Beacon Roofing Supply Reports Fourth Quarter and Annual 2012 Results *Record fourth quarter sales of $598 million vs. $576 million. *Fourth quarter EPS of $0.58 ($0.60 adjusted) vs. $0.67 ($0.56 adjusted). *Record annual EPS of $1.58 ($1.67 adjusted) vs. $1.27 ($1.16 adjusted). *Record annual sales of $2.04 billion vs. $1.82 billion. *Annual existing market sales up 6%. Business Wire PEABODY, Mass. -- November 29, 2012 Beacon Roofing Supply, Inc. (the “Company”) (NASDAQ: BECN) announced results today for its fourth quarter and fiscal year ended September 30, 2012. Paul Isabella, the Company’s President and Chief Executive Officer, stated: “We are very pleased with our record quarter and annual 2012 results, which exceeded our expectations. Our total sales benefited from the positive impact of acquisitions and from a 6% increase in existing market sales for the year. The adjusted fourth quarter net income exceeded last year’s adjusted net income, even though we were facing a very challenging comparison to last year’s fourth quarter, when there were substantial roofing activities from hail storms. Our gross margin continued to improve over the prior year, and our annual operating margin was significantly higher than in 2011. We are confident in the long-term growth opportunities available in our industry and are actively investing to realize those opportunities, such as with our most recent acquisition of McClure-Johnston.” Fourth Quarter Total sales increased 3.9% to $598.1 million in 2012 from $575.6 million in 2011. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s fourth quarter, declined 5.6% (4.1% based on the same number of business days). In existing markets, residential and non-residential roofing product sales decreased 3.3% and 10.5%, respectively, while complementary product sales increased 1.2%. This year’s fourth quarter sales were primarily impacted by lower roofing activity in the markets affected by last year’s hail storms, partially offset by the benefit of slightly higher overall average selling prices. Net income for the fourth quarter was $27.9 million compared to $31.3 million in 2011. Fourth quarter diluted net income per share was $0.58 compared to $0.67 in 2011. The lower net income was due primarily to a one-time income tax benefit of $5.1 million, or $0.11 diluted income per share, realized in 2011. The benefit in 2012 from the higher sales and gross margin rate and lower interest expense was partially offset by the impact from higher operating expenses compared to 2011. Earnings in the fourth quarter of fiscal 2012 were also impacted by the following items: a charge of $3.0 million ($1.8 million net of tax), or approximately $0.04 diluted earnings per share, for the recognition of termination benefits in operating expenses associated with an acquisition and the announced retirement of our CFO; and a benefit of $1.1 million ($0.7 million net of tax), or approximately $0.01 diluted earnings per share, for the recognition of the change in the fair value of certain interest rate derivatives in interest expense and other financing costs. Below is a recap of the calculation of our adjusted diluted income per share for the fourth quarter of this year and last year (in thousands except per share amounts): Diluted Diluted 2012 EPS 2011 EPS Net income $ 27,891 $ 0.58 $ 31,257 $ 0.67 Company adjustments, net of income taxes: Change in fair value of certain (656 ) (0.01 ) - - interest rate derivatives Termination 1,775 0.04 - - benefits Change in tax status - - (5,060 ) (0.11 ) of foreign entity Adjusted net $ 29,009 $ 0.60 $ 26,197 $ 0.56 income The calculations of the adjusted diluted income and income per share for 2012 do not add down due to rounding. Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which are reconciled to the net income in this press release, were $57.1 million in 2012 compared to $55.4 million in 2011, a 3.1% increase. Fiscal Year Total sales increased 12.5% to $2.04 billion in 2012 from $1.82 billion in 2011. Existing market sales increased 6.3% (7.6% based on the same number of business days). In existing markets, residential and non-residential roofing product sales increased 11.8% and 2.3%, respectively, while complementary product sales declined 0.4%. Annual sales were favorably impacted by increased re-roofing and remodeling activities in the first half of the this year, including the impact from improved weather conditions and stronger business in several markets that experienced significant storms during the course of last fiscal year, and by higher average selling prices. Annual net income was $75.6 million in 2012 compared to $59.2 million in 2011. Annual diluted net income per share was $1.58 compared to $1.27 per share in 2011. The higher net income was due to the higher sales and gross margin rate, partially offset by the impact from certain charges discussed below, higher operating expenses and a higher income tax provision. Earnings in fiscal 2012 were impacted by the following items: the fourth quarter charge of $3.0 million ($1.8 million net of tax), or approximately $0.04 diluted earnings per share, for the recognition of the termination benefits mentioned above; a charge of $3.8 million ($2.3 million net of tax), or approximately $0.05 diluted earnings per share, for the recognition of the fair value of certain interest rate derivatives and other charge in interest expense and other financing costs resulting from the Company’s refinancing in April 2012; and a charge of $0.3 million, or approximately $0.01 diluted earnings per share, from the increase in the liability for consideration due for the Enercon acquisition. As mentioned above, there was a one-time income tax benefit of $5.1 million, or $0.11 diluted income per share, realized in the fourth quarter of 2011. Adjusted EBITDA for fiscal 2012 was $176.1 million compared to $134.9 million for fiscal 2011, an increase of 30.6%. Cash flow from operations was $85.4 million in 2012 compared to $79.3 million in 2011. This increase in operating cash flows was influenced mostly by the positive impact from the higher net income and from higher non-cash charges this year, partially offset by the impact from less favorable changes in working capital. Cash on hand decreased by $102.8 million to $40.2 million at September 30, 2012 compared to $143.0 million at September 30, 2011, due primarily to a significant paydown of debt this year (net of new borrowings) and the costs of the acquisitions made since last year. 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 719-325-2329. 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 224 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. Beacon Roofing Supply, Inc. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) Fiscal Quarter Ended Fiscal Year Ended September % of September % of September % of September % of 30, 2012 Net 30, 2011 Net 30, 2012 Net 30, 2011 Net Sales Sales Sales Sales Net sales $ 598,121 100.0% $ 575,562 100.0% $ 2,043,658 100.0% $ 1,817,423 100.0% Cost of 448,494 75.0% 442,691 76.9% 1,542,254 75.5% 1,397,798 76.9% products sold Gross profit 149,627 25.0% 132,871 23.1% 501,404 24.5% 419,625 23.1% Operating 101,325 16.9% 85,269 14.8% 357,732 17.5% 315,883 17.4% expenses Income from 48,302 8.1% 47,602 8.3% 143,672 7.0% 103,742 5.7% operations Changes in assets and liabilities, excluding the effects of acquisitions: Interest expense and other 2,456 0.3% 3,383 0.6% 17,173 0.8% 13,364 0.7% financing costs Income before 45,846 7.7% 44,219 7.7% 126,499 6.2% 90,378 5.0% income taxes Income taxes 17,955 3.0% 12,962 2.3% 50,934 2.5% 31,158 1.7% Net income $ 27,891 4.7% $ 31,257 5.4% $ 75,565 3.7% $ 59,220 3.3% Net income per share: Basic $ 0.59 $ 0.68 $ 1.62 $ 1.29 Diluted $ 0.58 $ 0.67 $ 1.58 $ 1.27 Weighted average shares used in computing net income per share: Basic 47,245,476 46,129,848 46,718,948 45,919,198 Diluted 48,302,368 46,959,634 47,840,967 46,753,152 BEACON ROOFING SUPPLY, INC Condensed Consolidated Balance Sheets (In thousands) September 30, 2012 September 30, 2011 Assets Current assets: Cash and cash equivalents $ 40,205 $ 143,027 Accounts receivable, net 291,456 280,322 Inventories 222,740 202,474 Prepaid expenses and other 60,287 37,573 assets Deferred income taxes 16,087 15,469 Total current assets 630,775 678,865 Changes in assets and liabilities, excluding the effects of acquisitions: Property and equipment, net 57,376 47,427 Goodwill 443,161 380,916 Other assets, net 85,670 49,756 Total assets $ 1,216,982 $ 1,156,964 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 167,390 $ 182,523 Accrued expenses 71,627 69,906 Current portions of long-term 56,932 15,605 obligations Total current liabilities 295,949 268,034 Senior notes payable and other obligations, net of current 220,875 311,511 portion Deferred income taxes 48,196 38,992 Common stock 477 462 Additional paid-in capital 280,184 248,260 Retained earnings 368,675 293,110 Accumulated other comprehensive 2,626 (3,405 ) income (loss) Total stockholders' equity 651,962 538,427 Total liabilities and $ 1,216,982 $ 1,156,964 stockholders' equity BEACON ROOFING SUPPLY, INC Condensed Consolidated Statements of Cash Flows Fiscal Year Ended (In thousands) September 30, 2012 September 30, 2011 Operating activities: Net income $ 75,565 $ 59,220 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,353 25,060 Stock-based compensation 7,873 6,073 Adjustment of liability for 250 - contingent consideration Certain interest expense and 4,359 - other financing costs Gain on sale of fixed assets (1,278 ) (750 ) Deferred income taxes 7,700 (465 ) Changes in assets and liabilities, excluding the effects of acquisitions: Accounts receivable 19,804 (35,314 ) Inventories 13,338 (35,016 ) Prepaid expenses and other (22,448 ) 7,470 assets Accounts payable and accrued (44,155 ) 53,012 expenses Net cash provided by operating 85,361 79,290 activities Investing activities: Purchases of property and (17,404 ) (14,433 ) equipment Acquisition of businesses (141,049 ) (34,942 ) Proceeds from sales of assets 1,418 1,543 Net cash used in investing (157,035 ) (47,832 ) activities Financing activities: Borrowings (repayments) under 41,272 (50 ) revolving lines of credit, net Repayments under senior notes & (91,785 ) (11,053 ) other, net Payment of deferred financing (5,377 ) - costs Proceeds from exercise of 21,478 5,302 options Income tax benefit from stock-based compensation - deductions in excess of the associated compensation cost 2,588 756 Net cash used by financing (31,824 ) (5,045 ) activities Effect of exchange rate changes 676 (522 ) on cash Net increase (decrease) in cash (102,822 ) 25,891 and cash equivalents Cash and cash equivalents at 143,027 117,136 beginning of period Cash and cash equivalents at end $ 40,205 $ 143,027 of period BEACON ROOFING SUPPLY, INC Unaudited Consolidated Sales by Product Line Three Months Ended September 30, 2012 September 30, 2011 (dollars in Net Mix % Net Mix % Change millions) Sales Sales Residential roofing $ 301.9 50.5 % $ 278.0 48.3 % $ 23.9 8.6 % products Non-residential roofing 219.6 36.7 % 229.4 39.9 % (9.8 ) -4.3 % products Complementary building 76.6 12.8 % 68.1 11.8 % 8.5 12.5 % products $ 598.1 100.0 % $ 575.6 100.0 % $ 22.6 3.9 % Consolidated Sales by Product Line for Existing Markets* Three Months Ended September 30, 2012 September 30, 2011 (dollars in Net Mix % Net Mix % Change millions) Sales Sales Residential roofing $ 268.8 49.5 % $ 278.0 48.3 % $ (9.2 ) -3.3 % products Non-residential roofing 205.4 37.8 % 229.4 39.9 % (24.0 ) -10.5 % products Complementary building 68.9 12.7 % 68.1 11.8 % 0.8 1.2 % products $ 543.1 100.0 % $ 575.6 100.0 % $ (32.4 ) -5.6 % Existing Market Sales by Business Day** Three Months Ended September 30, 2012 September 30, 2011 (dollars in Net Mix % Net Mix % Change millions) Sales Sales Residential roofing $ 4.267 49.5 % $ 4.344 48.3 % $ (0.1 ) -1.8 % products Non-residential roofing 3.260 37.8 % 3.584 39.9 % (0.3 ) -9.0 % products Complementary building 1.094 12.7 % 1.064 11.8 % 0.0 2.8 % products $ 8.621 100.0 % $ 8.992 100.0 % $ (0.4 ) -4.1 % 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 2012. **There were 63 business days in this year's fourth quarter compared to 64 business days in last year's fourth quarter. BEACON ROOFING SUPPLY, INC Unaudited Consolidated Sales by Product Line Fiscal Years Ended September 30, 2012 September 30, 2011 (dollars in Net Sales Mix % Net Sales Mix % Change millions) Residential roofing $ 1,023.5 50.1 % $ 850.0 46.8 % $ 173.5 20.4 % products Non-residential roofing 757.9 37.1 % 718.1 39.5 % 39.8 5.5 % products Complementary building 262.2 12.8 % 249.3 13.7 % 12.9 5.2 % products $ 2,043.6 100.0 % $ 1,817.4 100.0 % $ 226.2 12.4 % Consolidated Sales by Product Line for Existing Markets* Fiscal Years Ended September 30, 2012 September 30, 2011 (dollars in Net Sales Mix % Net Sales Mix % Change millions) Residential roofing $ 923.5 48.5 % $ 826.2 46.1 % $ 97.3 11.8 % products Non-residential roofing 734.0 38.5 % 717.4 40.0 % 16.6 2.3 % products Complementary building 247.9 13.0 % 248.8 13.9 % (0.9 ) -0.4 % products $ 1,905.4 100.0 % $ 1,792.4 100.0 % $ 113.0 6.3 % Existing Market Sales By Business Day** Fiscal Years Ended September 30, 2012 September 30, 2011 (dollars in Net Sales Mix % Net Sales Mix % Change millions) Residential roofing $ 3.679 48.5 % $ 3.253 46.1 % $ 0.427 13.1 % products Non-residential roofing 2.924 38.5 % 2.824 40.0 % 0.100 3.5 % products Complementary building 0.988 13.0 % 0.980 13.9 % 0.008 0.8 % products $ 7.591 100.0 % $ 7.057 100.0 % $ 0.535 7.6 % Note: Some totals above may not foot due to rounding. *Excludes branches acquired during the four quarters prior to the start of fiscal 2012. **There were 251 business days in fiscal year 2012 compared to 254 business days in fiscal year 2011. BEACON ROOFING SUPPLY, INC Results in Existing Markets-Unaudited For the Fourth Quarter Ended: Existing Markets Acquired Markets Consolidated September 30, September 30, September 30, (in 2012 2011 2012 2011 2012 2011 thousands) Net Sales $ 543,094 $ 575,562 $ 55,027 $ - $ 598,121 $ 575,562 Gross 134,986 132,871 $ 14,641 - 149,627 132,871 Profit Gross 24.9% 23.1% 26.6% 25.0% 23.1% Margin Operating 87,023 85,269 14,302 - 101,325 85,269 Expenses Operating Expenses 16.0% 14.8% 26.0% 16.9% 14.8% as a % of Net Sales Operating $ 47,963 $ 47,602 $ 339 $ - $ 48,302 $ 47,602 Income Operating 8.8% 8.3% 0.6% 8.1% 8.3% Margin Beacon Roofing Supply, Inc. Earnings Before Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation ("Adjusted EBITDA") Unaudited (Dollars in thousands) Three Months Ended Fiscal Year Ended September 30, September 30, 2012 2011 2012 2011 Net income $ 27,891 $ 31,257 $ 75,565 $ 59,220 Interest expense and 2,456 3,383 17,173 13,364 other financing costs, net Income taxes 17,955 12,962 50,934 31,158 Depreciation and 6,607 6,265 24,353 25,060 amortization Adjustment of liability for - - 250 - contingent consideration Stock-based 2,222 1,562 7,873 6,073 compensation Adjusted EBITDA $ 57,131 $ 55,429 $ 176,148 $ 134,875 (1) (1) Adjusted EBITDA is defined as net income plus interest expense and other financing costs (net of interest income), income taxes, depreciation and amortization 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. BEACON ROOFING SUPPLY, INC. Adjusted Diluted Net Income per Share ("Adjusted Earnings per Share") Unaudited (Dollars in thousands except per share amounts) Three Months Ended September 30, Fiscal Years Ended September 30, Diluted Diluted Diluted Diluted 2012 EPS 2011 EPS 2012 EPS 2011 EPS Net income $ 27,891 $ 0.58 $ 31,257 $ 0.67 $ 75,565 $ 1.58 $ 59,220 $ 1.27 Company adjustments, net of income taxes: Fair value of certain interest rate derivatives and charge associated (656 ) (0.01 ) - - 2,293 0.05 - - with refinancing Termination 1,775 0.04 - - 1,775 0.04 - - benefits Increase in liability for - - - - 250 0.01 - - purchase consideration Change in tax status of - - (5,060 ) (0.11 ) - - (5,060 ) (0.11 ) foreign entity Adjusted net $ 29,009 $ 0.60 $ 26,197 $ 0.56 $ 79,882 $ 1.67 $ 54,160 $ 1.16 income Note: Some totals above may not foot due to rounding. 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, the Company’s refinancing charge in April 2012, termination benefits, and the increase 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 an acquisition and the announced retirement of our 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 diluted earnings per share calculated in accordance with GAAP. BECN-F Contact: Beacon Roofing Supply, Inc. Dave Grace, 978-535-7668 x14 CFO firstname.lastname@example.org
Beacon Roofing Supply Reports Fourth Quarter and Annual 2012 Results
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