Peabody, MA - Beacon Roofing Supply, Inc. announced results for its third quarter and nine months ended June 30, 2013 of the fiscal year ending September 30, 2013 (“fiscal 2013”).
Paul Isabella, the Company’s President & Chief Executive Officer, stated: “We experienced a challenging demand environment during the third quarter of fiscal 2013, however we still recorded double-digit growth with sales up 12% over last year. Our total sales benefited from the positive impact of several acquisitions made since the start of last year, as well as a 1.2% increase in organic sales in the quarter. In addition to 19 branches acquired so far this year, we also opened two branches in this year’s third quarter and three new branches year to date. Our sales growth occurred despite unusually heavy rains and other harsh weather factors in many of our markets that delayed Spring and early Summer roofing activities, as well as the negative impact from fewer hail storms during fiscal 2013 than in the prior year. The soft demand led to pricing pressures that negatively impacted our gross margins, although our continued focus on expense controls enabled us to limit the impact on earnings. Our fourth quarter sales volumes are off to a good start and we will continue to focus on opening new branches, smart acquisition growth and improving our gross margins.”
Third Quarter
Total sales increased 11.9% to $627.2 million in 2013 from $560.5 million in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s third quarter, increased 1.2%. In existing markets, residential and non-residential roofing product sales increased 0.2% and 1.1%, respectively, while complementary product sales increased 5.2%. The 2013 sales performance was unfavorably affected by heavy rains in several regions and fewer hail storms.
Net income for the third quarter was $27.2 million compared to net income of $25.4 million in 2012. The third quarter diluted income per share was $0.55 in 2013 compared to an adjusted $0.62 in 2012. This decline was due primarily to lower gross margins from product cost increases that have not been consistently passed through to customers due to the soft demand environment. Although operating expenses were up in total, they were down as a percentage of sales resulting from continued cost controls and sales base growth. The 2013 diluted income per share was negatively impacted by approximately $.02 per share compared to 2012 by a higher base of shares outstanding. Earnings in the third quarter of fiscal 2012 were impacted by the following charges: $4.9 million ($2.9 million net of taxes), or approximately $0.06 diluted earnings per share, for costs resulting from the Company’s refinancing in April 2012; and $1.3 million, or approximately $0.03 diluted earnings per share, from the increase in the liability for consideration due for the Enercon acquisition.
Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which is reconciled to the net income in this press release, was $58.0 million in 2013 compared to $60.2 million in 2012, a decrease of 3.6%.
Nine Months
Total sales increased 7.7% to $1.56 billion in 2013 from $1.45 billion in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year, declined 2.0% (2.5% on a same day basis). There was one additional business day in this year’s nine months. In existing markets, residential and non-residential roofing product sales decreased 1.6% and 4.8%, respectively, while complementary product sales increased 5.0%. The comparison of the 2013 nine month sales to 2012 was unfavorably affected by last year’s high level of re-roofing activities, including the beneficial impact from mild weather in the first half of 2012 and strong business in several markets in the first quarter of 2012 that experienced significant storms in 2011. In addition, as discussed above, this year’s third quarter business was negatively affected by numerous rain events.
Net income for the nine months was $45.2 million compared to $47.7 million in 2012, a decrease of 5.2%. Nine month adjusted diluted net income per share was $0.90 compared to an adjusted $1.07 in 2012. The lower net income was due primarily to less favorable weather conditions and the other factors mentioned above for the third quarter decline in comparable net income. This year’s nine months included a $2.6 million credit to interest expense ($1.5 million net of taxes), $0.03 per share, resulting from adjustments in the fair values of prior interest rate derivatives, and a $0.9 million charge ($0.5 million net of taxes), $0.01 per share, for termination benefits. Last year’s nine month net income included charges of $4.9 million ($2.9 million net of tax), $0.06 per share, associated with last year’s refinancing and an unfavorable $0.3 million year-to-date adjustment, $.01 per share, to the Enercon consideration.
Adjusted EBITDA for the nine months was $111.5 million in 2013 compared to $119.1 million in 2012, a decrease of 6.4%.
Cash flow from operations was $49.4 million compared to $35.3 million in 2012. This comparison in operating cash flows was influenced mostly by a more favorable change in net working capital this year, including building inventory later in the third quarter this year rather than earlier in 2012, resulting in a much higher increase in accounts payable this year. Cash on hand decreased by $4.9 million to $26.4 million at June 30, 2013 compared to $31.2 million at June 30, 2012, due primarily to timing of cash receipts at the end of the periods.
