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Beacon Reports Third Quarter 2020 Results

Beacon (Nasdaq: BECN) (the “Company”) announced results today for its third quarter and nine-month period ended June 30, 2020 (“2020”).

“Fiscal third quarter results were highlighted by exceptional operating cost and cash flow performance,” said Julian Francis, Beacon’s President and Chief Executive Officer. “Our team rapidly implemented a broad-based cost reduction strategy beginning in March, resulting in meaningful sequential and year-over-year expense decreases, as well as an Adjusted EBITDA margin that was consistent with the prior year period. Although certain cost actions were clearly temporary in nature, we remain focused on improving our expense structure to produce permanent efficiency gains and foster attractive levels of operating leverage as demand improves. Sales steadily improved throughout the quarter, as COVID-19 restrictions eased and economies reopened, highlighted by June daily sales that were similar to prior year levels. Our limited reliance on discretionary product categories and our diverse mix of residential and non-residential markets provides our business with stability in this challenging environment. We produced record operating cash flow this quarter, leveraging favorable operating execution and tighter management of working capital. While uncertainties from the pandemic remain, our results this quarter have reinforced our commitment to our key strategic initiatives and demonstrated our ability to drive productivity and generate strong operating cash flow, even in difficult times.”

Third Quarter

Net sales decreased 6.9% to $1.79 billion, from $1.92 billion in 2019. The sales decrease was influenced by softer demand early in the quarter resulting from government restrictions in reaction to COVID-19, partially offset by stable sales in states/provinces without similar restrictions. Residential roofing product sales decreased 1.3%, non-residential roofing product sales decreased 9.6%, and complementary product sales decreased 12.5% compared to the prior year. The third quarter of fiscal years 2020 and 2019 each had 64 business days.

Net income (loss) was $(6.7) million, compared to $31.0 million in 2019. Net income (loss) attributable to common shareholders was $(12.7) million, compared to $25.0 million in 2019. EPS was $(0.18), compared to $0.32 in 2019. Third quarter results were primarily impacted by reduced sales and lower gross margins, largely attributable to a softer demand environment induced by COVID-19, as well as a net $32.8 million tax provision stemming from the adjustment of a prior quarter deferred tax benefit related to the Company’s application of the CARES Act. These impacts were partially offset by the implementation of aggressive cost-cutting actions, including reductions in both hours worked and headcount as well as decreases in fleet costs and other discretionary expenditures.

Adjusted Net Income (Loss) was $69.5 million, compared to $72.6 million in 2019. Adjusted EBITDA was $147.5 million, compared to $157.8 million in 2019.

Please see the included financial tables for a reconciliation of “Adjusted” non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as further detail on the components driving the net changes over the comparative periods.

Year-to-Date

Net sales decreased 2.9% to $4.93 billion, from $5.08 billion in 2019. The sales decrease was primarily influenced by softer demand resulting from government restrictions in reaction to COVID-19 and decreased hurricane-related demand in the Mid-Atlantic and Southeast, partially offset by the continued positive impact of our industry-leading digital platform. Residential roofing product sales decreased 1.7%, non-residential roofing product sales were flat, and complementary product sales decreased 6.5% compared to the prior year. The first nine months of fiscal years 2020 and 2019 had 190 and 189 business days, respectively.

Net income (loss) was $(152.8) million, compared to $(38.0) million in 2019. Net income (loss) attributable to common shareholders was $(170.8) million, compared to $(56.0) million in 2019. EPS was $(2.48), compared to $(0.82) in 2019. Nine-month results were primarily impacted by the second quarter write-off of certain trade names in connection with the Company’s rebranding efforts that were announced in January 2020.

Adjusted Net Income (Loss) was $85.3 million, compared to $94.2 million in 2019. Adjusted EBITDA was $280.7 million, compared to $307.0 million in 2019.

Please see the included financial tables for a reconciliation of “Adjusted” non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as further detail on the components driving the net changes over the comparative periods.

Earnings Call

The Company will host a conference call and webcast today at 5:00 p.m. ET to discuss these results. Details for the earnings release event are as follows:

What:

Beacon Third Quarter 2020 Earnings Call

When:

Thursday, August 6, 2020

Time:

5:00 p.m. ET

Access:

Register for the conference call or webcast by visiting:

Beacon Investor Relations – Events & Presentations

Upon registration, participants will receive an email containing event details and unique access codes. To ensure timely access, participants should register for the earnings call at least 10 minutes before the 5:00 p.m. ET start time. An archived copy of the webcast will be available on the Events & Presentations page shortly after the call.

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 Form 10-K for the fiscal year ended September 30, 2019 and Form 10-Q for the quarter ended March 31, 2020. 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

Founded in 1928, Beacon is a Fortune 500, publicly-traded distributor of residential and commercial 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 110,000 customers, utilizing its vast branch network and diverse service offerings to provide high-quality products and support throughout the entire business lifecycle. Beacon 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. Beacon’s stock is traded on the Nasdaq Global Select Market under the ticker symbol BECN. To learn more about Beacon, please visit www.becn.com

 

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

 

Three Months Ended June 30,

Nine Months Ended June 30,

2020

% of

Net Sales

2019

% of

Net Sales

2020

% of

Net Sales

2019

% of

Net Sales

Net sales

$

1,792,505

100.0

%

$

1,924,534

100.0

%

$

4,926,103

100.0

%

$

5,075,247

100.0

%

Cost of products sold

1,360,373

75.9

%

1,451,998

75.4

%

3,740,873

75.9

%

3,832,154

75.5

%

Gross profit

432,132

24.1

%

472,536

24.6

%

1,185,230

24.1

%

1,243,093

24.5

%

Operating expense:

Selling, general and administrative

295,426

16.5

%

328,827

17.1

%

940,855

19.1

%

976,928

19.3

%

Depreciation

16,986

0.9

%

17,731

0.9

%

53,553

1.1

%

52,779

1.0

%

Amortization1

44,825

2.5

%

51,724

2.7

%

276,959

5.6

%

155,508

3.1

%

Total operating expense

357,237

19.9

%

398,282

20.7

%

1,271,367

25.8

%

1,185,215

23.4

%

Income (loss) from operations

74,895

4.2

%

74,254

3.9

%

(86,137

)

(1.7

%)

57,878

1.1

%

Interest expense, financing costs, and other2

35,059

2.0

%

38,089

2.0

%

96,806

2.0

%

116,902

2.3

%

Loss on debt extinguishment

-

0.0

%

-

0.0

%

14,678

0.3

%

-

0.0

%

Income (loss) before provision for income taxes

39,836

2.2

%

36,165

1.9

%

(197,621

)

(4.0

%)

(59,024

)

(1.2

%)

Provision for (benefit from) income taxes3

46,561

2.6

%

5,178

0.3

%

(44,846

)

(0.9

%)

(21,032

)

(0.5

%)

Net income (loss)

(6,725

)

(0.4

%)

30,987

1.6

%

(152,775

)

(3.1

%)

(37,992

)

(0.7

%)

Dividends on Preferred Stock4

6,000

0.3

%

6,000

0.3

%

18,000

0.4

%

18,000

0.4

%

Net income (loss) attributable to common shareholders

$

(12,725

)

(0.7

%)

$

24,987

1.3

%

$

(170,775

)

(3.5

%)

$

(55,992

)

(1.1

%)

Weighted-average common stock outstanding:

Basic

68,840,849

68,477,946

68,775,920

68,391,882

Diluted5

68,840,849

69,265,384

68,775,920

68,391,882

Net income (loss) per share6:

Basic

$

(0.18

)

$

0.32

$

(2.48

)

$

(0.82

)

Diluted

$

(0.18

)

$

0.32

$

(2.48

)

$

(0.82

)

____________________________________

  1. Nine months ended June 30, 2020 amount includes non-cash accelerated intangible asset amortization of $142.6 million in connection with the Rebranding.
  2. Nine months ended June 30, 2020 amount includes a $5.6 million settlement received in connection with a class action lawsuit and a $5.3 million refund received as the final true-up of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the acquisition of Allied Building Products Corp. on January 2, 2018 (the “Allied Acquisition”).
  3. Three and nine months ended June 30, 2020 amounts include a tax provision (benefit) of $32.8 million and $(0.5) million, respectively, stemming from the revaluation of deferred tax assets and liabilities made in conjunction with the Company’s application of the CARES Act. Nine months ended June 30, 2020 amount also includes an income tax provision (benefit) of $(36.5) million stemming from a decrease of deferred tax liabilities in connection with the Rebranding.
  4. Three months ended June 30, 2020 and 2019 amounts are composed of $5.0 million in accrued cumulative Preferred Stock dividends and an additional $1.0 million of Preferred Stock dividends that had been declared and paid as of period end. Nine months ended June 30, 2020 and 2019 amounts are composed of $5.0 million in accrued cumulative Preferred Stock dividends and an additional $13.0 million of Preferred Stock dividends that had been declared and paid as of period end.
  5. Amounts do not include 9,694,619 shares issuable upon conversion of the Company’s participating Preferred Stock because such conversion would be anti-dilutive.
  6. 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 June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

Net income (loss)

$

(6,725

)

$

30,987

$

(152,775

)

$

(37,992

)

Dividends on Preferred Stock

6,000

6,000

18,000

18,000

Net income (loss) attributable to common shareholders

$

(12,725

)

$

24,987

$

(170,775

)

$

(55,992

)

Undistributed income allocated to participating securities

-

(3,099

)

-

-

Net income (loss) attributable to common shareholders - basic and diluted

$

(12,725

)

$

21,888

$

(170,775

)

$

(55,992

)

Weighted-average common shares outstanding - basic

68,840,849

68,477,946

68,775,920

68,391,882

Effect of common share equivalents

-

787,438

-

-

Weighted-average common shares outstanding - diluted

68,840,849

69,265,384

68,775,920

68,391,882

Net income (loss) per share - basic

$

(0.18

)

$

0.32

$

(2.48

)

$

(0.82

)

Net income (loss) per share - diluted

$

(0.18

)

$

0.32

$

(2.48

)

$

(0.82

)

 

BEACON ROOFING SUPPLY, INC.

Consolidated Balance Sheets

(In thousands)

 

June 30,

September 30,

June 30,

2020

2019

2019

Assets

Current assets:

Cash and cash equivalents

$

1,018,376

$

72,287

$

27,729

Accounts receivable, net

993,757

1,108,134

1,079,091

Inventories, net

951,538

1,018,183

1,124,063

Prepaid expenses and other current assets

301,964

315,643

361,831

Total current assets

3,265,635

2,514,247

2,592,714

Property and equipment, net

236,928

260,376

269,041

Goodwill

2,489,760

2,490,590

2,490,940

Intangibles, net

845,217

1,125,540

1,177,694

Operating lease assets

442,287

-

-

Other assets, net

25

2,059

1,243

Total assets

$

7,279,852

$

6,392,812

$

6,531,632

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

780,179

$

822,931

$

643,411

Accrued expenses

559,123

599,155

590,756

Current operating lease liabilities

99,165

-

-

Current portions of long-term debt/obligations

12,858

18,689

19,366

Total current liabilities

1,451,325

1,440,775

1,253,533

Borrowings under revolving lines of credit, net

848,736

80,961

424,011

Long-term debt, net

2,494,474

2,494,623

2,494,648

Deferred income taxes, net

58,099

103,913

110,180

Non-current operating lease liabilities

339,540

-

-

Long-term obligations under equipment financing, net

400

4,609

6,332

Other long-term liabilities

1,351

6,383

5,352

Total liabilities

5,193,925

4,131,264

4,294,056

Convertible Preferred Stock1

399,195

399,195

399,195

Stockholders' equity:

Common stock

688

685

684

Undesignated preferred stock

-

-

-

Additional paid-in capital

1,095,149

1,083,042

1,077,953

Retained earnings

628,447

799,222

777,842

Accumulated other comprehensive income (loss)

(37,552

)

(20,596

)

(18,098

)

Total stockholders' equity

1,686,732

1,862,353

1,838,381

Total liabilities and stockholders' equity

$

7,279,852

$

6,392,812

$

6,531,632

____________________________________

  1. In connection with the Allied Acquisition, the Company completed the sale of 400,000 shares of Series A Cumulative Convertible Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), with an aggregate liquidation preference of $400.0 million, at a purchase price of $1,000 per share, to CD&R Boulder Holdings, L.P. The Preferred Stock is convertible perpetual participating preferred stock of the Company, and conversion of the Preferred Stock into $0.01 par value shares of the Company’s common stock will be at a conversion price of $41.26 per share (or 9,694,619 shares of common stock). The Preferred Stock accumulates dividends at a rate of 6.0% per annum (payable in cash or in-kind, subject to certain conditions). The Preferred Stock is not mandatorily redeemable; therefore, it is classified as mezzanine equity on the Company’s consolidated balance sheets.
 

BEACON ROOFING SUPPLY, INC.

Consolidated Statements of Cash Flows

(In thousands)

 

Nine Months Ended June 30,

2020

2019

Operating Activities

Net income (loss)

$

(152,775

)

$

(37,992

)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

330,513

208,287

Stock-based compensation

13,349

12,901

Certain interest expense and other financing costs

8,608

9,077

Beneficial lease amortization

-

1,714

Loss on debt extinguishment

14,678

-

Gain on sale of fixed assets

(2,008

)

(3,470

)

Deferred income taxes

(41,163

)

3,195

338(h)(10) election refund1

(5,282

)

-

Changes in operating assets and liabilities:

Accounts receivable

113,277

10,970

Inventories

65,817

(188,213

)

Prepaid expenses and other current assets

4,790

(117,520

)

Accounts payable and accrued expenses

(102,565

)

(93,908

)

Other assets and liabilities

3,210

62

Net cash provided by (used in) operating activities

250,449

(194,897

)

Investing Activities

Purchases of property and equipment

(31,397

)

(44,337

)

Acquisition of businesses, net1

5,282

(163,973

)

Proceeds from the sale of assets

2,399

6,200

Net cash provided by (used in) investing activities

(23,716

)

(202,110

)

Financing Activities

Borrowings under revolving lines of credit

2,037,212

1,734,476

Payments under revolving lines of credit

(1,271,233

)

(1,404,836

)

Payments under term loan

(7,275

)

(7,275

)

Borrowings under senior notes

300,000

-

Payment under senior notes

(309,564

)

-

Payment of debt issuance costs

(3,900

)

-

Payments under equipment financing facilities and finance leases

(6,446

)

(7,602

)

Payment of dividends on Preferred Stock

(18,000

)

(18,000

)

Proceeds from issuance of common stock related to equity awards

1,627

1,654

Payment of taxes related to net share settlement of equity awards

(2,866

)

(3,639

)

Net cash provided by (used in) financing activities

719,555

294,778

Effect of exchange rate changes on cash and cash equivalents

(199

)

31

Net increase (decrease) in cash and cash equivalents

946,089

(102,198

)

Cash and cash equivalents, beginning of period

72,287

129,927

Cash and cash equivalents, end of period

$

1,018,376

$

27,729

__________________________________________________

  1. Related to a gain recognized for a partial refund of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the Allied Acquisition.
 

BEACON ROOFING SUPPLY, INC.

Consolidated Sales by Product Line

(In thousands)

 

Sales by Product Line

Three Months Ended June 30,

2020

2019

Change

Net Sales

Mix %

Net Sales

Mix %

$

%

Residential roofing products

$

837,039

46.7

%

$

848,259

44.1

%

$

(11,220

)

(1.3

%)

Non-residential roofing products

426,961

23.8

%

472,105

24.5

%

(45,144

)

(9.6

%)

Complementary building products

528,505

29.5

%

604,170

31.4

%

(75,665

)

(12.5

%)

$

1,792,505

100.0

%

$

1,924,534

100.0

%

$

(132,029

)

(6.9

%)

Sales by Business Day1

Three Months Ended June 30,

2020

2019

Change

Net Sales

Mix %

Net Sales

Mix %

$

%

Residential roofing products

$

13,079

46.7

%

$

13,254

44.1

%

$

(175

)

(1.3

%)

Non-residential roofing products

6,671

23.8

%

7,377

24.5

%

(706

)

(9.6

%)

Complementary building products

8,258

29.5

%

9,440

31.4

%

(1,182

)

(12.5

%)

$

28,008

100.0

%

$

30,071

100.0

%

$

(2,063

)

(6.9

%)

__________________________________________________

  1. The third quarter of fiscal years 2020 and 2019 each had 64 business days.
 

Sales by Product Line

Nine Months Ended June 30,

2020

2019

Change

Net Sales

Mix %

Net Sales

Mix %

$

%

Residential roofing products

$

2,130,825

43.2

%

$

2,168,755

42.7

%

$

(37,930

)

(1.7

%)

Non-residential roofing products

1,200,665

24.4

%

1,200,546

23.7

%

119

0.0

%

Complementary building products

1,594,613

32.4

%

1,705,946

33.6

%

(111,333

)

(6.5

%)

$

4,926,103

100.0

%

$

5,075,247

100.0

%

$

(149,144

)

(2.9

%)

Sales by Business Day1

Nine Months Ended June 30,

2020

2019

Change

Net Sales

Mix %

Net Sales

Mix %

$

%

Residential roofing products

$

11,215

43.2

%

$

11,475

42.7

%

$

(260

)

(2.3

%)

Non-residential roofing products

6,319

24.4

%

6,352

23.7

%

(33

)

(0.5

%)

Complementary building products

8,393

32.4

%

9,026

33.6

%

(633

)

(7.0

%)

$

25,927

100.0

%

$

26,853

100.0

%

$

(926

)

(3.4

%)

__________________________________________________

  1. The first nine months of fiscal years 2020 and 2019 had 190 and 189 business days, respectively.
 

BEACON ROOFING SUPPLY, INC.

Adjusted Net Income (Loss)1

(In thousands)

 

Three Months Ended June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

Net income (loss)

$

(6,725

)

$

30,987

$

(152,775

)

$

(37,992

)

Adjustments:

Acquisition costs2

48,416

60,482

142,925

185,922

Business restructuring costs3

2,846

1,664

167,836

1,664

COVID-19 impact4

36,216

-

2,894

-

Effects of tax reform

-

-

-

(462

)

Total adjustments

87,478

62,146

313,655

187,124

Tax impact of total adjustments5

(11,271

)

(20,563

)

(75,550

)

(54,946

)

Total adjustments, net of tax

76,207

41,583

238,105

132,178

Adjusted Net Income (Loss)

$

69,482

$

72,570

$

85,330

$

94,186

_________________________

  1. Adjusted Net Income (Loss) is defined as net income excluding the impact of acquisition costs, business restructuring costs, the effects of tax reform, and the direct financial impact of the COVID-19 pandemic.
  2. The following table presents a breakout of the components of acquisition costs for each of the periods indicated:
 

Three Months Ended June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

Amortization of intangible assets

$

44,825

$

51,724

$

134,310

$

155,508

Costs classified as selling, general, and administrativea

1,588

5,733

7,887

21,337

Non-operating (income) expensesb

2,003

3,025

728

9,077

Total acquisition costs

$

48,416

$

60,482

$

142,925

$

185,922

___________________________

  1. Mainly composed of professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses.
  2. Amounts include the amortization of debt issuance costs. For the nine months ended June 30, 2020, amounts are offset by a $5.3 million refund received as the final true-up of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the Allied Acquisition.

3. The following table presents a breakout of the components of business restructuring costs for each of the periods indicated:

 

Three Months Ended June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

Amortization in connection with the Rebranding

$

-

$

-

$

142,649

$

-

Costs classified as selling, general, and administrativea

1,069

1,664

1,890

1,664

Non-operating (income) expensesb

1,777

-

23,297

-

Total business restructuring costs

$

2,846

$

1,664

$

167,836

$

1,664

___________________________

  1. Mainly composed of costs stemming from headcount rationalization efforts and certain Rebranding costs.
  2. Amounts include accrued estimated costs related to employee benefit plan withdrawals and amortization of debt issuance costs. Nine months ended June 30, 2020 amount also includes a loss on debt extinguishment of $14.7 million in connection with the October 2019 debt refinancing.

4. Three and nine months ended June 30, 2020 amounts include a tax provision (benefit) of $32.8 million and $(0.5) million, respectively, stemming from the revaluation of deferred tax assets and liabilities made in conjunction with the Company’s application of the CARES Act. Three and nine months ended June 30, 2020 amounts also include $3.4 million of severance and other costs directly related to the Company’s response to the COVID-19 pandemic, which are classified as selling, general and administrative.

5. Represents tax impact on adjustments that are not included in the Company’s income tax provision (benefit) for the period presented. The effective tax rate applied to these adjustments is calculated by using forecasted adjusted pre-tax income while factoring in estimated discrete tax adjustments for the fiscal year. The tax impact of adjustments for the three months ended June 30, 2020 and 2019 were calculated using a blended effective tax rate of 12.9% and 33.1%, respectively. The tax impact of adjustments for the nine months ended June 30, 2020 and 2019 were calculated using an effective tax rate of 24.1% and 29.4%, respectively.

We use Adjusted Net Income (Loss) 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 Net Income (Loss) consistently using the same method each period.

We believe that Adjusted Net Income (Loss) is a useful measure because it permits investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe Adjusted Net Income (Loss) 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. You should not consider Adjusted Net Income (Loss) in isolation or as a substitute for net income calculated in accordance with GAAP. Adjusted Net Income (Loss) 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) may differ from similarly titled measures presented by other companies.

 

BEACON ROOFING SUPPLY, INC.

Adjusted EBITDA1

(In thousands)

 

Three Months Ended June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

Net income (loss)

$

(6,725

)

$

30,987

$

(152,775

)

$

(37,992

)

Interest expense, net

35,360

40,169

105,781

121,800

Income taxes2

46,561

5,178

(44,846

)

(21,032

)

Depreciation and amortization3

61,811

69,455

330,512

208,287

Stock-based compensation

3,532

4,637

13,349

12,901

Acquisition costs4

1,588

5,733

2,605

21,337

Business restructuring costs5

1,962

1,664

22,589

1,664

COVID-19 impact6

3,426

-

3,449

-

Adjusted EBITDA

$

147,515

$

157,823

$

280,664

$

306,965

Net sales

$

1,792,505

$

1,924,534

$

4,926,103

$

5,075,247

Net margin7

(0.4

%)

1.6

%

(3.1

%)

(0.7

%)

Adjusted EBITDA margin7

8.2

%

8.2

%

5.7

%

6.0

%

_________________________________

  1. Adjusted EBITDA is defined as net income excluding the impact of interest expense (net of interest income), income taxes, depreciation and amortization, stock-based compensation, acquisition costs, business restructuring costs, and the direct financial impact of the COVID-19 pandemic.
  2. Three and nine months ended June 30, 2020 amounts include a tax provision (benefit) of $32.8 million and $(0.5) million, respectively, stemming from the revaluation of deferred tax assets and liabilities made in conjunction with the Company’s application of the CARES Act. Nine months ended June 30, 2020 amount also includes an income tax provision (benefit) of $(36.5) million stemming from a decrease of deferred tax liabilities in connection with the Rebranding.
  3. Nine months ended June 30, 2020 amount includes the impact of non-cash accelerated intangible asset amortization of $142.6 million related to the write-off of certain trade names in connection with the Rebranding.
  4. Includes selling, general, and administrative costs related to acquisitions such as professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses. For the nine months ended June 30, 2020, amounts are offset by a $5.3 million refund received as the final true-up of the $164.0 million payment resulting from the 338(h)(10) election made in connection with the Allied Acquisition. Other items the Company classifies as acquisition costs are embedded within the other balances reported in the table.
  5. Amounts include accrued estimated costs related to employee benefit plan withdrawals, costs stemming from headcount rationalization efforts, and certain Rebranding costs. Nine months ended June 30, 2020 amount also includes a loss on debt extinguishment of $14.7 million in connection with October 2019 debt refinancing. Other items the Company classifies as business restructuring costs are embedded within the other balances reported in the table.
  6. Mainly composed of severance and other costs directly related to the Company’s response to the COVID-19 pandemic. Other items the Company classifies as part of the COVID-19 impact are embedded within the other balances reported in the table.
  7. We define net margin as net income (loss) divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

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 over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe Adjusted EBITDA is useful to investors when evaluating our business, it is not prepared and presented in accordance with 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, INC.

Adjusted Operating Expense1

(In thousands)

 

Three Months Ended June 30,

Nine Months Ended June 30,

2020

2019

2020

2019

Operating expense

$

357,237

$

398,282

$

1,271,367

$

1,185,215

Amortization2

(44,825

)

(51,724

)

(276,959

)

(155,508

)

Acquisition costs3

(1,588

)

(5,733

)

(7,887

)

(21,337

)

Business restructuring costs4

(1,069

)

(1,664

)

(1,890

)

(1,664

)

COVID-19 impact5

(3,426

)

-

(3,449

)

-

Adjusted Operating Expense

$

306,329

$

339,161

$

981,182

$

1,006,706

Net sales

$

1,792,505

$

1,924,534

$

4,926,103

$

5,075,247

Operating expense as a % of net sales

19.9

%

20.7

%

25.8

%

23.4

%

Adjusted Operating Expense as a % of net sales

17.1

%

17.6

%

19.9

%

19.8

%

_________________________________

  1. Adjusted Operating Expense is defined as operating expense excluding the impact of amortization, acquisition costs, business restructuring costs, and the direct financial impact of the COVID-19 pandemic.
  2. Nine months ended June 30, 2020 amount includes the impact of non-cash accelerated intangible asset amortization of $142.6 million related to the write-off of certain trade names in connection with the Rebranding.
  3. Mainly composed of professional fees, branch integration expenses, travel expenses, employee severance and retention costs, and other personnel expenses.
  4. Mainly composed of costs stemming from headcount rationalization efforts and certain Rebranding costs.
  5. Mainly composed of severance and other costs directly related to the Company’s response to the COVID-19 pandemic.

We use Adjusted Operating Expense 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 Operating Expense consistently using the same methods each period.

We believe that Adjusted Operating Expense is a useful measure because it permits investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that are not indicative of ongoing operating performance.

While we believe Adjusted Operating Expense is useful to investors when evaluating our business, it is not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. Adjusted Operating Expense should not be considered in isolation or as a substitute for operating expense calculated in accordance with GAAP. Adjusted Operating Expense may have material limitations and may differ from similarly titled measures presented by other companies.

Contacts:

Brent Rakers, Director Investor Relations
Brent.Rakers@becn.com
901-232-2737

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