May 3, 2023
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Trade & Services
100 F St. NE
Washington, DC 20549
Attn: Blaise Rhodes
Rufus Decker
Re: Beacon Roofing Supply, Inc.
Form 10-K for Fiscal Year Ended December 31, 2022
Filed February 24, 2023
File No. 000-50924
Dear Mr. Rhodes and Mr. Decker:
Beacon Roofing Supply, Inc. (the “Company”) respectfully submits these responses to comments submitted by the staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission in its April 19, 2023 letter regarding the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Form 10-K”). The Staff’s initial numbered comments can be found in bold italicized text below, and are, in each case, followed by the Company’s response.
Form 10-K for Fiscal Year Ended December 31, 2022
Consolidated Financial Statements
Consolidated Balance Sheets, page 44
1.Please tell us with quantification the significant components of accrued expenses as of each balance sheet date. Also, separately disclose any components that exceed the thresholds of Rule 5-02.20 of Regulation S-X.
505 Huntmar Park Dr., Ste. 300, Herndon, VA 20170 | 571-323-3939
becn.com
Response: The following table sets forth, with quantification, the significant components of accrued expenses as of each balance sheet date contained in the Form10-K (in millions):
| December 31, | September 30, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Inventory | $ | 106.9 | * | $ 211.1 | * | |||||||||
| Customer rebates | 112.8 | * | 63.9 | |||||||||||
| Payroll and employee benefit costs | 118.6 | * | 135.7 | * | ||||||||||
| Selling, general and administrative | 96.0 | * | 77.0 | * | ||||||||||
| Income taxes | 7.8 | 37.4 | ||||||||||||
| Interest and other | 5.9 | 21.6 | ||||||||||||
| Total accrued expenses | $ | 448.0 | $ 546.7 | |||||||||||
* Exceeds threshold of Rule 5-02.20 | |||||||||||||||||
The Company will include a note to the financial statements in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which we expect to file on May 5, 2023, disclosing the components of accrued expenses, including those that exceed the thresholds set forth in Rule 5-02.20 of Regulation S-X, as follows:
The following table summarizes the significant components of accrued expenses (in millions):
| March 31, | December 31, | March 31, | |||||||||||||||
| 2023 | 2022 | 2022 | |||||||||||||||
| Inventory | $ | 108.8 | $ | 106.9 | $ | 198.0 | |||||||||||
| Customer rebates | 35.8 | 112.8 | 31.0 | ||||||||||||||
| Payroll and employee benefit costs | 47.6 | 118.6 | 65.3 | ||||||||||||||
| Selling, general and administrative | 101.7 | 96.0 | 72.8 | ||||||||||||||
| Income taxes | 1.3 | 7.8 | 31.9 | ||||||||||||||
| Interest and other | 11.2 | 5.9 | 11.8 | ||||||||||||||
| Total accrued expenses | $ | 306.4 | $ | 448.0 | $ | 410.8 | |||||||||||
The Company will use similar note disclosure in its future Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. If any component accumulated under the caption “Interest and other” exceeds the 5% threshold in future periods, such component will be presented separately.
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Consolidated Statements of Operations, page 45
2.Please tell us your basis in GAAP for presenting net income (loss) attributable to common stockholders without reduction for undistributed earnings attributable to participating preferred stock. Refer to ASC 260-10-45-60 through 45-60B, ASC 260-10-45-65 through 45-66 and ASC 260-10-55-73.
Response: The Company presented net income (loss) attributable to common stockholders without reduction for undistributed earnings attributable to participating preferred stock on the face of its consolidated statements of operations on the basis of Topic 6.B. of the Codification of Staff Accounting Bulletins. The relevant language of the Topic states that “The amount to be reported should be computed for each period as net income or loss less … dividends on preferred stock ….” There is no reference to adjustment for undistributed earnings, even though participation features are not uncommon in preferred stocks. We believe the note titled “Net Income (Loss) Per Share” and resulting earnings per share data set forth on the face of the consolidated statements of operations are compliant with the cited ASC provisions. However, in order to enhance the clarity of the presentation, the Company will, beginning with its upcoming Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, present net income (loss) attributable to common stockholders reduced by both preferred stock dividends and undistributed earnings attributable to participating preferred stock on the face of the consolidated statements of operations.
Below is the proposed presentation for the Quarterly Report on Form 10-Q, which we expect to file on May 5, 2023.
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BEACON ROOFING SUPPLY, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net sales | $ | 1,732.3 | $ | 1,686.9 | |||||||
| Cost of products sold | 1,290.4 | 1,247.4 | |||||||||
| Gross profit | 441.9 | 439.5 | |||||||||
| Operating expense: | |||||||||||
| Selling, general and administrative | 338.3 | 309.3 | |||||||||
| Depreciation | 20.7 | 17.5 | |||||||||
| Amortization | 22.3 | 21.4 | |||||||||
| Total operating expense | 381.3 | 348.2 | |||||||||
| Income (loss) from operations | 60.6 | 91.3 | |||||||||
| Interest expense, financing costs and other, net | 27.8 | 16.6 | |||||||||
| Income (loss) before provision for income taxes | 32.8 | 74.7 | |||||||||
| Provision for (benefit from) income taxes | 8.0 | 18.9 | |||||||||
| Net income (loss) | $ | 24.8 | $ | 55.8 | |||||||
| Reconciliation of net income (loss) to net income (loss) attributable to common stockholders: | |||||||||||
| Net income (loss) | $ | 24.8 | $ | 55.8 | |||||||
| Dividends on Preferred Stock | (6.0) | (6.0) | |||||||||
| Undistributed income allocated to participating securities | (2.5) | (6.1) | |||||||||
| Net income (loss) attributable to common stockholders | $ | 16.3 | $ | 43.7 | |||||||
| Weighted-average common stock outstanding: | |||||||||||
| Basic | 64.3 | 70.1 | |||||||||
| Diluted | 65.6 | 71.3 | |||||||||
| Net income (loss) per share: | |||||||||||
| Basic | $ | 0.25 | $ | 0.62 | |||||||
| Diluted | $ | 0.25 | $ | 0.61 | |||||||
See accompanying Notes to Condensed Consolidated Financial Statements
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Should the Staff have any questions in advance of providing further written correspondence to address the Company’s responses, please contact me or our Chief Accounting Officer, Sam Guzman, at 703-431-0963.
We appreciate the opportunity to work with the Staff to continue to enhance our financial statement presentation and disclosures.
| Sincerely, | |||||
| /s/ FRANK A. LONEGRO | |||||
| Frank A. Lonegro | |||||
Executive Vice President & Chief Financial Officer | |||||
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