Beacon Roofing Supply 2013 Sales Up 9.6%

Total sales increased 9.6% to a record $2.24 billion in 2013 from $2.04 billion in 2012. Existing market sales increased 1.2% (0.4% based on the same number of business days). In existing markets, residential and complementary product sales increased 1.3% and 5.2%, respectively, while non-residential roofing product sales declined 0.4%.

Beacon Roofing Supply Reports Fourth Quarter and Annual 2013 Results

Peabody, MA - Beacon Roofing Supply, Inc. announced results for its fourth quarter and fiscal year ended September 30, 2013 (fiscal 2013Âť).

Paul Isabella, the Company's President and Chief Executive Officer, stated: "We experienced a solid increase in organic demand this quarter, which when combined with our acquisitions drove strong top line growth of over 14%. We also completed the opening of seven new branches this quarter, taking us to the total of 10 that we had targeted for 2013. Plus, we are on track to open another 15-20 additional new branches in 2014. Top line growth is one of the cornerstones of our strategy and is very much on track. We continued to experience a challenging pricing environment which drove down our gross margins from the prior year. We were able to mitigate some of this negative impact through cost control and leverage of our operating expenses which were down 80 basis points over the prior year. As we move forward into 2014 our focus will continue to be on growing the top line while improving our gross margins and continuing to leverage our operating expenses."

Fourth Quarter

Total sales increased 14.3% to $683.5 million in 2013 from $598.1 million in 2012. Existing market (organic) sales, which exclude branches acquired after the beginning of last year's fourth quarter, increased 7.6% (6.0% based on the same number of business days). In existing markets, residential roofing product sales increased 6.5%, non-residential roofing product sales increased 10.1%, and complementary product sales increased 5.0%.

Net income for the fourth quarter was $27.4 million compared to $27.9 million in 2012. Fourth quarter diluted net income per share was $0.55 compared to $0.58 in 2012. Net income for the quarter was unfavorably impacted by lower gross margins as a result of the continued impact of product cost increases that have not been consistently passed through to customers and a higher mix of non-residential roofing products. This was partially offset by continued cost control and leverage of operating expenses across a higher volume base.

Earnings in the fourth quarter of fiscal 2012 were impacted by the following items: a charge of $3.0 million ($1.8 million net of tax), or approximately $0.04 diluted earnings per share, for the recognition of termination benefits in operating expenses associated with an acquisition and the announced retirement of the CFO; and a benefit of $1.1 million ($0.7 million net of tax), or approximately $0.01 diluted earnings per share, for the recognition of the change in the fair value of certain interest rate derivatives in interest expense and other financing costs.

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which are reconciled to the net income in this press release, were $58.9 million in 2013 compared to $57.1 million in 2012, an increase of 3.2%.

Fiscal Year

Total sales increased 9.6% to a record $2.24 billion in 2013 from $2.04 billion in 2012. Existing market sales increased 1.2% (0.4% based on the same number of business days). In existing markets, residential and complementary product sales increased 1.3% and 5.2%, respectively, while non-residential roofing product sales declined 0.4%. Fiscal year 2012 sales were favorably impacted by mild weather in the first half of the year, coupled with significant storm business carryover from 2011. During the first half of fiscal year 2013 the company experienced an unfavorable weather impact from fewer storms and heavy rains in several regions.

Annual net income was $72.6 million in 2013 compared to $75.6 million in 2012. Annual diluted net income per share was $1.47 compared to $1.58 per share in 2012. As described for the quarter, net income for the year was also unfavorably impacted by lower gross margins as a result of the impact of product cost increases that have not been consistently passed through to customers as a result of a soft demand environment. In addition, the first half of 2013 was unfavorably impacted by higher operating expenses due to the integration of acquisitions made in late 2012 and early 2013. This year's twelve months net income 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 $1.2 million charge ($0.7 million net of taxes), $0.01 per share, for termination benefits. Last year's twelve months 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, $0.01 per share, from the increase in the liability for consideration due for the Enercon consideration.

Adjusted EBITDA for fiscal 2013 was $170.4 million compared to $176.1 million for fiscal 2012, a decrease of 3.2%.

Cash flow from operations was $78.5 million in 2013 compared to $85.4 million in 2012. This decrease in operating cash flows was influenced mostly by lower non-cash charges this year. Cash on hand increased by $6.8 million to $47.0 million at September 30, 2013, compared to $40.2 million at September 30, 2012. This increase was due primarily to decreased cash used for investing and financing activities in 2013. As of September 30, 2013, we had available borrowings under our revolving lines of credit of $272.1 million.

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