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
| 2018 | % of
| ||||||||||||
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
| |||||||||
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 | |||||||
___________________________
| |
| 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/
Contacts:
Joseph.Nowicki@becn.com
571-323-3939
