1 | As of June 30, 2017March 31, 2018 |
For the three month periodsmonths ended June 30,March 31, 2018 and 2017, and 2016, we recorded $20.7$37.1 million and $17.4$20.3 million of amortization expense relating to the above-listed intangible assets, respectively. For the nine month periodssix months ended June 30,March 31, 2018 and 2017, and 2016, we recorded $61.1$55.3 million and $49.7$40.4 million of amortization expense relating to the above-listed intangible assets, respectively. The intangible asset lives range from 15 to 20 years and have a weighted-average remaining life of 17.618.9 years as of June 30, 2017.March 31, 2018. The following table presentssummarizes the estimated annualfuture amortization expense for these intangible assets (in thousands): | Year Ending September 30, | | | | | | | | 2017 (Jul - Sept) | | $ | 23,235 | | | 2018 | | | 71,731 | | | 2018 (Apr - Sept) | | | $ | 74,619 | | 2019 | | | 58,516 | | | | 188,832 | | 2020 | | | 47,313 | | | | 181,762 | | 2021 | | | 37,662 | | | | 152,665 | | 2022 | | | | 125,020 | | Thereafter | | | 131,455 | | | | 494,354 | | | | | | | $ | 1,217,252 | | | | $ | 369,912 | | | | | | | |
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8. Financing Arrangements The following table summarizes all financing arrangements from the respective periods presented (in thousands): | March 31, | | | September 30, | | | March 31, | | | 2018 | | | 2017 | | | 2017 | | Revolving Lines of Credit: | | | | | | | | | | | | 2020 ABL | | | | | | | | | | | | U.S. Revolver, expires October 1, 2020 1 | $ | - | | | $ | - | | | $ | 269,124 | | Canada Revolver, expires October 1, 20202 | | - | | | | 3,205 | | | | - | | 2023 ABL | | | | | | | | | | | | U.S. Revolver, expires January 2, 20233 | | 424,528 | | | | - | | | | - | | Canada Revolver, expires January 2, 2023 | | - | | | | - | | | | - | | Less: current portion | | - | | | | - | | | | - | | Borrowings under revolving lines of credit, net | $ | 424,528 | | | $ | 3,205 | | | $ | 269,124 | | | | | | | | | | | | | | Term Loans: | | | | | | | | | | | | Term Loan, matures October 1, 20224 | $ | - | | | $ | 433,440 | | | $ | 434,912 | | Term Loan, matures January 2, 20255 | | 931,909 | | | | - | | | | - | | Less: current portion | | (9,700 | ) | | | (4,500 | ) | | | (4,500 | ) | Total long-term borrowings under term loans | $ | 922,209 | | | $ | 428,940 | | | $ | 430,412 | | | | | | | | | | | | | | Senior Notes: | | | | | | | | | | | | Senior Notes, mature October 20236 | | 292,967 | | | | 292,328 | | | | 291,689 | | Senior Notes, mature November 20257 | | 1,278,713 | | | | - | | | | - | | Less: current portion | | - | | | | - | | | | - | | Total long-term borrowings under Senior Notes | $ | 1,571,680 | | | $ | 292,328 | | | $ | 291,689 | | | | | | | | | | | | | | Long-term debt, net | $ | 2,493,889 | | | $ | 721,268 | | | $ | 722,101 | | | | | | | | | | | | | | Equipment Financing Facilities and Other: | | | | | | | | | | | | Equipment financing facilities, various maturities through September 20218 | $ | 13,347 | | | $ | 12,898 | | | $ | 15,577 | | Capital lease obligations, various maturities through November 20219 | | 14,863 | | | | 19,956 | | | | 22,204 | | Total obligations under equipment financing facilities and other | | 28,210 | | | | 32,854 | | | | 37,781 | | Less: current portion | | (9,897 | ) | | | (9,641 | ) | | | (9,514 | ) | Long-term obligations under equipment financing and other, net | $ | 18,313 | | | $ | 23,213 | | | $ | 28,267 | |
________________________________ 8. | Financing Arrangements1 | Extinguished on January 2, 2018 ; Effective rate on borrowings of 2.97% as of March 31, 2017 |
| 2 | Extinguished on January 2, 2018; Effective rate on borrowings of 3.70% as of September 30, 2017 |
3 Effective rate on borrowings of 3.41% as of March 31, 2018 | 4 | Extinguished on January 2, 2018; Interest rate of 3.50% as of September 30, 2017 and March 31, 2017 |
5 Interest rate of 3.94% as of March 31, 2018 | 6 | Interest rate of 6.38% as of March 31, 2018, September 30, 2017 and March 31, 2017 |
| 7 | Interest rate of 4.88% as of March 31, 2018 |
| 8 | Fixed interest rates ranging from 2.33% to 3.25% as of March 31, 2018, September 30, 2017, and March 31, 2017 |
9 Fixed interest rates ranging from 2.72% to 10.39% as of March 31, 2018 , September 30, 2017, and March 31, 2017 Financing - Allied Acquisition In connection with the Allied Acquisition, the Company entered into various financing arrangements totaling $3.57 billion, including an asset-based revolving line of credit of $1.30 billion (“2023 ABL”), $525.0 million of which was drawn at closing, and a $970.0 million term loan (“2025 Term Loan”). The Company also raised an additional $1.30 billion through the issuance of senior notes (the “2025 Senior Notes”). The proceeds from these financing arrangements were used to finance the Allied Acquisition, to refinance or otherwise extinguish all third-party indebtedness, to pay fees and expenses associated with the acquisition, and to provide working capital and funds for other general corporate purposes. The Company capitalized new debt issuance costs totaling approximately $67.7 million related to the 2023 ABL, the 2025 Term Loan and the 2025 Senior Notes. Since the financing arrangements entered into in connection with the Allied Acquisition had certain lenders who also participated in previous financing arrangements entered into by the Company, portions of the transactions were accounted for as either a debt modification or a debt extinguishment. In accordance with the accounting for debt modification, the Company expensed $2.0 17
million of debt issuance costs related to the Allied financing arrangements and recognized a loss on debt extinguishment of $1.7 million. The remainder of the debt issuance costs will be amortized over the term of the Allied financing arrangements. 2023 ABL On January 2, 2018, the Company entered into a $1.30 billion asset-based revolving line of credit with Wells Fargo Bank, N.A. and a syndicate of other lenders. The 2023 ABL consists of revolving loans in both the United States (“2023 U.S. Revolver”) in the amount of $1.20 billion and Canada (“2023 Canada Revolver”) in the amount of $100.0 million. The 2023 ABL has a maturity date of January 2, 2023. The 2023 ABL has various borrowing tranches with an interest rate based on a LIBOR rate (with a floor) plus a fixed spread. The current unused commitment fees on the 2023 ABL are 0.25% per annum. There is one financial covenant under the 2023 ABL, which is a Consolidated Fixed Charge Ratio. The Consolidated Fixed Charge Ratio is calculated by dividing consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) by Consolidated Fixed Charges (both as defined in the agreement). Per the covenant, the Company’s Consolidated Fixed Charge Ratio has to be a minimum of 1.00 at the end of each fiscal quarter, calculated on a trailing four quarter basis. The 2023 ABL is secured by a first priority lien over substantially all of the Company’s and each guarantor’s accounts, chattel paper, deposit accounts, books, records and inventory (as well as intangibles related thereto), 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”). The 2023 ABL is guaranteed jointly, severally, fully and unconditionally by the Company’s active United States subsidiaries. As of March 31, 2018, the total balance outstanding on the 2023 ABL, net of $11.8 million of unamortized debt issuance costs, was $424.5 million. The Company also has outstanding standby letters of credit related to the 2023 U.S. Revolver in the amount of $14.8 million as of March 31, 2018. 2025 Term Loan On January 2, 2018, the Company entered into a $970.0 million Term Loan with Citibank N.A., and a syndicate of other lenders. The 2025 Term Loan requires quarterly principal payments in the amount of $2.4 million, with the remaining outstanding principal to be paid on its January 2, 2025 maturity date. The interest rate is based on a LIBOR rate (with a floor) plus a fixed spread. The Company has the option of selecting a LIBOR period that determines the rate at which interest can accrue on the Term Loan as well as the period in which interest payments are made. The 2025 Term Loan is secured by a first priority lien on the Term Priority Collateral and a second priority lien on the ABL Priority Collateral. Certain excluded assets will not be included in the Term Priority Collateral and the Revolving Priority Collateral. The Term Loan is guaranteed jointly, severally, fully and unconditionally by the Company’s active United States subsidiaries. As of March 31, 2018, the outstanding balance on the Term Loan, net of $38.1 million of unamortized debt issuance costs, was $931.9 million. 2025 Senior Notes On October 25, 2017, Beacon Escrow Corporation, a wholly owned subsidiary of the Company (the “Escrow Issuer”), completed a private offering of $1.30 billion aggregate principal amount of 4.875% Senior Notes due 2025 at an issue price of 100%. The 2025 Senior Notes bear interest at a rate of 4.875% per annum, payable semi-annually in arrears, beginning May 1, 2018. The Company anticipates repaying the 2025 Senior Notes at the maturity date of November 1, 2025. Per the terms of the Escrow Agreement, the net proceeds from the 2025 Senior Notes remained in escrow until they were used to fund a portion of the purchase price of the Allied Acquisition payable at closing on January 2, 2018. Upon closing of the Allied Acquisition on January 2, 2018, (i) the Escrow Issuer merged with and into the Company, and the Company assumed all obligations under the 2025 Senior Notes; and (ii) all existing domestic subsidiaries of the Company (including the entities acquired in the Allied Acquisition) became guarantors of the 2025 Senior Notes As of March 31, 2018, the outstanding balance on the 2025 Senior Notes, net of $21.3 million of unamortized debt issuance costs, was $1.28 billion. Financing - RSG Acquisition In connection with the RSG Acquisition, on October 1, 2015, the Company entered into various financing arrangements totaling $1.45 billion. A “Senior Secured Credit Facility” was entered into that is comprised ofbillion, including an asset-based revolving line of credit (“2020 ABL”) of $700.0 million ($350.0 million of which was drawn at closing) and 18
a new $450.0 million term loan (“2022 Term Loan”). The Company also raised an additional $300.0 million through the issuance of senior notes (the “Senior“2023 Senior Notes”). The proceeds from the Senior Secured Credit Facility and Senior Notesthese financing arrangements were used to provide working capital and funds for other general corporate purposes, to refinance or otherwise extinguish all third-party indebtedness for borrowed money under Company’s and RSG’s existing senior secured credit facilities and RSG’s unsecured senior notes due 2020, to finance the acquisition, and to pay fees and expenses associated with the RSG acquisition. The Company incurred financingdebt issuance costs totaling approximately $31.3 million. million related to the 2020 ABL, 2022 Term Loan and 2023 Senior Notes.The following table summarizes all financing arrangements the Company has entered into (in thousands):
| | | | | | | | | | | | | | | June 30, | | | September 30, | | | June 30, | | | | 2017 | | | 2016 | | | 2016 | | Senior Secured Credit Facility | | | | | | | | | | | | | Revolving Lines of Credit: | | | | | | | | | | | | | U.S. Revolver, expires October 1, 20201 | | $ | 437,285 | | | $ | 355,087 | | | $ | 406,917 | | Canadian Revolver, expires October 1, 20202 | | | 12,330 | | | | 4,574 | | | | 9,290 | | Term Loan, matures October 1, 20223 | | | 434,177 | | | | 436,380 | | | | 435,507 | | | | | | | | | | | | | | | Total borrowings under Senior Secured Credit Facility | | | 883,792 | | | | 796,041 | | | | 851,714 | | Less: current portion | | | (4,500 | ) | | | (4,500 | ) | | | (4,500 | ) | | | | | | | | | | | | | | Total long-term borrowings under Senior Secured Credit Facility | | $ | 879,292 | | | $ | 791,541 | | | $ | 847,214 | | | | | | | | | | | | | | | Senior Notes | | | | | | | | | | | | | Senior Notes, matures October 20234 | | | 292,008 | | | | 291,049 | | | | 290,623 | | Less: current portion | | | — | | | | — | | | | — | | | | | | | | | | | | | | | Total long-term borrowings under Senior Notes | | $ | 292,008 | | | $ | 291,049 | | | $ | 290,623 | | | | | | | | | | | | | | | Equipment Financing Facilities and Other | | | | | | | | | | | | | Equipment financing facilities, various maturities through September 20215 | | $ | 16,701 | | | $ | 20,419 | | | $ | 21,641 | | Capital lease obligations, various maturities through November 20216 | | | 20,973 | | | | 25,013 | | | | 26,184 | | | | | | | | | | | | | | | Total obligations under equipment financing facilities and other | | | 37,674 | | | | 45,432 | | | | 47,825 | | Less: current portion | | | (9,262 | ) | | | (10,311 | ) | | | (8,105 | ) | | | | | | | | | | | | | | Total long-term obligations under equipment financing facilities and other | | $ | 28,412 | | | $ | 35,121 | | | $ | 39,720 | | | | | | | | | | | | | | |
1 - | Effective rates on borrowings are 3.28% as of June 30, 2017; 2.90% as of September 30, 2016; and 2.77% as of June 30, 2016 |
2 - | Effective rates on borrowings are 3.20% as of June 30, 2017, September 30, 2016 and June 30, 2016 |
3 - | Interest rate of 3.50% as of June 30, 2017; 3.50% as of September 30, 2016; 4.00% as of June 30, 2016 |
4 - | Interest rate of 6.38% as of June 30, 2017, September 30, 2016 and June 30, 2016 |
5 - | Fixed interest rates ranging from 2.33% to 3.25% as of June 30, 2017 and September 30, 2016; 2.33% to 4.49% as of June 30, 2016 |
6 - | Fixed interest rates ranging from 2.72% to 10.39% as of June 30, 2017, September 30, 2016, and June 30, 2016 |
Asset-based Line of Credit (“ABL”)2020 ABL
On October 1, 2015, the Company entered into a $700$700.0 million ABLasset-based revolving line of credit with Wells Fargo Bank, N.A. and a syndicate of other lenders. ThisThe 2020 ABL consistshad an original maturity date of October 2, 2010 and consisted of revolving loans in both the United States (“2020 U.S. Revolver”) in the amount of $670.0 million and Canada (“Canada Revolver”) in the amount of $30.0 million. The 2020 ABL has a maturity date of October 1, 2020. The U.S. Revolver hashad various borrowing tranches of borrowings, bearingwith an interest at rates ranging from 2.59% to 4.75%. The effective rate of these borrowings is 3.28% and is paid monthly. As of June 30, 2017, the outstanding balance on the U.S. Revolver and Canada Revolvers, net of debt issuance fees, was $449.6 million. The U.S. Revolver also has outstanding standby letters of credit in the amount of $10.9 million as of June 30, 2017. Current unused commitment fees on the revolving credit facilities are 0.25% per annum. There is one financial covenant under the ABL, which is a Consolidated Fixed Charge Ratio. The Consolidated Fixed Charge Ratio is calculated by dividing consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) by Consolidated Fixed Charges (as defined in the agreement). Per the covenant, the Company’s Consolidated Fixed Charge Ratio must be a minimum of 1.00 at the end of each fiscal quarter, calculatedbased on a trailing four quarter basis.LIBOR rate (with a floor) plus a fixed spread. The covenant is only applicable when the borrowing availability is less than 10%full balance of the maximum loan cap or $60.0 million. The2020 ABL is guaranteed jointly and severally and fully and unconditionally bywas paid on January 2, 2018 in conjunction with the Company’s active United States subsidiary. Allied Acquisition. 2022 Term Loan On October 1, 2015, the Company entered into a $450.0 million Term Loan with Citibank N.A., and a syndicate of other lenders. The 2022 Term Loan requiresrequired quarterly principal payments in the amount of $1.1 million, with the remaining outstanding principal to be paid on its original maturity date of October 1, 2022. The interest rate paid iswas based on a LIBOR rate (with a floor) plus a fixed spread. The Company hashad the option of selecting a LIBOR period that determinesdetermined the rate at which interest canwould accrue, on the Term Loan as well as the period in which interest payments are made. On September 16, 2016, The full balance of the Company refinanced its2022 Term Loan loweringwas paid on January 2, 2018 in conjunction with the LIBOR floor by 25 basis points and loweringAllied Acquisition, including the spread by 25 basis points. As a resultwrite-off of the refinancing, the Company wrote off $1.6$0.7 million ofin debt issuance costs in interest expense. As of June 30, 2017, the outstanding balance on the Term Loan, net of debt issuance fees, was $434.2 million. The Term Loan is guaranteed jointly and severally and fully and unconditionally by the Company’s active United States subsidiary.costs.
2023 Senior Notes On October 1, 2015, the Company raised $300.0 million by issuing senior notes due 2023. The 2023 (the “Senior Notes”). The Senior Notes have a coupon rate of 6.38% per annum and are payable semi-annually in arrears, beginning April 1, 2016. There are early payment provisions in the Senior Note indenture in which the Company would be subject to “make whole” provisions. ManagementThe Company anticipates repaying the notes at the maturity date of October 1, 2023. As of June 30, 2017 the outstanding balance on the Senior Notes, net of debt issuance fees, was $292.0 million. The 2023 Senior Notes are guaranteed jointly, and severally, and fully and unconditionally by the Company’s active United States subsidiary.subsidiaries. Other Information
TheAs of March 31, 2018, the outstanding balance on the 2023 Senior Secured Credit Facility and the previous credit facility it replaced had certain lenders who participated in both arrangements, therefore management accounted for a portionNotes, net of this transaction as a debt modification and a portion as a debt extinguishment. In accordance with the accounting for debt modification, the Company expensed $2.2$7.0 million of directunamortized debt issuance costs, incurred and will amortize the previously capitalized issuance costs over the term of the Senior Secured Credit Facility. The remainder of the settlement of the Company’s previous financing arrangements was accounted for as debt extinguishment, for which the Company recognized a loss of $0.8 million in the first quarter of fiscal year 2016.$293.0 million.
Equipment Financing Facilities and Other As of June 30, 2017,March 31, 2018, the Company had a $16.7$13.3 million outstanding under equipment financing facilities, with fixed interest rates ranging from 2.33% to 3.25% and payments due through September 2021. As of June 30, 2017March 31, 2018, the Company had $21.0$14.9 million of capital lease obligations outstanding. These leases have interest rates ranging from 2.72% to 10.39% with payments due through November 2021. 9. Commitments and Contingencies 9. | Commitments and Contingencies |
Operating Leases The Company mostly operates in leased facilities, which are accounted for as operating leases. The leases typically provide for a base rent plus real estate taxes. Certain of the leases provide for escalating rents over the lives of the leases and rent expense is recognized over the terms of those leases on a straight-line basis. At March 31, 2018, the minimum rental commitments under all non-cancelable operating leases with initial or remaining terms of more than one year were as follows (in thousands): 19
Year Ending September 30, | | | | | 2018 (April - Sept) | | $ | 39,484 | | 2019 | | | 99,398 | | 2020 | | | 86,089 | | 2021 | | | 75,097 | | 2022 | | | 55,207 | | Thereafter | | | 135,396 | | Total minimum lease payments | | $ | 490,671 | |
For the three months ended June 30,March 31, 2018 and 2017, and 2016, rent expense was $15.8$28.5 million and $14.5$14.7 million, respectively. For the ninesix months ended June 30,March 31, 2018 and 2017, and 2016, rent expense was $44.7$43.7 million and $45.1$28.9 million, respectively. Sublet income was immaterial for each of these periods. 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 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. In connection with its acquisitions, the Company’s practice is to request indemnification for any and all known material liabilities of significance as of the respective dates of acquisition. Historically, environmental liabilities have not had a material impact on the Company’s results of operations, financial position or liquidity. The Company is subject to litigation 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. 10. Geographic Data The following tables summarize certain geographic information for the periods presented (in thousands): | | | Three Months Ended June 30, | | | Nine Months Ended June 30, | | Three Months Ended March 31, | | | Six Months Ended March 31, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Net sales | | | | | | | | | | | | | | | | | | | | | | | | U.S. | | $ | 1,167,647 | | | $ | 1,097,555 | | | $ | 2,977,108 | | | $ | 2,832,573 | | $ | 1,404,617 | | | $ | 849,226 | | | $ | 2,480,879 | | | $ | 1,809,461 | | Canada | | | 46,247 | | | | 55,171 | | | | 109,694 | | | | 120,170 | | | 21,008 | | | | 21,498 | | | | 66,725 | | | | 63,447 | | | | | | | | | | | | | | | | Total net sales | | $ | 1,213,894 | | | $ | 1,152,726 | | | $ | 3,086,802 | | | $ | 2,952,743 | | $ | 1,425,625 | | | $ | 870,724 | | | $ | 2,547,604 | | | $ | 1,872,908 | | | | | | | | | | | | | | | | | | | | | | June 30, | | | September 30, | | | June 30, | | | | | | | | 2017 | | | 2016 | | | 2016 | | | Long-lived assets | | | | | | | | | | U.S. | | | | $ | 515,170 | | | $ | 527,680 | | | $ | 545,070 | | | Canada | | | | | 13,204 | | | | 13,374 | | | | 13,949 | | | | | | | | | | | | | | | | Total long-lived assets | | | | $ | 528,374 | | | $ | 541,054 | | | $ | 559,019 | | | | | | | | | | | | | | | |
11. | Fair Value Measurement |
| | | | | March 31, | | | September 30, | | | March 31, | | | | | | | 2018 | | | 2017 | | | 2017 | | Long-lived assets | | | | | | | | | | | | | | | | U.S. | | | | | $ | 1,499,860 | | | $ | 507,236 | | | $ | 511,507 | | Canada | | | | | | 13,125 | | | | 13,446 | | | | 12,841 | | Total long-lived assets | | | | | $ | 1,512,985 | | | $ | 520,682 | | | $ | 524,348 | |
11. Fair Value Measurement As of June 30, 2017,March 31, 2018, 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). Based As of March 31, 2018, based upon recent trading prices (Level 2 — market approach) as of June 30, 2017,, the fair value of the Company’s $300.0 million Senior Notes due in 2023 was $323.6 million. $317.0 million and the fair value of the $1.30 billion Senior Notes due 2025 was $1.24 billion. 20
As of June 30, 2017,March 31, 2018, the fair value of the Company’s Senior Secured Credit Facilityterm loan and revolving asset-based line of credit approximated the amount outstanding. The Company estimates the fair value of its Senior Secured Credit Facility by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles (Level 3). 12. Income Taxes 12. | Supplemental Guarantor Information |
AllOn December 22, 2017, the U.S. federal government officially signed into law the Tax Cut and Jobs Act of 2017 (“TCJA”). ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions, January 1, 2018. Though certain key aspects of the new law are effective January 1, 2018 and have an immediate accounting effect, other significant provisions are not effective or may not result in accounting effects for September 30 fiscal year-end companies until October 1, 2018.
Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. Per SAB 118, the measurement period is deemed to have an earlier end date when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the updated tax law are expected to be recorded at the time a reasonable estimate for all, or a portion, of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed. SAB 118 states, that at each reporting period, companies must disclose the effects of the TCJA for areas where accounting is complete, disclose provisional amounts (or adjustments to provisional amounts) for the effects of the TCJA areas where accounting is not complete but a reasonable estimate has been determined, and confirm areas where a reasonable estimate of the effects cannot yet be made, and therefore taxes are reflected in accordance with law prior to the enactment of the TCJA. As of March 31, 2018, the Company was still assessing the overall impact that the TCJA will have on its financial statements and related disclosures; however, the Company was able to make the following reasonable estimates on the impact of the corporate taxation changes from the TCJA: The Company has a blended federal corporate income tax rate for fiscal year 2018 of 24.5%. This transitional tax rate stems from Section 15 of the Internal Revenue Code that states if the tax rate changes in during a tax year, the tax rate for the full year is calculated using the prior and revised tax rates on a proportional basis using the number of days under each legislated rate. For 2019, the Company will have a federal corporate income tax rate of 21%. The Company initially remeasured all its deferred tax assets and liabilities based on the revised corporate income tax rate (21%). Due to the Company’s status as a non-calendar year-end filer, it was required to perform additional analysis to distinguish those deferred taxes that will be realized during fiscal year 2018 at the blended federal corporate income tax rate of 24.5% from those that will be realized in future years at the revised rate. As a result, the Company recognized a provisional decrease of its deferred tax liabilities and related income tax benefit of $1.5 million and $48.9 million in its consolidated statement of operations for the three and six months ended March 31, 2018, respectively. The Company will continue to refine its deferred tax remeasurement calculation and assess the related impact, which potentially could result in additional adjustments. The Company estimated the impact of the mandatory repatriation transition tax on the net accumulated earnings and profits of the Company’s foreign subsidiary, Beacon Roofing Supply Canada Company (“BRSCC”). As a result, the Company recognized a provisional expense of $0.9 million for the one-time transition tax liability in its consolidated statement of operations for the three and six months ended March 31, 2018. The Company has not yet finalized its calculation of the repatriation transition tax, as it continues to analyze of the amount of BRSCC earnings held in cash and other specified assets that had been previously deferred from U.S. federal taxation. State conformity to the TCJA law changes has not been communicated by the state and local jurisdictions at this time; therefore, the Company has not made any provisional adjustments related to the potential impact in its financial statements. The Company will continue to account for items where a reasonable estimate of the impact could not be assessed as of March 31, 2018 under the guidance that was in effect immediately prior to the enactment of the TCJA, ASC 740, Accounting for Income Taxes. 13. Supplemental Guarantor Information The 2023 Senior Notes issued on October 1, 2015and 2025 Senior Notes are guaranteed jointly and severally by all of the United States subsidiaries of the Company (collectively, the “Guarantors”), and not by the Canadian subsidiaries of the Company. Such guarantees are full and 21
unconditional. Supplemental condensed consolidating financial information of the Company, including such information for the Guarantors, is presented below. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the non-guarantor subsidiaries operated as independent entities. Investments in subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Separate financial statements of the Guarantors are not provided as the consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of the assets held by, and the operations of, the combined groups. 22
BEACON ROOFING SUPPLY, INC. Condensed Consolidating Balance Sheets (Unaudited; In thousands) | | | | | | | | | | | | | | | | | | | | | | | June 30, 2017 | | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Assets | | | | | Current assets: | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | — | | | $ | 34,583 | | | $ | 7,314 | | | $ | (8,842 | ) | | $ | 33,055 | | Accounts receivable, net | | | 1,327 | | | | 640,796 | | | | 29,994 | | | | (1,140 | ) | | | 670,977 | | Inventories, net | | | — | | | | 608,367 | | | | 33,058 | | | | — | | | | 641,425 | | Prepaid expenses and other current assets | | | 30,158 | | | | 185,633 | | | | 5,686 | | | | — | | | | 221,477 | | | | | | | | | | | | | | | | | | | | | | | Total current assets | | | 31,485 | | | | 1,469,379 | | | | 76,052 | | | | (9,982 | ) | | | 1,566,934 | | Intercompany receivable, net | | | — | | | | 1,037,846 | | | | — | | | | (1,037,846 | ) | | | — | | Investments in consolidated subsidiaries | | | 3,070,328 | | | | — | | | | — | | | | (3,070,328 | ) | | | — | | Deferred income taxes, net | | | 58,230 | | | | — | | | | — | | | | (58,230 | ) | | | — | | Property and equipment, net | | | 6,541 | | | | 140,126 | | | | 10,284 | | | | — | | | | 156,951 | | Goodwill | | | — | | | | 1,226,034 | | | | 29,980 | | | | — | | | | 1,256,014 | | Intangibles, net | | | — | | | | 440,042 | | | | 2,920 | | | | — | | | | 442,962 | | Other assets, net | | | 1,242 | | | | 269 | | | | — | | | | — | | | | 1,511 | | | | | | | | | | | | | | | | | | | | | | | Total Assets | | $ | 3,167,826 | | | $ | 4,313,696 | | | $ | 119,236 | | | $ | (4,176,386 | ) | | $ | 3,424,372 | | | | | | | | | | | | | | | | | | | | | | | Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | | Accounts payable | | $ | 23,839 | | | $ | 354,696 | | | $ | 19,026 | | | $ | (9,982 | ) | | $ | 387,579 | | Accrued expenses | | | 18,174 | | | | 257,387 | | | | 4,754 | | | | — | | | | 280,315 | | Current portions of long-term debt | | | 4,500 | | | | 9,262 | | | | — | | | | — | | | | 13,762 | | | | | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 46,513 | | | | 621,345 | | | | 23,780 | | | | (9,982 | ) | | | 681,656 | | Intercompany payable, net | | | 998,740 | | | | — | | | | 39,106 | | | | (1,037,846 | ) | | | — | | Borrowings under revolving lines of credit, net | | | — | | | | 437,285 | | | | 12,330 | | | | — | | | | 449,615 | | Long-term debt, net | | | 721,685 | | | | — | | | | — | | | | — | | | | 721,685 | | Deferred income taxes, net | | | — | | | | 199,746 | | | | 600 | | | | (58,230 | ) | | | 142,116 | | Long-term obligations under equipment financing and other, net | | | — | | | | 28,365 | | | | 47 | | | | — | | | | 28,412 | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 1,766,938 | | | | 1,286,741 | | | | 75,863 | | | | (1,106,058 | ) | | | 2,023,484 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total stockholders’ equity | | | 1,400,888 | | | | 3,026,955 | | | | 43,373 | | | | (3,070,328 | ) | | | 1,400,888 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders’ Equity | | $ | 3,167,826 | | | $ | 4,313,696 | | | $ | 119,236 | | | $ | (4,176,386 | ) | | $ | 3,424,372 | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2018 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Assets | | | | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | $ | - | | | $ | 18,746 | | | $ | 8,196 | | | $ | (10,942 | ) | | $ | 16,000 | | Accounts receivable, net | | - | | | | 816,058 | | | | 17,905 | | | | (1,140 | ) | | | 832,823 | | Inventories, net | | - | | | | 978,852 | | | | 26,725 | | | | - | | | | 1,005,577 | | Prepaid expenses and other current assets | | 35,646 | | | | 199,947 | | | | 4,722 | | | | - | | | | 240,315 | | Total current assets | | 35,646 | | | | 2,013,603 | | | | 57,548 | | | | (12,082 | ) | | | 2,094,715 | | | | | | | | | | | | | | | | | | | | | | Intercompany receivable, net | | - | | | | 1,284,455 | | | | - | | | | (1,284,455 | ) | | | - | | Investments in consolidated subsidiaries | | 5,949,437 | | | | - | | | | - | | | | (5,949,437 | ) | | | - | | Deferred income taxes, net | | 19,902 | | | | - | | | | - | | | | (19,902 | ) | | | - | | Property and equipment, net | | 10,761 | | | | 272,866 | | | | 10,595 | | | | - | | | | 294,222 | | Goodwill | | - | | | | 2,351,447 | | | | 30,173 | | | | - | | | | 2,381,620 | | Intangibles, net | | - | | | | 1,407,772 | | | | 2,530 | | | | - | | | | 1,410,302 | | Other assets, net | | 1,243 | | | | 268 | | | | - | | | | - | | | | 1,511 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 6,016,989 | | | $ | 7,330,411 | | | $ | 100,846 | | | $ | (7,265,876 | ) | | $ | 6,182,370 | | | | | | | | | | | | | | | | | | | | | | Liabilities and Stockholders' Equity | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | Accounts payable | $ | 21,042 | | | $ | 572,222 | | | $ | 12,377 | | | $ | (12,082 | ) | | $ | 593,559 | | Accrued expenses | | 61,788 | | | | 281,265 | | | | 4,997 | | | | - | | | | 348,050 | | Current portions of long-term debt | | 9,700 | | | | 9,897 | | | | - | | | | - | | | | 19,597 | | Total current liabilities | | 92,530 | | | | 863,384 | | | | 17,374 | | | | (12,082 | ) | | | 961,206 | | | | | | | | | | | | | | | | | | | | | | Intercompany payable, net | | 1,247,040 | | | | - | | | | 37,415 | | | | (1,284,455 | ) | | | - | | Borrowings under revolving lines of credit, net | | - | | | | 424,528 | | | | - | | | | - | | | | 424,528 | | Long-term debt, net | | 2,493,889 | | | | - | | | | - | | | | - | | | | 2,493,889 | | Deferred income taxes, net | | - | | | | 110,614 | | | | 389 | | | | (19,902 | ) | | | 91,101 | | Long-term obligations under equipment financing and other, net | | - | | | | 18,313 | | | | - | | | | - | | | | 18,313 | | Other long-term liabilities | | 814 | | | | 9,729 | | | | 74 | | | | - | | | | 10,617 | | Total liabilities | | 3,834,273 | | | | 1,426,568 | | | | 55,252 | | | | (1,316,439 | ) | | | 3,999,654 | | | | | | | | | | | | | | | | | | | | | | Convertible preferred stock | | 399,195 | | | | - | | | | - | | | | - | | | | 399,195 | | | | | | | | | | | | | | | | | | | | | | Total stockholders' equity | | 1,783,521 | | | | 5,903,843 | | | | 45,594 | | | | (5,949,437 | ) | | | 1,783,521 | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders' Equity | $ | 6,016,989 | | | $ | 7,330,411 | | | $ | 100,846 | | | $ | (7,265,876 | ) | | $ | 6,182,370 | |
23
BEACON ROOFING SUPPLY, INC. Condensed Consolidating Balance Sheets (Unaudited; In thousands) | | | | | | | | | | | | | | | | | | | | | | | September 30, 2016 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Assets | | | | | Current assets: | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | — | | | $ | 37,447 | | | $ | 2,876 | | | $ | (8,937 | ) | | $ | 31,386 | | Accounts receivable, net | | | — | | | | 593,395 | | | | 34,710 | | | | (1,140 | ) | | | 626,965 | | Inventories, net | | | — | | | | 460,516 | | | | 20,220 | | | | — | | | | 480,736 | | Prepaid expenses and other current assets | | | 3,527 | | | | 153,681 | | | | 5,895 | | | | — | | | | 163,103 | | | | | | | | | | | | | | | | | | | | | | | Total current assets | | | 3,527 | | | | 1,245,039 | | | | 63,701 | | | | (10,077 | ) | | | 1,302,190 | | Intercompany receivable, net | | | — | | | | 878,931 | | | | — | | | | (878,931 | ) | | | — | | Investments in consolidated subsidiaries | | | 2,891,677 | | | | — | | | | — | | | | (2,891,677 | ) | | | — | | Deferred income taxes, net | | | 59,567 | | | | — | | | | — | | | | (59,567 | ) | | | — | | Property and equipment, net | | | 4,626 | | | | 133,897 | | | | 10,046 | | | | — | | | | 148,569 | | Goodwill | | | — | | | | 1,167,905 | | | | 29,660 | | | | — | | | | 1,197,565 | | Intangibles, net | | | — | | | | 460,696 | | | | 3,328 | | | | — | | | | 464,024 | | Other assets, net | | | 1,242 | | | | 269 | | | | — | | | | — | | | | 1,511 | | | | | | | | | | | | | | | | | | | | | | | Total Assets | | $ | 2,960,639 | | | $ | 3,886,737 | | | $ | 106,735 | | | $ | (3,840,252 | ) | | $ | 3,113,859 | | | | | | | | | | | | | | | | | | | | | | | Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | | Accounts payable | | $ | 26,630 | | | $ | 329,895 | | | $ | 14,467 | | | $ | (10,077 | ) | | $ | 360,915 | | Accrued expenses | | | 42,594 | | | | 114,016 | | | | 4,503 | | | | — | | | | 161,113 | | Current portions of long-term obligations | | | 4,500 | | | | 10,311 | | | | — | | | | — | | | | 14,811 | | | | | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 73,724 | | | | 454,222 | | | | 18,970 | | | | (10,077 | ) | | | 536,839 | | Intercompany payable, net | | | 840,159 | | | | — | | | | 38,772 | | | | (878,931 | ) | | | — | | Borrowings under revolving lines of credit, net | | | — | | | | 355,087 | | | | 4,574 | | | | — | | | | 359,661 | | Long-term debt, net | | | 722,929 | | | | — | | | | — | | | | — | | | | 722,929 | | Deferred income taxes, net | | | — | | | | 194,556 | | | | 493 | | | | (59,567 | ) | | | 135,482 | | Long-term obligations under equipment financing and other, net | | | — | | | | 35,074 | | | | 47 | | | | — | | | | 35,121 | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 1,636,812 | | | | 1,038,939 | | | | 62,856 | | | | (948,575 | ) | | | 1,790,032 | | | | | | | | | | | | | | | | | | | | | | | Total stockholders’ equity | | | 1,323,827 | | | | 2,847,798 | | | | 43,879 | | | | (2,891,677 | ) | | | 1,323,827 | | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders’ Equity | | $ | 2,960,639 | | | $ | 3,886,737 | | | $ | 106,735 | | | $ | (3,840,252 | ) | | $ | 3,113,859 | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Assets | | | | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | $ | - | | | $ | 149,799 | | | $ | 1,582 | | | $ | (13,131 | ) | | $ | 138,250 | | Accounts receivable, net | | - | | | | 663,034 | | | | 42,633 | | | | (1,140 | ) | | | 704,527 | | Inventories, net | | - | | | | 527,226 | | | | 24,698 | | | | - | | | | 551,924 | | Prepaid expenses and other current assets | | 4,195 | | | | 198,817 | | | | 6,126 | | | | - | | | | 209,138 | | Total current assets | | 4,195 | | | | 1,538,876 | | | | 75,039 | | | | (14,271 | ) | | | 1,603,839 | | | | | | | | | | | | | | | | | | | | | | Intercompany receivable, net | | - | | | | 655,372 | | | | - | | | | (655,372 | ) | | | - | | Investments in consolidated subsidiaries | | 3,160,273 | | | | - | | | | - | | | | (3,160,273 | ) | | | - | | Deferred income taxes, net | | 30,822 | | | | - | | | | - | | | | (30,822 | ) | | | - | | Property and equipment, net | | 6,610 | | | | 138,955 | | | | 10,564 | | | | - | | | | 156,129 | | Goodwill | | - | | | | 1,220,812 | | | | 31,174 | | | | - | | | | 1,251,986 | | Intangibles, net | | - | | | | 426,187 | | | | 2,882 | | | | - | | | | 429,069 | | Other assets, net | | 2,912 | | | | 5,622 | | | | - | | | | - | | | | 8,534 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 3,204,812 | | | $ | 3,985,824 | | | $ | 119,659 | | | $ | (3,860,738 | ) | | $ | 3,449,557 | | | | | | | | | | | | | | | | | | | | | | Liabilities and Stockholders' Equity | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | Accounts payable | $ | 27,174 | | | $ | 468,891 | | | $ | 21,903 | | | $ | (14,271 | ) | | $ | 503,697 | | Accrued expenses | | 51,183 | | | | 204,173 | | | | 5,941 | | | | - | | | | 261,297 | | Current portions of long-term obligations | | 4,500 | | | | 9,641 | | | | - | | | | - | | | | 14,141 | | Total current liabilities | | 82,857 | | | | 682,705 | | | | 27,844 | | | | (14,271 | ) | | | 779,135 | | | | | | | | | | | | | | | | | | | | | | Intercompany payable, net | | 618,881 | | | | - | | | | 36,491 | | | | (655,372 | ) | | | - | | Borrowings under revolving lines of credit, net | | - | | | | - | | | | 3,205 | | | | - | | | | 3,205 | | Long-term debt, net | | 721,268 | | | | - | | | | - | | | | - | | | | 721,268 | | Deferred income taxes, net | | - | | | | 168,209 | | | | 996 | | | | (30,822 | ) | | | 138,383 | | Long-term obligations under equipment financing and other, net | | - | | | | 23,147 | | | | 66 | | | | - | | | | 23,213 | | Other long-term liabilities | | | | | | 2,547 | | | | - | | | | - | | | | 2,547 | | Total liabilities | | 1,423,006 | | | | 876,608 | | | | 68,602 | | | | (700,465 | ) | | | 1,667,751 | | | | | | | | | | | | | | | | | | | | | | Total stockholders' equity | | 1,781,806 | | | | 3,109,216 | | | | 51,057 | | | | (3,160,273 | ) | | | 1,781,806 | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders' Equity | $ | 3,204,812 | | | $ | 3,985,824 | | | $ | 119,659 | | | $ | (3,860,738 | ) | | $ | 3,449,557 | |
24
BEACON ROOFING SUPPLY, INC. Condensed Consolidating Balance Sheets (Unaudited; In thousands) | | | | | | | | | | | | | | | | | | | | | | | June 30, 2016 | | �� | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Assets | | | | | Current assets: | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | $ | — | | | $ | 39,168 | | | $ | 3,461 | | | $ | (6,093 | ) | | $ | 36,536 | | Accounts receivable, net | | | — | | | | 608,880 | | | | 32,361 | | | | (1,140 | ) | | | 640,101 | | Inventories, net | | | — | | | | 589,976 | | | | 30,932 | | | | — | | | | 620,908 | | Prepaid expenses and other current assets | | | 11,697 | | | | 196,123 | | | | 5,562 | | | | (8,309 | ) | | | 205,073 | | | | | | | | | | | | | | | | | | | | | | | Total current assets | | | 11,697 | | | | 1,434,147 | | | | 72,316 | | | | (15,542 | ) | | | 1,502,618 | | Intercompany receivable, net | | | | | | | 950,364 | | | | — | | | | (950,364 | ) | | | — | | Investments in consolidated subsidiaries | | | 2,838,385 | | | | — | | | | — | | | | (2,838,385 | ) | | | — | | Deferred income taxes, net | | | 67,484 | | | | — | | | | — | | | | (67,484 | ) | | | — | | Property and equipment, net | | | 4,266 | | | | 138,725 | | | | 10,398 | | | | — | | | | 153,389 | | Goodwill | | | — | | | | 1,170,087 | | | | 30,119 | | | | — | | | | 1,200,206 | | Intangibles, net | | | — | | | | 473,699 | | | | 3,551 | | | | — | | | | 477,250 | | Other assets, net | | | 1,233 | | | | 197 | | | | — | | | | — | | | | 1,430 | | | | | | | | | | | | | | | | | | | | | | | Total Assets | | $ | 2,923,065 | | | $ | 4,167,219 | | | $ | 116,384 | | | $ | (3,871,775 | ) | | $ | 3,334,893 | | | | | | | | | | | | | | | | | | | | | | | Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | | Accounts payable | | $ | 15,964 | | | $ | 544,311 | | | $ | 10,290 | | | $ | (7,233 | ) | | $ | 563,332 | | Accrued expenses | | | — | | | | 200,014 | | | | 13,707 | | | | (8,309 | ) | | | 205,412 | | Current portions of long-term obligations | | | 4,500 | | | | 8,105 | | | | — | | | | — | | | | 12,605 | | | | | | | | | | | | | | | | | | | | | | | Total current liabilities | | | 20,464 | | | | 752,430 | | | | 23,997 | | | | (15,542 | ) | | | 781,349 | | Intercompany payable, net | | | 911,321 | | | | — | | | | 39,043 | | | | (950,364 | ) | | | — | | Borrowings under revolving lines of credit | | | — | | | | 406,916 | | | | 9,291 | | | | — | | | | 416,207 | | Long-term debt, net | | | 721,630 | | | | — | | | | — | | | | — | | | | 721,630 | | Deferred income taxes, net | | | — | | | | 173,344 | | | | 477 | | | | (67,484 | ) | | | 106,337 | | Long-term obligations under equipment financing and other, net | | | — | | | | 39,672 | | | | 48 | | | | — | | | | 39,720 | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | | 1,653,415 | | | | 1,372,362 | | | | 72,856 | | | | (1,033,390 | ) | | | 2,065,243 | | | | | | | | | | | | | | | | | | | | | | | Total stockholders’ equity | | | 1,269,650 | | | | 2,794,857 | | | | 43,528 | | | | (2,838,385 | ) | | | 1,269,650 | | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders’ Equity | | $ | 2,923,065 | | | $ | 4,167,219 | | | $ | 116,384 | | | $ | (3,871,775 | ) | | $ | 3,334,893 | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Assets | | | | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | $ | - | | | $ | 24,181 | | | $ | 1,946 | | | $ | (16,115 | ) | | $ | 10,012 | | Accounts receivable, net | | - | | | | 490,724 | | | | 15,437 | | | | 225 | | | | 506,386 | | Inventories, net | | - | | | | 556,463 | | | | 24,426 | | | | - | | | | 580,889 | | Prepaid expenses and other current assets | | 28,952 | | | | 184,764 | | | | 3,673 | | | | - | | | | 217,389 | | Total current assets | | 28,952 | | | | 1,256,132 | | | | 45,482 | | | | (15,890 | ) | | | 1,314,676 | | | | | | | | | | | | | | | | | | | | | | Intercompany receivable, net | | - | | | | 961,450 | | | | - | | | | (961,450 | ) | | | - | | Investments in consolidated subsidiaries | | 2,959,542 | | | | - | | | | - | | | | (2,959,542 | ) | | | - | | Deferred income taxes, net | | 57,419 | | | | - | | | | - | | | | (57,419 | ) | | | - | | Property and equipment, net | | 5,614 | | | | 140,918 | | | | 9,848 | | | | - | | | | 156,380 | | Goodwill | | - | | | | 1,198,805 | | | | 29,254 | | | | - | | | | 1,228,059 | | Intangibles, net | | - | | | | 436,513 | | | | 2,994 | | | | - | | | | 439,507 | | Other assets, net | | 1,242 | | | | 269 | | | | - | | | | - | | | | 1,511 | | | | | | | | | | | | | | | | | | | | | | Total Assets | $ | 3,052,769 | | | $ | 3,994,087 | | | $ | 87,578 | | | $ | (3,994,301 | ) | | $ | 3,140,133 | | | | | | | | | | | | | | | | | | | | | | Liabilities and Stockholders' Equity | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | | | | | | | | | | | Accounts payable | $ | 27,209 | | | $ | 468,144 | | | $ | 6,865 | | | $ | (15,890 | ) | | $ | 486,328 | | Accrued expenses | | 26,226 | | | | 103,045 | | | | 1,993 | | | | - | | | | 131,264 | | Current portions of long-term obligations | | 4,500 | | | | 9,514 | | | | - | | | | - | | | | 14,014 | | Total current liabilities | | 57,935 | | | | 580,703 | | | | 8,858 | | | | (15,890 | ) | | | 631,606 | | | | | | | | | | | | | | | | | | | | | | Intercompany payable, net | | 923,565 | | | | - | | | | 37,885 | | | | (961,450 | ) | | | - | | Borrowings under revolving lines of credit | | - | | | | 269,124 | | | | - | | | | - | | | | 269,124 | | Long-term debt, net | | 722,101 | | | | - | | | | - | | | | - | | | | 722,101 | | Deferred income taxes, net | | - | | | | 194,556 | | | | 358 | | | | (57,419 | ) | | | 137,495 | | Long-term obligations under equipment financing and other, net | | - | | | | 28,221 | | | | 46 | | | | - | | | | 28,267 | | Other long-term liabilities | | - | | | | 2,372 | | | | - | | | | - | | | | 2,372 | | Total liabilities | | 1,703,601 | | | | 1,074,976 | | | | 47,147 | | | | (1,034,759 | ) | | | 1,790,965 | | | | | | | | | | | | | | | | | | | | | | Total stockholders' equity | | 1,349,168 | | | | 2,919,111 | | | | 40,431 | | | | (2,959,542 | ) | | | 1,349,168 | | | | | | | | | | | | | | | | | | | | | | Total Liabilities and Stockholders' Equity | $ | 3,052,769 | | | $ | 3,994,087 | | | $ | 87,578 | | | $ | (3,994,301 | ) | | $ | 3,140,133 | |
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BEACON ROOFING SUPPLY, INC. Condensed Consolidating Statements of Operations (Unaudited; In thousands, except share and per share amounts)thousands) | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2017 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | | $ | — | | | $ | 1,167,647 | | | $ | 46,247 | | | $ | — | | | $ | 1,213,894 | | Cost of products sold | | | — | | | | 880,325 | | | | 35,815 | | | | — | | | | 916,140 | | | | | | | | | | | | | | | | | | | | | | | Gross profit | | | — | | | | 287,322 | | | | 10,432 | | | | — | | | | 297,754 | | Operating expense | | | 407 | | | | 204,478 | | | | 7,998 | | | | — | | | | 212,883 | | Intercompany charges (income) | | | (12,549 | ) | | | 11,987 | | | | 562 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Income from operations | | | 12,142 | | | | 70,857 | | | | 1,872 | | | | — | | | | 84,871 | | Interest expense, financing costs, and other | | | 9,610 | | | | 3,586 | | | | 201 | | | | — | | | | 13,397 | | Intercompany interest expense (income) | | | (6,724 | ) | | | 6,724 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Income before provision for income taxes | | | 9,256 | | | | 60,547 | | | | 1,671 | | | | — | | | | 71,474 | | Provision for income taxes | | | 3,473 | | | | 22,883 | | | | 459 | | | | — | | | | 26,815 | | | | | | | | | | | | | | | | | | | | | | | Income before equity in net income of subsidiaries | | | 5,783 | | | | 37,664 | | | | 1,212 | | | | — | | | | 44,659 | | Equity in net income of subsidiaries | | | 38,876 | | | | — | | | | — | | | | (38,876 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 44,659 | | | $ | 37,664 | | | $ | 1,212 | | | $ | (38,876 | ) | | $ | 44,659 | | | | | | | | | | | | | | | | | | | | | | | Weighted-average common stock outstanding: | | | | | | | | | | | | | | | | | | | | | Basic | | | | | | | | | | | | | | | | | | | 60,311,923 | | Diluted | | | | | | | | | | | | | | | | | | | 61,350,843 | �� | Net income per share: | | | | | | | | | | | | | | | | | | | | | Basic | | | | | | | | | | | | | | | | | | $ | 0.74 | | Diluted | | | | | | | | | | | | | | | | | | $ | 0.73 | |
| | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2016 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | | $ | — | | | $ | 1,097,554 | | | $ | 55,172 | | | $ | — | | | $ | 1,152,726 | | Cost of products sold | | | — | | | | 828,448 | | | | 42,203 | | | | — | | | | 870,651 | | | | | | | | | | | | | | | | | | | | | | | Gross profit | | | — | | | | 269,106 | | | | 12,969 | | | | — | | | | 282,075 | | Operating expenses | | | 5,933 | | | | 189,343 | | | | 8,420 | | | | — | | | | 203,696 | | Intercompany charges (income) | | | (10,598 | ) | | | 9,938 | | | | 660 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Income from operations | | | 4,665 | | | | 69,825 | | | | 3,889 | | | | — | | | | 78,379 | | Interest income, financing costs, and other | | | 9,926 | | | | 2,511 | | | | (211 | ) | | | — | | | | 12,226 | | Intercompany interest expense (income) | | | (6,325 | ) | | | 5,909 | | | | 416 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Income before provision for income taxes | | | 1,064 | | | | 61,405 | | | | 3,684 | | | | — | | | | 66,153 | | Provision for income taxes | | | 3,667 | | | | 20,384 | | | | 976 | | | | — | | | | 25,027 | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before equity in net income of subsidiaries | | | (2,603 | ) | | | 41,021 | | | | 2,708 | | | | — | | | | 41,126 | | Equity in net income of subsidiaries | | | 43,729 | | | | — | | | | — | | | | (43,729 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 41,126 | | | $ | 41,021 | | | $ | 2,708 | | | $ | (43,729 | ) | | $ | 41,126 | | | | | | | | | | | | | | | | | | | | | | | Weighted-average common stock outstanding: | | | | | | | | | | | | | | | | | | | | | Basic | | | | | | | | | | | | | | | | | | | 59,615,121 | | Diluted | | | | | | | | | | | | | | | | | | | 60,619,809 | | Net income per share: | | | | | | | | | | | | | | | | | | | | | Basic | | | | | | | | | | | | | | | | | | $ | 0.69 | | Diluted | | | | | | | | | | | | | | | | | | $ | 0.68 | |
| Three Months Ended March 31, 2018 | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | $ | - | | | $ | 1,404,617 | | | $ | 21,008 | | | $ | - | | | $ | 1,425,625 | | Cost of products sold | | - | | | | 1,070,605 | | | | 16,643 | | | | - | | | | 1,087,248 | | Gross profit | | - | | | | 334,012 | | | | 4,365 | | | | - | | | | 338,377 | | Operating expense | | 3,115 | | | | 384,245 | | | | 8,415 | | | | - | | | | 395,775 | | Intercompany charges (income) | | (1,477 | ) | | | 1,477 | | | | - | | | | - | | | | - | | Income (loss) from operations | | (1,638 | ) | | | (51,710 | ) | | | (4,050 | ) | | | - | | | | (57,398 | ) | Interest expense, financing costs, and other | | 47,220 | | | | 3,807 | | | | (11,457 | ) | | | - | | | | 39,570 | | Intercompany interest expense (income) | | (5,181 | ) | | | 4,804 | | | | 377 | | | | - | | | | - | | Income (loss) before provision for income taxes | | (43,677 | ) | | | (60,321 | ) | | | 7,030 | | | | - | | | | (96,968 | ) | Provision for (benefit from) income taxes | | (10,469 | ) | | | (18,575 | ) | | | (1,269 | ) | | | - | | | | (30,313 | ) | Income (loss) before equity in net income of subsidiaries | | (33,208 | ) | | | (41,746 | ) | | | 8,299 | | | | - | | | | (66,655 | ) | Equity in net income of subsidiaries | | (33,447 | ) | | | - | | | | - | | | | 33,447 | | | | - | | Net income (loss) | $ | (66,655 | ) | | $ | (41,746 | ) | | $ | 8,299 | | | $ | 33,447 | | | $ | (66,655 | ) |
| Three Months Ended March 31, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | $ | - | | | $ | 849,226 | | | $ | 21,498 | | | $ | - | | | $ | 870,724 | | Cost of products sold | | - | | | | 649,595 | | | | 16,652 | | | | - | | | | 666,247 | | Gross profit | | - | | | | 199,631 | | | | 4,846 | | | | - | | | | 204,477 | | Operating expense | | 7,010 | | | | 193,448 | | | | 7,075 | | | | - | | | | 207,533 | | Intercompany charges (income) | | (12,555 | ) | | | 11,993 | | | | 562 | | | | - | | | | - | | Income (loss) from operations | | 5,545 | | | | (5,810 | ) | | | (2,791 | ) | | | - | | | | (3,056 | ) | Interest expense, financing costs, and other | | 3,983 | | | | 8,003 | | | | 282 | | | | - | | | | 12,268 | | Intercompany interest expense (income) | | (5,089 | ) | | | 5,089 | | | | - | | | | - | | | | - | | Income (loss) before provision for income taxes | | 6,651 | | | | (18,902 | ) | | | (3,073 | ) | | | - | | | | (15,324 | ) | Provision for (benefit from) income taxes | | 2,444 | | | | (7,568 | ) | | | (844 | ) | | | - | | | | (5,968 | ) | Income (loss) before equity in net income of subsidiaries | | 4,207 | | | | (11,334 | ) | | | (2,229 | ) | | | - | | | | (9,356 | ) | Equity in net income of subsidiaries | | (13,563 | ) | | | - | | | | - | | | | 13,563 | | | | - | | Net income (loss) | $ | (9,356 | ) | | $ | (11,334 | ) | | $ | (2,229 | ) | | $ | 13,563 | | | $ | (9,356 | ) |
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BEACON ROOFING SUPPLY, INC. Condensed Consolidating Statements of Operations (Unaudited; In thousands, except share and per share amounts)thousands) | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, 2017 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | | $ | — | | | $ | 2,977,108 | | | $ | 109,694 | | | $ | — | | | $ | 3,086,802 | | Cost of products sold | | | — | | | | 2,248,454 | | | | 85,050 | | | | — | | | | 2,333,504 | | | | | | | | | | | | | | | | | | | | | | | Gross profit | | | — | | | | 728,654 | | | | 24,644 | | | | — | | | | 753,298 | | Operating expense | | | 16,063 | | | | 584,999 | | | | 23,464 | | | | — | | | | 624,526 | | Intercompany charges (income) | | | (37,057 | ) | | | 35,379 | | | | 1,678 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Income (loss) from operations | | | 20,994 | | | | 108,276 | | | | (498 | ) | | | — | | | | 128,772 | | Interest expense, financing costs, and other | | | 28,947 | | | | 9,044 | | | | 1,248 | | | | — | | | | 39,239 | | Intercompany interest expense (income) | | | (17,406 | ) | | | 17,406 | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before provision for income taxes | | | 9,453 | | | | 81,826 | | | | (1,746 | ) | | | — | | | | 89,533 | | Provision for (benefit from) income taxes | | | 3,063 | | | | 31,217 | | | | (480 | ) | | | — | | | | 33,800 | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before equity in net income of subsidiaries | | | 6,390 | | | | 50,609 | | | | (1,266 | ) | | | — | | | | 55,733 | | Equity in net income of subsidiaries | | | 49,343 | | | | — | | | | — | | | | (49,343 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) | | $ | 55,733 | | | $ | 50,609 | | | $ | (1,266 | ) | | $ | (49,343 | ) | | $ | 55,733 | | | | | | | | | | | | | | | | | | | | | | | Weighted-average common stock outstanding: | | | | | | | | | | | | | | | | | | | | | Basic | | | | | | | | | | | | | | | | | | | 60,131,546 | | Diluted | | | | | | | | | | | | | | | | | | | 61,163,591 | | Net income per share: | | | | | | | | | | | | | | | | | | | | | Basic | | | | | | | | | | | | | | | | | | $ | 0.93 | | Diluted | | | | | | | | | | | | | | | | | | $ | 0.91 | |
| | | Nine Months Ended June 30, 2016 | | Six Months Ended March 31, 2018 | | | | Parent | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | Eliminations and Other | | Consolidated | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | | $ | — | | | $ | 2,832,819 | | | $ | 120,171 | | | $ | (247 | ) | | $ | 2,952,743 | | $ | - | | | $ | 2,480,879 | | | $ | 66,725 | | | $ | - | | | $ | 2,547,604 | | Cost of products sold | | | — | | | 2,149,477 | | | | 92,486 | | | (247 | ) | | 2,241,716 | | | - | | | | 1,887,041 | | | | 52,433 | | | | - | | | | 1,939,474 | | | | | | | | | | | | | | | | | | | Gross profit | | | — | | | 683,342 | | | | 27,685 | | | | — | | | 711,027 | | | - | | | | 593,838 | | | | 14,292 | | | | - | | | | 608,130 | | Operating expenses | | | 65,092 | | | 513,755 | | | | 23,074 | | | | — | | | 601,921 | | | Operating expense | | | 3,438 | | | | 595,000 | | | | 17,994 | | | | - | | | | 616,432 | | Intercompany charges (income) | | | (36,038 | ) | | 33,394 | | | | 2,644 | | | | — | | | | — | | | (584 | ) | | | 584 | | | | - | | | | - | | | | - | | | | | | | | | | | | | | | | | | | Income (loss) from operations | | | (29,054 | ) | | 136,193 | | | | 1,967 | | | | — | | | 109,106 | | | (2,854 | ) | | | (1,746 | ) | | | (3,702 | ) | | | - | | | | (8,302 | ) | Interest expense, financing costs, and other | | | 24,563 | | | 17,016 | | | | (71 | ) | | | — | | | 41,508 | | | 57,296 | | | | 4,632 | | | | 210 | | | | - | | | | 62,138 | | Intercompany interest expense (income) | | | (15,046 | ) | | 13,858 | | | | 1,188 | | | | — | | | | — | | | (10,889 | ) | | | 10,125 | | | | 764 | | | | - | | | | - | | | | | | | | | | | | | | | | | | | Income (loss) before provision for income taxes | | | (38,571 | ) | | 105,319 | | | | 850 | | | | — | | | 67,598 | | | (49,261 | ) | | | (16,503 | ) | | | (4,676 | ) | | | - | | | | (70,440 | ) | Provision for (benefit from) income taxes | | | (17,206 | ) | | 42,054 | | | | 225 | | | | — | | | 25,073 | | | (4,948 | ) | | | (65,247 | ) | | | (1,186 | ) | | | - | | | | (71,381 | ) | | | | | | | | | | | | | | | | | | Income (loss) before equity in net income of subsidiaries | | | (21,365 | ) | | 63,265 | | | | 625 | | | | — | | | 42,525 | | | (44,313 | ) | | | 48,744 | | | | (3,490 | ) | | | - | | | | 941 | | Equity in net income of subsidiaries | | | 63,890 | | | | — | | | | — | | | (63,890 | ) | | | — | | | 45,254 | | | | - | | | | - | | | | (45,254 | ) | | | - | | | | | | | | | | | | | | | | | | | Net income | | $ | 42,525 | | | $ | 63,265 | | | $ | 625 | | | $ | (63,890 | ) | | $ | 42,525 | | | | | | | | | | | | | | | | | | | | Weighted-average common stock outstanding: | | | | | | | | | | | | Basic | | | | | | | | | | 59,293,500 | | | Diluted | | | | | | | | | | 60,276,695 | | | Net income per share: | | | | | | | | | | | | Basic | | | | | | | | | | $ | 0.72 | | | Diluted | | | | | | | | | | $ | 0.71 | | | Net income (loss) | | $ | 941 | | | $ | 48,744 | | | $ | (3,490 | ) | | $ | (45,254 | ) | | $ | 941 | |
| Six Months Ended March 31, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net sales | $ | - | | | $ | 1,809,461 | | | $ | 63,447 | | | $ | - | | | $ | 1,872,908 | | Cost of products sold | | - | | | | 1,368,129 | | | | 49,235 | | | | - | | | | 1,417,364 | | Gross profit | | - | | | | 441,332 | | | | 14,212 | | | | - | | | | 455,544 | | Operating expense | | 15,656 | | | | 380,521 | | | | 15,466 | | | | - | | | | 411,643 | | Intercompany charges (income) | | (24,508 | ) | | | 23,392 | | | | 1,116 | | | | - | | | | - | | Income (loss) from operations | | 8,852 | | | | 37,419 | | | | (2,370 | ) | | | - | | | | 43,901 | | Interest expense, financing costs, and other | | 19,337 | | | | 5,458 | | | | 1,047 | | | | - | | | | 25,842 | | Intercompany interest expense (income) | | (10,682 | ) | | | 10,682 | | | | - | | | | - | | | | - | | Income (loss) before provision for income taxes | | 197 | | | | 21,279 | | | | (3,417 | ) | | | - | | | | 18,059 | | Provision for (benefit from) income taxes | | (410 | ) | | | 8,334 | | | | (939 | ) | | | - | | | | 6,985 | | Income (loss) before equity in net income of subsidiaries | | 607 | | | | 12,945 | | | | (2,478 | ) | | | - | | | | 11,074 | | Equity in net income of subsidiaries | | 10,467 | | | | - | | | | - | | | | (10,467 | ) | | | - | | Net income (loss) | $ | 11,074 | | | $ | 12,945 | | | $ | (2,478 | ) | | $ | (10,467 | ) | | $ | 11,074 | |
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BEACON ROOFING SUPPLY, INC. Condensed Consolidating Statements of Comprehensive Income (Unaudited; In thousands) | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2017 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income | | $ | 44,659 | | | $ | 37,664 | | | $ | 1,212 | | | $ | (38,876 | ) | | $ | 44,659 | | Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | 1,730 | | | | — | | | | 1,730 | | | | (1,730 | ) | | | 1,730 | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income | | | 1,730 | | | | — | | | | 1,730 | | | | (1,730 | ) | | | 1,730 | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | $ | 46,389 | | | $ | 37,664 | | | $ | 2,942 | | | $ | (40,606 | ) | | $ | 46,389 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2016 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income | | $ | 41,126 | | | $ | 41,021 | | | $ | 2,708 | | | $ | (43,729 | ) | | $ | 41,126 | | Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | 365 | | | | — | | | | 365 | | | | (365 | ) | | | 365 | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income | | | 365 | | | | — | | | | 365 | | | | (365 | ) | | | 365 | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | $ | 41,491 | | | $ | 41,021 | | | $ | 3,073 | | | $ | (44,094 | ) | | $ | 41,491 | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2018 | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income (loss) | $ | (66,655 | ) | | $ | (41,746 | ) | | $ | 8,299 | | | $ | 33,447 | | | $ | (66,655 | ) | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | (2,028 | ) | | | - | | | | (2,028 | ) | | | 2,028 | | | | (2,028 | ) | Total other comprehensive income (loss) | | (2,028 | ) | | | - | | | | (2,028 | ) | | | 2,028 | | | | (2,028 | ) | Comprehensive income (loss) | $ | (68,683 | ) | | $ | (41,746 | ) | | $ | 6,271 | | | $ | 35,475 | | | $ | (68,683 | ) |
| | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, 2017 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income (loss) | | $ | 55,733 | | | $ | 50,609 | | | $ | (1,266 | ) | | $ | (49,343 | ) | | $ | 55,733 | | Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | 891 | | | | — | | | | 891 | | | | (891 | ) | | | 891 | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income | | | 891 | | | | — | | | | 891 | | | | (891 | ) | | | 891 | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income (loss) | | $ | 56,624 | | | $ | 50,609 | | | $ | (375 | ) | | $ | (50,234 | ) | | $ | 56,624 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, 2016 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income | | $ | 42,525 | | | $ | 63,265 | | | $ | 625 | | | $ | (63,890 | ) | | $ | 42,525 | | Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | 2,122 | | | | — | | | | 2,122 | | | | (2,122 | ) | | | 2,122 | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income | | | 2,122 | | | | — | | | | 2,122 | | | | (2,122 | ) | | | 2,122 | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | $ | 44,647 | | | $ | 63,265 | | | $ | 2,747 | | | $ | (66,012 | ) | | $ | 44,647 | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income (loss) | $ | (9,356 | ) | | $ | (11,334 | ) | | $ | (2,229 | ) | | $ | 13,563 | | | $ | (9,356 | ) | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | 813 | | | | - | | | | 813 | | | | (813 | ) | | | 813 | | Total other comprehensive income (loss) | | 813 | | | | - | | | | 813 | | | | (813 | ) | | | 813 | | Comprehensive income (loss) | $ | (8,543 | ) | | $ | (11,334 | ) | | $ | (1,416 | ) | | $ | 12,750 | | | $ | (8,543 | ) |
| Six Months Ended March 31, 2018 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income (loss) | $ | 941 | | | $ | 48,744 | | | $ | (3,490 | ) | | $ | (45,254 | ) | | $ | 941 | | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | (1,971 | ) | | | - | | | | (1,971 | ) | | | 1,971 | | | | (1,971 | ) | Total other comprehensive income (loss) | | (1,971 | ) | | | - | | | | (1,971 | ) | | | 1,971 | | | | (1,971 | ) | Comprehensive income (loss) | $ | (1,030 | ) | | $ | 48,744 | | | $ | (5,461 | ) | | $ | (43,283 | ) | | $ | (1,030 | ) |
| Six Months Ended March 31, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net income (loss) | $ | 11,074 | | | $ | 12,945 | | | $ | (2,478 | ) | | $ | (10,467 | ) | | $ | 11,074 | | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | (839 | ) | | | - | | | | (839 | ) | | | 839 | | | | (839 | ) | Total other comprehensive income (loss) | | (839 | ) | | | - | | | | (839 | ) | | | 839 | | | | (839 | ) | Comprehensive income (loss) | $ | 10,235 | | | $ | 12,945 | | | $ | (3,317 | ) | | $ | (9,628 | ) | | $ | 10,235 | |
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BEACON ROOFING SUPPLY, INC. Condensed Consolidating Statements of Cash Flows (Unaudited; In thousands) | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, 2017 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net cash provided by (used in) operating activities | | $ | (33,267 | ) | | $ | 108,628 | | | $ | (2,064 | ) | | $ | 855 | | | $ | 74,152 | | Investing Activities | | | | | | | | | | | | | | | | | | | | | Purchases of property and equipment | | | (2,972 | ) | | | (27,522 | ) | | | (1,388 | ) | | | — | | | | (31,882 | ) | Acquisition of businesses | | | (128,533 | ) | | | — | | | | — | | | | — | | | | (128,533 | ) | Proceeds from the sale of assets | | | — | | | | 1,828 | | | | 11 | | | | — | | | | 1,839 | | Intercompany activity | | | 159,325 | | | | — | | | | — | | | | (159,325 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | 27,820 | | | | (25,694 | ) | | | (1,377 | ) | | | (159,325 | ) | | | (158,576 | ) | | | | | | | | | | | | | | | | | | | | | | Financing Activities | | | | | | | | | | | | | | | | | | | | | Borrowings under revolving lines of credit | | | — | | | | 1,705,434 | | | | 16,493 | | | | — | | | | 1,721,927 | | Repayments under revolving lines of credit | | | — | | | | (1,624,574 | ) | | | (8,996 | ) | | | — | | | | (1,633,570 | ) | Repayments under term loan | | | (3,375 | ) | | | — | | | | — | | | | — | | | | (3,375 | ) | Borrowings under equipment financing facilities and other | | | — | | | | 2,111 | | | | — | | | | — | | | | 2,111 | | Repayments under equipment financing facilities and other | | | — | | | | (9,870 | ) | | | — | | | | — | | | | (9,870 | ) | Proceeds from issuance of common stock | | | 9,994 | | | | — | | | | — | | | | — | | | | 9,994 | | Taxes paid related to net share settelement of equity awards | | | (1,172 | ) | | | — | | | | — | | | | — | | | | (1,172 | ) | Intercompany activity | | | — | | | | (158,899 | ) | | | 334 | | | | 158,565 | | | | — | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | 5,447 | | | | (85,798 | ) | | | 7,831 | | | | 158,565 | | | | 86,045 | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | — | | | | — | | | | 48 | | | | — | | | | 48 | | Net increase (decrease) in cash and cash equivalents | | | — | | | | (2,864 | ) | | | 4,438 | | | | 95 | | | | 1,669 | | Cash and cash equivalents, beginning of period | | | — | | | | 37,447 | | | | 2,876 | | | | (8,937 | ) | | | 31,386 | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents, end of period | | $ | — | | | $ | 34,583 | | | $ | 7,314 | | | $ | (8,842 | ) | | $ | 33,055 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, 2016 | | | | Parent | | | Guarantor Subsidiaries | | | Non-Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net cash provided by (used in) operating activities | | $ | (106,764 | ) | | $ | 173,900 | | | $ | 9,109 | | | $ | (1,886 | ) | | $ | 74,359 | | Investing Activities | | | | | | | | | | | | | | | | | | | | | Purchases of property and equipment | | | (2,338 | ) | | | (16,791 | ) | | | (2,424 | ) | | | — | | | | (21,553 | ) | Acquisition of businesses | | | (1,018,658 | ) | | | — | | | | — | | | | — | | | | (1,018,658 | ) | Proceeds from the sale of assets | | | — | | | | 969 | | | | — | | | | — | | | | 969 | | Intercompany activity | | | 561,413 | | | | — | | | | — | | | | (561,413 | ) | | | — | | | | | | | | | | | | | | | | | | | | | | | Net cash used in investing activities | | | (459,583 | ) | | | (15,822 | ) | | | (2,424 | ) | | | (561,413 | ) | | | (1,039,242 | ) | | | | | | | | | | | | | | | | | | | | | | Financing Activities | | | | | | | | | | | | | | | | | | | | | Borrowings under revolving lines of credit | | | — | | | | 1,409,128 | | | | — | | | | — | | | | 1,409,128 | | Repayments under revolving lines of credit | | | — | | | | (994,627 | ) | | | (11,449 | ) | | | — | | | | (1,006,076 | ) | Borrowings under term loan | | | 450,000 | | | | — | | | | — | | | | — | | | | 450,000 | | Repayments under term loan | | | (189,000 | ) | | | — | | | | — | | | | — | | | | (189,000 | ) | Borrowings under Senior Notes | | | 300,000 | | | | — | | | | — | | | | — | | | | 300,000 | | Repayments under equipment financing facilities and other | | | — | | | | (3,847 | ) | | | — | | | | — | | | | (3,847 | ) | Payment of deferred financing costs | | | (18,890 | ) | | | (8,923 | ) | | | — | | | | — | | | | (27,813 | ) | Proceeds from issuance of common stock | | | 20,213 | | | | — | | | | — | | | | — | | | | 20,213 | | Excess tax benefit from stock-based compensation | | | 4,024 | | | | — | | | | — | | | | — | | | | 4,024 | | Intercompany activity | | | — | | | | (563,457 | ) | | | 2,045 | | | | 561,412 | | | | — | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | 566,347 | | | | (161,726 | ) | | | (9,404 | ) | | | 561,412 | | | | 956,629 | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | — | | | | — | | | | (871 | ) | | | — | | | | (871 | ) | Net decrease in cash and cash equivalents | | | — | | | | (3,648 | ) | | | (3,590 | ) | | | (1,887 | ) | | | (9,125 | ) | Cash and cash equivalents, beginning of period | | | — | | | | 42,816 | | | | 7,051 | | | | (4,206 | ) | | | 45,661 | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents, end of period | | $ | — | | | $ | 39,168 | | | $ | 3,461 | | | $ | (6,093 | ) | | $ | 36,536 | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended March 31, 2018 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net cash provided by (used in) operating activities | $ | (47,488 | ) | | $ | 77,948 | | | $ | 9,289 | | | $ | 217 | | | $ | 39,966 | | | | | | | | | | | | | | | | | | | | | | Investing Activities | | | | | | | | | | | | | | | | | | | | Purchases of property and equipment | | (5,050 | ) | | | (18,524 | ) | | | (1,259 | ) | | | - | | | | (24,833 | ) | Acquisition of businesses, net | | (2,726,561 | ) | | | - | | | | - | | | | - | | | | (2,726,561 | ) | Proceeds from the sale of assets | | - | | | | 398 | | | | 15 | | | | - | | | | 413 | | Intercompany activity | | 606,865 | | | | - | | | | - | | | | (606,865 | ) | | | - | | Net cash provided by (used in) investing activities | | (2,124,746 | ) | | | (18,126 | ) | | | (1,244 | ) | | | (606,865 | ) | | | (2,750,981 | ) | | | | | | | | | | | | | | | | | | | | | Financing Activities | | | | | | | | | | | | | | | | | | | | Borrowings under revolving lines of credit | | - | | | | 1,514,102 | | | | 16,565 | | | | - | | | | 1,530,667 | | Repayments under revolving lines of credit | | - | | | | (1,077,744 | ) | | | (19,719 | ) | | | - | | | | (1,097,463 | ) | Borrowings under term loan | | 970,000 | | | | - | | | | - | | | | - | | | | 970,000 | | Repayments under term loan | | (441,000 | ) | | | - | | | | - | | | | - | | | | (441,000 | ) | Repayments under equipment financing facilities and other | | - | | | | (5,643 | ) | | | - | | | | - | | | | (5,643 | ) | Borrowings under senior notes | | 1,300,000 | | | | - | | | | - | | | | - | | | | 1,300,000 | | Payment of debt issuance costs | | (55,893 | ) | | | (11,830 | ) | | | - | | | | - | | | | (67,723 | ) | Proceeds from issuance of convertible preferred stock | | 400,000 | | | | - | | | | - | | | | - | | | | 400,000 | | Payment of stock issuance costs | | (1,279 | ) | | | - | | | | - | | | | - | | | | (1,279 | ) | Payment of dividends on preferred stock | | (978 | ) | | | - | | | | - | | | | - | | | | (978 | ) | Proceeds from issuance of common stock related to equity awards | | 5,317 | | | | - | | | | - | | | | - | | | | 5,317 | | Taxes paid related to net share settlement of equity awards | | (3,933 | ) | | | - | | | | - | | | | - | | | | (3,933 | ) | Intercompany activity | | - | | | | (609,760 | ) | | | 923 | | | | 608,837 | | | | - | | Net cash provided by (used in) financing activities | | 2,172,234 | | | | (190,875 | ) | | | (2,231 | ) | | | 608,837 | | | | 2,587,965 | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | - | | | | - | | | | 800 | | | | - | | | | 800 | | | | | | | | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | - | | | | (131,053 | ) | | | 6,614 | | | | 2,189 | | | | (122,250 | ) | Cash and cash equivalents, beginning of period | | - | | | | 149,799 | | | | 1,582 | | | | (13,131 | ) | | | 138,250 | | Cash and cash equivalents, end of period | $ | - | | | $ | 18,746 | | | $ | 8,196 | | | $ | (10,942 | ) | | $ | 16,000 | |
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BEACON ROOFING SUPPLY, INC. Item 2. Management’s Discussion and AnalysisCondensed Consolidating Statements of Financial Condition and Results of OperationsCash Flows
(Unaudited; In thousands) | Six Months Ended March 31, 2017 | | | Parent | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiaries | | | Eliminations and Other | | | Consolidated | | Net cash provided by (used in) operating activities | $ | (29,347 | ) | | $ | 181,934 | | | $ | 5,121 | | | $ | (7,178 | ) | | $ | 150,530 | | | | | | | | | | | | | | | | | | | | | | Investing Activities | | | | | | | | | | | | | | | | | | | | Purchases of property and equipment | | (1,709 | ) | | | (21,742 | ) | | | (780 | ) | | | - | | | | (24,231 | ) | Acquisition of businesses | | (58,359 | ) | | | - | | | | - | | | | - | | | | (58,359 | ) | Proceeds from the sale of assets | | - | | | | 1,274 | | | | 11 | | | | - | | | | 1,285 | | Intercompany activity | | 83,397 | | | | - | | | | - | | | | (83,397 | ) | | | - | | Net cash provided by (used in) investing activities | | 23,329 | | | | (20,468 | ) | | | (769 | ) | | | (83,397 | ) | | | (81,305 | ) | | | | | | | | | | | | | | | | | | | | | Financing Activities | | | | | | | | | | | | | | | | | | | | Borrowings under revolving lines of credit | | - | | | | 852,583 | | | | 4,516 | | | | - | | | | 857,099 | | Repayments under revolving lines of credit | | - | | | | (939,438 | ) | | | (9,032 | ) | | | - | | | | (948,470 | ) | Repayments under term loan | | (1,125 | ) | | | - | | | | - | | | | - | | | | (1,125 | ) | Repayments under equipment financing facilities and other | | - | | | | (5,365 | ) | | | - | | | | - | | | | (5,365 | ) | Proceeds from issuance of common stock | | 7,840 | | | | - | | | | - | | | | - | | | | 7,840 | | Taxes paid related to net share settlement of equity awards | | (697 | ) | | | - | | | | - | | | | - | | | | (697 | ) | Intercompany activity | | - | | | | (82,512 | ) | | | (885 | ) | | | 83,397 | | | | - | | Net cash provided by (used in) financing activities | | 6,018 | | | | (174,732 | ) | | | (5,401 | ) | | | 83,397 | | | | (90,718 | ) | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | - | | | | - | | | | 119 | | | | - | | | | 119 | | | | | | | | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | - | | | | (13,266 | ) | | | (930 | ) | | | (7,178 | ) | | | (21,374 | ) | Cash and cash equivalents, beginning of period | | - | | | | 37,447 | | | | 2,876 | | | | (8,937 | ) | | | 31,386 | | Cash and cash equivalents, end of period | $ | - | | | $ | 24,181 | | | $ | 1,946 | | | $ | (16,115 | ) | | $ | 10,012 | |
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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 Management’s Discussion and Analysis included in our 20162017 Annual Report on Form 10-K and our condensed consolidated financial statements and the notes thereto included elsewhere in this document. Unless otherwise indicated, references to “2018” refer to the three and six months ended March 31, 2018 being discussed and references to “2017” refer to the three and nine month periodssix months ended June 30,March 31, 2017 being discussed and references to “2016” refer to the three and nine month periods ended June 30, 2016 being discussed. 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. Overview We are the largest publicly traded distributor of residential and non-residential roofing materials in the United States and Canada. We also distribute complementary building products, including siding, windows, specialty exterior building products, insulation, and waterproofing systems, for residentialwallboard and non-residential building exteriors.acoustical ceiling tiles. We are among the oldest and most established distributors in the industry. We purchase products from a large number of manufacturers and then distribute these goods to a customer base consisting of contractors and, to a lesser extent, general contractors, retailers, and building materials suppliers. As of June 30, 2017,March 31, 2018 , we operated 384588 branches in 4850 states throughout the United States and 6 provinces in Canada. We stock one of the most extensive assortments of high quality branded products in the industry, with over 46,000approximately 70,000 SKUs available across our branch network, enabling us to deliver products to serve nearly 67,000over 100,000 customers on a timely basis. For 2016, approximately 96% On January 2, 2018, we finalized acquisition of our net sales came from customers locatedAllied Building Products Corp., a New Jersey corporation, and an affiliated entity (together “Allied”) for $2.625 billion, subject to certain working capital and other adjustments. Allied is one of the country’s largest exterior and interior building products distributors and is headquartered in East Rutherford, New Jersey. Allied distributes products in 208 locations across 31 states in the United States.U.S. and has a strong presence in New York, New Jersey, Florida, California, Hawaii and the upper Midwest. We believe the acquisition of Allied was a strategically and financially compelling transaction that expanded our geographic footprint, enhanced our scale and market position, diversified our product offerings, and will provide new growth opportunities and increase our long-term profitability. Effective execution of both the sales and operating plans enables us to grow beyond the relative strength of the residential and non-residential roofing markets we serve. Our business model is a bottom-up approach, where each of our branches uses its regional knowledge and experience to assist with the development of a marketing plan and stocking a product mix that is best suited for its respective market. Local alignment with overall strategic goals provides the foundation for significant ownership of results at the branch level. Our distinctive operational model combined with significant branch level autonomy differentiates us from the competition. We provide our customers with value-added services, including, but not limited to, job site delivery, custom designed tapered roofing systems, metal fabrication, and trade credit. We consider customer relations and our employees’ knowledge of roofing and exterior building materials to be vital to our ability to increase customer loyalty and maintain customer satisfaction. Our customers’ business success can be enhanced when they are supported by our efficient and effective distribution network. We invest significant resources in professional development, management skills, product knowledge and operational proficiency. We pride ourselves on providing these capabilities developed on a foundation of continuous improvement driving service excellence, productivity and efficiencies. We seek opportunities to expand our business operations through both acquisitions and organic growth (by opening(opening branches, growing sales with existing customers, adding new customers and introducing new products). Our main acquisition strategy is to target market leaders whothat do business in geographic areas that we currently do not service or that complement our existing regional operations. In addition to our organic growth, the following highlightsacquisition of Allied, our recent success in delivering on our growth strategy: Acquisition Growth—2017:
strategy is highlighted by the following: On December 16, 2016, the Companywe purchased certain assets of BJ Supply Company, a distributor of roofing and related building products with 1 branch serving Pennsylvania and New Jersey and annual sales of $4 million. On January 3, 2017, the Companywe acquired American Building & Roofing, Inc., a distributor of mainly residential roofing and related building products with 7 branches around Washington State and annual sales of $36 million. On January 9, 2017, the Companywe acquired Eco Insulation Supply, a distributor of insulation and related accessories with 1 branch serving Connecticut, Southern New England and the New York City metropolitan area and annual sales of $8 million. On March 1, 2017, the Companywe acquired Acme Building Materials, Inc., a distributor of residential roofing and related building products with 3 branches in Eastern Michigan and annual sales of $13 million. 31
| • | On May 1, 2017, the Company purchased certain assets of Lowry’s Inc., a distributor of waterproofing and concrete restoration materials with 11 branches operating in California, Arizona, Utah and Hawaii and annual sales of $76 million. Acquisition Growth—2016:
On October 1, 2015, we completed our acquisition of Roofing Supply Group (“RSG”), a leading roofing products distributor, in a cash and stock transaction valued at approximately $1.17 billion. Completion of the RSG acquisition strengthened our position as the largest publicly traded roofing materials and related products distributor in the U.S., with approximately $3.71 billion in combined pro forma net sales at the time of the acquisition. The RSG Acquisition has provided us the opportunity to create a stronger roofing distribution company built upon the foundation of two strong, growing distribution platforms with an extensive national footprint and continued growth potential. On the date of the acquisition, RSG operated 85 branches across 25 states, with 300 to 2,200 SKUs per branch. This acquisition has allowed us to expand our product offerings and increase our cross selling opportunities while maintaining our standards for exceptional customer service and roofing expertise.
We finalized seven additional strategic acquisitions in fiscal year 2016, acquiring 42 branches that significantly enhanced our geographic footprint, particularly in the Southern, Western, and Pacific Northwest regions of the United States:
| ○ | | On December 1, 2015, we purchased certain assets of RCI Roofing Supply,Lowry’s Inc., a distributor of residentialwaterproofing and commercial roofing and related productsconcrete restoration materials with 511 branches operating in Nebraska, IowaCalifornia, Arizona, Utah and ColoradoHawaii and annual sales of approximately $23$76 million. |
In addition, we opened one new branch in fiscal year 2018 and four new branches in fiscal year 2017. These new branch locations allow us to penetrate deeper into our existing markets and establish a greater presence. Although new greenfield locations impact our operating cost structure slightly in the near-term, we believe they are strategically located within markets that possess strong dynamics, thereby presenting us with an opportunity to quickly establish our presence and gain local market share. | ○ | | On December 18, 2015, we acquired 100% of the equity interests of Roofing and Insulation Supply, a distributor primarily of residential and commercial insulation along with roofing and related products with 20 branches spanning 13 states operating across New England, the Mid-Atlantic, the Southeast, the Upper Midwest, Texas and Colorado and annual sales of approximately $70 million. |
| ○ | | On December 29, 2015, we purchased certain assets of Statewide Wholesale, a distributor of residential and commercial roofing and related products with 1 branch located in Denver, Colorado and annual sales of approximately $15 million. |
| ○ | | On April 1, 2016, we purchased certain assets of Atlantic Building Products, a distributor of decking, windows, siding, and related products with 2 branches operating in eastern Pennsylvania and annual sales of approximately $5 million. |
| ○ | | On April 1, 2016, we purchased certain assets of Lyf-Tym Building Products, a distributor of siding, windows, gutters, vinyl railings, and related products with 6 branches operating in North Carolina and Virginia and annual sales of approximately $20 million. |
| ○ | | On May 2, 2016, we purchased certain assets of Fox Brothers Company, a distributor of roofing, siding, windows, doors, and related products with 4 branches operating in Michigan and annual sales of approximately $35 million. |
| ○ | | On June 1, 2016, we acquired 100% of the equity interests of Woodfeathers, Inc., a distributor of primarily residential roofing and related products with 4 branches operating in Oregon and Washington and annual sales of approximately $30 million. |
Results of Operations Comparison of the Three Months Ended June 30,March 31, 2018 and 2017 and 2016 The following tables set forth selected consolidated statement of operations data and such data as a percentage of total revenuenet sales for each of the periods indicated:presented (in thousands, except for percentages): | Three Months Ended March 31, | | | 2018 | | | 2017 | | Net sales | $ | 1,425,625 | | | $ | 870,724 | | Cost of products sold | | 1,087,248 | | | | 666,247 | | Gross profit | | 338,377 | | | | 204,477 | | Operating expense | | 395,775 | | | | 207,533 | | Income (loss) from operations | | (57,398 | ) | | | (3,056 | ) | Interest expense, financing costs, and other | | 39,570 | | | | 12,268 | | Income (loss) before provision for income taxes | | (96,968 | ) | | | (15,324 | ) | Provision for (benefit from) income taxes | | (30,313 | ) | | | (5,968 | ) | Net income (loss) | | (66,655 | ) | | | (9,356 | ) | Dividends on preferred shares, declared | | 6,000 | | | | - | | Net income (loss) attributable to common shareholders | | (72,655 | ) | | | (9,356 | ) |
| | | Three Months Ended June 30, | | | | | 2017 | | 2016 | | Three Months Ended March 31, | | | | (In thousands) | | 2018 | | | 2017 | | Net sales | | $ | 1,213,894 | | | $ | 1,152,726 | | | 100.0 | % | | | 100.0 | % | Cost of products sold | | | 916,140 | | | 870,651 | | | 76.3 | % | | | 76.5 | % | | | | | | | | | Gross profit | | | 297,754 | | | 282,075 | | | 23.7 | % | | | 23.5 | % | Operating expense | | | 212,883 | | | 203,696 | | | 27.8 | % | | | 23.8 | % | | | | | | | | | Income from operations | | | 84,871 | | | 78,379 | | | Income (loss) from operations | | | (4.1 | %) | | | (0.3 | %) | Interest expense, financing costs, and other | | | 13,397 | | | 12,226 | | | 2.8 | % | | | 1.4 | % | | | | | | | | | Income before provision for income taxes | | | 71,474 | | | 66,153 | | | Provision for income taxes | | | 26,815 | | | 25,027 | | | | | | | | | | | Net income | | | 44,659 | | | 41,126 | | | | | | | | | | | | | | Three Months Ended June 30, | | | | | 2017 | | 2016 | | | | | % of Net Sales | | | Net sales | | | 100.0 | % | | 100.0 | % | | Cost of products sold | | | 75.5 | % | | 75.5 | % | | | | | | | | | | Gross profit | | | 24.5 | % | | 24.5 | % | | Operating expense | | | 17.5 | % | | 17.7 | % | | | | | | | | | | Income from operations | | | 7.0 | % | | 6.8 | % | | Interest expense, financing costs, and other | | | 1.1 | % | | 1.1 | % | | | | | | | | | | Income before provision for income taxes | | | 5.9 | % | | 5.7 | % | | Provision for income taxes | | | 2.2 | % | | 2.2 | % | | | | | | | | | | Net income | | | 3.7 | % | | 3.5 | % | | | | | | | | | | Income (loss) before provision for income taxes | | | (6.9 | %) | | | (1.7 | %) | Provision for (benefit from) income taxes | | | (2.2 | %) | | | (0.6 | %) | Net income (loss) | | | (4.7 | %) | | | (1.1 | %) | Dividends on preferred shares, declared | | | 0.4 | % | | | 0.0 | % | Net income (loss) attributable to common shareholders | | | (5.1 | %) | | | (1.1 | %) |
In managing our business, we consider all growth, including the opening of new branches, to be organic growth unless it results from an acquisition. When we refer to growth in existing markets or organic growth, we include growth from existing 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 the start of the fiscal reporting period. When we refer to regions, we are referring to our geographic regions. As of June 30, 2017,March 31, 2018 , we had a total of 384588 branches in operation. Our existing market calculations include 353359 branches and exclude 31229 branches because they were acquired after the start of the thirdsecond quarter of fiscal year 2016.2017. When we refer to our net product costs, we are referring to our invoice cost less the impact of short-term buying programs (also referred to as “special buys” given the manner in which they are offered). 32
The following table presents a summary ofsummarizes our results of operations by market type (existing and acquired) for the periods presented broken down by existing markets and acquired markets:(in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | | | | | | | | | Existing Markets | | | Acquired Markets | | | Consolidated | | | | Three Months Ended June 30, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | (Dollars in thousands) | | Net sales | | $ | 1,163,963 | | | $ | 1,139,140 | | | $ | 49,931 | | | $ | 13,586 | | | $ | 1,213,894 | | | $ | 1,152,726 | | | | | | | | | Gross profit | | $ | 283,089 | | | $ | 278,551 | | | $ | 14,665 | | | $ | 3,524 | | | $ | 297,754 | | | $ | 282,075 | | Gross margin | | | 24.3% | | | | 24.5% | | | | 29.4% | | | | 25.9% | | | | 24.5% | | | | 24.5% | | | | | | | | | Operating expense(1) | | $ | 200,931 | | | $ | 201,032 | | | $ | 11,952 | | | $ | 2,664 | | | $ | 212,883 | | | $ | 203,696 | | Operating expense as a % of net sales | | | 17.3% | | | | 17.6% | | | | 23.9% | | | | 19.6% | | | | 17.5% | | | | 17.7% | | | | | | | | | Operating income | | $ | 82,159 | | | $ | 77,519 | | | $ | 2,712 | | | $ | 860 | | | $ | 84,871 | | | $ | 78,379 | | Operating margin | | | 7.1% | | | | 6.8% | | | | 5.4% | | | | 6.3% | | | | 7.0% | | | | 6.8% | |
| Existing Markets | | | Acquired Markets | | | Consolidated | | | Three Months Ended March 31, | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Net sales | $ | 860,918 | | | $ | 862,035 | | | $ | 564,707 | | | $ | 8,689 | | | $ | 1,425,625 | | | $ | 870,724 | | | | | | | | | | | | | | | | | | | | | | | | | | Gross profit | $ | 195,332 | | | $ | 202,267 | | | $ | 143,045 | | | $ | 2,210 | | | $ | 338,377 | | | $ | 204,477 | | Gross margin | | 22.7 | % | | | 23.5 | % | | | 25.3 | % | | | 25.4 | % | | | 23.7 | % | | | 23.5 | % | | | | | | | | | | | | | | | | | | | | | | | | | Operating expense (1) | $ | 234,651 | | | $ | 205,544 | | | $ | 161,124 | | | $ | 1,989 | | | $ | 395,775 | | | $ | 207,533 | | Operating expense as a % of net sales | | 27.3 | % | | | 23.8 | % | | | 28.5 | % | | | 22.9 | % | | | 27.8 | % | | | 23.8 | % | | | | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | $ | (39,319 | ) | | $ | (3,277 | ) | | $ | (18,079 | ) | | $ | 221 | | | $ | (57,398 | ) | | $ | (3,056 | ) | Operating margin | | (4.6 | %) | | | (0.4 | %) | | | (3.2 | %) | | | 2.5 | % | | | (4.0 | %) | | | (0.4 | %) |
_____________________________________ 1 | During 20172018 and 2016,2017, we recorded amortization expense related to intangible assets recorded under purchase accounting of $20.7$37.1 million ($2.720.7 million from acquired markets) and $17.4$20.3 million ($0.4(immaterial amount from acquired markets), respectively. In addition, existing markettotal operating expense for 20172018 and 20162017 included non-recurring charges of $9.9$28.3 million ($6.1(immaterial amount from acquired markets) and $1.6 million net of taxes) and $7.9 million ($5.1 million, net of taxes)(none from acquired markets), respectively, for the recognition of certain costs related to acquisitions completed in fiscal years 2016 and 2017.acquisitions. |
Net Sales Consolidated net sales increased $61.2$554.9 million, or 5.3%63.7%, to $1.21$1.43 billion in 20172018, up from $1.15 billion$870.7 million in 2016.2017. Existing market sales increased $24.8decreased $1.1 million, or 2.2%0.1%, over the same comparative period. We believe the increasedecrease in our 20172018 existing market sales was influenced primarily by the following factors: increased demandhigher prior year net sales in our residentialcertain regions related to multiple hail storm events and complementary product groups;hurricane Matthew; and
higher core residential re-roofing demand; and
increased storm demandlower sales volume in the Midwest region;Midwestern, Mid-Atlantic, and Northeast markets as a result of harsh winter weather;
partially offset by: lower commercialhigher pricing across all product sales;categories; high demand in Florida and weather-induced Texas following hurricanes Irma and Harvey and demand decreasesincreases in the Mid-Atlantic, NortheastCalifornia and our insulation businesses; and
strong growth within complementary products, particularly in our Southwest and West regions. Net sales within our acquired markets were $49.9$564.7 million in 2017,2018, an increase from 20162017 due to the sales impact from recent acquisitions. 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). Average overall selling prices in existing markets were flatup approximately 2% in 20172018 compared to 2016,2017, driven primarily price increases across all product categories and highlighted by small decreasesan increase in residential and non-residential selling prices which were both down less than 1% year-over-year. The average selling pricescomplementary product pricing of complementary products increased approximately 2% year-over-year. During the same period, net product costs were flat year-over-year.over 5%. Existing markets net sales by geographical region increased (decreased) from 20162017 to 20172018 as follows: Northeast 1.4%1.0%; Mid-Atlantic 1.8%(7.7)%; Southeast 2.8%14.7%; Southwest (7.9)(4.2)%; Midwest 14.5%(11.0)%; West 8.0%12.7%; and Canada (16.2)(2.3)%. These variations were primarily caused by short-term factors such as local market conditions, weather conditions and storm activity. Product group sales for our existing markets were as follows:follows (in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | | | | | | | | | 2017 | | | 2016 | | | Change | | | | Net Sales | | | % | | | Net Sales | | | % | | | $ | | | % | | | | (Dollars in thousands) | | Residential roofing products | | $ | 651,648 | | | | 56.0% | | | $ | 617,873 | | | | 54.2% | | | $ | 33,775 | | | | 5.5% | | Non-residential roofing products | | | 340,245 | | | | 29.2% | | | | 359,440 | | | | 31.6% | | | | (19,195) | | | | -5.3% | | Complementary building products | | | 172,070 | | | | 14.8% | | | | 161,827 | | | | 14.2% | | | | 10,243 | | | | 6.3% | | | | | | | | | | | | | | | | | | | | | | | | | | | Total existing market sales | | $ | 1,163,963 | | | | 100.0% | | | $ | 1,139,140 | | | | 100.0% | | | $ | 24,823 | | | | 2.2% | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | 2018 | | | 2017 | | | Change | | | Net Sales | | | % | | | Net Sales | | | % | | | $ | | | % | | Residential roofing products | $ | 461,311 | | | | 53.6 | % | | $ | 479,435 | | | | 55.6 | % | | $ | (18,124 | ) | | | (3.8 | %) | Non-residential roofing products | | 248,209 | | | | 28.8 | % | | | 243,893 | | | | 28.3 | % | | | 4,316 | | | | 1.8 | % | Complementary building products | | 151,398 | | | | 17.6 | % | | | 138,707 | | | | 16.1 | % | | | 12,691 | | | | 9.1 | % | Total existing market sales | $ | 860,918 | | | | 100.0 | % | | $ | 862,035 | | | | 100.0 | % | | $ | (1,117 | ) | | | (0.1 | %) |
For 2017,2018, our acquired markets recognized sales of $17.8$118.3 million, $4.5$83.5 million and $27.6$362.9 million in residential roofing products, non-residential roofing products and complementary building products, respectively. The combination of our 20172018 existing market sales of $1.16 billion$860.9 million plus the sales from acquired markets of $49.9$564.7 million equals our total 20172018 sales of $1.21$1.43 billion. We believe the existing market information is useful to investors because it helps explain organic growth or decline. Gross Profit Gross profit and gross margin for our consolidated and existing markets were as follows:follows (in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | | Change1 | | | | 2017 | | | 2016 | | | $ | | | % | | | | (Dollars in thousands) | | Gross profit—consolidated | | $ | 297,754 | | | $ | 282,075 | | | $ | 15,679 | | | | 5.6% | | Gross profit—existing markets | | | 283,089 | | | | 278,551 | | | | 4,538 | | | | 1.6% | | | | | | | Gross margin—consolidated | | | 24.5% | | | | 24.5% | | | | N/A | | | | 0.0% | | Gross margin—existing markets | | | 24.3% | | | | 24.5% | | | | N/A | | | | -0.2% | |
| Three Months Ended March 31, | | | Change1 | | | 2018 | | | 2017 | | | $ | | | % | | Gross profit - consolidated | $ | 338,377 | | | $ | 204,477 | | | $ | 133,900 | | | | 65.5 | % | Gross profit - existing markets | | 195,332 | | | | 202,267 | | | | (6,935 | ) | | | (3.4 | %) | Gross margin - consolidated | | 23.7 | % | | | 23.5 | % | | N/A | | | | 0.2 | % | Gross margin - existing markets | | 22.7 | % | | | 23.5 | % | | N/A | | | | (0.8 | %) |
________________________________ 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.points |
Our existingconsolidated gross profit increased $133.9 million, or 65.5%, to $338.4 million in 2018. Existing market gross profit increased $4.5decreased $6.9 million, or 1.6%3.4%, to $283.1 million in 2017,over the same comparative period and gross profit within our acquired markets was $14.7 million for the same period. Our overall$143.0 million. Consolidated gross margins stayedwere 23.7% in 2018, a 0.2% increase from the same at 24.5%. Grossprior year, and existing market gross margins within ourdecreased 0.8% over the comparative periods, to 22.7%. The decrease in existing markets for 2017 decreasedmarket gross margin was primarily driven by a product cost increase of approximately 2.5% as well as an unfavorable product mix related to 24.3%.lower residential sales volume and higher non-residential and complementary sales volume, partially offset by a price increase of approximately 2% across all products over the comparative period. Consolidated gross margin was slightly higher than existing market gross margin, primarily due to the positive impact of recent acquisitions. Direct sales (products shipped by our vendors directly to our customers), which typically have substantially lower gross margins (and operating expense) compared to our warehouse sales, represented 14.9%13.9% and 16.3%17.8% of our net sales in 20172018 and 2016,2017, respectively. We believe variations in direct sales activity to be primarily caused by short-term factors such as local market conditions, weather conditions and storm activity. None of these variations were driven by material regional impacts from changes in the direct sales mix of our geographical regions. Operating Expense Operating expense for consolidated and existing markets was as follows:follows (in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | | Change1 | | | | 2017 | | | 2016 | | | $ | | | % | | | | (Dollars in thousands) | | Operating expense—consolidated | | $ | 212,883 | | | $ | 203,696 | | | $ | 9,187 | | | | 4.5% | | Operating expense—existing markets | | | 200,931 | | | | 201,032 | | | | (101) | | | | -0.1% | | | | | | | Operating expense as a % of net sales—consolidated | | | 17.5% | | | | 17.7% | | | | N/A | | | | -0.2% | | Operating expense as a % of net sales—existing markets | | | 17.3% | | | | 17.6% | | | | N/A | | | | -0.3% | |
| Three Months Ended March 31, | | | Change1 | | | 2018 | | | 2017 | | | $ | | | % | | Operating expense - consolidated | $ | 395,775 | | | $ | 207,533 | | | $ | 188,242 | | | | 90.7 | % | Operating expense - existing markets | | 234,651 | | | | 205,544 | | | | 29,107 | | | | 14.2 | % | % of net sales - consolidated | | 27.8 | % | | | 23.8 | % | | N/A | | | | 4.0 | % | % of net sales - existing markets | | 27.3 | % | | | 23.8 | % | | N/A | | | | 3.5 | % |
________________________________ 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.points |
Operating expense in our existing markets decreasedincreased by $0.1$29.1 million, or 0.1%14.2% in 2017,2018, to $200.9$234.7 million, as compared to $201.0$205.5 million in 2016,2017, while operating expense within our acquired markets was $12.0$161.1 million in 2017.2018. The following factors were the leading causes of the decreaseincrease in operating expense in our existing markets: an increase in general and administrative expense of $27.4 million due to related to one-time costs incurred as part of the Allied acquisition; and an increase in payroll and employee benefit costs of $3.3 million due to incremental costs of salaries and other overhead costs to serve storms in Florida and Texas; 34
partially offset by: a decrease in bad debtamortization expense of $4.0 million due to improved collections results; partially offset by:
an increase inthe scheduled declining run-rate of intangible asset amortization expense of $1.3 million due to the incremental amortization of intangibles related to the RSG acquisition;acquisition.
an increase in selling and warehouse expenses of $2.3 million due to higher sales volume and the impact of recent acquisitions; and
a decrease of $0.3 million in losses recognized on the disposal of certain assets.
During 20172018 and 2016,2017, we recorded amortization expense related to the intangible assets recorded under purchase accounting within our existing markets of $18.0$16.3 million and $17.1$20.3 million, respectively. Our existing markets operating expense as a percentage of the related net sales in 20172018 was 17.3%27.3%, compared to 17.6%23.8% in 2016.2017. Interest Expense, Financing Costs and Other Interest expense, financing costs and other expense was $13.4$39.6 million in 2017,2018, as compared to $12.2$12.3 million in 2016.2017. The primary driver of the slightthis increase is athe higher average outstanding debt balance over the comparative periods. Income Taxes Provision forThere was an income tax was $26.8benefit of $30.3 million in 2017,2018, as compared to $25.0a $6.0 million benefit in 2016.2017. The increase2018 tax benefit was primarily due to the $5.3$81.6 million differenceincrease in pre-tax net income forloss over the comparative periods. The effective tax rate before discrete items decreased to 29.4% in 2018, compared to 38.8% in 2017. This decrease was relatively flat forprimarily driven by the comparative periods.reduction of the federal corporate income tax rate from 35% to a blended rate of 24.5%. We expect our fiscal year 20172018 effective annual income tax rate, to average approximately 39%, excluding any discrete items.items, will be approximately 29.0-30.0%.
Net Income (Loss)/Net Income (Loss) Per Share Net loss was $66.7 million in 2018, as compared to a net loss of $9.4 million in 2017. We declared $6.0 million of dividends on preferred shares in 2018 and none in 2017, making net loss attributable to common shareholders of $72.7 million in 2018, as compared to net loss attributable to common shareholders of $9.4 million in 2017. We calculate net income (loss) per share by dividing net income (loss), less dividends on preferred shares, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is calculated by utilizing the most dilutive result after applying and comparing the two-class method and if-converted method (see Note 4 in the notes to the condensed consolidated financial statements for further detail). The following table presents the all the components utilized to determine basic and diluted net income (loss) per share (in thousands, except share and per share amounts): | Three Months Ended March 31, | | | 2018 | | | 2017 | | Net income (loss) | $ | (66,655 | ) | | $ | (9,356 | ) | Less: Dividends on preferred shares, declared | | 6,000 | | | | - | | Net income (loss) attributable to common shareholders | $ | (72,655 | ) | | $ | (9,356 | ) | | | | | | | | | Weighted-average common shares outstanding, basic | | 68,019,300 | | | | 60,141,580 | | Effect of common share equivalents | | - | | | | - | | Weighted-average common shares outstanding, diluted (two-class method) | | 68,019,300 | | | | 60,141,580 | | Effect of Preferred Stock conversion | | 9,586,901 | | | | - | | Weighted-average common shares outstanding, diluted (if-converted method) | | 77,606,201 | | | | 60,141,580 | | | | | | | | | | Net income (loss) per share - basic | $ | (1.07 | ) | | $ | (0.16 | ) | Net income (loss) per share - diluted (two-class method) | | (1.07 | ) | | | (0.16 | ) | Net income (loss) per share - diluted (if-converted method) | | (0.86 | ) | | | (0.16 | ) |
35
Comparison of the NineSix Months Ended June 30,March 31, 2018 and 2017 and 2016 The following tables set forth selected consolidated statement of operations data and such data as a percentage of total revenuenet sales for each of the periods indicated:presented (in thousands, except for percentages): | | | | | | | | | | | | Nine Months Ended June 30, | | | | | 2017 | | | 2016 | | Six Months Ended March 31, | | | | (In thousands) | | 2018 | | | 2017 | | Net sales | | $ | 3,086,802 | | | $ | 2,952,743 | | $ | 2,547,604 | | | $ | 1,872,908 | | Cost of products sold | | | 2,333,504 | | | | 2,241,716 | | | 1,939,474 | | | | 1,417,364 | | | | | | | | | | Gross profit | | | 753,298 | | | | 711,027 | | | 608,130 | | | | 455,544 | | Operating expense | | | 624,526 | | | | 601,921 | | | 616,432 | | | | 411,643 | | | | | | | | | | Income from operations | | | 128,772 | | | | 109,106 | | | Income (loss) from operations | | | (8,302 | ) | | | 43,901 | | Interest expense, financing costs, and other | | | 39,239 | | | | 41,508 | | | 62,138 | | | | 25,842 | | | | | | | | | | Income before provision for income taxes | | | 89,533 | | | | 67,598 | | | Provision for income taxes | | | 33,800 | | | | 25,073 | | | | | | | | | | | Net income | | | 55,733 | | | | 42,525 | | | | | | | | | | | | | | Nine Months Ended June 30, | | | | | 2017 | | | 2016 | | | | | % of Net Sales | | | Net sales | | | 100.0% | | | | 100.0% | | | Cost of products sold | | | 75.6% | | | | 75.9% | | | | | | | | | | | Gross profit | | | 24.4% | | | | 24.1% | | | Operating expense | | | 20.2% | | | | 20.4% | | | | | | | | | | | Income from operations | | | 4.2% | | | | 3.7% | | | Interest expense, financing costs, and other | | | 1.3% | | | | 1.4% | | | | | | | | | | | Income before provision for income taxes | | | 2.9% | | | | 2.3% | | | Provision for income taxes | | | 1.1% | | | | 0.8% | | | | | | | | | | | Net income | | | 1.8% | | | | 1.5% | | | | | | | | | | | Income (loss) before provision for income taxes | | | (70,440 | ) | | | 18,059 | | Provision for (benefit from) income taxes | | | (71,381 | ) | | | 6,985 | | Net income (loss) | | | 941 | | | | 11,074 | | Dividends on preferred shares, declared | | | 6,000 | | | | - | | Net income (loss) attributable to common shareholders | | | (5,059 | ) | | | 11,074 | |
| Six Months Ended March 31, | | | 2018 | | | 2017 | | Net sales | | 100.0 | % | | | 100.0 | % | Cost of products sold | | 76.1 | % | | | 75.7 | % | Gross profit | | 23.9 | % | | | 24.3 | % | Operating expense | | 24.2 | % | | | 22.0 | % | Income (loss) from operations | | (0.3 | %) | | | 2.3 | % | Interest expense, financing costs, and other | | 2.4 | % | | | 1.4 | % | Income (loss) before provision for income taxes | | (2.7 | %) | | | 0.9 | % | Provision for (benefit from) income taxes | | (2.7 | %) | | | 0.3 | % | Net income (loss) | | 0.0 | % | | | 0.6 | % | Dividends on preferred shares, declared | | 0.2 | % | | | 0.0 | % | Net income (loss) attributable to common shareholders | | (0.2 | %) | | | 0.6 | % |
In managing our business, we consider all growth, including the opening of new branches, to be organic growth unless it results from an acquisition. When we refer to growth in existing markets or organic growth, we include growth from existing 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 the start of the fiscal reporting period. When we refer to regions, we are referring to our geographic regions. As of June 30, 2017,March 31, 2018, we had a total of 384588 branches in operation. Our existing market calculations include 322358 branches and exclude 62excluded 230 branches because they were acquired after the start of fiscal year 2016.2017. When we refer to our net product costs, we are referring to our invoice cost less the impact of short-term buying programs (also referred to as “special buys” given the manner in which they are offered). 36
The following table presents a summary ofsummarizes our results of operations by market type (existing and acquired) for the periods presented broken down by existing markets and acquired markets:(in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Existing Markets | | | Acquired Markets | | | Consolidated | | | | | Nine Months Ended June 30, | | Existing Markets | | | Acquired Markets | | | Consolidated | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | Six Months Ended March 31, | | | | (Dollars in thousands) | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Net sales | | $ | 2,899,742 | | | $ | 2,878,003 | | | $ | 187,060 | | | $ | 74,740 | | | $ | 3,086,802 | | | $ | 2,952,743 | | $ | 1,943,585 | | | $ | 1,861,568 | | | $ | 604,019 | | | $ | 11,340 | | | $ | 2,547,604 | | | $ | 1,872,908 | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross profit | | $ | 699,798 | | | $ | 691,732 | | | $ | 53,500 | | | $ | 19,295 | | | $ | 753,298 | | | $ | 711,027 | | $ | 454,557 | | | $ | 452,858 | | | $ | 153,573 | | | $ | 2,686 | | | $ | 608,130 | | | $ | 455,544 | | Gross margin | | | 24.1% | | | | 24.0% | | | | 28.6% | | | | 25.8% | | | | 24.4% | | | | 24.1% | | | 23.4 | % | | | 24.3 | % | | | 25.4 | % | | | 23.7 | % | | | 23.9 | % | | | 24.3 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Operating expense(1) | | $ | 575,167 | | | $ | 582,261 | | | $ | 49,359 | | | $ | 19,660 | | | $ | 624,526 | | | $ | 601,921 | | $ | 444,936 | | | $ | 408,987 | | | $ | 171,496 | | | $ | 2,656 | | | $ | 616,432 | | | $ | 411,643 | | Operating expense as a % of net sales | | | 19.8% | | | | 20.2% | | | | 26.4% | | | | 26.3% | | | | 20.2% | | | | 20.4% | | | 22.9 | % | | | 22.0 | % | | | 28.4 | % | | | 23.4 | % | | | 24.2 | % | | | 22.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income (loss) | | $ | 124,631 | | | $ | 109,471 | | | $ | 4,141 | | | $ | (365) | | | $ | 128,772 | | | $ | 109,106 | | $ | 9,621 | | | $ | 43,870 | | | $ | (17,923 | ) | | $ | 31 | | | $ | (8,302 | ) | | $ | 43,901 | | Operating margin | | | 4.3% | | | | 3.8% | | | | 2.2% | | | | -0.5% | | | | 4.2% | | | | 3.7% | | | 0.5 | % | | | 2.4 | % | | | (3.0 | %) | | | 0.3 | % | | | (0.3 | %) | | | 2.3 | % |
1 | During 20172018 and 2016,2017, we recorded amortization expense related to intangible assets recorded under purchase accounting of $61.1$55.3 million ($8.922.4 million from acquired markets) and $49.7$40.4 million ($3.0 million(immaterial amount from acquired markets), respectively. In addition, existing markettotal operating expense for 20172018 and 20162017 included non-recurring charges of $28.5$33.9 million ($17.5(immaterial amount from acquired markets) and $2.7 million net of taxes) and $44.7 million ($27.1 million, net of taxes)(none from acquired markets), respectively, for the recognition of certain costs related to acquisitions completed in fiscal years 2016 and 2017.acquisitions. |
Net Sales Consolidated net sales increased $134.1$674.7 million, or 4.5%36.0%, to $3.09$2.55 billion in 20172018, up from $2.95$1.87 billion in 2016.2017. Existing market sales increased $21.7$82.0 million, or 0.8%4.4%, over the same comparative period. We believe the slight increase in our 20172018 existing market sales werewas influenced primarily by the following factors: higher pricing and increased demand across all product categories; high demand in Florida and Texas following hurricanes Irma and Harvey; and strong growth within complementary products, particularly in our residentialSouthwest and complementary product groups;West regions; partially offset by: lower average selling prices;higher prior year net sales in certain regions related to multiple hail storm events and hurricane Matthew. lower commercial product demand.
Net sales within our acquired markets were $187.1$604.0 million in 2017,2018, an increase from 20162017 due to the sales impact from recent acquisitions. 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). Average overall selling prices in existing markets declined less thanwere up over 1% in 20172018 compared to 2016,2017, driven primarily price increases across all product categories and highlighted by decreasesan increase in residential and non-residential selling prices which were both downcomplementary product pricing of approximately 1% year-over-year. The average selling prices of complementary products increased over 1% year-over-year. During the same period, net product costs decreased less than 1% year-over-year.5%. Existing markets net sales by geographical region increased (decreased) from 20162017 to 20172018 as follows: Northeast (5.6)%2.2%; Mid-Atlantic 3.5%(4.3)%; Southeast 4.2%18.9%; Southwest 2.0%(2.1)%; Midwest 8.1%(0.9)%; West (12.9)(19.7)%; and Canada (8.7)%5.2%. These variations were primarily caused by short-term factors such as local market conditions, weather conditions and storm activity. Product group sales for our existing markets were as follows:follows (in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, | | | | | | | | | | | 2017 | | | 2016 | | | Change | | Six Months Ended March 31, | | | | | | | | | | | | Net Sales | | | % | | | Net Sales | | | % | | | $ | | | % | | 2018 | | | 2017 | | | Change | | | | (Dollars in thousands) | | Net Sales | | | % | | | Net Sales | | | % | | | $ | | | % | | Residential roofing products | | $ | 1,621,546 | | | | 55.9% | | | $ | 1,533,170 | | | | 53.2% | | | $ | 88,376 | | | | 5.8% | | $ | 1,041,864 | | | | 53.6 | % | | $ | 1,008,718 | | | | 54.2 | % | | $ | 33,146 | | | | 3.3 | % | Non-residential roofing products | | | 889,264 | | | | 30.7% | | | | 971,938 | | | | 33.8% | | | | (82,674) | | | | -8.5% | | | 571,984 | | | | 29.4 | % | | | 554,367 | | | | 29.8 | % | | | 17,617 | | | | 3.2 | % | Complementary building products | | | 388,932 | | | | 13.4% | | | | 372,895 | | | | 13.0% | | | | 16,037 | | | | 4.3% | | | 329,737 | | | | 17.0 | % | | | 298,483 | | | | 16.0 | % | | | 31,254 | | | | 10.5 | % | | | | | | | | | | | | | | | | | | | | Total existing market sales | | $ | 2,899,742 | | | | 100.0% | | | $ | 2,878,003 | | | | 100.0% | | | $ | 21,739 | | | | 0.8% | | $ | 1,943,585 | | | | 100.0 | % | | $ | 1,861,568 | | | | 100.0 | % | | $ | 82,017 | | | | 4.4 | % | | | | | | | | | | | | | | | | | |
For 2017,2018, our acquired markets recognized sales of $60.9$126.5 million, $11.4$88.7 million and $114.8$388.8 million in residential roofing products, non-residential roofing products and complementary building products, respectively. The combination of our 20172018 existing 37
market sales of $2.90$1.94 billion plus the sales from acquired markets of $187.1$604.0 million equals our total 20172018 sales of $3.09$2.55 billion. We believe the existing market information is useful to investors because it helps explain organic growth or decline. Gross Profit Gross profit and gross margin for our consolidated and existing markets were as follows:follows (in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, | | | Change1 | | | | 2017 | | | 2016 | | | $ | | | % | | | | (Dollars in thousands) | | Gross profit—consolidated | | $ | 753,298 | | | $ | 711,027 | | | $ | 42,271 | | | | 5.9% | | Gross profit—existing markets | | | 699,798 | | | | 691,732 | | | | 8,066 | | | | 1.2% | | | | | | | Gross margin—consolidated | | | 24.4% | | | | 24.1% | | | | N/A | | | | 0.3% | | Gross margin—existing markets | | | 24.1% | | | | 24.0% | | | | N/A | | | | 0.1% | |
| Six Months Ended March 31, | | | Change1 | | | 2018 | | | 2017 | | | $ | | | % | | Gross profit - consolidated | $ | 608,130 | | | $ | 455,544 | | | $ | 152,586 | | | | 33.5 | % | Gross profit - existing markets | | 454,557 | | | | 452,858 | | | | 1,699 | | | | 0.4 | % | Gross margin - consolidated | | 23.9 | % | | | 24.3 | % | | N/A | | | | (0.4 | %) | Gross margin - existing markets | | 23.4 | % | | | 24.3 | % | | 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. |
Our existingconsolidated gross profit increased $152.6 million, or 33.5%, to $608.1 million in 2018. Existing market gross profit increased $8.1$1.7 million, or 1.2%0.4%, to $699.8 million in 2017,over the same comparative period and gross profit within our acquired markets was $53.5 million for the same period. Our overall$153.6 million. Consolidated gross margins improvedwere 23.9% in 2018, a 0.4% decrease from the prior year, and existing market gross margins decreased 0.9% over the comparative periods, to 24.4%23.4%. The decrease in 2017, mainlyexisting market gross margin was primarily driven by a product cost increase of over 2%, partially offset by a price increase of over 1% across all products over the comparative period. Consolidated gross margin was slightly higher than existing market gross margin, primarily due to a favorable shift in sales mix to residential products. Gross margins within our existing markets for 2017 increased to 24.1%.the positive impact of recent acquisitions. Direct sales (products shipped by our vendors directly to our customers), which typically have substantially lower gross margins (and operating expense) compared to our warehouse sales, represented 15.5%13.7% and 16.4%15.8% of our net sales in 20172018 and 2016,2017, respectively. We believe variations in direct sales activity to be primarily caused by short-term factors such as local market conditions, weather conditions and storm activity. None of these variations were driven by material regional impacts from changes in the direct sales mix of our geographical regions. Operating Expense Operating expense for consolidated and existing markets was as follows:follows (in thousands, except for percentages): | | | | | | | | | | | | | | | | | | | Nine Months Ended June 30, | | | Change1 | | | | 2017 | | | 2016 | | | $ | | | % | | | | (Dollars in thousands) | | Operating expense—consolidated | | $ | 624,526 | | | $ | 601,921 | | | | $ 22,605 | | | | 3.8% | | Operating expense—existing markets | | | 575,167 | | | | 582,261 | | | | (7,094) | | | | -1.2% | | | | | | | Operating expense as a % of net sales —consolidated | | | 20.2% | | | | 20.4% | | | | N/A | | | | -0.2% | | Operating expense as a % of net sales —existing markets | | | 19.8% | | | | 20.2% | | | | N/A | | | | -0.4% | |
| Six Months Ended March 31, | | | Change1 | | | 2018 | | | 2017 | | | $ | | | % | | Operating expense - consolidated | $ | 616,432 | | | $ | 411,643 | | | $ | 204,789 | | | | 49.7 | % | Operating expense - existing markets | | 444,936 | | | | 408,987 | | | | 35,949 | | | | 8.8 | % | % of net sales - consolidated | | 24.2 | % | | | 22.0 | % | | N/A | | | | 2.2 | % | % of net sales - existing markets | | 22.9 | % | | | 22.0 | % | | 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. |
Operating expense in our existing markets decreasedincreased by $7.1$35.9 million, or 1.2%8.8% in 2017,2018, to $575.2$444.9 million, as compared to $582.3$409.0 million in 2016,2017, while operating expense within our acquired markets was $49.4$171.5 million in 2017.2018. The following factors were the leading causes of the decreaseincrease in operating expense in our existing markets: a decrease in payroll, employee benefits costs, and stock compensation expense of $9.0 million due to additional compensation costs recognized in 2016 as a result of the RSG transaction;
a decreasean increase in general and administrative expense of $5.6$28.0 million due to related to one-time costs incurred as part of the Allied acquisition
an increase in payroll and employee benefit costs of $13.5 million due to higher insurance costs, and higher salaries and wages from annual merit increases as well as additional headcount; partially offset by: a decrease in amortization expense of $7.5 million due to the continued realizationscheduled declining run-rate of cost synergies and consolidation of certain branches related to recent acquisitions; and a decrease in bad debt expense of $3.0 million due to improved collections results;
partially offset by:
an increase in depreciation andintangible asset amortization expense of $6.3 million due to the incremental amortization of intangibles related to the RSG transaction;acquisition.
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During 2018 and an increase in selling expense of $4.4 million due to higher sales volume and related employee costs.
During 2017 and 2016,, we recorded amortization expense related to the intangible assets recorded under purchase accounting within our existing markets of $52.3$32.9 million and $46.7$40.4 million, respectively. Our existing markets operating expense as a percentage of the related net sales in 20172018 was 19.8%22.9%, compared to 20.2%22.0% in 2016.2017.
Interest Expense, Financing Costs and Other Interest expense, financing costs and other expense was $39.2$62.1 million in 2017,2018, as compared to $41.5$25.8 million in 2016.2017. The primary driver of this increase is the decrease is a lower interest rate from the September 2016 refinancing of our Term Loan and the gradual decrease inhigher average outstanding debt balance over the comparative periods. Income Taxes There was an income tax benefit of $71.4 million in 2018, as compared to a $7.0 million income tax provision in 2017. The 2018 tax benefit was primarily due to the net $48.0 million beneficial impact recognized in 2018 as a result of recent principal payments. Income Taxes
Provision for income taxes was $33.8the enactment of the Tax Cuts and Jobs Act of 2017 (see Note 12), as well as a $22.1 million in 2017, as compared to $25.1tax benefit, excluding any discrete items, stemming from an increase of $88.5 million in 2016. The increase was primarily due to a $21.9 million increase in pre-tax net income forloss over the comparative periods. The effective tax rate before discrete items decreased to 29.4% in 2018, compared to 38.8% in 2017. This decrease was relatively flat forprimarily driven by the comparative periods.reduction of the federal corporate income tax rate from 35% to a blended rate of 24.5%. We expect our fiscal year 20172018 effective annual income tax rate, to average approximately 39%, excluding any discrete items.items, will be approximately 29.0-30.0%.
Net Income (Loss)/Net Income (Loss) Per Share Net income was $0.9 million in 2018, as compared to a net income of $11.1 million in 2017. We declared $6.0 million of dividends on preferred shares in 2018 and none in 2017, making net loss attributable to common shareholders of $5.1 million in 2018, as compared to net income attributable to shareholders of $9.4 million in 2017. We calculate net income (loss) per share by dividing net income (loss), less dividends on preferred shares, by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is calculated by utilizing the most dilutive result after applying and comparing the two-class method and if-converted method (see Note 4 in the notes to the condensed consolidated financial statements for further detail). The following table presents the all the components utilized to determine basic and diluted net income (loss) per share (in thousands, except share and per share amounts): | Six Months Ended March 31, | | | 2018 | | | 2017 | | Net income (loss) | $ | 941 | | | $ | 11,074 | | Less: Dividends on preferred shares, declared | | 6,000 | | | | - | | Net income (loss) attributable to common shareholders | $ | (5,059 | ) | | $ | 11,074 | | | | | | | | | | Weighted-average common shares outstanding, basic | | 67,922,276 | | | | 60,041,332 | | Effect of common share equivalents | | - | | | | 1,028,606 | | Weighted-average common shares outstanding, diluted (two-class method) | | 67,922,276 | | | | 61,069,938 | | Effect of Preferred Stock conversion | | 4,740,776 | | | | - | | Weighted-average common shares outstanding, diluted (if-converted method) | | 72,663,052 | | | | 61,069,938 | | | | | | | | | | Net income (loss) per share - basic | $ | (0.07 | ) | | $ | 0.18 | | Net income (loss) per share - diluted (two-class method) | | (0.07 | ) | | | 0.18 | | Net income (loss) per share - diluted (if-converted method) | | 0.01 | | | | 0.18 | |
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 Net Income (Loss)/Adjusted EPS We define Adjusted Net Income (Loss) as net income that excludes certain non-recurring acquisition costs, the amortization of intangibles, business restructuring costs, and the incremental amortizationnon-recurring effects of intangibles related to acquisitions completed in fiscal years 2016 and 2017.tax reform. Adjusted net income per share (“Adjusted EPS”) is calculated by dividing the Adjusted Net Income (Loss) for the period by the weighted-average diluted shares outstanding for the period. 39
We define Adjusted EBITDA as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation, non-recurring acquisition costs, and certain non-recurring costs from acquisitions completed in fiscal years 2016 and 2017.business restructuring costs. EBITDA is a measure commonly used in the distribution industry. We use these supplemental measures to evaluate performance period over period and to analyze the underlying trends in our business and to establish operational goals and forecasts that are used in allocating resources. We expect to compute our non-GAAP financial measures consistently using the same consistent methodmethods from quarter to quarter and year to year. We feelbelieve these measures are useful because they allow investors to better understand year-over-year changes in underlying operating performance. We believe that these non-GAAP measures provide investors and analysts with a measure of operating results unaffected by differences in capital structures and capital investment cycles among otherwise comparable companies. Further, we believe these measures are useful to investors because they improve comparability of results of operations since they eliminate the impact of purchase accounting adjustments that can render operating results non-comparable between periods. WhileAlthough we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared in accordance with GAAP. You should not consider any of these measures as a substitute alongside other financial performance measures presented in accordance with GAAP.
The following tables presenttable presents a reconciliation of net income, the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted Net Income (Loss)/Adjusted EPS and Adjusted EBITDA for each of the periods indicated (in thousands, except per share amounts): Adjusted Net Income (Loss)/Adjusted EPS | | | | | | | | | | | | | | | | | Three Months Ended March 31, | | | Six Months Ended March 31, | | | | Three Months Ended June 30, | | | Nine Months Ended June 30, | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | Amount | | | Per Share | | | Amount | | | Per Share | | | Amount | | | Per Share | | | Amount | | | Per Share | | | | Amount | | | Per Share | | | Amount | | | Per Share | | | Amount | | | Per Share | | | Amount | | | Per Share | | | Net income | | $ | 44,659 | | | $ | 0.73 | | | $ | 41,126 | | | $ | 0.68 | | | $ | 55,733 | | | $ | 0.91 | | | $ | 42,525 | | | $ | 0.71 | | | Company adjustments, net of income taxes: | | | | | | | | | | | | | | | | | | Net income (loss) | | $ | (66,655 | ) | | $ | (0.98 | ) | | $ | (9,356 | ) | | $ | (0.16 | ) | | $ | 941 | | | $ | 0.01 | | | $ | 11,074 | | | $ | 0.18 | | Less: Dividends on preferred shares, declared | | | 6,000 | | | | (0.09 | ) | | | - | | | | - | | | | 6,000 | | | | (0.08 | ) | | | - | | | | - | | Net income (loss) attributable to common shareholders | | $ | (72,655 | ) | | $ | (1.07 | ) | | $ | (9,356 | ) | | $ | (0.16 | ) | | $ | (5,059 | ) | | $ | (0.07 | ) | | $ | 11,074 | | | $ | 0.18 | | Adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Acquisition costs1 | | | 6,761 | | | | 0.11 | | | | 5,444 | | | | 0.09 | | | | 20,075 | | | | 0.33 | | | | 30,405 | | | | 0.50 | | | 50,604 | | | | 0.74 | | | | 14,404 | | | | 0.24 | | | | 76,237 | | | | 1.12 | | | | 28,373 | | | | 0.46 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Effects of tax reform2 | | | (1,491 | ) | | | (0.02 | ) | | | - | | | | - | | | | (47,983 | ) | | | (0.71 | ) | | | - | | | | - | | Adjusted Net Income (Loss) | | $ | 51,420 | | | $ | 0.84 | | | $ | 46,570 | | | $ | 0.77 | | | $ | 75,808 | | | $ | 1.24 | | | $ | 72,930 | | | $ | 1.21 | | $ | (23,542 | ) | | $ | (0.35 | ) | | $ | 5,048 | | | $ | 0.08 | | | $ | 23,195 | | | $ | 0.34 | | | $ | 39,447 | | | $ | 0.64 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1 | Acquisition costs reflect certain non-recurring charges and the incremental amortization of intangibles related to acquisitions completed in fiscal years 2016 and 2017, net of $4.2 million and $2.9 million in tax for the three months ended June 30, 2017 and 2016, respectively and $12.6March 31, 2018 include $34.6 million and $19.8 million in tax for the nine months ended June 30, 2017 and 2016, respectively. |
Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | | Nine Months Ended June 30, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | Net income | | $ | 44,659 | | | $ | 41,126 | | | $ | 55,733 | | | $ | 42,525 | | Acquisition costs1 | | | 1,971 | | | | 2,157 | | | | 4,715 | | | | 23,310 | | Interest expense, net | | | 13,614 | | | | 12,508 | | | | 40,098 | | | | 41,836 | | Income taxes | | | 26,815 | | | | 25,027 | | | | 33,800 | | | | 25,073 | | Depreciation and amortization | | | 29,283 | | | | 25,375 | | | | 86,238 | | | | 73,019 | | Stock-based compensation | | | 3,653 | | | | 3,374 | | | | 11,227 | | | | 14,070 | | | | | | | | | | | | | | | | | | | Adjusted EBITDA | | $ | 119,995 | | | $ | 109,567 | | | $ | 231,811 | | | $ | 219,833 | | | | | | | | | | | | | | | | | | | Adjusted EBITDA as a % of net sales | | | 9.9% | | | | 9.5% | | | | 7.5% | | | | 7.4% | |
1 | Acquisition costs reflect certainof non-recurring charges related to acquisitions completedand $37.1 million of amortization expense related to intangibles, both net of $21.1 million in fiscal years 2016tax in total. Acquisition costs for the three months ended March 31, 2017 include $3.1 million of non-recurring charges related to acquisitions and $20.3 million of amortization expense related to intangibles, both net of $9.0 million in tax in total. Acquisition costs for the six months ended March 31, 2018 include $52.5 million of non-recurring charges related to acquisitions and $55.2 million of amortization expense related to intangibles, both net of $31.5 million in tax in total. Acquisition costs for the six months ended March 31, 2017 include $5.9 million of non-recurring charges related to acquisitions and $40.4 million of amortization expense related to intangibles, both net of $17.8 million in tax in total. |
| 2 | Impact of the Tax Cuts and Jobs Act of 2017 – see Note 12 for further discussion. |
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The following table presents a reconciliation of net income, the most directly comparable financial measure as measured in accordance with GAAP, to Adjusted EBITDA for each of the periods indicated (in thousands, except percentages): Adjusted EBITDA | Three Months Ended March 31, | | | Six Months Ended March 31, | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | Net income (loss) | $ | (66,655 | ) | | $ | (9,356 | ) | | $ | 941 | | | $ | 11,074 | | Acquisition costs1 | | 28,301 | | | | 1,584 | | | | 33,870 | | | | 2,744 | | Interest expense, net | | 41,763 | | | | 13,245 | | | | 65,279 | | | | 26,484 | | Income taxes | | (30,313 | ) | | | (5,968 | ) | | | (71,381 | ) | | | 6,985 | | Depreciation and amortization | | 54,188 | | | | 28,530 | | | | 81,092 | | | | 56,955 | | Stock-based compensation | | 4,376 | | | | 3,758 | | | | 7,835 | | | | 7,574 | | Adjusted EBITDA | $ | 31,660 | | | $ | 31,793 | | | $ | 117,636 | | | $ | 111,816 | | | | | | | | | | | | | | | | | | Adjusted EBITDA as a % of net sales | | 2.2 | % | | | 3.7 | % | | | 4.6 | % | | | 6.0 | % |
___________________________________ | 1 | Acquisition costs reflect non-recurring charges related to acquisitions (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation. |
Seasonality and Quarterly Fluctuations In general, sales and net income are highest during our first, third and fourth fiscal quarters, which represent the peak months of construction and re-roofing, especially in our branches in the northern and mid-western U.S. and in Canada. We have historically incurred low net income levels or net losses during the second quarter when our sales are substantially lower. We generally experience an increase in inventory, accounts receivable and accounts payable during the third and fourth quarters of the year as a result of the seasonality of our business. Our peak cash usage generally occurs during the third quarter, primarily because accounts payable terms offered by our suppliers typically have due dates in April, May and June, while our peak accounts receivable collections typically occur from June through November. We generally experience a slowing of our accounts receivable collections during our second quarter, mainly due to the inability of some of our customers to conduct their businesses effectively in inclement weather in certain divisions. We continue to attempt to collect those receivables, which require payment under our standard terms. We do not provide material concessions to our customers during this quarter of the year. We generally experience our peak working capital needs during the third quarter after we build our inventories following the winter season but before we begin collecting on most of our spring receivables. Certain Quarterly Financial Data The following table sets forth certain unaudited quarterly data for fiscal year 20172018 (ending September 30, 2017)March 31, 2018) and fiscal year 20162017 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. trends (in thousands, except per share amounts): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | | Qtr 1 | | | Qtr 2 | | | Qtr 3 | | | Qtr 1 | | | Qtr 2 | | | Qtr 3 | | | Qtr 4 | | | | (Dollars in thousands) | | Net sales | | $ | 1,002,184 | | | $ | 870,724 | | | $ | 1,213,894 | | | $ | 976,480 | | | $ | 823,537 | | | $ | 1,152,726 | | | $ | 1,174,366 | | % of year’s sales | | | 32.5% | | | | 28.2% | | | | 39.3% | | | | 23.7% | | | | 20.0% | | | | 27.9% | | | | 28.4% | | | | | | | | | | Gross profit | | $ | 251,067 | | | $ | 204,477 | | | $ | 297,754 | | | $ | 233,188 | | | $ | 195,764 | | | $ | 282,075 | | | $ | 302,042 | | % of year’s gross profit | | | 33.3% | | | | 27.1% | | | | 39.5% | | | | 23.0% | | | | 19.3% | | | | 27.8% | | | | 29.9% | | | | | | | | | | Income (loss) from operations | | $ | 46,957 | | | $ | (3,056) | | | $ | 84,871 | | | $ | 26,844 | | | $ | 3,883 | | | $ | 78,379 | | | $ | 95,878 | | % of year’s income from operations | | | 36.5% | | | | -2.4% | | | | 65.9% | | | | 13.1% | | | | 1.9% | | | | 38.2% | | | | 46.8% | | | | | | | | | | Net income (loss) | | $ | 20,430 | | | $ | (9,356) | | | $ | 44,659 | | | $ | 7,118 | | | $ | (5,719) | | | $ | 41,126 | | | $ | 47,392 | | | | | | | | | | Net income (loss) per share—basic | | $ | 0.34 | | | $ | (0.16) | | | $ | 0.74 | | | $ | 0.12 | | | $ | (0.10) | | | $ | 0.69 | | | $ | 0.79 | | Net income (loss) per share—diluted | | $ | 0.33 | | | $ | (0.16) | | | $ | 0.73 | | | $ | 0.12 | | | $ | (0.10) | | | $ | 0.68 | | | $ | 0.78 | |
| 2018 | | | 2017 | | | Qtr 1 | | | Qtr 2 | | | Qtr 1 | | | Qtr 2 | | | Qtr 3 | | | Qtr 4 | | Net sales | $ | 1,121,979 | | | $ | 1,425,625 | | | $ | 1,002,184 | | | $ | 870,724 | | | $ | 1,213,894 | | | $ | 1,289,868 | | Gross profit | | 269,753 | | | | 338,377 | | | | 251,067 | | | | 204,477 | | | | 297,754 | | | | 322,641 | | Income (loss) from operations | | 49,096 | | | | (57,398 | ) | | | 46,957 | | | | (3,056 | ) | | | 84,871 | | | | 87,324 | | Net income (loss) | | 67,596 | | | | (66,655 | ) | | | 20,430 | | | | (9,356 | ) | | | 44,659 | | | | 45,131 | | Dividends on preferred shares, declared | | - | | | | 6,000 | | | | - | | | | - | | | | - | | | | - | | Net income (loss) attributable to common shareholders | $ | 67,596 | | | $ | (72,655 | ) | | $ | 20,430 | | | $ | (9,356 | ) | | $ | 44,659 | | | $ | 45,131 | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) per share - basic | $ | 1.00 | | | $ | (1.07 | ) | | $ | 0.34 | | | $ | (0.16 | ) | | $ | 0.74 | | | $ | 0.74 | | Net income (loss) per share - diluted | $ | 0.98 | | | $ | (1.07 | ) | | $ | 0.33 | | | $ | (0.16 | ) | | $ | 0.73 | | | $ | 0.73 | |
41
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 June 30, 2017March 31, 2018 were our cash and cash equivalents of $33.1$16.0 million and our available borrowings of $229.1$764.4 million under our asset based lending revolving credit facility. 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; Our primary capital needs are for working capital obligations and other general corporate purposes, including acquisitions and capital expenditures. Our primary sources of working capital are cash from operations and cash equivalents supplemented by bank borrowings. In the past, we have financed larger acquisitions initially through increased bank borrowings and the issuance of common stock. We then repay any such borrowings with cash flows from operations. We have funded most of our capital expenditures with cash on hand or through increased bank borrowings, including equipment financing, and then have reduced those obligations with cash flows from operations. We believe we have adequate current 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 seek potential acquisitions from time to time and hold discussions with certain acquisition candidates. If suitable acquisition opportunities or working capital needs arise that require additional financing, we believe that our financial position and earnings history provide a sufficient base for obtaining additional financing resources at reasonable rates and terms. We may also choose to issue additional shares of common stock or preferred stock in order to raise funds. The following table summarizes our cash flows for the periods indicated (in thousands): | | Six Months Ended March 31, | | | | 2018 | | | 2017 | | Net cash provided by (used in) operating activities | | $ | 39,966 | | | $ | 150,530 | | Net cash provided by (used in) investing activities | | | (2,750,981 | ) | | | (81,305 | ) | Net cash provided by (used in) financing activities | | | 2,587,965 | | | | (90,718 | ) | Effect of exchange rate changes on cash and cash equivalents | | | 800 | | | | 119 | | Net increase (decrease) in cash and cash equivalents | | $ | (122,250 | ) | | $ | (21,374 | ) |
| | | | | | | | | | | Nine Months Ended June 30, | | | | 2017 | | | 2016 | | Net cash provided by operating activities | | $ | 74,152 | | | $ | 74,359 | | Net cash used in investing activities | | | (158,576 | ) | | | (1,039,242 | ) | Net cash provided by financing activities | | | 86,045 | | | | 956,629 | | Effect of exchange rate changes on cash and equivalents | | | 48 | | | | (871 | ) | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | $ | 1,669 | | | $ | (9,125 | ) | | | | | | | | | |
Operating Activities Our netNet cash provided by operating activities was $74.2$40.0 million in 2017,2018, compared to $74.4$150.5 million provided by operating activities in 2016.2017. Cash from operations decreased $0.2$110.6 million, mainly due to an increasea decrease in net income after adjustments for non-cash items of $28.1$32.0 million and a increase in working capital that provided an incremental cash usageoutflow of $28.3 million.$78.6 million stemming from changes to our net working capital.
Investing Activities Net cash used in investing activities was $158.6$2.75 billion in 2018, compared to $81.3 million in 2017, compared2017. The $2.67 billion of additional investing cash flow spend was primarily due to $1.04 billion in 2016. During 2017, we spent $128.5 millionthe acquisition of Allied Building Products Corp. that closed on acquisitions compared to $1.02 billion in 2016. This decrease was partially offset by a $10.3 million increase in capital expenditures, which were $31.9 million in 2017 as compared to $21.6 million in 2016.January 2, 2018. Financing Activities Net cash provided by financing activities was $86.0 million$2.59 billion in 2017,2018, compared to $956.6$90.7 million used in 2016.financing activities in 2017. The net decreasefinancing cash flow increase of $870.6 million$2.68 billion was primarily due to the net increase in outstanding debt resulting from the new financing agreementsarrangements that we entered into in connection with the Allied Acquisition (see Note 8) as a result ofwell as the RSG acquisition$400.0 million in 2016, offset by repayments and payment of deferred financing costs. In addition,gross proceeds received from the issuance of commonconvertible preferred stock decreased by $10.2 million to $10.0 million in 2017, as compared to $20.2 million in 2016. This decrease is due to the additional stock option exercise activity that occurred in 2016 in relation to the RSG acquisition.(see Note 3). 42
Capital Resources We currently haveAs of March 31, 2018, we had access to the following financing arrangements:
an asset-based revolving line of credit in the United States; an asset-based revolving line of credit in Canada; two separate senior notes instruments Financing - Allied Acquisition In connection with the RSG acquisition on October 1, 2015,Allied Acquisition, we entered into various financing arrangements totaling $1.45 billion. These arrangements allowed us to refinance our existing debt and substantially pay off all the RSG debt at closing. Prior to the RSG acquisition, we had a credit facility with a syndicate of commercial banks that included a revolver and a long term note. As of the date of the RSG acquisition, approximately $185.6 million was outstanding on the long-term note payable and approximately $11.2 million was outstanding under the revolver. We entered into a “Senior Secured Credit Facility”, comprised of$3.57 billion, including an asset-based revolving line of credit of $1.30 billion (“2023 ABL”) of $700.0 million ($350.0, $525.0 million of which was drawn at closing)closing, and a new $450.0$970.0 million term loan (“2025 Term Loan”). We also raised an additional $300.0 million$1.30 billion through the issuance of senior notes (the “Senior“2025 Senior Notes”).
Asset-based LineThe proceeds from these financing arrangements were used to finance the Allied Acquisition, to refinance or otherwise extinguish all third-party indebtedness, to pay fees and expenses associated with the acquisition, and to provide working capital and funds for other general corporate purposes. We capitalized new debt issuance costs totaling approximately $67.7 million related to the 2023 ABL, the 2025 Term Loan and the 2025 Senior Notes.
Since the financing arrangements entered into in connection with the Allied Acquisition had certain lenders who also participated in our previous financing arrangements, portions of Credit (“ABL”)the transactions were accounted for as either a debt modification or a debt extinguishment. In accordance with the accounting for debt modification, we expensed $2.0 million of debt issuance costs related to the Allied financing arrangements and recognized a loss on debt extinguishment of $1.7 million. The remainder of the debt issuance costs will be amortized over the term of the Allied financing arrangements. 2023 ABL On October 1, 2015,January 2, 2018, we entered into a $700.0 million ABL$1.30 billion asset-based revolving line of credit with Wells Fargo Bank, N.A. and a syndicate of other lenders. ThisThe 2023 ABL consists of revolving loans in both the United States (“2023 U.S. Revolver”) in the amount of $670.0 million$1.20 billion and Canada (“2023 Canada Revolver”) in the amount of $30.0$100.0 million. The 2023 ABL has a maturity date of October 1, 2020. January 2, 2023. The U.S. Revolver2023 ABL has various borrowing tranches of borrowings, bearingwith an interest at rates ranging from 2.59% to 4.75%.rate based on a LIBOR rate (with a floor) plus a fixed spread. The effective rate of these borrowings is 3.28% and is paid monthly. As of June 30, 2017, the outstanding balance on the U.S. Revolver and Canada Revolvers, net of debt issuance fees, was $449.6 million. The U.S. Revolver also has outstanding standby letters of credit in the amount of $10.9 million as of June 30, 2017. Currentcurrent unused commitment fees on the revolving credit facilities2023 ABL are 0.25% per annum. There is one financial covenant under the 2023 ABL, which is a Consolidated Fixed Charge Ratio. The Consolidated Fixed Charge Ratio is calculated by dividing consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) by Consolidated Fixed Charges (as(both as defined in the agreement). Per the covenant, theour Consolidated Fixed Charge Ratio musthas to be a minimum of 1.00 at the end of each fiscal quarter, calculated on a trailing four quarter basis. The covenant2023 ABL is only applicable when the borrowing availability is less than 10%secured by a first priority lien over substantially all of our and each guarantor’s accounts, chattel paper, deposit accounts, books, records and inventory (as well as intangibles related thereto), subject to certain customary exceptions (the “ABL Priority Collateral”), and a second priority lien over substantially all of our and each guarantor’s other assets, including all of the maximum loan capequity interests of any subsidiary held by us or $60.0 million. any guarantor, subject to certain customary exceptions (the “Term Priority Collateral”). The 2023 ABL is guaranteed jointly, and severally, and fully and unconditionally by our active United States subsidiary.subsidiaries. As of March 31, 2018, the total balance outstanding on the 2023 ABL, net of $11.8 million of unamortized debt issuance costs, was $424.5 million. We also have outstanding standby letters of credit related to the 2023 U.S. Revolver in the amount of $14.8 million as of March 31, 2018. 2025 Term Loan On October 1, 2015,January 2, 2018, we entered into a $450.0$970.0 million Term Loan with Citibank N.A., and a syndicate of other lenders. The 2025 Term Loan requires quarterly principal payments in the amount of $1.1$2.4 million, with the remaining outstanding principal to be paid on its maturity date of October 1, 2022.January 2, 2025. The interest rate paid is based on a LIBOR rate (with a floor) plus a fixed spread. We have the option of selecting a LIBOR period that determines the rate at which interest can accrue on the Term Loan as well as the period in which interest payments are made. On September 16, 2016, we refinanced our43
The 2025 Term Loan is secured by a first priority lien on the Term Priority Collateral and lowereda second priority lien on the LIBOR floorABL Priority Collateral. Certain excluded assets will not be included in the Term Priority Collateral and the Revolving Priority Collateral. The Term Loan is guaranteed jointly, severally, fully and unconditionally by 25 basis points and lowered the spread by 25 basis points. As a result of the refinancing we wrote off $1.6 million of debt issuance costs in interest expense. our active United States subsidiaries. As of June 30, 2017March 31, 2018, the outstanding balance on the Term Loan, net of $38.1 million of unamortized debt issuance fees,costs, was $434.2$931.9 million. The Term Loan is guaranteed jointly and severally and fully and unconditionally by our active United States subsidiary.
2025 Senior Notes On October 25, 2017, Beacon Escrow Corporation, our wholly-owned subsidiary (the “Escrow Issuer”), completed a private offering of $1.30 billion aggregate principal amount of 4.875% Senior Notes due 2025 at an issue price of 100%. The 2025 Senior Notes bear interest at a rate of 4.875% per annum, payable semi-annually in arrears, beginning May 1, 2018. We anticipate repaying the 2025 Senior Notes at the maturity date of November 1, 2025. Per the terms of the Escrow Agreement, the net proceeds from the 2025 Senior Notes remained in escrow until they were used to fund a portion of the purchase price of the Allied Acquisition payable at closing on January 2, 2018. Upon closing of the Allied Acquisition on January 2, 2018, (i) the Escrow Issuer merged with and into us, and we assumed all obligations under the 2025 Senior Notes; and (ii) all our existing domestic subsidiaries (including the entities acquired in the Allied Acquisition) became guarantors of the 2025 Senior Notes. As of March 31, 2018, the outstanding balance on the 2025 Senior Notes, net of $21.3 million of debt issuance costs, was $1.28 billion. Financing - RSG Acquisition In connection with the RSG Acquisition, we entered into various financing arrangements totaling $1.45 billion, including an asset-based revolving line of credit (“2020 ABL”) of $700.0 million ($350.0 million of which was drawn at closing) and a $450.0 million term loan (“2022 Term Loan”). We also raised an additional $300.0 million through the issuance of senior notes (the “2023 Senior Notes”). The proceeds from these financing arrangements were used to provide working capital and funds for other general corporate purposes, to refinance or otherwise extinguish all third-party indebtedness, to finance the acquisition, and to pay fees and expenses associated with the RSG acquisition. We incurred debt issuance costs totaling approximately $31.3 million related to the 2020 ABL, 2022 Term Loan, and 2023 Senior Notes. 2020 ABL On October 1, 2015, we entered into a $700.0 million asset-based revolving line of credit with Wells Fargo Bank, N.A. and a syndicate of other lenders. The 2020 ABL had an original maturity date of October 1, 2022 and consisted of revolving loans in both the United States (“2020 U.S. Revolver”) in the amount of $670.0 million and Canada (“Canada Revolver”) in the amount of $30.0 million. The 2020 ABL had various borrowing tranches with an interest rate based on a LIBOR rate (with a floor) plus a fixed spread. The full balance of the 2020 ABL was paid on January 2, 2018 in conjunction with the Allied Acquisition. 2022 Term Loan On October 1, 2015, we entered into a $450.0 million Term Loan with Citibank N.A., and a syndicate of other lenders. The 2022 Term Loan required quarterly principal payments in the amount of $1.1 million, with the remaining outstanding principal to be paid on its original maturity date of October 1, 2022. The interest rate was based on a LIBOR rate (with a floor) plus a fixed spread. We had the option of selecting a LIBOR period that determines the rate at which interest would accrue, as well as the period in which interest payments are made. The full balance of the 2022 Term Loan was paid on January 2, 2018 in conjunction with the Allied Acquisition, including the write-off of $0.7 million in debt issuance costs. 2023 Senior Notes which mature on On October 1, 2015, we raised $300.0 million by issuing senior notes due 2023. These notes bear interest at theThe 2023 Senior Notes have a coupon rate of 6.38% per year,annum and are payable semi-annually in arrears, on April 1 and October 1 of each year, beginning April 1, 2016. There are early payment provisions in the Senior Note indenture in which we would be subject to “make whole” provisions. Management anticipatesWe anticipate repaying the notes at the maturity date of October 1, 2023. As of June 30, 2017 the outstanding balance on the Senior Notes, net of debt issuance fees, was $292.0 million. The 2023 Senior Notes are guaranteed jointly, and severally, and fully and unconditionally by our active United States subsidiary.subsidiaries. As of March 31, 2018, the outstanding balance on the 2023 Senior Notes, net of $7.0 million of unamortized debt issuance costs, was $293.0 million. 44
Equipment Financing Facilities and Other As of June 30, 2017,March 31, 2018 , we had $16.7$13.3 million outstanding under equipment financing facilities, with fixed interest rates ranging from 2.33% to 3.25% and payments due through September 2021. As of June 30, 2017,March 31, 2018 , we had $21.0$14.9 million of capital lease obligations outstanding. These leases have interest rates ranging from 2.72% to 10.39% with payments due through November 2021. 45
Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995 Our disclosure and analysis in this report contains forward-looking information 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. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. 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, 2016. 2017.46
Item 3. | Quantitative and QualitativeQualitative Disclosures about Market Risk |
The Company’sOur market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of its 20162017 Annual Report on Form 10-K have not changed materially during the ninesix month period ended June 30, 2017.March 31, 2018.
Item 4. | Controls and Procedures |
As of June 30, 2017,March 31, 2018, 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 “Act”)). Based on that evaluation, management, including the CEO and CFO, concluded that as of June 30, 2017,March 31, 2018, 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 Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and to ensure that information required to be disclosed by us in the reports that we file or submit under the 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 generally accepted in the United States. Based on On January 2, 2018, we completed our acquisition of Allied Building Products Corp. and an affiliated entity ("Allied"). In conducting our assessment of the most recent evaluation,effectiveness of our internal controls over financial reporting during the quarter, management has elected to exclude Allied from our controls assessment for the remainder of fiscal year 2018, as permitted under existing SEC staff guidance. We are currently in the process of integrating and assessing Allied’s historical internal controls over financial reporting with those of the rest of the Company. The integration may lead to changes in future periods, but we have concluded thatdo not expect these changes to materially affect our internal controls over financial reporting. Including the Allied acquisition, there has been no significant change into our internal control over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II. OTHER INFORMATION | | | Incorporated by Reference | Exhibit Number | | Description | | Form | | File No. | | Exhibit | | Filing Date | | | | | | | | | | | | 3.1 | | Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock of Beacon Roofing Supply, Inc. | | Form 8-K | | 000-50924 | | 3.1 | | January 5, 2018 | | | | | | | | | | | | 4.1 | | Indenture, dated as of October 25, 2017, between Beacon Escrow Corporation and U.S. Bank National Association, as trustee. | | Form 8-K | | 000-50924 | | 4.1 | | October 26, 2017 | | | | | | | | | | | | 4.2 | | Form of 4.875% Senior Notes due 2025 (included as Exhibit A to the Indenture incorporated by reference as Exhibit 4.1). | | Form 8-K | | 000-50924 | | 4.2 | | October 26, 2017 | | | | | | | | | | | | 4.3 | | Supplemental Indenture, dated as of January 2, 2018, to the Indenture dated as of October 25, 2017, by and among Beacon Roofing Supply, Inc., certain direct and indirect subsidiaries of Beacon, as subsidiary guarantors, and U.S. Bank National Association, as trustee. | | Form 8-K | | 000-50924 | | 4.2 | | January 5, 2018 | | | | | | | | | | | | 4.4 | | Second Supplemental Indenture, dated as of January 2, 2018, to the Indenture dated as of October 1, 2015, by and among Beacon Roofing Supply, Inc., certain direct and indirect subsidiaries of Beacon, as additional subsidiary guarantors, and U.S. Bank National Association, as trustee. | | Form 8-K | | 000-50924 | | 4.3 | | January 5, 2018 | | | | | | | | | | | | 10.1 | | Term Loan Credit Agreement, dated as of January 2, 2018, by and among Beacon Roofing Supply, Inc., Citibank N.A., as administrative agent, and the lenders and financial institutions party thereto. | | Form 8-K | | 000-50924 | | 10.1 | | January 5, 2018 | | | | | | | | | | | | 10.2 | | Amended and Restated Credit Agreement, dated as of January 2, 2018, by and among Beacon Roofing Supply, Inc., Wells Fargo Bank, National Association, as administrative agent, and the US borrowers, Canadian borrower, lenders and financial institutions party thereto. | | Form 8-K | | 000-50924 | | 10.2 | | January 5, 2018 | | | | | | | | | | | | 10.3 | | Registration Rights Agreement, dated as of January 2, 2018, by and between Beacon Roofing Supply, Inc. and CD&R Boulder Holdings, L.P. | | Form 8-K | | 000-50924 | | 10.4 | | January 5, 2018 | | | | | | | | | | | | 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 XBRL Instance | | | | | | | | | | | | | | | | | | | | | | 101.SCH XBRL Taxonomy Extension Schema | | | | | | | | | | | 101.CAL XBRL Taxonomy Extension Calculation | | | | | | | | | | | 101.LAB XBRL Taxonomy Extension Labels | | | | | | | | | | | 101.CAL XBRL Taxonomy Extension Calculation | | | | | | | | | | | 101.PRE XBRL Taxonomy Extension Presentation | | | | | | | | | | | 101.LAB XBRL Taxonomy Extension Labels | | | | | | | | | | | 101.DEF XBRL Taxonomy Extension Definition | | | | | | | | | | | | | | | | | | | |
+ | | | | | | | | | | | | | | | | | | | Incorporated by Reference
| | Exhibit
Number
| | Description
| | Form
| | File No.
| | Exhibit | | | Filing Date | | | | | | | | 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 XBRL Instance | | | | | | | | | | | | | | | | | | | | | 101.SCH XBRL Taxonomy Extension Schema
| | | | | | | | | | | | | | | | | | | | | 101.CAL XBRL Taxonomy Extension Calculation
| | | | | | | | | | | | | | | | | | | | | 101.LAB XBRL Taxonomy Extension Labels
| | | | | | | | | | | | | | | | | | | | | 101.PRE XBRL Taxonomy Extension Presentation
| | | | | | | | | | | | | | | | | | | | | 101.DEF XBRL Taxonomy Extension Definition
| | | | | | | | | | | | |
+ | Management contract or compensatory plan/arrangement |
48
Pursuant to Rule 405 of Regulation S-T, the following interactive data files formatted in Extensible Business Reporting Language (XBRL) are attached as Exhibit 101 to this Quarterly Report on Form 10-Q: (i) the Consolidated Balance Sheets as of JuneMarch 31, 2018; September 30, 2017; September 30, 2016; and June 30, 2016,March 31, 2017, (ii) the Consolidated Statements of Operations for the three and ninesix months ended June 30,March 31, 2018and March 31, 2017, and June 30, 2016, (iii) the Consolidated Statements of Comprehensive Income for the three and ninesix months ended June 30,March 31, 2018and March 31, 2017, and June 30, 2016, (iv) the Consolidated Statements of Cash Flows for the ninesix months ended June 30,March 31, 2018and March 31, 2017, and June 30, 2016, and (v) the Notes to Condensed Consolidated Financial Statements. 49
SIGNATURESIGNATURE
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: August 3, 2017May 9, 2018 | | BY: | | /s/ JOSEPH M. NOWICKI | | | | | Joseph M. Nowicki | | | | | Executive Vice President & Chief Financial Officer |
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