Exhibit 99.2
BEACON ROOFING SUPPLY, INC.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
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December 31, 2015 | September 30, 2015 | December 31, 2014 | ||||||||||
(unaudited) | (audited) | (unaudited) | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 32,210 | $ | 45,661 | $ | 23,337 | ||||||
Accounts receivable, less allowance of $8,871, $6,298 and $8,138 at December 31, 2015, September 30, 2015 and December 31, 2014, respectively | 489,172 | 399,732 | 269,383 | |||||||||
Inventories, net | 466,063 | 320,999 | 314,670 | |||||||||
Prepaid expenses and other current assets | 150,384 | 97,928 | 76,975 | |||||||||
Deferred income taxes | 31,938 | 2,309 | 14,629 | |||||||||
Total current assets | 1,169,767 | 866,629 | 698,994 | |||||||||
Property and equipment, net | 145,607 | 90,405 | 88,303 | |||||||||
Goodwill | 1,162,111 | 496,415 | 489,325 | |||||||||
Intangibles, net | 487,477 | 87,055 | 97,273 | |||||||||
Other assets, net | 1,270 | 1,233 | 10,916 | |||||||||
TOTAL ASSETS | $ | 2,966,232 | $ | 1,541,737 | $ | 1,384,811 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 347,205 | $ | 244,891 | $ | 163,367 | ||||||
Accrued expenses | 151,547 | 124,794 | 72,738 | |||||||||
Borrowings under revolver lines of credit | — | 11,240 | 23,289 | |||||||||
Current portion of long-term obligations | 14,287 | 16,320 | 16,689 | |||||||||
Total current liabilities | 513,039 | 397,245 | 276,083 | |||||||||
Long-term debt, net of current portion | 722,888 | 170,200 | 180,657 | |||||||||
Borrowings under revolver lines of credit | 343,225 | — | — | |||||||||
Deferred income taxes | 132,605 | 68,809 | 64,165 | |||||||||
Long-term obligations under equipment financing and other, net of current portion | 43,322 | 22,367 | 34,112 | |||||||||
Total liabilities | 1,755,079 | 658,621 | 555,017 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Common stock (voting); $.01 par value; 100,000,000 shares authorized: 59,192,132 issued and outstanding at December 31, 2015; 49,790,743 issued and outstanding at September 30, 2015; and 49,476,380 issued and outstanding at December 31, 2014 | 591 | 497 | 494 | |||||||||
Undesignated preferred stock; 5,000,000 shares authorized, none issued or outstanding | — | — | — | |||||||||
Additional paid-in capital | 668,828 | 345,934 | 331,068 | |||||||||
Retained earnings | 564,523 | 557,405 | 508,035 | |||||||||
Accumulated other comprehensive loss | (22,789 | ) | (20,720 | ) | (9,803 | ) | ||||||
Total stockholders’ equity | 1,211,153 | 883,116 | 829,794 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,966,232 | $ | 1,541,737 | $ | 1,384,811 |
See accompanying notes
1
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Operations
(unaudited; in thousands, except share and per share amounts)
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Three Months Ended December 31, | ||||||||
2015 | 2014 | |||||||
Net sales | $ | 976,480 | $ | 596,042 | ||||
Cost of products sold | 743,292 | 458,477 | ||||||
Gross profit | 233,188 | 137,565 | ||||||
Operating expenses | 206,344 | 113,745 | ||||||
Income from operations | 26,844 | 23,820 | ||||||
Interest expense, financing costs and other | 16,256 | 2,655 | ||||||
Income before provision for income taxes | 10,588 | 21,165 | ||||||
Provision for income taxes | 3,470 | 8,258 | ||||||
Net income | $ | 7,118 | $ | 12,907 | ||||
Net income per share: | ||||||||
Basic | $ | 0.12 | $ | 0.26 | ||||
Diluted | $ | 0.12 | $ | 0.26 | ||||
Weighted-average shares used in computing net income per share: | ||||||||
Basic | 58,972,913 | 49,428,842 | ||||||
Diluted | 59,962,033 | 50,012,881 |
See accompanying notes
2
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Comprehensive Income
(unaudited; in thousands)
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Three Months Ended December 31, | ||||||||
2015 | 2014 | |||||||
Net income | $ | 7,118 | $ | 12,907 | ||||
Other comprehensive loss: | ||||||||
Foreign currency translation adjustment | (2,469 | ) | (3,189 | ) | ||||
Unrealized gain loss due to change in fair value of derivatives, net of tax | — | (35 | ) | |||||
Total other comprehensive loss, net of tax | (2,469 | ) | (3,224 | ) | ||||
Comprehensive income | $ | 4,649 | $ | 9,683 |
See accompanying notes
3
BEACON ROOFING SUPPLY, INC.
Consolidated Statements of Cash Flows
(unaudited; in thousands)
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Three Months Ended December 31, | ||||||||
2015 | 2014 | |||||||
Operating activities | ||||||||
Net income | $ | 7,118 | $ | 12,907 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 23,671 | 8,257 | ||||||
Stock-based compensation | 7,179 | 2,348 | ||||||
Certain interest expense and other financing costs | 2,425 | 271 | ||||||
Loss/(Gain) on sale of fixed assets | (300 | ) | (126 | ) | ||||
Deferred income taxes | (333 | ) | 47 | |||||
Other | 426 | (64 | ) | |||||
Changes in assets and liabilities, net of the effects of businesses acquired: | ||||||||
Accounts receivable | 95,715 | 99,643 | ||||||
Inventories | 43,514 | (861 | ) | |||||
Prepaid expenses and other assets | (1,773 | ) | (1,369 | ) | ||||
Accounts payable and accrued expenses | (132,967 | ) | (80,864 | ) | ||||
Net cash provided by operating activities | 44,675 | 40,189 | ||||||
Investing activities | ||||||||
Purchases of property and equipment | (2,153 | ) | (3,138 | ) | ||||
Acquisition of businesses | (941,156 | ) | (69,746 | ) | ||||
Proceeds from sales of assets | 229 | 115 | ||||||
Net cash used in investing activities | (943,080 | ) | (72,769 | ) | ||||
Financing activities | ||||||||
Borrowings under revolving lines of credit | 890,128 | 147,507 | ||||||
Repayments under revolving lines of credit | (549,378 | ) | (142,440 | ) | ||||
Borrowings under term loan | 450,000 | — | ||||||
Repayments under term loan | (186,750 | ) | (2,812 | ) | ||||
Repayments under equipment financing facilities and other | (1,367 | ) | (1,412 | ) | ||||
Borrowings under Senior Notes | 300,000 | — | ||||||
Payment of deferred financing costs | (27,813 | ) | — | |||||
Proceeds from exercise of options | 8,984 | 662 | ||||||
Excess tax benefit from stock-based compensation | 1,501 | 53 | ||||||
Net cash provided by financing activities | 885,305 | 1,558 | ||||||
Effect of exchange rate changes on cash | (351 | ) | (113 | ) | ||||
Net decrease in cash and cash equivalents | (13,451 | ) | (31,135 | ) | ||||
Cash and cash equivalents, beginning of period | 45,661 | 54,472 | ||||||
Cash and cash equivalents, end of period | $ | 32,210 | $ | 23,337 | ||||
Supplemental cash flow information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 10,827 | $ | 2,624 | ||||
Income taxes, net of refunds | $ | 7,621 | $ | 8,144 |
See accompanying notes
4
During the period, the company issued Common Stock with a value of $302 million and replacement awards with a value of $5 million in connection with the acquisition of Roofing Supply Group, LLC. which are accounted for as a non-cash investing activity.
See accompanying notes
5
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
1. Basis of Presentation
Beacon Roofing Supply, Inc. (the “Company”) prepared the condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the requirements of the Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information have been condensed or omitted. The balance sheet as of December 31, 2014 has been presented for a better understanding of the impact of seasonal fluctuations on the Company’s financial condition.
In management’s opinion, the financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three-month period (first quarter) ended December 31, 2015 are not necessarily indicative of the results to be expected for the twelve months ending September 30, 2016 (fiscal year 2016 or “2016”).
The three-month periods ended December 31, 2015 and December 31, 2014 each had 62 business days.
These interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in the Company’s fiscal year 2015 (“2015”) Annual Report on Form 10-K for the year ended September 30, 2015, collectively referred to as the “2015 Annual Report.”
At December 31, 2015, 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 upon recent trading prices (Level 2 — market approach) at December 31, 2015 the fair value of the Company’s $300.0 million senior unsecured notes was $309.0 million. As of December 31, 2015, the fair value of the Company’s New Senior Credit Facilities approximated the amount outstanding. The Company estimates the fair value of its New Senior Credit Facilities by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles (Level 3).
Recent Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-3, “Simplifying the Presentation of Debt Issuance Costs” to simplify the presentation of debt issuance costs. This new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with the required presentation for debt discounts. This update is effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years and early adoption is permitted. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. The Company elected to early adopt this new guidance effective October 1, 2015. The adoption of this standard changed the Company’s previous practice of presenting debt issuance costs as an asset and resulted in the reduction of total assets and total liabilities in an amount equal to the balance of unamortized debt issuance costs at each balance sheet date presented. Debt issuance costs that are now presented as a direct reduction from the carrying amount of the associated debt liability amounted to $30 million at December 31, 2015, $4 million at September 30, 2015, and $2 million at December 31, 2014.
2. Acquisitions
Roofing Supply Group
On October 1, 2015 (“Acquisition Date”), the Company acquired 100% of the equity of Roofing Supply Group, LLC (“RSG” or “RSG Acquisition”), a leading roofing products distributor owned by investment firm Clayton, Dubilier & Rice (“CD&R”). RSG’s results of operations have been included with Company’s consolidated results beginning October 1, 2015. RSG distributes roofing supplies and related materials from 85 locations across 25 states as of the date of the close.
6
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
2. Acquisitions – (continued)
Total consideration paid for RSG was approximately $1.2 billion, out of which $288 million was in cash, $307 million of Company’s common stock and option replacement awards, and $574 million in refinancing of RSG’s indebtedness. The RSG long-term debt was repaid simultaneously with the proceeds of a new ABL Revolver, Term Loan B and Senior Notes (see Note 7).
In connection with the RSG Acquisition, the Company was required to issue equity awards to certain RSG employees in replacement of RSG equity awards that were cancelled at closing. The replacement awards consisted of 661,349 shares of the Company’s common stock options with a weighted-average grant date fair value of $20.90. The terms and fair value of these awards approximated the cancelled RSG awards on the issuance date. The fair value of the replacement awards associated with services rendered through the date of the RSG Acquisition was recognized as a component of the total acquisition consideration, and the remaining fair value of the replaced awards associated with post RSG Acquisition services will be recognized as an expense on a straight-line basis over the remaining vesting period.
The RSG Acquisition has been accounted for as a business combination in accordance with the requirements of ASC 805 Business Combinations. The purchase price has been allocated among assets acquired and liabilities assumed at fair value based on information currently available, with the excess purchase price recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of RSG. These come from the synergies that are obtained in operating the branches as part of a larger network, and from an experienced employee base skilled at managing a distribution business. The Company’s allocation of the purchase price is subject to change on receipt of additional information, including, but not limited to, the finalization of intangible asset valuations, property, plant, and equipment valuations, and the Company’s continued review of assumed liabilities that may result in the recognition of additional or changes in the carrying amount of those liabilities on Beacon’s opening balance sheet and an adjustment to goodwill. An additional area where preliminary estimates are not yet finalized relates to deferred tax assets and liabilities. The Company has recorded purchase accounting entries on a preliminary basis as follows (in thousands):
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Cash | $ | 16,451 | ||
Accounts receivable | 177,251 | |||
Inventory | 179,651 | |||
Other current assets | 50,707 | |||
Property, plant, and equipment | 57,973 | |||
Other intangible assets (see Note 6) | 382,100 | |||
Goodwill (see Note 6) | 617,715 | |||
Current liabilities | (250,479 | ) | ||
Non-current liabilities | (61,918 | ) | ||
Total purchase price | $ | 1,169,451 |
RSG’s future growth attributable to new customers, geographic market presence and assembled workforce are additional assets that are not separable and which contributed to recorded goodwill, of which $84 million is tax deductible. All of the Company’s goodwill plus the indefinite-lived trade name are tested for impairment annually, and all acquired goodwill and intangible assets are subject to review for impairment if indicators of impairment develop in the future. The fair value of accounts receivables acquired is $177 million, with the gross contractual amount being $186 million. The Company expects $9 million to be uncollectible.
There were no material contingencies assumed as part of this acquisition.
7
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
2. Acquisitions – (continued)
The actual revenue and net loss from the RSG Acquisition included in Company’s statements of operations for the three month period ended December 31, 2015 was approximately $340 million and $(21) million, respectively. The following represents the unaudited pro forma consolidated revenue and net loss for the Company for the period indicated as if the RSG Acquisition had been included in Company’s consolidated results of operations beginning October 1, 2014 (in thousands, except per share amount):
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Three Months Ended December 31, 2014 | ||||
Revenue | $ | 876,953 | ||
Net loss | $ | (11,908 | ) | |
Net loss per share | $ | (0.20 | ) |
The above pro forma results have been calculated by combining the historical results of the Company and RSG as if it had occurred on October 1, 2014, and adjusting the income tax provision as if it had been calculated on the resulting, combined results. The pro forma results include an estimate for all periods for intangible asset amortization (which is subject to change when the final asset values have been determined), stock compensation expense, interest expense, and also reflect the following 2016 expenses in fiscal 2015 instead of in 2016: $29.5 million of direct acquisition costs. No other material pro forma adjustments were deemed necessary, either to conform the 2015 acquisitions to Company’s accounting policies or for any other situation. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on October 1, 2014 or that may be achieved in the future.
Other acquisitions
In the three months ended December 31, 2015, the Company acquired 26 branches from the following three additional acquisitions:
• | On December 1, 2015, the Company purchased certain assets of RCI Roofing Supply (“RCI”), a distributor of residential and commercial roofing and related products with five branches across Nebraska, Iowa and Colorado with annual sales of approximately $23 million. |
• | On December 18, 2015, the Company acquired 100% of the equity interests of Roofing and Insulation Supply (“RIS”), a distributor primarily of residential and commercial insulation along with roofing and related products with 20 branches spanning 13 states across New England, the Mid-Atlantic, the Southeast, the Upper Midwest, Texas and Colorado with annual sales of approximately $70 million. |
• | On December 29, 2015, the Company purchased certain assets of Statewide Wholesale (“Statewide”), a distributor of residential and commercial roofing and related products located in Denver, Colorado with annual sales of approximately $15 million. |
The Company recorded the preliminary acquired assets and liabilities at their estimated fair values at the acquisition date, with resulting goodwill of $51 million (which is deductible for tax purposes) and $32 million in intangible assets associated with these other acquisitions. The Company’s allocation of the purchase price is subject to change on receipt of additional information, including, but not limited to, the finalization of intangible asset valuations and property, plant, and equipment valuations.
The Company has not provided pro forma results of operations for any acquisitions besides RSG completed in fiscal years 2016 or 2015 herein as they were not material to the Company on either an individual or an aggregate basis. The Company included the results of operations of each acquisition in its consolidated statement of income from the date of each acquisition.
8
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
3. Net Income per Share
Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares and dilutive common share equivalents then outstanding using the treasury stock method. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock awards.
The following table presents the basic and diluted weighted-average shares outstanding for each period presented:
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Three Months Ended December 31, | ||||||||
2015 | 2014 | |||||||
Weighted-average common shares outstanding | 58,972,913 | 49,428,842 | ||||||
Effect of dilutive securities: | ||||||||
Stock option awards | 748,678 | 476,941 | ||||||
Restricted stock awards | 240,442 | 107,098 | ||||||
Shares for diluted net income per share | 59,962,033 | 50,012,881 |
The following table includes the number of shares that may be dilutive common shares in the future. These shares were not included in the computation of diluted net income per share because the effect was either anti-dilutive or the requisite performance condition was not met.
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Three Months Ended December 31, | ||||||||
2015 | 2014 | |||||||
Stock option awards | 679,995 | 1,394,330 | ||||||
Restricted stock awards | 88,407 | 266,497 |
4. Comprehensive Income and Capital Structure
The following table presents the activity included in stockholders’ equity during the three months ended December 31, 2015 (in thousands):
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Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||
Balance at September 30, 2015 | $ | 497 | $ | 345,934 | $ | 557,405 | $ | (20,720 | ) | $ | 883,116 | |||||||||
Issuance of common stock | 94 | 315,715 | 315,809 | |||||||||||||||||
Stock-based compensation | 7,179 | 7,179 | ||||||||||||||||||
Net income | 7,118 | 7,118 | ||||||||||||||||||
Other comprehensive loss | (2,469 | ) | (2,469 | ) | ||||||||||||||||
Amounts reclassified out of other comprehensive income, net of tax | 400 | 400 | ||||||||||||||||||
Balance at December 31, 2015 | $ | 591 | $ | 668,828 | $ | 564,523 | $ | (22,789 | ) | $ | 1,211,153 |
9
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
4. Comprehensive Income and Capital Structure – (continued)
Accumulated other comprehensive loss consists of adjustments related to the translation of foreign currencies and fair value adjustments associated with cash flow hedges. The following table presents the changes in accumulated other comprehensive income (loss), by component, during the three months ended December 31, 2015 (in thousands):
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Foreign Currency Translation | Derivative Financial Instruments | Accumulated Other Comprehensive Loss | ||||||||||
Balance at September 30, 2015 | $ | (19,293 | ) | $ | (1,427 | ) | $ | (20,720 | ) | |||
Other comprehensive income (loss) recognized in accumulated other comprehensive income, net of tax | (2,469 | ) | — | (2,469 | ) | |||||||
Amounts reclassified out of other comprehensive loss, net of tax | — | 400 | 400 | |||||||||
Balance at December 31, 2015 | $ | (21,762 | ) | $ | (1,027 | ) | $ | (22,789 | ) |
The reclassification of $0.4 million out of accumulated other comprehensive loss into the consolidated statement of operations during the three months ended December 31, 2015 is included in interest expense.
5. Stock-Based Compensation
On February 12, 2014, the shareholders of the Company approved the Beacon Roofing Supply, Inc. 2014 Stock Plan (the “2014 Plan”). The 2014 Plan provides for discretionary awards of stock options, stock, stock units and stock appreciation rights (“SARs”) for up to 5,100,000 shares of common stock to selected employees and non-employee directors. As of December 31, 2015, there were 1,877,407 shares of common stock available for awards under the 2014 Plan, subject to increase for shares that are forfeited or expire, or are used for tax withholding on stock awards and stock unit awards under the 2004 Plan (defined below) and the 2014 Plan.
Prior to the 2014 Plan, the Company maintained the amended and restated Beacon Roofing Supply, Inc. 2004 Stock Plan (the “2004 Plan”). Upon shareholder approval of the 2014 Plan, the Company ceased issuing equity awards from the pre-existing 2004 Plan and all future equity awards will be issued from the 2014 Plan.
The Company recognizes the cost of employee services rendered in exchange for awards of equity instruments based on the fair value of those awards at the date of the grant. Compensation expense for time-based equity awards is recognized, on a straight-line basis, net of forfeitures, over the requisite service period for the fair value of the awards that actually vest. Compensation expense for performance-based equity awards is recognized, net of forfeitures, by projecting the number of restricted units that are expected to vest based on the achievement of the underlying related performance measures.
For all equity awards granted prior to October 1, 2014, in the event of a change in control of the Company, all awards are immediately vested. Beginning in fiscal 2015, equity awards contain a “double trigger” change in control mechanism. Unless an award is continued or assumed by a public company in an equitable manner, an award shall become fully vested immediately prior to a change in control (at 100% in the case of a performance-based restricted stock award). If an award is so continued or assumed, vesting will continue in accordance with the terms of the award, unless there is a qualifying termination within one-year following the change in control, in which event the award shall become fully vested immediately (at 100% in the case of a performance-based restricted stock award).
Stock options
Non-qualified options generally expire 10 years after the grant date and, except under certain conditions, the options are subject to continued employment and vest in one-third increments over a three-year period following the grant dates. During the three months ended December 31, 2015 and 2014, the Company
10
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
5. Stock-Based Compensation – (continued)
recorded stock-based compensation expense related to stock option awards of $6.1 million and $1.6 million, respectively. As of December 31, 2015, there was $12.2 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 2.22 years.
The following table illustrates the assumptions used in the Black-Scholes pricing model for options granted (inclusive of replacement options discussed in Note 2) during the three months ended December 31, 2015:
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2015 | ||||
Risk-free interest rate | 1.56 – 1.87% | |||
Expected volatility | 30.96 – 36.40% | |||
Expected life in years | 5.57 – 5.60 | |||
Expected dividend yield | 0.00% |
Expected lives of the options granted are based primarily on historical activity, while expected volatilities are based on historical volatilities of the Company’s stock and consideration of public companies’ stock.
Information regarding the Company’s stock options is summarized below:
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Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
(in years) | (in millions) | |||||||||||||||
Outstanding at September 30, 2015 | 2,410,907 | $ | 24.55 | 6.3 | $ | 20.70 | ||||||||||
Granted | 987,548 | 21.25 | ||||||||||||||
Exercised | (362,381 | ) | 21.50 | |||||||||||||
Canceled | (11,528 | ) | 24.70 | |||||||||||||
Outstanding at December 31, 2015 | 3,024,546 | $ | 23.83 | 6.5 | $ | 52.47 | ||||||||||
Vested or Expected to Vest at December 31, 2015 | 2,929,727 | $ | 23.69 | 6.5 | $ | 51.64 | ||||||||||
Exercisable at December 31, 2015 | 1,929,138 | $ | 21.77 | 4.9 | $ | 37.45 |
Restricted stock awards
During the three months ended December 31, 2015 and 2014, the Company recorded stock-based compensation expense related to restricted stock awards of $1.1 million and $0.7 million, respectively. As of December 31, 2015, there was $14.7 million of total unrecognized compensation cost related to unvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.24 years.
The total fair values of the restricted stock awards were determined based upon the number of shares or units and the closing prices of the Company’s common stock on the dates of the grants. The restricted stock awards granted to management are subject to continued employment, except under certain conditions, and will vest if the Company attains a targeted rate of return on invested capital at the end of a three-year period. The actual number of shares or units that will vest can range from 0% to 125% of the management grants depending upon actual Company performance below or above the target level and the Company estimates that performance in determining the projected number of shares or units that will vest and the related compensation cost. The restricted stock awards granted to non-employee directors are also subject to continued service, vest at the end of one year (except under certain conditions) and the underlying common shares will not be distributed until the date of the director’s termination of service on the Board, except that, beginning in fiscal year 2016, directors holding units with a value equal to five times the annual cash retainer may elect to have future grants settle simultaneously with vesting. Grants made prior to fiscal 2014 settle on a
11
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
5. Stock-Based Compensation – (continued)
date that is six months after the director’s termination of service on the board. In November 2013 and 2014, the Company also issued restricted stock awards that are subject to continued employment and will vest over three to five years. In May 2015, the Company also issued restricted stock awards that are subject to continued employment and will vest after two years.
Information regarding the Company’s restricted shares and units is summarized below:
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Number of Shares | Weighted- Average Grant Price | |||||||
Outstanding at September 30, 2015 | 619,999 | $ | 31.95 | |||||
Granted | 191,691 | 39.48 | ||||||
Lapse of restrictions/conversions | — | — | ||||||
Canceled | (108,530 | ) | 37.09 | |||||
Outstanding at December 31, 2015 | 703,160 | $ | 34.08 | |||||
Vested or Expected to Vest at December 31, 2015 | 636,595 | $ | 33.86 |
6. Goodwill and Intangible Assets
Goodwill
The following table sets forth the change in the carrying amount of goodwill for the Company during the period (in thousands):
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2015 | 2014 | |||||||
Balance at September 30, | $ | 496,415 | $ | 466,206 | ||||
Acquisition of RSG | 617,715 | — | ||||||
Other Acquisitions | 50,709 | 24,309 | ||||||
Translation and Other Adjustments | (2,728 | ) | (1,190 | ) | ||||
Balance at December 31, | $ | 1,162,111 | $ | 489,325 |
In the current period, the change in the carrying amount of goodwill is attributable to the company’s acquisitions of RSG and the other acquisitions (see Note 2).
Intangible Assets
In connection with the acquisition of RSG and other acquisitions, we recorded intangible assets of $382 million, which includes $63 million of indefinite lived trademarks and $319 million of customer relationships. The weighted-average useful lives of the acquired assets are 18.96 years for customer relationships.
Intangible assets and other assets consisted of the following (in thousands):
![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
December 31, 2015 | September 30, 2015 | December 31, 2014 | Weighted- Average Remaining Life | |||||||||||||
Amortizable intangible assets: | ||||||||||||||||
Non-compete agreements | $ | 2,824 | $ | 2,824 | $ | 2,824 | 4.36 | |||||||||
Customer relationships | 542,187 | 191,852 | 190,388 | 18.96 | ||||||||||||
Trademarks | 1,100 | 1,100 | 700 | 4.03 | ||||||||||||
Beneficial lease arrangements | 610 | 610 | 610 | |||||||||||||
546,721 | 196,386 | 194,522 | ||||||||||||||
Less: Accumulated amortization | (132,294 | ) | (119,081 | ) | (106,999 | ) | ||||||||||
414,427 | 77,305 | 87,523 | ||||||||||||||
Indefinite lived trademarks | 73,050 | 9,750 | 9,750 | |||||||||||||
Other assets | 1,270 | 1,233 | 10,916 | |||||||||||||
$ | 488,747 | $ | 88,288 | $ | 108,189 |
12
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
6. Goodwill and Intangible Assets – (continued)
During the period ended December 31, 2015, we recorded amortization expense in relation to the above-listed intangible assets of $15.1 million. During the period ended December 31, 2014, we recorded amortization expense of $3.6 million. The following table presents the estimated annual amortization expense for these intangible assets (in thousands):
![]() | ![]() | |||
2016 (Jan – Sept) | $ | 52,776 | ||
2017 | 75,154 | |||
2018 | 61,766 | |||
2019 | 49,778 | |||
2020 | 39,891 | |||
Thereafter | 135,062 | |||
$ | 414,427 |
7. Financing Arrangements
Financing arrangements consisted of the following (in thousands):
![]() | ![]() | ![]() | ![]() | |||||||||
December 31, 2015 | September 30, 2015 | December 31, 2014 | ||||||||||
Senior Secured Credit Facility | ||||||||||||
Revolving Lines of Credit: | ||||||||||||
U.S. Revolver — expires October 1, 2020 (effective rate on borrowings 2.02% at December 31, 2015; 0.00% at September 30, 2015 and at December 31, 2014) | $ | 316,523 | $ | — | $ | — | ||||||
Canadian revolver — expires October 1, 2020 (effective rate on borrowings 3.20% at December 31, 2015; 0.00% at September 30, 2015 and at December 31, 2014) | 7,225 | — | — | |||||||||
U.S. Revolver — expires October 1, 2020 (effective rate on borrowings of 4.00% at December 31, 2015; 0.00% at September 30, 2015 and at December 31, 2014) | 19,477 | — | — | |||||||||
Canadian revolver — expires March 31, 2017 (effective rate on borrowings 0.00% at December 31, 2015; 3.70% at September 30, 2015; and 4.00% at December 31, 2014); refinanced in first quarter of 2016 | — | 11,240 | 8,189 | |||||||||
U.S. Revolver — expires March 31, 2017 (effective rate on borrowings of 0.00% at December 31, 2015 and at September 30, 2015; and 4.25% at December 31, 2014); refinanced in first quarter of 2016 | — | — | 15,100 |
13
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
7. Financing Arrangements – (continued)
![]() | ![]() | ![]() | ![]() | |||||||||
December 31, 2015 | September 30, 2015 | December 31, 2014 | ||||||||||
Term Loan: | ||||||||||||
Term Loan — matures October 1, 2022 (4.00% at December 31, 2015; 0.00% at September 30, 2015 and at December 31, 2014) | $ | 437,298 | $ | — | $ | — | ||||||
Term Loan — matures March 31, 2017 (0.00% at December 31, 2015; 4.25% on September 30, 2015; and 2.17% at December 31, 2014); refinanced in first quarter of 2016 | — | 181,450 | 191,907 | |||||||||
Total borrowings under Senior Secured Credit Facility | 780,523 | 192,690 | 215,196 | |||||||||
Less: current portion | (4,500 | ) | (22,490 | ) | (34,539 | ) | ||||||
Total long-term portion of borrowings under Senior Secured Credit Facility | $ | 776,023 | $ | 170,200 | $ | 180,657 | ||||||
Senior Notes | ||||||||||||
Senior Notes — expires October 2023 (6.38% at December 31, 2015; 0.00% on September 30, 2015 and at December 31, 2014) | $ | 290,091 | $ | — | $ | — | ||||||
Less: current portion | — | — | — | |||||||||
Total long-term portion of borrowings under Senior Notes | $ | 290,091 | $ | — | $ | — | ||||||
Equipment Financing Facilities | ||||||||||||
Borrowings under various equipment financing facilities — various maturities through September 2021 and various fixed interest rates ranging from 2.33% to 4.49% at December 31, 2015; 2.33% to 4.49% at September 30, 2015; and 2.33% to 4.60% at December 31, 2014) | $ | 24,121 | $ | 25,488 | $ | 29,629 | ||||||
Borrowings under various capital lease obligations various maturities through November 2021 and various fixed interest rates ranging from 2.72% to 10.39% at December 31, 2015; 0.00% at September 30, 2015 and December 31, 2014) | 26,073 | — | — | |||||||||
Less: current portion | (9,787 | ) | (5,069 | ) | (5,439 | ) | ||||||
Total long-term portion of borrowings under equipment financing facilities | $ | 40,407 | $ | 20,419 | $ | 24,190 |
As a result of the RSG Acquisition, on October 1, 2015, the Company entered into a credit agreement governing the terms of a new $450 million seven-year senior secured term loan “B” facility (the “Term Loan B Facility”) and a new credit agreement governing the terms of a new senior secured asset-based revolving credit facility of up to $700 million, subject to a borrowing base (the “ABL Facility”) (collectively the “New Senior Credit Facilities”). The Company also raised $300 million by issuing 8 year senior notes due 2023 (the “Senior Notes”), having a coupon rate of 6.38% per annum, payable semi-annually in arrears.
14
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
7. Financing Arrangements – (continued)
Revolving Line of Credit Facilities
On October 1, 2015, the Company entered into a $700 million ABL Facility with Wells Fargo Bank, N.A. and a syndicate of other lenders. This ABL Facility consists of revolving loans in both the United States (“US Revolver”) in the amount of $670 million and Canada (“Canadian Revolver”) in the amount of $30 million CAD. The ABL Facility has a maturity date of October 1, 2020. The US Revolver has various tranches of borrowings, bearing interest at rates ranging from 1.92% to 4.00%. The effective rate of these borrowings is 2.13% and is paid monthly. At December 31, 2015, the outstanding balance on the US Revolver, net of debt issuance fees, was $336.0 million. The US Revolver also has outstanding standby letters of credit in the amount of $10.5 million as of December 31, 2015. The Canadian Revolver bears interest at 3.20% and has an outstanding balance of $10.0 million CAD ($7.2 million USD) at December 31, 2015. Current unused commitment fees on the revolving credit facilities are 0.25% per annum. There is one financial covenant under the ABL Facility, which is a Consolidated Fixed Charge Ratio. As defined in the ABL Facility, the Company’s ratio must be at least 1.00 to 1.00 at the end of each fiscal quarter, calculated on a trailing four quarter basis. The covenant is only applicable when the borrowing availability is less than 10% of the maximum loan cap or $60 million. Borrowings under the U.S. Revolver are guaranteed by the Issuer and will be guaranteed by any future domestic subsidiaries that guarantee the Senior Notes and the Term Loan B Facility (except with respect to Beacon Canada, Inc., as described below). Borrowings under the Canadian Revolver are guaranteed by the Issuer and Beacon Canada, Inc. and will be guaranteed by any future domestic subsidiaries that guarantee the Senior Notes and the Term Loan B Facility and certain foreign subsidiaries.
Term Loan
On October 1, 2015, the Company entered into a $450 million Term Loan B Facility with Citibank N.A., and a syndicate of other lenders. The Term Loan requires quarterly principal payments in the amount of $1.1 million, with the remaining outstanding principal to be paid on its maturity date of October 1, 2022. Outstanding principal on the Term Loan bears interest at 4.00% and is paid every six months. The Company has the option of selecting the rate at which interest can accrue on the Term Loan as well as the period in which interest payments are made. The Company elected to pay interest based on the six month LIBOR rate, subject to a minimum rate of 1.00%, in addition to a base rate of 3.00%. At December 31, 2015 the outstanding balance on the Term Loan, net of debt issuance fees, was $437.3 million. The Term Loan B is guaranteed jointly and severally and fully and unconditionally by all of the United States subsidiaries of the Company (except Beacon Canada, Inc., a domestic subsidiary with no material assets other than stock in a foreign subsidiary) but not by the Canadian subsidiaries of the Company.
Senior Notes
The Company also raised $300 million by issuing 8 year senior notes due 2023 (the “Senior Notes”), having a coupon rate of 6.38% per annum, payable semi-annually in arrears beginning April 1, 2016. There are early payment provisions in the Senior Note agreement in which the Company would be subject to penalties and “make whole” provisions. Management anticipates repaying the notes at the maturity date of October 1, 2023. The Senior Notes are guaranteed jointly and severally and fully and unconditionally by all of the United States subsidiaries of the Company (except Beacon Canada, Inc., a domestic subsidiary with no material assets other than stock in a foreign subsidiary) but not by the Canadian subsidiaries of the Company.
The proceeds from the New Senior Secured Credit Facilities and Senior Notes were used to provide working capital and funds for other general corporate purposes, 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 pay fees and expenses associated with the RSG Acquisition Transaction. The Company incurred financing costs totaling approximately $31.2 million.
15
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
7. Financing Arrangements – (continued)
Since the New Senior Credit Facilities and the previous Term Loan financing arrangements had certain lenders who participated in both arrangements, management accounted for a portion of this transaction as a debt modification and a portion as a debt extinguishment. In accordance with the accounting for debt modification, the Company will amortize the previously capitalized issuance costs over the term of the New Senior Credit Facilities and expense the $2.2 million of direct issuance costs incurred related to the New Senior Credit Facilities. The remainder of the settlement of the Company’s previous debt arrangements was accounted for as debt extinguishment. The Company recognized a loss on extinguishment of $0.8 million.
The Senior Notes which are unsecured obligations of the Company are guaranteed jointly and severally and fully and unconditionally, on an unsecured senior basis, by each of the domestic subsidiaries that is a borrower under or that guarantees obligations under Term Loan B Facility (and any refinancing indebtedness). The Canadian subsidiaries have guaranteed the borrowings under the Canadian Revolver, but have not guaranteed the Senior Notes or borrowings under the Term Loan B Facility.
Annual principal payments for all outstanding borrowings for each of the next five years and thereafter are as follows (in thousands):
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Term Loan B Facility | ABL Facility | Senior Notes | Equipment Financing Facilities | Total | ||||||||||||||||
2016 (Jan – Sept) | $ | 3,375 | $ | — | $ | — | $ | 7,343 | $ | 10,718 | ||||||||||
2017 | 4,500 | — | — | 10,336 | 14,836 | |||||||||||||||
2018 | 4,500 | — | — | 9,646 | 14,146 | |||||||||||||||
2019 | 4,500 | — | — | 10,298 | 14,798 | |||||||||||||||
2020 | 4,500 | — | — | 7,538 | 12,038 | |||||||||||||||
Thereafter | 427,500 | 351,702 | 300,000 | 5,033 | 1,084,235 | |||||||||||||||
Subtotal | 448,875 | 351,702 | 300,000 | 50,194 | 1,150,771 | |||||||||||||||
Less current portion | (4,500 | ) | — | — | (9,787 | ) | (14,287 | ) | ||||||||||||
Total long-term debt | $ | 444,375 | $ | 351,702 | $ | 300,000 | $ | 40,407 | $ | 1,136,484 |
8. Financial Instruments
Financial Derivatives
The Company used interest rate derivative instruments to manage the risk related to fluctuating cash flows from interest rate changes by converting a portion of its variable-rate borrowings into fixed-rate borrowings. On March 28, 2013, the Company entered into an interest rate swap agreement with a notional amount of $213.8 million which was scheduled to expire on March 31, 2017. This agreement swapped the thirty-day LIBOR to a fixed-rate of 1.38%. The instrument had scheduled reductions of the notional amount equal to $2.8 million per quarter, effectively matching the repayment schedule under the Term Loan. In October 2015, the Company settled its interest rate swap agreement resulting in a cash payment by the Company of $2.3 million. The pre-tax unrealized gain within accumulated other comprehensive income associated with the cancelled interest rate swap contract of $2.3 million is being amortized over the original life of the swap contract, through March 2017.
9. 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.
16
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
9. Leases – (continued)
The Company assumed operating leases as part of each of the 2016 acquisitions (see Note 2). At December 31, 2015, the minimum rental commitments under these acquired, non-cancelable operating leases with initial or remaining terms of more than one year were as follows:
![]() | ![]() | |||
Operating Leases | ||||
2016 (Jan – Sept) | 12,105 | |||
2017 | 13,947 | |||
2018 | 7,916 | |||
2019 | 4,730 | |||
2020 | 2,476 | |||
Thereafter | 1,908 | |||
Total minimum lease payments | $ | 43,082 |
Rent expense for the acquired branches was $6.9 million in 2016. Sublet income was immaterial.
10. Foreign Net Revenue
Foreign (Canadian) net revenue totaled $45.1 million and $45.6 million in the three months ended December 31, 2015 and 2014, respectively.
11. Supplemental Guarantor Information
All of the Senior Notes issued by the Company (or Parent) are guaranteed jointly and severally by all of the United States subsidiaries of the Company (except Beacon Canada, Inc., a domestic subsidiary with no material assets other than stock in a foreign subsidiary) (collectively, the “Guarantors”), and not by the Canadian subsidiaries of the Company. Such guarantees are full and 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 Regulation S-X of the SEC. 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.
17
BEACON ROOFING SUPPLY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited; in thousands, except share and per share data or otherwise indicated)
11. Supplemental Guarantor Information – (continued)
BEACON ROOFING SUPPLY, INC.
Condensed Consolidating Balance Sheets
(unaudited; in thousands)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
December 31, 2015 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Assets: | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 35,829 | $ | 8,754 | $ | (12,373 | ) | $ | 32,210 | |||||||||
Accounts receivable, less allowance of $8,510 as at September 30, 2014 | — | 466,415 | 23,378 | (621 | ) | 489,172 | ||||||||||||||
Inventories, net | — | 447,120 | 18,943 | — | 466,063 | |||||||||||||||
Prepaid expenses and other current assets | 4,232 | 139,726 | 6,426 | — | 150,384 | |||||||||||||||
Deferred income taxes | 3,052 | 28,890 | — | (4 | ) | 31,938 | ||||||||||||||
Total current assets | 7,284 | 1,117,980 | 57,501 | (12,998 | ) | 1,169,767 | ||||||||||||||
Intercompany | — | 824,837 | — | (824,837 | ) | — | ||||||||||||||
Investments in consolidated subsidiaries | 2,719,051 | — | — | (2,719,051 | ) | — | ||||||||||||||
Deferred income taxes | 15,980 | — | 160 | (16,140 | ) | — | ||||||||||||||
Property and equipment, net | 2,687 | 134,935 | 7,985 | — | 145,607 | |||||||||||||||
Goodwill | — | 1,134,000 | 28,111 | — | 1,162,111 | |||||||||||||||
Intangibles, net | — | 483,844 | 3,633 | — | 487,477 | |||||||||||||||
Other assets, net | 1,232 | 38 | — | — | 1,270 | |||||||||||||||
Total assets | $ | 2,746,234 | $ | 3,695,634 | $ | 97,390 | $ | (3,573,026 | ) | $ | 2,966,232 | |||||||||
Liabilities and equity: | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 19,364 | $ | 333,072 | $ | 7,763 | $ | (12,994 | ) | $ | 347,205 | |||||||||
Accrued expenses | 1,511 | 144,611 | 5,425 | — | 151,547 | |||||||||||||||
Borrowings under revolver lines of credit | — | — | — | — | — | |||||||||||||||
Deferred income taxes | — | — | 4 | (4 | ) | — | ||||||||||||||
Current portion of long-term obligations | 4,500 | 9,787 | — | — | 14,287 | |||||||||||||||
Total current liabilities | 25,375 | 487,470 | 13,192 | (12,998 | ) | 513,039 | ||||||||||||||
Long-term debt, net of current portion | 722,888 | — | — | — | 722,888 | |||||||||||||||
Borrowings under revolver lines of credit | — | 336,000 | 7,225 | — | 343,225 | |||||||||||||||
Deferred income taxes | — | 148,745 | — | (16,140 | ) | 132,605 | ||||||||||||||
Long-term obligations under equipment financing and other, net of current portion | 45 | 43,222 | 55 | — | 43,322 | |||||||||||||||
Intercompany | 786,773 | — | 38,064 | (824,837 | ) | — | ||||||||||||||
Total liabilities | 1,535,081 | 1,015,437 | 58,536 | (853,975 | ) | 1,755,079 | ||||||||||||||
Total stockholders’ equity | 1,211,153 | 2,680,197 | 38,854 | (2,719,051 | ) | 1,211,153 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 2,746,234 | $ | 3,695,634 | $ | 97,390 | $ | (3,573,026 | ) | $ | 2,966,232 |
18
BEACON ROOFING SUPPLY, INC.
Condensed Consolidating Balance Sheets
(unaudited; in thousands)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
December 31, 2014 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Assets: | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 24,872 | $ | 4,697 | $ | (6,232 | ) | $ | 23,337 | |||||||||
Accounts receivable, less allowance of $8,150 as at September 30, 2014 | — | 247,373 | 23,426 | (1,416 | ) | 269,383 | ||||||||||||||
Inventories, net | — | 291,890 | 22,780 | — | 314,670 | |||||||||||||||
Prepaid expenses and other current assets | — | 70,525 | 6,450 | — | 76,975 | |||||||||||||||
Deferred income taxes | 743 | 13,756 | 130 | — | 14,629 | |||||||||||||||
Total current assets | 743 | 648,416 | 57,483 | (7,648 | ) | 698,994 | ||||||||||||||
Intercompany | — | 378,029 | — | (378,029 | ) | — | ||||||||||||||
Investments in consolidated subsidiaries | 1,374,778 | — | — | (1,374,778 | ) | — | ||||||||||||||
Deferred income taxes | 13,784 | — | — | (13,784 | ) | — | ||||||||||||||
Property and equipment, net | 2,693 | 76,088 | 9,522 | — | 88,303 | |||||||||||||||
Goodwill | — | 455,620 | 33,705 | — | 489,325 | |||||||||||||||
Intangibles, net | 13 | 93,888 | 3,372 | — | 97,273 | |||||||||||||||
Other assets, net | 9,422 | — | 1,494 | — | 10,916 | |||||||||||||||
Total assets | $ | 1,401,433 | $ | 1,652,041 | $ | 105,576 | $ | (1,774,239 | ) | $ | 1,384,811 | |||||||||
Liabilities and equity: | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 12,811 | $ | 152,121 | $ | 6,083 | $ | (7,648 | ) | $ | 163,367 | |||||||||
Accrued expenses | 2,075 | 65,700 | 4,963 | — | 72,738 | |||||||||||||||
Borrowings under revolver lines of credit | 15,100 | — | 8,189 | — | 23,289 | |||||||||||||||
Deferred income taxes | — | — | — | — | — | |||||||||||||||
Current portion of long-term obligations | 11,250 | 5,439 | — | — | 16,689 | |||||||||||||||
Total current liabilities | 41,236 | 223,260 | 19,235 | (7,648 | ) | 276,083 | ||||||||||||||
Long-term debt, net of current portion | 180,657 | — | — | — | 180,657 | |||||||||||||||
Borrowings under revolver lines of credit | — | — | — | — | — | |||||||||||||||
Deferred income taxes | — | 77,021 | 928 | (13,784 | ) | 64,165 | ||||||||||||||
Long-term obligations under equipment financing and other, net of current portion | 7,949 | 26,091 | 72 | — | 34,112 | |||||||||||||||
Intercompany | 341,797 | — | 36,232 | (378,029 | ) | — | ||||||||||||||
Total liabilities | 571,639 | 326,372 | 56,467 | (399,461 | ) | 555,017 | ||||||||||||||
Total stockholders’ equity | 829,794 | 1,325,669 | 49,109 | (1,374,778 | ) | 829,794 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 1,401,433 | $ | 1,652,041 | $ | 105,576 | $ | (1,774,239 | ) | $ | 1,384,811 |
19
BEACON ROOFING SUPPLY, INC.
Condensed Consolidating Statements of Operations
(unaudited; in thousands, except share and per share amounts)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Three Months Ended December 31, 2015 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Net sales | $ | — | $ | 931,484 | $ | 45,137 | $ | (141 | ) | $ | 976,480 | |||||||||
Cost of products sold | — | 708,383 | 35,050 | (141 | ) | 743,292 | ||||||||||||||
Gross profit | — | 223,101 | 10,087 | — | 233,188 | |||||||||||||||
Operating expenses | 31,172 | 167,014 | 8,158 | — | 206,344 | |||||||||||||||
Intercompany charges (income) | (7,847 | ) | 7,186 | 661 | — | — | ||||||||||||||
Income from operations | (23,325 | ) | 48,901 | 1,268 | — | 26,844 | ||||||||||||||
Intercompany interest expense, financing costs and other | 9,874 | 6,238 | 144 | — | 16,256 | |||||||||||||||
Intercompany interest expenses (income) | (3,926 | ) | 3,537 | 389 | — | — | ||||||||||||||
Income before income taxes and equity in net income of subsidiaries | (29,273 | ) | 39,126 | 735 | — | 10,588 | ||||||||||||||
Provision for income taxes | (9,732 | ) | 13,007 | 195 | — | 3,470 | ||||||||||||||
Income before equity in net income of subsidiaries | (19,541 | ) | 26,119 | 540 | — | 7,118 | ||||||||||||||
Equity in net income of subsidiaries | 26,659 | — | — | (26,659 | ) | — | ||||||||||||||
Net income | $ | 7,118 | $ | 26,119 | $ | 540 | $ | (26,659 | ) | $ | 7,118 | |||||||||
Net income per share: | ||||||||||||||||||||
Basic | $ | 0.12 | ||||||||||||||||||
Diluted | $ | 0.12 | ||||||||||||||||||
Weighted-average shares used in computing net income per share: | ||||||||||||||||||||
Basic | 58,972,913 | |||||||||||||||||||
Diluted | 59,962,033 |
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Three Months Ended December 31, 2014 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Net sales | $ | — | $ | 550,502 | $ | 45,614 | $ | (74 | ) | $ | 596,042 | |||||||||
Cost of products sold | — | 422,981 | 35,570 | (74 | ) | 458,477 | ||||||||||||||
Gross profit | — | 127,521 | 10,044 | — | 137,565 | |||||||||||||||
Operating expenses | 9,420 | 95,638 | 8,687 | — | 113,745 | |||||||||||||||
Intercompany charges (income) | (6,698 | ) | 6,102 | 596 | — | — | ||||||||||||||
Income from operations | (2,722 | ) | 25,781 | 761 | — | 23,820 | ||||||||||||||
Interest expense, financing costs and other | (2,439 | ) | 65 | 151 | — | 2,655 | ||||||||||||||
Intercompany interest expense (income) | (3,914 | ) | 3,515 | 399 | — | — | ||||||||||||||
Income before income taxes and equity in net income of subsidiaries | (1,247 | ) | 22,201 | 211 | — | 21,165 | ||||||||||||||
Provision for income taxes | (510 | ) | 9,067 | (299 | ) | — | 8,258 | |||||||||||||
Income before equity in net income of subsidiaries | (737 | ) | 13,134 | 510 | — | 12,907 | ||||||||||||||
Equity in net income of subsidiaries | 13,644 | — | — | (13,644 | ) | — | ||||||||||||||
Net income | $ | 12,907 | $ | 13,134 | $ | 510 | $ | (13,644 | ) | $ | 12,907 | |||||||||
Net income per share: | ||||||||||||||||||||
Basic | $ | 0.26 | ||||||||||||||||||
Diluted | $ | 0.26 | ||||||||||||||||||
Weighted-average shares used in computing net income per share: | ||||||||||||||||||||
Basic | 49,428,842 | |||||||||||||||||||
Diluted | 50,012,881 |
20
BEACON ROOFING SUPPLY, INC.
Condensed Consolidating Statements of Comprehensive Income
(unaudited; in thousands)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Three Months Ended December 31, 2015 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Net income | $ | 7,118 | $ | 26,119 | $ | 540 | $ | (26,659 | ) | $ | 7,118 | |||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation adjustment | (2,469 | ) | — | (2,469 | ) | 2,469 | (2,469 | ) | ||||||||||||
Total other comprehensive income (loss), net of tax | (2,469 | ) | — | (2,469 | ) | 2,469 | (2,469 | ) | ||||||||||||
Comprehensive income | $ | 4,649 | $ | 26,119 | $ | (1,929 | ) | $ | (24,190 | ) | $ | 4,649 |
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Three Months Ended December 31, 2014 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Net income | $ | 12,907 | $ | 13,134 | $ | 510 | $ | (13,644 | ) | $ | 12,907 | |||||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation adjustment | (3,189 | ) | — | (3,189 | ) | 3,189 | (3,189 | ) | ||||||||||||
Unrealized gain (loss) due to change in fair value of derivatives, net of tax | (35 | ) | — | — | — | (35 | ) | |||||||||||||
Total other comprehensive income (loss), net of tax | (3,224 | ) | — | (3,189 | ) | 3,189 | (3,224 | ) | ||||||||||||
Comprehensive income | $ | 9,683 | $ | 13,134 | $ | (2,679 | ) | $ | (10,456 | ) | $ | 9,683 |
21
BEACON ROOFING SUPPLY, INC.
Condensed Consolidating Statements of Cash Flows
(unaudited; in thousands)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Three Months Ended December 31, 2015 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Net cash provided by operating activities | $ | (49,989 | ) | $ | 98,053 | $ | 4,778 | $ | (8,167 | ) | $ | 44,675 | ||||||||
Investing activities | ||||||||||||||||||||
Purchases of property and equipment | (566 | ) | (1,578 | ) | (9 | ) | — | (2,153 | ) | |||||||||||
Acquisition of businesses | (941,156 | ) | — | — | — | (941,156 | ) | |||||||||||||
Proceeds from sales of assets | — | 229 | — | — | 229 | |||||||||||||||
Intercompany activity | 436,866 | — | — | (436,866 | ) | — | ||||||||||||||
Net cash used in investing activities | (504,856 | ) | (1,349 | ) | (9 | ) | (436,866 | ) | (943,080 | ) | ||||||||||
Financing activities | ||||||||||||||||||||
Borrowings under revolving lines of credit | — | 878,947 | 11,181 | — | 890,128 | |||||||||||||||
Repayments under revolving lines of credit | — | (534,470 | ) | (14,908 | ) | — | (549,378 | ) | ||||||||||||
Borrowings under term loan | 450,000 | — | — | — | 450,000 | |||||||||||||||
Repayments under term loan | (186,750 | ) | — | — | — | (186,750 | ) | |||||||||||||
Repayments under equipment financing facilities | — | (1,367 | ) | — | — | (1,367 | ) | |||||||||||||
Borrowings under Senior Notes | 300,000 | — | — | — | 300,000 | |||||||||||||||
Payment of deferred financing costs | (18,890 | ) | (8,923 | ) | — | — | (27,813 | ) | ||||||||||||
Proceeds from exercise of options | 8,984 | — | — | — | 8,984 | |||||||||||||||
Excess tax benefit from equity-based compensation | 1,501 | — | — | — | 1,501 | |||||||||||||||
Intercompany activity | — | (437,878 | ) | 1,012 | 436,866 | — | ||||||||||||||
Net cash (used in) provided by financing activities | 554,845 | (103,691 | ) | (2,715 | ) | 436,866 | 885,305 | |||||||||||||
Effect of exchange rate changes on cash | — | — | (351 | ) | — | (351 | ) | |||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (6,987 | ) | 1,703 | (8,167 | ) | (13,451 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | — | 42,816 | 7,051 | (4,206 | ) | 45,661 | ||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 35,829 | $ | 8,754 | $ | (12,373 | ) | $ | 32,210 |
22
BEACON ROOFING SUPPLY, INC.
Condensed Consolidating Statements of Cash Flows
(unaudited; in thousands)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | |||||||||||||||
Three Months Ended December 31, 2014 | ||||||||||||||||||||
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations and Other | Consolidated Company | ||||||||||||||||
Net cash provided by operating activities | (20,701 | ) | $ | 54,900 | $ | 5,401 | $ | 589 | $ | 40,189 | ||||||||||
Investing activities | ||||||||||||||||||||
Purchases of property and equipment | (148 | ) | (2,697 | ) | (293 | ) | — | (3,138 | ) | |||||||||||
Acquisition of businesses | (69,746 | ) | — | — | — | (69,746 | ) | |||||||||||||
Proceeds from sales of assets | — | 115 | — | — | 115 | |||||||||||||||
Intercompany activity | 85,392 | — | — | (85,392 | ) | — | ||||||||||||||
Net cash used in investing activities | 15,498 | (2,582 | ) | (293 | ) | (85,392 | ) | (72,769 | ) | |||||||||||
Financing activities | ||||||||||||||||||||
Borrowings under revolving lines of credit | 147,507 | — | — | — | 147,507 | |||||||||||||||
Repayments under revolving lines of credit | (140,207 | ) | — | (2,233 | ) | — | (142,440 | ) | ||||||||||||
Repayments under term loan | (2,812 | ) | — | — | — | (2,812 | ) | |||||||||||||
Repayments under equipment financing facilities | — | (1,412 | ) | — | — | (1,412 | ) | |||||||||||||
Proceeds from exercise of options | 662 | — | — | — | 662 | |||||||||||||||
Excess tax benefit from equity-based compensation | 53 | — | — | — | 53 | |||||||||||||||
Intercompany activity | — | (84,087 | ) | (1,306 | ) | 85,393 | — | |||||||||||||
Net cash (used in) provided by financing activities | 5,203 | (85,499 | ) | (3,539 | ) | 85,393 | 1,558 | |||||||||||||
Effect of exchange rate changes on cash | — | — | (113 | ) | — | (113 | ) | |||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (33,181 | ) | 1,456 | 590 | (31,135 | ) | |||||||||||||
Cash and cash equivalents, beginning of period | — | 58,053 | 3,241 | (6,822 | ) | 54,472 | ||||||||||||||
Cash and cash equivalents, end of period | — | $ | 24,872 | $ | 4,697 | $ | (6,232 | ) | $ | 23,337 |
23