Mid-single digit Q2 daily sales growth prior
to the mid-March COVID-19 outbreak
Enhanced liquidity and implemented cost
actions in response to COVID-19
- Record second quarter net sales of $1.46 billion, including
10.8% daily organic sales growth in non-residential roofing vs.
prior year
- Consolidated gross margins of 23.5% vs. 23.4% in the prior
year
- Net income (loss) of $(122.6) million; reflects impact of
$142.6 million ($106.2 million net of taxes) non-cash Rebranding
charge
- Adjusted Net Income (Loss) of $(12.5) million vs. $(24.9)
million in the prior year
- Record second quarter Adjusted EBITDA of $38.9 million vs.
$27.4 million in the prior year
Beacon (Nasdaq: BECN) (the “Company”) announced results today
for its second quarter and six-month period ended March 31, 2020
(“2020”).
“Consistent with our pre-release, we produced record second
quarter net sales and adjusted EBITDA,” said Julian Francis,
Beacon’s President and Chief Executive Officer. “Q2 again
demonstrates significant positive progress toward our goals,
highlighted by nearly 5% sales growth the first 2 ½ months,
year-to-year gross margin stabilization and positive adjusted
operating leverage. Despite being declared an essential business in
all markets in which we operate, in mid-March the COVID-19 pandemic
forced us to quickly adapt to a changing environment. In response,
we have taken swift and meaningful actions to reduce costs. We have
also taken proactive measures to reduce inventory and capital
expenditures, and we have mitigated any long-term liquidity risks
by strengthening our cash position. April sales declined with
considerable divergence in state-by-state performance, as certain
states have been significantly impacted by state and local
government restrictions. With that said, we are well prepared for a
range of demand scenarios through a strong operating model,
financial flexibility, and appropriate cost actions. Amid this
period of uncertainty, we are finding opportunities to improve
productivity and seeing our industry-leading digital platform and
enhanced levels of customer service increasingly becoming
differentiators for customers. We expect these items to drive
sustainable benefits when the COVID-19 headwinds have passed.”
Second Quarter
Net sales increased 2.1% to $1.46 billion, from $1.43 billion in
2019. The sales increase was influenced by our sales initiatives
around contractor conversions, national account sales, and the
continued positive impact of our industry-leading digital platform,
partially offset by decreased hurricane-related demand compared to
the prior year. Residential roofing product sales decreased 1.3%,
non-residential roofing product sales increased 12.6%, and
complementary product sales decreased 0.4% compared to the prior
year. The second quarter of fiscal years 2020 and 2019 had 64 and
63 business days, respectively.
Net income (loss) was $(122.6) million, compared to $(68.1)
million in 2019. Net income (loss) attributable to common
shareholders was $(128.6) million, compared to $(74.1) million in
2019. EPS was $(1.87), compared to $(1.08) in 2019. Second quarter
results were negatively impacted by the write-off of certain trade
names in connection with the Company’s rebranding efforts that were
announced in January 2020 (the “Rebranding”). This impact was
partially offset by higher sales and gross margins, and lower
interest expense, finance, and other.
Adjusted Net Income (Loss) was $(12.5) million, compared to
$(24.9) million in 2019. Adjusted EBITDA was $38.9 million,
compared to $27.4 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 0.5% to $3.13 billion, from $3.15 billion in
2019. The sales decline was mainly influenced by decreased
hurricane-related demand compared to the prior year, partially
offset by the continued positive impact of our industry-leading
digital platform. Residential roofing product sales decreased 2.3%,
non-residential roofing product sales increased 6.0%, and
complementary product sales decreased 2.8% compared to the prior
year. The first six months of fiscal years 2020 and 2019 had 126
and 125 business days, respectively.
Net income (loss) was $(146.1) million, compared to $(69.0)
million in 2019. Net income (loss) attributable to common
shareholders was $(158.1) million, compared to $(81.0) million in
2019. EPS was $(2.30), compared to $(1.18) in 2019. Six-month
results were negatively impacted by the second quarter write-off of
certain trade names in connection with the Rebranding.
Adjusted Net Income (Loss) was $15.8 million, compared to $21.6
million in 2019. Adjusted EBITDA was $133.1 million, compared to
$149.1 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.
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 Second Quarter 2020 Earnings
Call
When:
Thursday, May 7, 2020
Time:
5:00 p.m. ET
Webcast:
Beacon Investor Relations – Events &
Presentations (live and replay)
Live Call:
(833) 513-0543; Conference ID #4742125
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, the impact of the COVID‑19
pandemic on the construction sector, in general, and the financial
position and operating results of our Company, in particular, which
cannot be predicted and could change rapidly, and 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 March
31,
Six Months Ended March
31,
2020
% of Net Sales
2019
% of Net Sales
2020
% of Net Sales
2019
% of Net Sales
Net sales
$
1,458,486
100.0
%
$
1,429,037
100.0
%
$
3,133,598
100.0
%
$
3,150,713
100.0
%
Cost of products sold
1,116,086
76.5
%
1,094,049
76.6
%
2,380,500
76.0
%
2,380,156
75.5
%
Gross profit
342,400
23.5
%
334,988
23.4
%
753,098
24.0
%
770,557
24.5
%
Operating expense:
Selling, general and administrative
318,510
21.9
%
320,408
22.4
%
645,429
20.6
%
648,101
20.6
%
Depreciation
17,495
1.2
%
17,447
1.2
%
36,567
1.2
%
35,048
1.1
%
Amortization1
187,356
12.8
%
51,763
3.6
%
232,134
7.4
%
103,784
3.3
%
Total operating expense
523,361
35.9
%
389,618
27.2
%
914,130
29.2
%
786,933
25.0
%
Income (loss) from operations
(180,961
)
(12.4
%)
(54,630
)
(3.8
%)
(161,032
)
(5.1
%)
(16,376
)
(0.5
%)
Interest expense, financing costs, and
other2
23,454
1.6
%
40,452
2.8
%
61,747
2.0
%
78,813
2.5
%
Loss on debt extinguishment
-
0.0
%
-
0.0
%
14,678
0.5
%
-
0.0
%
Income (loss) before provision for income
taxes
(204,415
)
(14.0
%)
(95,082
)
(6.6
%)
(237,457
)
(7.6
%)
(95,189
)
(3.0
%)
Provision for (benefit from) income
taxes
(81,775
)
(5.6
%)
(26,996
)
(1.8
%)
(91,407
)
(2.9
%)
(26,210
)
(0.8
%)
Net income (loss)
(122,640
)
(8.4
%)
(68,086
)
(4.8
%)
(146,050
)
(4.7
%)
(68,979
)
(2.2
%)
Dividends on Preferred Stock3
6,000
0.4
%
6,000
0.4
%
12,000
0.3
%
12,000
0.4
%
Net income (loss) attributable to common
shareholders
$
(128,640
)
(8.8
%)
$
(74,086
)
(5.2
%)
$
(158,050
)
(5.0
%)
$
(80,979
)
(2.6
%)
Weighted-average common stock
outstanding:
Basic
68,820,155
68,451,920
68,743,633
68,348,850
Diluted4
68,820,155
68,451,920
68,743,633
68,348,850
Net income (loss) per share5:
Basic
$
(1.87
)
$
(1.08
)
$
(2.30
)
$
(1.18
)
Diluted
$
(1.87
)
$
(1.08
)
$
(2.30
)
$
(1.18
)
____________________________________
1
Three and six months ended March 31, 2020
and 2019 amounts include non-cash accelerated intangible asset
amortization of $142.6 million in connection with the
Rebranding.
2
Three and six months ended March 31, 2020
amounts include a $5.6 million settlement received in connection
with a class action lawsuit and a $5.3 million refund to be
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 months ended March 31, 2020 and 2019
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. Six months ended March 31, 2020 and 2019 amounts are
composed of $5.0 million in undeclared cumulative Preferred Stock
dividends, as well as an additional $7.0 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 March
31,
Six Months Ended March
31,
2020
2019
2020
2019
Net income (loss)
$
(122,640
)
$
(68,086
)
$
(146,050
)
$
(68,979
)
Dividends on Preferred Stock
6,000
6,000
12,000
12,000
Net income (loss) attributable to common
shareholders
$
(128,640
)
$
(74,086
)
$
(158,050
)
$
(80,979
)
Undistributed income allocated to
participating securities
-
-
-
-
Net income (loss) attributable to common
shareholders - basic and diluted
$
(128,640
)
$
(74,086
)
$
(158,050
)
$
(80,979
)
Weighted-average common shares outstanding
- basic
68,820,155
68,451,920
68,743,633
68,348,850
Effect of common share equivalents
-
-
-
-
Weighted-average common shares outstanding
- diluted
68,820,155
68,451,920
68,743,633
68,348,850
Net income (loss) per share - basic
$
(1.87
)
$
(1.08
)
$
(2.30
)
$
(1.18
)
Net income (loss) per share - diluted
$
(1.87
)
$
(1.08
)
$
(2.30
)
$
(1.18
)
BEACON ROOFING SUPPLY,
INC.
Consolidated Balance
Sheets
(In thousands)
March 31,
September 30,
March 31,
2020
2019
2019
Assets
Current assets:
Cash and cash equivalents
$
781,172
$
72,287
$
645
Accounts receivable, net
907,539
1,108,134
869,760
Inventories, net
1,037,905
1,018,183
1,031,183
Prepaid expenses and other current
assets
305,367
315,643
332,100
Total current assets
3,031,983
2,514,247
2,233,688
Property and equipment, net
247,372
260,376
271,022
Goodwill
2,488,635
2,490,590
2,490,326
Intangibles, net
889,983
1,125,540
1,229,949
Operating lease assets
452,006
-
-
Other assets, net
10
2,059
1,243
Total assets
$
7,109,989
$
6,392,812
$
6,226,228
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
643,086
$
822,931
$
510,434
Accrued expenses
362,817
599,155
453,889
Current operating lease liabilities
98,477
-
-
Current portions of long-term
debt/obligations
13,412
18,689
19,988
Total current liabilities
1,117,792
1,440,775
984,311
Borrowings under revolving lines of
credit, net
1,001,609
80,961
416,614
Long-term debt, net
2,494,821
2,494,623
2,494,673
Deferred income taxes, net
50,365
103,913
110,064
Non-current operating lease
liabilities
349,365
-
-
Long-term obligations under equipment
financing, net
963
4,609
8,527
Other long-term liabilities
1,671
6,383
5,702
Total liabilities
5,016,586
4,131,264
4,019,891
Convertible Preferred Stock1
399,195
399,195
399,195
Stockholders' equity:
Common stock
688
685
684
Undesignated preferred stock
-
-
-
Additional paid-in capital
1,091,469
1,083,042
1,073,243
Retained earnings
641,172
799,222
752,855
Accumulated other comprehensive income
(loss)
(39,121
)
(20,596
)
(19,640
)
Total stockholders' equity
1,694,208
1,862,353
1,807,142
Total liabilities and stockholders'
equity
$
7,109,989
$
6,392,812
$
6,226,228
____________________________________
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)
Six Months Ended March
31,
2020
2019
Operating Activities
Net income (loss)
$
(146,050
)
$
(68,979
)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
268,701
138,832
Stock-based compensation
9,817
8,264
Certain interest expense and other
financing costs
5,721
6,051
Beneficial lease amortization
-
1,145
Loss on debt extinguishment
14,678
-
Gain on sale of fixed assets
(884
)
(1,172
)
Deferred income taxes
(49,320
)
3,086
338(h)(10) election refund1
(5,282
)
-
Changes in operating assets and
liabilities:
Accounts receivable
199,063
219,740
Inventories
(21,819
)
(96,052
)
Prepaid expenses and other current
assets
6,527
(85,320
)
Accounts payable and accrued expenses
(434,926
)
(368,154
)
Other assets and liabilities
2,950
415
Net cash provided by (used in) operating
activities
(150,824
)
(242,144
)
Investing Activities
Purchases of property and equipment
(25,064
)
(26,320
)
Acquisition of businesses, net
-
(163,973
)
Proceeds from the sale of assets
1,122
1,428
Net cash provided by (used in) investing
activities
(23,942
)
(188,865
)
Financing Activities
Borrowings under revolving lines of
credit
2,029,316
1,880,684
Payments under revolving lines of
credit
(1,109,903
)
(1,557,615
)
Payments under term loan
(4,850
)
(4,850
)
Borrowings under senior notes
300,000
-
Payment under senior notes
(309,564
)
-
Payment of debt issuance costs
(3,718
)
-
Payments under equipment financing
facilities and finance leases
(4,427
)
(2,642
)
Payment of dividends on Preferred
Stock
(12,000
)
(12,000
)
Proceeds from issuance of common stock
related to equity awards
1,447
1,559
Payment of taxes related to net share
settlement of equity awards
(2,834
)
(3,617
)
Net cash provided by (used in) financing
activities
883,467
301,519
Effect of exchange rate changes on cash
and cash equivalents
184
208
Net increase (decrease) in cash and cash
equivalents
708,885
(129,282
)
Cash and cash equivalents, beginning of
period
72,287
129,927
Cash and cash equivalents, end of
period
$
781,172
$
645
__________________________________________________
1
Related to a gain recognized for a partial
refund of the $164.0 million payment made in connection with the
Allied Acquisition; payment was received subsequent to March 31,
2020.
BEACON ROOFING SUPPLY,
INC.
Consolidated Sales by Product
Line
(In thousands)
Sales by Product Line
Three Months Ended March
31,
2020
2019
Change
Net Sales
Mix %
Net Sales
Mix %
$
%
Residential roofing products
$
591,213
40.5
%
$
598,917
42.0
%
$
(7,704
)
(1.3
%)
Non-residential roofing products
353,001
24.2
%
313,626
21.9
%
39,375
12.6
%
Complementary building products
514,272
35.3
%
516,494
36.1
%
(2,222
)
(0.4
%)
$
1,458,486
100.0
%
$
1,429,037
100.0
%
$
29,449
2.1
%
Sales by Business Day1
Three Months Ended March
31,
2020
2019
Change
Net Sales
Mix %
Net Sales
Mix %
$
%
Residential roofing products
$
9,238
40.5
%
$
9,507
42.0
%
$
(269
)
(2.8
%)
Non-residential roofing products
5,516
24.2
%
4,978
21.9
%
538
10.8
%
Complementary building products
8,036
35.3
%
8,198
36.1
%
(162
)
(2.0
%)
$
22,790
100.0
%
$
22,683
100.0
%
$
107
0.5
%
__________________________________________________
1
The second quarter of fiscal years 2020
and 2019 had 64 and 63 business days, respectively.
BEACON ROOFING SUPPLY,
INC.
Consolidated Sales by Product
Line
(In thousands)
Sales by Product Line
Six Months Ended March
31,
2020
2019
Change
Net Sales
Mix %
Net Sales
Mix %
$
%
Residential roofing products
$
1,293,473
41.3
%
$
1,323,780
42.0
%
$
(30,307
)
(2.3
%)
Non-residential roofing products
773,896
24.7
%
729,939
23.2
%
43,957
6.0
%
Complementary building products
1,066,229
34.0
%
1,096,994
34.8
%
(30,765
)
(2.8
%)
$
3,133,598
100.0
%
$
3,150,713
100.0
%
$
(17,115
)
(0.5
%)
Sales by Business Day1
Six Months Ended March
31,
2020
2019
Change
Net Sales
Mix %
Net Sales
Mix %
$
%
Residential roofing products
$
10,266
41.3
%
$
10,590
42.0
%
$
(324
)
(3.1
%)
Non-residential roofing products
6,142
24.7
%
5,840
23.2
%
302
5.2
%
Complementary building products
8,462
34.0
%
8,776
34.8
%
(314
)
(3.6
%)
$
24,870
100.0
%
$
25,206
100.0
%
$
(336
)
(1.3
%)
__________________________________________________
1
The first six months of fiscal years 2020
and 2019 had 126 and 125 business days, respectively.
BEACON ROOFING SUPPLY,
INC.
Adjusted Net Income
(Loss)1
(In thousands)
Three Months Ended March
31,
Six Months Ended March
31,
2020
2019
2020
2019
Net income (loss)
$
(122,640
)
$
(68,086
)
$
(146,050
)
$
(68,979
)
Adjustments:
Acquisition costs2
43,875
61,479
94,509
125,440
Business restructuring costs3
144,461
-
164,991
-
COVID-19 impact4
(33,322
)
-
(33,322
)
-
Effects of tax reform
-
(462
)
-
(462
)
Total adjustments
155,014
61,017
226,178
124,978
Tax impact of total adjustments5
(44,854
)
(17,815
)
(64,282
)
(34,383
)
Total adjustments, net of tax
110,160
43,202
161,896
90,595
Adjusted Net Income (Loss)
$
(12,480
)
$
(24,884
)
$
15,846
$
21,616
_________________________
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 March
31,
Six Months Ended March
31,
2020
2019
2020
2019
Amortization of intangible assets
$
44,707
$
51,764
$
89,485
$
103,784
Costs classified as selling, general, and
administrativea
2,447
6,687
6,299
15,605
Non-operating (income) expensesb
(3,279
)
3,028
(1,275
)
6,051
Total acquisition costs
43,875
61,479
94,509
125,440
___________________________
a.
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.
b.
The following table presents a breakout of the components of
acquisition costs for each of the periods indicated:
3
The following table presents a breakout of the components of
business restructuring costs for each of the periods indicated:
Three Months Ended March
31,
Six Months Ended March
31,
2020
2019
2020
2019
Amortization in connection with the
Rebranding
$
142,649
$
-
$
142,649
$
-
Costs classified as selling, general, and
administrativea
816
-
821
-
Non-operating (income) expensesb
996
-
21,521
-
Total business restructuring costs
144,461
-
164,991
-
___________________________
a.
Mainly composed of costs stemming from headcount rationalization
efforts and certain Rebranding costs.
b.
Amounts include accrued estimated
costs related to employee benefit plan withdrawals and amortization
of debt issuance costs. For the six months ended March 31, 2020,
amount also includes a loss on debt extinguishment of $14.7 million
in connection with the October 2019 debt refinancing.
4
Mainly composed of a $33.3 million income tax benefit resulting
from our application of the CARES Act (see Note 14 in the Notes to
Condensed Consolidated Financial Statements), partially offset by
severance and other costs directly related to the Company’s
response to the COVID-19 pandemic.
5
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
March 31, 2020 and 2019 were calculated using a blended effective
tax rate of 28.9% and 29.2%, respectively. The tax impact of
adjustments for the six months ended March 31, 2020 and 2019 were
calculated using an effective tax rate of 28.4% and 27.5%,
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 March
31,
Six Months Ended March
31,
2020
2019
2020
2019
Net income (loss)
$
(122,640
)
$
(68,086
)
$
(146,050
)
$
(68,979
)
Interest expense, net
35,625
41,815
70,421
81,631
Income taxes2
(81,775
)
(26,996
)
(91,407
)
(26,210
)
Depreciation and amortization3
204,851
69,210
268,701
138,832
Stock-based compensation
4,661
4,807
9,817
8,264
Acquisition costs4
(2,835
)
6,687
1,017
15,605
Business restructuring costs5
943
-
20,627
-
COVID-19 impact6
23
-
23
-
Adjusted EBITDA
$
38,853
$
27,437
$
133,149
$
149,143
Adjusted EBITDA as a % of net sales
2.7
%
1.9
%
4.2
%
4.7
%
_________________________________
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. EBITDA is a
measure commonly used in the distribution industry, and we present
Adjusted EBITDA to enhance your understanding of our operating
performance.
2
Three and six months ended March 31, 2020
amounts include tax benefits from deferred tax adjustments of $36.5
million related to the Rebranding and $33.3 million related to the
impact of the recently announced CARES Act related to the COVID-19
pandemic that allows the Company to carry back net operating losses
for five years and tax effects current year net losses at a 35%
rate.
3
Three and six months ended March 31, 2020
amounts include 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 (excluding the impact
of tax). For the three and six months ended March 31, 2020, amounts
are offset by a $5.3 million refund to be 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. The other
items the Company classifies as acquisition costs are embedded
within the other balances reported in the table.
5
Six months ended March 31, 2020 amount is
mainly composed of a loss on debt extinguishment of $14.7 million
in connection with debt refinancing, as well as accrued estimated
costs related to employee benefit plan withdrawals, costs stemming
from headcount rationalization efforts, and certain Rebranding
costs.
6
Mainly composed of severance and other
costs directly related to the Company’s response to the COVID-19
pandemic.
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 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/20200507005957/en/
Joseph Nowicki, Executive VP & CFO Joseph.Nowicki@becn.com
571-323-3939
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