply, Inc. (the "Company") (NASDAQ: BECN) announced results today for its fourth quarter and fiscal year ended September 30, 2014 (“2014”).

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Again this quarter we were able to demonstrate our focus on driving top line revenue growth with a 6.3% increase in sales. Almost two thirds of that growth was due to the success of our 26 new greenfields that we opened in the current year. In addition, we completed three acquisitions in August and October that, for next year, will add over $88 million to our revenue base. We continue to experience pressure on our gross margins which are down slightly from last quarter and from last year. The soft residential market, coupled with heightened competition, has continued to put pressure on our market pricing. We continue to invest heavily to grow the business through the opening of the new greenfield branches. As a result, we are well positioned to continue to see sales growth. Recognizing the challenges we face from gross margin pressure, in 2015 we will continue our focus on driving more leverage through our operating cost structure and work to lower our overall operating costs as a percentage of sales.”

Fourth Quarter

Total sales increased 6.3% to a fourth quarter record $726.5 million in 2014 from $683.6 million in 2013. On an overall consolidated basis, residential roofing product sales increased 5.1%, non-residential roofing product sales increased 4.9%, and complementary product sales increased 14.5% over the prior year. During the fourth quarter, the Company opened nine new greenfield branches and made one acquisition with three branches. Sales from greenfield branches totaled $28.4 million. The fourth quarters of 2014 and 2013 both had the same number of business days.

Net income for the fourth quarter was $24.2 million, compared to net income of $27.4 million in 2013. The fourth quarter diluted income per share was $0.48, 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. During the fourth quarter, the Company incurred increased operating expenses of $6.1 million related to new stores (greenfield locations not open last year) as the Company continued to expand its footprint in existing and new markets.

Fiscal Year

Total sales increased 3.8% to an annual record $2.33 billion in 2014, from $2.24 billion in 2013. Existing market (organic) sales, which exclude branches acquired after the beginning of last year, increased 2.9%. Fiscal years 2014 and 2013 both had the same number of business days. In existing markets, residential roofing product sales increased 0.2%, non-residential roofing product sales increased 6.0%, and complementary product sales increased 4.7%. Sales from greenfields were $43.6 million for the year. 2014 was unfavorably impacted by the severity of winter storms and prolonged colder temperatures in most markets during the first half of the year.

Net income in 2014 was $53.8 million, compared to $72.6 million in 2013, a decrease of 25.8%. Diluted net income per share for 2014 was $1.08, compared to $1.47 in 2013. Adjusted net income, after removing the impact of certain non-recurring items, was $71.8 million in 2013, with adjusted diluted net income per share of $1.45 (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 softer overall demand following the adverse and extended weather conditions during the first half of 2014. The weather related impacts were compounded by an unfavorable shift in sales mix in 2014. Additionally in 2014, the Company incurred incremental operating expenses of $12.1 million related to new stores (greenfield locations not open last year) as the Company continued to expand its footprint in existing and new markets. Included in the Company’s operating results for 2013 were 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 $1.2 million charge ($0.7 million, net of taxes), $0.01 per share, for termination benefits.

Cash flow provided by operations was $55.5 million in 2014, compared to $78.5 million in 2013. This decrease in operating cash flows was influenced primarily by the decrease in net income year-over-year. Cash on hand increased to $54.5 million as of September 30, 2014, from $47.0 million as of September 30, 2013. Net working capital has improved $70.8 million since September 30, 2013, to $462.1 million as of September 30, 2014. As of September 30, 2014, the Company had a total leverage ratio of 1.88:1 and available borrowings under revolving credit facilities of $311.8 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.

About Beacon Roofing Supply

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. For more than 85 years, Beacon has built a tradition of partnership and trust with our customers and suppliers. As of September 30, 2014, Beacon operated 264 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
(in thousands, except share and per share amounts)
 
      Quarter Ended

September 30,

      Year Ended

September 30,

2014    

% of Net
Sales

  2013    

% of Net
Sales

2014    

% of Net
Sales

  2013    

% of Net
Sales

(unaudited) (unaudited)  
Net sales $ 726,494 100.0 % $ 683,568 100.0 % $ 2,326,905 100.0 % $ 2,240,723 100.0 %
Cost of products sold   563,164 77.5 %   525,909 76.9 %   1,799,065 77.3 %   1,709,326 76.3 %
Gross profit 163,330 22.5 % 157,659 23.1 % 527,840 22.7 % 531,397 23.7 %
 
Operating expenses   120,151 16.5 %   110,088 16.1 %   428,977 18.4 %   401,676 17.9 %
 
Income from operations 43,179 5.9 % 47,571 7.0 % 98,863 4.2 % 129,721 5.8 %
 
Interest expense, financing costs and other   2,388 0.3 %   1,650 0.2 %   10,095 0.4 %   8,247 0.4 %
 
Income (loss) before provision for income taxes 40,791 5.6 % 45,921 6.7 % 88,768 3.8 % 121,474 5.4 %
Provision (benefit) for income taxes   16,584 2.3 %   18,517 2.7 %   34,922 1.5 %   48,867 2.2 %
 
Net income (loss) $ 24,207 3.3 % $ 27,404 4.0 % $ 53,846 2.3 % $ 72,607 3.2 %
 
Net income (loss) per share:
Basic $ 0.49 $ 0.56 $ 1.09 $ 1.50
Diluted $ 0.48 $ 0.55 $ 1.08 $ 1.47
 
Weighted average shares used in computing net income (loss) per share:
Basic 49,350,831 48,819,289 49,227,466 48,472,240
Diluted 49,970,551 49,651,862 49,947,699 49,385,335
 

 
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(in thousands)
          September 30, 2014       September 30, 2013
ASSETS
Current assets:
Cash and cash equivalents $ 54,472 $ 47,027
Accounts receivable, net 360,802 329,673
Inventories 301,626 251,370
Prepaid expenses and other assets 66,828 62,422
Deferred income taxes   14,610     14,591  
Total current assets 798,338 705,083
 
Property and equipment, net 88,565 67,659
Goodwill 466,206 469,203
Other assets, net   80,787     96,751  
 
TOTAL ASSETS $ 1,433,896   $ 1,338,696  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 220,834 $ 182,914
Accrued expenses 80,285 68,298
Borrowings under revolving lines of credit 18,514 47,426
Current portion of long-term obligations   16,602     15,098  
Total current liabilities 336,235 313,736
 
Senior notes payable, net of current portion 185,625 196,875
Deferred income taxes 64,100 61,003

Long-term obligations under equipment financing and other,
net of current portion

  30,835     12,726  
Total liabilities   616,795     584,340  
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 493 488
Undesignated preferred stock - -
Additional paid-in capital 328,059 312,962
Retained earnings 495,128 441,282
Accumulated other comprehensive income (loss)   (6,579 )   (376 )
Total stockholders' equity   817,101     754,356  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,433,896   $ 1,338,696  
 

 
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(in thousands)
               
Year Ended September 30,
  2014     2013  
Operating activities:
Net income $ 53,846 $ 72,607
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Depreciation and amortization 30,294 30,415
Stock-based compensation 7,422 9,266
Certain interest expense and other financing costs 816 (1,541 )
Gain on sale of fixed assets (1,323 ) (1,487 )
Deferred income taxes

3,078

4,416
Other

129

-
Changes in assets and liabilities, net of the effects of businesses acquired:
Accounts receivable (32,984 ) (22,790 )
Inventories (50,846 ) (16,033 )
Prepaid expenses and other assets (4,790 ) 8,343
Accounts payable and accrued expenses   49,855     (4,703 )
Net cash provided by operating activities   55,497     78,493  
 
Investing activities:
Purchases of property and equipment (37,239 ) (26,120 )
Acquisition of businesses (1,514 ) (64,606 )
Proceeds from sales of assets   1,437     1,235  
Net cash used in investing activities   (37,316 )   (89,491 )
 
Financing activities:
Borrowings under revolving lines of credit, net of repayments (27,626 ) 6,296
Borrowings under equipment financing facilities 25,377 3,993
Repayments under equipment financing facilities (5,009 ) (4,549 )
Repayments under term loan (11,250 ) (11,250 )
Proceeds from exercises of options 7,680 18,579
Excess tax benefit from equity-based compensation   1,030     4,944  
Net cash (used in) provided by financing activities   (9,798 )   18,013  
Effect of exchange rate changes on cash   (938 )   (193 )
Net decrease in cash and cash equivalents 7,445 6,822
Cash and cash equivalents at beginning of period   47,027     40,205  
Cash and cash equivalents at end of period $ 54,472   $ 47,027  
 

 
BEACON ROOFING SUPPLY, INC
(unaudited, dollars in millions)
                               
Consolidated Sales by Product Line
Quarter Ended
 
September 30, 2014 September 30, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products

$

352.4

48.5 % $ 335.2 49.0 % $ 17.2 5.1 %
Non-residential roofing products 270.9 37.3 % 258.2 37.8 % 12.7 4.9 %
Complementary building products   103.2 14.2 %   90.1 13.2 %   13.1 14.5 %
 
$ 726.5 100.0 % $ 683.5 100.0 % $ 43.0 6.3 %
 
Consolidated Sales by Product Line for Existing Markets*
Quarter Ended
 
September 30, 2014 September 30, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 351.9 48.5 % $ 333.5 48.8 % $ 18.4 5.5 %
Non-residential roofing products 270.9 37.3 % 257.1 37.6 % 13.8 5.4 %
Complementary building products   103.1 14.2 %   92.9 13.6 %   10.2 11.0 %
 
$ 725.9 100.0 % $ 683.5 100.0 % $ 42.4 6.2 %
 
Existing Market Sales By Business Day**
Quarter Ended
 
September 30, 2014 September 30, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 5.498 48.5 % $ 5.211 48.8 % $ 0.287 5.5 %
Non-residential roofing products 4.233 37.3 % 4.018 37.6 % 0.215 5.4 %
Complementary building products   1.611 14.2 %   1.451 13.6 %   0.160 11.0 %
 
$ 11.342 100.0 % $ 10.680 100.0 % $ 0.662 6.2 %

 

Note: Some totals above may not foot due to rounding.
*Excludes branches acquired during the four quarters prior to the start of the fourth quarter of Fiscal 2014.
**There were 64 business days in each of the quarters ended September 30, 2014 and 2013.

 
BEACON ROOFING SUPPLY, INC
(unaudited, dollars in millions)
                               
Consolidated Sales by Product Line
Year Ended
 
September 30, 2014 September 30, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 1,108.5 47.7 % $ 1,100.5 49.1 % $ 8.0 0.7 %
Non-residential roofing products 876.0 37.6 % 822.7 36.7 % 53.3 6.5 %
Complementary building products   342.4 14.7 %   317.5 14.2 %   24.9 7.8 %
 
$ 2,326.9 100.0 % $ 2,240.7 100.0 % $ 86.2 3.8 %
 
Consolidated Sales by Product Line for Existing Markets*
Year Ended
 
September 30, 2014 September 30, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 1,063.1 48.4 % $ 1,061.4 49.8 % $ 1.7 0.2 %
Non-residential roofing products 828.5 37.8 % 781.5 36.6 % 47.0 6.0 %
Complementary building products   303.3 13.8 %   289.8 13.6 %   13.5 4.7 %
 
$ 2,194.9 100.0 % $ 2,132.7 100.0 % $ 62.2 2.9 %
 
Existing Market Sales By Business Day**
Year Ended
 
September 30, 2014 September 30, 2013
Net Sales Mix % Net Sales Mix % Change
Residential roofing products $ 4.202 48.4 % $ 4.195 49.8 % $ 0.007 0.2 %
Non-residential roofing products 3.275 37.8 % 3.089 36.6 % 0.186 6.0 %
Complementary building products   1.199 13.8 %   1.145 13.6 %   0.053 4.7 %
 
$ 8.676 100.0 % $ 8.430 100.0 % $ 0.246 2.9 %

 

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 253 business days in each of the years ended September 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)
         

Quarter Ended

September 30,

     

Year Ended

September 30,

  2014     EPS         2013     EPS   2014     EPS         2013       EPS
Net income & diluted earnings per share $ 24,207     $ 0.48 $ 27,404     $ 0.55 $ 53,846     $ 1.08 $ 72,607     $ 1.47
Company adjustments, net of income taxes:
Fair value of certain interest rate derivatives and
charge associated with refinancing - - - - - - (1,536 ) (0.03 )
Termination benefits   -       -   176       0.00   -       -   717         0.01  
 
Adjusted net income & diluted earnings per share $ 24,207     $ 0.48 $ 27,580     $ 0.56 $ 53,846     $ 1.08 $ 71,788       $ 1.45  
 

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.

BECN-F

Contacts

Beacon Roofing Supply, Inc.
Joseph Nowicki, 571-323-3940
Executive Vice President & Chief Financial Officer
JNowicki@becn.com

Release Summary

Beacon Roofing Supply Reports Q4 and Annual 2014 Results Record Q4 sales of $726.5 million Record 2014 sales of $2.33 billion Annual diluted EPS of $1.08 26 new greenfield branches in 2014

Contacts

Beacon Roofing Supply, Inc.
Joseph Nowicki, 571-323-3940
Executive Vice President & Chief Financial Officer
JNowicki@becn.com