Beacon Roofing Supply 8K Reports Fourth Quarter and Fiscal Year 2019 Results | BECN 25 Nov 19

Exhibit 99.1

Beacon Roofing Supply Reports Fourth Quarter and Fiscal Year 2019 Results

Fourth quarter highlighted by strong residential roofing growth and robust operating cash performance

Executive Vice President and Chief Financial Officer Joseph Nowicki to depart later this fiscal year

•	Record fourth quarter net sales of $2.03 billion, including 11.5% daily sales growth in organic residential roofing vs. prior year

•	Fourth quarter operating cash flow of $407.6 million, driving total debt reduction of approximately $345 million

•	Three-year cumulative annual operating cash flow of over $1 billion

•	Fourth quarter net income of $27.4 million; Adjusted EBITDA of $169.1 million

•	Refinanced $300 million senior notes in October 2019, extending maturity to 2026 and lowering interest rate from 6.375% to 4.5%

HERNDON, VA.—(BUSINESS WIRE)—November 25, 2019—Beacon Roofing Supply, Inc. (Nasdaq: BECN) (“Beacon” or the “Company”) announced results today for its fourth quarter and fiscal year ended September 30, 2019 (“2019”). The Company also announced that Executive Vice President and Chief Financial Officer Joseph Nowicki will leave the Company later this fiscal year to shift focus to his family, charitable work and Board service. Mr. Nowicki will remain CFO during the Company’s nationwide search for his successor and will support the transition of his duties until his departure.

Julian Francis, Beacon’s new President and Chief Executive Officer, stated: “In joining Beacon, I recognize the great opportunity offered by this industry and the Company’s demonstrated long-term growth, EBITDA margins and operating cash flow. We are now pivoting from a growth run via acquisitions to a focus on organic growth, gross margin expansion and operating expense rigor. Several positive elements are evident in our fourth quarter performance, including 11.5% organic daily sales growth in residential roofing, continued strong operating cash flow, and positive SG&A expense leverage. I see tremendous opportunities to substantially improve upon Beacon’s financial performance. Operationally, I am turning immediate focus to growing our customer base, differentiating e-commerce capabilities through our digital platform, and enhancing the productivity of our branch network. We are just getting started, and I am proud to lead Beacon forward into this exciting next stage of growth.”

Fourth Quarter

Net sales increased 4.9% to $2.03 billion in 2019, from $1.94 billion in 2018. Consolidated residential roofing product sales increased 12.7%, consolidated non-residential roofing product sales increased 2.4%, and consolidated complementary product sales decreased 3.2% compared to the prior year. Existing markets net sales increased 4.8% compared to the prior year, driven mainly by 13.2% growth in residential roofing. The fourth quarter of fiscal years 2019 and 2018 had 64 and 63 business days, respectively.

Net income was $27.4 million, compared to $48.3 million in 2018. Net income attributable to common shareholders was $21.4 million, compared to $42.3 million in 2018. Diluted net income (loss) per share (“EPS”) was $0.27, compared to $0.54 in 2018. Fourth quarter results were negatively impacted by lower gross margins and higher acquisition-related costs compared to 2018. Fourth quarter results were positively impacted by existing market sales growth in residential roofing.

Adjusted Net Income (Loss) was $82.0 million, compared to $84.1 million in 2018. Adjusted EPS was $1.04, compared to $1.07 in 2018. Adjusted EBITDA was $169.1 million, compared to $178.3 million in 2018. (Please see the included financial tables for a reconciliation of “Adjusted” financial measures to the most directly comparable GAAP financial measures, as well as further detail on the components driving the net changes over the comparative periods.)

Fiscal Year

Net sales increased 10.7% to $7.11 billion, from $6.42 billion in 2018. Consolidated residential roofing product sales increased 10.0%, consolidated non-residential roofing product sales increased 4.2%, and consolidated complementary product sales increased 17.0% compared to the prior year. Existing markets net sales increased 3.3% compared to the prior year, driven mainly by 7.0% growth in residential roofing and improved pricing. Fiscal years 2019 and 2018 had 253 and 252 business days, respectively.

Net income (loss) was $(10.6) million, compared to $98.6 million in 2018. Net income (loss) attributable to common shareholders was $(34.6) million, compared to $80.6 million in 2018. EPS was $(0.51), compared to $1.05 in 2018. Fiscal year 2019 results were negatively impacted by higher acquisition-related costs compared to 2018 as well as increase in interest expense directly tied to the financing of the Allied acquisition. In addition, 2018 results include a $48.8 million net tax benefit resulting from the enactment of the Tax Cuts and Jobs Act of 2017. Fiscal year 2019 results were positively impacted by existing market sales growth in residential roofing.

Adjusted Net Income (Loss) was $176.2 million, compared to $206.7 million in 2018. Adjusted EPS was $2.26, compared to $2.70 in 2018. Adjusted EBITDA was $476.0 million, compared to $483.6 million in 2018. (Please see the included financial tables for a reconciliation of “Adjusted” financial measures to the most directly comparable GAAP financial measures as well as further detail on the components driving the net changes over the comparative periods).

The Company will host a webcast and conference call today at 5:00 p.m. ET to discuss these results. The webcast link and call-in details are as follows:


What:	Beacon Roofing Supply Fourth Quarter 2019 Earnings Conference Call
When	Monday, November 25, 2019
Time:	5:00 p.m. ET
Webcast:	http://ir.beaconroofingsupply.com/events-presentations (live and replay)
Live Call:	720-634-9063; Conf. ID #3964617

To assure timely access, conference call participants should dial in prior to the 5:00 p.m. ET start time.

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.

About Beacon Roofing Supply

Founded in 1928, Beacon Roofing Supply is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products in North America, operating over 500 branches throughout all 50 states in the U.S. and 6 provinces in Canada. Beacon serves an extensive base of over 100,000 customers, utilizing its vast branch network and diverse service offerings to provide high-quality products and support throughout the entire business lifecycle. Beacon also offers its own private label brand, TRI-BUILT, and has a proprietary digital account management suite, Beacon Pro+, which allows customers to manage their businesses online. A Fortune 500 company, Beacon’s stock is traded on the Nasdaq Global Select Market under the ticker symbol BECN. To learn more about Beacon and its brands, please visit www.becn.com.

Beacon Roofing Supply, Inc.
Joseph Nowicki, Executive VP & CFO

571-323-3939
Joseph.Nowicki@becn.com

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

	Three Months Ended September 30,										Year Ended September 30,
	2019		% of Net Sales			2018		% of Net Sales			2019			% of Net Sales			2018			% of Net Sales
Net sales	$	2,029,913		100.0	%	$	1,935,756		100.0	%	$	7,105,160			100.0	%	$	6,418,311			100.0	%
Cost of products sold		1,536,451		75.7	%		1,444,459		74.6	%		5,368,605			75.6	%		4,824,990			75.2	%
Gross profit		493,462		24.3	%		491,297		25.4	%		1,736,555			24.4	%		1,593,321			24.8	%
Operating expense¹:
Selling, general and administrative		334,115		16.5	%		328,658		17.0	%		1,311,043			18.4	%		1,187,192			18.5	%
Depreciation		17,916		0.9	%		18,678		1.0	%		70,695			1.0	%		60,318			0.9	%
Amortization		51,557		2.5	%		35,846		1.9	%		207,065			2.9	%		141,185			2.2	%
Total operating expense		403,588		19.9	%		383,182		19.9	%		1,588,803			22.3	%		1,388,695			21.6	%
Income (loss) from operations		89,874		4.4	%		108,115		5.5	%		147,752			2.1	%		204,626			3.2	%
Interest expense, financing costs, and other²		41,632		2.1	%		37,058		1.9	%		158,534			2.2	%		136,544			2.1	%
Income (loss) before provision for income taxes		48,242		2.3	%		71,057		3.6	%		(10,782	)		(0.1	%)		68,082			1.1	%
Provision for (benefit from) income taxes		20,862		1.0	%		22,747		1.2	%		(170	)		0.0	%		(30,544	)		(0.4	%)
Net income (loss)		27,380		1.3	%		48,310		2.4	%		(10,612	)		(0.1	%)		98,626			1.5	%
Dividends on preferred shares³		6,000		0.3	%		6,000		0.4	%		24,000			0.4	%		18,000			0.2	%
Net income (loss) attributable to common shareholders	$	21,380		1.0	%	$	42,310		2.0	%	$	(34,612	)		(0.5	%)	$	80,626			1.3	%

Weighted-average common stock outstanding:
Basic		68,520,451					68,119,406					68,424,288						68,012,879
Diluted		69,253,100					69,042,868					68,424,288						69,191,039

Net income (loss) per share⁴:
Basic	$	0.27				$	0.54				$	(0.51	)				$	1.07
Diluted	$	0.27				$	0.54				$	(0.51	)				$	1.05

______________________________________________

Operating expense for the three months ended September 30, 2019 and 2018 includes acquisition and business restructuring costs of $6.2 million and $10.6 million, respectively. Operating expense for the years ended September 30, 2019 and 2018 includes acquisition and business restructuring costs of $29.2 million and $54.4 million, respectively.

Interest expense, financing costs, and other for the three months ended September 30, 2019 and 2018 includes acquisition costs of $6.3 million and $2.7 million, respectively. Interest expense, financing costs, and other for the years ended September 30, 2019 and 2018 includes acquisition costs of $15.4 million and $24.8 million, respectively.

Three months ended September 30, 2019 and 2018 amounts are composed of $5.0 million in undeclared cumulative Preferred Stock dividends, as well as an additional $1.0 million of Preferred Stock dividends that had been declared and paid as of period end. Year ended September 30, 2019 amount is composed of $5.0 million in undeclared cumulative Preferred Stock dividends, as well as an additional $19.0 million of Preferred Stock dividends that had been declared and paid as of period end. Year ended September 30, 2018 amount is composed of $5.0 million in undeclared cumulative Preferred Stock dividends, as well as an additional $13.0 million of Preferred Stock dividends that had been declared and paid as of period end.

⁴

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents or the conversion of Preferred Stock. Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock unit awards. Diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common shareholders by the fully diluted weighted-

average number of common shares outstanding during the period. The following table presents the components and calculations of basic and diluted net income (loss) per share for each period presented (in thousands, except share and per share amounts):

	Three Months Ended September 30,						Year Ended September 30,
	2019			2018			2019			2018
Net income (loss)	$	27,380		$	48,310		$	(10,612	)	$	98,626
Dividends on preferred shares		6,000			6,000			24,000			18,000
Net income (loss) attributable to common shareholders	$	21,380		$	42,310		$	(34,612	)	$	80,626
Undistributed income allocated to participating securities		(2,650	)		(5,406	)		-			(7,742	)
Net income (loss) attributable to common shareholders - basic and diluted	$	18,730		$	36,904		$	(34,612	)	$	72,884

Weighted-average common shares outstanding - basic		68,520,451			68,119,406			68,424,288			68,012,879
Effect of common share equivalents		732,649			1,061,756			-			1,178,160
Weighted-average common shares outstanding - diluted		69,253,100			69,181,162			68,424,288			69,191,039

Net income (loss) per share - basic	$	0.27		$	0.54		$	(0.51	)	$	1.07
Net income (loss) per share - diluted	$	0.27		$	0.54		$	(0.51	)	$	1.05

BEACON ROOFING SUPPLY, INC.

Consolidated Balance Sheets

(In thousands)

	September 30,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	72,287		$	129,927
Accounts receivable, net		1,108,134			1,090,533
Inventories, net		1,018,183			936,047
Prepaid expenses and other current assets		315,643			244,360
Total current assets		2,514,247			2,400,867
Property and equipment, net		260,376			280,407
Goodwill		2,490,590			2,491,779
Intangibles, net		1,125,540			1,334,366
Other assets, net		2,059			1,243
Total assets	$	6,392,812		$	6,508,662

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	822,931		$	880,872
Accrued expenses		599,155			611,539
Current portions of long-term debt/obligations		18,689			19,661
Total current liabilities		1,440,775			1,512,072
Borrowings under revolving lines of credit, net		80,961			92,442
Long-term debt, net		2,494,623			2,494,725
Deferred income taxes, net		103,913			106,994
Long-term obligations under equipment financing and other, net		4,609			13,639
Other long-term liabilities		6,383			5,290
Total liabilities		4,131,264			4,225,162

Convertible preferred stock		399,195			399,195

Stockholders' equity:
Common stock		685			681
Undesignated preferred stock		-			-
Additional paid-in capital		1,083,042			1,067,040
Retained earnings		799,222			833,834
Accumulated other comprehensive income (loss)		(20,596	)		(17,250	)
Total stockholders' equity		1,862,353			1,884,305
Total liabilities and stockholders' equity	$	6,392,812		$	6,508,662

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Cash Flows

(In thousands)

	Year Ended September 30,
	2019			2018
Operating Activities
Net income (loss)	$	(10,612	)	$	98,626
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		277,761			201,503
Stock-based compensation		16,360			16,473
Certain interest expense and other financing costs		12,102			17,338
Beneficial lease amortization		2,290			-
Loss on debt extinguishment		-			1,248
Gain on sale of fixed assets		(3,830	)		(1,294	)
Deferred income taxes		(2,555	)		(30,118	)
Changes in operating assets and liabilities, net of the effects of businesses acquired in the period:
Accounts receivable		(18,501	)		(45,093	)
Inventories		(82,774	)		(65,069	)
Prepaid expenses and other assets		(70,815	)		57,554
Accounts payable and accrued expenses		92,133			287,428
Other liabilities		1,094			785
Net cash provided by (used in) operating activities		212,653			539,381

Investing Activities
Purchases of property and equipment		(57,031	)		(46,010	)
Acquisition of businesses, net		(163,973	)		(2,740,480	)
Proceeds from the sale of assets		9,269			2,149
Net cash provided by (used in) investing activities		(211,735	)		(2,784,341	)

Financing Activities
Borrowings under revolving lines of credit		2,100,085			2,807,741
Repayments under revolving lines of credit		(2,113,982	)		(2,707,741	)
Borrowings under term loan		-			970,000
Repayments under term loan		(9,700	)		(445,850	)
Borrowings under senior notes		-			1,300,000
Payment of debt issuance costs		(817	)		(65,788	)
Repayments under equipment financing facilities and other		(10,001	)		(11,593	)
Proceeds from issuance of convertible preferred stock		-			400,000
Payment of stock issuance costs		-			(1,279	)
Payment of dividends on preferred stock		(24,000	)		(12,978	)
Proceeds from issuance of common stock related to equity awards		3,314			7,514
Taxes paid related to net share settlement of equity awards		(3,668	)		(3,975	)
Net cash provided by (used in) financing activities		(58,769	)		2,236,051

Effect of exchange rate changes on cash and cash equivalents		211			586

Net increase (decrease) in cash and cash equivalents		(57,640	)		(8,323	)
Cash and cash equivalents, beginning of period		129,927			138,250
Cash and cash equivalents, end of period	$	72,287		$	129,927

BEACON ROOFING SUPPLY, INC.

Consolidated Sales by Product Line

(In thousands)

Consolidated Sales by Product Line
	Three Months Ended September 30,
	2019					2018					Change
	Net Sales		Mix %			Net Sales		Mix %			$			%
Residential roofing products	$	912,201		44.9	%	$	809,498		41.8	%	$	102,703			12.7	%
Non-residential roofing products		505,160		24.9	%		493,438		25.5	%		11,722			2.4	%
Complementary building products		612,552		30.2	%		632,820		32.7	%		(20,268	)		(3.2	%)
	$	2,029,913		100.0	%	$	1,935,756		100.0	%	$	94,157			4.9	%


Existing Market¹ Sales by Product Line
	Three Months Ended September 30,
	2019					2018					Change
	Net Sales		Mix %			Net Sales		Mix %			$			%
Residential roofing products	$	911,693		45.1	%	$	805,044		41.8	%	$	106,649			13.2	%
Non-residential roofing products		504,097		25.0	%		492,085		25.6	%		12,012			2.4	%
Complementary building products		602,705		29.9	%		628,693		32.6	%		(25,988	)		(4.1	%)
	$	2,018,495		100.0	%	$	1,925,822		100.0	%	$	92,673			4.8	%


Existing Market¹ Sales by Business Day²
	Three Months Ended September 30,
	2019					2018					Change
	Net Sales		Mix %			Net Sales		Mix %			$			%
Residential roofing products	$	14,245		45.1	%	$	12,778		41.8	%	$	1,467			11.5	%
Non-residential roofing products		7,877		25.0	%		7,811		25.6	%		66			0.8	%
Complementary building products		9,417		29.9	%		9,979		32.6	%		(562	)		(5.6	%)
	$	31,539		100.0	%	$	30,568		100.0	%	$	971			3.2	%

__________________________________________________

¹	Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of the fourth quarter of fiscal year 2019.

²	There were 64 and 63 business days in the quarters ended September 30, 2019 and 2018, respectively.

BEACON ROOFING SUPPLY, INC.

Consolidated Sales by Product Line

(In thousands)

Consolidated Sales by Product Line
	Year Ended September 30,
	2019					2018					Change
	Net Sales		Mix %			Net Sales		Mix %			$			%
Residential roofing products	$	3,079,628		43.3	%	$	2,798,756		43.6	%	$	280,872			10.0	%
Non-residential roofing products		1,705,178		24.0	%		1,635,963		25.5	%		69,215			4.2	%
Complementary building products		2,320,354		32.7	%		1,983,592		30.9	%		336,762			17.0	%
	$	7,105,160		100.0	%	$	6,418,311		100.0	%	$	686,849			10.7	%


Existing Market¹ Sales by Product Line
	Year Ended September 30,
	2019					2018					Change
	Net Sales		Mix %			Net Sales		Mix %			$			%
Residential roofing products	$	2,207,851		53.2	%	$	2,063,800		51.3	%	$	144,051			7.0	%
Non-residential roofing products		1,183,422		28.5	%		1,200,934		29.9	%		(17,512	)		(1.5	%)
Complementary building products		759,906		18.3	%		755,454		18.8	%		4,452			0.6	%
	$	4,151,179		100.0	%	$	4,020,188		100.0	%	$	130,991			3.3	%


Existing Market¹ Sales by Business Day²
	Year Ended September 30,
	2019					2018					Change
	Net Sales		Mix %			Net Sales		Mix %			$			%
Residential roofing products	$	8,727		53.2	%	$	8,190		51.3	%	$	537			6.6	%
Non-residential roofing products		4,678		28.5	%		4,766		29.9	%		(88	)		(1.8	%)
Complementary building products		3,004		18.3	%		2,998		18.8	%		6			0.2	%
	$	16,409		100.0	%	$	15,954		100.0	%	$	455			2.9	%

__________________________________________________

¹	Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of fiscal year 2019.

²	There were 253 and 252 business days in the years ended September 30, 2019 and 2018, respectively.

BEACON ROOFING SUPPLY, INC.

Adjusted Net Income (Loss) and Adjusted EPS¹

(In thousands, except per share amounts)

	Three Months Ended September 30,												Year Ended September 30,
	2019						2018						2019						2018
	Amount			Per Share²			Amount			Per Share²			Amount			Per Share³			Amount			Per Share³
Net income (loss)	$	27,380		$	0.35		$	48,310		$	0.61		$	(10,612	)	$	(0.14	)	$	98,626		$	1.29
Adjustments:
Acquisition costs⁴		58,340			0.74			49,177			0.63			244,262			3.13			220,466			2.89
Business restructuring costs⁵		5,689			0.07			-			-			7,354			0.09			-			-
Effects of tax reform⁶		-			-			344			-			(462	)		(0.01	)		(48,805	)		(0.64	)
Total adjustments		64,029			0.81			49,521			0.63			251,154			3.21			171,661			2.25
Tax impact of total adjustments⁷		(9,379	)		(0.12	)		(13,747	)		(0.17	)		(64,326	)		(0.81	)		(63,607	)		(0.84	)
Total adjustments, net of tax		54,650			0.69			35,774			0.46			186,828			2.40			108,054			1.41
Adjusted Net Income (Loss)	$	82,030		$	1.04		$	84,084		$	1.07		$	176,216		$	2.26		$	206,680		$	2.70

____________________________________________

Adjusted Net Income (Loss) is defined as net income that excludes acquisition costs, business restructuring costs, and the effects of tax reform. Adjusted net income (loss) per share or "Adjusted EPS" is calculated by dividing the Adjusted Net Income (Loss) for the period by the weighted-average diluted shares outstanding for the period after assuming the full conversion of the participating Preferred Stock.

The weighted-average share count utilized in the calculation of Adjusted EPS for the quarter ended September 30, 2019 is 78,947,719, which is equal to the 69,253,100 diluted weighted-average shares outstanding plus the assumed conversion of 9,694,619 weighted-average shares of participating Preferred Stock. The weighted-average share count utilized in the calculation of Adjusted EPS for the quarter ended September 30, 2018 is 78,737,487, which is equal to the 69,042,868 diluted weighted-average shares outstanding plus the assumed conversion of 9,694,619 weighted-average shares of participating Preferred Stock. The shares of participating Preferred Stock were excluded from the GAAP net income (loss) per share calculations for both periods due to their anti-dilutive nature.

The weighted-average share count utilized in the calculation of Adjusted EPS for the year ended September 30, 2019 is 78,118,907, which is equal to the 68,424,288 diluted weighted-average shares outstanding plus the assumed conversion of 9,694,619 weighted-average shares of participating Preferred Stock. The weighted-average share count utilized in the calculation of Adjusted EPS for the year ended September 30, 2018 is 76,415,522, which is equal to the 69,191,039 diluted weighted-average shares outstanding plus the assumed conversion of 7,224,483 weighted-average shares of participating Preferred Stock. The shares of participating Preferred Stock were excluded from the GAAP net income (loss) per share calculations for both periods due to their anti-dilutive nature.

⁴	The following table presents a breakout of the components of acquisition costs for each of the periods indicated:

	Three Months Ended September 30,				Year Ended September 30,
	2019		2018		2019		2018
Amortization of intangible assets	$	51,557	$	35,847	$	207,065	$	141,185
Costs classified as selling, general, and administrative^a		3,757		10,614		25,095		54,442
Amortization of debt issuance costs		3,026		2,716		12,102		24,839
Total acquisition costs		58,340		49,177		244,262		220,466

__________________________________________________

^a.

Selling, general, and administrative costs related to acquisitions are mainly composed of professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses.

⁵	Business restructuring costs are composed of costs stemming from headcount rationalization efforts and accrued estimated costs related to employee benefit restructuring.

⁶	Impact of the Tax Cuts and Jobs Act of 2017.

⁷

The effective tax rate applied to these adjustments is calculated by using adjusted pre-tax income while factoring in discrete tax adjustments for the fiscal year. The tax impact of adjustments for the quarter ended September 30, 2019 and 2018 were calculated using an effective tax rate of 14.6% and 28.0%, respectively. The tax impact of adjustments for the year ended September 30, 2019 and 2018 were calculated using an effective tax rate of 25.8% and 28.9%, respectively.

We use Adjusted Net Income (Loss) and Adjusted EPS to evaluate financial performance, analyze the underlying trends in our business and establish operational goals and forecasts that are used when allocating resources.

We believe that Adjusted Net Income (Loss) and Adjusted EPS are useful measures because they permit investors to better understand changes in underlying operating performance over comparative periods by providing financial results that are unaffected by cyclical variances that can be driven by items such as investment activity or purchase accounting adjustments.

While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful to investors when evaluating our business, they are not prepared and presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), and therefore should be considered supplemental in nature. You should not consider Adjusted Net Income (Loss) or Adjusted EPS in isolation or as a substitute for net income and net income per share or diluted earnings per share calculated in accordance with GAAP. Adjusted Net Income (Loss) and Adjusted EPS may have material limitations including, but not limited to, the exclusion of certain costs without a corresponding reduction of net income for the income generated by the assets to which the excluded costs are related. In addition, Adjusted Net Income (Loss) and Adjusted EPS may differ from similarly titled measures presented by other companies.

BEACON ROOFING SUPPLY, INC.

Adjusted EBITDA¹

(In thousands)

	Three Months Ended September 30,						Year Ended September 30,
	2019			2018			2019			2018
Net income (loss)	$	27,380		$	48,310		$	(10,612	)	$	98,626
Interest expense, net		38,446			38,740			160,246			143,074
Income taxes		20,862			22,747			(170	)		(30,544	)
Depreciation and amortization		69,473			54,524			277,760			201,503
Stock-based compensation		3,459			3,340			16,360			16,473
Acquisition costs²		3,757			10,614			25,095			54,441
Business restructuring costs³		5,689			-			7,354			-
Adjusted EBITDA	$	169,066		$	178,275		$	476,033		$	483,573

Adjusted EBITDA as a % of net sales		8.3	%		9.2	%		6.7	%		7.5	%

__________________________________________________

Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, acquisition costs, and business restructuring costs. EBITDA is a measure commonly used in the distribution industry, and we present Adjusted EBITDA to enhance your understanding of our operating performance.

²	Represents selling, general, and administrative costs related to acquisitions (excluding the impact of tax). Other items the Company classifies as acquisition costs are embedded in other balances of the table.

³	Business restructuring costs are composed of costs stemming from headcount rationalization efforts and accrued estimated costs related to employee benefit restructuring.

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

We believe that Adjusted EBITDA is a useful measure because it permits investors to better understand changes in underlying operating performance over comparative periods by providing financial results that are unaffected by cyclical variances that can be driven by items such as investment activity or purchase accounting adjustments.

While we believe Adjusted EBITDA is useful to investors when evaluating our business, it is not prepared and presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), and therefore should be considered supplemental in nature. Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. Adjusted EBITDA may have material limitations including, but not limited to, the exclusion of certain costs without a corresponding reduction of net income for the income generated by the assets to which the excluded costs are related. In addition, Adjusted EBITDA may differ from similarly titled measures presented by other companies.

Beacon Roofing Supply (BECN) 8-KBeacon Roofing Supply Reports Fourth Quarter and Fiscal Year 2019 Results