Beacon Reports Third Quarter 2020 Results

Cost actions drive improved Q3 operating margin percentage

Third quarter cash generation yields significant net debt reduction 

  • Net sales of $1.79 billion, a decrease of 6.9% vs. prior year; sales improvement throughout the quarter, with June daily sales flat vs. prior year
  • Operating expense declined to $357.2 million (19.9% of sales) vs. $398.3 million (20.7% of sales) in the prior year, including a 10.2% decrease in SG&A expenses vs. prior year
  • Adjusted Operating Expense of $306.3 million (17.1% of sales) vs. $339.2 million (17.6% of sales) in the prior year
  • Net income (loss) of $(6.7) million vs. $31.0 million in the prior year, primarily driven by comparative $41.2 million tax provision increase; net margin of (0.4%) vs. 1.6% in the prior year
  • Adjusted EBITDA of $147.5 million vs. $157.8 million in the prior year; Adjusted EBITDA margin of 8.2% in both quarters
  • Cost leverage on improving sales within the quarter and working capital actions drove record Q3 operating cash flows of $401.3 million, yielding significant net debt reduction

HERNDON, Va.--()--Beacon (Nasdaq: BECN) (the “Company”) announced results today for its third quarter and nine-month period ended June 30, 2020 (“2020”).

“Fiscal third quarter results were highlighted by exceptional operating cost and cash flow performance,” said Julian Francis, Beacon’s President and Chief Executive Officer. “Our team rapidly implemented a broad-based cost reduction strategy beginning in March, resulting in meaningful sequential and year-over-year expense decreases, as well as an Adjusted EBITDA margin that was consistent with the prior year period. Although certain cost actions were clearly temporary in nature, we remain focused on improving our expense structure to produce permanent efficiency gains and foster attractive levels of operating leverage as demand improves. Sales steadily improved throughout the quarter, as COVID-19 restrictions eased and economies reopened, highlighted by June daily sales that were similar to prior year levels. Our limited reliance on discretionary product categories and our diverse mix of residential and non-residential markets provides our business with stability in this challenging environment. We produced record operating cash flow this quarter, leveraging favorable operating execution and tighter management of working capital. While uncertainties from the pandemic remain, our results this quarter have reinforced our commitment to our key strategic initiatives and demonstrated our ability to drive productivity and generate strong operating cash flow, even in difficult times.”

Third Quarter

Net sales decreased 6.9% to $1.79 billion, from $1.92 billion in 2019. The sales decrease was influenced by softer demand early in the quarter resulting from government restrictions in reaction to COVID-19, partially offset by stable sales in states/provinces without similar restrictions. Residential roofing product sales decreased 1.3%, non-residential roofing product sales decreased 9.6%, and complementary product sales decreased 12.5% compared to the prior year. The third quarter of fiscal years 2020 and 2019 each had 64 business days.

Net income (loss) was $(6.7) million, compared to $31.0 million in 2019. Net income (loss) attributable to common shareholders was $(12.7) million, compared to $25.0 million in 2019. EPS was $(0.18), compared to $0.32 in 2019. Third quarter results were primarily impacted by reduced sales and lower gross margins, largely attributable to a softer demand environment induced by COVID-19, as well as a net $32.8 million tax provision stemming from the adjustment of a prior quarter deferred tax benefit related to the Company’s application of the CARES Act. These impacts were partially offset by the implementation of aggressive cost-cutting actions, including reductions in both hours worked and headcount as well as decreases in fleet costs and other discretionary expenditures.

Adjusted Net Income (Loss) was $69.5 million, compared to $72.6 million in 2019. Adjusted EBITDA was $147.5 million, compared to $157.8 million in 2019.

Please see the included financial tables for a reconciliation of “Adjusted” non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as further detail on the components driving the net changes over the comparative periods.

Year-to-Date

Net sales decreased 2.9% to $4.93 billion, from $5.08 billion in 2019. The sales decrease was primarily influenced by softer demand resulting from government restrictions in reaction to COVID-19 and decreased hurricane-related demand in the Mid-Atlantic and Southeast, partially offset by the continued positive impact of our industry-leading digital platform. Residential roofing product sales decreased 1.7%, non-residential roofing product sales were flat, and complementary product sales decreased 6.5% compared to the prior year. The first nine months of fiscal years 2020 and 2019 had 190 and 189 business days, respectively.

Net income (loss) was $(152.8) million, compared to $(38.0) million in 2019. Net income (loss) attributable to common shareholders was $(170.8) million, compared to $(56.0) million in 2019. EPS was $(2.48), compared to $(0.82) in 2019. Nine-month results were primarily impacted by the second quarter write-off of certain trade names in connection with the Company’s rebranding efforts that were announced in January 2020.

Adjusted Net Income (Loss) was $85.3 million, compared to $94.2 million in 2019. Adjusted EBITDA was $280.7 million, compared to $307.0 million in 2019.

Please see the included financial tables for a reconciliation of “Adjusted” non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as further detail on the components driving the net changes over the comparative periods.

Earnings Call

The Company will host a conference call and webcast today at 5:00 p.m. ET to discuss these results. Details for the earnings release event are as follows:

What:

Beacon Third Quarter 2020 Earnings Call

When:

Thursday, August 6, 2020

Time:

5:00 p.m. ET

Access:

Register for the conference call or webcast by visiting:

 

Beacon Investor Relations – Events & Presentations

Upon registration, participants will receive an email containing event details and unique access codes. To ensure timely access, participants should register for the earnings call at least 10 minutes before the 5:00 p.m. ET start time. An archived copy of the webcast will be available on the Events & Presentations page shortly after the call.

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 Form 10-K for the fiscal year ended September 30, 2019 and Form 10-Q for the quarter ended March 31, 2020. 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.

About Beacon

Founded in 1928, Beacon is a Fortune 500, publicly-traded distributor of residential and commercial building products in North America, operating over 500 branches throughout all 50 states in the U.S. and 6 provinces in Canada. Beacon serves an extensive base of over 110,000 customers, utilizing its vast branch network and diverse service offerings to provide high-quality products and support throughout the entire business lifecycle. Beacon offers its own private label brand, TRI BUILT, and has a proprietary digital account management suite, Beacon Pro+, which allows customers to manage their businesses online. Beacon’s stock is traded on the Nasdaq Global Select Market under the ticker symbol BECN. To learn more about Beacon, please visit www.becn.com

 

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

% of

Net Sales

 

 

2019

 

 

% of

Net Sales

 

 

2020

 

 

% of

Net Sales

 

 

2019

 

 

% of

Net Sales

 

Net sales

$

1,792,505

 

 

 

100.0

%

 

$

1,924,534

 

 

 

100.0

%

 

$

4,926,103

 

 

 

100.0

%

 

$

5,075,247

 

 

 

100.0

%

Cost of products sold

 

1,360,373

 

 

 

75.9

%

 

 

1,451,998

 

 

 

75.4

%

 

 

3,740,873

 

 

 

75.9

%

 

 

3,832,154

 

 

 

75.5

%

Gross profit

 

432,132

 

 

 

24.1

%

 

 

472,536

 

 

 

24.6

%

 

 

1,185,230

 

 

 

24.1

%

 

 

1,243,093

 

 

 

24.5

%

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

295,426

 

 

 

16.5

%

 

 

328,827

 

 

 

17.1

%

 

 

940,855

 

 

 

19.1

%

 

 

976,928

 

 

 

19.3

%

Depreciation

 

16,986

 

 

 

0.9

%

 

 

17,731

 

 

 

0.9

%

 

 

53,553

 

 

 

1.1

%

 

 

52,779

 

 

 

1.0

%

Amortization1

 

44,825

 

 

 

2.5

%

 

 

51,724

 

 

 

2.7

%

 

 

276,959

 

 

 

5.6

%

 

 

155,508

 

 

 

3.1

%

Total operating expense

 

357,237

 

 

 

19.9

%

 

 

398,282

 

 

 

20.7

%

 

 

1,271,367

 

 

 

25.8

%

 

 

1,185,215

 

 

 

23.4

%

Income (loss) from operations

 

74,895

 

 

 

4.2

%

 

 

74,254

 

 

 

3.9

%

 

 

(86,137

)

 

 

(1.7

%)

 

 

57,878

 

 

 

1.1

%

Interest expense, financing costs, and other2

 

35,059

 

 

 

2.0

%

 

 

38,089

 

 

 

2.0

%

 

 

96,806

 

 

 

2.0

%

 

 

116,902

 

 

 

2.3

%

Loss on debt extinguishment

 

-

 

 

 

0.0

%

 

 

-

 

 

 

0.0

%

 

 

14,678

 

 

 

0.3

%

 

 

-

 

 

 

0.0

%

Income (loss) before provision for income taxes

 

39,836

 

 

 

2.2

%

 

 

36,165

 

 

 

1.9

%

 

 

(197,621

)

 

 

(4.0

%)

 

 

(59,024

)

 

 

(1.2

%)

Provision for (benefit from) income taxes3

 

46,561

 

 

 

2.6

%

 

 

5,178

 

 

 

0.3

%

 

 

(44,846

)

 

 

(0.9

%)

 

 

(21,032

)

 

 

(0.5

%)

Net income (loss)

 

(6,725

)

 

 

(0.4

%)

 

 

30,987

 

 

 

1.6

%

 

 

(152,775

)

 

 

(3.1

%)

 

 

(37,992

)

 

 

(0.7

%)

Dividends on Preferred Stock4

 

6,000

 

 

 

0.3

%

 

 

6,000

 

 

 

0.3

%

 

 

18,000

 

 

 

0.4

%

 

 

18,000

 

 

 

0.4

%

Net income (loss) attributable to common shareholders

$

(12,725

)

 

 

(0.7

%)

 

$

24,987

 

 

 

1.3

%

 

$

(170,775

)

 

 

(3.5

%)

 

$

(55,992

)

 

 

(1.1

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

68,840,849

 

 

 

 

 

 

 

68,477,946

 

 

 

 

 

 

 

68,775,920

 

 

 

 

 

 

 

68,391,882

 

 

 

 

 

Diluted5

 

68,840,849

 

 

 

 

 

 

 

69,265,384

 

 

 

 

 

 

 

68,775,920

 

 

 

 

 

 

 

68,391,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share6:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.18

)

 

 

 

 

 

$

0.32

 

 

 

 

 

 

$

(2.48

)

 

 

 

 

 

$

(0.82

)

 

 

 

 

Diluted

$

(0.18

)

 

 

 

 

 

$

0.32

 

 

 

 

 

 

$

(2.48

)

 

 

 

 

 

$

(0.82

)

 

 

 

 

____________________________________

  1. Nine months ended June 30, 2020 amount includes non-cash accelerated intangible asset amortization of $142.6 million in connection with the Rebranding.
  2. Nine months ended June 30, 2020 amount includes a $5.6 million settlement received in connection with a class action lawsuit and a $5.3 million refund received as the final true-up of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the acquisition of Allied Building Products Corp. on January 2, 2018 (the “Allied Acquisition”).
  3. Three and nine months ended June 30, 2020 amounts include a tax provision (benefit) of $32.8 million and $(0.5) million, respectively, stemming from the revaluation of deferred tax assets and liabilities made in conjunction with the Company’s application of the CARES Act. Nine months ended June 30, 2020 amount also includes an income tax provision (benefit) of $(36.5) million stemming from a decrease of deferred tax liabilities in connection with the Rebranding.
  4. Three months ended June 30, 2020 and 2019 amounts are composed of $5.0 million in accrued cumulative Preferred Stock dividends and an additional $1.0 million of Preferred Stock dividends that had been declared and paid as of period end. Nine months ended June 30, 2020 and 2019 amounts are composed of $5.0 million in accrued cumulative Preferred Stock dividends and an additional $13.0 million of Preferred Stock dividends that had been declared and paid as of period end.
  5. Amounts do not include 9,694,619 shares issuable upon conversion of the Company’s participating Preferred Stock because such conversion would be anti-dilutive.
  6. Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents or the conversion of Preferred Stock. Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock unit awards. Diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by the fully diluted weighted-average number of common shares outstanding during the period. The following table presents the components and calculations of basic and diluted net income (loss) per share for each period presented (in thousands, except share and per share amounts):

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

$

(6,725

)

 

$

30,987

 

 

$

(152,775

)

 

$

(37,992

)

Dividends on Preferred Stock

 

6,000

 

 

 

6,000

 

 

 

18,000

 

 

 

18,000

 

Net income (loss) attributable to common shareholders

$

(12,725

)

 

$

24,987

 

 

$

(170,775

)

 

$

(55,992

)

Undistributed income allocated to participating securities

 

-

 

 

 

(3,099

)

 

 

-

 

 

 

-

 

Net income (loss) attributable to common shareholders - basic and diluted

$

(12,725

)

 

$

21,888

 

 

$

(170,775

)

 

$

(55,992

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - basic

 

68,840,849

 

 

 

68,477,946

 

 

 

68,775,920

 

 

 

68,391,882

 

Effect of common share equivalents

 

-

 

 

 

787,438

 

 

 

-

 

 

 

-

 

Weighted-average common shares outstanding - diluted

 

68,840,849

 

 

 

69,265,384

 

 

 

68,775,920

 

 

 

68,391,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic

$

(0.18

)

 

$

0.32

 

 

$

(2.48

)

 

$

(0.82

)

Net income (loss) per share - diluted

$

(0.18

)

 

$

0.32

 

 

$

(2.48

)

 

$

(0.82

)

 

BEACON ROOFING SUPPLY, INC.

Consolidated Balance Sheets

(In thousands)

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

2020

 

 

2019

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,018,376

 

 

$

72,287

 

 

$

27,729

 

Accounts receivable, net

 

993,757

 

 

 

1,108,134

 

 

 

1,079,091

 

Inventories, net

 

951,538

 

 

 

1,018,183

 

 

 

1,124,063

 

Prepaid expenses and other current assets

 

301,964

 

 

 

315,643

 

 

 

361,831

 

Total current assets

 

3,265,635

 

 

 

2,514,247

 

 

 

2,592,714

 

Property and equipment, net

 

236,928

 

 

 

260,376

 

 

 

269,041

 

Goodwill

 

2,489,760

 

 

 

2,490,590

 

 

 

2,490,940

 

Intangibles, net

 

845,217

 

 

 

1,125,540

 

 

 

1,177,694

 

Operating lease assets

 

442,287

 

 

 

-

 

 

 

-

 

Other assets, net

 

25

 

 

 

2,059

 

 

 

1,243

 

Total assets

$

7,279,852

 

 

$

6,392,812

 

 

$

6,531,632

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

780,179

 

 

$

822,931

 

 

$

643,411

 

Accrued expenses

 

559,123

 

 

 

599,155

 

 

 

590,756

 

Current operating lease liabilities

 

99,165

 

 

 

-

 

 

 

-

 

Current portions of long-term debt/obligations

 

12,858

 

 

 

18,689

 

 

 

19,366

 

Total current liabilities

 

1,451,325

 

 

 

1,440,775

 

 

 

1,253,533

 

Borrowings under revolving lines of credit, net

 

848,736

 

 

 

80,961

 

 

 

424,011

 

Long-term debt, net

 

2,494,474

 

 

 

2,494,623

 

 

 

2,494,648

 

Deferred income taxes, net

 

58,099

 

 

 

103,913

 

 

 

110,180

 

Non-current operating lease liabilities

 

339,540

 

 

 

-

 

 

 

-

 

Long-term obligations under equipment financing, net

 

400

 

 

 

4,609

 

 

 

6,332

 

Other long-term liabilities

 

1,351

 

 

 

6,383

 

 

 

5,352

 

Total liabilities

 

5,193,925

 

 

 

4,131,264

 

 

 

4,294,056

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred Stock1

 

399,195

 

 

 

399,195

 

 

 

399,195

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

688

 

 

 

685

 

 

 

684

 

Undesignated preferred stock

 

-

 

 

 

-

 

 

 

-

 

Additional paid-in capital

 

1,095,149

 

 

 

1,083,042

 

 

 

1,077,953

 

Retained earnings

 

628,447

 

 

 

799,222

 

 

 

777,842

 

Accumulated other comprehensive income (loss)

 

(37,552

)

 

 

(20,596

)

 

 

(18,098

)

Total stockholders' equity

 

1,686,732

 

 

 

1,862,353

 

 

 

1,838,381

 

Total liabilities and stockholders' equity

$

7,279,852

 

 

$

6,392,812

 

 

$

6,531,632

 

____________________________________

  1. In connection with the Allied Acquisition, the Company completed the sale of 400,000 shares of Series A Cumulative Convertible Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), with an aggregate liquidation preference of $400.0 million, at a purchase price of $1,000 per share, to CD&R Boulder Holdings, L.P. The Preferred Stock is convertible perpetual participating preferred stock of the Company, and conversion of the Preferred Stock into $0.01 par value shares of the Company’s common stock will be at a conversion price of $41.26 per share (or 9,694,619 shares of common stock). The Preferred Stock accumulates dividends at a rate of 6.0% per annum (payable in cash or in-kind, subject to certain conditions). The Preferred Stock is not mandatorily redeemable; therefore, it is classified as mezzanine equity on the Company’s consolidated balance sheets.
 

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Cash Flows

(In thousands)

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

Operating Activities

 

 

 

 

 

 

 

Net income (loss)

$

(152,775

)

 

$

(37,992

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

330,513

 

 

 

208,287

 

Stock-based compensation

 

13,349

 

 

 

12,901

 

Certain interest expense and other financing costs

 

8,608

 

 

 

9,077

 

Beneficial lease amortization

 

-

 

 

 

1,714

 

Loss on debt extinguishment

 

14,678

 

 

 

-

 

Gain on sale of fixed assets

 

(2,008

)

 

 

(3,470

)

Deferred income taxes

 

(41,163

)

 

 

3,195

 

338(h)(10) election refund1

 

(5,282

)

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

113,277

 

 

 

10,970

 

Inventories

 

65,817

 

 

 

(188,213

)

Prepaid expenses and other current assets

 

4,790

 

 

 

(117,520

)

Accounts payable and accrued expenses

 

(102,565

)

 

 

(93,908

)

Other assets and liabilities

 

3,210

 

 

 

62

 

Net cash provided by (used in) operating activities

 

250,449

 

 

 

(194,897

)

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

(31,397

)

 

 

(44,337

)

Acquisition of businesses, net1

 

5,282

 

 

 

(163,973

)

Proceeds from the sale of assets

 

2,399

 

 

 

6,200

 

Net cash provided by (used in) investing activities

 

(23,716

)

 

 

(202,110

)

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Borrowings under revolving lines of credit

 

2,037,212

 

 

 

1,734,476

 

Payments under revolving lines of credit

 

(1,271,233

)

 

 

(1,404,836

)

Payments under term loan

 

(7,275

)

 

 

(7,275

)

Borrowings under senior notes

 

300,000

 

 

 

-

 

Payment under senior notes

 

(309,564

)

 

 

-

 

Payment of debt issuance costs

 

(3,900

)

 

 

-

 

Payments under equipment financing facilities and finance leases

 

(6,446

)

 

 

(7,602

)

Payment of dividends on Preferred Stock

 

(18,000

)

 

 

(18,000

)

Proceeds from issuance of common stock related to equity awards

 

1,627

 

 

 

1,654

 

Payment of taxes related to net share settlement of equity awards

 

(2,866

)

 

 

(3,639

)

Net cash provided by (used in) financing activities

 

719,555

 

 

 

294,778

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(199

)

 

 

31

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

946,089

 

 

 

(102,198

)

Cash and cash equivalents, beginning of period

 

72,287

 

 

 

129,927

 

Cash and cash equivalents, end of period

$

1,018,376

 

 

$

27,729

 

__________________________________________________

  1. Related to a gain recognized for a partial refund of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the Allied Acquisition.
 

BEACON ROOFING SUPPLY, INC.

Consolidated Sales by Product Line

(In thousands)

 

Sales by Product Line

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

Net Sales

 

 

Mix %

 

 

Net Sales

 

 

Mix %

 

 

$

 

 

%

 

Residential roofing products

$

837,039

 

 

 

46.7

%

 

$

848,259

 

 

 

44.1

%

 

$

(11,220

)

 

 

(1.3

%)

Non-residential roofing products

 

426,961

 

 

 

23.8

%

 

 

472,105

 

 

 

24.5

%

 

 

(45,144

)

 

 

(9.6

%)

Complementary building products

 

528,505

 

 

 

29.5

%

 

 

604,170

 

 

 

31.4

%

 

 

(75,665

)

 

 

(12.5

%)

 

$

1,792,505

 

 

 

100.0

%

 

$

1,924,534

 

 

 

100.0

%

 

$

(132,029

)

 

 

(6.9

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales by Business Day1

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

Net Sales

 

 

Mix %

 

 

Net Sales

 

 

Mix %

 

 

$

 

 

%

 

Residential roofing products

$

13,079

 

 

 

46.7

%

 

$

13,254

 

 

 

44.1

%

 

$

(175

)

 

 

(1.3

%)

Non-residential roofing products

 

6,671

 

 

 

23.8

%

 

 

7,377

 

 

 

24.5

%

 

 

(706

)

 

 

(9.6

%)

Complementary building products

 

8,258

 

 

 

29.5

%

 

 

9,440

 

 

 

31.4

%

 

 

(1,182

)

 

 

(12.5

%)

 

$

28,008

 

 

 

100.0

%

 

$

30,071

 

 

 

100.0

%

 

$

(2,063

)

 

 

(6.9

%)

__________________________________________________

  1. The third quarter of fiscal years 2020 and 2019 each had 64 business days.
 

Sales by Product Line

 

 

Nine Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

Net Sales

 

 

Mix %

 

Net Sales

 

 

Mix %

 

$

 

 

%

 

Residential roofing products

$

2,130,825

 

 

 

43.2

%

 

$

2,168,755

 

 

 

42.7

%

 

$

(37,930

)

 

 

(1.7

%)

Non-residential roofing products

 

1,200,665

 

 

 

24.4

%

 

 

1,200,546

 

 

 

23.7

%

 

 

119

 

 

 

0.0

%

Complementary building products

 

1,594,613

 

 

 

32.4

%

 

 

1,705,946

 

 

 

33.6

%

 

 

(111,333

)

 

 

(6.5

%)

 

$

4,926,103

 

 

 

100.0

%

 

$

5,075,247

 

 

 

100.0

%

 

$

(149,144

)

 

 

(2.9

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales by Business Day1

 

 

Nine Months Ended June 30,

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

Net Sales

 

 

Mix %

 

Net Sales

 

 

Mix %

 

$

 

 

%

 

Residential roofing products

$

11,215

 

 

 

43.2

%

 

$

11,475

 

 

 

42.7

%

 

$

(260

)

 

 

(2.3

%)

Non-residential roofing products

 

6,319

 

 

 

24.4

%

 

 

6,352

 

 

 

23.7

%

 

 

(33

)

 

 

(0.5

%)

Complementary building products

 

8,393

 

 

 

32.4

%

 

 

9,026

 

 

 

33.6

%

 

 

(633

)

 

 

(7.0

%)

 

$

25,927

 

 

 

100.0

%

 

$

26,853

 

 

 

100.0

%

 

$

(926

)

 

 

(3.4

%)

__________________________________________________

  1. The first nine months of fiscal years 2020 and 2019 had 190 and 189 business days, respectively.
 

BEACON ROOFING SUPPLY, INC.

Adjusted Net Income (Loss)1

(In thousands)

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

$

(6,725

)

 

$

30,987

 

 

$

(152,775

)

 

$

(37,992

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs2

 

48,416

 

 

 

60,482

 

 

 

142,925

 

 

 

185,922

 

Business restructuring costs3

 

2,846

 

 

 

1,664

 

 

 

167,836

 

 

 

1,664

 

COVID-19 impact4

 

36,216

 

 

 

-

 

 

 

2,894

 

 

 

-

 

Effects of tax reform

 

-

 

 

 

-

 

 

 

-

 

 

 

(462

)

Total adjustments

 

87,478

 

 

 

62,146

 

 

 

313,655

 

 

 

187,124

 

Tax impact of total adjustments5

 

(11,271

)

 

 

(20,563

)

 

 

(75,550

)

 

 

(54,946

)

Total adjustments, net of tax

 

76,207

 

 

 

41,583

 

 

 

238,105

 

 

 

132,178

 

Adjusted Net Income (Loss)

$

69,482

 

 

$

72,570

 

 

$

85,330

 

 

$

94,186

 

_________________________

  1. Adjusted Net Income (Loss) is defined as net income excluding the impact of acquisition costs, business restructuring costs, the effects of tax reform, and the direct financial impact of the COVID-19 pandemic.
  2. The following table presents a breakout of the components of acquisition costs for each of the periods indicated:
 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Amortization of intangible assets

$

44,825

 

 

$

51,724

 

 

$

134,310

 

 

$

155,508

 

Costs classified as selling, general, and administrativea

 

1,588

 

 

 

5,733

 

 

 

7,887

 

 

 

21,337

 

Non-operating (income) expensesb

 

2,003

 

 

 

3,025

 

 

 

728

 

 

 

9,077

 

Total acquisition costs

$

48,416

 

 

$

60,482

 

 

$

142,925

 

 

$

185,922

 

___________________________

  1. Mainly composed of professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses.
  2. Amounts include the amortization of debt issuance costs. For the nine months ended June 30, 2020, amounts are offset by a $5.3 million refund received as the final true-up of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the Allied Acquisition.

3. The following table presents a breakout of the components of business restructuring costs for each of the periods indicated:

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Amortization in connection with the Rebranding

$

-

 

 

$

-

 

 

$

142,649

 

 

$

-

 

Costs classified as selling, general, and administrativea

 

1,069

 

 

 

1,664

 

 

 

1,890

 

 

 

1,664

 

Non-operating (income) expensesb

 

1,777

 

 

 

-

 

 

 

23,297

 

 

 

-

 

Total business restructuring costs

$

2,846

 

 

$

1,664

 

 

$

167,836

 

 

$

1,664

 

___________________________

  1. Mainly composed of costs stemming from headcount rationalization efforts and certain Rebranding costs.
  2. Amounts include accrued estimated costs related to employee benefit plan withdrawals and amortization of debt issuance costs. Nine months ended June 30, 2020 amount also includes a loss on debt extinguishment of $14.7 million in connection with the October 2019 debt refinancing.

4. Three and nine months ended June 30, 2020 amounts include a tax provision (benefit) of $32.8 million and $(0.5) million, respectively, stemming from the revaluation of deferred tax assets and liabilities made in conjunction with the Company’s application of the CARES Act. Three and nine months ended June 30, 2020 amounts also include $3.4 million of severance and other costs directly related to the Company’s response to the COVID-19 pandemic, which are classified as selling, general and administrative.

5. Represents tax impact on adjustments that are not included in the Company’s income tax provision (benefit) for the period presented. The effective tax rate applied to these adjustments is calculated by using forecasted adjusted pre-tax income while factoring in estimated discrete tax adjustments for the fiscal year. The tax impact of adjustments for the three months ended June 30, 2020 and 2019 were calculated using a blended effective tax rate of 12.9% and 33.1%, respectively. The tax impact of adjustments for the nine months ended June 30, 2020 and 2019 were calculated using an effective tax rate of 24.1% and 29.4%, respectively.

We use Adjusted Net Income (Loss) to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute Adjusted Net Income (Loss) consistently using the same method each period.

We believe that Adjusted Net Income (Loss) is a useful measure because it permits investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe Adjusted Net Income (Loss) is useful to investors when evaluating our business, it is not prepared and presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), and therefore should be considered supplemental in nature. You should not consider Adjusted Net Income (Loss) in isolation or as a substitute for net income calculated in accordance with GAAP. Adjusted Net Income (Loss) may have material limitations including, but not limited to, the exclusion of certain costs without a corresponding reduction of net income for the income generated by the assets to which the excluded costs are related. In addition, Adjusted Net Income (Loss) may differ from similarly titled measures presented by other companies.

 

BEACON ROOFING SUPPLY, INC.

Adjusted EBITDA1

(In thousands)

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

$

(6,725

)

 

$

30,987

 

 

$

(152,775

)

 

$

(37,992

)

Interest expense, net

 

35,360

 

 

 

40,169

 

 

 

105,781

 

 

 

121,800

 

Income taxes2

 

46,561

 

 

 

5,178

 

 

 

(44,846

)

 

 

(21,032

)

Depreciation and amortization3

 

61,811

 

 

 

69,455

 

 

 

330,512

 

 

 

208,287

 

Stock-based compensation

 

3,532

 

 

 

4,637

 

 

 

13,349

 

 

 

12,901

 

Acquisition costs4

 

1,588

 

 

 

5,733

 

 

 

2,605

 

 

 

21,337

 

Business restructuring costs5

 

1,962

 

 

 

1,664

 

 

 

22,589

 

 

 

1,664

 

COVID-19 impact6

 

3,426

 

 

 

-

 

 

 

3,449

 

 

 

-

 

Adjusted EBITDA

$

147,515

 

 

$

157,823

 

 

$

280,664

 

 

$

306,965

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

1,792,505

 

 

$

1,924,534

 

 

$

4,926,103

 

 

$

5,075,247

 

Net margin7

 

(0.4

%)

 

 

1.6

%

 

 

(3.1

%)

 

 

(0.7

%)

Adjusted EBITDA margin7

 

8.2

%

 

 

8.2

%

 

 

5.7

%

 

 

6.0

%

_________________________________

  1. Adjusted EBITDA is defined as net income excluding the impact of interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, acquisition costs, business restructuring costs, and the direct financial impact of the COVID-19 pandemic.
  2. Three and nine months ended June 30, 2020 amounts include a tax provision (benefit) of $32.8 million and $(0.5) million, respectively, stemming from the revaluation of deferred tax assets and liabilities made in conjunction with the Company’s application of the CARES Act. Nine months ended June 30, 2020 amount also includes an income tax provision (benefit) of $(36.5) million stemming from a decrease of deferred tax liabilities in connection with the Rebranding.
  3. Nine months ended June 30, 2020 amount includes the impact of non-cash accelerated intangible asset amortization of $142.6 million related to the write-off of certain trade names in connection with the Rebranding.
  4. Includes selling, general, and administrative costs related to acquisitions such as professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses. For the nine months ended June 30, 2020, amounts are offset by a $5.3 million refund received as the final true-up of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the Allied Acquisition. Other items the Company classifies as acquisition costs are embedded within the other balances reported in the table.
  5. Amounts include accrued estimated costs related to employee benefit plan withdrawals, costs stemming from headcount rationalization efforts, and certain Rebranding costs. Nine months ended June 30, 2020 amount also includes a loss on debt extinguishment of $14.7 million in connection with October 2019 debt refinancing. Other items the Company classifies as business restructuring costs are embedded within the other balances reported in the table.
  6. Mainly composed of severance and other costs directly related to the Company’s response to the COVID-19 pandemic. Other items the Company classifies as part of the COVID-19 impact are embedded within the other balances reported in the table.
  7. We define net margin as net income (loss) divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

We use Adjusted EBITDA to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute Adjusted EBITDA consistently using the same methods each period.

We believe that Adjusted EBITDA is a useful measure because it permits investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe Adjusted EBITDA is useful to investors when evaluating our business, it is not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. Adjusted EBITDA may have material limitations including, but not limited to, the exclusion of certain costs without a corresponding reduction of net income for the income generated by the assets to which the excluded costs are related. In addition, Adjusted EBITDA may differ from similarly titled measures presented by other companies.

 

BEACON ROOFING SUPPLY, INC.

Adjusted Operating Expense1

(In thousands)

 

 

Three Months Ended June 30,

 

 

Nine Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expense

$

357,237

 

 

$

398,282

 

 

$

1,271,367

 

 

$

1,185,215

 

Amortization2

 

(44,825

)

 

 

(51,724

)

 

 

(276,959

)

 

 

(155,508

)

Acquisition costs3

 

(1,588

)

 

 

(5,733

)

 

 

(7,887

)

 

 

(21,337

)

Business restructuring costs4

 

(1,069

)

 

 

(1,664

)

 

 

(1,890

)

 

 

(1,664

)

COVID-19 impact5

 

(3,426

)

 

 

-

 

 

 

(3,449

)

 

 

-

 

Adjusted Operating Expense

$

306,329

 

 

$

339,161

 

 

$

981,182

 

 

$

1,006,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

1,792,505

 

 

$

1,924,534

 

 

$

4,926,103

 

 

$

5,075,247

 

Operating expense as a % of net sales

 

19.9

%

 

 

20.7

%

 

 

25.8

%

 

 

23.4

%

Adjusted Operating Expense as a % of net sales

 

17.1

%

 

 

17.6

%

 

 

19.9

%

 

 

19.8

%

_________________________________

  1. Adjusted Operating Expense is defined as operating expense excluding the impact of amortization, acquisition costs, business restructuring costs, and the direct financial impact of the COVID-19 pandemic.
  2. Nine months ended June 30, 2020 amount includes the impact of non-cash accelerated intangible asset amortization of $142.6 million related to the write-off of certain trade names in connection with the Rebranding.
  3. Mainly composed of professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses.
  4. Mainly composed of costs stemming from headcount rationalization efforts and certain Rebranding costs.
  5. Mainly composed of severance and other costs directly related to the Company’s response to the COVID-19 pandemic.

We use Adjusted Operating Expense to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute Adjusted Operating Expense consistently using the same methods each period.

We believe that Adjusted Operating Expense is a useful measure because it permits investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe Adjusted Operating Expense is useful to investors when evaluating our business, it is not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. Adjusted Operating Expense should not be considered in isolation or as a substitute for operating expense calculated in accordance with GAAP. Adjusted Operating Expense may have material limitations and may differ from similarly titled measures presented by other companies.

Contacts

Brent Rakers, Director Investor Relations
Brent.Rakers@becn.com
901-232-2737

Contacts

Brent Rakers, Director Investor Relations
Brent.Rakers@becn.com
901-232-2737