Sequential gross margin improvement
underscores progress on fundamentals
Branding announcement supports long-term
strategic vision for organic growth
- Net sales of $1.68 billion
- Consolidated gross margins of 24.5%; up 20 bps
sequentially
- Net income (loss) of $(23.4) million; Adjusted Net Income
(Loss) of $28.3 million
- Adjusted EBITDA of $94.3 million
Beacon (Nasdaq: BECN) (the “Company”) announced results today
for its first quarter ended December 31, 2019 (“2020”).
“Our first quarter delivered important progress toward our
goals,” said Julian Francis, Beacon’s President and Chief Executive
Officer. “Results were broadly in line with our expectations,
highlighted by sequential gross margin improvement and another
quarter of growth in our non-residential roofing product line. As
expected, our sales declined modestly, which we believe was in line
with the market. On the balance sheet, we decreased total debt by
more than $300 million over the comparative periods. As part of our
strategic review, we recently announced the unification of our 40
exterior product names into a single brand: Beacon Building
Products. Our new brand enables us to leverage our nationwide scale
to better serve customers, enhances our investment in e-commerce,
and furthers our goal of developing innovative service
propositions. Overall, we remain well-positioned to deliver annual
sales and Adjusted EBITDA growth for fiscal 2020.”
First Quarter
Net sales decreased 2.7% to $1.68 billion, from $1.72 billion in
2019. The sales decline was mainly influenced by decreased
hurricane-related demand compared to the prior year. Residential
roofing product sales decreased 4.1%, non-residential roofing
product sales increased 0.2%, and complementary product sales
decreased 3.1% compared to the prior year. The first quarter of
fiscal years 2020 and 2019 each had 62 business days.
Net income (loss) was $(23.4) million, compared to $(0.9)
million in 2019. Net income (loss) attributable to common
shareholders was $(29.4) million, compared to $(6.9) million in
2019. EPS was $(0.43), compared to $(0.10) in 2019. Adjusted Net
Income (Loss) was $28.3 million, compared to $46.5 million in 2019.
Adjusted EBITDA was $94.3 million, compared to $121.7 million in
2019.
First quarter results were impacted by lower gross margins and
debt refinancing expenses that were incurred to reduce future cash
outflows. The impact of these items was partially offset by slight
increases in non-residential roofing product sales and lower
operating expenses.
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.
The Company will host a webcast and conference call today at
5:00 p.m. ET to discuss these results. The webcast link and call-in
details are as follows:
What:
Beacon First Quarter 2020 Earnings
Conference Call
When
Monday, February 3, 2020
Time:
5:00 p.m. ET
Webcast:
Beacon Investor Relations – Events &
Presentations (live and replay)
Live Call:
(877) 799-4970, Conf. ID #1478967
To assure timely access, conference call participants should
dial in prior to the 5:00 p.m. ET start time.
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.
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 December
31,
2019
% of Net Sales
2018
% of Net Sales
Net sales
$
1,675,112
100.0
%
$
1,721,676
100.0
%
Cost of products sold
1,264,414
75.5
%
1,286,107
74.7
%
Gross profit
410,698
24.5
%
435,569
25.3
%
Operating expense:
Selling, general and administrative1
326,919
19.5
%
327,693
19.1
%
Depreciation
19,072
1.1
%
17,601
1.0
%
Amortization
44,778
2.7
%
52,021
3.1
%
Total operating expense
390,769
23.3
%
397,315
23.2
%
Income (loss) from operations
19,929
1.2
%
38,254
2.1
%
Interest expense, financing costs, and
other2
38,293
2.3
%
38,361
2.2
%
Loss on debt extinguishment
14,678
0.9
%
-
0.0
%
Income (loss) before provision for income
taxes
(33,042
)
(2.0
%)
(107
)
(0.1
%)
Provision for (benefit from) income
taxes
(9,632
)
(0.6
%)
786
0.0
%
Net income (loss)
(23,410
)
(1.4
%)
(893
)
(0.1
%)
Dividends on Preferred Stock3
6,000
0.4
%
6,000
0.3
%
Net income (loss) attributable to common
shareholders
$
(29,410
)
(1.8
%)
$
(6,893
)
(0.4
%)
Weighted-average common stock
outstanding:
Basic
68,667,943
68,248,020
Diluted4
68,667,943
68,248,020
Net income (loss) per share5:
Basic
$
(0.43
)
$
(0.10
)
Diluted
$
(0.43
)
$
(0.10
)
____________________________________
1
Includes acquisition and business
restructuring costs of $3.9 million and $8.9 million for the three
months ended December 31, 2019 and 2018, respectively.
2
Includes acquisition and business
restructuring costs of $7.8 million and $3.0 million for the three
months ended December 31, 2019 and 2018, respectively.
3
Three months ended December 31,
2019 and 2018 amounts are composed of $5.0 million in undeclared
cumulative Preferred Stock dividends, as well as an additional $1.0
million of Preferred Stock dividends that had been declared and
paid as of period end.
4
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.
5
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 December
31,
2019
2018
Net income (loss)
$
(23,410
)
$
(893
)
Dividends on Preferred Stock
6,000
6,000
Net income (loss) attributable to common
shareholders
$
(29,410
)
$
(6,893
)
Undistributed income allocated to
participating securities
-
-
Net income (loss) attributable to common
shareholders - basic and diluted
$
(29,410
)
$
(6,893
)
Weighted-average common shares outstanding
- basic
68,667,943
68,248,020
Effect of common share equivalents
-
-
Weighted-average common shares outstanding
- diluted
68,667,943
68,248,020
Net income (loss) per share - basic
$
(0.43
)
$
(0.10
)
Net income (loss) per share - diluted
$
(0.43
)
$
(0.10
)
BEACON ROOFING SUPPLY,
INC.
Consolidated Balance
Sheets
(In thousands)
December 31,
September 30,
December 31,
2019
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
43,749
$
72,287
$
18,423
Accounts receivable, net
861,087
1,108,134
881,749
Inventories, net
1,037,827
1,018,183
1,025,310
Prepaid expenses and other current
assets
311,112
315,643
375,598
Total current assets
2,253,775
2,514,247
2,301,080
Property and equipment, net
253,019
260,376
273,742
Goodwill
2,491,166
2,490,590
2,489,730
Intangibles, net
1,077,478
1,125,540
1,282,242
Operating lease assets
463,081
-
-
Other assets, net
10
2,059
1,243
Total assets
$
6,538,529
$
6,392,812
$
6,348,037
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
594,613
$
822,931
$
551,940
Accrued expenses
411,169
599,155
375,672
Current operating lease liabilities
98,994
-
-
Current portions of long-term
debt/obligations
13,877
18,689
20,315
Total current liabilities
1,118,653
1,440,775
947,927
Borrowings under revolving lines of
credit, net
215,642
80,961
503,216
Long-term debt, net
2,495,135
2,494,623
2,497,123
Deferred income taxes, net
107,085
103,913
110,179
Non-current operating lease
liabilities
358,504
-
-
Long-term obligations under equipment
financing, net
1,607
4,609
10,689
Other long-term liabilities
2,018
6,383
5,532
Total liabilities
4,298,644
4,131,264
4,074,666
Convertible Preferred Stock1
399,195
399,195
399,195
Stockholders' equity:
Common stock
687
685
684
Undesignated preferred stock
-
-
-
Additional paid-in capital
1,086,970
1,083,042
1,067,711
Retained earnings
769,812
799,222
826,941
Accumulated other comprehensive income
(loss)
(16,779
)
(20,596
)
(21,160
)
Total stockholders' equity
1,840,690
1,862,353
1,874,176
Total liabilities and stockholders'
equity
$
6,538,529
$
6,392,812
$
6,348,037
____________________________________
1
In connection with the
acquisition of Allied Building Products Corp. on January 2, 2018,
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)
Three Months Ended December
31,
2019
2018
Operating Activities
Net income (loss)
$
(23,410
)
$
(893
)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
63,850
69,622
Stock-based compensation
5,156
3,457
Certain interest expense and other
financing costs
2,849
3,024
Beneficial lease amortization
-
572
Loss on debt extinguishment
14,678
-
Gain on sale of fixed assets
(330
)
(265
)
Deferred income taxes
2,357
3,201
Changes in operating assets and
liabilities, net of the effects of businesses acquired in the
period:
Accounts receivable
247,685
207,119
Inventories
(19,147
)
(90,712
)
Prepaid expenses and other current
assets
(3,362
)
(131,638
)
Accounts payable and accrued expenses
(417,507
)
(400,616
)
Other assets and liabilities
1,874
246
Net cash provided by (used in) operating
activities
(125,307
)
(336,883
)
Investing Activities
Purchases of property and equipment
(12,194
)
(11,688
)
Acquisition of businesses, net
-
(163,973
)
Proceeds from the sale of assets
396
401
Net cash provided by (used in) investing
activities
(11,798
)
(175,260
)
Financing Activities
Borrowings under revolving lines of
credit
750,711
1,298,654
Payments under revolving lines of
credit
(616,767
)
(888,225
)
Payments under term loan
(2,425
)
-
Borrowings under senior notes
300,000
-
Payment under senior notes
(309,564
)
-
Payment of debt issuance costs
(3,582
)
-
Payments under equipment financing
facilities and finance leases
(2,282
)
(1,465
)
Payment of dividends on Preferred
Stock
(6,000
)
(6,000
)
Proceeds from issuance of common stock
related to equity awards
875
834
Payment of taxes related to net share
settlement of equity awards
(2,101
)
(3,617
)
Net cash provided by (used in) financing
activities
108,865
400,181
Effect of exchange rate changes on cash
and cash equivalents
(298
)
458
Net increase (decrease) in cash and cash
equivalents
(28,538
)
(111,504
)
Cash and cash equivalents, beginning of
period
72,287
129,927
Cash and cash equivalents, end of
period
$
43,749
$
18,423
BEACON ROOFING SUPPLY,
INC.
Consolidated Sales by Product
Line
(In thousands)
Sales by Product Line
Three Months Ended December
31,
2019
2018
Change
Net Sales
Mix %
Net Sales
Mix %
$
%
Residential roofing products
$
702,236
41.9
%
$
732,190
42.5
%
$
(29,954
)
(4.1
%)
Non-residential roofing products
420,853
25.1
%
419,909
24.4
%
944
0.2
%
Complementary building products
552,023
33.0
%
569,577
33.1
%
(17,554
)
(3.1
%)
$
1,675,112
100.0
%
$
1,721,676
100.0
%
$
(46,564
)
(2.7
%)
Sales by Business Day1
Three Months Ended December
31,
2019
2018
Change
Net Sales
Mix %
Net Sales
Mix %
$
%
Residential roofing products
$
11,326
41.9
%
$
11,810
42.5
%
$
(484
)
(4.1
%)
Non-residential roofing products
6,788
25.1
%
6,773
24.4
%
15
0.2
%
Complementary building products
8,904
33.0
%
9,187
33.1
%
(283
)
(3.1
%)
$
27,018
100.0
%
$
27,770
100.0
%
$
(752
)
(2.7
%)
__________________________________________________
1
There were 62 business days in
each of the quarters ended December 31, 2019 and 2018.
BEACON ROOFING SUPPLY,
INC.
Adjusted Net Income
(Loss)1
(In thousands)
Three Months Ended December
31,
2019
2018
Net income (loss)
$
(23,410
)
$
(893
)
Adjustments:
Acquisition costs2
51,479
63,962
Business restructuring costs3
19,683
-
Total adjustments
71,162
63,962
Tax impact of total adjustments4
(19,424
)
(16,569
)
Total adjustments, net of tax
51,738
47,393
Adjusted Net Income (Loss)
$
28,328
$
46,500
_________________________
1
Adjusted Net Income (Loss) is defined as net income that
excludes acquisition costs, business restructuring costs, and the
effects of tax reform
2
The following table presents a breakout of the components of
acquisition costs for each of the periods indicated:
Three Months Ended December
31,
2019
2018
Amortization of intangible assets
$
44,778
$
52,021
Costs classified as selling, general, and
administrativea
3,852
8,917
Amortization of debt issuance costs
2,849
3,024
Total acquisition costs
51,479
63,962
___________________________
- Selling, general, and administrative costs related to
acquisitions are mainly composed of professional fees, branch
integration expenses, travel expenses, employee severance and
retention costs, and other personnel expenses.
3
Business restructuring costs are mainly composed of a loss on
debt extinguishment of $14.7 million in connection with debt
refinancing. Also included are accrued estimated costs related to
employee benefit plan withdrawals, costs stemming from headcount
rationalization efforts, and re-branding costs.
4
The effective tax rate applied to these adjustments is
calculated by using adjusted pre-tax income while factoring in
discrete tax adjustments for the fiscal year. The tax impact of
adjustments for the quarter ended December 31, 2019 and 2018 were
calculated using an effective tax rate of 27.3% and 25.9%,
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 in
underlying operating performance over comparative periods by
providing financial results that are unaffected by cyclical
variances that can be driven by items such as investment activity
or purchase accounting adjustments.
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 December
31,
2019
2018
Net income (loss)
$
(23,410
)
$
(893
)
Interest expense, net
34,796
39,816
Income taxes
(9,632
)
786
Depreciation and amortization
63,850
69,622
Stock-based compensation
5,156
3,457
Acquisition costs2
3,852
8,917
Business restructuring costs3
19,683
-
Adjusted EBITDA
$
94,295
$
121,705
Adjusted EBITDA as a % of net sales
5.6%
7.1%
_________________________________
1
Adjusted EBITDA is defined as net income
plus interest expense (net of interest income), income taxes,
depreciation and amortization, stock-based compensation,
acquisition costs, and business restructuring costs. EBITDA is a
measure commonly used in the distribution industry, and we present
Adjusted EBITDA to enhance your understanding of our operating
performance.
2
Represents selling, general, and
administrative costs related to acquisitions (excluding the impact
of tax) only. The other items the Company classifies as acquisition
costs are embedded within the other balances reported in the
table.
3
Business restructuring costs are mainly
composed of a loss on debt extinguishment of $14.7 million in
connection with debt refinancing. Also included are accrued
estimated costs related to employee benefit plan withdrawals, costs
stemming from headcount rationalization efforts, and re-branding
costs.
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 in underlying
operating performance over comparative periods by providing
financial results that are unaffected by cyclical variances that
can be driven by items such as investment activity or purchase
accounting adjustments.
While we believe Adjusted EBITDA 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. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200203005757/en/
Joseph Nowicki, Executive VP & CFO Joseph.Nowicki@becn.com
571-323-3939
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