10
interest rates, foreclosure rates, housing inventory levels and occupancy, changes in the tax laws, employment levels, consumer confidence, and the health of the United States economy and mortgage markets. Economic downturns in the regions and markets we serve could result in lower net sales and, since many of our expenses are fixed, lower profitability. Unfavorable changes in demographics, credit markets, consumer confidence, housing affordability, or housing inventory levels and occupancy, or a weakening of the United States economy or of any regional or local economy in which we operate, could adversely affect consumer spending, resulting in decreased demand for our products, and adversely affecting our business. In addition, instability in the economy and financial markets, including as a result of terrorism or civil or political unrest, may result in a decrease in housing starts or business investment, which would adversely affect our business.
11
U.S. and federal and provincial laws in Canada, pose increasingly complex compliance challenges, which may increase compliance costs, and any failure to comply with data privacy laws and regulations could result in significant sanctions, monetary costs or other harm to us.
12
exceptions, and (5) the liquidation, dissolution or filing of a voluntary petition for bankruptcy or receivership. at CD&R, currently serve as directors for the Company. Notwithstanding that all directors are subject to fiduciary duties to us and to applicable law, the interests of the directors designated by the CD&R Stockholder may differ from the interests of our other directors or common stockholders as a whole. With such representation on our board of directors, the CD&R Stockholder has influence over the appointment of management and any action requiring the vote of our board of directors, including significant corporate action such as mergers and sales of substantially all of our assets. The directors controlled by the CD&R Stockholder may also be able to influence decisions affecting our capital structure, including decisions to issue additional capital stock and incur additional debt. Non-Branch Location Branches Facilities U.S. State Alabama 7 Alaska 1 Arizona 5 Arkansas 4 California 35 Colorado 14 Connecticut 5 1 Delaware 3 Florida 27 Georgia 12 Hawaii 3 Idaho 2 Illinois 13 Indiana 7 Iowa 3 Kansas 4 Kentucky 5 Louisiana 8 Maine 4 Maryland 17 1 Massachusetts 12 Michigan 10 Minnesota 5 1 Mississippi 2 Missouri 8 Montana 1 Nebraska 6 Nevada 2 New Hampshire 3 New Jersey 19 1 New Mexico 1 New York 16 North Carolina 18 1 North Dakota 2 Ohio 10 Oklahoma 2 Oregon 7 Pennsylvania 31 Rhode Island 1 South Carolina 9 South Dakota 1 Tennessee 7 Texas 29 1 Utah 5 Vermont 1 Virginia 14 1 Washington 16 1 West Virginia 4 Wisconsin 4 Wyoming 2 Total — United States 427 8 Canadian Province Alberta 3 British Columbia 3 Nova Scotia 1 Ontario 6 Quebec 5 Saskatchewan 1 Total — Canada 19 - Total — All 446 8 claims, and insurance or indemnification rights may be insufficient or unavailable to protect the Company against all loss exposures. Our reputation could be negatively affected by publicity resulting from adverse outcomes in legal proceedings or governmental investigations. Base INDEXED RETURNS Period Years Ended September 30, Company / Index 9/30/2016 2017 2018 2019 2020 2021 Beacon Roofing Supply, Inc. 100 121.82 86.02 79.70 73.85 113.53 Nasdaq Index 100 123.68 154.82 155.63 219.37 285.75 S&P 1500 Trading Companies & Distributors Index 100 113.68 156.63 143.73 177.70 244.04 On February 24, 2022, the Company announced a program to repurchase up to $500.0 million of its common stock. As of December 31, 2022, the Company had approximately $112.1 million of the original authorization remaining to repurchase shares. On February 23, 2023, the Company announced that its Board has authorized and approved an increase of the program by approximately $387.9 million, permitting future share repurchases of $500.0 million. national call center. We also provide the most complete digital efficiently. Year Ended September 30, 2021 2020 2019 Net sales $ 6,642.0 $ 5,916.7 $ 5,996.1 Cost of products sold 4,884.3 4,496.2 4,568.5 Gross profit 1,757.7 1,420.5 1,427.6 Operating expense: Selling, general and administrative 1,138.7 1,065.5 1,092.8 Depreciation 58.9 58.1 60.5 Amortization 103.3 261.9 142.9 Total operating expense 1,300.9 1,385.5 1,296.2 Income (loss) from operations 456.8 35.0 131.4 Interest expense, financing costs, and other 98.1 128.6 153.5 Loss on debt extinguishment 60.2 14.7 — Income (loss) from continuing operations before income taxes 298.5 (108.3 ) (22.1 ) Provision for (benefit from) income taxes 77.3 (27.0 ) (3.2 ) Net income (loss) from continuing operations 221.2 (81.3 ) (18.9 ) Net income (loss) from discontinued operations (266.7 ) 0.4 8.3 Net income (loss) (45.5 ) (80.9 ) (10.6 ) Dividends on Preferred Stock 24.0 24.0 24.0 Net income (loss) attributable to common stockholders $ (69.5 ) $ (104.9 ) $ (34.6 ) Year Ended September 30, 2021 2020 2019 Net sales 100.0 % 100.0 % 100.0 % Cost of products sold 73.5 % 76.0 % 76.2 % Gross profit 26.5 % 24.0 % 23.8 % Operating expense: Selling, general and administrative 17.1 % 18.0 % 18.2 % Depreciation 0.9 % 1.0 % 1.0 % Amortization 1.6 % 4.4 % 2.4 % Total operating expense 19.6 % 23.4 % 21.6 % Income (loss) from operations 6.9 % 0.6 % 2.2 % Interest expense, financing costs, and other 1.5 % 2.2 % 2.6 % Loss on debt extinguishment 0.9 % 0.2 % 0.0 % Income (loss) from continuing operations before income taxes 4.5 % (1.8 %) (0.4 %) Provision for (benefit from) income taxes 1.2 % (0.4 %) (0.1 %) Net income (loss) from continuing operations 3.3 % (1.4 %) (0.3 %) Net income (loss) from discontinued operations (4.0 %) 0.0 % 0.1 % Net income (loss) (0.7 %) (1.4 %) (0.2 %) Dividends on Preferred Stock 0.3 % 0.4 % 0.4 % Net income (loss) attributable to common stockholders (1.0 %) (1.8 %) (0.6 %)further exacerbateadd to the risks to our financial condition described above.13class (subject toclass. Additionally, for so long as the limitation that any one Preferred Stock holder, together with its affiliates, cannot vote any preferred shares in excess of 19.99% ofis outstanding, certain matters will require the aggregate voting power of the common stock outstanding immediately prior to the execution of the Investment Agreement prior to stockholder approval). The prior written consentapproval of the holders of a majority of the Preferred Stock, is requiredincluding: (1) amendments or modifications to among other things, (i) amend or modify our charter, by-laws or the certificate of designations governing the Preferred Stock that would adversely affect the Preferred Stock, (2) authorization, creation, increase in the authorized amount of, or (ii) amendissuance of any class or series of senior or parity equity securities or any security convertible into, shares of senior or parity equity securities (but not junior securities), (3) any increase or decrease in the authorized number of preferred shares or the issuance of additional shares of Preferred Stock, (4) amendments to our debt agreements to,that would, among other things, adversely affect our ability to pay dividends on the Preferred Stock, subject to certain exceptions.September 30, 2021,December 31, 2022, the CD&R Stockholder beneficially ownsowned shares of our common stock and Preferred Stock, which, taken together on an as-converted basis, represent approximately 30.2%33.4% of our total voting power. As a result, the CD&R Stockholder may have the indirect ability to significantly influence our policies and operations. In addition, under the Investment Agreement, the CD&R Stockholder is entitled to appoint up to two directors to our board of directors. Both Nathan K. Sleeper and Philip W. Knisely, partners14 Additionally, for so long as CD&R Stockholder owns Preferred Stock, certain matters will require the approval of the CD&R Stockholder, including: (1) amendments or modifications to our charter, by-laws or the certificate of designations governing the Preferred Stock that would adversely affect the Preferred Stock, (2) authorization, creation, increase in the authorized amount of, or issuance of any class or series of senior or parity equity securities or any security convertible into, shares of senior or parity equity securities (but not junior securities), (3) any increase or decrease in the authorized number of preferred shares or the issuance of additional shares of Preferred Stock, (4) amendments to our debt agreements that would, among other things, adversely affect our ability to pay dividends on the Preferred Stock, subject to certain exceptions, and (5) the liquidation, dissolution or filing of a voluntary petition for bankruptcy or receivership. The CD&R Stockholder and its affiliates are in the business of making or advising on investments in companies, including businesses that may directly or indirectly compete with certain portions of our business. In addition, the CD&R Stockholder may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its overall equity investment and have a negative impact to our common stockholders as a whole. Furthermore, the CD&R Stockholder currently owns, and may in the future continue to own, businesses that directly or indirectly compete with us. The CD&R Stockholder may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. The CD&R Stockholder and its affiliates have also made investments in businesses that historically were, and remain, our suppliers and customers, and may in the future invest in businesses that are our suppliers and customers.September 30, 2021,December 31, 2022, we leased 428461 branch facilities and 86 non-branch facilities throughout the United States and Canada. These leased facilities range in size from approximately 2,000 to 260,000 square feet. In addition, as of September 30, 2021,December 31, 2022, we owned 1819 branch facilities. These owned facilities range in size from approximately 11,500 square feet to 68,000 square feet. We believe that our properties are in good operating condition and adequately serve our current business operations.15September 30, 2021:December 31, 2022:Location Branches Non-Branch
FacilitiesU.S. State Alabama 8 Alaska 1 Arizona 5 Arkansas 5 California 33 Colorado 14 Connecticut 5 1 Delaware 3 Florida 38 Georgia 14 Hawaii 2 Idaho 2 Illinois 16 Indiana 8 Iowa 3 Location Branches Non-Branch
FacilitiesKansas 11 Kentucky 6 Louisiana 7 Maine 4 Maryland 17 Massachusetts 12 Michigan 10 Minnesota 6 1 Mississippi 2 Missouri 10 Montana 1 Nebraska 7 Nevada 2 New Hampshire 3 New Jersey 18 1 New Mexico 1 New York 13 North Carolina 22 1 North Dakota 2 Ohio 10 Oklahoma 2 Oregon 7 Pennsylvania 31 Rhode Island 1 South Carolina 9 South Dakota 2 Tennessee 11 Texas 32 1 Utah 5 Vermont 1 Virginia 15 1 Washington 14 West Virginia 4 Wisconsin 5 Wyoming 2 Total — United States 462 6 Canadian Province Alberta 3 British Columbia 2 Nova Scotia 1 Ontario 6 Quebec 5 Saskatchewan 1 Total — Canada 18 — Total — All 480 6 16lawsuitslegal proceedings and other proceedings concerning matters arising from conducting our business, including routine legal proceedingsgovernmental investigations arising in the normalordinary course of business,. including product-related, personal injury, employment, environmental, property, or commercial matters. These proceedings may also include actions brought against us with respect to corporate matters and transactions in which we were involved. There canThe defense of these proceedings and governmental investigations may require significant expense and require management’s time and attention and depending on the resolution of the proceedings and investigations, we could be no assurance asrequired to the ultimate outcome of a legal proceeding; however, we have generally denied,pay damages or believe we have meritorious defenses and will deny, liability in all significant litigation pending against us and intend to vigorously defend each case, other than matters deemed appropriate for settlement.fines. We accrue a liability for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims.17NovemberFebruary 8, 2021,2023, there were 6456 registered holders of record of our common stock.20162017 and the re-investment of all dividends. The closing price of our common stock on September 30, 2021,December 31, 2022, was $47.76.$52.79.
Base Period INDEXED RETURNS Company / Index 9/30/2017 9/30/2018 9/30/2019 9/30/2020 9/30/2021 12/31/2021 12/31/2022 Beacon Roofing Supply, Inc. 100 70.61 65.42 60.62 93.19 111.90 103.00 Nasdaq Index 100 125.17 125.82 177.36 231.03 250.55 169.03 S&P 1500 Trading Companies & Distributors Index 100 137.78 126.43 156.32 214.67 250.86 239.42 Period Total Number of Shares Purchased October 2022 — $ — — $ 112,147,537 November 2022 — — — $ 112,147,537 December 2022 1,051,478 47.55 1,051,478 $ 112,147,537 Total 1,051,478 $ 47.55 1,051,478 
18“2021,” “2020” and “2019”“2022” are referring to the twelve-month period ended December 31, 2022, while references to “Fiscal 2021” are referring to the twelve-month period ended September 30, for each of those respective fiscal years.2021 and references to “Calendar 2021” are referring to the twelve-month period ended December 31, 2021. This section of this Annual Report on Form 10-K generally discusses 2022, Fiscal 2021, and 2020Calendar 2021 items and year-to-year comparisons between 2021 and 2020.such periods. Discussions of 2019 items from the twelve-month period ended September 30, 2020 (“Fiscal 2020”) and year-to-year comparisons between 2020Fiscal 2021 and 2019Fiscal 2020 that are not included in this Form 10-K can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2020.2021. Discussions of year-to-year comparisons between the three-month periods ended December 31, 2021 and 2020 that are not included in this Form 10-K can be found in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Transition Report on Form 10-Q for the period ended December 31, 2021, which is incorporated by reference. The following discussion may contain forward-looking statements that reflect our plans and expectation. Our actual results could differ materially from those anticipated by these forward-looking statements due to the factors discussed elsewhere in this Annual Report on Form 10-K, particularly in the “Risk Factors” section. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.the United States and Canada.North America. We are among the oldest and most established distributors in the industry, providing high-quality products tohave served the building industry. Our customers rely on usindustry for local access to the building productsover 90 years and services they need to operate their businesses and serve their clients.On February 10, 2021, we completed the saleas of our interior products and insulation businesses (“Interior Products”) to Foundation Building Materials Holding Company LLC for approximately $850 million in cash (subject to a working capital and certain other adjustments as set forth in the Purchase Agreement). As of September 30, 2021, the adjusted purchase price for Interior Products was $842.7 million. We used the proceeds from the divestiture of our Interior Products business to reduce net debt leverage and strengthen our balance sheet, which provides us the financial flexibility to pursue strategic growth initiatives in our core exterior products business. Beginning with the condensed consolidated financial statements for the three months ended December 31, 2020, we have reflected Interior Products as discontinued operations for all periods presented. Unless otherwise noted, amounts and disclosures relate to our continuing operations. For additional information, see Note 3 in the Notes to Consolidated Financial Statements.On January 15, 2020, we announced the rebranding of our exterior products branches with the trade name “Beacon Building Products” (the “Rebranding”). The new name, and a related logo, were adopted at substantially all of our exterior products branches.As of September 30, 2021,2022, we operated 446480 branches throughout all 50 states in the U.S. and six provinces in Canada. We offer one of the most extensive assortmentsranges of high-quality brandedprofessional grade exterior products in the industry, withcomprising over 100,000130,000 SKUs, available across our branch network.Weand we serve over 80,000 customers by promptly providing the products they require, allowing our customers to deliver on the project specifications and timelines that are critical to their success. Our customer base is composed of professional contractors, home builders, building owners, lumberyards and retailers across the United States and Canada who depend on reliable local access to building products fornearly 100,000 residential and non-residential projects. Our customers vary in size, ranging from relatively small contractors to large contractors and builders that operate on a national scale.Effective execution of both our sales and operating plans enableswho trust us to grow beyondhelp them save time, work more efficiently and enhance their businesses.relative strength of the marketsroofing and other specialty contractors we serve. As a distributor, our national scale, networked model, and specialized capabilities are competitive advantages, providing strong value for both customers and suppliers. We intend to grow faster than the market by enhancing our customers’ experience, activating a complete go-to-market strategy, and expanding our footprint organically and through acquisitions while also driving margin-enhancing initiatives.businessdifferentiated service model is a bottom-up approach, where eachdesigned to solve customer needs. The scale of our branches uses its localbusiness provides branch coverage, technology enablement, and regional knowledge and experience to assist with the development of a marketing plan and product mixinvestment in our team that is best suited for its respective market. Local alignment with overall strategic goals provides the foundation for significant ownership of results at the branch level. Our distinctive operating model and branch level autonomy differentiate us from the competition. Our branch-based operating modelcustomer service excellence. In addition, service is further enhanced in large markets by networking branches through our On-TimeOn Time and Complete network (Beacon OTC®OTC®) that allows us to serve our customers more effectively, market-based sales teams, and efficiently.offeringcommerce platform in building productsroofing distribution, creating value for customers who are able to operate their businesses more effectively and continue to expand our capabilities. Beacon PRO+ is our proprietary digital account management suite which allows customers to manage their business with us online, and Beacon 3D+ is our roofing estimating tool for our residential customers. These platforms help our customers save time, work more efficiently and19grow their businesses. We believe customer relations and our employees’ extensive industry knowledge are vital to promote customer loyalty and maintain customer satisfaction. We invest significant resources in professional development, management skills, product knowledge, and operational proficiency. These capabilities were developed on a foundation of continuous improvement, thereby driving our service excellence, productivity and efficiency.(“Allied”) for $2.88 billion in 2018 (the “Allied Acquisition”) and Roofing Supply Group, LLC for $1.17 billion in 2016. These strategic acquisitions expanded our geographic footprint, enhanced our market presence, and diversified our product offerings. The scale we have achieved from our expansion efforts serves as a competitive advantage, allowing us to use our assets more efficiently, and control our expenses to drive operating leverage. also pursued and finalized numerous smaller acquisitions in key markets to complement the expansion of our geographic footprint, including 22 total branches from our acquisitions in 2022 (for additional information, see Note 3 in the Notes to Consolidated Financial Statements):footprint, such as our recently announced acquisition of Midway Sales & Distributing, Inc.,on December 30, 2022, we acquired Whitney Building Products, LLC, a leading Midwest distributor of residentialcommercial and commercial exterior buildingmultifamily waterproofing and roofing suppliesrestoration products, with 10 branches across Kansas, Missouri and Nebraskaone branch located in Massachusetts and annual sales of approximately $130 million.$19 million prior to the acquisition;We•on November 1, 2022, we acquired Coastal Construction Products, one of the largest independent distributors of specialty waterproofing products in the U.S., with 18 branches primarily in the Southeast and annual sales of approximately $250 million prior to the acquisition;business, and webusiness. We also remain heavily focused on improving our operations and continuing to identify additional opportunities for organic growth. Our recent highlights in these pursuits are demonstrated by the following results:results for 2022:•fiscal year 20212022 organic daily sales growth of 12.7%23.7% compared to 2020;•eight16 new branch locations since the start of fiscal year 2020;opened in 2022; and•labor cost efficiency and fleet utilization metrics as compared to historical levels, driven by strategic cost actions.COVID-19 PandemicWe continue to monitor the ongoing impact of the COVID-19 pandemic, including the effects of recent notable variants of the virus. The health and safetyresults of our employees, customers, and the communities in which we operate remains our top priority. Additional safety measures have been implemented in response to the COVID-19 pandemic. Our essential business designation status in all the local markets that we serve has not changed, and we have yet to experience a significant amount of business disruption from forced temporary branch closures due to COVID-19. To date, our business experienced the largest adverse impact from COVID-19branches falling in the third quarter of fiscal year 2020, mainly in areas with significant government construction restrictions that have since been reduced. We have the financial strength and operational flexibility to respond to future COVID-19 pandemic restrictions, and have taken proactive steps to make a number of the cost management initiatives undertaken in response to the COVID-19 pandemic permanent.The exterior products industry experienced constrained supply chain dynamics in 2021. As a result, we experienced cost increases and, at times, a limited ability to purchase enough product to meet consumer demand. We have seen an increase in our short-cycle backlog metrics. Open orders, a measurebottom quintile of our backlog, ended the year significantly higher than the prior year-end. We took proactive measures to actively increase our inventory, price efficiently and deliver high-value solutions to our customers’ critical building material needs. These trends, caused in large part from global disruptions related to the COVID-19 pandemic, may persist in the near-term. As a leading distributor of essential building materials, we will continue to react quickly to market and supply chain developments and ensure high-quality service for our customers.operating performance metrics.20Results of OperationsThe following tables set forth consolidated statement of operations data and such data as a percentage of total net sales for the periods presented (in millions):
| Year Ended | |||||||||||
| December 31, | September 30, | ||||||||||
| 2022 | 2021 | ||||||||||
| Net sales | $ | 8,429.7 | $ | 6,642.0 | |||||||
| Cost of products sold | 6,194.2 | 4,884.3 | |||||||||
| Gross profit | 2,235.5 | 1,757.7 | |||||||||
| Operating expense: | |||||||||||
| Selling, general and administrative | 1,372.9 | 1,138.7 | |||||||||
| Depreciation | 75.1 | 58.9 | |||||||||
| Amortization | 84.1 | 103.3 | |||||||||
| Total operating expense | 1,532.1 | 1,300.9 | |||||||||
| Income (loss) from operations | 703.4 | 456.8 | |||||||||
| Interest expense, financing costs and other | 83.7 | 98.1 | |||||||||
| Loss on debt extinguishment | — | 60.2 | |||||||||
| Income (loss) from continuing operations before income taxes | 619.7 | 298.5 | |||||||||
| Provision for (benefit from) income taxes | 161.3 | 77.3 | |||||||||
| Net income (loss) from continuing operations | 458.4 | 221.2 | |||||||||
| Net income (loss) from discontinued operations | — | (266.7) | |||||||||
| Net income (loss) | 458.4 | (45.5) | |||||||||
| Dividends on Preferred Stock | 24.0 | 24.0 | |||||||||
| Net income (loss) attributable to common stockholders | $ | 434.4 | $ | (69.5) | |||||||
| Year Ended | |||||||||||
| December 31, | September 30, | ||||||||||
| 2022 | 2021 | ||||||||||
| Net sales | 100.0 | % | 100.0 | % | |||||||
| Cost of products sold | 73.5 | % | 73.5 | % | |||||||
| Gross profit | 26.5 | % | 26.5 | % | |||||||
| Operating expense: | |||||||||||
| Selling, general and administrative | 16.3 | % | 17.1 | % | |||||||
| Depreciation | 0.9 | % | 0.9 | % | |||||||
| Amortization | 1.0 | % | 1.6 | % | |||||||
| Total operating expense | 18.2 | % | 19.6 | % | |||||||
| Income (loss) from operations | 8.3 | % | 6.9 | % | |||||||
| Interest expense, financing costs and other | 1.0 | % | 1.5 | % | |||||||
| Loss on debt extinguishment | — | % | 0.9 | % | |||||||
| Income (loss) from continuing operations before income taxes | 7.3 | % | 4.5 | % | |||||||
| Provision for (benefit from) income taxes | 1.9 | % | 1.2 | % | |||||||
| Net income (loss) from continuing operations | 5.4 | % | 3.3 | % | |||||||
| Net income (loss) from discontinued operations | — | % | (4.0) | % | |||||||
| Net income (loss) | 5.4 | % | (0.7) | % | |||||||
| Dividends on Preferred Stock | 0.2 | % | 0.3 | % | |||||||
| Net income (loss) attributable to common stockholders | 5.2 | % | (1.0) | % | |||||||
21
programs.
(“Fiscal 2021”)
Netbusiness, substantially driven by a weighted-average selling price increase of approximately 23-24% as well as an estimated volume increase of approximately 2-3%. Additionally, net sales by geographic region increased from 2020 toin 2022 includes the results of acquired branches, while net sales in Fiscal 2021 as follows: Northeast 16.3%; Mid-Atlantic 5.5%; Southeast 26.3%; Southwest 14.8%; Midwest 4.4%; West 8.9%;includes the results of divested branches that were included in continuing operations. Excluding the impact of acquired and Canada 24.1%.
divested branches, the increase in net sales would have been approximately 1% lower.
To calculate approximate weighted average selling price and product cost changes, we review organic U.S. warehouse sales of the same items sold regionally period over period and normalize the data for non-representative outliers. To determine estimated volumes, we subtract the change in weighted average selling price, calculated as described above, from the total changes in net sales, excluding acquisitions and dispositions. As a result, and especially in high inflationary periods, the weighted average selling price and estimated volume changes may not be directly comparable to changes reported in prior periods.
| Year Ended September 30, |
|
|
|
|
|
|
| |||||||||||||||
| 2021 |
|
| 2020 |
|
| Change |
| |||||||||||||||
| Net Sales |
|
| % |
|
| Net Sales |
|
| % |
|
| $ |
|
| % |
| ||||||
Residential roofing products | $ | 3,516.2 |
|
|
| 53.0 | % |
| $ | 3,079.4 |
|
|
| 52.1 | % |
| $ | 436.8 |
|
|
| 14.2 | % |
Non-residential roofing products |
| 1,688.8 |
|
|
| 25.4 | % |
|
| 1,616.8 |
|
|
| 27.3 | % |
|
| 72.0 |
|
|
| 4.5 | % |
Complementary building products |
| 1,437.0 |
|
|
| 21.6 | % |
|
| 1,220.5 |
|
|
| 20.6 | % |
|
| 216.5 |
|
|
| 17.7 | % |
Total net sales | $ | 6,642.0 |
|
|
| 100.0 | % |
| $ | 5,916.7 |
|
|
| 100.0 | % |
| $ | 725.3 |
|
|
| 12.3 | % |
| Year Ended | Year-over-Year Change | ||||||||||||||||||||||||||||||||||
| December 31, | September 30, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| Net Sales | % | Net Sales | % | $ | % | ||||||||||||||||||||||||||||||
| Residential roofing products | $ | 4,217.9 | 50.0 | % | $ | 3,516.2 | 53.0 | % | $ | 701.7 | 20.0 | % | |||||||||||||||||||||||
| Non-residential roofing products | 2,464.3 | 29.2 | % | 1,688.8 | 25.4 | % | 775.5 | 45.9 | % | ||||||||||||||||||||||||||
| Complementary building products | 1,747.5 | 20.8 | % | 1,437.0 | 21.6 | % | 310.5 | 21.6 | % | ||||||||||||||||||||||||||
| Total net sales | $ | 8,429.7 | 100.0 | % | $ | 6,642.0 | 100.0 | % | $ | 1,787.7 | 26.9 | % | |||||||||||||||||||||||
| Year Ended September 30, |
|
| Change1 |
| ||||||||||
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
Gross profit | $ | 1,757.7 |
|
| $ | 1,420.5 |
|
| $ | 337.2 |
|
|
| 23.7 | % |
Gross margin |
| 26.5 | % |
|
| 24.0 | % |
| N/A |
|
|
| 2.5 | % | |
__________________________________
| Year Ended | Change1 | ||||||||||||||||||||||
| December 31, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Gross profit | $ | 2,235.5 | $ | 1,757.7 | $ | 477.8 | 27.2 | % | |||||||||||||||
| Gross margin | 26.5 | % | 26.5 | % | N/A | — | % | ||||||||||||||||
| Year Ended | Change1 | ||||||||||||||||||||||
| December 31, | September 30, | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Selling, general and administrative | $ | 1,372.9 | $ | 1,138.7 | $ | 234.2 | 20.6 | % | |||||||||||||||
| Depreciation | 75.1 | 58.9 | 16.2 | 27.5 | % | ||||||||||||||||||
| Amortization | 84.1 | 103.3 | (19.2) | (18.6) | % | ||||||||||||||||||
| Total operating expense | $ | 1,532.1 | $ | 1,300.9 | $ | 231.2 | 17.8 | % | |||||||||||||||
| % of net sales | 18.2 | % | 19.6 | % | N/A | (1.4) | % | ||||||||||||||||
Year Ended September 30, Change1 2021 2020 $ % Selling, general, and administrative $ 1,138.7 $ 1,065.5 $ 73.2 6.9 % Depreciation 58.9 58.1 0.8 1.4 % Amortization 103.3 261.9 (158.6 ) (60.6 %) Total operating expense $ 1,300.9 $ 1,385.5 $ (84.6 ) (6.1 %) % of net sales 19.6 % 23.4 % N/A (3.8 %) growth. Income Taxes Fiscal 2021. Year Ended September 30, 2021 2020 Numerator: Net income (loss) from continuing operations $ 221.2 $ (81.3 ) Dividends on Preferred Stock (24.0 ) (24.0 ) Net income (loss) from continuing operations attributable to common stockholders - Basic 197.2 (105.3 ) Add back: dividends on Preferred Stock1 24.0 — Net income (loss) from continuing operations attributable to common stockholders - Diluted (if-converted and two-class method) 221.2 (105.3 ) Net income (loss) from discontinued operations attributable to common stockholders - Basic and Diluted (if-converted and two-class method) (266.7 ) 0.4 Net income (loss) attributable to common stockholders - Basic $ (69.5 ) $ (104.9 ) Net income (loss) attributable to common stockholders - Diluted (if-converted and two-class method) $ (45.5 ) $ (104.9 ) Denominator: Weighted-average common shares outstanding - basic 69.7 68.8 Effect of common share equivalents 1.1 — Effect of convertible Preferred Stock1 9.7 — Weighted-average common shares outstanding - diluted 80.5 68.8 Net income (loss) per share: Basic - Continuing operations $ 2.83 $ (1.53 ) Basic - Discontinued operations (3.83 ) 0.01 Basic net income (loss) per share $ (1.00 ) $ (1.52 ) Diluted - Continuing operations $ 2.75 $ (1.53 ) Diluted - Discontinued operations (3.32 ) 0.01 Diluted net income (loss) per share (if-converted and two-class method) $ (0.57 ) $ (1.52 ) corresponding reduction of net income for the income generated by the assets to which the excluded costs relate. In addition, these non-GAAP financial measures may differ from similarly titled measures presented by other companies. The following table presents the impact and respective location of the adjusting items in our consolidated statements of operations for each of the periods indicated (in millions): Operating Expense Non-Operating Expense SG&A1 Amortization Interest Expense Other (Income) Expense Income Taxes2 Total Year Ended September 30, 2021 Acquisition costs $ 3.3 $ 101.1 $ 6.1 $ — $ — $ 110.5 Restructuring costs3 9.4 2.2 2.7 60.3 — 74.6 COVID-19 impacts 1.6 — — — — 1.6 Total adjusting items $ 14.3 $ 103.3 $ 8.8 $ 60.3 $ — $ 186.7 Year Ended September 30, 2020 Acquisition costs4 $ 9.6 $ 119.3 $ 8.0 $ (5.1 ) $ — $ 131.8 Restructuring costs5 2.3 142.6 3.6 21.5 — 170.0 COVID-19 impacts6 4.2 — — — (0.7 ) 3.5 Total adjusting items $ 16.1 $ 261.9 $ 11.6 $ 16.4 $ (0.7 ) $ 305.3 Year Ended September 30, 2019 Acquisition costs $ 25.1 $ 142.9 $ 12.1 $ — $ — $ 180.1 Restructuring costs 4.1 — — 3.3 — 7.4 Effects of tax reform — — — — (0.5 ) (0.5 ) Total adjusting items $ 29.2 $ 142.9 $ 12.1 $ 3.3 $ (0.5 ) $ 187.0 Year Ended September 30, 2021 2020 2019 Operating expense $ 1,300.9 $ 1,385.5 $ 1,296.2 Acquisition costs (104.4 ) (128.9 ) (168.0 ) Restructuring costs (11.6 ) (144.9 ) (4.1 ) COVID-19 impacts (1.6 ) (4.2 ) — Adjusted Operating Expense $ 1,183.3 $ 1,107.5 $ 1,124.1 Net sales $ 6,642.0 $ 5,916.7 $ 5,996.1 Operating expense as % of net sales 19.6 % 23.4 % 21.6 % Adjusted Operating Expense as % of net sales 17.8 % 18.7 % 18.7 % Year Ended September 30, 2021 2020 2019 Net income (loss) from continuing operations $ 221.2 $ (81.3 ) $ (18.9 ) Adjusting items: Acquisition costs 110.5 131.8 180.1 Restructuring costs 74.6 170.0 7.4 COVID-19 impacts 1.6 3.5 — Effects of tax reform — — (0.5 ) Total adjusting items 186.7 305.3 187.0 Less: tax impact of adjusting items1 (47.8 ) (78.2 ) (47.7 ) Total adjustments, net of tax 138.9 227.1 139.3 Adjusted Net Income (Loss) $ 360.1 $ 145.8 $ 120.4 Net sales $ 6,642.0 $ 5,916.7 $ 5,996.1 Net income (loss) as % of sales 3.3 % (1.4 %) (0.3 %) Adjusted Net Income (Loss) as % of sales 5.4 % 2.5 % 2.0 % Year Ended September 30, 2021 2020 2019 Net income (loss) from continuing operations $ 221.2 $ (81.3 ) $ (18.9 ) Interest expense, net 101.0 138.4 154.0 Income taxes 77.3 (27.0 ) (3.2 ) Depreciation and amortization 162.2 320.0 203.4 Stock-based compensation 18.4 16.0 15.3 Acquisition costs1 3.3 4.5 25.1 Restructuring costs1 69.7 23.8 7.4 COVID-19 impacts1 1.6 4.2 — Adjusted EBITDA $ 654.7 $ 398.6 $ 383.1 Net sales $ 6,642.0 $ 5,916.7 $ 5,996.1 Net income (loss) as % of net sales 3.3 % (1.4 %) (0.3 %) Adjusted EBITDA as % of net sales 9.9 % 6.7 % 6.4 % In addition, the There was no significant inflationary pressure in 2020. Year Ended September 30, 2021 2020 2019 Net cash provided by (used in) operating activities $ 78.0 $ 479.3 $ 212.7 Net cash provided by (used in) investing activities 773.9 (39.0 ) (211.7 ) Net cash provided by (used in) financing activities (1,216.0 ) 112.2 (58.8 ) Effect of exchange rate changes on cash and cash equivalents (0.5 ) (0.2 ) 0.2 Net increase (decrease) in cash and cash equivalents $ (364.6 ) $ 552.3 $ (57.6 ) cash flows was $2.5 million. 2022. As of Intangible Assets value based on either discounted cash flows or appraised values. Company. Assuming 30 day LIBOR rates as of December 31, 2022 remain constant, we would expect the impact to cash interest expense resulting from the expiration of the three-year swap to be approximately $7 million annually. Page Description of the Matter How We Addressed the Matter in Our Audit Company’s branch locations. September 30, 2021 2020 Assets Current assets: Cash and cash equivalents $ 260.0 $ 624.6 Accounts receivable, less allowance of $16.3 and $17.9 as of September 30, 2021 and 2020, respectively 978.3 885.2 Inventories, net 1,084.5 871.4 Prepaid expenses and other current assets 345.9 351.8 Current assets held for sale — 243.8 Total current assets 2,668.7 2,976.8 Property and equipment, net 236.6 207.8 Goodwill 1,760.9 1,756.1 Intangibles, net 414.8 518.0 Operating lease assets 399.2 376.2 Deferred income taxes, net 64.5 — Other assets, net 9.8 2.1 Non-current assets held for sale — 1,120.5 Total assets $ 5,554.5 $ 6,957.5 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 812.9 $ 885.8 Accrued expenses 546.7 507.3 Current operating lease liabilities 88.5 84.0 Current finance lease liabilities 5.0 2.4 Current portions of long-term debt/obligations 10.0 12.3 Current liabilities held for sale — 139.4 Total current liabilities 1,463.1 1,631.2 Borrowings under revolving lines of credit, net — 251.1 Long-term debt, net 1,614.5 2,494.2 Deferred income taxes, net 0.7 71.8 Non-current operating lease liabilities 311.3 290.5 Non-current finance lease liabilities 22.9 5.2 Non-current liabilities held for sale — 53.4 Total liabilities 3,412.5 4,797.4 Commitments and contingencies (Note 12) Convertible Preferred Stock; $0.01 par value; aggregate liquidation preference $400.0; 0.4 shares authorized, issued and outstanding as of September 30, 2021 and 2020 (Note 5) 399.2 399.2 Stockholders' equity: Common stock (voting); $0.01 par value; 100.0 shares authorized; 70.1 and 69.0 shares issued and outstanding as of September 30, 2021 and 2020, respectively 0.7 0.7 Undesignated preferred stock; 5.0 shares authorized, NaN issued or outstanding 0 0 Additional paid-in capital 1,145.0 1,100.6 Retained earnings 620.5 694.3 Accumulated other comprehensive income (loss) (23.4 ) (34.7 ) Total stockholders' equity 1,742.8 1,760.9 Total liabilities and stockholders' equity $ 5,554.5 $ 6,957.5 See accompanying Notes to Consolidated Financial Statements Year Ended September 30, 2021 2020 2019 Net sales $ 6,642.0 $ 5,916.7 $ 5,996.1 Cost of products sold 4,884.3 4,496.2 4,568.5 Gross profit 1,757.7 1,420.5 1,427.6 Operating expense: Selling, general and administrative 1,138.7 1,065.5 1,092.8 Depreciation 58.9 58.1 60.5 Amortization 103.3 261.9 142.9 Total operating expense 1,300.9 1,385.5 1,296.2 Income (loss) from operations 456.8 35.0 131.4 Interest expense, financing costs, and other 98.1 128.6 153.5 Loss on debt extinguishment 60.2 14.7 — Income (loss) from continuing operations before income taxes 298.5 (108.3 ) (22.1 ) Provision for (benefit from) income taxes 77.3 (27.0 ) (3.2 ) Net income (loss) from continuing operations 221.2 (81.3 ) (18.9 ) Net income (loss) from discontinued operations1 (266.7 ) 0.4 8.3 Net income (loss) (45.5 ) (80.9 ) (10.6 ) Dividends on Preferred Stock 24.0 24.0 24.0 Net income (loss) attributable to common stockholders $ (69.5 ) $ (104.9 ) $ (34.6 ) Weighted-average common stock outstanding2: Basic 69.7 68.8 68.4 Diluted 80.5 68.8 68.4 Net income (loss) per share2: Basic - Continuing operations $ 2.83 $ (1.53 ) $ (0.63 ) Basic - Discontinued operations (3.83 ) 0.01 0.12 Basic net income (loss) per share $ (1.00 ) $ (1.52 ) $ (0.51 ) Diluted - Continuing operations $ 2.75 $ (1.53 ) $ (0.63 ) Diluted - Discontinued operations (3.32 ) 0.01 0.12 Diluted net income (loss) per share $ (0.57 ) $ (1.52 ) $ (0.51 ) Year Ended September 30, 2021 2020 2019 Net income (loss) $ (45.5 ) $ (80.9 ) $ (10.6 ) Other comprehensive income (loss): Foreign currency translation adjustment 4.0 (0.7 ) (1.7 ) Unrealized gain (loss) due to change in fair value of derivatives, net of tax 7.3 (13.4 ) (1.6 ) Total other comprehensive income (loss) 11.3 (14.1 ) (3.3 ) Comprehensive income (loss) $ (34.2 ) $ (95.0 ) $ (13.9 ) Common Stock Retained Shares Amount APIC1 Earnings AOCI2 Total Balance as of September 30, 2018 68.1 $ 0.7 $ 1,067.0 $ 833.8 $ (17.3 ) $ 1,884.2 Issuance of common stock, net of shares withheld for taxes 0.5 — (0.4 ) — — (0.4 ) Stock-based compensation — — 16.4 — — 16.4 Other comprehensive income (loss) — — — — (3.3 ) (3.3 ) Net income (loss) — — — (10.6 ) — (10.6 ) Dividends on Preferred Stock — — — (24.0 ) — (24.0 ) Balance as of September 30, 2019 68.6 $ 0.7 $ 1,083.0 $ 799.2 $ (20.6 ) $ 1,862.3 Issuance of common stock, net of shares withheld for taxes 0.4 — 0.4 — — 0.4 Stock-based compensation — — 17.2 — — 17.2 Other comprehensive income (loss) — — — — (14.1 ) (14.1 ) Net income (loss) — — — (80.9 ) — (80.9 ) Dividends on Preferred Stock — — — (24.0 ) — (24.0 ) Balance as of September 30, 2020 69.0 $ 0.7 $ 1,100.6 $ 694.3 $ (34.7 ) $ 1,760.9 Adoption of ASU 2016-13 — — — (4.3 ) — (4.3 ) Issuance of common stock, net of shares withheld for taxes 1.1 — 21.8 — — 21.8 Stock-based compensation — — 22.6 — — 22.6 Other comprehensive income (loss) — — — — 11.3 11.3 Net income (loss) — — — (45.5 ) — (45.5 ) Dividends on Preferred Stock — — — (24.0 ) — (24.0 ) Balance as of September 30, 2021 70.1 $ 0.7 $ 1,145.0 $ 620.5 $ (23.4 ) $ 1,742.8 Year Ended September 30, 2021 2020 2019 Operating Activities Net income (loss) $ (45.5 ) $ (80.9 ) $ (10.6 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 175.2 391.1 277.8 Stock-based compensation 22.6 17.2 16.4 Certain interest expense and other financing costs 8.7 11.5 12.1 Beneficial lease amortization — — 2.3 Loss on debt extinguishment 60.2 14.7 — Gain on sale of fixed assets and other (3.8 ) (3.5 ) (3.8 ) Deferred income taxes (139.2 ) (25.6 ) (2.6 ) Loss on sale of Interior Products2 360.6 — — 338(h)(10) election refund — (5.1 ) — Changes in operating assets and liabilities: Accounts receivable (81.3 ) 78.4 (18.5 ) Inventories (225.0 ) 73.4 (82.8 ) Prepaid expenses and other current assets 9.6 (73.6 ) (70.8 ) Accounts payable and accrued expenses (56.0 ) 72.2 92.1 Other assets and liabilities (8.1 ) 9.5 1.1 Net cash provided by (used in) operating activities 78.0 479.3 212.7 Investing Activities Purchases of property and equipment (66.5 ) (48.5 ) (57.0 ) Acquisition of businesses, net — 5.1 (164.0 ) Proceeds from sale of Interior Products2 836.0 — — Proceeds from the sale of assets 4.4 4.4 9.3 Net cash provided by (used in) investing activities 773.9 (39.0 ) (211.7 ) Financing Activities Borrowings under revolving lines of credit 252.3 2,038.0 2,100.1 Payments under revolving lines of credit (509.3 ) (1,870.0 ) (2,114.0 ) Borrowings under term loan 1,000.0 — — Payments under term loan (948.3 ) (9.7 ) (9.7 ) Borrowings under senior notes 350.0 300.0 — Payment under senior notes (1,300.0 ) (309.6 ) — Payment of debt issuance costs (20.3 ) (4.3 ) (0.8 ) Payment of call premium (31.7 ) — — Payments under equipment financing facilities and finance leases (6.5 ) (8.6 ) (10.0 ) Payment of dividends on Preferred Stock (24.0 ) (24.0 ) (24.0 ) Proceeds from issuance of common stock related to equity awards 26.3 3.3 3.3 Payment of taxes related to net share settlement of equity awards (4.5 ) (2.9 ) (3.7 ) Net cash provided by (used in) financing activities (1,216.0 ) 112.2 (58.8 ) Effect of exchange rate changes on cash and cash equivalents (0.5 ) (0.2 ) 0.2 Net increase (decrease) in cash and cash equivalents (364.6 ) 552.3 (57.6 ) Cash and cash equivalents, beginning of period 624.6 72.3 129.9 Cash and cash equivalents, end of period $ 260.0 $ 624.6 $ 72.3 Supplemental Cash Flow Information Operating cash flows provided by (used in) discontinued operations $ (28.2 ) $ 84.9 $ 12.9 Investing cash flows provided by (used in) discontinued operations $ (2.5 ) $ (7.5 ) $ (7.6 ) Cash paid during the period for: Interest $ 120.0 $ 130.3 $ 146.4 Income taxes paid (received), net of refunds3 $ 85.2 $ (5.4 ) $ (8.5 ) North America. Basis of Presentation Use of Estimates Fiscal Year The periods presented are the year ended December 31, 2022 (“2022”), the three months ended December 31, 2021 (the “Transition Period”), and the years ended September 30, 2021 (“Fiscal 2021”) and September 30, 2020 (“Fiscal 2020”). Each of the Company’s fiscal quarters ends on the last day of the calendar month. Business Combinations Accounts Receivable Concentrations of Risk Inventories, consisting substantially of finished goods, are valued at the lower of cost or market (net realizable value). Cost is determined using the moving weighted-average cost method. Property and Equipment Asset Class Estimated Useful Life Buildings and improvements 40 years Equipment 3 to 7 years Furniture and fixtures 7 years Shorter of the estimated useful life or the term of the lease, considering renewal options expected to be exercised. On an annual basis and at interim periods when circumstances require, the Company tests the recoverability of its goodwill and indefinite-lived intangible assets and reviews for indicators of impairment. Examples of such indicators include a significant change in the business climate, unexpected competition, loss of key personnel, or a decline in the Company’s market capitalization below the Company’s net book value. characteristics The Company’s total market capitalization exceeded carrying value by approximately 117% as of August 31, 2022. The Company did not identify any macroeconomic, industry conditions, or cost-related factors that would indicate it is more likely than not that the fair value of the reporting unit was less than its carrying value. Evaluation of Long-Lived Assets Fair Value Measurement Financial Derivatives Net Sales Leases 2038. 2032. Stock-Based Compensation periods if actual forfeitures differ from those estimates. For awards with Foreign Currency Translation Net Income (Loss) per Share Recent Accounting Pronouncements—Adopted Transition Period. transactions individually and in the aggregate are not material to the Company. The results of operations for these transactions are included in the Company’s consolidated statements of operations from the date of the acquisition (dollars in millions): For Whitney Building Products and Coastal Construction Products, the measurement period is still open and amounts are based on provisional estimates of the fair value of assets acquired and liabilities assumed as of December 31, 2022. During the three months ended December 31, 2021, the Company received $6.6 million of final purchase consideration from FBM. The following table reconciles major line items constituting Year Ended September 30, 2021 2020 2019 Net sales $ 357.9 $ 1,027.2 $ 1,109.1 Cost of products sold (264.2 ) (748.5 ) (800.1 ) Selling, general and administrative (79.1 ) (207.5 ) (218.2 ) Depreciation and amortization (13.0 ) (71.1 ) (74.4 ) Other income (loss) 0.1 0.5 (5.1 ) Loss on sale (360.6 ) — — Pretax income (loss) from discontinued operations (358.9 ) 0.6 11.3 Provision for (benefit from) income taxes (92.2 ) 0.2 3.0 Net income (loss) from discontinued operations $ (266.7 ) $ 0.4 $ 8.3 represented a component of the Company’s single reporting unit, the carrying value of the net assets of Interior Products included an allocation of September 30, 20201 Carrying amounts of major classes of assets held for sale: Accounts receivable, net $ 144.1 Inventories, net 73.2 Prepaid expenses and other current assets 26.5 Total current assets 243.8 Property and equipment, net 35.9 Goodwill 734.3 Intangibles, net 283.2 Operating lease assets 67.1 Total non-current assets 1,120.5 Total assets held for sale $ 1,364.3 Carrying amounts of major classes of liabilities held for sale: Accounts payable $ 68.8 Accrued expenses 54.1 Current operating lease liabilities 16.5 Total current liabilities 139.4 Non-current operating lease liabilities 49.9 Other long-term liabilities 3.5 Total non-current liabilities 53.4 Total liabilities held for sale $ 192.8 The following table presents the Company’s net sales by line of business and geography for each period presented (in millions): U.S. Canada Total Year Ended September 30, 2021 Residential roofing products $ 3,443.4 $ 72.8 $ 3,516.2 Non-residential roofing products 1,551.7 137.1 1,688.8 Complementary building products 1,426.5 10.5 1,437.0 Total net sales $ 6,421.6 $ 220.4 $ 6,642.0 Year Ended September 30, 2020 Residential roofing products $ 3,023.0 $ 56.4 $ 3,079.4 Non-residential roofing products 1,504.6 112.2 1,616.8 Complementary building products 1,211.5 9.0 1,220.5 Total net sales $ 5,739.1 $ 177.6 $ 5,916.7 Year Ended September 30, 2019 Residential roofing products $ 2,779.7 $ 56.4 $ 2,836.1 Non-residential roofing products 1,437.1 122.4 1,559.5 Complementary building products 1,592.6 7.9 1,600.5 Total net sales $ 5,809.4 $ 186.7 $ 5,996.1 Year Ended September 30, 2021 2020 2019 Numerator: Net income (loss) from continuing operations $ 221.2 $ (81.3 ) $ (18.9 ) Dividends on Preferred Stock (24.0 ) (24.0 ) (24.0 ) Net income (loss) from continuing operations attributable to common stockholders - Basic 197.2 (105.3 ) (42.9 ) Add back: dividends on Preferred Stock1 24.0 — — Net income (loss) from continuing operations attributable to common stockholders - Diluted 221.2 (105.3 ) (42.9 ) Net income (loss) from discontinued operations attributable to common stockholders - Basic and Diluted (266.7 ) 0.4 8.3 Net income (loss) attributable to common stockholders - Basic $ (69.5 ) $ (104.9 ) $ (34.6 ) Net income (loss) attributable to common stockholders - Diluted $ (45.5 ) $ (104.9 ) $ (34.6 ) Denominator: Weighted-average common shares outstanding - basic 69.7 68.8 68.4 Effect of common share equivalents 1.1 — — Effect of convertible Preferred Stock1 9.7 — — Weighted-average common shares outstanding - diluted 80.5 68.8 68.4 Net income (loss) per share: Basic - Continuing operations $ 2.83 $ (1.53 ) $ (0.63 ) Basic - Discontinued operations (3.83 ) 0.01 0.12 Basic net income (loss) per share $ (1.00 ) $ (1.52 ) $ (0.51 ) Diluted - Continuing operations $ 2.75 $ (1.53 ) $ (0.63 ) Diluted - Discontinued operations (3.32 ) 0.01 0.12 Diluted net income (loss) per share $ (0.57 ) $ (1.52 ) $ (0.51 ) Year Ended September 30, 2021 2020 2019 Stock options 0.5 2.0 1.3 Restricted stock units — 0.3 0.1 Preferred Stock — 9.7 9.7 award then earned but not then vested). The fair values of the options granted for the Year Ended September 30, 2021 2020 2019 Risk-free interest rate 0.44 % 1.61 % 2.86 % Expected volatility 48.15 % 34.26 % 29.68 % Expected life (in years) 5.36 5.26 5.22 Dividend yield 0 0 0 Options Weighted- Weighted- Aggregate Balance as of September 30, 2020 2.5 $ 33.09 5.9 $ 6.9 Granted 0.3 35.78 Exercised (0.9 ) 29.88 Canceled/Forfeited (0.1 ) 40.32 Expired (0.0 ) 15.47 Balance as of September 30, 2021 1.8 $ 34.88 5.8 $ 24.9 Vested and expected to vest after September 30, 2021 1.8 $ 34.89 5.8 $ 24.5 Exercisable as of September 30, 2021 1.1 $ 36.35 4.5 $ 14.5 The following table summarizes additional information on stock options for the periods presented (in millions, except per share amounts): Year Ended September 30, 2021 2020 2019 Weighted-average fair value of stock options granted $ 15.62 $ 10.35 $ 8.91 Total grant date fair value of stock options vested $ 5.6 $ 4.3 $ 3.9 Total intrinsic value of stock options exercised $ 15.7 $ 2.1 $ 2.8 The following table summarizes all RSUs Weighted-Average Grant Date Fair Value Balance as of September 30, 2020 1.2 $ 33.55 Granted 0.4 38.18 Released (0.4 ) 41.50 Canceled/Forfeited (0.2 ) 29.87 Balance as of September 30, 2021 1.0 $ 33.76 Vested and expected to vest after September 30, 20211 1.1 $ 33.91 The following table summarizes additional information on RSUs for the period presented (in millions, except per share amounts): Year Ended September 30, 2021 2020 2019 Weighted-average fair value of RSUs granted $ 38.18 $ 31.81 $ 28.02 Total grant date fair value of RSUs vested $ 16.5 $ 14.4 $ 16.1 Total intrinsic value of RSUs released $ 15.2 $ 9.8 $ 11.5 The following table summarizes the significant components of prepaid expenses and other current assets (in millions): September 30, 2021 2020 Vendor rebates $ 289.5 $ 306.2 Other 56.4 45.6 Total prepaid expenses and other current assets $ 345.9 $ 351.8 The following table provides a detailed breakout of property and equipment, by type (in millions): September 30, 2021 2020 Land and buildings $ 85.9 $ 76.5 Equipment 417.3 397.3 Furniture and fixtures 58.9 42.1 Finance lease assets 29.0 9.7 Total property and equipment 591.1 525.6 Accumulated depreciation (354.5 ) (317.8 ) Total property and equipment, net $ 236.6 $ 207.8 Balance as of September 30, 2019 $ 1,756.3 Translation and other adjustments (0.2 ) Balance as of September 30, 2020 $ 1,756.1 Translation and other adjustments 4.8 Balance as of September 30, 2021 $ 1,760.9 20 years. The following table summarizes intangible assets by category (in millions, except time September 30, Weighted- 2021 2020 (Years) Amortizable intangible assets: Non-compete agreements $ 0.2 $ 0.2 0.7 Customer relationships 1,076.2 1,085.5 15.4 Beneficial lease arrangements — 3.7 — Total amortizable intangible assets 1,076.4 1,089.4 Accumulated amortization (671.4 ) (581.2 ) Total amortizable intangible assets, net $ 405.0 $ 508.2 Indefinite-lived trademarks 9.8 9.8 Total intangibles, net $ 414.8 $ 518.0 The following table summarizes the estimated future amortization expense for intangible assets (in millions): Year Ending September 30, 2022 $ 82.1 2023 66.2 2024 53.1 2025 42.8 2026 34.5 Thereafter 126.3 Total future amortization expense $ 405.0 The following table summarizes all outstanding debt (presented net of unamortized debt issuance costs) and other financing arrangements September 30, 2021 2020 Revolving Lines of Credit 2023 ABL: 2023 U.S. Revolver1 $ — $ 251.1 2026 ABL: 2026 U.S. Revolver — — 2026 Canada Revolver — — Current portion — — Borrowings under revolving lines of credit, net $ — $ 251.1 Long-term Debt, net Term Loan: 2025 Term Loan2 $ — $ 922.3 2028 Term Loan3 981.7 — Current portion (10.0 ) (9.7 ) Long-term borrowings under term loan 971.7 912.6 Senior Notes: 2025 Senior Notes4 — 1,285.7 2026 Senior Notes5 296.6 295.9 2029 Senior Notes6 346.2 — Current portion 0 0 Long-term borrowings under senior notes 642.8 1,581.6 Long-term debt, net $ 1,614.5 $ 2,494.2 Equipment Financing Facilities, net Equipment financing facilities7 $ — $ 2.6 Current portion — (2.6 ) Long-term obligations under equipment financing, net $ — $ — 2021 Debt Refinancing Company capitalized debt issuance costs totaling December 31, 2022. December 31, 2022. The following table presents annual principal payments for all outstanding financing arrangements for each of the next five years and thereafter (in millions): Year Ending September 30, 2026 ABL 2028 Term Loan Senior Notes1 Total 2022 $ 0 $ 10.0 $ 0 $ 10.0 2023 0 10.0 0 10.0 2024 0 10.0 0 10.0 2025 0 10.0 0 10.0 2026 0 10.0 0 10.0 Thereafter 0 947.5 650.0 1,597.5 Total debt 0 997.5 650.0 1,647.5 Unamortized debt issuance costs 0 (15.8 ) (7.2 ) (23.0 ) Total debt, net $ 0 $ 981.7 $ 642.8 $ 1,624.5 The following table summarizes components of lease costs recognized in the consolidated statements of operations (in millions; amounts include both continuing and discontinued operations): Year Ended September 30, 2021 2020 Operating lease costs $ 106.1 $ 104.5 Finance lease costs: Amortization of right-of-use assets 5.2 4.4 Interest on lease obligations 0.5 0.1 Variable lease costs 9.2 8.6 Total lease costs $ 121.0 $ 117.6 Year Ended September 30, 2021 2020 Cash paid for amounts included in measurement of lease obligations: Operating cash flows from operating leases $ 106.3 $ 118.7 Operating cash flows from finance leases $ 0.5 $ 0.2 Financing cash flows from finance leases $ 4.0 $ 4.3 Right-of-use assets obtained in exchange for new finance lease liabilities $ 29.1 $ 6.2 Right-of-use assets obtained in exchange for new operating lease liabilities $ 55.4 $ 26.0 Year Ending September 30, Operating Leases Finance Leases 2022 $ 100.9 $ 5.8 2023 87.8 5.8 2024 74.3 5.8 2025 52.3 5.8 2026 39.0 4.8 Thereafter 88.5 2.3 Total future lease payments 442.8 30.3 Imputed interest (43.0 ) (2.4 ) Total lease liabilities $ 399.8 $ 27.9 The following table summarizes the components of, and changes in, Foreign Derivative Currency Financial AOCI Balance as of September 30, 2018 $ (17.3 ) $ — $ (17.3 ) Other comprehensive income (loss) before reclassifications (1.7 ) (1.6 ) (3.3 ) Reclassifications out of other comprehensive income (loss) — — — Balance as of September 30, 2019 $ (19.0 ) $ (1.6 ) $ (20.6 ) Other comprehensive income (loss) before reclassifications (0.7 ) (13.4 ) (14.1 ) Reclassifications out of other comprehensive income (loss) — — — Balance as of September 30, 2020 $ (19.7 ) $ (15.0 ) $ (34.7 ) Other comprehensive income (loss) before reclassifications 4.0 7.3 11.3 Reclassifications out of other comprehensive income (loss) — — — Balance as of September 30, 2021 $ (15.7 ) $ (7.7 ) $ (23.4 ) The following table summarizes the components of the income tax provision (benefit) (in millions): Year Ended September 30, 2021 2020 2019 Current: Federal1 $ 28.4 $ (1.5 ) $ (2.5 ) Foreign 3.6 1.4 0.6 State 13.3 0.5 1.0 Total current taxes 45.3 0.4 (0.9 ) Deferred: Federal 27.6 (21.0 ) (1.4 ) Foreign 0.1 0.2 0 State 4.3 (6.6 ) (0.9 ) Total deferred taxes 32.0 (27.4 ) (2.3 ) Provision for (benefit from) income taxes $ 77.3 $ (27.0 ) $ (3.2 ) Year Ended September 30, 2021 2020 2019 U.S. federal income taxes at statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 4.6 % 4.1 % 1.1 % Share-based payments (0.3 %) (0.5 %) (1.9 %) Deferred tax asset/liability remeasurement1 0.0 % 0.6 % 0.0 % Repatriation transition tax1 0.0 % 0.0 % 2.1 % Non-deductible meals and entertainment 0.2 % (0.8 %) (6.4 %) Other 0.4 % 0.5 % (1.4 %) Effective tax rate 25.9 % 24.9 % 14.5 % September 30, 2021 2020 Deferred tax assets: Deferred compensation $ 9.0 $ 10.4 Allowance for doubtful accounts 5.6 5.2 Accrued vacation and other 15.1 9.0 Inventory valuation 15.0 12.7 Tax loss carryforwards1 0.8 3.1 Unrealized loss on financial derivatives 2.4 4.8 Lease liability 100.7 94.8 Excess tax over book depreciation and amortization 15.4 — Total deferred tax assets 164.0 140.0 Deferred tax liabilities: Excess tax over book depreciation and amortization — (115.3 ) Lease right-of-use asset (100.2 ) (96.5 ) Total deferred tax liabilities (100.2 ) (211.8 ) Net deferred income tax assets (liabilities) $ 63.8 $ (71.8 ) December 31, 2022. The following September 30, 2021 2020 Long-lived assets: U.S. $ 641.3 $ 708.2 Canada 10.1 9.9 Total long-lived assets $ 651.4 $ 718.1 The following table summarizes changes in the valuation of the allowance for doubtful accounts for each balance sheet period presented (in millions): Year Ended September 30, 2021 2020 2019 Beginning Balance $ 17.9 $ 12.5 $ 16.7 Charged to Operations 9.7 17.6 9.4 Write-offs (11.3 ) (12.2 ) (13.5 ) Ending Balance $ 16.3 $ 17.9 $ 12.5 The Company records any differences paid or received on its interest rate hedges to interest expense, financing costs and Assets/(Liabilities) as of September 30, Instrument Fair Value Hierarchy 2021 2020 Designated interest rate swaps1 Level 2 $ (7.7 ) $ (15.0 ) The following table summarizes the amounts of gain (loss) on the interest rate derivative instruments recognized in other comprehensive income (in millions): Year Ended September 30, Instrument 2021 2020 2019 Designated interest rate swaps $ 7.3 $ (13.4 ) $ (1.6 ) 2021 2020 Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1 Net sales $ 1,875.4 $ 1,872.1 $ 1,318.0 $ 1,576.5 $ 1,755.0 $ 1,549.3 $ 1,197.1 $ 1,415.3 % of fiscal year’s net sales 28.2 % 28.2 % 19.8 % 23.7 % 29.7 % 26.2 % 20.2 % 23.9 % Gross profit $ 507.8 $ 517.4 $ 332.8 $ 399.7 $ 441.3 $ 368.7 $ 270.4 $ 340.1 % of fiscal year’s gross profit 28.9 % 29.4 % 18.9 % 22.7 % 31.1 % 26.0 % 19.0 % 23.9 % Net income (loss) from continuing operations $ 104.5 $ 79.8 $ (10.5 ) $ 47.4 $ 68.2 $ (4.1 ) $ (121.4 ) $ (24.0 ) Net income (loss) $ 104.8 $ 76.5 $ (6.3 ) $ (220.5 ) $ 71.9 $ (6.8 ) $ (122.6 ) $ (23.4 ) Net income (loss) attributable to common stockholders $ 98.8 $ 70.5 $ (12.3 ) $ (226.5 ) $ 65.9 $ (12.8 ) $ (128.6 ) $ (29.4 ) Net income (loss) from continuing operations per share - basic $ 1.23 $ 0.93 $ (0.24 ) $ 0.60 $ 0.79 $ (0.14 ) $ (1.85 ) $ (0.44 ) Net income (loss) per share - basic $ 1.24 $ 0.89 $ (0.18 ) $ (3.27 ) $ 0.84 $ (0.18 ) $ (1.87 ) $ (0.43 ) Net income (loss) from continuing operations per share - diluted $ 1.21 $ 0.91 $ (0.24 ) $ 0.59 $ 0.78 $ (0.14 ) $ (1.85 ) $ (0.44 ) Net income (loss) per share - diluted $ 1.22 $ 0.87 $ (0.18 ) $ (3.24 ) $ 0.83 $ (0.18 ) $ (1.87 ) $ (0.43 ) /s/ Ernst & Young LLP Tysons, Virginia DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Incorporated by Reference Exhibit Number Description Form Exhibit Filing Date 2.1 8-K 2.1 August 24, 2017 2.2 8-K 2.1 December 21, 2020 3.1 Second Amended and Restated Certificate of Incorporation of Beacon Roofing Supply, Inc. 10-K 3.1 December 23, 2004 3.2 By-Laws of Beacon Roofing Supply, Inc. (effective August 11, 2021). 8-K 3.1 August 17, 2021 3.3 8-K 3.1 January 5, 2018 4.1 10-K 4.1 November 26, 2019 4.2 8-K 4.1 October 9, 2019 4.3 8-K 4.2 October 9, 2019 4.4 8-K 4.1 May 10, 2021 4.5 8-K 4.2 May 10, 2021 10.1 8-K 10.1 May 21, 2021 10.2 8-K 10.2 May 21, 2021 10.3 8-K 10.1 August 24, 2017 10.4 8-K 10.1 November 21, 2018 10.5 10-Q 10.1 May 8, 2019 10.6 8-K 10.4 January 5, 2018 10.7 Amendment and Restatement of Section 2(a) of the Registration Rights Agreement, dated June 11, 2019 10-Q 10.1 August 7, 2019 10.8+ Description of Beacon Roofing Supply, Inc. Executive Annual Incentive Plan 10-Q 10.2 February 9, 2021 10.9+ Beacon Roofing Supply, Inc. Amended and Restated 2004 Stock Plan DEF 14A Appendix A January 7, 2011 10.10+ First Amendment dated as of October 31, 2011 to the Beacon Roofing Supply, Inc. 2004 Stock Plan 10-K 10.10 November 29, 2011 10.11+ Beacon Roofing Supply, Inc. Second Amended and Restated 2014 Stock Plan DEF 14A Appendix A January 9, 2020 10.12+ 10-Q 10.2 May 8, 2020 Incorporated by Reference Description 32.1* 32.2* 101* 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) BEACON ROOFING SUPPLY, INC. (REGISTRANT) By: /s/ FRANK A. LONEGRO Frank A. Lonegro Executive Vice President and Chief Financial Officer Date: /s/ PHILIP W. KNISELY Chairman Philip W. Knisely /s/ JULIAN G. FRANCIS President and Chief Executive Officer Julian G. Francis /s/ FRANK A. LONEGRO Executive Vice President and Chief Financial Officer Frank A. Lonegro /s/ SAMUEL M. GUZMAN JR. Vice President and Chief Accounting Officer Samuel M. Guzman Jr. /s/ CARL T. BERQUIST Director Carl T. Berquist /s/ BARBARA G. FAST Director Barbara G. Fast /s/ RICHARD W. FROST Director Richard W. Frost /s/ ALAN GERSHENHORN Director Alan Gershenhorn /s/ MELANIE M. HART Director Robert M. McLaughlin /s/ EARL NEWSOME Director Earl Newsome /s/ NEIL S. NOVICH Director Neil S. Novich /s/ STUART A. RANDLE Director Stuart A. Randle /s/ NATHAN K. SLEEPER Director Nathan K. Sleeper /s/ DOUGLAS L. YOUNG Director Douglas L. YoungGross margin was 26.5%2021, up 2.5 percentage points2022, from 24.0%$1.30 billion in 2020.Fiscal 2021. The comparative increase in gross margin resulted from a weighted-average selling price increase of approximately 8-9%, partially offset by a weighted-average product cost increase of approximately 6-7%.Operating ExpenseThe following table summarizes operating expense for the periods presented (in millions):__________________________________1.Percentage changes for dollar amounts represent the ratable increase or decrease from period-to-period. Percentage changes for percentages represent the net period-to-period change in basis points.Operating expense decreased 6.1% to $1.30 billion in 2021, from $1.39 billion in 2020. The comparative decrease in operating expense was mainly influenced by the following factors:$158.6 million decrease in amortization expense, which included the gross impact of accelerated22amortization of $142.6 million related to the write-off of certain trade names in connection with the Rebranding in 2020. The decrease was partially offset by a $58.0$116.2 million increase in payroll and employee benefit costs and stock-based compensation, primarily due to increased headcount to drive and support growth for new and acquired branches,as well as wage inflation and higher incentive compensation, including special RSU grants made in connection with the year-over-yearCompany’s Ambition 2025 strategic plan;annual incentive expenseselling costs, primarily due to an increase in 2021,fleet costs, as well as net sales growth resulting in higher wages to support stronger demand,commissions; and the impact of certain temporary cost actions taken 2020 in response to the COVID-19 pandemic.Our focus on improving our cost structure has allowed us to identify opportunities for efficiencies across our business. While certain of our cost actions have been temporary in nature, we continue our efforts to improve our expense structure in order to produce permanent efficiency gains. Our selling, general and administrative expenses, primarily due to higher insurance expenses and an increase in travel and entertainment expenses.percentagepercent of sales was comparatively lower in 2022, driven primarily by the positive impact from net sales improved by 0.9 percentage points, driven by the combination of higher year-over-year sales, lower travel and entertainment expenses, and improved operating leverage from labor productivity initiatives.2021, compared to $128.6 million in 2020.Fiscal 2021. The comparative decrease is primarily due to a $37.4 million decrease in interest expense resulting from decreasedlower average debt balances andduring the respective periods, partially offset by a lowerhigher weighted-average interest rate on our outstanding debt. The decreasepartially offset by:a $5.6$60.2 million settlement received in 2020 in connection with a class action lawsuit;Fiscal 2021 anda $5.3 million refund received in 2020 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.2021, compared to $(27.0) million in 2020.Fiscal 2021. The comparative increase in income tax expense was primarily due to an increase in pretaxpre-tax book income in 2021.2022. The effective tax rate was 26.0% in 2022, compared to 25.9% in 2021, compared to 24.9% in 2020.2021, compared to $(81.3) million in 2020. NetFiscal 2021. There was no net income (loss) from discontinued operations wasin 2022, compared to $(266.7) million in Fiscal 2021 compared to $0.4 million in 2020 (see Note 34 in the Notes to Consolidated Financial Statements for further discussion). Net income (loss) was $458.4 million in 2022, compared to $(45.5) million in 2021, compared to $(80.9) million in 2020.Fiscal 2021. There were $24.0 million of dividends on Preferred Stock in both 20212022 and 2020,Fiscal 2021, making net income (loss) attributable to common stockholders $434.4 million and $(69.5) million, and $(104.9) million, respectively.56 in the Notes to Consolidated Financial Statements for further discussion).23____________________________ Year Ended December 31, September 30, 2022 2021 Numerator: Net income (loss) from continuing operations $ 458.4 $ 221.2 Dividends on Preferred Stock (24.0) (24.0) Undistributed income from continuing operations allocated to participating securities (54.8) — Net income (loss) from continuing operations attributable to common stockholders - Basic 379.6 197.2 — 24.0 Net income (loss) from continuing operations attributable to common stockholders – Diluted (if-converted and two-class method) 379.6 221.2 Net income (loss) from discontinued operations — (266.7) Undistributed income from discontinued operations allocated to participating securities — — Net income (loss) from discontinued operations attributable to common stockholders – Basic and Diluted (if-converted and two-class method) — (266.7) Net income (loss) attributable to common stockholders – Basic (if-converted and two-class method) $ 379.6 $ (69.5) Net income (loss) attributable to common stockholders - Diluted (if-converted and two-class method) $ 379.6 $ (45.5) Denominator: Weighted-average common shares outstanding – Basic 67.1 69.7 Effect of common share equivalents 1.3 1.1 — 9.7 Weighted-average common shares outstanding – Diluted 68.4 80.5 Net income (loss) per share: Basic – Continuing operations $ 5.66 $ 2.83 Basic – Discontinued operations — (3.83) Basic net income (loss) per share $ 5.66 $ (1.00) Diluted – Continuing operations $ 5.55 $ 2.75 Diluted – Discontinued operations — (3.32) Diluted net income (loss) per share (if-converted and two-class method) $ 5.55 $ (0.57) Fiscal 2021 Calendar 2021 (Unaudited) (Unaudited) Net sales $ 6,642.0 $ 1,754.9 $ 1,576.5 $ 6,820.4 Cost of products sold 4,884.3 1,293.3 1,176.8 5,000.8 Gross profit 1,757.7 461.6 399.7 1,819.6 Operating expense: Selling, general and administrative 1,138.7 294.2 265.2 1,167.7 Depreciation 58.9 16.5 13.9 61.5 Amortization 103.3 22.2 25.5 100.0 Loss on sale of business — 22.3 — 22.3 Total operating expense 1,300.9 355.2 304.6 1,351.5 Income (loss) from operations 456.8 106.4 95.1 468.1 Interest expense, financing costs and other 98.1 17.4 30.0 85.5 Loss on debt extinguishment 60.2 — — 60.2 Income (loss) from continuing operations before income taxes 298.5 89.0 65.1 322.4 Provision for (benefit from) income taxes 77.3 20.9 17.7 80.5 Net income (loss) from continuing operations 221.2 68.1 47.4 241.9 Net income (loss) from discontinued operations (266.7) (0.1) (267.9) 1.1 Net income (loss) (45.5) 68.0 (220.5) 243.0 Dividends on Preferred Stock 24.0 6.0 6.0 24.0 Net income (loss) attributable to common stockholders $ (69.5) $ 62.0 $ (226.5) $ 219.0 Fiscal 2021 Calendar 2021 (Unaudited) (Unaudited) Operating Activities Net income (loss) $ (45.5) $ 68.0 $ (220.5) $ 243.0 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 175.2 38.7 52.3 161.6 Stock-based compensation 22.6 2.8 4.9 20.5 Certain interest expense and other financing costs 8.7 1.3 2.9 7.1 Loss on debt extinguishment 60.2 — — 60.2 Gain on sale of fixed assets and other (3.8) (1.6) (0.6) (4.8) Deferred income taxes (139.2) 1.6 (85.9) (51.7) Loss on sale of business 360.6 22.3 — 382.9 Loss on classification as held for sale — — 355.4 (355.4) Changes in operating assets and liabilities: Accounts receivable (81.3) 137.6 149.6 (93.3) Inventories (225.0) (89.1) (89.3) (224.8) Prepaid expenses and other current assets 9.6 (26.2) 18.0 (34.6) Accounts payable and accrued expenses (56.0) (102.6) (227.5) 68.9 Other assets and liabilities (8.1) (3.2) 1.6 (12.9) Net cash provided by (used in) operating activities 78.0 49.6 (39.1) 166.7 Investing Activities Purchases of property and equipment (66.5) (23.3) (18.0) (71.8) Acquisition of business, net — (89.0) — (89.0) Proceeds from sale of business 836.0 35.8 — 871.8 Proceeds from sale of assets 4.4 1.7 0.7 5.4 Net cash provided by (used in) investing activities 773.9 (74.8) (17.3) 716.4 Financing Activities Borrowings under revolving lines of credit 252.3 — 2.3 250.0 Payments under revolving lines of credit (509.3) — (102.3) (407.0) Borrowings under term loan 1,000.0 — — 1,000.0 Payments under term loan (948.3) (2.5) (2.4) (948.4) Borrowings under senior notes 350.0 — — 350.0 Payment under senior notes (1,300.0) — — (1,300.0) Payment of debt issuance costs (20.3) — — (20.3) Payment of call premium (31.7) — — (31.7) Payments under equipment financing facilities and finance leases (6.5) (1.4) (1.7) (6.2) Payment of dividends on Preferred Stock (24.0) (6.0) (6.0) (24.0) Proceeds from issuance of common stock related to equity awards 26.3 5.2 7.1 24.4 Payment of taxes related to net share settlement of equity awards (4.5) (4.4) (2.8) (6.1) Net cash provided by (used in) financing activities (1,216.0) (9.1) (105.8) (1,119.3) Effect of exchange rate changes on cash and cash equivalents (0.5) 0.1 (1.0) 0.6 Net increase (decrease) in cash and cash equivalents (364.6) (34.2) (163.2) (235.6) Cash and cash equivalents, beginning of period 624.6 260.0 624.6 260.0 Cash and cash equivalents, end of period $ 260.0 $ 225.8 $ 461.4 $ 24.4 Consolidated Balance Sheets (in millions) December 31, December 31, 2022 2021 (Unaudited) Assets Current assets: Cash and cash equivalents $ 67.7 $ 225.8 Accounts receivable, net 1,009.1 855.2 Inventories, net 1,322.9 1,161.7 Prepaid expenses and other current assets 417.8 367.2 Total current assets 2,817.5 2,609.9 Property and equipment, net 337.0 256.3 Goodwill 1,916.3 1,777.4 Intangibles, net 447.7 421.0 Operating lease assets 467.6 413.9 Deferred income taxes, net 9.9 61.9 Other assets, net 7.5 8.9 Total assets $ 6,003.5 $ 5,549.3 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 821.0 $ 794.2 Accrued expenses 448.0 472.1 Current operating lease liabilities 94.5 89.0 Current finance lease liabilities 16.1 6.4 Current portion of long-term debt/obligations 10.0 10.0 Total current liabilities 1,389.6 1,371.7 Borrowings under revolving lines of credit, net 254.9 — Long-term debt, net 1,606.4 1,612.9 Deferred income taxes, net 0.2 0.8 Non-current operating lease liabilities 382.1 326.3 Non-current finance lease liabilities 67.0 26.0 Total liabilities 3,700.2 3,337.7 Convertible Preferred Stock 399.2 399.2 Stockholders' equity: Common stock 0.6 0.7 Undesignated preferred stock — — Additional paid-in capital 1,187.2 1,148.6 Retained earnings 728.8 682.5 Accumulated other comprehensive income (loss) (12.5) (19.4) Total stockholders' equity 1,904.1 1,812.4 Total liabilities and stockholders' equity $ 6,003.5 $ 5,549.3 Consolidated Statements of Operations (in millions) Year Ended December 31, 2022 2021 (Unaudited) Net sales $ 8,429.7 $ 6,820.4 Cost of products sold 6,194.2 5,000.8 Gross profit 2,235.5 1,819.6 Operating expense: Selling, general and administrative 1,372.9 1,167.7 Depreciation 75.1 61.5 Amortization 84.1 100.0 Loss on sale of business — 22.3 Total operating expense 1,532.1 1,351.5 Income (loss) from operations 703.4 468.1 Interest expense, financing costs and other 83.7 85.5 Loss on debt extinguishment — 60.2 Income (loss) from continuing operations before income taxes 619.7 322.4 Provision for (benefit from) income taxes 161.3 80.5 Net income (loss) from continuing operations 458.4 241.9 Net income (loss) from discontinued operations — 1.1 Net income (loss) 458.4 243.0 Dividends on Preferred Stock 24.0 24.0 Net income (loss) attributable to common stockholders $ 434.4 $ 219.0 Consolidated Statements of Cash Flows (in millions) Year Ended December 31, 2022 2021 (Unaudited) Operating Activities Net income (loss) $ 458.4 $ 243.0 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 159.2 161.6 Stock-based compensation 27.6 20.5 Certain interest expense and other financing costs 5.2 7.1 Loss on debt extinguishment — 60.2 Gain on sale of fixed assets and other (4.1) (4.8) Deferred income taxes 30.1 (51.7) Loss on sale of business — 27.5 Changes in operating assets and liabilities: Accounts receivable (111.4) (93.3) Inventories (117.7) (224.8) Prepaid expenses and other current assets (36.3) (34.6) Accounts payable and accrued expenses (15.2) 68.9 Other assets and liabilities 5.3 (12.9) Net cash provided by (used in) operating activities 401.1 166.7 Investing Activities Purchases of property and equipment (90.1) (71.8) Acquisition of business, net (309.2) (89.0) Proceeds from sale of business — 871.8 Proceeds from sale of assets 5.2 5.4 Investment in available for sale securities (1.5) — Net cash provided by (used in) investing activities (395.6) 716.4 Financing Activities Borrowings under revolving lines of credit 2,781.3 250.0 Payments under revolving lines of credit (2,520.6) (407.0) Borrowings under term loan — 1,000.0 Payments under term loan (10.0) (948.4) Borrowings under senior notes — 350.0 Payment under senior notes — (1,300.0) Payment of debt issuance costs — (20.3) Payment of call premium — (31.7) Payments under equipment financing facilities and finance leases (12.1) (6.2) Repurchase and retirement of common stock, net (388.1) — Payment of dividends on Preferred Stock (24.0) (24.0) Proceeds from issuance of common stock related to equity awards 16.7 24.4 Payment of taxes related to net share settlement of equity awards (5.7) (6.1) Net cash provided by (used in) financing activities (162.5) (1,119.3) Effect of exchange rate changes on cash and cash equivalents (1.1) 0.6 Net increase (decrease) in cash and cash equivalents (158.1) (235.6) Cash and cash equivalents, beginning of period 225.8 461.4 Cash and cash equivalents, end of period $ 67.7 $ 225.8 Years Ended December 31, Change 2022 2021 $ % (Unaudited) Net sales $ 8,429.7 $ 6,820.4 $ 1,609.3 23.6 % Gross profit $ 2,235.5 $ 1,819.6 $ 415.9 22.9 % Gross margin 26.5 % 26.7 % N/A (0.2) % Total operating expense $ 1,532.1 $ 1,351.5 $ 180.6 13.4 % Income (loss) from operations $ 703.4 $ 468.1 $ 235.3 50.3 % Net income (loss) from continuing operations $ 458.4 $ 241.9 $ 216.5 89.5 % •••24••divestiture;and Solar Products divestitures; accrued estimated costs related to employee benefit plan withdrawals; andamortization of debt issuance costs; costs related to changing our fiscal year end; debt refinancing and extinguishment costs; and abandoned lease costs.•Effects of tax reform. Represents income tax provision (benefit) related to the Tax Cuts and Jobs Act of 2017.______________________________ Operating Expense Amorti-
zationLoss on Sale of Business Interest Expense Other (Income) Expense Total Year Ended December 31, 2022 Acquisition costs $ 6.3 $ 84.1 $ — $ 4.0 $ — $ — $ 94.4 Restructuring costs 8.9 — — 1.2 — — 10.1 COVID-19 impacts 2.0 — — — — — 2.0 Total adjusting items $ 17.2 $ 84.1 $ — $ 5.2 $ — $ — $ 106.5 Year Ended December 31, 2021 Acquisition costs $ 2.6 $ 97.8 $ — $ 5.1 $ — $ — $ 105.5 10.4 2.2 22.3 2.1 60.3 — 97.3 COVID-19 impacts 2.3 — — — — — 2.3 Total adjusting items $ 15.3 $ 100.0 $ 22.3 $ 7.2 $ 60.3 $ — $ 205.1 Year Ended September 30, 2021 Acquisition costs $ 3.3 $ 101.1 $ — $ 6.1 $ — $ — $ 110.5 9.4 2.2 — 2.7 60.3 — 74.6 COVID-19 impacts 1.6 — — — — — 1.6 Total adjusting items $ 14.3 $ 103.3 $ — $ 8.8 $ 60.3 $ — $ 186.7 Year Ended September 30, 2020 $ 9.6 $ 119.3 $ — $ 8.0 $ (5.1) $ — $ 131.8 2.3 142.6 — 3.6 21.5 — 170.0 4.2 — — — — (0.7) 3.5 Total adjusting items $ 16.1 $ 261.9 $ — $ 11.6 $ 16.4 $ (0.7) $ 305.3 the Rebranding.our rebranding efforts. Other (income) expense includes a loss on debt extinguishment of $14.7 million in connection with the October 2019 debt refinancing.25Year Ended December 31, Year Ended September 30, 2022 2021 2021 2020 Operating expense $ 1,532.1 $ 1,351.5 $ 1,300.9 $ 1,385.5 Acquisition costs (90.4) (100.4) (104.4) (128.9) Restructuring costs (8.9) (34.9) (11.6) (144.9) COVID-19 impacts (2.0) (2.3) (1.6) (4.2) Adjusted Operating Expense $ 1,430.8 $ 1,213.9 $ 1,183.3 $ 1,107.5 Net sales $ 8,429.7 $ 6,820.4 $ 6,642.0 $ 5,916.7 Operating expense as % of net sales 18.2 % 19.8 % 19.6 % 23.4 % Adjusted Operating Expense as % of net sales 17.0 % 17.8 % 17.8 % 18.7 % ______________________________Year Ended December 31, Year Ended September 30, 2022 2021 2021 2020 Net income (loss) from continuing operations $ 458.4 $ 241.9 $ 221.2 $ (81.3) Adjusting items: Acquisition costs 94.4 105.5 110.5 131.8 Restructuring costs 10.1 97.3 74.6 170.0 COVID-19 impacts 2.0 2.3 1.6 3.5 Total adjusting items 106.5 205.1 186.7 305.3 (27.0) (52.6) (47.8) (78.2) Total adjustments, net of tax 79.5 152.5 138.9 227.1 Adjusted Net Income (Loss) $ 537.9 $ 394.4 $ 360.1 $ 145.8 Net sales $ 8,429.7 $ 6,820.4 $ 6,642.0 $ 5,916.7 Net income (loss) as % of sales 5.4 % 3.5 % 3.3 % (1.4) % Adjusted Net Income (Loss) as % of sales 6.4 % 5.8 % 5.4 % 2.5 % 2020 and 20192020 were calculated using a blended effective tax rate of 25.4%, 25.6%, 25.6% and 25.5%25.6%, respectively.26______________________________Year Ended December 31, Year Ended September 30, 2022 2021 2021 2020 Net income (loss) from continuing operations $ 458.4 $ 241.9 $ 221.2 $ (81.3) Interest expense, net 86.3 86.7 101.0 138.4 Income taxes 161.3 80.5 77.3 (27.0) Depreciation and amortization 159.2 161.5 162.2 320.0 Stock-based compensation 27.6 17.4 18.4 16.0 6.3 2.6 3.3 4.5 8.9 93.0 69.7 23.8 2.0 2.3 1.6 4.2 Adjusted EBITDA $ 910.0 $ 685.9 $ 654.7 $ 398.6 Net sales $ 8,429.7 $ 6,820.4 $ 6,642.0 $ 5,916.7 Net income (loss) as % of net sales 5.4 % 3.5 % 3.3 % (1.4) % Adjusted EBITDA as % of net sales 10.8 % 10.1 % 9.9 % 6.7 % during our first, thirdin quarters ending June 30, September 30, and fourth fiscal quarters,December 31, which representencompass the peak months of construction and re-roofing. Conversely, we have historically experienced low net income levels or net losses during the second fiscal quarter,in quarters ending March 31, when winter construction cycles and cold weather patterns have an adverse impact on our customers’ ability to conduct their business.secondquarters ending March 31 and third fiscal quarters of the year,June 30, driven primarily by increased purchasing that is necessary to meet the rise in demand for our products during the warmer months. Accounts receivable, accounts payable, and cash collections are generally at their highest during the thirdquarters ending June 30 and fourth fiscal quarters of the year,September 30, when sales are typically at their peak.impactimpacts of the COVID-19 pandemic hasand continuing supply chain disruptions as well as inflation have caused, and may continue to cause, fluctuations in our financial results and working capital that are not aligned with the seasonality we generally experience. There was moderate product inflation from our suppliers in 2019, and we were able to mostly offset higher product costs with increased selling prices.27September 30, 2021December 31, 2022 were our cash and cash equivalents of $260.0$67.7 million and our available borrowings of approximately $1.28$1.02 billion under our asset-based revolving lines of credit.••••• and•share repurchases; andcapital expenditures.share repurchases. Our primary sources of working capital are cash from operations and bank borrowings. We have financed largelarger acquisitions through increased bank borrowings and the issuance of long-term debt and common or preferred stock. We then repay any such borrowings with cash flows from operations or subsequent financings. We have funded most of our capital expenditures with cash on hand, increased bank borrowings, or equipment financing, and then reduced those obligations with cash flows from operations. We may explore additional or replacement financing sources in order to bolster liquidity and strengthen our capital structure. For a schedule of lease payments over the next five years and thereafter, see Note 1113 in the Notes to Consolidated Financial Statements. For a schedule of principal payments for all outstanding financing arrangements over the next five years and thereafter, see Note 1012 in the Notes to Consolidated Financial Statements.and hold discussions with certain acquisition candidates.including as part of our Ambition 2025 initiative. If suitable acquisition opportunities or working capital needs arise that require additional financing, we believe that our financial position, credit profile, and earnings history provide a sufficient base for obtaining additional financing resources at reasonable rates and terms. We may also choose to issue additional shares of common stock or preferred stock in order to raise funds. Year Ended December 31, September 30, 2022 2021 Net cash provided by (used in) operating activities $ 401.1 $ 78.0 Net cash provided by (used in) investing activities (395.6) 773.9 Net cash provided by (used in) financing activities (162.5) (1,216.0) Effect of exchange rate changes on cash and cash equivalents (1.1) (0.5) Net increase (decrease) in cash and cash equivalents $ (158.1) $ (364.6) 2021, compared to $479.3 million in 2020.Fiscal 2021. Cash from operations decreased $401.3increased $323.1 million primarily due to an increase in net income after adjustments for non-cash items of $237.6 million, as well as an incremental cash outflowinflow of $520.7$85.5 million stemming from changes to our net working capital, mainly driven by increasesa favorable change in inventories and accounts receivable and a decrease in accounts payable, partially offset by an increase in net income after adjustments for non-cash items of $119.4 million.cash outflows related to inventories. Operating cash flows provided by (used in)used in discontinued operations for the years ended September 30,Fiscal 2021 and 2020 were $(28.2)was $28.2 million.and $84.9 million, respectively.Investing ActivitiesNetin 2022, compared to net cash provided by investing activities wasof $773.9 million in 2021, compared to net cash used in investing activities of $39.0 million in 2020.Fiscal 2021. The $812.9 million increase$1.17 billion decrease in investing cash flows was primarily due to proceeds from the sale of Interior Products.Products in Fiscal 2021 as well as our business acquisitions in 2022. Investing28provided by (used in)used in discontinued operations for the years ended September 30,Fiscal 2021 and 2020 were $(2.5) million and $(7.5) million, respectively.2021, compared to net cash provided by financing activities of $112.2 million in 2020.Fiscal 2021. The financing cash flow decreaseincrease of $1.33$1.05 billion was primarily due to a $425.0$517.7 million decreaseincrease in net borrowings under our revolving lines of credit and a $950.0 million decrease in net payments under our senior notes over the comparative periods, and a $970.3partially offset by repurchases of common stock of $388.1 million decrease in net borrowings under our senior notes.officesteams are staffed to manage and monitor our receivable aging balances and our systems allow us to enforce pre-determinedpredetermined credit approval levels and properly leverage new business. The credit pre-approvalpreapproval process denotes the maximum credit that each level of management can approve, with the highest credit amount requiring approval by our CEO and CFO. There are daily communications with branch and field staff. Our divisional officesteams conduct periodic reviews with their branch managers, various regional management staff and the Chief Credit Officer. Depending on the state of the respective division’s receivables, these reviews can be weekly, bi-weeklybiweekly or monthly. Additionally, the divisions are required to submit a monthly receivable forecast to the Chief Credit Officer. On a monthly basis, the Chief Credit Officer reviews and discusses these forecasts, as well as a prior month recap, with members of our executive management team.•••••0.15%0.17% of net sales. The continued limitation of bad debt expense is primarily attributed to the continued strengthening of our collections process and overall credit environment.Upon completion of the 2021 Debt Refinancing, the weighted-average interest rate on our outstanding debt was 3.11% as of September 30, 2021, down from 4.21% as of March 31, 2021.September 30, 2021December 31, 2022, we had access to the following financing arrangements:•billion;••$981.7$972.2 million; and•notenotes instruments, including the 2029 Senior Notes and 2026 Senior Notes, with an outstanding balancebalances of $346.2$346.8 million and $296.6$297.4 million, respectively.1012 in the Notes to Consolidated Financial Statements for additional information on our current financing arrangements and the 2021 Debt Refinancing.29••Business combinationsindefinite-lived intangiblesintangible assetsIndefinite-Lived IntangiblesWe currently have threeThe Company evaluates its components which we evaluate for aggregation by examining the distribution methods, sales mix, and operating results of each component to determine if these characteristics will be sustained over a long-term basis. For purposes of this evaluation, we expect components to exhibit similar economic characteristics 3-5 years after events such as an acquisition within our core roofing business or management/business restructuring. Components that exhibit similar economic2021,2022, it was determined that all components exhibited similar economic characteristics, and therefore should be aggregated into a single reporting unit (collectively, the “Reporting Unit”).2021,2022, we concluded that it was more likely than not that the fair value of the goodwill and indefinite-lived intangible assets exceeded their net carrying amount, therefore the quantitative two-step impairment test was not required. Our total market capitalization exceeded carrying value by approximately 112%117% as of August 31, 2021.2022. We did not identify any macroeconomic, industry conditions, or cost-related factors that would indicate it is more likely than not that the fair value of the reporting unit was less than its carrying value.non-compete agreements, customer relationships and trade names. Non-compete agreements are amortized on a straight-line basis over the terms of the associated contractual agreements; customerCustomer relationship assets are amortized on an accelerated basis based on the expected cash flows generated by the existing customers; and trade names are amortized on an accelerated basis over a five- or ten-year period.the term we expect to use the trade name. Amortizable intangible assets are tested for impairment, when deemed necessary, based on undiscounted cash flows and, if impaired, are written down to fair30 In connection with certain financing arrangements, we have debt issuance costs that are amortized over the lives of the associated financings.instruments areinstrument is with a large financial counterparty that is rated highly by nationally recognized credit rating agencies.September 30, 2021,December 31, 2022, net of unamortized debt issuance costs, we had outstanding borrowings of $981.7$972.2 million under our term loan, $642.8$644.2 million under our respective senior notes, and zero$254.9 million under our asset-based revolving lines of credit. Borrowings under our asset-based revolving lines of credit and term loan incur interest on a floating rate basis while borrowings under our senior notes incur interest on a fixed rate basis. As of September 30, 2021,December 31, 2022, our weighted-average effective interest rate on debt instruments with variable rates was 2.3%6.14%. Based on our analysis, the financial impact of a hypothetical 10% interest rate fluctuation in effect as of September 30, 2021December 31, 2022 would be immaterial.2025 Term Loan. The swaps are for three- and five-year terms, and each hedge againstprevious term loan. Each swap agreement has a notional amount of $250 million for a total of $500 million. As part of the 2021 Debt Refinancing, we refinanced the 2025 Term Loan,previous term loan, resulting in the issuance of the 2028 Term Loan; the two interest rate swaps were designed and executed such that they continue to hedge against a total notional amount of $500 million related to the refinanced 2028 Term Loan. The swaps are “pay-fixed/receive-floating” instrumentsinstruments. One agreement (the “5-year swap”) will expire on August 30, 2024 and swaps the thirty-day LIBOR with fixed ratesa fixed-rate of 1.499%1.49%. The second agreement (the “3-year swap”) expired on August 30, 2022 and 1.489% forswapped the three- and five-year swaps, respectively.thirty-day LIBOR with a fixed-rate of 1.50%. The swaps are5-year swap is designed to hedge against theamountsamount of $250 million, each, will exceed 1.499% and 1.489% within three- and five-years, respectively.five years. The interest rate swaps areswap is designated as a cash flow hedgeshedge and as such, changes in the fair value of the swap instruments areinstrument is recorded as a component of accumulated other comprehensive income and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. As of September 30, 2021,December 31, 2022, the fair value of the 3-year and 5-year swaps,swap, net of tax, were $2.4was $9.7 million and $5.3 million, respectively, both in favor of the counterparty.3.3%3.2% of our net sales in 20212022 were derived from sales to customers in Canada. This business is primarily conducted in the local currency. This exposes us to risks associated with changes in foreign currency that can adversely affect net sales, net income, and cash flows. A 10% fluctuation of foreign currency exchange rates would not have a material impact on our results of operations or cash flows; therefore, we currently do not enter into financial instruments to manage this minimal foreign currency exchange risk.September 30, 2021December 31, 2022 we had no such derivative financial instruments in place.31F-1 and 2020F-32020, and 20192020F-42020, and 20192020F-52020, and 20192020F-62020, and 20192020F-7F-8F-8F-8F-134.55F-15F-16F-177.61F-19F-19F-19F-21F-25F-25F-25F-26F-28F-28F-28F-28F-29F-29F-3032 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the year ended December 31, 2022, the three months ended December 31, 2021, and each of the threetwo years in the period ended September 30, 2021, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and September 30, 2021, and 2020, and the results of its operations and its cash flows for the year ended December 31, 2022, the three months ended December 31, 2021, and each of the threetwo years in the period ended September 30, 2021, in conformity with U.S. generally accepted accounting principles.September 30, 2021,December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 19, 2021February 24, 2023 expressed an unqualified opinion thereon.Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.F-1ValuationExistence of Vendor RebatesInventoryCompany’s arrangementsfinancial statements, inventories consist substantially of finished goods, with vendors typically provide for rebates as inventory purchases are made. A vendor rebate receivable and a corresponding reduction to inventory are recorded atcost determined utilizing the point in whichweighted-average cost method.purchased,complex and requires significant effort in testing due to the disaggregation of inventory across 480 branch locations. This results in both: (1) a reductionhigh degree of auditor judgment in costdetermining the extent of products sold is recognized at the point the related inventory is sold. The Company had $289.5 millionprocedures to be performed and (2) a high degree of vendor rebate receivables as of September 30, 2021 (see Note 7), of which a portion relatedeffort to rebates earned under cumulative annual calendar-year vendor rebate agreements. The annual calendar-year vendor rebate agreements provide for rebates only after the Company makes annual purchases of a specified amount. The Company updates its estimates of annual calendar-year purchases each reporting periodperform procedures in order to estimatevalidate the cumulative rebates earned under annual calendar-year vendor agreements.Auditing rebates earned under cumulative annual calendar-year vendor agreementsexistence of inventory. For example, there is especially challenging due to the judgment required by managementin determining the number of branch locations at which to estimate the vendor rebates earned during the year, as the projected full year rebate rate is applied to inventory purchased and sold during the year. This estimate has a significant effect on the amount of cost of products sold recognized during the year.perform testing procedures.vendor rebatesinventory process. For example, we tested themanagement’s controls relating to management’s reviewthe performance of counts of inventory held at the estimated level of calendar-year purchases that are used to determine the estimated vendor rebates earned.valuationexistence of vendor rebates, we performed audit procedures that included, among others, evaluating management’s precision in forecasting calendar-year purchases by comparing historical actual results to management’s estimates of annual purchases in prior years, as well as assessing purchasing activity subsequent toinventory at the balance sheet date, comparedour audit procedures included, among others, performing test counts of inventory items at a sample of branch locations, comparing our test count results to management’s estimates.the Company’s system of record, and performing analytical procedures over the total inventory balance at the balance sheet date.November 19, 2021F-2 December 31, September 30, 2022 2021 Assets Current assets: Cash and cash equivalents $ 67.7 $ 260.0 Accounts receivable, less allowance of $17.2 and $16.3 as of December 31, 2022 and September 30, 2021, respectively 1,009.1 978.3 Inventories, net 1,322.9 1,084.5 Prepaid expenses and other current assets 417.8 345.9 Total current assets 2,817.5 2,668.7 Property and equipment, net 337.0 236.6 Goodwill 1,916.3 1,760.9 Intangibles, net 447.7 414.8 Operating lease right-of-use assets, net 467.6 399.2 Deferred income taxes, net 9.9 64.5 Other assets, net 7.5 9.8 Total assets $ 6,003.5 $ 5,554.5 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 821.0 $ 812.9 Accrued expenses 448.0 546.7 Current portion of operating lease liabilities 94.5 88.5 Current portion of finance lease liabilities 16.1 5.0 Current portion of long-term debt/obligations 10.0 10.0 Total current liabilities 1,389.6 1,463.1 Borrowings under revolving lines of credit, net 254.9 — Long-term debt, net 1,606.4 1,614.5 Deferred income taxes, net 0.2 0.7 Operating lease liabilities 382.1 311.3 Finance lease liabilities 67.0 22.9 Total liabilities 3,700.2 3,412.5 Commitments and contingencies (Note 14) Convertible Preferred Stock (voting); $0.01 par value; aggregate liquidation preference $400.0; 0.4 shares authorized, issued and outstanding as of December 31, 2022 and September 30, 2021 (Note 6) 399.2 399.2 Stockholders’ equity: Common stock (voting); $0.01 par value; 100.0 shares authorized; 64.2 and 70.1 shares issued and outstanding as of December 31, 2022 and September 30, 2021, respectively 0.6 0.7 Undesignated preferred stock; 5.0 shares authorized, none issued or outstanding — — Additional paid-in capital 1,187.2 1,145.0 Retained earnings 728.8 620.5 Accumulated other comprehensive income (loss) (12.5) (23.4) Total stockholders’ equity 1,904.1 1,742.8 Total liabilities and stockholders’ equity $ 6,003.5 $ 5,554.5 F-3 Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Net sales $ 8,429.7 $ 1,754.9 $ 6,642.0 $ 5,916.7 Cost of products sold 6,194.2 1,293.3 4,884.3 4,496.2 Gross profit 2,235.5 461.6 1,757.7 1,420.5 Operating expense: Selling, general and administrative 1,372.9 294.2 1,138.7 1,065.5 Depreciation 75.1 16.5 58.9 58.1 Amortization 84.1 22.2 103.3 261.9 Loss on sale of business — 22.3 — — Total operating expense 1,532.1 355.2 1,300.9 1,385.5 Income (loss) from operations 703.4 106.4 456.8 35.0 Interest expense, financing costs and other 83.7 17.4 98.1 128.6 Loss on debt extinguishment — — 60.2 14.7 Income (loss) from continuing operations before income taxes 619.7 89.0 298.5 (108.3) Provision for (benefit from) income taxes 161.3 20.9 77.3 (27.0) Net income (loss) from continuing operations 458.4 68.1 221.2 (81.3) — (0.1) (266.7) 0.4 Net income (loss) 458.4 68.0 (45.5) (80.9) Dividends on Preferred Stock 24.0 6.0 24.0 24.0 Net income (loss) attributable to common stockholders $ 434.4 $ 62.0 $ (69.5) $ (104.9) Basic 67.1 70.3 69.7 68.8 Diluted 68.4 71.5 80.5 68.8 Basic - Continuing operations $ 5.66 $ 0.78 $ 2.83 $ (1.53) Basic - Discontinued operations — — (3.83) 0.01 Basic net income (loss) per share $ 5.66 $ 0.78 $ (1.00) $ (1.52) Diluted - Continuing operations $ 5.55 $ 0.76 $ 2.75 $ (1.53) Diluted - Discontinued operations — — (3.32) 0.01 Diluted net income (loss) per share $ 5.55 $ 0.76 $ (0.57) $ (1.52) 34 for detailed calculations and further discussion.56 for detailed calculations and further discussion.F-4 Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Net income (loss) $ 458.4 $ 68.0 $ (45.5) $ (80.9) Other comprehensive income (loss): Foreign currency translation adjustment (6.9) 0.4 4.0 (0.7) Unrealized gain (loss) due to change in fair value of derivatives, net of tax 13.8 3.6 7.3 (13.4) Total other comprehensive income (loss) 6.9 4.0 11.3 (14.1) Comprehensive income (loss) $ 465.3 $ 72.0 $ (34.2) $ (95.0) F-5____________________________________ Common Stock Shares Amount Balance as of September 30, 2019 68.6 $ 0.7 $ 1,083.0 $ 799.2 $ (20.6) $ 1,862.3 Issuance of common stock, net of shares withheld for taxes 0.4 — 0.4 — — 0.4 Stock-based compensation — — 17.2 — — 17.2 Other comprehensive income (loss) — — — — (14.1) (14.1) Net income (loss) — — — (80.9) — (80.9) Dividends on Preferred Stock — — — (24.0) — (24.0) Balance as of September 30, 2020 69.0 $ 0.7 $ 1,100.6 $ 694.3 $ (34.7) $ 1,760.9 Adoption of ASU 2016-13 — — — (4.3) — (4.3) Issuance of common stock, net of shares withheld for taxes 1.1 — 21.8 — — 21.8 Stock-based compensation — — 22.6 — — 22.6 Other comprehensive income (loss) — — — — 11.3 11.3 Net income (loss) — — — (45.5) — (45.5) Dividends on Preferred Stock — — — (24.0) — (24.0) Balance as of September 30, 2021 70.1 $ 0.7 $ 1,145.0 $ 620.5 $ (23.4) $ 1,742.8 Issuance of common stock, net of shares withheld for taxes 0.3 — 0.8 — — 0.8 Stock-based compensation — — 2.8 — — 2.8 Other comprehensive income (loss) — — — — 4.0 4.0 Net income (loss) — — — 68.0 — 68.0 Dividends on Preferred Stock — — — (6.0) — (6.0) Balance as of December 31, 2021 70.4 $ 0.7 $ 1,148.6 $ 682.5 $ (19.4) $ 1,812.4 Repurchase and retirement of common stock, net (6.9) (0.1) — (388.1) — (388.2) Issuance of common stock, net of shares withheld for taxes 0.7 — 11.0 — — 11.0 Stock-based compensation — — 27.6 — — 27.6 Other comprehensive income (loss) — — — — 6.9 6.9 Net income (loss) — — — 458.4 — 458.4 Dividends on Preferred Stock — — — (24.0) — (24.0) Balance as of December 31, 2022 64.2 $ 0.6 $ 1,187.2 $ 728.8 $ (12.5) $ 1,904.1 ("AOCI"(“AOCI”).F-6______________________________ Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Operating Activities Net income (loss) $ 458.4 $ 68.0 $ (45.5) $ (80.9) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 159.2 38.7 175.2 391.1 Stock-based compensation 27.6 2.8 22.6 17.2 Certain interest expense and other financing costs 5.2 1.3 8.7 11.5 Loss on debt extinguishment — — 60.2 14.7 Gain on sale of fixed assets and other (4.1) (1.6) (3.8) (3.5) Deferred income taxes 30.1 1.6 (139.2) (25.6) — 22.3 360.6 — 338(h)(10) election refund — — — (5.1) Changes in operating assets and liabilities: Accounts receivable (111.4) 137.6 (81.3) 78.4 Inventories (117.7) (89.1) (225.0) 73.4 Prepaid expenses and other current assets (36.3) (26.2) 9.6 (73.6) Accounts payable and accrued expenses (15.2) (102.6) (56.0) 72.2 Other assets and liabilities 5.3 (3.2) (8.1) 9.5 Net cash provided by (used in) operating activities 401.1 49.6 78.0 479.3 Investing Activities Purchases of property and equipment (90.1) (23.3) (66.5) (48.5) Acquisition of business, net (309.2) (89.0) — 5.1 — 35.8 836.0 — Proceeds from sale of assets 5.2 1.7 4.4 4.4 Investment in available for sale securities (1.5) — — — Net cash provided by (used in) investing activities (395.6) (74.8) 773.9 (39.0) Financing Activities Borrowings under revolving lines of credit 2,781.3 — 252.3 2,038.0 Payments under revolving lines of credit (2,520.6) — (509.3) (1,870.0) Borrowings under term loan — — 1,000.0 — Payments under term loan (10.0) (2.5) (948.3) (9.7) Borrowings under senior notes — — 350.0 300.0 Payment under senior notes — — (1,300.0) (309.6) Payment of debt issuance costs — — (20.3) (4.3) Payment of call premium — — (31.7) — Payments under equipment financing facilities and finance leases (12.1) (1.4) (6.5) (8.6) Repurchase and retirement of common stock, net (388.1) — — — Payment of dividends on Preferred Stock (24.0) (6.0) (24.0) (24.0) Proceeds from issuance of common stock related to equity awards 16.7 5.2 26.3 3.3 Payment of taxes related to net share settlement of equity awards (5.7) (4.4) (4.5) (2.9) Net cash provided by (used in) financing activities (162.5) (9.1) (1,216.0) 112.2 Effect of exchange rate changes on cash and cash equivalents (1.1) 0.1 (0.5) (0.2) Net increase (decrease) in cash and cash equivalents (158.1) (34.2) (364.6) 552.3 Cash and cash equivalents, beginning of period 225.8 260.0 624.6 72.3 Cash and cash equivalents, end of period $ 67.7 $ 225.8 $ 260.0 $ 624.6 Supplemental Cash Flow Information Operating cash flows provided by (used in) discontinued operations $ — $ — $ (28.2) $ 84.9 Investing cash flows provided by (used in) discontinued operations $ — $ — $ (2.5) $ (7.5) Cash paid during the period for: Interest $ 83.4 $ 22.2 $ 120.0 $ 130.3 $ 157.1 $ 40.6 $ 85.2 $ (5.4) 34 for additional information.YearTaxes paid in the year ended December 31, 2022 includes $18.6 million related to the transition period from October 1, 2021 to December 31, 2021. Taxes paid in the three months ended December 31, 2021 and year ended September 30, 2021 amount includesinclude $9.9 million and $63.3 million, respectively, related to the Interior Products divestiture.F-7(the(“Beacon” or the “Company”) was incorporated in the state of Delaware on August 22, 1997 and is the largest publicly traded distributor of residential and non-residential roofing materials and complementary building products, such as siding and waterproofing, in the United States and Canada.$850$850 million in cash (subject to a working capital and certain other adjustments as set forth in the Purchase Agreement). As of September 30, 2021, the adjusted purchase price for Interior Products was $842.7 million. On January 29, 2021, ASP assigned the Purchase Agreement to FBM. The final adjusted purchase price for Interior Products was $842.7 million. Unless otherwise noted, the Company has reflected Interior Products as discontinued operations for all periods presented.the three months ended December 31, 2021 and the years ended September 30, 2021 and 2020. For additional information, see Notes 2 and 3.On January 15, 2020, the4.announced the rebranding ofoperates its exterior products branches withbusiness primarily under the trade name “Beacon Building Products” (the “Rebranding”). The new name, and a related logo, were adopted at substantially all of Beacon’s exterior products branches.The Company operates its business under regional and local trade names and services customers in all 50 states throughout the U.S. and 6six provinces in Canada. The Company’s material subsidiaries are Beacon Sales Acquisition, Inc. and, Beacon Roofing Supply Canada Company.inter-companyintercompany transactions have been eliminated. Beginning with the condensed consolidated financial statements for the three months ended December 31, 2020, theThe Company has reflected Interior Products as discontinued operations for all periods presented.the three months ended December 31, 2021 and years ended September 30, 2021 and 2020. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to the Company'sCompany’s continuing operations. Certain prior period amounts have been reclassified to conform to current period presentation.Assumptions made in the development of these estimates contemplate the impact of the novel coronavirus (“COVID‑19”) on the economy and the Company’s anticipated results; however,Accordingly, actual amounts could differ materially from these estimates.Beacon uses a fiscal reporting calendar which begins on October 1 and ends on September 30. The fiscal years presented are the years ended September 30, (“2021”), September 30, 2020 (“2020”), and September 30, 2019 (“2019”). Each of the Company’s fiscal quarters ends on the last dayBoard of the calendar month.As announced on August 17, 2021, the Company willDirectors approved a change in its fiscal year end from September 30 to December 31, which will be effective beginning31. The Company’s 2022 fiscal year began on January 1, 2022 for the year endingand ended on December 31, 2022. The Company plans to file a transition report on Form 10‑QT for the transition period from October 1, 2021, to December 31, 2021. This change better aligns the Company’s financial reporting calendar with many of its industry peers and provides internal benefits by shifting the timing of the budgeting, physical inventory, and performance review cycles away from the Company’s busiest time of year.1one operating segment.F-80no single customer represented at least 10% of the Company’s revenue during the year ended September 30, 2021December 31, 2022 or accounts receivable as of September 30, 2021.December 31, 2022.LeaseholdSoftware3 to 5 years Finance lease assets and leasehold improvements Indefinite-Lived Intangiblescurrently has threeevaluates its components which it evaluates for aggregation by examining the distribution methods, sales mix, and operating results of each component to determine if these characteristics will be sustained over a long-term basis. For purposes of this evaluation, the Company expects its components to exhibit similar economicF-93-53-5 years after events such as an acquisition within the Company’s core roofing business or management/business restructuring. Components that exhibit similar economic characteristics are subsequently aggregated into a single reporting unit. Based on the Company’s most recent impairment assessment performed as of August 31, 2021,2022, it was determined that all of the Company’s components exhibited similar economic characteristics, and therefore should be aggregated into a single reporting unit (collectively, the “Reporting Unit”). qualitative impairment assessment performed as of August 31, 2021,2022, the Company concluded that there were no indicators of impairment, and that therefore it was more likely than not that the fair value of the goodwill and indefinite-lived intangible assets exceeded their net carrying amount, and therefore the quantitative two-step impairment test was not required.non-compete agreements, customer relationships and trade names. Non-compete agreements are amortized on a straight-line basis over the terms of the associated contractual agreements; customerCustomer relationship assets are amortized on an accelerated basis based on the expected cash flows generated by the existing customers; and trade names are amortized on an accelerated basis over a five or ten year period.the term the Company expects to use the trade name. Amortizable intangible assets are tested for impairment, when deemed necessary, based on undiscounted cash flows and, if impaired, are written down to fair value based on either discounted cash flows or appraised values. In connection with certain financing arrangements, the Company has debt issuance costs that are amortized over the lives of the associated financings.•••has enteredenters into interest rate swaps to minimize the risks and costs associated with financing activities, as well as to maintain an appropriate mix of fixed-rate and floating-rate debt. The swap agreements are contracts to exchange variable-rate for fixed-interest rate payments over the life of the agreements. The Company'sCompany’s derivative instruments are designated as cash flow hedges, for which the Company records changes in their fair value, net of tax, in other comprehensive income.F-1020212023 and 2038.20212023 and 2028.F-11a performance-based vesting condition,performance conditions, the Company accrues stock-based compensation expenseover the service period if, and to the extent that, it is probabledetermined that achievement of the performance condition will be achieved.Stock-based compensation expense for restricted stock units is measured based onprobable. Market conditions are incorporated into the grant date fair value of stock-based awards with market conditions using a Monte Carlo valuation model. Compensation expense for stock-based awards with market conditions is recognized over the Company’s common stock onservice period and is not reversed if the grant date. market condition is not met. If awards with market, performance and/or service conditions are forfeited due to failure to achieve performance conditions or failure to satisfy service conditions, any previously recognized expense for such awards is reversed.•••0.•In December 2019, the FASB issued ASU 2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes.” This guidance is intended to simplify thefor income taxespronouncements were adopted by removing certain exceptions, clarifying existing guidance and improving consistent application of the guidance. The Company early adopted this standard for the year ended September 30, 2021. The adoption of the standard did not have a material impact on the Company’s financial statements and related disclosures.F-12In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments.” This guidance is intended to introduce a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. This new standard became effective for the Company on October 1, 2020. The adoption ofduring 2022 or the new standard was done using the modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of October 1, 2020. The most significant effect of the standard was an increase to the Company’s accounts receivable reserve and a corresponding retained earnings adjustment of approximately $4.3 million on October 1, 2020.In January 2017, the FASB issued ASU 2017-04, “Simplifying the Accounting for Goodwill Impairment.” This guidance is intended to introduce a simplified approach to measurement of goodwill impairment, eliminating the need for a hypothetical purchase price allocation and instead measuring impairment by the amount a reporting unit’s carrying value exceeds its fair value. This new standard became effective for the Company on October 1, 2020. The adoption of this new guidance did not have a material impact on the Company’s financial statements and related disclosures.ASUAccounting Standards Update (“ASU”) 2021-08, “Business Combinations – Accounting for Contract Assets and Contact Liabilities from Contracts with Customers.” The guidance is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice. The guidance requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606 as if they had originated the contracts, as opposed to at fair value on the acquisition date. The standard will be effective for business combinations that occur after January 1, 2023. Early adoption is permitted. The Company is currently evaluatingwill adopt this standard on a prospective basis and does not expect the impact thatadoption of this guidance mayto have a material impact on its financial statements and related disclosures.In January 2021,The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and expedients may be elected over time, as reference rate activities occur through December 31, 2022. However, in December 2022, the FASB issued ASU 2021-01,2022-06, “Reference Rate Reform (Topic 848), Scope: Deferral of the Sunset Date of Topic 848,” to clarifyextending the scope of the guidance and reduce potential diversity in practice. The standard is effective as of March 12, 2020 throughsunset date under Topic 848 from December 31, 2022. However, the standard is not applicable2022 to contract modifications made, and hedging relationships entered into or evaluated after, December 31, 2022.2024 to align the temporary accounting relief guidance with the expected LIBOR cessation date of June 30, 2023. The Company will evaluate and disclose the impact of this guidance in the period of election, as well as the nature and reason for doing so.Date Acquired Company Name Region Branches December 30, 2022 Whitney Building Products Massachusetts 1 $ 1.7 $ 2.8 November 1, 2022 Coastal Construction Products Florida, Illinois, Alabama, Georgia, Arkansas, Tennessee, North Carolina, Massachusetts 18 $ 131.3 $ 102.8 June 1, 2022 Complete Supply, Inc. Illinois 1 $ 8.6 $ 4.6 April 29, 2022 Wichita Falls Builders Wholesale, Inc. Texas 1 $ 0.4 $ 0.5 January 1, 2022 Crabtree Siding and Supply Tennessee 1 $ 0.1 $ 0.1 November 1, 2021 Midway Sales & Distributing, Inc. Kansas, Missouri, Nebraska 10 $ 28.8 $ 38.5 3. Discontinued Operations1.$850$850 million in cash (subject to a working capital and certain other adjustments as set forth in the Purchase Agreement). As of September 30, 2021, theThe final adjusted purchase price for Interior Products was $842.7$842.7 million.2018 (see Note 5 for additional information)6) to enhance leadership focus, reduce net leverage, strengthen its balance sheet, enhance leadership focus, and provide the financial flexibility to pursue strategic growth initiatives in its core exteriors business.pretaxpre-tax income (loss) from discontinued operations to net income (loss) from discontinued operations as presented in the consolidated statements of operations (in millions):Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Net sales $ — $ 357.9 $ 1,027.2 Cost of products sold — (264.2) (748.5) Selling, general and administrative (0.1) (79.1) (207.5) Depreciation and amortization — (13.0) (71.1) Other income — 0.1 0.5 Loss on sale — (360.6) — Pre-tax income (loss) from discontinued operations (0.1) (358.9) 0.6 Provision for (benefit from) income taxes — (92.2) 0.2 Net income (loss) from discontinued operations $ (0.1) $ (266.7) $ 0.4 $360.6$360.6 million for the year ended September 30, 2021 was calculated by comparing the purchase price (as adjusted) to the carrying value of the net assets of Interior Products as of February 10, 2021, the closing date of the sale. As Interior ProductsF-13$730.9$730.9 million of the Company’s consolidated goodwill balance. The Company allocated consolidated goodwill based on the relative fair value of the component, which was determined using the purchase price (as adjusted) of Interior Products and the market capitalization of the Company as of February 10, 2021. The net result of this allocation attributed a higher amount of goodwill than that which was directly associated with the Interior Products portion of the Allied Acquisition (as defined in Note 6), thereby having a significant influence on the loss on the Interior Products divestiture transaction. The loss on sale reflects the finalized transaction costs and net working capital adjustment.The following table reconciles the carrying amounts of major classes of assets and liabilities ofThere were no results from discontinued operations to total assets and liabilities of discontinued operations that were classified as held for sale in the consolidated balance sheets (in millions):___________________________1.Amounts reflect balances that were recast as a result of the Interior Products divestiture.year ended December 31, 2022. There were 0no assets or liabilities held for sale as of December 31, 2022 or September 30, 2021.F-144.5. Net Sales U.S. Canada Total Year Ended December 31, 2022 Residential roofing products $ 4,138.1 $ 79.8 $ 4,217.9 Non-residential roofing products 2,285.7 178.6 2,464.3 Complementary building products 1,736.6 10.9 1,747.5 Total net sales $ 8,160.4 $ 269.3 $ 8,429.7 Three Months Ended December 31, 2021 Residential roofing products $ 904.3 $ 15.5 $ 919.8 Non-residential roofing products 413.9 35.5 449.4 Complementary building products 383.3 2.4 385.7 Total net sales $ 1,701.5 $ 53.4 $ 1,754.9 Year Ended September 30, 2021 Residential roofing products $ 3,443.4 $ 72.8 $ 3,516.2 Non-residential roofing products 1,551.7 137.1 1,688.8 Complementary building products 1,426.5 10.5 1,437.0 Total net sales $ 6,421.6 $ 220.4 $ 6,642.0 Year Ended September 30, 2020 Residential roofing products $ 3,023.0 $ 56.4 $ 3,079.4 Non-residential roofing products 1,504.6 112.2 1,616.8 Complementary building products 1,211.5 9.0 1,220.5 Total net sales $ 5,739.1 $ 177.6 $ 5,916.7 F-155.6. Net Income (Loss) Per ShareThe following table presents the components and calculations of basic and dilutedBasic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for each period presented (in millions, except percommon share amounts; certain amounts may not recalculate due to rounding):____________________________1.The hypotheticalequivalents or the conversion of the Preferred Stock became dilutive for(as defined below). Common share equivalents consist of the year ended September 30, 2021, primarily stemming fromincremental common shares issuable upon the significant income from continuing operationsexercise of stock options and offsetting loss from discontinued operations in 2021, and their combined effect on the Company’s calculationvesting of dilutedrestricted stock unit awards. Diluted net income (loss) per share.The following table includes the number of shares that may be dilutive common shares in the future. These shares were not included in the computation of dilutedshare is calculated by dividing net income (loss) per share becauseattributable to common stockholders by the effect was either anti-dilutive orfully diluted weighted-average number of common shares outstanding during the requisite performance conditions were not met (in millions): (“Allied”) on January 2, 2018 (the “Allied Acquisition”), the Company completed the sale of 400,000 shares of Series A Cumulative Convertible Participating Preferred Stock, par value $0.01$0.01 per share (the “Preferred Stock”), with an aggregate liquidation preference of $400.0$400.0 million, at a purchase price of $1,000$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$0.01 par value shares of the Company’s common stock will be at a conversion price of $41.26$41.26 per share (or 9,694,619 shares of common stock). The Preferred Stock accumulates dividends at a rate of 6.0%6.0% per annum (payable quarterly in cash or in-kind, subject to certain conditions). The Preferred Stock is not mandatorily redeemable; therefore, it is classified as mezzanine equity in the Company’s consolidated balance sheets. Holders of Preferred Stock participate in dividends on an as-converted basis when declared on common shares. As a result, Preferred Stock is classified as a participating security and thereby requires the allocation of net income (but not net loss) that would have otherwise been available to common stockholders when calculating net income (loss) per share. Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Numerator: Net income (loss) from continuing operations $ 458.4 $ 68.1 $ 221.2 $ (81.3) Dividends on Preferred Stock (24.0) (6.0) (24.0) (24.0) Undistributed income from continuing operations allocated to participating securities (54.8) (7.5) — — Net income (loss) from continuing operations attributable to common stockholders – Basic 379.6 54.6 197.2 (105.3) — — 24.0 — Net income (loss) from continuing operations attributable to common stockholders – Diluted 379.6 54.6 221.2 (105.3) Net income (loss) from discontinued operations attributable to common stockholders – Basic and Diluted $ — $ (0.1) $ (266.7) $ 0.4 Net income (loss) attributable to common stockholders – Basic $ 379.6 $ 54.5 $ (69.5) $ (104.9) Net income (loss) attributable to common stockholders – Diluted $ 379.6 $ 54.5 $ (45.5) $ (104.9) Denominator: Weighted-average common shares outstanding – Basic 67.1 70.3 69.7 68.8 Effect of common share equivalents 1.3 1.2 1.1 — — — 9.7 — Weighted-average common shares outstanding – Diluted 68.4 71.5 80.5 68.8 Net income (loss) per share: Basic – Continuing operations $ 5.66 $ 0.78 $ 2.83 $ (1.53) Basic – Discontinued operations — — (3.83) 0.01 Basic net income (loss) per share $ 5.66 $ 0.78 $ (1.00) $ (1.52) Diluted – Continuing operations $ 5.55 $ 0.76 $ 2.75 $ (1.53) Diluted – Discontinued operations — — (3.32) 0.01 Diluted net income (loss) per share $ 5.55 $ 0.76 $ (0.57) $ (1.52) F-16The hypothetical conversion of the Preferred Stock became dilutive for the year ended September 30, 2021, primarily stemming from the significant income from continuing operations and offsetting loss from discontinued operations in Fiscal 2021, and their combined effect on the Company’s calculation of diluted net income (loss) per share.6.The following table includes the number of shares that may be dilutive common shares in the future. These shares were not included in the computation of diluted net income (loss) per share because the effect was either anti-dilutive or the requisite performance conditions were not met (in millions): Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Stock options 0.2 0.2 0.5 2.0 Restricted stock units — — — 0.3 Preferred Stock 9.7 9.7 — 9.7 shares,awards, including those from the predecessor plan, be returned to the 2014 Plan and made available for issuance. As of September 30, 2021,December 31, 2022, there were 5,335,8793,837,472 shares of common stock available for issuance.issuance pursuant to the 2014 Plan. The 2014 Plan is the only plan maintained by the Company pursuant to which equity awards are granted.Equity granted in fiscal year 2015 and later contain a “double trigger” change in control mechanism. Unlessmechanism to the extent such employee equity award is continued or assumed after a change in control. If an award is not continued or assumed by a public company in an equitable manner, ansuch award shall become fully vested immediately prior to a change in control (at 100%(in the case of a restricted stock unit award with performance conditions at the grant targetthen-calculable payout percentage for any completed annual performance periods and at 100% for any annual performance periods not yet calculable, and in the case of a performance-based restricted stock unit award)award with market conditions at 100% of the award then earned but not then vested). If an award is so continued or assumed, vesting will continue in accordance with the terms of the award, unless there is a qualifying termination within one-yearone year following the change in control, in which event the award shall immediately become fully vested (at 100%(in the case of a restricted stock unit award with performance conditions at the grant targetthen-calculable payout percentage for any completed annual performance periods and at 100% for any annual performance periods yet calculable, and in the case of a performance-based restricted stock unit award). Options granted prior to fiscal year 2015 vest immediately upon a change in controlaward with market conditions at 100% of the Company.three-year-year period following the grant dates.date.year ended September 30, 2021periods presented were estimated on the dates of grants using the Black-Scholes option-pricing model with the following weighted-average assumptions: Year Ended December 31, 2022 Year Ended September 30, 2021 2020 Risk-free interest rate 1.93 % 0.44 % 1.61 % Expected volatility 48.89 % 48.15 % 34.26 % Expected life (in years) 5.14 5.36 5.26 Dividend yield — — —
Outstanding
Average
Exercise
Price
Average
Remaining
Contractual
Term (Years)
Intrinsic
Value1________________________________________ Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Balance as of September 30, 2021 1.8 $ 34.88 5.8 $ 24.9 Exercised (0.2) $ 32.14 Canceled/Forfeited (0.0) $ 28.85 Expired (0.0) $ 18.72 Balance as of December 31, 2021 1.6 $ 35.25 5.8 $ 36.2 Granted 0.2 $ 58.99 Exercised (0.5) $ 35.53 Canceled/Forfeited (0.0) $ 43.02 Expired (0.0) $ 30.15 Balance as of December 31, 2022 1.3 $ 38.73 6.0 $ 20.7 Vested and expected to vest after December 31, 2022 1.3 $ 38.53 6.0 $ 20.7 Exercisable as of December 31, 2022 1.0 $ 35.33 5.2 $ 18.8 2020, and 2019,2020, the Company recorded stock-based compensation expense related to stock options of $4.4$3.9 million, $4.1$0.6 million, $4.4 million, and $3.9$4.1 million, respectively. As of September 30, 2021,December 31, 2022, there was $4.3$4.7 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.71.9 years.F-17 Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Weighted-average fair value per share of stock options granted $ 26.50 $ — $ 15.62 $ 10.35 Total grant date fair value of stock options vested $ 2.7 $ 3.7 $ 5.6 $ 4.3 Total intrinsic value of stock options exercised $ 11.5 $ 4.1 $ 15.7 $ 2.1 Restrictedonemarket or more additional vestingperformance conditions. Market conditions tied directly toare incorporated into the grant date fair value of the management awards with market conditions using a definedMonte Carlo valuation model. Compensation expense for management awards with market conditions is recognized over the service period and is not reversed if the market condition is not met. For awards with performance metric forconditions, the Company (“PSUs”). The actual number of PSUsawards that will vest can range from 0%0% to 200%200% of the original grant amount, depending upon actual Company performance below or above the established performance metric targets. TheAt each reporting date, the Company estimates performance in relation to the defined targets when determining the projected number of PSUsmanagement awards with performance conditions that are expected to vest and calculating the related stock-based compensation expense. Management awards with performance conditions are amortized over the service period if, and to the extent that, it is determined that achievement of the performance condition is probable. If awards with market, performance and/or service conditions are forfeited due to failure to achieve performance conditions or failure to satisfy service conditions, any previously recognized expense for such awards is reversed.board. Beginning in fiscal year 2016, the Company enacted a policy that allows anyBoard. Any non-employee directors who have Beacon equity holdings (defined as common stock and outstanding vested equity awards) with a total fair value that is greater than or equal to five times the annual Board cash retainer tomay elect to have any future RSU grants settle simultaneously with vesting.restricted stock unitRSU activity for the periods presented (in millions, except per sharegrant date fair value amounts):
Outstanding_________________________________________ Weighted-Average Grant Date Fair Value Balance as of September 30, 2021 1.0 $ 33.76 Granted 0.0 $ 52.43 Released (0.2) $ 28.97 Canceled/Forfeited (0.1) $ 28.94 Balance as of December 31, 2021 0.7 $ 35.99 Granted 0.8 $ 50.63 0.0 $ 33.47 (0.3) $ 33.69 Canceled/Forfeited (0.0) $ 43.96 Balance as of December 31, 2022 1.2 $ 45.60 1.3 $ 44.75 September 30, 2021,December 31, 2022, certain outstanding PSUsawards with performance conditions were expected to vest at greater than 100%100% of their original grant amount.2020, and 2019,2020, the Company recorded stock-based compensation expense related to RSUs of $14.0$23.7 million, $11.9$2.2 million, $14.0 million, and $11.4$11.9 million, respectively. As of September 30, 2021,December 31, 2022, there was $15.3$28.3 million of total unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 1.82.1 years.F-18 Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Weighted-average fair value per share of RSUs granted $ 50.63 $ 52.43 $ 38.18 $ 31.81 Total grant date fair value of RSUs vested $ 9.6 $ 7.0 $ 16.5 $ 14.4 Total intrinsic value of RSUs released $ 17.4 $ 14.5 $ 15.2 $ 9.8 7.from time to time through various means, including open market purchases (including block trades), privately negotiated transactions, accelerated share repurchase transactions or through a series of forward purchase agreements, option contracts or similar agreements and contracts (including Rule 10b5-1 plans) adopted by the Company, in each case in accordance with the rules and regulations of the Securities and Exchange Commission, including, if applicable, Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing, volume, and nature of share repurchases pursuant to the Repurchase Program are at the discretion of management and may be suspended or discontinued at any time. Shares repurchased under the Repurchase Program are retired immediately and are included in the category of authorized but unissued shares. Direct and incremental costs associated with the Repurchase Program are deferred and included as a component of the purchase price. The excess of the purchase price over the par value of the common shares is reflected in retained earnings. December 31, September 30, 2022 2021 Vendor rebates $ 335.9 $ 289.5 Other 81.9 56.4 Total prepaid expenses and other current assets $ 417.8 $ 345.9 8. December 31, September 30, 2022 2021 Land and buildings $ 103.6 $ 85.9 Equipment 449.4 410.6 Furniture and fixtures 58.3 50.9 Software 18.4 8.0 Finance lease assets 99.8 29.0 Fixed assets in progress 30.1 6.7 Total property and equipment 759.6 591.1 Accumulated depreciation (422.6) (354.5) Total property and equipment, net $ 337.0 $ 236.6 yearsyear ended September 30,December 31, 2022, three months ended December 31, 2021, 2020, and 2019 was $58.9 million, $58.1 million, and $60.5 million, respectively.9. Goodwill and Intangible AssetsGoodwillThe following table sets forth the change in the carrying amount of goodwill during the years ended September 30, 2021 and 2020 respectivelywas $75.1 million, $16.5 million, $58.9 million, and $58.1 million, respectively.Balance as of September 30, 2020 $ 1,756.1 Translation and other adjustments 4.8 Balance as of September 30, 2021 1,760.9 Acquisition of Midway 30.0 Divestiture of Solar Products (13.6) Translation and other adjustments 0.1 Balance as of December 31, 2021 1,777.4 Acquisitions 140.9 Translation and other adjustments (2.0) Balance as of December 31, 2022 $ 1,916.3 September 30, 2021December 31, 2022 were driven primarily by final purchase price adjustments relatedthe Company’s recent acquisitions. See Note 3 for additional information.the divestiture of Interior Products.F-19Intangible Assetsperiod amounts)periods):
Average
Remaining
Life1___________________________________________ December 31, September 30, 2022 2021 (Years) Amortizable intangible assets: Customer relationships $ 1,198.1 $ 1,076.2 15.9 Trademarks 4.5 — 1.8 Non-compete agreements — 0.2 0.0 Total amortizable intangible assets 1,202.6 1,076.4 15.7 Accumulated amortization (764.7) (671.4) Total amortizable intangible assets, net 437.9 405.0 Indefinite-lived trademarks 9.8 9.8 Total intangibles, net $ 447.7 $ 414.8 September 30, 2021.December 31, 2022.Rebranding,Company’s rebranding efforts, the Company incurred non-cash accelerated intangible asset amortization of $142.6$142.6 million related to the write-off of certain trade names, primarily Allied (exterior products only), Roofing Supply Group and JGA. The Company used an income approach, specifically the relief from royalty method, to determine the fair value of remaining indefinite-lived trademarks. Various Level 3 fair value assumptions were used in the determination of the estimated fair value, including items such as sales growth rates, royalty rates, discount rates, and other prospective financial information.For the years ended September 30, 2021, 2020, and 2019, the Company recorded $103.3 million, $261.9 million, and $142.9 million, respectively, of amortizationassets. The intangible asset lives range from 5 to 20assets for the year ended December 31, 2022, three months ended December 31, 2021, and years and the weighted-average remaining life was 15.4 years as of ended September 30, 2021.2021 and 2020 was $84.1 million, $22.2 million, $103.3 million, and $261.9 million, respectively.Year Ending December 31, 2023 $ 82.5 2024 67.8 2025 55.0 2026 46.6 2027 37.9 Thereafter 148.1 Total future amortization expense $ 437.9 F-2010.12. Financing Arrangementsfrom the respective periods presented (in millions):___________________________________________________ December 31, September 30, 2022 2021 Revolving Lines of Credit 2026 ABL: $ 254.9 $ — 2026 Canada Revolver — — Borrowings under revolving lines of credit, net $ 254.9 $ — Long-term Debt, net Term Loan: $ 972.2 $ 981.7 Current portion (10.0) (10.0) Long-term borrowings under term loan 962.2 971.7 Senior Notes: 297.4 296.6 346.8 346.2 Long-term borrowings under senior notes 644.2 642.8 Long-term debt, net $ 1,606.4 $ 1,614.5 1.89%5.45% as of September 30, 2020.December 31, 2022.2.41%6.32% and 2.33% as of December 31, 2022 and September 30, 2020.2021, respectively.2.33% as of September 30, 2021.4.Interest rate of 4.88 as of September 30, 2020. 5.Interest rate of 4.50%4.50% for all periods presented.6.4.4.125% as of September 30, 2021.4.125% for all periods presented.7.Fixed interest rates ranging from 2.33% to 2.89% as of September 30, 2020.$350.0$350.0 million issuance of senior notes (the “2029 Senior Notes”). In addition, the Company entered into a second amended and restated credit agreement for its $1.30$1.30 billion asset-based revolving line of credit (the “2026 ABL”), and an amended and restated term loan credit agreement for a term loan of $1.00$1.00 billion (the “2028 Term Loan”), which together are defined as the “New Senior Secured Credit Facilities.Facilities.”$1.30$1.30 billion aggregate principal amount outstanding of the 2025Company’s 4.875% Senior Notes (as defined below)due 2025 at a redemption price of 102.438%102.438%, to refinance all outstanding borrowings under the 2025 Term Loan (as defined below),Company’s previous term loan, and to pay all related accrued interest, fees and expenses.$50.7$60.2 million. In addition, theF-21$29.0$29.0 million related to the 2029 Senior Notes, 2026 ABL and 2028 Term Loan, which are being amortized over the terms of the financing arrangements.$350.0$350.0 million aggregate principal amount of 4.125%4.125% senior unsecured notes due 2029 at an issue price of 100.000%100.000%. The 2029 Senior Notes mature on May 15, 2029 and bear interest at a rate of 4.125%4.125% per annum, payable on May 15 and November 15 of each year, commencingwhich2021.2021. The 2029 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of the Company’s active United States subsidiaries.September 30, 2021,December 31, 2022, the outstanding balance on the 2029 Senior Notes, net of $3.8$3.2 million of unamortized debt issuance costs, was $346.2$346.8 million.$1.30$1.30 billion senior secured asset-based revolving credit facility with Wells Fargo Bank, N.A. and a syndicate of other lenders. The 2026 ABL provides for revolving loan commitments in both the United States (“2026 U.S. Revolver”) in an amount up to $1.25$1.25 billion (“2026 U.S. Revolver”) and Canada (“2026 Canada Revolver”) in an amount up to $50.0$50.0 million (“2026 Canada Revolver”) (as such amounts may be reallocated pursuant to the terms of the 2026 ABL). The 2026 ABL has a maturity date of May 19, 2026.2026. The 2026 ABL has various borrowing tranches with an interest rate based, at the Company’s option, on a base rate, plus an applicable margin, or a reserve adjusted LIBOR rate, plus an applicable margin. The applicable margin for borrowings is based on the Company’s quarterly average excess availability as determined by reference to a borrowing base and ranges from 0.25%0.25% to 0.75%0.75% per annum in the case of base rate borrowings and 1.25%1.25% to 1.75%1.75% per annum in the case of LIBOR borrowings. The current unused commitment fees on the 2026 ABL are 0.20%0.20% per annum.September 30, 2021.United StatesU.S. subsidiaries.F-22September 30, 2021, there was 0December 31, 2022, the outstanding balance outstanding on the 2026 ABL, and there was $7.7net of $5.6 million of unamortized debt issuance costs, included in the consolidated balance sheets in other assets, net.was $254.9 million. The Company also had outstanding standby letters of credit related to the 2026 U.S. Revolver in the amount of $12.5$15.7 million as of September 30, 2021.$1.00$1.00 billion senior secured term loan B facility with Citibank, N.A.Citi and a syndicate of other lenders. The 2028 Term Loan requires quarterly principal payments in the amount of $2.5$2.5 million, with the remaining outstanding principal to be paid on its May 19, 2028 maturity date. The interest rate is based, at the Company’s option, on a base rate, plus an1.25%1.25% to 1.50%1.50% per annum in the case of base rate borrowings and 2.25%2.25% to 2.50%2.50% per annum in the case of LIBOR borrowings.United StatesU.S. subsidiaries.September 30, 2021,December 31, 2022, the outstanding balance on the 2028 Term Loan, net of $15.8$12.8 million of unamortized debt issuance costs, was $981.7$972.2 million.2019 Debt Refinancing$300.0$300.0 million aggregate principal amount of 4.50%4.50% Senior Secured Notes due 2026 (the “2026 Senior Notes”) at an issue price of 100.000%100.000%. The 2026 Senior Notes mature on November 15, 2026 and bear interest at a rate of 4.50%4.50% per annum, payable on May 15 and November 15 of each year, commencing on May 15, 2020.2020. The 2026 Senior Notes and related subsidiary guarantees are secured by a shared first-priority lien on the Term Priority Collateral and a shared second-priority lien on the ABL Priority Collateral. Certain excluded assets will not be included in the Term Priority Collateral and the ABL Priority Collateral. The 2026 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of the Company’s active United StatesU.S. subsidiaries.2023 ABL (as defined below),Company’s previous asset-based revolving credit facility, to redeem all $300.0$300.0 million aggregate principal amount outstanding of the 2023 Senior Notes (as defined below) at a redemption price of 103.188% and to pay all related accrued interest, fees and expenses.The intent of the transaction was to take advantage of lower market interest rates by refinancing the then-existingCompany’s 6.375% Senior Notes due 2023 (the “2023 Senior Notes”) with the 2026 Senior Notes. 2023.$14.7$14.7 million in the year ended September 30, 2020. The Company has capitalized debt issuance costs of $4.7$4.7 million related to the 2026 Senior Notes, which are being amortized over the term of the financing arrangements.September 30, 2021,December 31, 2022, the outstanding balance on the 2026 Senior Notes, net of $3.4$2.6 million of unamortized debt issuance costs, was $$297.4 million.296.6 million.Financing - Allied AcquisitionIn connection with the Allied Acquisition, the Company entered into various financing arrangements totaling $3.57 billion, including an asset-based revolving line of credit of $1.30 billion (“2023 ABL”), $525.0 million of which was drawn at closing, and a $970.0 million term loan (“2025 Term Loan”). The Company also raised an additional $1.30 billion through the issuance of senior notes (the “2025 Senior Notes”).F-23The proceeds from these financing arrangements were used to finance the Allied Acquisition, to refinance or otherwise extinguish all third-party indebtedness, to pay fees and expenses associated with the acquisition, and to provide working capital and funds for other general corporate purposes. The Company capitalized new debt issuance costs totaling approximately $65.3 million related to the 2023 ABL, the 2025 Term Loan and the 2025 Senior Notes, which were being amortized over the term of the financing arrangements.2023 ABLOn January 2, 2018, the Company entered into a $1.30 billion asset-based revolving line of credit with Wells Fargo Bank, N.A. and a syndicate of other lenders. The 2023 ABL provided for revolving loans in both the United States (“2023 U.S. Revolver”) in an amount up to $1.25 billion and Canada in an amount up to $50.0 million. The 2023 ABL had an original maturity date of January 2, 2023. The 2023 ABL had various borrowing tranches with an interest rate based, at the Company’s option, on a base rate, plus an applicable margin, or a reserve adjusted LIBOR rate, plus an applicable margin. On May 19, 2021, in conjunction with the 2021 Debt Refinancing, the Company wrote off $0.8 million of related debt issuance costs. There was 0 principal balance outstanding on the 2023 ABL at the time of the refinancing.2025 Term LoanOn January 2, 2018, the Company entered into a $970.0 million term loan with Citibank N.A., and a syndicate of other lenders. The 2025 Term Loan required quarterly principal payments in the amount of $2.4 million, with the remaining outstanding principal to be paid on its original maturity date of January 2, 2025. The interest rate was based, at the Company’s option, on a base rate, plus an applicable margin, or a reserve adjusted LIBOR rate, plus an applicable margin. The applicable margin was 1.25% per annum with respect to base rate borrowings and 2.25% per annum with respect to LIBOR borrowings. The Company had the option of selecting a LIBOR period that determined the rate at which interest would accrue, as well as the period in which interest payments were made. In February 2021, the Company made an additional principal payment of $423.9 million and wrote off $9.5 million of related debt issuance costs, which is reflected in the loss on extinguishment in the consolidated statement of operations. On May 19, 2021, in conjunction with the 2021 Debt Refinancing, the Company paid the remaining $517.0 million balance of the 2025 Term Loan and wrote off $1.1 million of related debt issuance costs.2025 Senior NotesOn October 25, 2017, Beacon Escrow Corporation, a wholly owned subsidiary of the Company, completed a private offering of $1.30 billion aggregate principal amount of 4.875% Senior Notes due 2025 at an issue price of 100.000%. The 2025 Senior Notes were subsequently assumed by the Company. The 2025 Senior Notes had a coupon rate of 4.875% per annum and were payable semi-annually in arrears, beginning May 1, 2018. There were early payment provisions in the indenture under which the Company would be subject to redemption premiums. On May 19, 2021, in conjunction with the 2021 Debt Refinancing, the Company redeemed all $1.30 billion aggregate principal amount outstanding of the 2025 Senior Notes at a redemption price of 102.438% plus accrued interest and wrote off $12.5 million of related unamortized debt issuance costs.__________________________________Year Ending December 31, 2026 ABL 2023 $ — $ 10.0 $ — $ 10.0 2024 — 10.0 — 10.0 2025 — 10.0 — 10.0 2026 260.5 10.0 300.0 570.5 2027 — 10.0 — 10.0 Thereafter — 935.0 350.0 1,285.0 Total debt 260.5 985.0 650.0 1,895.5 Unamortized debt issuance costs (5.6) (12.8) (5.8) (24.2) Total debt, net $ 254.9 $ 972.2 $ 644.2 $ 1,871.3 F-2411. Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Operating lease costs $ 112.7 $ 27.3 $ 106.1 $ 104.5 Finance lease costs: Amortization of right-of-use assets 13.3 2.0 5.2 4.4 Interest on lease obligations 2.6 0.3 0.5 0.1 Variable lease costs 9.4 2.1 9.2 8.6 Total lease costs $ 138.0 $ 31.7 $ 121.0 $ 117.6 Company'sCompany’s leases (in millions): Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Cash paid for amounts included in measurement of lease obligations: Operating cash flows from operating leases $ 105.0 $ 26.2 $ 106.3 $ 118.7 Operating cash flows from finance leases $ 2.4 $ 0.2 $ 0.5 $ 0.2 Financing cash flows from finance leases $ 12.1 $ 1.5 $ 4.0 $ 4.3 Right-of-use assets obtained in exchange for new finance lease liabilities $ 62.8 $ 6.3 $ 29.1 $ 6.2 Right-of-use assets obtained in exchange for new operating lease liabilities $ 66.2 $ 10.8 $ 55.4 $ 26.0 September 30, 2021,December 31, 2022, the Company’s operating leases had a weighted-average remaining lease term of 5.96.2 years and a weighted-average discount rate of 3.57%4.49%, and the Company’s finance leases had a weighted-average remaining lease term of 5.45.0 years and a weighted-average discount rate of 3.41%5.01%.September 30, 2021December 31, 2022 (in millions):Year Ending December 31, Year Ending December 31, 2023 $ 113.4 $ 19.8 2024 101.9 19.6 2025 83.0 19.4 2026 69.7 17.8 2027 2027 53.7 12.8 Thereafter 127.4 4.4 Total future lease payments 549.1 93.8 Imputed interest (72.5) (10.7) Total lease liabilities $ 476.6 $ 83.1 12.14. Commitments and ContingenciesIn connection with its acquisitions, the Company’s practice is to request indemnification for any and all known material liabilities of significance as of the respective dates of acquisition. Historically, environmental liabilities have not had a material impact on the Company’s results of operations, financial position or liquidity.13.In December 2018, a Company vehicle was involved in an accident that resulted in a fatality. The estate of the decedent and two bystanders filed a lawsuit in October 2019 in the Fourth Judicial District Court for Utah County, Provo Division, against the driver and the Company. Trial was held in late August 2022; the jury determined that the truck driver was not liable for the accident. Because the driver was found not liable, applicable law provided that the Company could not be held liable. As a result, there is not a probable loss with respect to this matter, and the Company has not accrued any amounts within its financial statements as of December 31, 2022. The plaintiffs have filed post-trial motions seeking a mistrial and new trial. Any potential loss in regard to this matter is not reasonably estimable. In August 2022 an employee of the Company was involved in a fatal worksite accident. The accident is currently being investigated by California’s Division of Occupational Safety and Health. The Company anticipates that any statutory benefits to be paid as a result of the accident will be through workers’ compensation insurance, subject to the Company’s self-insured retention. There is not a probable or reasonably estimable loss beyond statutory workers’ compensation amounts with respect to this accident.F-25accumulated other comprehensive lossAOCI (in millions):
Translation
Instruments Balance as of September 30, 2019 $ (19.0) $ (1.6) $ (20.6) Other comprehensive income (loss) before reclassifications (0.7) (13.4) (14.1) Reclassifications out of other comprehensive income (loss) — — — Balance as of September 30, 2020 $ (19.7) $ (15.0) $ (34.7) Other comprehensive income (loss) before reclassifications 4.0 7.3 11.3 Reclassifications out of other comprehensive income (loss) — — — Balance as of September 30, 2021 $ (15.7) $ (7.7) $ (23.4) Other comprehensive income (loss) before reclassifications $ 0.4 $ 3.6 $ 4.0 Reclassifications out of other comprehensive income (loss) $ — $ — $ — Balance as of December 31, 2021 $ (15.3) $ (4.1) $ (19.4) Other comprehensive income (loss) before reclassifications (6.9) 13.8 6.9 Reclassifications out of other comprehensive income (loss) — — — Balance as of December 31, 2022 $ (22.2) $ 9.7 $ (12.5) 14.$77.3$161.3 million, $20.9 million, $77.3 million and $(27.0) million and $(3.2) million for the year ended December 31, 2022, three months ended December 31, 2021, and years ended September 30, 2021 and 2020, and 2019, respectively.F-26 Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 Current: Federal $ 91.5 $ 14.1 $ 28.4 $ (1.5) Foreign 7.2 0.9 3.6 1.4 State 32.6 4.7 13.3 0.5 Total current taxes 131.3 19.7 45.3 0.4 Deferred: Federal 25.5 0.9 27.6 (21.0) Foreign (0.6) — 0.1 0.2 State 5.1 0.3 4.3 (6.6) Total deferred taxes 30.0 1.2 32.0 (27.4) Provision for (benefit from) income taxes $ 161.3 $ 20.9 $ 77.3 $ (27.0) _____________________________ Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, 2021 2020 U.S. federal income taxes at statutory rate 21.0 % 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 4.8 % 4.3 % 4.6 % 4.1 % (0.4) % (2.2) % (0.3) % (0.5) % — % — % — % 0.6 % Non-deductible meals and entertainment 0.2 % 0.2 % 0.2 % (0.8) % Other 0.4 % 0.2 % 0.4 % 0.5 % Effective tax rate 26.0 % 23.5 % 25.9 % 24.9 % 35%35% statutory rate._____________________________ December 31, September 30, 2022 2021 Deferred tax assets: Deferred compensation $ 10.3 $ 9.0 Allowance for doubtful accounts 6.5 5.6 Accrued vacation and other 9.3 15.1 Inventory valuation 19.2 15.0 0.8 0.8 Unrealized (gain) loss on financial derivatives (3.1) 2.4 Lease liability 119.8 100.7 Excess tax over book depreciation and amortization — 15.4 Total deferred tax assets 162.8 164.0 Deferred tax liabilities: (39.4) — Lease right-of-use asset (113.7) (100.2) Total deferred tax liabilities (153.1) (100.2) Net deferred income tax assets (liabilities) $ 9.7 $ 63.8 alternative minimumintangibles, and recording of deferred tax carryforwards.liability from Coastal acquisition.$135.3$135.3 million of federal and state net operating loss carryforwards (“NOL”NOLs”) carryforwards as part of its acquisition of Roofing Supply Group, LLC in fiscal year 2016. For the year ended September 30, 2021, theThe Company utilized thehas $0.7 million in state NOLs remaining $25.4 millionas of federal NOLs.September 30, 2021.December 31, 2022. Under the Tax Cuts and Jobs Act enacted in December 2017, future distributions from foreign subsidiaries will generally be subject to a federal dividends received deduction in the U.S. Should the earnings be remitted as dividends, the Company may be subject to additional foreign withholding and state income taxes. It is not practicable to estimate the amount of any additional taxes which may be payable on the undistributed earnings.F-27September 30, 2021,December 31, 2022, the Company’s goodwill balance on its consolidated balance sheet was $1.76$1.92 billion, of which there remains an amortizable tax basis of $1.16$1.12 billion for income tax purposes.September 30, 2021,December 31, 2022, there were 0no uncertain tax positions which, if recognized, would affect the Company’s effective tax rate. The Company’s accounting policy is to recognize any interest and penalties related to income tax matters in income tax expense in the consolidated statements of operations.6six provinces in Canada. The Company is currently under audit in certain state and local jurisdictions for various years. These audits may involve complex issues, which may require an extended period of time to resolve. Additional taxes are reasonably possible; however, the amounts cannot be estimated at this time or would not be significant. The Company is no longer subject to U.S. federal income tax examinations for any fiscal years ended on or before September 30, 2017.2018. For the majority of states, the Company is also no longer subject to tax examinations for any fiscal years ended on or before September 30, 2017.2018. In Canada, the Company is no longer subject to federal or provincial tax examinations for any fiscal years ended on or before September 30, 2017. For the Canadian provinces, the Company is no longer subject to tax examinations for any fiscal years ended on or before September 30, 2017.2018.15.tables summarizetable summarizes certain geographic information for the periods presented (in millions): December 31, September 30, 2022 2021 Long-lived assets: U.S. $ 770.6 $ 641.3 Canada 11.8 10.1 Total long-lived assets $ 782.4 $ 651.4 16.2022 2021 Beginning Balance $ 16.1 $ 17.9 Charged to Operations 14.2 9.7 Write-offs (13.1) (11.3) Ending Balance $ 17.2 $ 16.3 17.September 30, 2021,December 31, 2022, the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable and accrued expenses approximated fair value because of the short-term nature of these instruments. The Company measures its cash equivalents at amortized cost, which approximates fair value based upon quoted market prices (Level 1).September 30, 2021,December 31, 2022, based upon recent trading prices (Level 2), the fair value of the Company’s $300.0$300.0 million 2026 Senior Notes due in 2026was $312.0$281.6 million and the fair value of the $350.0$350.0 million 2029 Senior Notes due in 2029was $$293.1 million.349.1 million.September 30, 2021,December 31, 2022, the fair value of the Company’s term loan and revolving lines of credit approximated the amount outstanding. The Company estimates the fair value of its term loan and revolving lines of credit by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles (Level 3).18.all full-timenon-union employees of the Company who have 90 days of service and are at least 21 years old. Employees covered by a collective bargaining agreement are generally excluded from participation. All employees who are non-resident aliens are also excluded from participation. An eligible employee may elect to make a before-tax contribution of between 1%1% and 100%100% of his or her compensation through payroll deductions, not to exceed the annual limit set by law. The Company currently matches the first 50%50% of participant contributions limited to 6%6% of a participant’s gross compensation (maximum Company match is 3%3%). The combined total expense for this plan and a similar plan for Canadian employees was $12.4 million, $12.1 million, and $11.7 million for the year ended December 31, 2022, three months ended December 31, 2021, and years ended September 30, 2021 and 2020 and 2019, respectively.F-28The Company sponsors an external pension fund for certain of its foreign employees who belong to a local union. Pension contributions are made to government-sponsored social security pension plans in accordance with local legal requirements. Annual contributions were $0.7was $13.4 million, $1.7$4.5 million, $12.4 million, and $1.0$12.1 million, for the years ended September 30, 2021, 2020, and 2019, respectively.was $2.1 million, $2.5 million, and $2.6 million for the year ended December 31, 2022, three months ended December 31, 2021, and years ended September 30, 2021 and 2020 was $3.7 million, $0.4 million, $2.1 million, and 2019,$2.5 million, respectively. Withdrawal from participation in one of these plans requires the Company to make a lump-sum contribution to the plan, and the Company’s withdrawal liability depends on the extent of the plan’s funding of vested benefits, among other factors.19.2two interest rate swap agreements to manage the interest rate risk associated with the variable rate on the 2025 Term Loan.Company’s previous term loan. Each swap agreement has a notional amount of $250.0$250.0 million. As part of the 2021 Debt Refinancing, Beacon refinanced the 2025 Term Loan,its previous term loan, resulting in the issuance of the 2028 Term Loan; the two interest rate swaps were designed and executed such that they continue to hedge against a total notional amount of $500.0$500.0 million related to the refinanced 2028 Term Loan. One agreement (the “5-year“5-year swap”) will expire on August 30, 2024 and swaps the thirty-day LIBOR with a fixed-rate of 1.49%1.49%. The second agreement (the “3-year“3-year swap”) will expireexpired on August 30, 2022 and swapsswapped the thirty-day LIBOR with a fixed-rate of 1.50%1.50%. At the inception of the swap agreements, the Company determined that both swaps qualified for cash flow hedge accounting under ASC 815. Therefore, changes in the fair value of the swaps, net of taxes, will be recognized in other comprehensive income each period, then reclassified into the consolidated statements of operations as a component of interest expense, financing costs and other in the period in which the hedged transaction affects earnings.swaps areoutstanding 5-year swap will be assessed qualitatively by the Company during the liveslife of the hedgeshedge by a)(i) comparing the current terms of the hedgeshedge with the related hedged debt to assure they continue to coincide and b) evaluating(ii) through an evaluation of the ability of the counterparty to the hedgeshedge to honor theirits obligations under the hedges.hedge. The Company performed a qualitative analysis as of September 30, 2021December 31, 2022 and concluded that the outstanding 5-year swap agreements continuecontinues to meet the requirements under ASC 815 to qualify for cash flow hedge accounting. As of September 30, 2021,December 31, 2022, the fair value of the 3-year and 5-year swaps,5‑year swap, net of tax, were $2.4was $9.7 million and $5.3 million, respectively, both in favor of the counterparty. These amounts are included in accrued expenses in the accompanying consolidated balance sheets.Company.other.other within the consolidated statements of operations. The following table summarizes the combined fair values, net of tax, of the interest rate derivative instruments (in millions):_______________________ December 31, September 30, Instrument Fair Value Hierarchy 2022 2021 Level 2 $ 9.7 $ (7.7) Year Ended December 31, 2022 Three Months Ended December 31, 2021 Year Ended September 30, Instrument 2021 2020 Designated interest rate swaps $ 13.8 $ 3.6 $ 7.3 $ (13.4) 20. Quarterly Financial DataThe following table sets forth certain unaudited quarterly data for 2021 and 2020 which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of this data. Results of any one orF-29more quarters are not necessarily indicative of results for an entire fiscal year or of continuing trends (in millions, except per share amounts):21.22. Subsequent EventsNovember 1, 2021,February 24, 2022, the Company announced a program to repurchase up to $500.0 million of its common stock. As of December 31, 2022, the acquisitionCompany had approximately $112.1 million of Midway Sales & Distributing, Inc., a leading Midwest distributorthe original authorization remaining to repurchase shares. On February 23, 2023, the Company announced that its Board has authorized and approved an increase of residential and commercial exterior building and roofing supplies with 10 branches across Kansas, Missouri and Nebraska and annual salesthe program by approximately $387.9 million, permitting future share repurchases of approximately $$500.0 million.130 million.F-30September 30, 2021.December 31, 2022. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2021,December 31, 2022, our disclosure controls and procedures were (1) designed to ensure that material information relating to Beacon Roofing Supply, Inc., including its consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) designed to be effective, and were effective, in that they provide reasonable assurance of achieving their objectives, including that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.•••OurAside from the aforementioned Coastal exclusion, our management assessed the effectiveness of our internal controls over financial reporting as of September 30, 2021,December 31, 2022, using the criteria set forth in Internal Control — Integrated Framework issued by the Committee ofSeptember 30, 2021,December 31, 2022, our internal control over financial reporting is effective at the reasonable assurance level based on those criteria.33September 30, 2021,December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Beacon Roofing Supply, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021,December 31, 2022, based on the COSO criteria. and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the year ended December 31, 2022, the three months ended December 31, 2021, and each of the threetwo years in the period ended September 30, 2021, and the related notes and our report dated November 19, 2021February 24, 2023 expressed an unqualified opinion thereon.November 19, 202134September 30, 2021December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections35This part of our Form 10-K, which includes Items 10 through 14, is omitted because we will file20222023 Annual Meeting of Stockholders pursuant to Regulation 14Abe filed with the SEC not later than 120 days after the close ofSEC.fiscal year-end, whichdefinitive proxy statement will includefor our 2023 Annual Meeting of Stockholders to be filed with the information requiredSEC.Items 10 through 14 and is incorporated hereinreference to our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC.reference.reference to our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC.•• and 2020•2020, and 2019•2020, and 2019•2020, and 2019•2020, and 2019•36Exhibit Number Incorporated by Reference Description Form Exhibit Filing Date 2.1 8-K 2.1 August 24, 2017 2.2 8-K 2.1 December 21, 2020 3.1 10-K 3.1 December 23, 2004 3.2 8-K 3.1 August 17, 2021 3.3 8-K 3.1 January 5, 2018 4.1 10-K 4.1 November 26, 2019 4.2 8-K 4.1 October 9, 2019 4.3 8-K 4.2 October 9, 2019 4.4 8-K 4.1 May 10, 2021 4.5 8-K 4.2 May 10, 2021 Exhibit Number Incorporated by Reference Description Form Exhibit Filing Date 10.1 8-K 10.1 May 21, 2021 10.2 8-K 10.2 May 21, 2021 10.3 8-K 10.1 August 24, 2017 10.4 8-K 10.1 November 21, 2018 10.5 10-Q 10.1 May 8, 2019 10.6 8-K 10.4 January 5, 2018 10.7 10-Q 10.1 August 7, 2019 10.8+ 10-Q 10.1 February 4, 2022 10.9+ DEF 14A Appendix A January 7, 2011 10.10+ 10-K 10.10 November 29, 2011 10.11+ DEF 14A Appendix A January 9, 2020 10.12+ 10-Q 10.1 May 6, 2022 10.13+ 10-Q 10.2 May 6, 2022 10.14+ 10-Q 10.3 May 6, 2022 10.15+ 10-Q 10.4 May 6, 2022 10.16+ 10-Q 10.5 May 6, 2022 10.17+ 8-K 10.1 March 14, 2022 10.18+ 10-K 10.19 November 20, 2020 10.19+ 10-K 10.20 November 20, 2020 10.20+ 8-K 10.1 November 17, 2021 21* 23.1* 31.1* 31.2* 3710.13+Exhibit Number 10-Q10.3May 8, 202010.14+Form of Beacon Roofing Supply, Inc. Second Amended and Restated 2014 Stock Plan Performance-Based Restricted Stock Unit Award Agreement for Employees10-QExhibit10.4Filing DateMay 8, 202010.15+10-Q10.5May 8, 202010.16+10-Q10.6May 8, 202010.17+10-K10.19November 20, 202010.18+10-K10.20November 20, 202010.19+10-Q10.1February 9, 202121*23.1*31.1*CEO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*CFO certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Instance–Instance–the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document._______________________________None.38November 19, 2021SIGNATURE TITLE DATE SIGNATURETITLEDATENovember 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023Director February 24, 2023 Melanie M. Hart /s/ ROBERT M. MCLAUGHLIN November 19, 2021February 24, 2023November 19, 2021February 24, 2023 November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 2023November 19, 2021February 24, 202339