Beacon Roofing Supply, Inc. (the "Company") (NASDAQ:BECN) announced results today for its second quarter ended March 31, 2016 and first half ended March 31, 2016 of the fiscal year ending September 30, 2016 ("fiscal 2016").

Paul Isabella, the Company’s President and Chief Executive Officer, stated: “I am pleased to announce our outstanding second quarter and first half 2016 results that have Beacon well positioned to achieve another record breaking year. We had record second quarter sales of $823.5 million, nearly doubling the prior year at 99.3% growth. Growth came from our acquisitions, led by RSG, and organically through same-store sales and maturing greenfield operations. Gross margin grew in the quarter by 40 basis points over the prior year, mainly driven from a strong residential mix increase. We also saw very good cost leverage during the quarter. Our balance sheet is strong, and we have been able to pay down approximately $50 million of revolving debt while funding approximately $100 million in acquisitions. Inventory has been managed effectively, and inventory turns increased to 4.1 compared to 2.9 last year. Our strong cash flow generation and solid EBITDA has helped to reduce our net debt leverage ratio to 3.6 times. Adjusted earnings per share of $0.03 were positive in our historically toughest quarter for the first time since 2012 and were $0.23 better than last year. We are tracking to plan on the RSG synergy attainment, with integration progressing as expected. The acquisition pipeline is more robust than ever, and we already have made three great acquisitions to start the third quarter. I am enthusiastic about the second half of the year, and we will continue to push hard to achieve strong results for our shareholders.”

Second Quarter

Total sales increased 99.3% to a second quarter record of $823.5 million in 2016, from $413.2 million in 2015. Residential roofing product sales increased 113.1%, non-residential roofing product sales increased 95.3%, and complementary product sales increased 67.2% over the prior year. Existing market sales, excluding acquisitions, increased 27.7% for the quarter. The second quarter of 2016 and 2015 had 64 and 63 business days, respectively.

The net loss for the second quarter was ($5.7) million, compared to ($9.8) million in 2015. The second quarter net loss per share was ($0.10), compared to ($0.20) in 2015. Adjusted net income, after removing the impact of non-recurring RSG Acquisition-related costs, was $1.7 million in the second quarter 2016, with adjusted diluted net income per share of $0.03 (see included financial tables for a reconciliation of adjusted net income and adjusted earnings per share). The net income for the quarter was favorably impacted by warmer than normal weather, allowing for higher volumes and gross margins which improved by 40 basis points over the prior year. This was offset by increased operating expenses driven by the incremental costs associated with the RSG acquisition made this fiscal year.

First Half

Total sales increased 78.4% to a first half record of $1.8 billion in 2016, from $1.0 billion in 2015. Residential roofing product sales increased 92.1%, non-residential roofing product sales increased 73.1%, and complementary product sales increased 49.9% over the prior year. Existing market sales, excluding acquisitions, increased 18.3% for the first half. The first half of 2016 and 2015 had 126 and 125 business days, respectively.

Net income for the first half was $1.4 million, compared to $3.1 million in 2015. The first half net income per share was $0.02, compared to $0.06 in 2015. Adjusted net income, after removing the impact of non-recurring RSG Acquisition-related costs, was $26.4 million in the second quarter 2016, with adjusted diluted net income per share of $0.44 (see included financial tables for a reconciliation of adjusted net income and adjusted earnings per share). The net income for the first half was favorably impacted by higher volume and gross margins which improved by 60 basis points over the prior year. This was offset by increased operating expenses driven by the incremental costs associated with the RSG acquisition made this fiscal year.

The Company will host a webcast and conference call today at 5:00 p.m. (EST) to discuss these results. The live webcast of the call, along with a webcast replay after the call, can be accessed at http://ir.beaconroofingsupply.com/events.cfm (the “Events & Presentations” page of the “Investor Relations” section of the Company’s web site). There will be a slide presentation of the results available on that page of the website as well. For those unable to connect to the Internet or who may wish to ask questions, the conference call dial-in number is 720-634-9063. To assure timely access, call participants should call in before 5:00 p.m.

About Beacon Roofing Supply

Founded in 1928, Beacon Roofing Supply, Inc. (NASDAQ: BECN) is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating 369 branches throughout 45 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.

                                                 
 
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Operations
(unaudited; in thousands, except share and per share amounts)
 

Three Months Ended
March 31,

 

Six Months Ended
March 31,

2016*

 

% of
Net Sales

   2015  

% of
Net Sales

2016*

% of
Net Sales

   2015  

% of
Net Sales

Net sales $ 823,537 100.0 % $ 413,184 100.0 % $ 1,800,017 100.0 % $ 1,009,226 100.0 %
Cost of products sold   627,773   76.2 %   316,411   76.6 %   1,371,065 76.2 %   774,888   76.8 %
Gross profit 195,764 23.8 % 96,773 23.4 % 428,952 23.8 % 234,338 23.2 %
Operating expenses   191,881   23.3 %   110,979   26.9 %   398,225 22.1 %   224,724   22.3 %
Income from operations 3,883 0.5 % (14,206 ) -3.4 % 30,727 1.7 % 9,614 1.0 %
Interest expense, financing costs and other   13,026   1.6 %   2,522   0.6 %   29,282 1.6 %   5,177   0.5 %
Income (loss) before provision for income taxes (9,143 ) -1.1 % (16,728 ) -4.0 % 1,445 0.1 % 4,437 0.4 %
Provision (benefit) for income taxes   (3,424 ) -0.4 %   (6,942 ) -1.7 %   46 0.0 %   1,316   0.1 %
Net income (loss) $ (5,719 ) -0.7 % $ (9,786 ) -2.4 % $ 1,399 0.1 % $ 3,121   0.3 %
 
Net income (loss) per share:
Basic $ (0.10 ) $ (0.20 ) $ 0.02 $ 0.06
Diluted $ (0.10 ) $ (0.20 ) $ 0.02 $ 0.06
 
Weighted average shares used in computing net income (loss) per share:
Basic 59,295,990 49,513,141 59,133,569 49,470,528
Diluted 59,295,990 49,513,141 60,077,852 50,029,935
 
 
 

* The second quarter 2016 Consolidated Statements of Operations includes $5.5 million of non-recurring charges, $5.7 million of additional amortization for acquired intangibles, and $1.2 million of interest expense, financing costs and other for the recognition of certain costs related to the RSG acquisition. For the six months ended March 31, 2016 Consolidated Statements of Operations includes $25.5 million of non-recurring charges, $11.4 million of additional amortization for acquired intangibles, and $5.0 million of interest expense, financing costs and other for the recognition of certain costs related to the RSG acquisition Management believes the Adjusted Net Income for second quarter 2016 and 6 months ended March 31, 2016 provides a meaningful comparison to prior periods operating results as it adjusts for the impact of the RSG Acquisition.

                     
 
BEACON ROOFING SUPPLY, INC
Consolidated Balance Sheets
(in thousands)
 

March 31,
2016

September 30,
2015

March 31,
2015

ASSETS (unaudited) (audited) (unaudited)
Current assets
Cash and cash equivalents $ 14,841 $ 45,661 $ 22,956
Accounts receivable, net 490,850 399,732 248,154
Inventories 513,750 320,999 361,317
Prepaid expenses and other current assets   164,624     97,928     73,490  

Total current assets

1,184,065 864,320 705,917
 
Property and equipment, net 147,995 90,405 85,054
Goodwill 1,160,775 496,415 488,324
Intangible assets, net 472,582 87,055 91,650
Other assets, net   1,430     1,233     3,012  
TOTAL ASSETS $ 2,966,847   $ 1,539,428   $ 1,373,957  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 417,994 $ 244,891 $ 202,713
Accrued expenses 152,691 124,794 80,546
Borrowings under revolver lines of credit - 11,240 3,948
Current portion of long-term obligations   12,159     16,320     16,612  
Total current liabilities 582,844 397,245 303,819
 
Borrowings under revolving lines of credit 295,690 - -
Long-term debt, net of current 722,542 170,200 178,241
Deferred income taxes 102,878 66,500 48,637
Long-term obligations under equipment financing and other,
net of current portion   42,907     22,367     24,779  
Total liabilities   1,746,861     656,312     555,476  
 
Commitments and contingencies
 
Stockholders' equity:
Common stock 595 497 495
Undesignated preferred stock - - -
Additional paid-in capital 678,749 345,934 335,972
Retained earnings 558,804 557,405 498,249
Accumulated other comprehensive loss   (18,162 )   (20,720 )   (16,235 )
Total stockholders' equity   1,219,986     883,116     818,481  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,966,847   $ 1,539,428   $ 1,373,957  
 
             
 
BEACON ROOFING SUPPLY, INC
Consolidated Statements of Cash Flows
(unaudited; in thousands)
 

 

Six Months Ended
March 31,

2016 2015
Operating activities:
Net income $ 1,399 $ 3,121

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 47,644 16,430
Stock-based compensation 10,696 4,744
Certain interest expense and other financing costs 4,053 543
Gain on sale of fixed assets (411 ) (273 )
Deferred income taxes 1,741 287
Adjustment of liability for contingent consideration and other (280 ) 181

Changes in assets and liabilities, net of the effects of businesses acquired:

Accounts receivable 95,150 118,564
Inventories (2,519 ) (50,305 )
Prepaid expenses and other assets (15,815 ) (5,007 )
Accounts payable and accrued expenses   (61,006 )   (25,800 )
Net cash provided by (used in) operating activities   80,652     62,485  
 
Investing activities:
Purchases of property and equipment (11,059 ) (5,384 )
Acquisition of businesses (941,156 ) (69,745 )
Proceeds from sales of assets   377     367  
Net cash used in investing activities   (951,838 )   (74,762 )
 
Financing activities:
Borrowings under revolving lines of credit, net of repayments 292,273 (13,632 )
Borrowings under term loan, net of repayments 262,125 (5,625 )
Borrowings under Senior Notes 300,000 -
Borrowings/(Repayments) under equipment financing facilities and other (2,633 ) (2,758 )
Payment of deferred financing costs (27,813 )
Proceeds from exercise of options 15,391 3,171
Excess tax benefit from stock-based compensation   1,630     262  
Net cash used in financing activities   840,973     (18,582 )
 
Effect of exchange rate changes on cash   (607 )   (657 )
Net decrease in cash and cash equivalents (30,820 ) (31,516 )
Cash and cash equivalents, beginning of period   45,661     54,472  
Cash and cash equivalents, end of period $ 14,841   $ 22,956  
 
 
                                       
 
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line

(unaudited; dollars in thousands)

 
Consolidated Sales by Product Line
Three Months Ended March 31,
2016   2015   Change
Net Sales Mix % Net Sales Mix %   $ %  
Residential roofing products $ 436,153 53.0 % $ 204,714 49.5 % $ 231,439 113.1 %
Non-residential roofing products 269,469 32.7 % 138,004 33.4 % 131,465 95.3 %
Complementary building products   117,915 14.3 %   70,467 17.1 %   47,448 67.2 %
$ 823,537 100.0 % $ 413,185 100.0 % $ 410,352 99.3 %
 
 
 
Consolidated Sales by Product Line for Existing Markets*
Three Months Ended March 31,
2016   2015   Change
Net Sales Mix % Net Sales Mix %   $ %  
Residential roofing products $ 253,613 51.4 % $ 192,991 50.0 % $ 60,622 31.4 %
Non-residential roofing products 155,305 31.5 % 123,817 32.0 % 31,488 25.4 %
Complementary building products   84,514 17.1 %   69,529 18.0 %   14,985 21.5 %
$ 493,432 100.0 % $ 386,337 100.0 % $ 107,095 27.7 %
 
 
 
Existing Market Sales By Business Day**
Three Months Ended March 31,
2016   2015   Change
Net Sales Mix % Net Sales Mix %   $ %  
Residential roofing products $ 3,963 51.4 % $ 3,063 50.0 % $ 900 29.4 %
Non-residential roofing products 2,427 31.5 % 1,965 32.0 % 462 23.5 %
Complementary building products   1,321 17.1 %   1,104 18.0 %   217 19.7 %
$ 7,711 100.0 % $ 6,132 100.0 % $ 1,579 25.7 %
 
 

*Excludes branches acquired during the four quarters prior to the start of the second quarter of Fiscal 2016.
**There were 64 and 63 business days in the quarters ended March 31, 2016 and 2015, respectively.

                                       
 
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line

(unaudited; dollars in thousands)

 
Consolidated Sales by Product Line
Six Months Ended March 31,
2016   2015   Change
Net Sales Mix % Net Sales Mix %   $ %  
Residential roofing products $ 930,100 51.7 % $ 484,239 48.0 % $ 445,861 92.1 %
Non-residential roofing products 617,704 34.3 % 356,778 35.4 % 260,926 73.1 %
Complementary building products   252,213 14.0 %   168,209 16.6 %   84,004 49.9 %
$ 1,800,017 100.0 % $ 1,009,226 100.0 % $ 790,791 78.4 %
 
 
 
Consolidated Sales by Product Line for Existing Markets*
Six Months Ended March 31,
2016   2015   Change
Net Sales Mix % Net Sales Mix %   $ %  
Residential roofing products $ 549,691 49.5 % $ 448,002 47.8 % $ 101,689 22.7 %
Non-residential roofing products 372,983 33.7 % 325,106 34.7 % 47,877 14.7 %
Complementary building products   185,704 16.8 %   164,190 17.5 %   21,514 13.0 %
$ 1,108,378 100.0 % $ 937,298 100.0 % $ 171,080 18.3 %
 
 
 
Existing Market Sales By Business Day**
Six Months Ended March 31,
2016   2015   Change
Net Sales Mix % Net Sales Mix %   $ %  
Residential roofing products $ 4,363 49.6 % $ 3,584 47.8 % $ 779 21.7 %
Non-residential roofing products 2,960 33.6 % 2,601 34.7 % 359 13.9 %
Complementary building products   1,474 16.8 %   1,314 17.5 %   160 12.2 %
$ 8,797 100.0 % $ 7,499 100.0 % $ 1,298 17.3 %
 
 

*Excludes branches acquired during the four quarters prior to the start of the second quarter of Fiscal 2016.
**There were 126 and 125 business days for the six months ended March 31, 2016 and 2015, respectively.

                                                       
BEACON ROOFING SUPPLY INC
Adjusted Net Income and Adjusted Net Income Per Share1
(unaudited; in thousands except per share amounts)
 
Three Months Ended

March 31,

Six Months Ended

March 31,

2016   2015   2016 2015
Amount Per Share Amount Per Share Amount Per Share Amount Per Share
Net income $ (5,719 ) $ (0.10 ) $ (9,786 ) $ (0.20 ) $ 1,399 $ 0.02 $ 3,121 $ 0.06
Company adjustments, net of income taxes:
RSG Acquisition costs   7,401     0.12     -     -     24,961   0.42   -   -
 
Adjusted Net Income $ 1,682   $ 0.03   $ (9,786 ) $ (0.20 ) $ 26,360 $ 0.44 $ 3,121 $ 0.06

(1) The Company’s management believes that “Adjusted Net Income” and “Adjusted Net Income Per Share”, which excludes non-recurring costs related to the RSG acquisition, and incremental amortization of acquired intangibles, are useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. While management believes Adjusted Net Income and Adjusted Net Income Per Share are useful measures for investors, these are not measurements presented in accordance with United States generally accepted accounting principles (“GAAP”). You should not consider Adjusted Net Income or Adjusted Net Income Per Share in isolation or as a substitute for net income and net loss per share or diluted earnings per share calculated in accordance with GAAP.

                         
BEACON ROOFING SUPPLY, INC.
Adjusted EBITDA1
(unaudited; in thousands)
 
Three Months Ended

March 31,

Six Months Ended

March 31,

2016 2015 2016 2015
Net Income $ (5,719 ) $ (9,786 ) $ 1,399 $ 3,121
RSG Acquisition costs2 5,452 - 21,154 -
Interest expense, net 13,128 2,522 29,328 5,177
Income taxes (3,424 ) (6,942 ) 46 1,316
Depreciation and amortization 23,966 8,188 47,637 16,430
Stock-based compensation   3,516     2,389     10,696   4,744
Adjusted EBITDA $ 36,918   $ (3,630 ) $ 110,261 $ 30,788

(1) Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation and non-recurring costs related to the RSG acquisition. 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, 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.

(2) RSG Acquisition costs reflect all non-recurring charges related to the acquisition (excluding the impact of tax) that are not embedded in other balances of the table. Additional RSG Acquisition costs are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation in the table above.

BECN-F

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