UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ~~AND~~ EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to __________

Commission File Number 000-50924

BEACON ROOFING SUPPLY, INC.

(Exact name of registrant as specified in its charter)


Delaware			36-4173371
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

505 Huntmar Park Drive, Suite 300, Herndon, VA 20170

(Address of principal executive offices) (Zip ~~Code)~~code)

(571) 323-3939

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	BECN	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

~~Emerging growth company~~

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, ~~2022, 65,061,944~~2023, 63,157,642 shares of common stock, par value $0.01 per share, of the registrant were outstanding.

BEACON ROOFING SUPPLY, INC.

FORM 10-Q

For the Quarter Ended September 30, ~~2022~~2023

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION (UNAUDITED)

Item 1. Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Balance Sheets

(InUnaudited; in millions, except per share amounts)


		September 30,		December 31,		September 30,
		2022		2021		2021			September 30,		December 31,		September 30,
		(unaudited)		(unaudited)					2023		2022		2022
Assets	Assets							Assets
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	84.9	$	225.8	$	260.0	Cash and cash equivalents	$	69.7	$	67.7	$	84.9
Accounts receivable, less allowance of $15.7, $16.1 and $16.3 as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively		1,352.5		855.2		978.3
Accounts receivable, less allowance of $16.7, $17.2, and $15.7 as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively								Accounts receivable, less allowance of $16.7, $17.2, and $15.7 as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively	1,415.7		1,009.1		1,352.5
Inventories, net	Inventories, net	1,388.9		1,161.7		1,084.5		Inventories, net	1,307.9		1,322.9		1,388.9
Prepaid expenses and other current assets	Prepaid expenses and other current assets	415.3		367.2		345.9		Prepaid expenses and other current assets	518.9		417.8		415.3

Total current assets	Total current assets	3,241.6		2,609.9		2,668.7		Total current assets	3,312.2		2,817.5		3,241.6
Property and equipment, net	Property and equipment, net	306.2		256.3		236.6		Property and equipment, net	396.3		337.0		306.2
Goodwill	Goodwill	1,782.7		1,777.4		1,760.9		Goodwill	1,933.6		1,916.3		1,782.7
Intangibles, net	Intangibles, net	361.4		421.0		414.8		Intangibles, net	410.5		447.7		361.4
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	432.1		413.9		399.2		Operating lease right-of-use assets, net	483.0		467.6		432.1
Deferred income taxes, net	Deferred income taxes, net	56.4		61.9		64.5		Deferred income taxes, net	4.9		9.9		56.4
Other assets, net	Other assets, net	4.0		8.9		9.8		Other assets, net	12.5		7.5		4.0

Total assets	Total assets	$	6,184.4	$	5,549.3	$	5,554.5	Total assets	$	6,553.0	$	6,003.5	$	6,184.4

Liabilities and Stockholders' Equity
Liabilities and Stockholders’ Equity								Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	1,062.2	$	794.2	$	812.9	Accounts payable	$	1,179.9	$	821.0	$	1,062.2
Accrued expenses	Accrued expenses	512.9		472.1		546.7		Accrued expenses	601.3		448.0		512.9
Current portion of operating lease liabilities	Current portion of operating lease liabilities	89.6		89.0		88.5		Current portion of operating lease liabilities	99.2		94.5		89.6
Current portion of finance lease liabilities	Current portion of finance lease liabilities	14.0		6.4		5.0		Current portion of finance lease liabilities	21.9		16.1		14.0
Current portion of long-term debt/obligations	Current portion of long-term debt/obligations	10.0		10.0		10.0		Current portion of long-term debt/obligations	10.0		10.0		10.0

Total current liabilities	Total current liabilities	1,688.7		1,371.7		1,463.1		Total current liabilities	1,912.3		1,389.6		1,688.7
Borrowings under revolving lines of credit, net	Borrowings under revolving lines of credit, net	246.1		—		—		Borrowings under revolving lines of credit, net	218.3		254.9		246.1
Long-term debt, net	Long-term debt, net	1,608.0		1,612.9		1,614.5		Long-term debt, net	2,193.9		1,606.4		1,608.0
Deferred income taxes, net		0.1		0.8		0.7
Other long-term liabilities								Other long-term liabilities	0.6		0.2		0.1
Operating lease liabilities	Operating lease liabilities	349.8		326.3		311.3		Operating lease liabilities	395.9		382.1		349.8
Finance lease liabilities	Finance lease liabilities	60.3		26.0		22.9		Finance lease liabilities	82.3		67.0		60.3

Total liabilities	Total liabilities	3,953.0		3,337.7		3,412.5		Total liabilities	4,803.3		3,700.2		3,953.0
Commitments and contingencies (Note 12)
Convertible Preferred Stock (voting); $0.01 par value; aggregate liquidation preference $400.0; 0.4 shares authorized, issued and outstanding as of September 30, 2022, December 31, 2021 and September 30, 2021 (Note 6)		399.2		399.2		399.2
Stockholders' equity:
Common stock (voting); $0.01 par value; 100.0 shares authorized; 65.1, 70.4 and 70.1 shares issued and outstanding as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively		0.7		0.7		0.7
Commitments and contingencies (Note 13)								Commitments and contingencies (Note 13)
Convertible Preferred Stock (voting); $0.01 par value; aggregate liquidation preference $400.0; 0.0, 0.4 and 0.4 shares authorized, issued and outstanding as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively (Note 5)								Convertible Preferred Stock (voting); $0.01 par value; aggregate liquidation preference $400.0; 0.0, 0.4 and 0.4 shares authorized, issued and outstanding as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively (Note 5)	—		399.2		399.2
Stockholders’ equity:								Stockholders’ equity:
Common stock (voting); $0.01 par value; 100.0 shares authorized; 63.2, 64.2, and 65.1 shares issued and outstanding as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively								Common stock (voting); $0.01 par value; 100.0 shares authorized; 63.2, 64.2, and 65.1 shares issued and outstanding as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively	0.6		0.6		0.7
Undesignated preferred stock; 5.0 shares authorized, none issued or outstanding	Undesignated preferred stock; 5.0 shares authorized, none issued or outstanding	—		—		—		Undesignated preferred stock; 5.0 shares authorized, none issued or outstanding	—		—		—
Additional paid-in capital	Additional paid-in capital	1,133.6		1,148.6		1,145.0		Additional paid-in capital	1,220.3		1,187.2		1,133.6
Retained earnings	Retained earnings	711.6		682.5		620.5		Retained earnings	534.7		728.8		711.6
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(13.7)		(19.4)		(23.4)		Accumulated other comprehensive income (loss)	(5.9)		(12.5)		(13.7)
Total stockholders' equity		1,832.2		1,812.4		1,742.8
Total liabilities and stockholders' equity		$	6,184.4	$	5,549.3	$	5,554.5
Total stockholders’ equity								Total stockholders’ equity	1,749.7		1,904.1		1,832.2
Total liabilities and stockholders’ equity								Total liabilities and stockholders’ equity	$	6,553.0	$	6,003.5	$	6,184.4

See accompanying Notes to Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Operations

(Unaudited; in millions, except per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net sales $ 2,415.2 $ 1,875.4 $ 6,460.3 $ 5,065.5
Cost of products sold 1,785.0 1,367.6 4,740.4 3,707.5
Gross profit 630.2 507.8 1,719.9 1,358.0
Operating expense:
Selling, general and administrative 357.9 309.4 1,022.6 873.5
Depreciation 19.0 15.3 55.4 45.0
Amortization 21.9 25.0 64.8 77.8
Total operating expense 398.8 349.7 1,142.8 996.3
Income (loss) from operations 231.4 158.1 577.1 361.7
Interest expense, financing costs and other 22.8 16.3 58.3 68.1
Loss on debt extinguishment — — — 60.2
Income (loss) from continuing operations before income taxes 208.6 141.8 518.8 233.4
Provision for (benefit from) income taxes 53.8 37.3 133.7 59.6
Net income (loss) from continuing operations 154.8 104.5 385.1 173.8
Net income (loss) from discontinued operations1
— 0.3 — 1.2
Net income (loss) 154.8 104.8 385.1 175.0
Dividends on Preferred Stock 6.0 6.0 18.0 18.0
Net income (loss) attributable to common stockholders $ 148.8 $ 98.8 $ 367.1 $ 157.0
Weighted-average common stock outstanding:2
Basic 65.0 70.1 67.7 69.9
Diluted 66.4 71.4 69.1 71.1
Net income (loss) per share:2
Basic - Continuing operations $ 1.99 $ 1.23 $ 4.74 $ 1.96
Basic - Discontinued operations — 0.01 — 0.01
Basic net income (loss) per share $ 1.99 $ 1.24 $ 4.74 $ 1.97
Diluted - Continuing operations $ 1.95 $ 1.21 $ 4.65 $ 1.93
Diluted - Discontinued operations — 0.01 — 0.01
Diluted net income (loss) per share $ 1.95 $ 1.22 $ 4.65 $ 1.94


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	2,584.3	$	2,415.2	$	6,820.3	$	6,460.3
Cost of products sold	1,911.7		1,785.0		5,069.6		4,740.4
Gross profit	672.6		630.2		1,750.7		1,719.9
Operating expense:
Selling, general and administrative	374.3		357.9		1,071.3		1,022.6
Depreciation	23.1		19.0		65.6		55.4
Amortization	21.4		21.9		65.1		64.8

Total operating expense	418.8		398.8		1,202.0		1,142.8
Income (loss) from operations	253.8		231.4		548.7		577.1
Interest expense, financing costs and other, net	35.2		22.8		89.0		58.3

Income (loss) before provision for income taxes	218.6		208.6		459.7		518.8
Provision for (benefit from) income taxes	57.3		53.8		119.8		133.7
Net income (loss)	$	161.3	$	154.8	$	339.9	$	385.1

Reconciliation of net income (loss) to net income (loss) attributable to common stockholders:
Net income (loss)	$	161.3	$	154.8	$	339.9	$	385.1
Dividends on Preferred Stock	(1.9)		(6.0)		(13.9)		(18.0)
Undistributed income allocated to participating securities	(7.6)		(19.3)		(34.3)		(46.0)
Repurchase Premium	(414.6)		—		(414.6)		—
Net income (loss) attributable to common stockholders	$	(262.8)	$	129.5	$	(122.9)	$	321.1

Weighted-average common shares outstanding:
Basic	63.2		65.0		63.7		67.7
Diluted	63.2		66.4		63.7		69.1

Net income (loss) per common share:
Basic	$	(4.16)	$	1.99	$	(1.93)	$	4.74
Diluted	$	(4.16)	$	1.95	$	(1.93)	$	4.65

1.~~See Note 4 for additional information.~~

2.~~See Note 6 for detailed calculations and further discussion.~~

See accompanying Notes to Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited; in millions)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income (loss)	Net income (loss)	$	154.8	$	104.8	$	385.1	$	175.0	Net income (loss)	$	161.3	$	154.8	$	339.9	$	385.1
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	(6.6)		(2.1)		(8.2)		0.2		Foreign currency translation adjustment	(2.5)		(6.6)		(0.2)		(8.2)
Unrealized gain (loss) due to change in fair value of derivatives, net of tax		3.5		1.2		13.9		5.6
Unrealized gain (loss) due to change in fair value of derivative financial instruments, net of tax										Unrealized gain (loss) due to change in fair value of derivative financial instruments, net of tax	3.5		3.5		8.6		13.9
Derivative financial instruments reclassified to earnings, net of tax										Derivative financial instruments reclassified to earnings, net of tax	(0.8)		—		(1.8)		—
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(3.1)		(0.9)		5.7		5.8		Total other comprehensive income (loss)	0.2		(3.1)		6.6		5.7
Comprehensive income (loss)	Comprehensive income (loss)	$	151.7	$	103.9	$	390.8	$	180.8	Comprehensive income (loss)	$	161.5	$	151.7	$	346.5	$	390.8

See accompanying Notes to Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of ~~Stockholders’~~Stockholders’ Equity

(Unaudited; in millions)


		Common Stock					Retained							Common Stock					Retained
														Shares	Amount		APIC1		Earnings		AOCI2		Total
Three Months Ended September 30, 2023													Three Months Ended September 30, 2023
Balance as of June 30, 2023													Balance as of June 30, 2023	63.4	$	0.6	$	1,208.1	$	820.1	$	(6.1)	$	2,022.7
Repurchase and retirement of common stock, net3													Repurchase and retirement of common stock, net3	(0.4)	—		—		(25.2)		—		(25.2)

Repurchase of Preferred Stock, net													Repurchase of Preferred Stock, net	—	—		—		(414.6)		—		(414.6)
Issuance of common stock, net of shares withheld for taxes													Issuance of common stock, net of shares withheld for taxes	0.2	—		—		—		—		—
Stock-based compensation													Stock-based compensation	—	—		7.9		—		—		7.9
Other comprehensive income (loss)													Other comprehensive income (loss)	—	—		—		—		0.2		0.2
Proceeds from disgorgement of short-swing profits, net of tax													Proceeds from disgorgement of short-swing profits, net of tax	—	—		4.3		—		—		4.3
Net income (loss)													Net income (loss)	—	—		—		161.3		—		161.3
Dividends on Preferred Stock													Dividends on Preferred Stock	—	—		—		(6.9)		—		(6.9)
Balance as of September 30, 2023													Balance as of September 30, 2023	63.2	$	0.6	$	1,220.3	$	534.7	$	(5.9)	$	1,749.7
		Shares	Amount		APIC1		Earnings		AOCI2		Total
Three Months Ended September 30, 2022	Three Months Ended September 30, 2022												Three Months Ended September 30, 2022
Balance as of June 30, 2022	Balance as of June 30, 2022	65.0	$	0.6	$	1,123.5	$	562.8	$	(10.6)	$	1,676.3	Balance as of June 30, 2022	65.0	$	0.6	$	1,123.5	$	562.8	$	(10.6)	$	1,676.3

Issuance of common stock, net of shares withheld for taxes	Issuance of common stock, net of shares withheld for taxes	0.1	0.1		2.2		—		—		2.3		Issuance of common stock, net of shares withheld for taxes	0.1	0.1		2.2		—		—		2.3
Stock-based compensation	Stock-based compensation	—	—		7.9		—		—		7.9		Stock-based compensation	—	—		7.9		—		—		7.9
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		(3.1)		(3.1)		Other comprehensive income (loss)	—	—		—		—		(3.1)		(3.1)
Net income (loss)	Net income (loss)	—	—		—		154.8		—		154.8		Net income (loss)	—	—		—		154.8		—		154.8
Dividends on Preferred Stock	Dividends on Preferred Stock	—	—		—		(6.0)		—		(6.0)		Dividends on Preferred Stock	—	—		—		(6.0)		—		(6.0)
Balance as of September 30, 2022	Balance as of September 30, 2022	65.1	$	0.7	$	1,133.6	$	711.6	$	(13.7)	$	1,832.2	Balance as of September 30, 2022	65.1	$	0.7	$	1,133.6	$	711.6	$	(13.7)	$	1,832.2

Three Months Ended September 30, 2021
Balance as of June 30, 2021		70.0	$	0.7	$	1,138.5	$	521.7	$	(22.5)	$	1,638.4
Nine Months Ended September 30, 2023													Nine Months Ended September 30, 2023
Balance as of December 31, 2022													Balance as of December 31, 2022	64.2	$	0.6	$	1,187.2	$	728.8	$	(12.5)	$	1,904.1
Repurchase and retirement of common stock, net3													Repurchase and retirement of common stock, net3	(1.5)	—		—		(100.5)		—		(100.5)

Repurchase of Preferred Stock, net													Repurchase of Preferred Stock, net	—	—		—		(414.6)		—		(414.6)
Issuance of common stock, net of shares withheld for taxes	Issuance of common stock, net of shares withheld for taxes	0.1	—		1.6		—		—		1.6		Issuance of common stock, net of shares withheld for taxes	0.5	—		6.6		—		—		6.6
Stock-based compensation	Stock-based compensation	—	—		4.9		—		—		4.9		Stock-based compensation	—	—		22.2		—		—		22.2
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		(0.9)		(0.9)		Other comprehensive income (loss)	—	—		—		—		6.6		6.6
Proceeds from disgorgement of short-swing profits, net of tax													Proceeds from disgorgement of short-swing profits, net of tax	—	—		4.3		—		—		4.3
Net income (loss)	Net income (loss)	—	—		—		104.8		—		104.8		Net income (loss)	—	—		—		339.9		—		339.9
Dividends on Preferred Stock	Dividends on Preferred Stock	—	—		—		(6.0)		—		(6.0)		Dividends on Preferred Stock	—	—		—		(18.9)		—		(18.9)
Balance as of September 30, 2021		70.1	$	0.7	$	1,145.0	$	620.5	$	(23.4)	$	1,742.8

Balance as of September 30, 2023													Balance as of September 30, 2023	63.2	$	0.6	$	1,220.3	$	534.7	$	(5.9)	$	1,749.7

Nine Months Ended September 30, 2022	Nine Months Ended September 30, 2022												Nine Months Ended September 30, 2022
Balance as of December 31, 2021	Balance as of December 31, 2021	70.4	$	0.7	$	1,148.6	$	682.5	$	(19.4)	$	1,812.4	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, net3	Repurchase and retirement of common stock, net3	(5.8)	(0.1)		—		(338.0)		—		(338.1)		Repurchase and retirement of common stock, net3	(5.8)	(0.1)		—		(338.0)		—		(338.1)
Net change in equity forward contracts3	Net change in equity forward contracts3	—	—		(50.0)		—		—		(50.0)		Net change in equity forward contracts3	—	—		(50.0)		—		—		(50.0)
Issuance of common stock, net of shares withheld for taxes	Issuance of common stock, net of shares withheld for taxes	0.5	0.1		14.0		—		—		14.1		Issuance of common stock, net of shares withheld for taxes	0.5	0.1		14.0		—		—		14.1
Stock-based compensation	Stock-based compensation	—	—		21.0		—		—		21.0		Stock-based compensation	—	—		21.0		—		—		21.0
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		5.7		5.7		Other comprehensive income (loss)	—	—		—		—		5.7		5.7
Net income (loss)	Net income (loss)	—	—		—		385.1		—		385.1		Net income (loss)	—	—		—		385.1		—		385.1
Dividends on Preferred Stock	Dividends on Preferred Stock	—	—		—		(18.0)		—		(18.0)		Dividends on Preferred Stock	—	—		—		(18.0)		—		(18.0)
Balance as of September 30, 2022	Balance as of September 30, 2022	65.1	$	0.7	$	1,133.6	$	711.6	$	(13.7)	$	1,832.2	Balance as of September 30, 2022	65.1	$	0.7	$	1,133.6	$	711.6	$	(13.7)	$	1,832.2

Nine Months Ended September 30, 2021
Balance as of December 31, 2020		69.4	$	0.7	$	1,109.8	$	463.5	$	(29.2)	$	1,544.8
Issuance of common stock, net of shares withheld for taxes		0.7	—		17.5		—		—		17.5
Stock-based compensation		—	—		17.7		—		—		17.7
Other comprehensive income (loss)		—	—		—		—		5.8		5.8
Net income (loss)		—	—		—		175.0		—		175.0
Dividends on Preferred Stock		—	—		—		(18.0)		—		(18.0)
Balance as of September 30, 2021		70.1	$	0.7	$	1,145.0	$	620.5	$	(23.4)	$	1,742.8

1.Additional Paid-in Capital (“APIC”).

2.Accumulated Other Comprehensive Income (Loss) ~~("AOCI"~~(“AOCI”).

3.See Note 87 for additional information.

See accompanying Notes to Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Cash Flows1

(Unaudited; in millions)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Operating Activities	Operating Activities					Operating Activities
Net income (loss)	Net income (loss)	$	385.1	$	175.0	Net income (loss)	$	339.9	$	385.1
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:					Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	120.2		122.9		Depreciation and amortization	130.7		120.2
Stock-based compensation	Stock-based compensation	21.0		17.7		Stock-based compensation	22.2		21.0
Certain interest expense and other financing costs	Certain interest expense and other financing costs	3.9		5.8		Certain interest expense and other financing costs	1.7		3.9
Loss on debt extinguishment		—		60.2

Gain on sale of fixed assets and other	Gain on sale of fixed assets and other	(4.3)		(3.2)		Gain on sale of fixed assets and other	(13.7)		(4.3)
Deferred income taxes	Deferred income taxes	0.6		(53.3)		Deferred income taxes	1.6		0.6

Loss on sale of business		—		5.2

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(500.0)		(230.9)		Accounts receivable	(394.4)		(500.0)
Inventories	Inventories	(228.3)		(135.7)		Inventories	37.7		(228.3)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(28.4)		(8.4)		Prepaid expenses and other current assets	(89.4)		(28.4)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	305.6		171.5		Accounts payable and accrued expenses	491.2		305.6
Other assets and liabilities	Other assets and liabilities	5.8		(9.7)		Other assets and liabilities	(1.8)		5.8
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	81.2		117.1		Net cash provided by (used in) operating activities	525.7		81.2

Investing Activities	Investing Activities					Investing Activities
Purchases of property and equipment	Purchases of property and equipment	(54.5)		(48.5)		Purchases of property and equipment	(85.5)		(54.5)
Acquisition of business, net	Acquisition of business, net	(16.5)		—		Acquisition of business, net	(73.7)		(16.5)
Proceeds from sale of business		—		836.0

Proceeds from sale of assets	Proceeds from sale of assets	4.5		3.7		Proceeds from sale of assets	15.3		4.5
Purchases of investments						Purchases of investments	(1.0)		—
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(66.5)		791.2		Net cash provided by (used in) investing activities	(144.9)		(66.5)

Financing Activities	Financing Activities					Financing Activities
Borrowings under revolving lines of credit	Borrowings under revolving lines of credit	2,046.4		250.0		Borrowings under revolving lines of credit	1,720.0		2,046.4
Payments under revolving lines of credit	Payments under revolving lines of credit	(1,793.9)		(407.0)		Payments under revolving lines of credit	(1,757.9)		(1,793.9)
Borrowings under term loan		—		1,000.0

Payments under term loan	Payments under term loan	(7.5)		(945.9)		Payments under term loan	(7.5)		(7.5)
Borrowings under senior notes	Borrowings under senior notes	—		350.0		Borrowings under senior notes	600.0		—
Payment under senior notes		—		(1,300.0)

Payment of debt issuance costs	Payment of debt issuance costs	—		(20.3)		Payment of debt issuance costs	(6.6)		—
Payment of call premium		—		(31.7)

Payments under equipment financing facilities and finance leases	Payments under equipment financing facilities and finance leases	(8.2)		(4.8)		Payments under equipment financing facilities and finance leases	(14.3)		(8.2)
Repurchase of convertible Preferred Stock						Repurchase of convertible Preferred Stock	(805.6)		—
Repurchase and retirement of common stock, net	Repurchase and retirement of common stock, net	(338.1)		—		Repurchase and retirement of common stock, net	(100.5)		(338.1)
Advance payment for equity forward contract	Advance payment for equity forward contract	(50.0)		—		Advance payment for equity forward contract	—		(50.0)
Payment of dividends on Preferred Stock	Payment of dividends on Preferred Stock	(18.0)		(18.0)		Payment of dividends on Preferred Stock	(18.9)		(18.0)
Proceeds from disgorgement of short-swing profits1						Proceeds from disgorgement of short-swing profits1	5.9		—
Proceeds from issuance of common stock related to equity awards	Proceeds from issuance of common stock related to equity awards	14.5		19.2		Proceeds from issuance of common stock related to equity awards	9.7		14.5
Payment of taxes related to net share settlement of equity awards	Payment of taxes related to net share settlement of equity awards	(0.4)		(1.7)		Payment of taxes related to net share settlement of equity awards	(3.1)		(0.4)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(155.2)		(1,110.2)		Net cash provided by (used in) financing activities	(378.8)		(155.2)

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(0.4)		0.5		Effect of exchange rate changes on cash and cash equivalents	—		(0.4)

Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	(140.9)		(201.4)		Net increase (decrease) in cash and cash equivalents	2.0		(140.9)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	225.8		461.4		Cash and cash equivalents, beginning of period	67.7		225.8
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	84.9	$	260.0	Cash and cash equivalents, end of period	$	69.7	$	84.9

Supplemental Cash Flow Information	Supplemental Cash Flow Information					Supplemental Cash Flow Information
Operating cash flows provided by (used in) discontinued operations		$	—	$	(21.8)

Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	52.3	$	72.9	Interest	$	73.1	$	52.3
Income taxes, net of refunds2	Income taxes, net of refunds2	$	113.2	$	83.2	Income taxes, net of refunds2	$	76.2	$	113.2

1.~~Unless otherwise noted, amounts include both continuing and discontinued operations.~~During the nine months ended September 30, 2023, the Company received payments of $5.9 million from a shareholder related to short-swing trading profits disgorged pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The payments were recorded to additional paid-in capital on the condensed consolidated balance sheets.

2.Nine months ended September 30, 2022 amount includes $18.6 million related to the transition period from October 1, 2021 to December 31, 2021. ~~Nine months ended September 30, 2021 amount includes $63.3 million related to the Interior Products divestiture.~~

See accompanying Notes to Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited; in millions, except per share amounts or otherwise indicated)

1. Company Overview

Beacon Roofing Supply, Inc. (“Beacon” or the “Company”) was incorporated in the state of Delaware on ~~August 22,~~July 16, 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 U.S. and Canada.~~

On February 10, 2021, the Company completed the sale of its interior products and insulation businesses (“Interior Products”) to Foundation Building Materials Holding Company LLC (“FBM”), pursuant to that certain Equity Purchase Agreement, dated as of December 20, 2020 (the “Purchase Agreement”), by and between the Company and ASP Sailor Acquisition Corp. (“ASP”), for approximately $850 million in cash (subject to a working capital and certain other adjustments as set forth in the Purchase Agreement). On January 29, 2021, ASP assigned the Purchase Agreement to FBM. Unless otherwise noted, the Company has reflected Interior Products as discontinued operations for the three and nine months ended September 30, 2021. For additional information, see Notes 2 and 4.North America.

The Company operates its business primarily under the trade name ~~"Beacon~~“Beacon Building ~~Products"~~Products” 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.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company prepared the condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the requirements of the Securities and Exchange Commission (“SEC”). As permitted under those rules, certain footnotes or other financial information have been condensed or omitted. Additionally, the Company has reflected Interior Products as discontinued operations for the three and nine months ended September 30, 2021. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company's continuing operations. Certain prior period amounts have been reclassified to conform to current period presentation.

The balance sheet as of September 30, ~~2021~~2022 has been presented for a better understanding of the impact of seasonal fluctuations on the Company’s financial condition. The three-month periods ended September 30, 2023 and 2022 had 63 and ~~2021 each had~~ 64 business ~~days.~~days, respectively. The nine-month periods ended September 30, ~~2022~~2023 and ~~2021~~2022 each had 191 business days.

On August 11, 2021, the Company’s Board of Directors approved a change in its fiscal year end from September 30 to December 31. The Company’s 2022 fiscal year began on January 1, 2022 and will end on December 31, 2022. 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.

In management’s opinion, the unaudited condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and nine months ended September 30, ~~2022~~2023 are not necessarily indicative of the results to be expected for the twelve months ending December 31, ~~2022.~~2023.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2021 as well as the unaudited Condensed Consolidated Financial Statements and Notes thereto contained in the Company’s Transition Report on Form 10-Q for the period from October 1, 2021 to December 31, ~~2021.~~

~~Use of Estimates~~

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Significant items subject to such estimates include accounts receivable, vendor incentives, inventories, purchase price allocations, goodwill and intangibles, and income taxes. 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. Actual amounts could differ materially from these estimates.

~~Business Combinations~~

The Company records acquisitions resulting in the consolidation of a business using the acquisition method of accounting. Under this method, the Company records the assets acquired, including intangible assets that can be identified and named, and liabilities assumed based on their estimated fair values at the date of acquisition. The Company uses an income approach to determine the fair value of acquired intangible assets, specifically the multi-period excess earnings method for customer relationships and the relief from royalty method for trade names. Various Level 3 fair value assumptions are used in the determination of these estimated fair values, including items such as sales growth rates, cost synergies, customer attrition rates, discount rates, and other prospective financial information. The purchase price in excess of the fair value of the assets acquired and liabilities assumed is recorded as goodwill. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. Transaction costs associated with acquisitions are expensed as incurred and are included as a component of selling, general and administrative expense within the condensed consolidated statements of operations.2022.

Recent Accounting Pronouncements—~~Not Yet~~ Adopted

In October 2021, the Financial Accounting Standards Board (the “FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2021-08, “Business Combinations – Accounting for Contract Assets and Contract 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 ~~the acquirer~~it had originated the contracts, as opposed to ~~recognizing and measuring such contract assets and liabilities~~ at fair value on the acquisition date. The standard ~~will be~~became effective for ~~business combinations that occur after~~the Company on January 1, ~~2023. Early adoption is permitted. The guidance will be~~2023 and was applied prospectively to acquisitions occurring ~~on or~~ after the ~~effective~~adoption date. The ~~Company will continue to evaluate the impact~~adoption of this new guidance ~~which would depend~~did not have a material impact on the ~~contract assets~~Company’s financial statements and ~~liabilities assumed in any future business combinations.~~related disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional practical expedients to ease the potential burden in accounting for contract modifications and hedge accounting related to reference rate reform. ~~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. Specifically, entities can elect to not apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. Also, entities can elect various optional expedients that would allow it to continue to apply hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. Adoption of the provisions of ASU 2020-04 are optional and expedients may be elected over time as reference rate reform activities occur. Further, in December 2022, the FASB issued ASU ~~2021-01,~~2022-06, “Reference Rate Reform (Topic 848)~~, Scope,” to clarify the scope~~: Deferral of the ~~guidance and reduce potential diversity in practice. The standard is effective as~~Sunset Date of ~~March 12, 2020 through~~Topic 848,” extending the sunset date under Topic 848 from December 31, ~~2022. However,~~2022 to December 31, 2024 to align the ~~standard is~~temporary accounting relief guidance with the LIBOR cessation date of June 30, 2023. During the three months ended March 31, 2023, the Company adopted the optional relief guidance provided under ASU 2020-04 after entering into a new interest rate swap agreement with a reference rate indexed to the Secured Overnight Financing Rate (“SOFR”), thereby creating a temporary mismatch in the referenced interest rate index of the Company’s interest rate swap and the hedged variable rate interest payments pursuant to the Company’s Term Loan. See Note 17 for further details of the transaction. The optional expedient did not ~~applicable to contract modifications made,~~have a material impact on the Company’s financial statements and ~~hedging relationships~~related disclosures. Additionally, in June 2023, the Company entered into ~~or evaluated after, December 31, 2022.~~the second amendment to the 2026 ABL, and in July 2023, the Company entered into the second

amendment to the 2028 Term Loan, both of which replaced the reference rates from LIBOR with SOFR. See Note 11 for further details of the transactions. In connection with these amendments, the Company adopted ASU 2020-04 and elected the debt accounting optional expedient. The optional expedient did not have a material impact on the Company’s financial statements and related disclosures. The Company may also take advantage of other optional relief guidance offered under ASU 2020-04 in the future and will evaluate and disclose the impact of this guidance in the period of election, as well as the nature and reason for doing so.

Recent Accounting Pronouncements—Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements – Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU affects a wide variety of Topics in the Codification. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.

3. Acquisitions

The following table presents the Company’s acquisitions ~~since the start of 2021 through~~between January 1, 2022 and September 30, ~~2022.~~2023. The Company acquired 100% of the ~~interests~~equity or substantially all of the assets in each case. The Company has not provided pro forma results of operations for any of the transactions below, as the transactions individually and in the aggregate for the respective year are not material to the Company. The results of operations for these transactions are included in the Company’s condensed consolidated statements of operations from the date of the acquisition (dollars in millions):


Date Acquired	Date Acquired	Company Name	Region	Branches	Goodwill Recognized1		Intangible Assets Acquired1		Date Acquired	Company Name	Region	Branches	Goodwill Recognized1		Intangible Assets Acquired1
September 5, 2023									September 5, 2023	S&H Building Material Corporation	New York	1	$	5.7	$	4.1
August 1, 2023									August 1, 2023	All American Vinyl Siding Supply, LLC	Mississippi	1	$	0.7	$	0.8
July 11, 2023									July 11, 2023	Crossroads Roofing Supply, Inc.	Oklahoma	5	$	2.5	$	11.1
June 12, 2023									June 12, 2023	Silver State Building Materials, Inc.	Nevada	1	$	0.5	$	0.9
March 31, 2023									March 31, 2023	Al's Roofing Supply, Inc.	California	4	$	3.6	$	7.1
March 31, 2023									March 31, 2023	Prince Building Systems, LLC	Wisconsin	1	$	0.6	$	2.0
January 4, 2023									January 4, 2023	First Coastal Exteriors, LLC	Alabama and Mississippi	2	$	0.8	$	1.9
December 30, 2022									December 30, 2022	Whitney Building Products	Massachusetts	1	$	2.7	$	2.8
November 1, 2022									November 1, 2022	Coastal Construction Products	Florida, Illinois, Alabama, Georgia, Arkansas, Tennessee, and North Carolina	18	$	133.1	$	102.7
June 1, 2022	June 1, 2022	Complete Supply, Inc.	Illinois	1	$	8.4	$	4.6	June 1, 2022	Complete Supply, Inc.	Illinois	1	$	8.6	$	4.6
April 29, 2022	April 29, 2022	Wichita Falls Builders Wholesale, Inc.	Texas	1	$	0.2	$	0.5	April 29, 2022	Wichita Falls Builders Wholesale, Inc.	Texas	1	$	0.4	$	0.5
January 1, 2022	January 1, 2022	Crabtree Siding and Supply	Tennessee	1	$	0.1	$	0.1	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

1.~~Based~~For S&H Building Material Corporation, All American Vinyl Siding Supply, LLC, Crossroads Roofing Supply, Inc., Silver State Building Materials, Inc., Al’s Roofing Supply, Inc., Prince Building Systems, LLC, First Coastal Exteriors, LLC, 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 September 30, ~~2022.~~2023.

~~Prior~~In each company’s respective twelve months prior to being acquired by Beacon, the ~~acquisitions, the acquired~~ companies listed above produced aggregate annual sales of approximately ~~$145~~$400.0 million. The total transaction costs incurred by the Company for these acquisitions for the three and nine months ended September 30, ~~2022~~2023 were ~~$0.3~~$2.1 million and ~~$1.5~~$4.9 million, respectively. Of the ~~$37.5~~$159.3 million of goodwill recognized for these acquisitions, ~~$37.3~~$81.8 million is deductible for tax purposes.

~~See Note 18, "Subsequent Events" below regarding the acquisition of Coastal Construction Products that closed on November 1, 2022.~~

~~Lowry’s~~

In connection with the May 1, 2017 acquisition of Lowry’s Inc., the Company recorded an indemnity holdback liability, which was remeasured to fair value at each reporting period until the contingency was resolved. During the first quarter of 2022, the contingency

was resolved and the Company released the indemnity holdback liability, resulting in a gain of $0.9 million, which is included as a component of and reduction to selling, general and administrative expense within the condensed consolidated statements of operations for the nine months ended September 30, 2022.

~~4. Divestitures~~

~~Solar Products~~

On December 1, 2021, the Company completed the divestiture of its solar products business ("Solar Products") in order to focus on the Company’s core exteriors business. The Company recorded a loss on sale of $22.3 million for the three months ended December 31, 2021. The results of operations from Solar Products were included within income from continuing operations for the three and nine months ended September 30, 2021 and were not material to the Company’s overall results.

~~Interior Products~~

On February 10, 2021, the Company completed the sale of Interior Products to FBM pursuant to the Purchase Agreement for approximately $850 million in cash (subject to a working capital and certain other adjustments as set forth in the Purchase Agreement). The final adjusted purchase price for Interior Products was $842.7 million. During the three months ended December 31, 2021, the Company received $6.6 million of final purchase consideration from FBM.

The Company completed this divestiture of net assets previously acquired in 2018 as part of the Allied Acquisition (as defined in Note 6) to enhance leadership focus, reduce net leverage, strengthen its balance sheet, and provide the financial flexibility to pursue strategic growth initiatives in its core exteriors business.

The following table reconciles major line items constituting pre-tax income (loss) from discontinued operations to net income (loss) from discontinued operations as presented in the condensed consolidated statements of operations (in millions):

Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2021
Net sales $ — $ 109.1
Cost of products sold — (80.3)
Selling, general and administrative (1.0) (22.2)
Depreciation and amortization — (0.2)
Other income 0.1 —
Loss on sale 1.4 (5.2)
Pre-tax income (loss) from discontinued operations 0.5 1.2
Provision for (benefit from) income taxes 0.2 —
Net income (loss) from discontinued operations $ 0.3 $ 1.2

There were no results from discontinued operations in the three or nine months ended September 30, 2022. There were no assets or liabilities held for sale as of September 30, 2022, December 31, 2021 or September 30, 2021.

5.4. Net Sales

The following table presents the Company’s net sales by line of business and geography (in millions):


									U.S.		Canada		Total
Three Months Ended September 30, 2023								Three Months Ended September 30, 2023
Residential roofing products								Residential roofing products	$	1,350.1	$	22.7	$	1,372.8
Non-residential roofing products								Non-residential roofing products	610.6		64.6		675.2
Complementary building products								Complementary building products	533.5		2.8		536.3
Total net sales								Total net sales	$	2,494.2	$	90.1	$	2,584.3
		U.S.		Canada		Total
Three Months Ended September 30, 2022	Three Months Ended September 30, 2022							Three Months Ended September 30, 2022
Residential roofing products	Residential roofing products	$	1,180.7	$	27.6	$	1,208.3	Residential roofing products	$	1,180.7	$	27.6	$	1,208.3
Non-residential roofing products	Non-residential roofing products	676.2		54.9		731.1		Non-residential roofing products	676.2		54.9		731.1
Complementary building products	Complementary building products	472.6		3.2		475.8		Complementary building products	472.6		3.2		475.8
Total net sales	Total net sales	$	2,329.5	$	85.7	$	2,415.2	Total net sales	$	2,329.5	$	85.7	$	2,415.2

Three Months Ended September 30, 2021
Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2023
Residential roofing products	Residential roofing products	$	970.0	$	24.8	$	994.8	Residential roofing products	$	3,470.8	$	50.7	$	3,521.5
Non-residential roofing products	Non-residential roofing products	433.3		40.7		474.0		Non-residential roofing products	1,652.7		143.5		1,796.2
Complementary building products	Complementary building products	403.5		3.1		406.6		Complementary building products	1,495.1		7.5		1,502.6
Total net sales	Total net sales	$	1,806.8	$	68.6	$	1,875.4	Total net sales	$	6,618.6	$	201.7	$	6,820.3

Nine Months Ended September 30, 2022	Nine Months Ended September 30, 2022							Nine Months Ended September 30, 2022
Residential roofing products	Residential roofing products	$	3,185.1	$	65.8	$	3,250.9	Residential roofing products	$	3,185.1	$	65.8	$	3,250.9
Non-residential roofing products	Non-residential roofing products	1,768.5		133.0		1,901.5		Non-residential roofing products	1,768.5		133.0		1,901.5
Complementary building products	Complementary building products	1,299.4		8.5		1,307.9		Complementary building products	1,299.4		8.5		1,307.9
Total net sales	Total net sales	$	6,253.0	$	207.3	$	6,460.3	Total net sales	$	6,253.0	$	207.3	$	6,460.3

Nine Months Ended September 30, 2021
Residential roofing products		$	2,612.1	$	59.4	$	2,671.5
Non-residential roofing products		1,185.6		104.8		1,290.4
Complementary building products		1,095.5		8.1		1,103.6
Total net sales		$	4,893.2	$	172.3	$	5,065.5

6.5. Net Income (Loss) Per Common Share

Basic net income (loss) per common 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 common share equivalents or the conversion of Preferred Stock (as defined below). Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock unit (“RSU”) awards. Diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the fully diluted weighted-average number of common shares outstanding during the period.

In connection with the acquisition of Allied Building Products Corp. 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 per share (the “Preferred Stock”), with an aggregate liquidation preference of $400.0 million, at a purchase price of $1,000 per share, to CD&R Boulder Holdings, L.P. ~~The~~(“CD&R Holdings”).

On July 31, 2023 (the “Repurchase Date”), the Company repurchased (the “Repurchase”) all 400,000 issued and outstanding shares of the Preferred Stock isheld by CD&R Holdings (the shares of Preferred Stock held by CD&R Holdings, the “Shares”) pursuant to a letter agreement dated July 6, 2023 (the “Repurchase Letter Agreement”) in cash for $805.4 million, including $0.9 million of accrued but unpaid dividends as of such date (the “Repurchase Price”). In connection with the Repurchase, CD&R Holdings agreed that for as long as Philip Knisely or Nathan Sleeper remains a member of the Company’s board of directors and for a period of six months thereafter, the customary voting, standstill, and transfer restrictions set forth in the original Investment Agreement with respect to the Preferred Stock will continue to apply to CD&R Holdings and its related fund in accordance with their terms. Following the closing of the repurchase, Mr. Sleeper resigned from the Company’s board; Mr. Knisely remains a member.

The aggregate Repurchase Price and related transaction fees and expenses were financed by a combination of proceeds from the 2030 Senior Notes, which are further described in Note 11, as well as the 2026 ABL and cash on hand.

On and after the Repurchase Date, all dividends and distributions ceased to accrue on the Shares, the repurchased Shares are no longer deemed outstanding, and all rights of CD&R Holdings with respect to the repurchased Shares terminated.

During the three and nine months ended September 30, 2023, the Company incurred costs directly attributable to the Preferred Stock Repurchase of $9.3 million.

Before such repurchase occurred, the Preferred Stock was convertible perpetual participating preferred stock of the Company, and conversion of the Preferred Stock into $0.01 par value shares of the Company’s common stock ~~will be~~would have been at a conversion price of $41.26 per share (or 9,694,619 shares of common stock). The Preferred Stock ~~accumulates~~accumulated dividends at a rate of 6.0% per annum (payable quarterly in cash or in-kind, subject to certain conditions). The Preferred Stock iswas not mandatorily redeemable; therefore, it iswas classified as mezzanine equity in the Company’s condensed consolidated balance sheets. Holders of Preferred Stock ~~participate~~would have participated in dividends on an as-converted basis ~~when~~if declared on common shares. As a result, Preferred Stock iswas classified as a participating security and thereby ~~requires~~required the allocation of income that would have otherwise been available to common stockholders when calculating net income (loss) per common share.

Prior to the repurchase, CD&R typically reinvested cash proceeds received from the quarterly Preferred Stock dividend payments to purchase shares of the Company’s common stock on the open market, the most recent of which occurred in April 2023. In connection with the Preferred Stock repurchase, CD&R triggered the short-swing profit rule pursuant to Section 16(b) of the Exchange Act and disgorged $4.7 million in short-swing trading profits to the Company immediately following the repurchase. Subsequent to the Preferred Stock repurchase, CD&R disgorged an additional $1.2 million of short-swing trading profits triggered by CD&R’s public offering to sell 5.0 million shares of the Company’s common stock. The $5.9 million of short-swing trading profits disgorged by CD&R pursuant to Section 16(b) of the Exchange Act during the three and nine months ended September 30, 2023 were recorded to additional paid-in capital on the condensed consolidated balance sheets.

The difference between the total consideration paid for the Repurchase, inclusive of direct costs, and the carrying value of the Preferred Stock, resulted in a $414.6 million Repurchase premium (the “Repurchase Premium”) which was recorded as a reduction to retained earnings within the condensed consolidated statement of stockholders’ equity. In calculating basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2023, the Repurchase Premium is included as a component of net income (loss) attributable to common stockholders.

Diluted net income (loss) per common share is calculated by utilizing the most dilutive result of the if-converted and two-class methods. In both methods, net income (loss) attributable to common stockholders and the weighted-average common shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules.

The following table presents the components and calculations of basic and diluted net income (loss) per common share (in millions, except per share amounts; certain amounts may not recalculate due to rounding):

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Numerator:
Net income (loss) from continuing operations $ 154.8 $ 104.5 $ 385.1 $ 173.8
Dividends on Preferred Stock (6.0) (6.0) (18.0) (18.0)
Undistributed income from continuing operations allocated to participating securities (19.3) (12.0) (46.0) (18.9)
Net income (loss) from continuing operations attributable to common stockholders – Basic and Diluted 129.5 86.5 321.1 136.9
Net income (loss) from discontinued operations – Basic — 0.3 — 1.2
Undistributed income from discontinued operations allocated to participating securities — — — (0.2)
Net income (loss) from discontinued operations attributable to common stockholders – Basic and Diluted — 0.3 — 1.0
Net income (loss) attributable to common stockholders – Basic and Diluted $ 129.5 $ 86.8 $ 321.1 $ 137.9
Denominator:
Weighted-average common shares outstanding – Basic 65.0 70.1 67.7 69.9
Effect of common share equivalents 1.4 1.3 1.4 1.2
Weighted-average common shares outstanding – Diluted 66.4 71.4 69.1 71.1
Net income (loss) per share:
Basic – Continuing operations $ 1.99 $ 1.23 $ 4.74 $ 1.96
Basic – Discontinued operations — 0.01 — 0.01
Basic net income (loss) per share $ 1.99 $ 1.24 $ 4.74 $ 1.97
Diluted – Continuing operations $ 1.95 $ 1.21 $ 4.65 $ 1.93
Diluted – Discontinued operations — 0.01 — 0.01
Diluted net income (loss) per share $ 1.95 $ 1.22 $ 4.65 $ 1.94


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net income (loss)	$	161.3	$	154.8	$	339.9	$	385.1
Dividends on Preferred Stock	(1.9)		(6.0)		(13.9)		(18.0)

Undistributed income allocated to participating securities	(7.6)		(19.3)		(34.3)		(46.0)


Repurchase Premium	(414.6)		—		(414.6)		—
Net income (loss) attributable to common stockholders – Basic and Diluted	$	(262.8)	$	129.5	$	(122.9)	$	321.1



Denominator:
Weighted-average common shares outstanding – Basic	63.2		65.0		63.7		67.7
Effect of common share equivalents	—		1.4		—		1.4

Weighted-average common shares outstanding – Diluted	63.2		66.4		63.7		69.1

Net income (loss) per common share:
Basic	$	(4.16)	$	1.99	$	(1.93)	$	4.74
Diluted	$	(4.16)	$	1.95	$	(1.93)	$	4.65

The following table includes the number of shares that may be dilutive common shares in the future ~~(in millions)~~(except for the Preferred Stock, which was redeemed in July 2023 and therefore has no dilutive impact in the future). These shares were not included in the

computation of diluted net income (loss) per common share because the effect was either anti-dilutive or the requisite performance conditions were not ~~met:~~met (in millions):


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Stock options	Stock options	0.2	0.2	0.2	0.3	Stock options	0.7	0.2	0.3	0.2

Restricted stock units						Restricted stock units	1.1	—	0.4	—
Preferred Stock	Preferred Stock	9.7	9.7	9.7	9.7	Preferred Stock	3.2	9.7	7.5	9.7
Equity forward contract	Equity forward contract	0.9	—	0.9	—	Equity forward contract	—	0.9	—	0.9

Additionally, there were shares issuable under the Company’s ESPP, as defined in Note 6, that were not included in the computation of diluted net income (loss) per common share because the anti-dilutive effects were de minimis during the three and nine months ended September 30, 2023.

7.6. Stock-based Compensation

On December 23, 2019, the Board of Directors of the Company (the “Board”) approved the Beacon Roofing Supply, Inc. Second Amended and Restated 2014 Stock Plan (the “2014 Plan”). On February 11, 2020, the stockholders of the Company approved an additional 4,850,000 shares to be reserved for issuance under the 2014 Plan. The 2014 Plan, which was originally approved by the stockholders on February 12, 2014, provides for discretionary awards of stock options, stock awards, restricted stock units, and stock appreciation rights to selected employees and non-employee directors. The 2014 Plan mandates that all shares underlying lapsed, forfeited, expired, terminated, cancelled and withheld awards, including those from the predecessor plan, be returned to the 2014 Plan and made available for issuance. As of September 30, ~~2022,~~2023, there were ~~3,729,864~~2,995,234 shares of common stock available for issuance pursuant to the 2014 Plan. The 2014 Plan is the only plan maintained by the Company pursuant to which equity awards are granted.

All unvested employee equity awards contain a “double trigger” change in control ~~mechanism. Unless~~mechanism 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, such award shall become ~~fully~~ vested immediately prior to a change in control (in the case of a restricted stock unit award with performance conditions at the then-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 restricted stock unit award with market performance 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 (without cause or for good reason) within one-year following the change in control, in which event the award shall immediately become ~~fully~~ vested (in the case of a restricted stock unit award with performance conditions at the then-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 restricted stock unit award with market performance conditions at 100% of the award then earned but not then vested).

Stock Options

Non-qualified stock options generally expire 10 years after the grant date and, except under certain conditions, the options are subject to continued employment and vest in three annual installments over the three-year period following the grant date.

The fair values of the options granted for the ~~nine months ended September 30, 2022~~periods presented were estimated on the dates of grants using the Black-Scholes option-pricing model with the following weighted-average assumptions:


~~Risk-free interest rate~~	~~1.93~~	%
~~Expected volatility~~	~~48.89~~	%
~~Expected life (in years)~~	~~5.14~~
~~Dividend yield~~	—


	Nine Months Ended September 30,
	2023		2022
Risk-free interest rate	4.26	%	1.93	%
Expected volatility	49.92	%	48.89	%
Expected life (in years)	5.12		5.14
Dividend yield	—		—

The following table summarizes all stock option activity for the nine months ended September 30, ~~2022~~2023 (in millions, except per share amounts and time periods):

Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value1
Balance as of December 31, 2021 1.6 $ 35.25 5.8 $ 36.2
Granted 0.2 58.99
Exercised (0.4) 36.36
Canceled/Forfeited (0.0) 40.21
Balance as of September 30, 2022 1.4 $ 38.37 6.1 $ 24.5
Vested and expected to vest after September 30, 2022 1.4 $ 38.14 6.1 $ 24.3
Exercisable as of September 30, 2022 0.9 $ 35.14 5.0 $ 18.7


	Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value1
Balance as of December 31, 2022	1.3	$	38.73	6.0	$	20.7
Granted	0.1	65.00
Exercised	(0.2)	37.96
Canceled/Forfeited	(0.0)	51.11

Balance as of September 30, 2023	1.2	$	41.14	6.0	$	43.4
Vested and expected to vest after September 30, 2023	1.2	$	40.86	5.9	$	43.2
Exercisable as of September 30, 2023	0.9	$	36.11	5.1	$	36.4

1.Aggregate intrinsic value represents the difference between the closing fair value of the underlying common stock and the exercise price of outstanding, in-the-money options on the date of measurement.

During each of the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded stock-based compensation expense related to stock options of $1.1 million. During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded stock-based compensation expense related to stock options of ~~$3.0~~$3.1 million and ~~$3.3~~$3.0 million, respectively. As of September 30, ~~2022,~~2023, there was ~~$5.6~~$4.9 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a

weighted-average period of ~~2.0~~1.9 years. The following table summarizes additional information on stock options (in millions, except per share amounts):

Nine Months Ended September 30,
2022 2021
Weighted-average fair value per share of stock options granted1
$ 26.50 $ —
Total grant date fair value of stock options vested $ 0.4 $ 1.7
Total intrinsic value of stock options exercised $ 9.6 $ 13.0

1.~~Due to the Company’s change in its fiscal year end, the Company made annual grants to employees during the nine months ended September 30, 2022.~~


	Nine Months Ended September 30,
	2023		2022
Weighted-average fair value per share of stock options granted	$	31.86	$	26.50
Total grant date fair value of stock options vested	$	1.9	$	0.4
Total intrinsic value of stock options exercised	$	7.6	$	9.6

Restricted Stock Units

Time-based ~~restricted stock unit (“RSU”)~~RSU awards granted to employees are subject to continued employment and generally vest on the third anniversary of the grant date. The Company also grants certain RSU awards to management that additionally may contain market or performance conditions. Market conditions are incorporated into the grant date fair value of the management awards with market conditions using a Monte 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 conditions, the actual number of awards that will vest can range from 0% to 200% of the original grant amount, depending upon actual Company performance below or above the established performance metric targets. At each reporting date, the Company estimates performance in relation to the defined targets when determining the projected number of management 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.

RSUs granted to non-employee directors are subject to continued service and vest on the first anniversary of the grant date (except under certain conditions). Generally, the common shares underlying the RSUs are not eligible for distribution until the non-employee director’s service on the Board has terminated, and for non-employee director RSU grants made prior to fiscal year 2014, the share distribution date is six months after the director’s termination of service on the Board. 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 may elect to have any future RSU grants settle simultaneously with vesting.

The following table summarizes all RSU activity for the nine months ended September 30, ~~2022~~2023 (in millions, except grant date fair value amounts):


		RSUs Outstanding	Weighted-Average Grant Date Fair Value			RSUs Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2021		0.7	$	35.99
Balance as of December 31, 2022					Balance as of December 31, 2022	1.2	$	45.60
Granted	Granted	0.7	50.70		Granted	0.4	$	63.06

Released	Released	(0.0)	33.78		Released	(0.1)	$	46.32
Canceled/Forfeited	Canceled/Forfeited	(0.0)	42.46		Canceled/Forfeited	(0.0)	$	51.41
Balance as of September 30, 2022		1.4	$	43.62
Vested and expected to vest after September 30, 20221		1.5	$	42.68
Balance as of September 30, 2023					Balance as of September 30, 2023	1.5	$	50.38
Vested and expected to vest after September 30, 20231					Vested and expected to vest after September 30, 20231	1.5	$	49.22

1.As of September 30, ~~2022,~~2023, outstanding awards with performance conditions were expected to vest at greater than 100% of their original grant amount.

The above table represents regular annual RSU awards granted during the nine months ended September 30, 2022, as well as special grants made in connection with the Company’s Ambition 2025 strategic plan to approximately 120 employees, consisting of the Company’s executive officers (other than the Chief Executive Officer who is not eligible for the program), other members of senior management, and key operations and sales leaders. A total of 0.4 million RSUs with market conditions were awarded. The latter awards were granted in order to align executives and managers at various levels of the Company with the initiatives implemented to achieve the Company's long-term stockholder return goals set forth in the Ambition 2025 strategic plan.

During the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded stock-based compensation expense related to RSUs of ~~$6.8~~$6.2 million and ~~$3.8~~$6.8 million, respectively. During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded stock-based compensation expense related to RSUs of ~~$18.0~~$18.5 million and ~~$11.2~~$18.0 million, respectively. As of September 30,

~~2022,~~ 2023, there was ~~$31.7~~$33.5 million of unrecognized compensation expense related to unvested RSUs (including unrecognized expense for RSUs with performance conditions at their estimated value as of September 30, ~~2022)~~2023), which is expected to be recognized over a weighted-average period of ~~2.2~~2.1 years.

The following table summarizes additional information regarding RSUs (in millions, except per share amounts):


		Nine Months Ended September 30,				Nine Months Ended September 30,
		2022		2021				2023		2022
Weighted-average fair value per share of RSUs granted	Weighted-average fair value per share of RSUs granted	$	50.70	$	51.89		Weighted-average fair value per share of RSUs granted	$	63.06	$	50.70
Total grant date fair value of RSUs vested	Total grant date fair value of RSUs vested	$	2.1	$	5.3		Total grant date fair value of RSUs vested	$	7.1	$	2.1
Total intrinsic value of RSUs released	Total intrinsic value of RSUs released	$	2.0	$	5.7		Total intrinsic value of RSUs released	$	11.8	$	2.0

Employee Stock Purchase Plan

On March 20, 2023, the Board adopted the Company’s 2023 Employee Stock Purchase Plan (the “ESPP”), subject to stockholder approval, which was subsequently obtained on May 17, 2023 in conjunction with the 2023 Annual Meeting of Stockholders. The ESPP allows eligible employees to acquire shares of the Company’s common stock through payroll deductions over six-month offering periods. The purchase price per share is equal to 85% of the lesser of (1) the fair market value of a share of the Company’s common stock on the offering date, defined as the first trading day of the offering period, or (2) the fair market value of a share of the Company’s common stock on the purchase date, defined as the last trading day of the offering period; provided that the purchase price is not less than the $0.01 par value per share of the common stock. Participant purchases are limited to a maximum of $12,500 per offering period (or $25,000 per calendar year). The Company is authorized to grant up to 1,000,000 shares of its common stock under the ESPP.

The first offering period commenced on July 1, 2023 and will end on December 31, 2023. As of September 30, 2023, the Company has not issued any shares of common stock. During the three and nine months ended September 30, 2023, the Company recorded stock-based compensation expense related to the ESPP of $0.6 million.

8.7. Share Repurchase Program

On February 24, 2022, the Company announced a new share repurchase program (the “Repurchase Program”), pursuant to which the Company may purchase up to $500.0 million of its common stock. On February 23, 2023, the Company announced that its Board authorized and approved an increase of the Repurchase Program by approximately $387.9 million, permitting future share repurchases of $500.0 million after considering actual share repurchases as of such re-authorization date.

Share repurchases under the Repurchase Program may be made from time to time through various means, including open market purchases (including block trades), privately negotiated transactions, accelerated share repurchase transactions (“ASR”) 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,~~SEC, including, if applicable, Rule 10b-18 of the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~Act. 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.

~~On March 10, 2022, pursuant to~~The following table sets forth the Repurchase Program, the Company entered into a Variable Tenor ASR Master Agreement (the “ASR Master Agreement”) and Supplemental Confirmation (collectively, the “March 2022 ASR Agreement”) with Citibank, N.A. (“Citi”) to repurchase $125.0 million of its common stock. Under the terms of the March 2022 ASR Agreement, the Company paid $125.0 million to Citi and received an initial share delivery of 1,689,189 shares of its common stock, representing 80% of the then expectedCompany’s share repurchases under the March 2022 ASR Agreement, based on the closing price of the Company’s common stock of $59.20 on March 11, 2022. On June 13, 2022, the Company completed the March 2022 ASR Agreement and received an additional 406,200 shares of the Company’s common stock. In total, 2,095,389 shares of the Company’s common stock were delivered under the March 2022 ASR Agreement at an average price of $59.65(in millions, except per share ~~which represents~~data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total number of shares repurchased	0.3		—		1.5		5.8
Amount repurchased1	$	25.1	$	—	$	99.9	$	387.9
Average price per share	$	83.89	$	—	$	67.90	$	58.28

1.Amount paid for the ~~daily volume-weighted average price of the Company’s common stock during the term of the March~~nine months ended September 30, 2022 ~~ASR Agreement, less a discount and adjustments pursuant to the terms of the March 2022 ASR Agreement.~~

On June 13, 2022, the Company entered into an additional Supplemental Confirmation (together with the ASR Master Agreement, the “June 2022 ASR Agreement”) with Citi to repurchase an additional $250.0includes $50.0 million ~~of its common stock. Under the terms~~ of the June 2022 ASR Agreement, the Company paid $250.0 million to Citi and received an initial share delivery of 3,480,077 shares of its common stock, representing 80% of the total expected share repurchases under the June 2022 ASR Agreement, based on the closingrepurchase price of the Company’s common stock of $57.47 on June 13, 2022. The final number of shares to be repurchased pursuant to the June 2022 ASR Agreement will be determined upon settlement based on the daily volume-weighted average price of the Company’s common stock during the term of the June 2022 ASR Agreement, less a discount and subject to adjustments pursuant to the terms of the June 2022 ASR Agreement. At settlement, Citi will deliver additional shares of the Company’s common stock, or, under certain circumstances, the Company will deliver cash or shares of the Company’s common stock to Citi, with the method of settlement at the Company’s election. As of September 30, 2022, the remaining $50.0 million of the $250.0 million purchase pricethat was evaluated as an unsettled equity forward contract indexed to the Company’s common stock and classified within stockholders’ equity as a reduction to additional ~~paid-in capital until the equity forward contract settles, when it will be reflected as a reduction~~paid in ~~retained earnings.~~capital. The final settlement of the June 2022 ASR ~~Agreement is expected to be completed~~occurred in the fourth quarter of ~~2022.~~2022 and resulted in the delivery of an additional 1.1 million shares of the Company’s common stock.

Share repurchases for the three and nine months ended September 30, 2023 were made on the open market through a Rule 10b5-1 repurchase plan. During the three and nine months ended September 30, 2023, the Company incurred costs directly attributable to the Repurchase Program of approximately $0.2 million and $0.8 million, respectively. Share repurchases for the nine months ended September 30, 2022 ~~the Company also repurchased on the~~were made through a combination of open market ~~221,658 shares of its common stock at an average price of $57.98 per share for an aggregate purchase price of $12.9 million.~~

transactions as well as through two ASRs. The Company did not incur costs directly attributable to the Repurchase Program during the three months ended September 30, 2022. During the nine months ended September 30, 2022, the Company incurred costs directly attributable to the Repurchase Program of approximately $0.2 million.

As of September 30, ~~2022,~~2023, the Company had approximately ~~$112.1~~$400.1 million available for repurchases remaining under the Repurchase Program.

~~There were no share repurchases during~~

8. Prepaid Expenses and Other Current Assets

The following table summarizes the ~~nine months ended September 30, 2021.~~significant components of prepaid expenses and other current assets (in millions):


	September 30,		December 31,		September 30,
	2023		2022		2022
Vendor rebates	$	407.2	$	335.9	$	339.1
Other	111.7		81.9		76.2
Total prepaid expenses and other current assets	$	518.9	$	417.8	$	415.3

9. Goodwill and Intangible Assets

Goodwill

The following table sets forth the change in the carrying amount of goodwill during the nine months ended September 30, ~~2022~~2023 (in millions):


Balance as of December 31, ~~2021~~2022	$	~~1,777.4~~1,916.3
Acquisitions	~~7.6~~17.2
Translation and other adjustments	~~(2.3)~~0.1
Balance as of September 30, ~~2022~~2023	$	~~1,782.7~~1,933.6

The changes in the carrying amount of goodwill for the nine months ended September 30, ~~2022~~2023 were driven primarily by the Company’s recent acquisitions. See Note 3 for additional information.

Intangible Assets

The intangible asset lives range from 2 to 20 years. The following table summarizes intangible assets by category (in millions, except time periods):


		September 30,		December 31,		September 30,		Weighted-Average Remaining		September 30,		December 31,		September 30,		Weighted-Average Remaining
		2022		2021		2021		Life1 (Years)		2023		2022		2022		Life1 (Years)
Amortizable intangible assets:	Amortizable intangible assets:								Amortizable intangible assets:
Non-compete agreements		$	—	$	0.2	$	0.2	—
Customer relationships	Customer relationships	1,097.0		1,092.3		1,076.2		14.9	Customer relationships	$	1,226.0	$	1,198.1	$	1,097.0	15.5
Trademarks	Trademarks	1.0		1.0		—		0.3	Trademarks	4.5		4.5		1.0		1.6

Total amortizable intangible assets	Total amortizable intangible assets	1,098.0		1,093.5		1,076.4		14.9	Total amortizable intangible assets	1,230.5		1,202.6		1,098.0		15.4
Accumulated amortization	Accumulated amortization	(746.4)		(682.3)		(671.4)			Accumulated amortization	(829.8)		(764.7)		(746.4)
Total amortizable intangible assets, net	Total amortizable intangible assets, net	351.6		411.2		405.0			Total amortizable intangible assets, net	400.7		437.9		351.6
Indefinite-lived trademarks	Indefinite-lived trademarks	9.8		9.8		9.8			Indefinite-lived trademarks	9.8		9.8		9.8
Total intangibles, net	Total intangibles, net	$	361.4	$	421.0	$	414.8		Total intangibles, net	$	410.5	$	447.7	$	361.4

1.As of September 30, ~~2022.~~2023.

Amortization expense relating to the above-listed intangible assets for the three months ended September 30, 2023 and 2022 was $21.4 million and $21.9 million, respectively. Amortization expense relating to the above-listed intangible assets for the nine months ended September 30, 2023 and 2022 was $65.1 million and $64.8 million, respectively.

The following table summarizes the estimated future amortization expense for intangible assets (in millions):


Year Ending December 31,	Year Ending December 31,			Year Ending December 31,
2022 (October - December)		$	18.1
2023		67.2
2023 (October - December)				2023 (October - December)	$	19.3
2024	2024	54.6		2024	71.4
2025	2025	44.3		2025	58.7
2026	2026	35.7		2026	50.0
2027				2027	40.8
Thereafter	Thereafter	131.7		Thereafter	160.5
Total future amortization expense	Total future amortization expense	$	351.6	Total future amortization expense	$	400.7

10. Accrued Expenses

The following table summarizes the significant components of accrued expenses (in millions):


	September 30,		December 31,		September 30,
	2023		2022		2022
Inventory	$	215.3	$	106.9	$	141.5
Customer rebates	98.2		112.8		90.4
Payroll and employee benefit costs	91.4		118.6		125.2
Selling, general and administrative	120.7		96.0		108.5
Income taxes	55.4		7.8		35.6
Interest and other	20.3		5.9		11.7
Total accrued expenses	$	601.3	$	448.0	$	512.9

~~10.~~11. Financing Arrangements

The following table summarizes all outstanding debt (presented net of unamortized debt issuance costs) and other financing arrangements (in millions):


		September 30,		December 31,		September 30,			September 30,		December 31,		September 30,
		2022		2021		2021			2023		2022		2022
Revolving Lines of Credit	Revolving Lines of Credit							Revolving Lines of Credit
2026 ABL:	2026 ABL:							2026 ABL:
2026 U.S. Revolver1	2026 U.S. Revolver1	$	246.1	$	—	$	—	2026 U.S. Revolver1	$	218.3	$	254.9	$	246.1
2026 Canada Revolver	2026 Canada Revolver	—		—		—		2026 Canada Revolver	—		—		—
Borrowings under revolving lines of credit, net	Borrowings under revolving lines of credit, net	$	246.1	$	—	$	—	Borrowings under revolving lines of credit, net	$	218.3	$	254.9	$	246.1

Long-term Debt, net	Long-term Debt, net							Long-term Debt, net
Term Loan:	Term Loan:							Term Loan:
2028 Term Loan2	2028 Term Loan2	$	974.0	$	979.8	$	981.7	2028 Term Loan2	$	966.4	$	972.2	$	974.0
Current portion	Current portion	(10.0)		(10.0)		(10.0)		Current portion	(10.0)		(10.0)		(10.0)
Long-term borrowings under term loan	Long-term borrowings under term loan	964.0		969.8		971.7		Long-term borrowings under term loan	956.4		962.2		964.0
Senior Notes:	Senior Notes:							Senior Notes:
2026 Senior Notes3	2026 Senior Notes3	297.3		296.8		296.6		2026 Senior Notes3	297.9		297.4		297.3
2029 Senior Notes4	2029 Senior Notes4	346.7		346.3		346.2		2029 Senior Notes4	347.2		346.8		346.7
2030 Senior Notes5								2030 Senior Notes5	592.4		—		—
Long-term borrowings under senior notes	Long-term borrowings under senior notes	644.0		643.1		642.8		Long-term borrowings under senior notes	1,237.5		644.2		644.0
Long-term debt, net	Long-term debt, net	$	1,608.0	$	1,612.9	$	1,614.5	Long-term debt, net	$	2,193.9	$	1,606.4	$	1,608.0

1.Effective rate on borrowings of 6.37%, 5.45%, and 3.79% as of September 30, ~~2022.~~2023, December 31, 2022 and September 30, 2022, respectively.

2.Interest rate of ~~4.77%~~7.68%, ~~2.34%~~6.32%, and ~~2.33%~~4.77% as of September 30, ~~2022,~~2023, December 31, ~~2021~~2022 and September 30, ~~2021,~~2022, respectively.

3.Interest rate of 4.50% for all periods presented.

4.Interest rate of 4.125% for all periods presented.

5.Interest rate of 6.50% as of September 30, 2023.

2021 Debt Refinancing

In May 2021, the Company entered into various financing arrangements to refinance certain debt instruments to take advantage of lower market interest rates for ~~our~~the Company’s fixed rate indebtedness and to extend maturities (the “2021 Debt Refinancing”). The transactions included a new $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 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 billion (the “2028 Term Loan”), which together are defined as the ~~“New Senior~~“Senior Secured Credit Facilities.”

On May 19, 2021, the Company used the net proceeds from the 2029 Senior Notes offering, together with cash on hand and borrowings under the ~~New~~ Senior Secured Credit Facilities, to redeem all $1.30 billion aggregate principal amount outstanding of the Company’s 4.875% Senior Notes due 2025 at a redemption price of 102.438%, to refinance all outstanding borrowings under the Company’s previous term loan, and to pay all related accrued interest, fees and expenses.

The financing arrangements entered into in connection with the 2021 Debt Refinancing had certain lenders who also participated in previous financing arrangements entered into by the Company; therefore, portions of the transactions were accounted for as either debt extinguishments or debt modifications. The Company recognized a loss on debt extinguishment for the nine months ended September 30, 2021 totaling $60.2 million. In addition, the Company capitalized debt issuance costs totaling $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.

2029 Senior Notes

On May 10, 2021, the Company and certain subsidiaries of the Company as guarantors completed a private offering of $350.0 million aggregate principal amount of 4.125% senior unsecured notes due 2029 at an issue price ~~of 100.000%.~~equal to par. The 2029 Senior Notes mature on May 15, 2029 and bear interest at a rate of 4.125% per annum, payable on May 15 and November 15 of each year, which commenced on November 15, 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.

The 2029 Senior Notes and related subsidiary guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers in accordance with

Rule 144A under the Securities Act and to non-U.S. persons outside of the United States pursuant to Regulation S under the Securities Act. The 2029 Senior Notes and related subsidiary guarantees have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and other applicable securities laws.

As of September 30, ~~2022,~~2023, the outstanding balance on the 2029 Senior Notes, net of ~~$3.3~~$2.8 million of unamortized debt issuance costs, was ~~$346.7~~$347.2 million.

2026 ABL

On May 19, 2021, the Company entered into a $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 in an amount up to $1.25 billion (“2026 U.S. Revolver”) and Canada in an amount up to $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. 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% to 0.75% per annum in the case of base rate borrowings and 1.25% to 1.75% per annum in the case of LIBOR borrowings. The unused commitment fees on the 2026 ABL are 0.20% per annum.

On June 6, 2023, the Company entered into Amendment No. 2 to the 2026 ABL (the “2026 ABL Amendment No. 2”) with Wells Fargo Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto. The 2026 ABL Amendment No. 2, among other things, (i) replaces the LIBOR interest rate index and its related borrowing mechanics under the 2026 ABL with a SOFR interest rate index and its related borrowing mechanics, and (ii) updates certain other provisions of the 2026 ABL to reflect the transition from LIBOR to SOFR. Except as amended by the 2026 ABL Amendment No. 2, the remaining terms of the 2026 ABL remain in full force and effect.

The 2026 ABL contains a springing financial covenant that requires a minimum 1.00 : 1.00 Fixed Charge Coverage Ratio (consolidated EBITDA less capital expenditures to fixed charges, each as defined in the 2026 ABL credit agreement) as of the end of each fiscal quarter (in each case, calculated on a trailing four fiscal quarter basis). The covenant would become operative if the Company failed to maintain a specified minimum amount of availability to borrow under the 2026 ABL, which was not applicable to the Company as of September 30, ~~2022.~~2023.

In addition, the ~~New~~ Senior Secured Credit Facilities and the 2029 Senior Notes (as well as the 2030 Senior Notes and the 2026 Senior Notes, each as defined below) are subject to negative covenants that, among other things and subject to certain exceptions, limit the Company’s ability and the ability of its restricted subsidiaries to: (i) incur indebtedness (including guarantee obligations); (ii) incur liens; (iii) engage in mergers or other fundamental changes; (iv) dispose of certain property or assets; (v) make certain payments, dividends or other distributions; (vi) make certain acquisitions, investments, loans and advances; (vii) prepay certain indebtedness; (viii) change the nature of their business; (ix) engage in certain transactions with affiliates; (x) engage in sale-leaseback transactions; and (xi) enter into certain other restrictive agreements. The 2026 ABL is secured by a first priority lien over substantially all of the Company’s and each guarantor’s accounts and other receivables, chattel paper, deposit accounts (excluding any such account containing identifiable proceeds of Term Priority Collateral (as defined below)), inventory, and, to the extent related to the foregoing and other ABL Priority Collateral, general intangibles (excluding equity interests in any subsidiary of the Company and all intellectual property), instruments, investment property (but not equity interests in any subsidiary of the Company), commercial tort claims, letters of credit, supporting obligations and letter of credit rights, together with all books, records and documents related to, and all proceeds and products of, the foregoing, subject to certain customary exceptions (the “ABL Priority Collateral”), and a second priority lien over substantially all of the Company’s and each guarantor’s other assets, including all of the equity interests of any subsidiary held by the Company or any guarantor, subject to certain customary exceptions (the “Term Priority Collateral”). Beacon Sales Acquisition, Inc., a Delaware corporation and subsidiary of the Company, is a U.S. Borrower under the 2026 ABL and Beacon Roofing Supply Canada Company, an unlimited liability company organized under the laws of Nova Scotia and subsidiary of the Company, is a Canadian borrower under the 2026 ABL. The 2026 ABL is fully and unconditionally guaranteed, on a joint and several basis, by the Company’s active U.S. subsidiaries.

As of September 30, ~~2022,~~2023, the outstanding balance on the 2026 ABL, net of ~~$6.0~~$4.4 million of unamortized debt issuance costs, was ~~$246.1~~$218.3 million. The Company also had outstanding standby letters of credit related to the 2026 U.S. Revolver in the amount of ~~$15.8~~$15.7 million as of September 30, ~~2022.~~2023.

2028 Term Loan

On May 19, 2021, the Company entered into a $1.00 billion senior secured term loan B facility with ~~Citi~~Citibank, N.A. and a syndicate of other lenders. The 2028 Term Loan requires quarterly principal payments in the amount of $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 an applicable margin, or a reserve adjusted LIBOR rate, plus an applicable margin. The applicable margin for the 2028 Term Loan ranges, depending on the Company’s consolidated total leverage ratio (consolidated total indebtedness to consolidated EBITDA, each as defined in the 2028 Term Loan credit agreement), from 1.25% to 1.50% per annum in the case of base rate borrowings and 2.25% to 2.50% per annum in the case of LIBOR borrowings.

On July 3, 2023, the Company entered into Amendment No. 2 to the 2028 Term Loan (the “2028 Term Loan Amendment No. 2”) with Citibank, N.A., as administrative agent and collateral agent, and the lenders party thereto. The 2028 Term Loan Amendment No. 2, among other things, (i) replaces the LIBOR interest rate index and its related borrowing mechanics under the 2028 Term Loan with a SOFR interest rate index and its related borrowing mechanics, and (ii) updates certain other provisions of the 2028 Term Loan to reflect the transition from LIBOR to SOFR. Except as amended by the 2028 Term Loan Amendment No. 2, the remaining terms of the 2028 Term Loan remain in full force and effect.

The 2028 Term Loan is 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 2028 Term Loan is fully and unconditionally guaranteed, on a joint and several basis, by certain of the Company’s active U.S. subsidiaries.

On March 16, 2023, the Company novated and amended its interest rate swap agreement related to the 2028 Term Loan. For additional information, see Note 17.

As of September 30, ~~2022,~~2023, the outstanding balance on the 2028 Term Loan, net of ~~$13.4~~$11.1 million of unamortized debt issuance costs, was ~~$974.0~~$966.4 million.

~~Other Financing Arrangements~~2030 Senior Notes

On July 31, 2023, the Company, and certain subsidiaries of the Company as guarantors, completed a private offering of $600.0 million aggregate principal amount of 6.500% Senior Secured Notes due 2030 (the “2030 Senior Notes”) at an issue price equal to par. The 2030 Senior Notes mature on August 1, 2030 and bear interest at a rate of 6.500% per annum, payable on February 1 and August 1 of each year, commencing on February 1, 2024.

The 2030 Senior Notes and related subsidiary guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act, to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to non-U.S. persons outside of the United States pursuant to Regulation S under the Securities Act. The 2030 Senior Notes and related subsidiary guarantees have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and other applicable securities laws.

On July 31, 2023 the Company used net proceeds from the offering, together with cash on hand and available borrowings under the 2026 ABL to complete the Repurchase.

The Company capitalized debt issuance costs of $7.9 million related to the 2030 Senior Notes, which are being amortized over the term of the financing arrangement.

As of September 30, 2023, the outstanding balance on the 2030 Senior Notes, net of $7.7 million of unamortized debt issuance costs, was $592.4 million.

2026 Senior Notes

On October 9, 2019, the Company, and certain subsidiaries of the Company as guarantors, completed a private offering of $300.0 million aggregate principal amount of 4.50% Senior Secured Notes due 2026 (the “2026 Senior Notes”) at an issue price ~~of 100.000%.~~equal to par. The 2026 Senior Notes mature on November 15, 2026 and bear interest at a rate of 4.50% per annum, payable on May 15 and November 15 of each year, commencing on May 15, 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 U.S. subsidiaries.

The 2026 Senior Notes and related subsidiary guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act, to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to non-U.S. persons outside of the United States pursuant to Regulation S under the Securities Act. The 2026 Senior Notes and related subsidiary guarantees have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and other applicable securities laws.

On October 28, 2019, the Company used the net proceeds from the offering, together with cash on hand and available borrowings under the Company’s previous asset-based revolving credit facility, to redeem all $300.0 million aggregate principal amount outstanding of the Company’s 6.375% Senior Notes due 2023.

The Company capitalized debt issuance costs of $4.7 million related to the 2026 Senior Notes, which are being amortized over the term of the financing arrangements.

As of September 30, ~~2022,~~2023, the outstanding balance on the 2026 Senior Notes, net of ~~$2.7~~$2.1 million of unamortized debt issuance costs, was ~~$297.3~~$297.9 million.

~~11.~~12. Leases

The following table summarizes components of lease costs recognized in the condensed consolidated statements of operations (in ~~millions; amounts include both continuing and discontinued operations)~~millions):

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Operating lease costs $ 29.1 $ 27.0 $ 83.8 $ 80.2
Finance lease costs:
Amortization of right-of-use assets 3.4 1.6 9.2 4.2
Interest on lease obligations 0.7 0.2 1.7 0.4
Variable lease costs 2.4 2.4 6.9 7.0
Total lease costs $ 35.6 $ 31.2 $ 101.5 $ 91.8


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease costs	$	31.1	$	29.1	$	91.7	$	83.8
Finance lease costs:
Amortization of right-of-use assets	5.6		3.4		15.4		9.2
Interest on lease obligations	1.4		0.7		3.8		1.7
Variable lease costs	3.2		2.4		9.1		6.9
Total lease costs	$	41.3	$	35.6	$	120.0	$	101.5

The following table presents supplemental cash flow information related to the Company’s leases (in millions):


		Nine Months Ended September 30,						Nine Months Ended September 30,
			2022		2021				2023		2022
Cash paid for amounts included in measurement of lease obligations:	Cash paid for amounts included in measurement of lease obligations:						Cash paid for amounts included in measurement of lease obligations:
Operating cash flows from operating leases	Operating cash flows from operating leases		$	78.0	$	75.4	Operating cash flows from operating leases		$	88.8	$	78.0
Operating cash flows from finance leases	Operating cash flows from finance leases		$	1.5	$	0.4	Operating cash flows from finance leases		$	3.6	$	1.5
Financing cash flows from finance leases	Financing cash flows from finance leases		$	8.2	$	3.0	Financing cash flows from finance leases		$	14.4	$	8.2
Right-of-use assets obtained in exchange for new finance lease liabilities	Right-of-use assets obtained in exchange for new finance lease liabilities		$	51.9	$	23.2	Right-of-use assets obtained in exchange for new finance lease liabilities		$	36.4	$	51.9
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities		$	28.7	$	50.9	Right-of-use assets obtained in exchange for new operating lease liabilities		$	45.0	$	28.7

As of September 30, ~~2022,~~2023, the Company’s operating leases had a weighted-average remaining lease term of ~~6.2~~6.1 years and a weighted-average discount rate of ~~4.05%~~4.97%, and the Company’s finance leases had a weighted-average remaining lease term of ~~5.1~~4.6 years and a weighted-average discount rate of ~~4.65%~~5.63%.

The following table summarizes future lease payments as of September 30, ~~2022~~2023 (in millions):


Year Ending December 31,	Year Ending December 31,	Operating Leases		Finance Leases		Year Ending December 31,	Operating Leases		Finance Leases
2022 (October - December)		$	26.6	$	4.3
2023		104.0		17.1
2023 (October - December)						2023 (October - December)	$	30.5	$	6.8
2024	2024	90.7		16.9		2024	118.1		27.1
2025	2025	71.4		16.6		2025	100.4		26.9
2026	2026	58.3		15.1		2026	87.2		25.6
2027						2027	70.8		20.7
Thereafter	Thereafter	148.1		13.5		Thereafter	171.1		11.2
Total future lease payments	Total future lease payments	499.1		83.5		Total future lease payments	578.1		118.3
Imputed interest	Imputed interest	(59.7)		(9.2)		Imputed interest	(83.0)		(14.1)
Total lease liabilities	Total lease liabilities	$	439.4	$	74.3	Total lease liabilities	$	495.1	$	104.2

~~12.~~

13. Commitments and Contingencies

The Company is subject to loss contingencies pursuant to various federal, state and local environmental laws and regulations; however, the Company is not aware of any reasonably possible losses that would have a material impact on its results of operations, financial position, or liquidity. Potential environmental loss contingencies include possible obligations to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical or other substances by the Company or by other parties. Historically, environmental liabilities have not had a material impact on the Company’s results of operations, financial position or liquidity.

The Company is subject to litigation and governmental investigations from time to time in the ordinary course of business; however, the Company does not expect the results, if any, to have a material adverse impact on its results of operations, financial position or liquidity. The Company accrues a liability for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The Company also considers whether an insurance recovery receivable is applicable and appropriate based on the specific legal claim. The actual costs of resolving legal claims and governmental investigations may be substantially higher or lower than the amounts accrued for those ~~claims.~~activities.

In December of 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 plaintiffs filed post-trial motions seeking a judgment as a matter of law or for a new trial. In April 2023, the trial court ruled on the plaintiffs’ motions, granting plaintiffs’ judgment against the driver ~~was found not liable, applicable law provided~~and ordering that the ~~Company could not be held liable.~~second phase of the trial proceed. On June 29, 2023, the Utah appeals court granted the Company’s petition for an interlocutory appeal. As ~~a result,~~the trial court ruling is under appeal, 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 September 30, 2022. Any~~ potential loss in regard to this matter is not reasonably estimable. Accordingly, the Company has not accrued any amounts related to this matter within its financial statements as of September 30, 2023.

~~13.~~14. Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is composed of certain gains and losses that are excluded from net income under GAAP and instead recorded as a separate element of stockholders’ equity.

The following table summarizes the components of, and changes in, AOCI (in millions):

Foreign Currency Translation Derivative Financial Instruments AOCI
Balance as of December 31, 2021 $ (15.3) $ (4.1) $ (19.4)
Other comprehensive income before reclassifications (8.2) 13.9 5.7
Balance as of September 30, 2022 $ (23.5) $ 9.8 $ (13.7)


	Foreign Currency Translation		Derivative Financial Instruments		AOCI
Balance as of December 31, 2022	$	(22.2)	$	9.7	$	(12.5)
Other comprehensive income (loss) before reclassifications	(0.2)		8.6		8.4
Reclassifications out of other comprehensive income (loss)	—		(1.8)		(1.8)
Balance as of September 30, 2023	$	(22.4)	$	16.5	$	(5.9)

Gains (losses) on derivative instruments are ~~recognized~~reclassified in the condensed consolidated statements of operations in interest expense, financing costs and ~~other.~~other, net in the period in which the hedged transaction affects earnings.

~~14.~~15. Geographic Data

The following table summarizes certain geographic information (in millions):


		September 30,		December 31,		September 30,			September 30,		December 31,		September 30,
		2022		2021		2021			2023		2022		2022
Long-lived assets:	Long-lived assets:							Long-lived assets:
U.S.	U.S.	$	651.6	$	666.5	$	641.3	U.S.	$	797.2	$	770.6	$	651.6
Canada	Canada	10.2		9.9		10.1		Canada	12.3		11.8		10.2
Total long-lived assets	Total long-lived assets	$	661.8	$	676.4	$	651.4	Total long-lived assets	$	809.5	$	782.4	$	661.8

~~15.~~16. Fair Value Measurement

As of September 30, ~~2022,~~2023, 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).

As of September 30, ~~2022,~~2023, based upon recent trading prices (Level 2), the fair value of the Company’s $300.0 million 2026 Senior Notes was ~~$275.3~~$282.0 million, ~~and~~ the fair value of the $350.0 million 2029 Senior Notes was ~~$284.4~~$298.4 million, and the fair value of the $600.0 million 2030 Senior Notes was $582.8 million.

As of September 30, ~~2022,~~2023, 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).

~~16.~~17. Financial Derivatives

The Company uses interest rate derivative instruments to manage the risk related to fluctuating cash flows from interest rate changes by converting a portion of its variable-rate borrowings into fixed-rate borrowings.

On September 11, 2019, the Company entered into two interest rate swap agreements to manage the interest rate risk associated with the variable rate on the Company’s previous term loan. Each swap agreement has a notional amount of $250.0 million. As part of the 2021 Debt Refinancing, Beacon refinanced 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 million related to the refinanced 2028 Term Loan. One agreement (the “5-year swap”) ~~will~~was scheduled to expire on August 30, 2024 and swaps the thirty-day LIBOR with a fixed-rate of 1.49%. The second agreement (the “3-year swap”) expired on August 30, 2022 and swapped the thirty-day LIBOR with a fixed-rate of 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, were recognized in other comprehensive income each period, then reclassified into the condensed consolidated statements of operations as a component of interest expense, financing costs and other, net in the period in which the hedged transaction affects earnings.

On March 16, 2023, the Company novated its 5-year swap agreement to another counterparty and, in connection with such novation, amended the interest rate swap agreement. The amendment changed the index rate from LIBOR to SOFR, increased the total notional amount of the interest rate swap to $500.0 million, and extended the termination date to March 31, 2027 (the “2027 interest rate swap”). Specifically, the fixed rate of 1.49% indexed to LIBOR was modified to 3.00% indexed to SOFR. The Company used a strategy commonly referred to as “blend and extend” which allows the asset position of the novated 5-year swap agreement of approximately $9.9 million to be effectively blended into the new 2027 interest rate swap agreement. As a result of this transaction, on March 16, 2023, the 5-year swap agreement was de-designated and the unrealized gain of $9.9 million included within accumulated other comprehensive income was frozen and will be ratably reclassified as a reduction to interest expense, financing costs and other, net over the original term of the 5-year swap, or through August 30, 2024 as the hedged transactions affect earnings. Additionally, the 2027 interest rate swap had a fair value of $9.9 million at inception and will be ratably recorded to accumulated other comprehensive income and reclassified to interest expense, financing costs and other, net over the term of the 2027 interest rate swap, or through March 31, 2027 as the hedged transactions affect earnings. At the inception of the 2027 interest rate swap, the Company determined that the swap qualified for cash flow hedge accounting under ASC 815. Therefore, changes in the fair value of the swap, net of taxes, will be recognized in other comprehensive income each period, then reclassified into the condensed consolidated statements of operations as a component of interest expense, financing costs and other, net in the period in which the hedged transaction affects earnings. The 2027 interest rate swap is the only swap agreement outstanding as of September 30, 2023.

The effectiveness of the outstanding ~~5-year~~2027 interest rate swap will be assessed qualitatively by the Company during the life of the hedge by (i) comparing the current terms of the hedge with the related hedged debt to assure they continue to coincide and (ii) through an evaluation of the ability of the counterparty to the hedge to honor its obligations under the hedge. The Company performed a qualitative analysis as of September 30, ~~2022~~2023 and concluded that the outstanding ~~5-year~~2027 interest rate swap continues to meet the requirements under ASC 815 to qualify for cash flow hedge accounting. As of September 30, ~~2022,~~2023, the fair value of the ~~5‑year~~2027 interest rate swap, net of tax, was ~~$9.8~~$18.3 million in favor of the Company.

During the three and nine months ended September 30, 2023, the Company reclassified gains of $0.8 million and $1.8 million, respectively, out of accumulated other comprehensive income (loss) and to interest expense, financing costs and other, net. Approximately $11.4 million of net gains included in accumulated other comprehensive income (loss) at September 30, 2023 is expected to be reclassified into earnings within the next 12 months as interest payments are made on the Company’s Term Loan and amortization of the frozen AOCI on the 5-year swap and inception date fair value of the 2027 interest rate swap occurs. The Company records any differences paid or received on its interest rate hedges to interest expense, financing costs and other, net within the condensed consolidated statements of operations.

The fair value of the interest rate swap is determined through the use of a pricing model, which utilizes verifiable inputs such as market interest rates that are observable at commonly quoted intervals (generally referred to as the “forward curve”) for the full terms

of the hedge agreements. These values reflect a Level 2 measurement under the applicable fair value hierarchy. The following table summarizes the combined fair values, net of tax, of the interest rate derivative ~~instruments~~instrument (in millions):


			Net Assets (Liabilities) as of								Net Assets (Liabilities) as of
			September 30,		December 31,		September 30,				September 30,		December 31,		September 30,
Instrument	Instrument	Fair Value Hierarchy	2022		2021		2021		Instrument	Fair Value Hierarchy	2023		2022		2022
Designated interest rate swaps1	Designated interest rate swaps1	Level 2	$	9.8	$	(4.1)	$	(7.7)	Designated interest rate swaps1	Level 2	$	18.3	$	9.7	$	9.8

1.Assets are included in the condensed consolidated balance sheets in prepaid expenses and other current assets, while liabilities are included in accrued expenses.

The fair value of the interest rate swaps is determined through the use of a pricing model, which utilizes verifiable inputs such as market interest rates that are observable at commonly quoted intervals (generally referred to as the “LIBOR Curve”) for the full terms of the hedge agreements. These values reflect a Level 2 measurement under the applicable fair value hierarchy.

~~The~~ following table summarizes the amounts of gain (loss) on the change in fair value of the designated interest rate ~~derivative instruments~~swaps recognized in other comprehensive income (in millions):

Three Months Ended
September 30, Nine Months Ended
September 30,
Instrument 2022 2021 2022 2021
Designated interest rate swaps $ 3.5 $ 1.2 $ 13.9 $ 5.6

~~17. Quarterly Financial Data~~

The following table sets forth certain unaudited quarterly data for 2022 and 2021, 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 or more quarters are not necessarily indicative of results for an entire fiscal year or of continuing trends (in millions, except per share amounts):

Three Months Ended
September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021
Net sales $2,415.2 $ 2,358.2 $ 1,686.9 $ 1,754.9 $ 1,875.4 $ 1,872.1 $ 1,318.0
% of fiscal year’s net sales n/a n/a n/a 25.7 % 27.5 % 27.5 % 19.3 %
Gross profit $630.2 $ 650.2 $ 439.5 $ 461.6 $ 507.8 $ 517.4 $ 332.8
% of fiscal year’s gross profit n/a n/a n/a 25.4 % 27.9 % 28.4 % 18.3 %
Net income (loss) from continuing operations $154.8 $ 174.5 $ 55.8 $ 68.1 $ 104.5 $ 79.8 $ (10.5)
Net income (loss) $154.8 $ 174.5 $ 55.8 $ 68.0 $ 104.8 $ 76.5 $ (6.3)
Net income (loss) attributable to common stockholders $148.8 $ 168.5 $ 49.8 $ 62.0 $ 98.8 $ 70.5 $ (12.3)
Net income (loss) from continuing operations per share – Basic $ 1.99 $ 2.17 $ 0.62 $ 0.78 $ 1.23 $ 0.93 $ (0.24)
Net income (loss) per share – Basic $ 1.99 $ 2.17 $ 0.62 $ 0.78 $ 1.24 $ 0.89 $ (0.18)
Net income (loss) from continuing operations per share – Diluted $ 1.95 $ 2.12 $ 0.61 $ 0.76 $ 1.21 $ 0.91 $ (0.24)
Net income (loss) per share – Diluted $ 1.95 $ 2.12 $ 0.61 $ 0.76 $ 1.22 $ 0.87 $ (0.18)

~~n/a = not currently available.~~

~~18. Subsequent Events~~

On November 1, 2022, the Company announced the acquisition of 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.


	Three Months Ended September 30,				Nine Months Ended September 30,
Instrument	2023		2022		2023		2022
Designated interest rate swaps	$	3.5	$	3.5	$	8.6	$	13.9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto and Management’s Discussion and Analysis included in our ~~2021~~2022 Annual Report on Form 10-K ~~our Condensed Consolidated Financial Statements and the notes thereto included in our Transition Report on Form 10-Q for the period from October 1, 2021 to December 31, 2021~~ and our Condensed Consolidated Financial Statements and the notes thereto included elsewhere in this report. Unless otherwise indicated, references to “2023” refer to the three or nine months ended September 30, 2023 being discussed and references to “2022” refer to the three or nine months ended September 30, 2022 ~~being discussed and references to “2021” refer to the three or nine months ended September 30, 2021~~ being discussed.

Cautionary Statement Regarding Forward-Looking Information

Our disclosure and analysis in this report contains forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that involves risks and uncertainties. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management’s plans and objectives, future contracts, and forecasts of trends and other matters. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate,” “estimate,” “expect,” “believe,” “will likely result,” “outlook,” “project” and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. 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.

Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include those set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended ~~September 30, 2021.~~December 31, 2022. We may not succeed in addressing these and other risks. Consequently, all forward-looking statements in this report are qualified by the factors, risks and uncertainties contained therein and readers are cautioned not to place undue reliance on forward-looking statements.

Overview

We are the largest publicly traded distributor of roofing materials and complementary building products, such as siding and waterproofing, in North America. We have served the building industry for over 90 years and as of September 30, ~~2022,~~2023, we operated ~~450~~517 branches throughout all 50 states in the U.S. and 6six provinces in Canada. We believe we offer one of the most extensive ranges of high-quality professional grade exterior products comprising over ~~100,000~~130,000 SKUs, and we serve ~~over 80,000~~nearly 100,000 residential and non-residential customers who trust us to help them save time, work more efficiently and enhance their businesses.

We are strategically focused on two core markets, residential and non-residential roofing, as well as complementary building products like siding and waterproofing that are often utilized by the roofing 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~~comprehensive go-to-market strategy, and expanding our footprint organically and through acquisitions while also driving margin-enhancing initiatives.

Our differentiated service model is designed to solve customer needs. The scale of our business provides branch coverage, technology enablement, and investment in our team that is the foundation of customer service excellence. In addition, service is further enhanced by our On Time and Complete network (Beacon OTC®), market-based sales teams, and national call center. We believe we also provide the most complete digital commerce platform in roofing distribution, creating value for customers who are able to operate their businesses more effectively and efficiently.

Our mission is to empower our customers to build more for their customers, businesses, and communities. Our project lifecycle support helps our customers find projects, land the job, do the work and close it out with guidance that allows them to deliver on project specifications and timelines that are critical to their success. Using an omni-channel approach and our PRO+ digital suite, we differentiate our services and drive customer retention. 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 for 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.

Our history has been strongly influenced by significant acquisition-driven growth, highlighted by the acquisitions of Allied Building Products Corp. for $2.88 billion in 2018 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 serves as a competitive advantage, allowing us to use our assets more efficiently, and ~~control~~manage our expenses to drive operating leverage.

We have since pursued and finalized numerous acquisitions in key markets to complement the expansion of our geographic footprint, including 37 total branches from 12 acquisitions since January 1, 2022, which, for the twelve months prior to being acquired,

produced aggregate annual sales of approximately $400.0 million. For additional information, see Note 3 in the Notes to Condensed Consolidated Financial Statements.

On February 24, 2022, we announced our Ambition 2025 Value Creation Framework (“Ambition 2025”) to drive growth, enhance customer service, and expand our footprint in key markets, which included new Ambition 2025 financial targets and the Repurchase Program (as defined and further detailed below), as well as strategic deployment of capital on acquisitions. ~~We have pursued~~

The Ambition 2025 strategies are central to achieving sales growth, improving operational performance, and ~~finalized numerous acquisitions in key markets to complement the expansion of~~increasing profitability. Most importantly, our ~~geographic footprint, including 13 total branches through September 30, 2022~~customers benefit from these ~~recent acquisitions (for additional information, see Note 3 in the Notes~~initiatives as they are designed to ~~Condensed Consolidated Financial Statements):~~

•~~On June 1, 2022, we acquired Complete Supply, Inc., an independent distributor of residential roofing~~make us more efficient and ~~exterior building supplies~~easier to ~~contractors and homebuilders,~~do business with, ~~1 branch located in Illinois and annual sales of approximately $10 million prior to the acquisition;~~

•On April 29, 2022, we acquired Wichita Falls Builders Wholesale, Inc., a distributor of complementary residential exterior building materials, including windows, doors and siding to contractors, homebuilders and retail customers, with 1 branch located in Texas and annual sales of approximately $4 million prior to the acquisition;

•On January 1, 2022, we acquired Crabtree Siding and Supply, a wholesale distributor of residential exterior building materials, including a broad offering of complementary products, to contractors and homebuilder customers, with 1 branch located in Tennessee and annual sales of approximately $1 million prior to the acquisition; and

•On November 1, 2021, we acquired Midway Sales & Distributing, Inc., a leading Midwest distributor of residential and commercial exterior building and roofing supplies, with 10 branches across Kansas, Missouri and Nebraska and annual sales of approximately $130 million prior to the acquisition.

In addition, on November 1, 2022, the Company announced the acquisition of 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.

~~As part of Ambition 2025, we will continue to pursue additional strategic acquisitions to grow~~differentiating our ~~business, while we also remain heavily focused on improving our operations and continuing to identify additional opportunities for organic growth.~~service from competitors. Our recent highlights in these pursuits are demonstrated by the following ~~results for~~accomplishments through the ~~first~~ nine months ~~of 2022:~~ended September 30, 2023:

•~~2022 organic daily sales growth of 24.8% compared to 2021, driven primarily by successful price execution;~~fifteen branches acquired;

•~~four~~seventeen new branch locations ~~opened in~~opened;

•digital sales 22.0% higher than the ~~first nine months of 2022, as well as five additional branches opened in October 2022;~~prior year period; and

•~~significant~~continued improvements in the results of our branches falling in the bottom quintile of our ~~operating~~financial performance metrics.

~~In managing~~As of September 30, 2023, we operated 517 branches, which we designate as either standalone or co-located. A co-located branch shares all or a portion of a physical location with a standalone branch, but it records sales separately (to a different customer base and/or through different product offerings from the standalone branch) and generally operates with independent employees and inventory. The number of branches operated as of September 30, 2023 includes an immaterial one-time adjustment as we realigned our ~~business, we consider all growth, including the opening~~definition of ~~new branches,~~a branch to be ~~organic growth unless it results from~~inclusive of both standalone and co-located locations.

Preferred Stock Repurchase Agreement

On July 31, 2023 (the “Repurchase Date”), we repurchased (the “Repurchase”) all 400,000 issued and outstanding shares of Preferred Stock held by an ~~acquisition. When we refer~~affiliate of Clayton, Dubilier & Rice, LLC (“CD&R”) CD&R Holdings Boulder Holdings, L.P. (“CD&R Holdings,” and the shares of Preferred Stock held by CD&R Holdings, the “Shares”) pursuant to ~~organic growth, we include growth from existing~~a letter agreement dated July 6, 2023 (the “Repurchase Letter Agreement”) in cash for $805.4 million, including $0.9 million of accrued but unpaid dividends as of such date (the “Repurchase Price”). In connection with the Repurchase, CD&R Holdings agreed that for as long as Philip Knisely or Nathan Sleeper remains a member of our board of directors and ~~newly opened branches, but exclude growth from acquired branches until they have been under our ownership~~ for ~~at least four full fiscal quarters at~~a period of six months thereafter, the ~~start~~customary voting, standstill, and transfer restrictions set forth in the original Investment Agreement with respect to the Preferred Stock will continue to apply to CD&R Holdings and its related fund in accordance with their terms. Following the closing of the ~~fiscal reporting period.~~repurchase, Mr. Sleeper resigned from our board; Mr. Knisely remains a member.

~~In order~~The aggregate Repurchase Price and related transaction fees and expenses were financed by a combination of proceeds from the 2030 Senior Notes, which are further described in Note 11 in the Notes to ~~pursue these strategic growth initiatives~~Condensed Consolidated Financial Statements, as well the 2026 ABL and ~~focus~~cash on ~~our core exterior products business,~~hand.

During the three and nine months ended September 30, 2023, we ~~completed two divestitures in 2021. On December 1, 2021, we completed~~incurred costs directly attributable to the ~~divestiture~~Preferred Stock Repurchase of ~~our solar products business (“Solar Products”).~~ $9.3 million.

The ~~results of operations from Solar Products were not material to us and are included in continuing operations~~difference between the total consideration paid for the ~~periods presented. On February 10, 2021, we completed~~Repurchase, inclusive of direct costs, and the ~~sale~~carrying value of ~~our interior products~~the Preferred Stock, resulted in a $414.6 million Repurchase premium (the “Repurchase Premium”) which was recorded as a reduction to retained earnings within the condensed consolidated statement of stockholders’ equity. In calculating basic and insulation businesses (“Interior Products”) to Foundation Building Materials Holding Company LLC for the final adjusted purchase price of $842.7 million. We have reflected Interior Products as discontinued operationsdiluted net income (loss) per common share for the three and nine months ended September 30, ~~2021. Unless otherwise noted, amounts and disclosures in our discussion below relate~~2023, the Repurchase Premium is included as a component of net income (loss) attributable to ~~our continuing operations. For additional information, see Note 4 in the Notes to Condensed Consolidated Financial Statements.~~common stockholders.

COVID-19 Pandemic and Supply Chain Dynamics

We continue to monitor the ongoing impact of the COVID-19 pandemic, including the effects of recent notable variants of the virus. The health and safety of our employees, customers, and the communities in which we operate remain our top priority. Additional safety measures have been implemented in response to the COVID-19 pandemic. We had an essential business designation status throughout the pandemic in all the local markets that we serve. To date, our business experienced the largest adverse impact from COVID-19 in the third quarter of fiscal year 2020, mainly in areas with significant government construction restrictions that have since been eliminated. 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 ~~which has continued in~~and the first half of 2022. As a result, we experienced significant cost increases and, at times, a limited ability to purchase enough product to meet customer demand. We have continued to experience elevated backlog ~~metrics.~~metrics, though they have eased throughout the last twelve months. Open orders, a measure of our backlog, ended the quarter slightly lower than the prior quarter-end, though it remains higher than ~~third quarter 2021 and pre-pandemic~~historical levels. These trends, caused in large part from global disruptions related to the COVID-19 pandemic and the subsequent rapid economic recovery, may persist in the near-term. In addition to inflationary pressures caused by product shortages, we are also experiencing product cost inflation caused by increased input costs, ~~including rising oil prices,~~ which increases may have been impacted by the global economic and geopolitical environment, including ~~the Russian invasion~~acts or threats of ~~Ukraine.~~terrorism and/or military conflicts. We took proactive measures to ensure adequate inventory, price effectively, and deliver high-value solutions to our customers’ critical building material needs. 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.

Comparison of the Three Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

The following tables set forth condensed consolidated statements of operations data and such data as a percentage of total net sales for the periods presented (in millions):


		Three Months Ended September 30,					Three Months Ended September 30,
		2022		2021			2023		2022
Net sales	Net sales	$	2,415.2	$	1,875.4	Net sales	$	2,584.3	$	2,415.2
Cost of products sold	Cost of products sold	1,785.0		1,367.6		Cost of products sold	1,911.7		1,785.0
Gross profit	Gross profit	630.2		507.8		Gross profit	672.6		630.2
Operating expense:	Operating expense:					Operating expense:
Selling, general and administrative	Selling, general and administrative	357.9		309.4		Selling, general and administrative	374.3		357.9
Depreciation	Depreciation	19.0		15.3		Depreciation	23.1		19.0
Amortization	Amortization	21.9		25.0		Amortization	21.4		21.9

Total operating expense	Total operating expense	398.8		349.7		Total operating expense	418.8		398.8
Income (loss) from operations	Income (loss) from operations	231.4		158.1		Income (loss) from operations	253.8		231.4
Interest expense, financing costs and other		22.8		16.3
Interest expense, financing costs and other, net						Interest expense, financing costs and other, net	35.2		22.8

Income (loss) from continuing operations before income taxes		208.6		141.8
Income (loss) before provision for income taxes						Income (loss) before provision for income taxes	218.6		208.6
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	53.8		37.3		Provision for (benefit from) income taxes	57.3		53.8
Net income (loss) from continuing operations		154.8		104.5
Net income (loss) from discontinued operations		—		0.3
Net income (loss)	Net income (loss)	154.8		104.8		Net income (loss)	$	161.3	$	154.8
Dividends on Preferred Stock		6.0		6.0
Net income (loss) attributable to common stockholders		$	148.8	$	98.8

Three Months Ended
September 30,
2022 2021
Net sales 100.0 % 100.0 %
Cost of products sold 73.9 % 72.9 %
Gross profit 26.1 % 27.1 %
Operating expense:
Selling, general and administrative 14.8 % 16.5 %
Depreciation 0.8 % 0.8 %
Amortization 0.9 % 1.3 %
Total operating expense 16.5 % 18.6 %
Income (loss) from operations 9.6 % 8.5 %
Interest expense, financing costs and other 1.0 % 0.9 %
Income (loss) from continuing operations before income taxes 8.6 % 7.6 %
Provision for (benefit from) income taxes 2.2 % 2.0 %
Net income (loss) from continuing operations 6.4 % 5.6 %
Net income (loss) from discontinued operations — % — %
Net income (loss) 6.4 % 5.6 %
Dividends on Preferred Stock 0.2 % 0.3 %
Net income (loss) attributable to common stockholders 6.2 % 5.3 %

~~When we refer to regions, we are referring to our geographic regions. When we refer to our net product costs, we are referring to our invoice cost less the impact of short-term buying programs.~~

~~As of September 30, 2022, we had a total of 450 branches in operation.~~


	Three Months Ended September 30,
	2023		2022
Net sales	100.0	%	100.0	%
Cost of products sold	74.0	%	73.9	%
Gross profit	26.0	%	26.1	%
Operating expense:
Selling, general and administrative	14.5	%	14.8	%
Depreciation	0.9	%	0.8	%
Amortization	0.8	%	0.9	%

Total operating expense	16.2	%	16.5	%
Income (loss) from operations	9.8	%	9.6	%
Interest expense, financing costs and other, net	1.3	%	1.0	%

Income (loss) before provision for income taxes	8.5	%	8.6	%
Provision for (benefit from) income taxes	2.2	%	2.2	%
Net income (loss)	6.3	%	6.4	%

In managing our business, we consider all growth, including the opening of new branches (also referred to as greenfields), to be organic growth, unless it results from an acquisition. When we refer to organic growth, we include growth from existing branches and greenfields but exclude growth from acquired branches until they have been under our ownership for at least four full fiscal quarters at the start of the fiscal reporting period, after which such branches are classified as existing. The following table summarizes the classification of branches for the results of operations for the three months ended September 30, 2023:


			Three Months Ended September 30, 2023
Branches:
Existing			452
Greenfields opened after July 1, 2022			31
Total organic branches			483
Acquired after July 1, 2022			34
Total branches			517

Net Sales

Net sales increased ~~28.8%~~7.0% to $2.58 billion in 2023, up from $2.42 billion in 2022, ~~up from $1.88 billion~~driven by a 13.6% increase in ~~2021. Net~~residential roofing products and a 12.7% increase in complementary building products, partially offset by a 7.6% decrease in non-residential roofing products. The following table summarizes net sales ~~increased across all three lines~~by line of business for the periods presented (in millions):


	Three Months Ended September 30,								Year-over-Year Change
	2023				2022
	Net Sales		Mix %		Net Sales		Mix %		$		%
Residential roofing products	$	1,372.8	53.1	%	$	1,208.3	50.0	%	$	164.5	13.6	%
Non-residential roofing products	675.2		26.1	%	731.1		30.3	%	(55.9)		(7.6)	%
Complementary building products	536.3		20.8	%	475.8		19.7	%	60.5		12.7	%
Total net sales	$	2,584.3	100.0	%	$	2,415.2	100.0	%	$	169.1	7.0	%

The increase in net sales was primarily driven by the following factors:

•net sales from acquired branches, which contributed $114.7 million year over year, primarily from the Coastal Construction Products acquisition, which is reported in the complementary building products line of business in the table above;

•net sales from greenfields, which contributed $74.1 million year over year;

•an estimated organic volume increase of approximately 1-2% (including the benefit of greenfields); and

•a weighted-average selling price increase of approximately ~~20-21% as well as an estimated volume increase of approximately 7-8%~~0-1%. Additionally, net sales in 2022 includes the results of acquired branches, while net sales in 2021 includes the results of divested branches that were included in continuing operations. Excluding the impact of acquired and divested branches, the increase in net sales would have been approximately 1% lower.

Net sales by geographic region, including the impact of acquired and divested branches, increased from 2021 to 2022 as follows: Northeast 23.8%; Mid-Atlantic 31.1%; Southeast 31.8%; Southwest 1.7%; Midwest 53.4%; West 10.0%; and Canada 24.8%.

We estimate the impact of inflation or deflation on our sales and gross profit by looking at changes in our average selling prices and gross margins (discussed below). 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.

~~The following table summarizes net sales by line of business for the periods presented (in millions):~~

Three Months Ended September 30, Year-over-Year Change
2022 2021
Net Sales Mix % Net Sales Mix % $ %
Residential roofing products $ 1,208.3 50.0 % $ 994.8 53.0 % $ 213.5 21.5 %
Non-residential roofing products 731.1 30.3 % 474.0 25.3 % 257.1 54.2 %
Complementary building products 475.8 19.7 % 406.6 21.7 % 69.2 17.0 %
Total net sales $ 2,415.2 100.0 % $ 1,875.4 100.0 % $ 539.8 28.8 %

Gross Profit

The following table summarizes gross profit and gross margin for the periods presented (in millions):

Three Months Ended
September 30,
Change1
2022 2021 $ %
Gross profit $ 630.2 $ 507.8 $ 122.4 24.1 %
Gross margin 26.1 % 27.1 % N/A (1.0) %

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.~~

Gross margin was 26.1% in 2022 down 1.0 percentage point from 27.1% in 2021. The comparative decrease in gross margin resulted from a weighted-average product cost increase of approximately 21-22%, partially offset by a weighted-average selling price increase (calculated as described above) of approximately 20-21% and a higher non-residential product sales mix.

~~Operating Expense~~

~~The following table summarizes operating expense for the periods presented (in millions):~~

Three Months Ended
September 30,
Change1
2022 2021 $ %
Selling, general and administrative $ 357.9 $ 309.4 $ 48.5 15.7 %
Depreciation 19.0 15.3 3.7 24.2 %
Amortization 21.9 25.0 (3.1) (12.4) %
Operating expense $ 398.8 $ 349.7 $ 49.1 14.0 %
% of net sales 16.5 % 18.6 % N/A (2.1) %


	Three Months Ended September 30,						Change1
	2023			2022			$		%
Gross profit	$	672.6		$	630.2		$	42.4	6.7	%

Gross margin	26.0		%	26.1		%	N/A		(0.1)	%

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.

Gross margin was 26.0% in 2023, down 0.1 percentage point from 26.1% in 2022. The slight decrease in gross margin resulted from a weighted-average product cost increase of approximately 1-2%, largely offset by a weighted-average selling price increase (calculated as described above) of approximately 0-1% and a lower non-residential product sales mix.

Operating Expense

The following table summarizes operating expense for the periods presented (in millions):


	Three Months Ended September 30,						Change1
	2023			2022			$		%
Selling, general and administrative	$	374.3		$	357.9		$	16.4	4.6	%
Depreciation	23.1			19.0			4.1		21.6	%
Amortization	21.4			21.9			(0.5)		(2.3)	%
Operating expense	$	418.8		$	398.8		$	20.0	5.0	%

% of net sales	16.2		%	16.5		%	N/A		(0.3)	%

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 increased ~~14.0%~~5.0% to $418.8 million in 2023, from $398.8 million in ~~2022, from $349.7~~2022. The change in operating expense in 2023 includes the impact of acquired branches and greenfields, which year over year contributed $22.5 million ~~in 2021.~~and $10.7 million, respectively. Excluding these impacts, operating expense decreased by approximately 3.3%, or $13.2 million. The comparative ~~increase~~decrease in operating expense from existing branches was mainly influenced by the following factors:

•a ~~$22.6~~$4.1 million ~~increase~~decrease in payroll and employee benefit costs, primarily due to ~~increased headcount to drive and support future growth,as well as wage inflation and higher~~lower incentive compensation;

•a ~~$10.6~~$4.0 million ~~increase~~decrease in ~~selling costs, primarily~~bad debt expense due to ~~an increase in fleet costs;~~improved collections; and

•a ~~$5.8~~$2.8 million ~~increase~~decrease in general and administrative expenses, primarily due to ~~higher insurance expenses and an increase in travel and entertainment expenses.~~lower professional fees.

Operating expense in 2022 includes the results of acquired branches, while operating expense in 2021 includes the results of divested branches that were included in continuing operations, the combined results of which drove a net increase of $6.8 million from 2021 to 2022.

Operating expense as a percent of sales was comparatively lower in ~~2022,~~2023, driven by the positive impact from net sales growth ~~as well as productivity gains.~~combined with cost management.

Interest Expense, Financing Costs and Other

Interest expense, financing costs and other, ~~expense~~net was $35.2 million in 2023, compared to $22.8 million in ~~2022, compared to $16.3 million in 2021.~~2022. The comparative increase is primarily due to ~~increased average debt balances during the respective periods and~~ a higher weighted-average interest rate on our outstanding ~~debt.~~debt coupled with an increase in average debt outstanding as a result of the 2030 Senior Notes issuance.

Income Taxes

Income tax provision (benefit) was $57.3 million in 2023, compared to $53.8 million in ~~2022, compared to $37.3 million in 2021.~~2022. The comparative increase in income tax provision was primarily due to higher pre-tax ~~income from continuing operations.~~income. The effective tax rate, excluding any discrete items, was 27.0% in 2023, compared to 25.9% in ~~2022, compared to 26.7% in 2021.~~2022. We expect our ~~2022~~2023 effective tax rate, excluding any discrete items that may arise during the tax year, will range from approximately ~~25.5%~~26.0% to ~~26.5%~~27.0%.

Net Income (Loss)/Net Income (Loss) Per Common Share

Net income (loss) from continuing operations was $154.8 million in 2022, compared to $104.5 million in 2021. Net income (loss) from discontinued operations was $0.3 million in 2021 (see Note 4 in the Notes to Condensed Consolidated Financial Statements for further discussion). Consolidated net income (loss) was $154.8 million in 2022, compared to $104.8 million in 2021. There were $6.0 million of dividends on preferred shares for both 2022 and 2021, making consolidated net income (loss) attributable to common stockholders $148.8 million and $98.8 million, respectively.

We calculate net income (loss) per common share by dividing net income (loss), less dividends on preferred shares and adjustments for participating securities, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by utilizing the most dilutive result after applying and comparing the two-class method and if-converted ~~method~~method. In calculating basic and diluted net income (loss) per common share for the three months ended September 30, 2023, the Repurchase Premium is included as a component of net income (loss) attributable to common stockholders (see Note 65 in the Notes to Condensed Consolidated Financial Statements for further discussion).

The following table presents all the components utilized to calculate basic and diluted net income (loss) per common share (in millions, except per share amounts; certain amounts may not recalculate due to rounding):

Three Months Ended
September 30,
2022 2021
Numerator:
Net income (loss) from continuing operations $ 154.8 $ 104.5
Dividends on Preferred Stock (6.0) (6.0)
Undistributed income from continuing operations allocated to participating securities (19.3) (12.0)
Net income (loss) from continuing operations attributable to common stockholders – Basic and Diluted (if-converted and two-class method) 129.5 86.5
Net income (loss) from discontinued operations attributable to common stockholders – Basic and Diluted (if-converted and two-class method) — 0.3
Net income (loss) attributable to common stockholders – Basic and Diluted (if-converted and two-class method) $ 129.5 $ 86.8
Denominator:
Weighted-average common shares outstanding – Basic 65.0 70.1
Effect of common share equivalents 1.4 1.3
Weighted-average common shares outstanding – Diluted 66.4 71.4
Net income (loss) per share:
Basic – Continuing operations $ 1.99 $ 1.23
Basic – Discontinued operations — 0.01
Basic net income (loss) per share $ 1.99 $ 1.24
Diluted – Continuing operations $ 1.95 $ 1.21
Diluted – Discontinued operations — 0.01
Diluted net income (loss) per share (if-converted and two-class method) $ 1.95 $ 1.22


	Three Months Ended September 30,
	2023		2022
Numerator:
Net income (loss)	$	161.3	$	154.8
Dividends on Preferred Stock	(1.9)		(6.0)
Undistributed income allocated to participating securities	(7.6)		(19.3)
Repurchase Premium	(414.6)		—


Net income (loss) attributable to common stockholders – Basic and Diluted	$	(262.8)	$	129.5

Denominator:
Weighted-average common shares outstanding – Basic	63.2		65.0
Effect of common share equivalents	—		1.4

Weighted-average common shares outstanding – Diluted	63.2		66.4

Net income (loss) per common share:
Basic	$	(4.16)	$	1.99
Diluted	$	(4.16)	$	1.95

Comparison of the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

The following tables set forth condensed consolidated statements of operations data and such data as a percentage of total net sales for the periods presented (in millions):


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Net sales	Net sales	$	6,460.3	$	5,065.5	Net sales	$	6,820.3	$	6,460.3
Cost of products sold	Cost of products sold	4,740.4		3,707.5		Cost of products sold	5,069.6		4,740.4
Gross profit	Gross profit	1,719.9		1,358.0		Gross profit	1,750.7		1,719.9
Operating expense:	Operating expense:					Operating expense:
Selling, general and administrative	Selling, general and administrative	1,022.6		873.5		Selling, general and administrative	1,071.3		1,022.6
Depreciation	Depreciation	55.4		45.0		Depreciation	65.6		55.4
Amortization	Amortization	64.8		77.8		Amortization	65.1		64.8

Total operating expense	Total operating expense	1,142.8		996.3		Total operating expense	1,202.0		1,142.8
Income (loss) from operations	Income (loss) from operations	577.1		361.7		Income (loss) from operations	548.7		577.1
Interest expense, financing costs and other		58.3		68.1
Loss on debt extinguishment		—		60.2
Income (loss) from continuing operations before income taxes		518.8		233.4
Interest expense, financing costs and other, net						Interest expense, financing costs and other, net	89.0		58.3

Income (loss) before provision for income taxes						Income (loss) before provision for income taxes	459.7		518.8
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	133.7		59.6		Provision for (benefit from) income taxes	119.8		133.7
Net income (loss) from continuing operations		385.1		173.8
Net income (loss) from discontinued operations		—		1.2
Net income (loss)	Net income (loss)	385.1		175.0		Net income (loss)	$	339.9	$	385.1
Dividends on Preferred Stock		18.0		18.0
Net income (loss) attributable to common stockholders		$	367.1	$	157.0


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Net sales	Net sales	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Cost of products sold	Cost of products sold	73.4	%	73.2	%	Cost of products sold	74.3	%	73.4	%
Gross profit	Gross profit	26.6	%	26.8	%	Gross profit	25.7	%	26.6	%
Operating expense:	Operating expense:					Operating expense:
Selling, general and administrative	Selling, general and administrative	15.8	%	17.3	%	Selling, general and administrative	15.7	%	15.8	%
Depreciation	Depreciation	0.9	%	0.9	%	Depreciation	1.0	%	0.9	%
Amortization	Amortization	1.0	%	1.5	%	Amortization	0.9	%	1.0	%

Total operating expense	Total operating expense	17.7	%	19.7	%	Total operating expense	17.6	%	17.7	%
Income (loss) from operations	Income (loss) from operations	8.9	%	7.1	%	Income (loss) from operations	8.1	%	8.9	%
Interest expense, financing costs and other		0.9	%	1.3	%
Loss on debt extinguishment		—	%	1.2	%
Income (loss) from continuing operations before income taxes		8.0	%	4.6	%
Interest expense, financing costs and other, net						Interest expense, financing costs and other, net	1.4	%	0.9	%

Income (loss) before provision for income taxes						Income (loss) before provision for income taxes	6.7	%	8.0	%
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	2.0	%	1.2	%	Provision for (benefit from) income taxes	1.8	%	2.0	%
Net income (loss) from continuing operations		6.0	%	3.4	%
Net income (loss) from discontinued operations		—	%	0.1	%
Net income (loss)	Net income (loss)	6.0	%	3.5	%	Net income (loss)	4.9	%	6.0	%
Dividends on Preferred Stock		0.3	%	0.4	%
Net income (loss) attributable to common stockholders		5.7	%	3.1	%

~~When we refer to regions, we~~the start of the fiscal reporting period, after which such branches are ~~referring to our geographic regions. When we refer to our net product costs, we are referring to our invoice cost less~~classified as existing. The following table summarizes the ~~impact~~classification of ~~short-term buying programs.~~

Asbranches for the results of operations for the nine months ended September 30, ~~2022, we had a total of 450 branches in operation.~~2023:


			Nine Months Ended September 30, 2023
Branches:
Existing			447
Greenfields opened after January 1, 2022			34
Total organic branches			481
Acquired after January 1, 2022			36
Total branches			517

Net Sales

Net sales increased ~~27.5%~~5.6% to $6.82 billion in 2023, up from $6.46 billion in 2022, ~~up from $5.07 billion~~driven by an 8.3% increase in ~~2021. Net~~residential roofing products and a 14.9% increase in complementary building products, partially offset by a 5.5% decrease in non-residential roofing products. The following table summarizes net sales ~~increased across all three lines~~by line of business ~~substantially~~for the periods presented (in millions):


	Nine Months Ended September 30,								Year-over-Year Change
	2023				2022
	Net Sales		%		Net Sales		%		$		%
Residential roofing products	$	3,521.5	51.6	%	$	3,250.9	50.3	%	$	270.6	8.3	%
Non-residential roofing products	1,796.2		26.4	%	1,901.5		29.4	%	(105.3)		(5.5)	%
Complementary building products	1,502.6		22.0	%	1,307.9		20.3	%	194.7		14.9	%
Total net sales	$	6,820.3	100.0	%	$	6,460.3	100.0	%	$	360.0	5.6	%

The increase in net sales was primarily driven by the following factors:

•net sales from acquired branches, which contributed $289.8 million year over year, primarily from the Coastal Construction Products acquisition, which is reported in the complementary building products line of business in the table above;

•net sales from greenfields, which contributed $135.5 million year over year; and

•a weighted-average selling price increase of approximately ~~22-23% as well as~~3-4%, partially offset by an estimated organic volume ~~increase~~decrease of approximately ~~4-5%. Additionally, net sales in 2022~~2-3% (which includes the ~~results~~benefit of acquired branches, while net sales in 2021 includes the results of divested branches that were included in continuing operations. Excluding the impact of acquired and divested branches, the increase in net sales would have been approximately 1% lower.

Net sales by geographic region, including the impact of acquired and divested branches, increased from 2021 to 2022 as follows: Northeast 23.5%; Mid-Atlantic 25.2%; Southeast 24.2%; Southwest 19.8%; Midwest 48.5%; West 11.5%; and Canada 20.3%greenfields).

~~The following table summarizes net sales by line of business for the periods presented (in millions):~~

Nine Months Ended September 30, Year-over-Year Change
2022 2021
Net Sales % Net Sales % $ %
Residential roofing products $ 3,250.9 50.3 % $ 2,671.5 52.7 % $ 579.4 21.7 %
Non-residential roofing products 1,901.5 29.4 % 1,290.4 25.5 % 611.1 47.4 %
Complementary building products 1,307.9 20.3 % 1,103.6 21.8 % 204.3 18.5 %
Total net sales $ 6,460.3 100.0 % $ 5,065.5 100.0 % $ 1,394.8 27.5 %

Gross Profit

The following table summarizes gross profit and gross margin for the periods presented (in millions):


		Nine Months Ended September 30,						Change1					Nine Months Ended September 30,						Change1
		2022			2021			$		%			2023			2022			$		%
Gross profit	Gross profit	$	1,719.9		$	1,358.0		$	361.9	26.6	%	Gross profit	$	1,750.7		$	1,719.9		$	30.8	1.8	%

Gross margin	Gross margin	26.6		%	26.8		%	N/A		(0.2)	%	Gross margin	25.7		%	26.6		%	N/A		(0.9)	%

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.

Gross margin was ~~26.6%~~25.7% in ~~2022,~~2023, down ~~0.2~~0.9 percentage points from ~~26.8%~~26.6% in ~~2021.~~2022. The ~~comparative~~year-over-year decrease in gross margin resulted from a weighted-average product cost increase of approximately ~~22-23% and a higher non-residential product sales mix, largely~~4-5%, partially offset by a weighted-average selling price increase (calculated as described above) of approximately ~~22-23%~~3-4%.

Operating Expense

The following table summarizes operating expense for the periods presented (in millions):


		Nine Months Ended September 30,						Change1					Nine Months Ended September 30,						Change1
		2022			2021			$		%			2023			2022			$		%
Selling, general and administrative	Selling, general and administrative	$	1,022.6		$	873.5		$	149.1	17.1	%	Selling, general and administrative	$	1,071.3		$	1,022.6		$	48.7	4.8	%
Depreciation	Depreciation	55.4			45.0			10.4		23.1	%	Depreciation	65.6			55.4			10.2		18.4	%
Amortization	Amortization	64.8			77.8			(13.0)		(16.7)	%	Amortization	65.1			64.8			0.3		0.5	%
Total operating expense	Total operating expense	$	1,142.8		$	996.3		$	146.5	14.7	%	Total operating expense	$	1,202.0		$	1,142.8		$	59.2	5.2	%

% of net sales	% of net sales	17.7		%	19.7		%	N/A		(2.0)	%	% of net sales	17.6		%	17.7		%	N/A		(0.1)	%

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 increased ~~14.7%~~5.2% to ~~$1,142.8~~$1.20 billion in 2023, from $1.14 billion in 2022. The change in operating expense in 2023 includes the impact of acquired branches and greenfields, which year over year contributed $61.3 million ~~in 2022, from $996.3~~and $24.5 million, ~~in 2021.~~respectively. Excluding these impacts, operating expense decreased by approximately 2.3%, or $26.6 million. The comparative ~~increase~~decrease in operating expense from existing branches was mainly influenced by the following factors:

•a ~~$67.8~~$9.1 million ~~increase~~decrease in payroll and employee benefit costs, primarily due to ~~increased headcount to drive and support future growth,as well as wage inflation and higher~~lower incentive compensation;

•a ~~$32.3~~$5.9 million ~~increase~~decrease in ~~selling costs, primarily~~bad debt expense due to ~~an increase in fleet costs, as well as net sales growth resulting in higher commissions;~~improved collections; and

•a ~~$24.9~~$4.0 million ~~increase~~decrease in general and administrative expenses, primarily due to ~~higher insurance expenses and an increase in travel and entertainment expenses.~~

~~Operating expense as a percent of sales was comparatively~~ lower ~~in 2022, driven by the positive impact from net sales growth as well as productivity gains.~~professional fees.

Interest Expense, Financing Costs and Other

Interest expense, financing costs and other, ~~expense~~net was $89.0 million in 2023, compared to $58.3 million in ~~2022, compared to $68.1 million in 2021.~~2022. The comparative ~~decrease~~increase is primarily due to ~~decreased average debt balances during the respective periods and~~ a ~~lower~~higher weighted-average interest rate on our outstanding ~~debt.~~

~~Loss on Debt Extinguishment~~

~~Loss on~~ debt, ~~extinguishment was $60.2 million~~and to a lesser extent, an increase in ~~2021 and includes~~average debt outstanding as a result of the ~~write-off of debt issuance costs and payment of redemption premiums stemming from our 2021 Debt Refinancing (as defined below).~~2030 Senior Notes issuance.

Income Taxes

Income tax provision (benefit) was $119.8 million in 2023, compared to $133.7 million in ~~2022, compared to $59.6 million in 2021.~~2022. The comparative ~~increase~~decrease in income tax provision was primarily due to ~~higher~~lower pre-tax ~~income from continuing operations.~~income. The effective tax rate, excluding any discrete items, was 26.7% in 2023, compared to 26.0% in ~~2022, compared to 26.3% in 2021.~~2022. We expect our ~~2022~~2023 effective tax rate, excluding any discrete items that may arise during the tax year, will range from approximately ~~25.5%~~26.0% to ~~26.5%~~27.0%.

Net Income (Loss)/Net Income (Loss) Per Common Share

Net income (loss) from continuing operations was $385.1 million in 2022, compared to $173.8 million in 2021. Net income (loss) from discontinued operations was $1.2 million in 2021 (see Note 4 in the Notes to Condensed Consolidated Financial Statements for further discussion). Consolidated net income (loss) was $385.1 million in 2022, compared to $175.0 million in 2021. There were $18.0 million of dividends on preferred shares for both 2022 and 2021, making consolidated net income (loss) attributable to common stockholders $367.1 million and $157.0 million, respectively.

We calculate net income (loss) per common share by dividing net income (loss), less dividends on preferred shares and adjustments for participating securities, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by utilizing the most dilutive result after applying and comparing the two-class method and if-converted ~~method~~method. In calculating basic and diluted net income (loss) per common share for the nine months ended September 30, 2023, the Repurchase Premium is included as a component of net income (loss) attributable to common stockholders (see Note 65 in the Notes to Condensed Consolidated Financial Statements for further discussion).

Nine Months Ended
September 30,
2022 2021
Numerator:
Net income (loss) from continuing operations $ 385.1 $ 173.8
Dividends on Preferred Stock (18.0) (18.0)
Undistributed income from continuing operations allocated to participating securities (46.0) (18.9)
Net income (loss) from continuing operations attributable to common stockholders – Basic and Diluted (if-converted and two-class method) 321.1 136.9
Net income (loss) from discontinued operations — 1.2
Undistributed income from discontinued operations allocated to participating securities — (0.2)
Net income (loss) from discontinued operations attributable to common stockholders – Basic and Diluted (if-converted and two-class method) — 1.0
Net income (loss) attributable to common stockholders – Basic and Diluted (if-converted and two-class method) $ 321.1 $ 137.9
Denominator:
Weighted-average common shares outstanding – Basic 67.7 69.9
Effect of common share equivalents 1.4 1.2
Weighted-average common shares outstanding – Diluted 69.1 71.1
Net income (loss) per share:
Basic – Continuing operations $ 4.74 $ 1.96
Basic – Discontinued operations — 0.01
Basic net income (loss) per share $ 4.74 $ 1.97
Diluted – Continuing operations $ 4.65 $ 1.93
Diluted – Discontinued operations — 0.01
Diluted net income (loss) per share (if-converted and two-class method) $ 4.65 $ 1.94


	Nine Months Ended September 30,
	2023		2022
Numerator:
Net income (loss)	$	339.9	$	385.1
Dividends on Preferred Stock	(13.9)		(18.0)

Undistributed income allocated to participating securities	(34.3)		(46.0)
Repurchase Premium	(414.6)		—


Net income (loss) attributable to common stockholders – Basic and Diluted	$	(122.9)	$	321.1

Denominator:
Weighted-average common shares outstanding – Basic	63.7		67.7
Effect of common share equivalents	—		1.4

Weighted-average common shares outstanding – Diluted	63.7		69.1

Net income (loss) per common share:
Basic	$	(1.93)	$	4.74
Diluted	$	(1.93)	$	4.65

Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, we prepare certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), specifically:

•Adjusted Operating Expense. We define Adjusted Operating Expense as operating expense, excluding the impact of the adjusting items (as described below).

•Adjusted Net Income (Loss). We define Adjusted Net Income (Loss) as net income (loss) ~~from continuing operations,~~, excluding the impact of the adjusting items (as described below).

•Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) ~~from continuing operations,~~, excluding the impact of interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, and the adjusting items (as described below).

We use these supplemental non-GAAP measures to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources. We expect to compute our non-GAAP financial measures consistently using the same methods each period.

We believe these non-GAAP measures are useful measures because they permit investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe that these non-GAAP measures are useful to investors when evaluating our business, they are not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. These non-GAAP measures should

not be considered in isolation or as a substitute for other financial performance measures presented in accordance with GAAP. These non-GAAP financial measures may have material limitations including, but not limited to, the exclusion of certain costs without a corresponding reduction of net income for the income generated by the assets to which the excluded costs relate. In addition, these non-GAAP financial measures may differ from similarly titled measures presented by other companies.

Adjusting Items to Non-GAAP Financial Measures

The impact of the following expense (income) items is excluded from each of our non-GAAP measures (the “adjusting items”):

•Acquisition costs. Represent certain direct and incremental costs related to ~~historical~~ acquisitions, including: amortization of intangible assets; professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses classified as selling, general and administrative; gains/losses related to changes in fair value of contingent consideration or holdback liabilities; and amortization of debt issuance costs. Acquisition costs are impacted by the timing and size of the acquisitions. We exclude acquisition costs from our non-GAAP financial measures to provide a useful comparison of

our operating results to prior periods and to our peer companies because such amounts vary significantly based on the magnitude of the acquisition and do not reflect our core operations.

•Restructuring costs. Represent costs stemming from headcount rationalization efforts and certain rebranding costs; impact of ~~the Interior Products and Solar Products~~ divestitures; costs related to changing our fiscal year end; amortization of debt issuance costs; debt refinancing and extinguishment costs; and abandoned lease costs. We exclude restructuring costs from our non-GAAP financial measures, as such items vary significantly based on the magnitude of the restructuring activity and also do not reflect expected future operating expenses. Additionally, these costs do not necessarily provide meaningful insight into the current or past core operations of our business.

•COVID-19 impacts. Represent costs directly related to the COVID-19 pandemic. Beginning January 1, 2023, we determined COVID-19 impacts should no longer be considered an adjusting item. This change was applied prospectively.

The following table presents the impact of the adjusting items on our condensed consolidated statements of operations for each of the periods indicated (in millions):


		Operating Expense				Non-Operating Expense							Operating Expense						Non-Operating Expense
		SG&A1		Amorti- zation			Interest Expense		Other (Income) Expense		Income Taxes2			Total			SG&A1		Amortization		Interest Expense		Income Taxes2		Total
Three Months Ended September 30, 2023																Three Months Ended September 30, 2023
Acquisition costs																Acquisition costs	$	2.2	$	21.4	$	1.0	$	—	$	24.6
Restructuring costs																Restructuring costs	—		—		0.5		—		0.5

Total adjusting items																Total adjusting items	$	2.2	$	21.4	$	1.5	$	—	$	25.1
Three Months Ended September 30, 2022	Three Months Ended September 30, 2022															Three Months Ended September 30, 2022
Acquisition costs	Acquisition costs	$	1.6	$	21.9		$	1.0	$	—	$	—		$	24.5	Acquisition costs	$	1.6	$	21.9	$	1.0	$	—	$	24.5
Restructuring costs	Restructuring costs	1.4		—			0.3		—		—			1.7		Restructuring costs	1.4		—		0.3		—		1.7
COVID-19 impacts	COVID-19 impacts	0.2		—			—		—		—			0.2		COVID-19 impacts	0.2		—		—		—		0.2
Total adjusting items	Total adjusting items	$	3.2	$	21.9		$	1.3	$	—	$	—		$	26.4	Total adjusting items	$	3.2	$	21.9	$	1.3	$	—	$	26.4
Three Months Ended September 30, 2021

Nine Months Ended September 30, 2023																Nine Months Ended September 30, 2023
Acquisition costs	Acquisition costs	$	0.9	$	25.0		$	1.0	$	—	$	—		$	26.9	Acquisition costs	$	5.3	$	65.1	$	3.0	$	—	$	73.4
Restructuring costs	Restructuring costs	2.8		—			0.3		(0.1)		—			3.0		Restructuring costs	2.0		—		1.0		—		3.0
COVID-19 impacts		0.4		—			—		—		—			0.4

Total adjusting items	Total adjusting items	$	4.1	$	25.0		$	1.3	$	(0.1)	$	—		$	30.3	Total adjusting items	$	7.3	$	65.1	$	4.0	$	—	$	76.4

Nine Months Ended September 30, 2022	Nine Months Ended September 30, 2022															Nine Months Ended September 30, 2022
Acquisition costs	Acquisition costs	$	3.8	$	64.8		$	3.0	$	—	$	—		$	71.6	Acquisition costs	$	3.8	$	64.8	$	3.0	$	—	$	71.6
Restructuring costs	Restructuring costs	6.0		—			0.9		—		—			6.9		Restructuring costs	6.0		—		0.9		—		6.9
COVID-19 impacts	COVID-19 impacts	1.7		—			—		—		—			1.7		COVID-19 impacts	1.7		—		—		—		1.7
Total adjusting items	Total adjusting items	$	11.5	$	64.8		$	3.9	$	—	$	—		$	80.2	Total adjusting items	$	11.5	$	64.8	$	3.9	$	—	$	80.2
Nine Months Ended September 30, 2021
Acquisition costs		$	2.3	$	75.5		$	4.1	$	—	$	—		$	81.9
Restructuring costs3		7.5		2.3			1.8		60.2		—			71.8
COVID-19 impacts		1.3		—			—		—		—			1.3
Total adjusting items		$	11.1	$	77.8		$	5.9	$	60.2	$	—		$	155.0

1.Selling, general and administrative expense (“SG&A”).

2.For tax impact of adjusting items, see Adjusted Net Income (Loss) table below.

3.Other (income) expense for the nine months ended September 30, 2021 includes a loss on debt extinguishment of $60.2 million in connection with the write-off of debt issuance costs and payment of redemption premiums stemming from our refinancing transactions.

Adjusted Operating Expense

The following table presents a reconciliation of operating expense, the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted Operating Expense for each of the periods indicated (in millions):


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021				2023			2022			2023			2022
Operating expense	Operating expense	$	398.8		$	349.7		$	1,142.8		$	996.3		Operating expense	$	418.8		$	398.8		$	1,202.0		$	1,142.8
Acquisition costs	Acquisition costs	(23.5)			(25.9)			(68.6)			(77.8)			Acquisition costs	(23.6)			(23.5)			(70.4)			(68.6)
Restructuring costs	Restructuring costs	(1.4)			(2.8)			(6.0)			(9.8)			Restructuring costs	—			(1.4)			(2.0)			(6.0)
COVID-19 impacts	COVID-19 impacts	(0.2)			(0.4)			(1.7)			(1.3)			COVID-19 impacts	—			(0.2)			—			(1.7)
Adjusted Operating Expense	Adjusted Operating Expense	$	373.7		$	320.6		$	1,066.5		$	907.4		Adjusted Operating Expense	$	395.2		$	373.7		$	1,129.6		$	1,066.5

Net sales	Net sales	$	2,415.2		$	1,875.4		$	6,460.3		$	5,065.5		Net sales	$	2,584.3		$	2,415.2		$	6,820.3		$	6,460.3
Operating expense as % of net sales	Operating expense as % of net sales	16.5		%	18.6		%	17.7		%	19.7		%	Operating expense as % of net sales	16.2		%	16.5		%	17.6		%	17.7		%
Adjusted Operating Expense as % of net sales	Adjusted Operating Expense as % of net sales	15.5		%	17.1		%	16.5		%	17.9		%	Adjusted Operating Expense as % of net sales	15.3		%	15.5		%	16.6		%	16.5		%

Adjusted Net Income (Loss)

The following table presents a reconciliation of net income (loss) ~~from continuing operations,~~, the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted Net Income (Loss) for each of the periods indicated (in millions):


		Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
		2022			2021			2022			2021					2023			2022			2023			2022
Net income (loss) from continuing operations		$	154.8		$	104.5		$	385.1		$	173.8
Net income (loss)															Net income (loss)	$	161.3		$	154.8		$	339.9		$	385.1
Adjusting items:	Adjusting items:														Adjusting items:
Acquisition costs	Acquisition costs	24.5			26.9			71.6			81.9				Acquisition costs	24.6			24.5			73.4			71.6
Restructuring costs	Restructuring costs	1.7			3.0			6.9			71.8				Restructuring costs	0.5			1.7			3.0			6.9
COVID-19 impacts	COVID-19 impacts	0.2			0.4			1.7			1.3				COVID-19 impacts	—			0.2			—			1.7
Total adjusting items	Total adjusting items	26.4			30.3			80.2			155.0				Total adjusting items	25.1			26.4			76.4			80.2
Less: tax impact of adjusting items1	Less: tax impact of adjusting items1	(6.7)			(7.7)			(20.6)			(39.7)				Less: tax impact of adjusting items1	(6.4)			(6.7)			(19.6)			(20.6)
Total adjustments, net of tax	Total adjustments, net of tax	19.7			22.6			59.6			115.3				Total adjustments, net of tax	18.7			19.7			56.8			59.6
Adjusted Net Income (Loss)	Adjusted Net Income (Loss)	$	174.5		$	127.1		$	444.7		$	289.1			Adjusted Net Income (Loss)	$	180.0		$	174.5		$	396.7		$	444.7

Net sales	Net sales	$	2,415.2		$	1,875.4		$	6,460.3		$	5,065.5			Net sales	$	2,584.3		$	2,415.2		$	6,820.3		$	6,460.3
Net income (loss) as % of sales	Net income (loss) as % of sales	6.4		%	5.6		%	6.0		%	3.4		%		Net income (loss) as % of sales	6.3		%	6.4		%	4.9		%	6.0		%
Adjusted Net Income (Loss) as % of sales	Adjusted Net Income (Loss) as % of sales	7.2		%	6.8		%	6.9		%	5.7		%		Adjusted Net Income (Loss) as % of sales	7.0		%	7.2		%	5.8		%	6.9		%

1.Amounts represent tax impact on adjustments that are not included in our income tax provision (benefit) for the periods presented. The tax impact of adjustments for the three months ended September 30, ~~2022~~2023 and ~~2021~~2022 were calculated using a blended effective tax rate of ~~25.4%~~25.5% and 25.4%, respectively. The tax impact of adjustments for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 were calculated using a blended effective tax rate of 25.7% ~~and 25.6%, respectively.~~for each period.

Adjusted EBITDA

The following table presents a reconciliation of net income (loss) ~~from continuing operations,~~, the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated (in millions):


		Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,					Nine Months Ended September 30,
		2022			2021			2022			2021					2023			2022			2023			2022
Net income (loss) from continuing operations		$	154.8		$	104.5		$	385.1		$	173.8
Net income (loss)															Net income (loss)	$	161.3		$	154.8		$	339.9		$	385.1
Interest expense, net	Interest expense, net	23.6			17.1			59.9			69.9				Interest expense, net	36.4			23.6			93.0			59.9
Income taxes	Income taxes	53.8			37.3			133.7			59.6				Income taxes	57.3			53.8			119.8			133.7
Depreciation and amortization	Depreciation and amortization	40.9			40.3			120.2			122.8				Depreciation and amortization	44.5			40.9			130.7			120.2
Stock-based compensation	Stock-based compensation	7.9			4.9			21.0			14.5				Stock-based compensation	7.9			7.9			22.2			21.0
Acquisition costs1	Acquisition costs1	1.6			0.9			3.8			2.3				Acquisition costs1	2.2			1.6			5.3			3.8
Restructuring costs1	Restructuring costs1	1.4			2.7			6.0			67.7				Restructuring costs1	—			1.4			2.0			6.0
COVID-19 impacts	COVID-19 impacts	0.2			0.4			1.7			1.3				COVID-19 impacts	—			0.2			—			1.7
Adjusted EBITDA	Adjusted EBITDA	$	284.2		$	208.1		$	731.4		$	511.9			Adjusted EBITDA	$	309.6		$	284.2		$	712.9		$	731.4

Net sales	Net sales	$	2,415.2		$	1,875.4		$	6,460.3		$	5,065.5			Net sales	$	2,584.3		$	2,415.2		$	6,820.3		$	6,460.3
Net income (loss) as % of net sales	Net income (loss) as % of net sales	6.4		%	5.6		%	6.0		%	3.4		%		Net income (loss) as % of net sales	6.3		%	6.4		%	4.9		%	6.0		%
Adjusted EBITDA as % of net sales	Adjusted EBITDA as % of net sales	11.8		%	11.1		%	11.3		%	10.1		%		Adjusted EBITDA as % of net sales	12.0		%	11.8		%	10.5		%	11.3		%

1.Amounts represent adjusting items included in SG&A and other income (expense); remaining adjusting item balances are embedded within the other line item balances reported in this table.

Seasonality and Quarterly Fluctuations

The demand for building materials is closely correlated to both seasonal changes and unpredictable weather patterns, therefore demand fluctuations are expected.

In general, our net sales and net income are highest in quarters ending June 30, September 30 and December 31, which represent the peak months of construction and re-roofing. Conversely, we have historically experienced low net income levels or net losses 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.

Our balance sheet fluctuates throughout the year, driven by similar seasonal trends. We generally experience an increase in inventory and peak cash usage in the quarters ending March 31 and 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 quarters ending June 30 and September 30, when sales are typically at their peak.

At times, we experience fluctuations in our financial performance that are driven by factors outside of our control, including the impact that severe weather events and unusual weather patterns may have on the timing and magnitude of demand and material availability.

In addition, the impacts of the COVID-19 pandemic and ~~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.

Liquidity

Liquidity is defined as the current amount of readily available cash and the ability to generate adequate amounts of cash to meet the current needs for cash. We assess our liquidity in terms of our cash and cash equivalents on hand and the ability to generate cash to fund our operating activities, taking into consideration available borrowings and the seasonal nature of our business.

Our principal sources of liquidity as of September 30, ~~2022~~2023 were our cash and cash equivalents of ~~$84.9~~$69.7 million and our available borrowings of approximately ~~$1.03~~$1.06 billion under our asset-based revolving lines of credit.

Significant factors which could affect future liquidity include the following:

•the adequacy of available bank lines of credit;

•the ability to attract long-term capital with satisfactory terms;

•cash flows generated from operating activities;

•working capital management;

•acquisitions;

•share repurchases; and

•capital expenditures.

Our primary capital needs are for working capital obligations and other general corporate purposes, including acquisitions, capital expenditures, and ~~capital expenditures.~~share repurchases. Our primary sources of working capital are cash from operations and bank borrowings. We have financed larger 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. The Repurchase of our Preferred Stock was funded primarily through the issuance of the 2030 Senior Notes and bank borrowings, and we expect to reduce those borrowings with cash flows from operations. We may from time to time explore additional or replacement financing sources in order to bolster liquidity and strengthen our capital structure.

We believe we currently have adequate liquidity and availability of capital to fund our present operations, meet our commitments on our existing debt and fund anticipated growth, including expansion in existing and targeted market areas. We may seek additional potential acquisitions from time to time, including as part of our Ambition 2025 ~~initiative, and hold discussions with certain acquisition candidates.~~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. This is most recently evidenced by the 2030 Senior Notes, which are described in further detail in the Capital Resources section below. We may also choose to issue additional shares of common stock or preferred stock in order to raise funds.

The following table summarizes our cash flows for the periods indicated (in millions):


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	81.2	$	117.1	Net cash provided by (used in) operating activities	$	525.7	$	81.2
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(66.5)		791.2		Net cash provided by (used in) investing activities	(144.9)		(66.5)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(155.2)		(1,110.2)		Net cash provided by (used in) financing activities	(378.8)		(155.2)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(0.4)		0.5		Effect of exchange rate changes on cash and cash equivalents	—		(0.4)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	$	(140.9)	$	(201.4)	Net increase (decrease) in cash and cash equivalents	$	2.0	$	(140.9)

Operating Activities

Net cash provided by operating activities ~~including both continuing and discontinued operations,~~ was $525.7 million in 2023, compared to $81.2 million in ~~2022, compared to $117.1 million in 2021.~~2022. Cash from operations ~~decreased $35.9~~increased $444.5 million in ~~2022~~2023 primarily due to an incremental cash ~~outflow~~inflow of ~~$232.1~~$488.6 million stemming from changes to our net working capital, mainly driven by ~~an unfavorable~~a favorable change in cash ~~outflows~~flows related to inventories, accounts payable and accrued expenses, and accounts receivable ~~and inventories~~ compared to the prior year, partially offset by ~~a favorable~~an unfavorable change in cash ~~inflows~~flows related to ~~accounts payable~~prepaid expenses and ~~accrued expenses. The unfavorable change related to accounts receivable is largely driven by increased sales, while the unfavorable change related to inventories~~other current assets, and ~~favorable change related to accounts payable~~other assets and ~~accrued expenses are primarily due to product cost inflation~~liabilities, as well as a ~~build-up of product inventories during our peak selling season. The~~ decrease ~~was partially offset by an increase~~ in net income after adjustments for non-cash items of ~~$196.2 million. Operating cash flows used in discontinued operations for the nine months ended September 30, 2021 were $21.8~~$44.1 million.

Investing Activities

Net cash used in investing activities was $144.9 million in 2023, compared to $66.5 million in ~~2022, compared to cash provided by investing activities of $791.2 million in 2021.~~2022. Cash ~~provided by investing activities in 2021 primarily reflects proceeds from the sale of Interior Products, whereas cash~~ used in investing activities increased $78.4 million in ~~2022 reflects cash used for~~2023 primarily due to an increase in acquisitions and purchases of property and equipment ~~as well as acquired businesses. There were no investing cash flows from discontinued operations.~~made by us during the period. See Note 3 for more information.

Financing Activities

Net cash used in financing activities was $378.8 million in 2023, compared to $155.2 million in ~~2022, compared to $1.11 billion in 2021.~~2022. Cash used in financing activities increased $223.6 million in ~~2021 was~~2023 primarily due to ~~$1.05 billion in net repayments~~the repurchase of ~~borrowings, mostly in connection with the 2021 Debt Refinancing (as defined below). Cash used in financing activities in 2022 primarily reflects $338.1 million in cash used to repurchase our common~~

convertible preferred stock, ~~and a $50.0 million advance payment for shares of our common stock, both under the Repurchase Program (as defined below),~~ partially offset by ~~$252.5 million~~an increase in ~~net borrowings.~~borrowings compared to the prior year due to the 2030 Senior Notes issuance.

Share Repurchase Program

On February 24, 2022, we announced a new share repurchase program (the “Repurchase Program”), pursuant to which we may purchase up to $500.0 million of our common stock. On February 23, 2023, we announced that our Board authorized and approved an

increase of the Repurchase Program by approximately $387.9 million, permitting future share repurchases of $500.0 million after considering actual share repurchases as of such re-authorization date.

Share repurchases under the Repurchase Program may be made from time to time through various means, including open market purchases (including block trades), privately negotiated transactions, accelerated share repurchase transactions (“ASR”) or through a series of forward purchase agreements, option contracts or similar agreements and contracts (including Rule 10b5-1 plans) adopted by us, in each case in accordance with the rules and regulations of the Securities and Exchange Commission, including, if applicable, Rule 10b-18 of the Exchange Act. The timing, volume, and nature of share repurchases pursuant to the Repurchase Program are at our discretion 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. AsDirect 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.

The following table sets forth our share repurchases (in millions, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total number of shares repurchased	0.3		—		1.5		5.8
Amount repurchased1	$	25.1	$	—	$	99.9	$	387.9
Average price per share	$	83.89	$	—	$	67.90	$	58.28

1.Amount paid for the nine months ended September 30, 2022 ~~we had approximately $112.1~~includes $50.0 million remaining under the Repurchase Program. The pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions, our debt repayment obligations, our stock price, and economic and market conditions.

On March 10, 2022, we entered into a Variable Tenor ASR Master Agreement (the “ASR Master Agreement”) and Supplemental Confirmation (collectively, the “March 2022 ASR Agreement”) with Citibank, N.A. (“Citi”) to repurchase $125.0 million of our common stock. Under the terms of the March 2022 ASR Agreement, we paid $125.0 million to Citi and received an initial share delivery of 1,689,189 shares of our common stock, representing 80% of the then expected share repurchases under the March 2022 ASR Agreement, based on the closing price of our common stock of $59.20 on March 11, 2022. On June 13, 2022, we completed the March 2022 ASR Agreement and received an additional 406,200 shares of our common stock. In total, 2,095,389 shares of our common stock were delivered under the March 2022 ASR Agreement at an average price of $59.65 per share, which represents the daily volume-weighted average price of our common stock during the term of the March 2022 ASR Agreement, less a discount and adjustments pursuant to the terms of the March 2022 ASR Agreement.

On June 13, 2022, we entered into an additional Supplemental Confirmation (together with the ASR Master Agreement, the “June 2022 ASR Agreement”) with Citi to repurchase an additional $250.0 million of our common stock. Under the terms of the June 2022 ASR Agreement, we paid $250.0 million to Citi and received an initial share delivery of 3,480,077 shares of our common stock, representing 80% of the total expected share repurchases under the June 2022 ASR Agreement, based on the closingrepurchase price of our common stock of $57.47 on June 13, 2022. The final number of shares to be repurchased pursuant to the ASR Agreement will be determined upon settlement. As of September 30, 2022, the remaining $50.0 million of the $250.0 million purchase pricethat was evaluated as an unsettled equity forward contract indexed to our common stock and classified within stockholders’ equity as a reduction to additional ~~paid-in capital until the equity forward contract settles, when it will be reflected as a reduction~~paid in ~~retained earnings.~~capital. The final settlement of the June 2022 ASR ~~Agreement is expected to be completed~~occurred in the fourth quarter of ~~2022.~~2022 and resulted in the delivery of an additional 1.1 million shares.

Share repurchases for the three and nine months ended September 30, 2023 were made on the open market through a Rule 10b5-1 repurchase plan. During the three and nine months ended September 30, 2023, we incurred costs directly attributable to the Repurchase Program of approximately $0.2 million and $0.8 million, respectively. Share repurchases for the nine months ended September 30, 2022 were made through a combination of open market transactions as well as through two ASRs. We did not incur costs directly attributable to the Repurchase Program during the three months ended September 30, 2022. During the nine months ended September 30, 2022, we ~~also repurchased on~~incurred costs directly attributable to the ~~open market 221,658 shares~~Repurchase Program of ~~our common stock at an average price~~approximately $0.2 million.

As of ~~$57.98 per share~~September 30, 2023, we had approximately $400.1 million available for ~~an aggregate purchase price of $12.9 million.~~

repurchases remaining under the Repurchase Program. See Note 87 in the Notes to Condensed Consolidated Financial Statements for additional information.

Capital Resources

On July 31, 2023, we, and certain of our subsidiaries as guarantors, completed a private offering of $600.0 million aggregate principal amount of senior secured notes with an interest rate of 6.500% per annum (the “2030 Senior Notes”) at an issue price equal to par. In May 2021, we entered into a series of financing arrangements to refinance certain debt instruments to take advantage of lower market interest rates for our fixed rate indebtedness and to extend maturities (the “2021 Debt Refinancing”). As of September 30, ~~2022,~~2023, we had access to the following financing arrangements:

•the 2026 U.S. Revolver, an asset-based revolving line of credit in the U.S., in an amount up to $1.25 billion and with an outstanding balance (net of ~~$246.1~~unamortized debt issuance costs) of $218.3 million;

•the 2026 Canada Revolver, an asset-based revolving line of credit in Canada, in an amount up to $50.0 ~~million;~~million and with no outstanding balance;

•the 2028 Term Loan with an outstanding balance (net of ~~$974.0~~unamortized debt issuance costs) of $966.4 million; and

•~~two~~three separate senior notes instruments, including the 2030 Senior Notes, 2029 Senior Notes, and 2026 Senior Notes, with outstanding balances (net of ~~$346.7~~unamortized debt issuance costs) of $592.4 million, $347.2 million, and ~~$297.3~~$297.9 million, respectively.

See Note 1011 in the Notes to Condensed Consolidated Financial Statements for additional information on our current financing arrangements, ~~and~~ the 2021 Debt ~~Refinancing.~~Refinancing, and the 2030 Senior Notes.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended ~~September 30, 2021~~December 31, 2022 have not changed materially during the ~~transition period from October 1, 2021 to December 31, 2021 or the~~ nine months ended September 30, ~~2022.~~

2023.

Item 4. Controls and Procedures

As of September 30, ~~2022,~~2023, management, including the CEO and CFO, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the ~~Securities~~ Exchange ~~Act of 1934 (the “Exchange Act”))~~Act). Based on that evaluation, management, including the CEO and CFO, concluded that as of September 30, ~~2022,~~2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and to ensure that such information ~~required to be disclosed by us in the reports that we file or submit under the Exchange Act~~ is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. We maintain a system of internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

There have been no material changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, ~~2022~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 1213 in the Notes to Condensed Consolidated Financial Statements for information about pending legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information with respect to the Company’s purchases of its common stock during the third quarter of ~~2022:~~2023:

~~Period~~

~~Total Number of Shares Purchased~~

~~Average Price Paid per Share~~

~~Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1, 2~~

~~Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs1, 2~~

~~July 2022~~

—

~~112,147,537~~

~~August 2022~~

—

~~112,147,537~~

~~September 2022~~

—

~~112,147,537~~

~~Total~~

—


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1, 2	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs1 (in millions)
July 1 - 31, 2023	298,838	$	83.89	298,838	$	400.1
August 1 - 31, 2023	—	—		—	$	400.1
September 1 - 30, 2023	—	—		—	$	400.1
Total	298,838	$	83.89	298,838

1.On February 24, 2022, the Company announced a program to repurchase up to $500.0 million of its common stock. On February 23, 2023, the Company announced that its Board authorized and approved an increase of the Repurchase Program by approximately $387.9 million, permitting future share repurchases of $500.0 million.

2.On June 13, 2022, the Company entered into a Supplemental Confirmation to its existing Variable Tenor ASR Master Agreement (the “ASR Master Agreement”) with Citibank, N.A. (“Citi”) (together with the ASR Master Agreement, the “June 2022 ASR Agreement”) whereupon the Company provided Citi with a prepayment of $250.0 million and received an initial share delivery of 3,480,077 shares of its common stock, representing 80% of the total expected share repurchases under the June 2022 ASR Agreement, basedAll purchases were made on the closing price of the Company’s common stock of $57.47 on June 13, 2022. Under the terms of the June 2022 ASR Agreement, the total number of shares delivered and average purchase price per share will be determined upon settlement, which is expected to occur during the fourth quarter of 2022. No deliveries were made by Citi under the June 2022 ASR Agreement during the third quarter of 2022.open market through a Rule 10b5-1 repurchase plan.

See Note 87 in the Notes to Condensed Consolidated Financial Statements for additional information on our Share Repurchase Program.

Item 5. Other Information

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the three months ended September 30, 2023, except as noted below, none of our directors or Section 16 officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408 of Regulation S-K.

Jason L. Taylor, President, West Division, entered into a Rule 10b5-1 trading arrangement on September 13, 2023. Mr. Taylor’s trading arrangement provides for the potential sale of up to 5,417 shares of our common stock through September 3, 2024. This trading arrangement is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act.

Item 6. Exhibits

~~Exhibit Number~~

~~Description~~

31.1*

~~Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)~~

31.2*

~~Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)~~

32.1**

~~Certification pursuant to 18 U.S.C. Section 1350~~

101*

~~101.INS Inline XBRL Instance – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

~~101.SCH Inline XBRL Taxonomy Extension Schema~~

~~101.CAL Inline XBRL Taxonomy Extension Calculation~~

~~101.PRE Inline XBRL Taxonomy Extension Presentation~~

~~101.LAB Inline XBRL Taxonomy Extension Labels~~

~~101.DEF Inline XBRL Taxonomy Extension Definition~~

104*

~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)~~

Incorporated by Reference

Exhibit Number

Description

Form

Exhibit

Filing Date

4.1

Indenture, dated as of July 31, 2023, by and among Beacon Roofing Supply, Inc., the subsidiary guarantor party thereto, and U.S. Bank Trust Company, National Association, as trustee and collateral agent.

8-K

4.1

July 31, 2023

4.2

Form of 6.500% Senior Secured Notes due 2030 (included as Exhibit A to the Indenture incorporated by reference as Exhibit 4.1).

8-K

4.2

July 31, 2023

10.1

Repurchase letter agreement, dated July 6, 2023, between Beacon Roofing Supply, Inc. and CD&R Boulder Holdings, L.P.

8-K

10.1

July 7, 2023

10.2

Amendment No. 2, dated as of July 3, 2023, to the Credit Agreement among the Company, the other loan parties party thereto, the lenders party thereto and the Administrative Agent.

8-K

10.1

July 10, 2023

31.1*

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)

31.2*

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)

32.1**

Certification pursuant to 18 U.S.C. Section 1350

101*

101.INS Inline XBRL Instance – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH Inline XBRL Taxonomy Extension Schema

101.CAL Inline XBRL Taxonomy Extension Calculation

101.PRE Inline XBRL Taxonomy Extension Presentation

101.LAB Inline XBRL Taxonomy Extension Labels

101.DEF Inline XBRL Taxonomy Extension Definition

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

** Furnished herewith

Pursuant to Rule 405 of Regulation S-T, the following interactive data files formatted in Inline Extensible Business Reporting Language (iXBRL) are attached as Exhibit 101 to this Quarterly Report on Form 10-Q:

(i)the Condensed Consolidated Balance Sheets as of September 30, ~~2022;~~2023; December 31, ~~2021;~~2022; and September 30, ~~2021,~~2022,

(ii)the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022,

(iii)the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022,

(iv)the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022,

(v)the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, and

(vi)the Notes to Condensed Consolidated Financial Statements.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BEACON ROOFING SUPPLY, INC.

Date: November ~~4, 2022~~3, 2023	BY:	/s/ FRANK A. LONEGRO
		Frank A. Lonegro
		Executive Vice President & Chief Financial Officer


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Net sales	$	—	$	109.1
Cost of products sold	—		(80.3)
Selling, general and administrative	(1.0)		(22.2)
Depreciation and amortization	—		(0.2)
Other income	0.1		—
Loss on sale	1.4		(5.2)
Pre-tax income (loss) from discontinued operations	0.5		1.2
Provision for (benefit from) income taxes	0.2		—
Net income (loss) from discontinued operations	$	0.3	$	1.2


	Three Months Ended
	September 30, 2022		June 30, 2022		March 31, 2022		December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Net sales	$2,415.2		$	2,358.2	$	1,686.9	$	1,754.9		$	1,875.4		$	1,872.1		$	1,318.0
% of fiscal year’s net sales	n/a		n/a		n/a		25.7		%	27.5		%	27.5		%	19.3		%

Gross profit	$630.2		$	650.2	$	439.5	$	461.6		$	507.8		$	517.4		$	332.8
% of fiscal year’s gross profit	n/a		n/a		n/a		25.4		%	27.9		%	28.4		%	18.3		%

Net income (loss) from continuing operations	$154.8		$	174.5	$	55.8	$	68.1		$	104.5		$	79.8		$	(10.5)
Net income (loss)	$154.8		$	174.5	$	55.8	$	68.0		$	104.8		$	76.5		$	(6.3)
Net income (loss) attributable to common stockholders	$148.8		$	168.5	$	49.8	$	62.0		$	98.8		$	70.5		$	(12.3)

Net income (loss) from continuing operations per share – Basic	$	1.99	$	2.17	$	0.62	$	0.78		$	1.23		$	0.93		$	(0.24)
Net income (loss) per share – Basic	$	1.99	$	2.17	$	0.62	$	0.78		$	1.24		$	0.89		$	(0.18)

Net income (loss) from continuing operations per share – Diluted	$	1.95	$	2.12	$	0.61	$	0.76		$	1.21		$	0.91		$	(0.24)
Net income (loss) per share – Diluted	$	1.95	$	2.12	$	0.61	$	0.76		$	1.22		$	0.87		$	(0.18)