Sales and Earnings Per Share
Increase 87% and 78% in the Second Quarter of 2006 for Beacon Roofing Supply
PEABODY, Mass.—(BUSINESS WIRE)—May 10, 2006—Beacon Roofing Supply, Inc. (Nasdaq: BECN) (the “Company”) announced today record performance for its fiscal 2006 second-quarter and year-to-date periods ended March 31, 2006.
Second Quarter
Sales increased 87.3% to a record $322.4 million in the second quarter of fiscal 2006 (“2006”) from $172.1 million in the second quarter of fiscal 2005 (“2005”), reflecting robust internal growth of 24.1%, with strong sales in all three major product lines: residential roofing, non-residential roofing and complementary building products. Shelter Distribution (“Shelter”), acquired in mid-October 2005, along with the other companies acquired since the second quarter of 2005, contributed the remaining sales increase. The Company also opened nine new branches since last year’s second quarter.
Gross profit increased 87.9% to $77.8 million in 2006 from $41.4 million in 2005. Gross margin increased slightly from 24.0% to 24.1%, helped by a 24.3% gross margin from the acquired companies. The Company’s gross margin in existing markets was unchanged at 24.0%. Existing markets exclude branches acquired in the year prior to the start of the reporting period.
Operating expenses increased $29.5 million, or 82.2%, in 2006 compared to 2005, reflecting increases of $26.8 million from the acquired companies and $2.7 million, or an increase of 7.6%, in existing markets. The existing market increase was primarily due to higher payroll costs and other expenses associated with the sales volume increase, partially offset by lower insurance claim costs and lower professional fees. As a percentage of net sales, overall operating expenses fell to 20.3% in 2006 from 20.8% in 2005 primarily due to the leveraging of fixed costs over the higher sales volume. The operating expense rate in existing markets declined to 18.1% from 20.8%, also mostly as a result of the leveraging of fixed costs over the higher sales volume.
Operating income increased 125.6% to a record $12.4 million in 2006 from $5.5 million in 2005. As a percentage of net sales, operating income increased to 3.8% from 3.2%, reflecting the lower expense rate. Due to the higher sales, stable gross margin and lower expense rate discussed above, existing market operating margin rose to 6.0% from 3.2%.
Interest expense increased $3.1 million to $4.3 million in 2006 due to higher borrowings (utilized to finance our acquisitions) and higher interest rates, partially offset by the benefit from the successful public sale of two million shares of our common stock in December 2005. In connection with the acquisitions in January 2006, the Company and its lenders amended the Company’s revolving lines of credit and term loans to, among other things, increase the revolving lines of credit and term loans to totals of $280 and $90 million, respectively. The net proceeds from the December public offering totaled $51.6 million, which were used to pay down our revolver borrowings.
The Company achieved record second-quarter net income of $4.8 million in 2006 compared to net income of $2.4 million in 2005, an increase of 97.5%. The Company has estimated an annual income tax rate of 40.5% for fiscal 2006 compared to the rate of 43.6% provided for in last year’s second quarter. The annual fiscal 2005 income tax rate was 40.0%.
Diluted net income per share for the second quarter was $0.16 in 2006 compared to $0.09 per share in 2005, a 77.8% increase.
Year-to-Date
Year-to-date (first-half) sales increased 78.4% to a record $662.3 million in 2006 from $371.3 million in 2005, reflecting internal growth of 19.1%, with strong sales in all three major product lines. The acquired companies contributed the remaining sales increase. The Company also opened nine new branches since last year’s first half.
Gross profit increased 76.1% to $161.5 million in 2006 from $91.7 million in 2005. Gross margin declined from 24.7% to 24.4% due to a lower gross margin from the acquired companies. However, the Company’s gross margin in existing markets was unchanged at 25.5%.
Operating expenses increased $54.5 million, or 79.1%, in 2006 compared to 2005, reflecting increases of $48.9 million from our acquired companies and $5.6 million, or an increase of 8.6%, in existing markets. The existing market increase was primarily due to higher payroll costs and other expenses associated with the sales volume increase. As a percentage of net sales, overall operating expenses were unchanged at 18.6%. The operating expense rate in existing markets declined to 17.3% from 19.0%, mostly as a result of the leveraging of fixed costs over the higher sales volume.
Operating income increased 66.9% to a record $38.1 million in 2006 from $22.8 million in 2005. As a percentage of net sales, operating income declined to 5.7% from 6.1%, reflecting a higher overall expense rate from the acquired companies, mostly at Shelter. Due to the higher sales, stable gross margin and lower expense rate discussed above, existing market operating margin rose to 8.2% from 6.5%.
Interest expense increased $6.2 million to $8.3 million in 2006 due to higher borrowings and higher interest rates, partially offset by the benefit from the sale of common stock mentioned above.
The Company achieved record first-half net income of $17.7 million in 2006 compared to net income of $11.2 million in 2005, an increase of 58.5%. Net income in 2005 included a $0.9 million charge for the early of retirement of debt. The Company has estimated an annual income tax rate of 40.5% for fiscal 2006 compared to the rate of 43.7% provided for in last year’s first half.
Diluted net income per share for the first half was $0.61 in 2006 compared to $0.41 per share in 2005, an increase of 48.8%.
Cash flow from operations was $35.7 million in the first half of 2006 compared to $2.8 million in 2005. The Company used a portion of its 2006 cash from operations to increase inventories by $32.8 million, exclusive of the effects of businesses acquired, in anticipation of a continued strong sales growth rate.
Robert Buck, the Company’s President & Chief Executive Officer, stated, “Our second quarter year-over-year performance was even stronger than what we achieved in our first quarter. Historically, our second quarter has been our lowest sales quarter and we have typically incurred net losses. Although we believe our sales benefited somewhat from the milder East Coast weather and Gulf Coast rebuilding, each of our regions performed very well. In addition, our overall expense performance was encouraging. We continue to work on the integration of our recent acquisitions while we look for further opportunistic acquisitions such as the ones we completed in the second quarter. We also know that our continued success is dependent upon having the most talented people working in a highly motivating environment, and we are focused on that goal throughout the year.”
Beacon Roofing Supply will be holding its investor conference call today, May 10, 2006, at 11:00 a.m. Eastern Time. The dial-in-number is 866.770.7129 (participant passcode 48654296). Please call five to ten minutes prior to the scheduled start time to assure timely access to the call.
About Beacon Roofing Supply Inc.:
Beacon Roofing Supply, Inc. is a leading distributor of roofing materials and complementary building products operating 148 branches in 30 states and in Eastern Canada.
Forward-Looking Statements:
This release contains information about management’s view of the Company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, those set forth in the “Risk Factors” section of the Company’s latest Form 10-K. In addition, the forward-looking statements included in this press release represent the Company’s views as of the date of this press release and these views could change. However, while the Company may elect to update these forward- looking statements at some point, the Company specifically disclaims any obligation to do so other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this press release.
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Operations (Unaudited)
|
| Three Months Ended |
| |||||||||||
|
| March 31, |
| March 31, |
| |||||||||
(Dollars in thousands, except per share data) |
|
|
| 2006 |
| % of Sales |
| 2005 |
| % of Sales |
| |||
Net sales |
| $ | 322,396 |
| 100.0 | % | $ | 172,116 |
| 100.0 | % | |||
Cost of products sold |
| 244,637 |
| 75.9 | % | 130,746 |
| 76.0 | % | |||||
Gross profit |
| 77,759 |
| 24.1 | % | 41,370 |
| 24.0 | % | |||||
Operating expenses (include stock-based compensation expense of $735 and $172 for the three months ended in 2006 and 2005, respectively) |
| 65,403 |
| 20.3 | % | 35,894 |
| 20.9 | % | |||||
Income from operations |
| 12,356 |
| 3.8 | % | 5,476 |
| 3.2 | % | |||||
Other expenses: |
|
|
|
|
|
|
|
|
| |||||
Interest expense |
| 4,294 |
| 1.3 | % | 1,185 |
| 0.7 | % | |||||
Income before income taxes |
| 8,062 |
| 2.5 | % | 4,291 |
| 2.5 | % | |||||
Income taxes |
| 3,286 |
| 0.9 | % | 1,873 |
| 1.1 | % | |||||
|
|
|
|
|
|
|
|
|
| |||||
Net income |
| $ | 4,776 |
| 1.5 | % | $ | 2,418 |
| 1.4 | % | |||
|
|
|
|
|
|
|
|
|
| |||||
Net income per share: |
|
|
|
|
|
|
|
|
| |||||
Basic |
| $ | 0.16 |
| $ | 0.09 |
|
|
|
|
| |||
Diluted |
| $ | 0.16 |
| $ | 0.09 |
|
|
|
|
| |||
Weighted average shares used in computing net income per share: |
|
|
|
|
|
|
|
|
| |||||
Basic |
| 29,053,876 |
| 26,384,001 |
|
|
|
|
| |||||
Diluted |
| 29,873,185 |
| 27,344,123 |
|
|
|
|
| |||||
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Operations (Unaudited)
|
| Six Months Ended |
| |||||||||
(Dollars in thousands, except per share data) |
| March 31, |
| March 31, |
| |||||||
|
| 2006 |
| % of Sales |
| 2005 |
| % of Sales |
| |||
Net sales |
| $ | 662,282 |
| 100.0 | % | $ | 371,306 |
| 100.0 | % | |
Cost of products sold |
| 500,815 |
| 75.6 | % | 279,590 |
| 75.3 | % | |||
Gross profit |
| 161,467 |
| 24.4 | % | 91,716 |
| 24.7 | % | |||
Operating expenses (include stock-based compensation expense of $1,333 and $346 for the six months ended in 2006 and 2005, respectively) |
| 123,399 |
| 18.6 | % | 68,907 |
| 18.6 | % | |||
Income from operations |
| 38,068 |
| 5.7 | % | 22,809 |
| 6.1 | % | |||
Other expenses: |
|
|
|
|
|
|
|
|
| |||
Interest expense |
| 8,312 |
| 1.3 | % | 2,077 |
| 0.6 | % | |||
Loss on early retirement of debt |
| — |
| — |
| 915 |
| 0.2 | % | |||
Income before income taxes |
| 29,756 |
| 4.5 | % | 19,817 |
| 5.3 | % | |||
Income taxes |
| 12,071 |
| 1.7 | % | 8,656 |
| 2.3 | % | |||
|
|
|
|
|
|
|
|
|
| |||
Net income |
| $ | 17,685 |
| 2.7 | % | $ | 11,161 |
| 3.0 | % | |
Net income per share: |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | 0.63 |
| $ | 0.42 |
|
|
|
|
| |
Diluted |
| $ | 0.61 |
| $ | 0.41 |
|
|
|
|
| |
Weighted average shares used in computing net income per share: |
|
|
|
|
|
|
|
|
| |||
Basic |
| 28,011,772 |
| 26,371,317 |
|
|
|
|
| |||
Diluted |
| 28,924,347 |
| 27,323,528 |
|
|
|
|
| |||
BEACON ROOFING SUPPLY, INC.
Condensed Consolidated Balance Sheets
|
| March 31, |
| March 31, |
| September 24, |
| |||||
(Dollars in thousands) |
|
|
| 2006 |
| 2005 |
| 2005 |
| |||
|
| (Unaudited) |
| (Unaudited) |
|
|
| |||||
Assets |
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
| |||||
Cash |
| $ | — |
| $ | 5,886 |
| $ | — |
| ||
Accounts receivable, net |
| 160,807 |
| 91,117 |
| 123,345 |
| |||||
Inventories |
| 178,494 |
| 95,980 |
| 82,423 |
| |||||
Prepaid expenses and other assets |
| 35,346 |
| 19,135 |
| 22,656 |
| |||||
Deferred income taxes |
| 10,983 |
| 3,227 |
| 4,339 |
| |||||
Total current assets |
| 385,630 |
| 215,345 |
| 232,763 |
| |||||
Property and equipment, net |
| 52,862 |
| 29,392 |
| 31,767 |
| |||||
Goodwill, net |
| 258,445 |
| 104,375 |
| 108,553 |
| |||||
Other assets, net |
| 61,298 |
| 12,988 |
| 13,904 |
| |||||
|
|
|
|
|
|
|
| |||||
Total assets |
| $ | 758,235 |
| $ | 362,100 |
| $ | 386,987 |
| ||
Liabilities and stockholders’ equity |
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
| |||||
Cash overdraft |
| $ | 1,257 |
| $ | — |
| $ | 6,107 |
| ||
Borrowings under revolving lines of credit |
| — |
| 67,859 |
| — |
| |||||
Accounts payable |
| 135,789 |
| 74,197 |
| 70,158 |
| |||||
Accrued expenses |
| 48,467 |
| 29,320 |
| 29,146 |
| |||||
Current portions of long-term debt and capital lease obligations |
| 28,370 |
| 6,161 |
| 6,348 |
| |||||
Total current liabilities |
| 213,883 |
| 177,537 |
| 111,759 |
| |||||
Borrowings under revolving lines of credit |
| 208,605 |
| — |
| 63,769 |
| |||||
Senior notes payable and other obligations, net of current portion |
| 52,453 |
| 20,990 |
| 20,156 |
| |||||
Deferred income taxes |
| 20,473 |
| 9,045 |
| 10,890 |
| |||||
Long-term obligations under capital leases and other, net of current portion |
| 7,057 |
| 814 |
| 1,668 |
| |||||
Stockholders’ equity: |
|
|
|
|
|
|
| |||||
Common stock |
| 294 |
| 266 |
| 269 |
| |||||
Additional paid-in capital |
| 201,368 |
| 140,135 |
| 142,173 |
| |||||
Deferred compensation |
| — |
| (344 | ) | — |
| |||||
Treasury stock |
| (515 | ) | (515 | ) | (515 | ) | |||||
Retained earnings |
| 49,735 |
| 10,295 |
| 32,050 |
| |||||
Accumulated other comprehensive income |
| 4,882 |
| 3,877 |
| 4,768 |
| |||||
Total stockholders’ equity |
| 255,764 |
| 153,714 |
| 178,745 |
| |||||
|
|
|
|
|
|
|
| |||||
Total liabilities and stockholders’ equity |
| $ | 758,235 |
| $ | 362,100 |
| $ | 386,987 |
| ||
BEACON ROOFING SUPPLY, INC.
Condensed Consolidated Cash Flows (Unaudited)
|
| Six Months Ended |
| ||||||
(Dollars In thousands) |
|
|
| 2006 |
| 2005 |
| ||
Operating activities: |
|
|
|
|
| ||||
Net income |
| $ | 17,685 |
| $ | 11,161 |
| ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||||
Depreciation and amortization |
| 10,816 |
| 3,940 |
| ||||
Stock-based compensation |
| 1,333 |
| 346 |
| ||||
Loss on early retirement of debt |
| — |
| 915 |
| ||||
Unrealized gain on interest rate collar |
| (286 | ) | — |
| ||||
Deferred income taxes |
| 289 |
| 232 |
| ||||
Changes in assets and liabilities, net |
|
|
|
|
| ||||
of the effects of businesses acquired: |
|
|
|
|
| ||||
Accounts receivable |
| 24,099 |
| 14,195 |
| ||||
Inventories |
| (32,768 | ) | (20,441 | ) | ||||
Prepaid expenses and other assets |
| (1,130 | ) | (811 | ) | ||||
Accounts payable and accrued expenses |
| 15,666 |
| (6,738 | ) | ||||
Net cash provided by operating activities |
| 35,704 |
| 2,799 |
| ||||
Investing activities: |
|
|
|
|
| ||||
Purchases of property and equipment, net of sales proceeds |
| (4,160 | ) | (4,791 | ) | ||||
Acquisition of businesses, net of cash acquired |
| (279,588 | ) | (30,334 | ) | ||||
Net cash used in investing activities |
| (283,748 | ) | (35,125 | ) | ||||
Financing activities: |
|
|
|
|
| ||||
Borrowings under revolving lines of credit |
| 144,825 |
| 22,994 |
| ||||
Borrowings (repayments) under senior notes payable, and other |
| 52,295 |
| (1,791 | ) | ||||
Repurchase of warrants |
| — |
| (34,335 | ) | ||||
Repayments of junior subordinated notes |
| — |
| (17,986 | ) | ||||
Repayments of subordinated notes payable to related parties |
| — |
| (29,442 | ) | ||||
Proceeds from exercises of options |
| 1,421 |
| — |
| ||||
Net proceeds from sale of common stock |
| 51,576 |
| 102,833 |
| ||||
Income tax benefit from stock-based compensation deductions in excess of recognized compensation cost |
| 4,890 |
| — |
| ||||
Deferred financing costs |
| (2,167 | ) | (342 | ) | ||||
Net cash provided by financing activities |
| 252,840 |
| 41,931 |
| ||||
Effect of exchange rate changes on cash |
| 54 |
| (25 | ) | ||||
Net increase in cash |
| 4,850 |
| 9,580 |
| ||||
Cash (overdraft) at beginning of year |
| (6,107 | ) | (3,694 | ) | ||||
|
|
|
|
|
| ||||
Cash (overdraft) at end of period |
| $ | (1,257) |
| $ | 5,886 |
| ||
Non-cash transactions: |
|
|
|
|
| ||||
Capital lease additions |
| $ | 3,518 |
| $ | — |
| ||
BEACON ROOFING SUPPLY, INC
Consolidated Sales by Product Line
|
| For the Three Months Ended |
| |||||||||||||||
|
|
|
| March 31, 2006 |
| March 31, 2005 |
|
|
|
|
| |||||||
(dollars in millions) |
|
|
| Net Sales |
| Mix% |
| Net Sales |
| Mix% |
| Growth |
| |||||
Residential roofing products |
| $ | 155.3 |
| 48.2 | % | $ | 71.0 |
| 41.2 | % | $ | 84.3 |
| 118.7 | % | ||
Non-residential roofing products |
| 100.8 |
| 31.3 | % | 57.1 |
| 34.2 | % | 43.7 |
| 76.5 | % | |||||
Complementary building products |
| 66.3 |
| 20.6 | % | 44.0 |
| 24.6 | % | 22.3 |
| 50.7 | % | |||||
|
| $ | 322.4 |
| 100.0 | % | $ | 172.1 |
| 100.0 | % | $ | 150.3 |
| 87.3 | % | ||
Consolidated Sales by Product Line for Existing Markets(a)
|
| For the Three Months Ended |
| |||||||||||||||||
|
| �� |
| March 31, 2006 |
| March 31, 2005 |
|
|
|
|
| |||||||||
(dollars in millions) |
|
|
| Net Sales |
| Mix% |
| Net Sales |
| Mix% |
| Growth |
| |||||||
Residential roofing products |
| $ | 95.8 |
| 44.8% |
| $ | 71.0 |
| 41.2 | % | $ | 24.8 |
| 34.9 | % | ||||
Non-residential roofing products |
| 65.5 |
| 30.7 | % | 57.1 |
| 33.2 | % | 8.4 |
| 14.7 | % | |||||||
Complementary building products |
| 52.3 |
| 24.5 | % | 44.0 |
| 25.6 | % | 8.3 |
| 18.9 | % | |||||||
|
| $ | 213.6 |
| 100.0 | % | $ | 172.1 |
| 100.0 | % | $ | 41.5 |
| 24.1 | % | ||||
(a) Excludes branches from markets acquired since the beginning of the second quarter of fiscal 2005.
Consolidated Sales by Product Line
|
| For the Six Months Ended |
| |||||||||||||||
|
| March 31, 2006 |
| March 31, 2005 |
|
|
|
|
| |||||||||
(dollars in millions) |
|
|
| Net Sales |
| Mix% |
| Net Sales |
| Mix% |
| Growth |
| |||||
Residential roofing products |
| $ | 317.6 |
| 48.0 | % | $ | 151.8 |
| 40.9 | % | $ | 165.8 |
| 109.2 | % | ||
Non-residential roofing products |
| 199.0 |
| 30.0 | % | 129.2 |
| 34.8 | % | 69.8 |
| 54.0 | % | |||||
Complementary building products |
| 145.7 |
| 22.0 | % | 90.3 |
| 24.3 | % | 55.4 |
| 61.4 | % | |||||
|
| $ | 662.3 |
| 100.0 | % | $ | 371.3 |
| 100.0 | % | $ | 291.0 |
| 78.4 | % | ||
Consolidated Sales by Product Line for Existing Markets(b)
|
| For the Six Months Ended |
| |||||||||||||||
|
|
|
| March 31, 2006 |
| March 31, 2005 |
|
|
|
|
| |||||||
(dollars in millions) |
|
|
| Net Sales |
| Mix% |
| Net Sales |
| Mix% |
| Growth |
| |||||
Residential roofing products |
| $ | 167.9 |
| 41.4 | % | $ | 134.7 |
| 39.6 | % | $ | 33.2 |
| 24.6 | % | ||
Non-residential roofing products |
| 141.9 |
| 35.0 | % | 123.3 |
| 36.2 | % | 18.6 |
| 15.1 | % | |||||
Complementary building products |
| 95.6 |
| 23.6 | % | 82.4 |
| 24.2 | % | 13.2 |
| 16.0 | % | |||||
|
| $ | 405.4 |
| 100.0 | % | $ | 340.4 |
| 100.0 | % | $ | 65.0 |
| 19.1 | % | ||
(b) Excludes branches from markets acquired during fiscal 2006 and 2005.
CONTACT: Beacon Roofing Supply, Inc. Dave Grace, CFO, 978-535-7668 x14