Herndon, VA - Beacon Roofing Supply, Inc. announced results for its second quarter and first half ended March 31, 2014 of the fiscal year ended September 30, 2014.
Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Severe winter weather that ranked among the 10 coldest on record in many states across the upper Midwest to the Southeast had a significant impact on our results this quarter. Multiple winter storms that brought record snowfall and freezing rain delayed both residential and commercial roofing projects across our core markets. However, during this period of soft demand we utilized the strength of our balance sheet to make strategic investments in equipment and inventory to grow our business. We believe these investments, along with employee training and our greenfield expansion, will help us maximize our opportunity related to re-roof growth, which is the bulk of our core business. We are especially excited about opening our eighth new branch of the year and are planning on as many as 25 for the full year. Finally, we remained focused on our long standing culture of cost control and leveraging of our operating expenses. All these actions have us well positioned to take advantage of the traditionally high seasonal demand in the second half of the year. We believe the second half of the year volume will be strong for both our residential and commercial markets.”
Second Quarter
Total sales decreased 7.5% to $384.9 million in 2014 from $416.3 million in 2013. On an overall consolidated basis, residential roofing product sales decreased 12.1%, non-residential roofing product sales decreased 2.3%, and complementary product sales decreased 4.1%. During the second quarter, the company had no branches classified as acquired markets and as such, consolidated sales are representative of existing market sales. In addition, the second quarter of 2014 and 2013 both had the same number of business days.
The net loss for the second quarter was $12.1 million, compared to a net loss of $0.2 million in 2013. The second quarter loss per share was $0.25, compared to a net loss per share of $0.00 in 2013. The increase in net loss for the second quarter was due to a combination of reduced sales as a result of the extended duration and severity of the colder temperatures and winter weather through many of our operating regions, reduced selling prices as a result of soft demand, and an unfavorable shift in sales mix to lower margin direct shipment and commercial business. In addition, the company incurred increased operating expenses of $3.9 million this quarter related to new stores (greenfield locations not open last year) as the company continued to expand its footprint in existing and new markets.
Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (“Adjusted EBITDA”), which are reconciled to the net loss in this press release, were ($7.3) million in 2014 compared to $11.6 million in 2013, driven primarily by the larger net loss.
First Half
Total sales increased 0.8% to $937.0 million in 2014 from $930.0 million in 2013. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s first quarter, decreased 1.5%. The first half of 2014 and 2013 both had the same number of business days. In existing markets, residential roofing product sales decreased 5.4%, non-residential roofing product sales increased 3.8%, and complementary product sales decreased 1.7%.
Net income for the first half of 2014 was $2.8 million compared to $18.0 million in 2013. First half of 2014 diluted net income per share was $0.06 compared to $0.37 in 2013. The lower net income was due to the same set of factors mentioned above for the second quarter decline in net income. First half of 2014 diluted net income per share was $0.06, compared to an adjusted diluted net income per share of $0.35 in 2013. The first half of 2013 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 certain interest rate derivatives, and a $0.9 million charge ($0.5 million, net of taxes), $0.01 per share, for termination benefits.
Adjusted EBITDA for the first half was $30.2 million in 2014, compared to $53.4 million in 2013, a decrease of 43.5% due primarily to lower net income.
Cash flow from operations was $36.1 million in 2014 compared to $20.6 million in 2013. This increase in operating cash flows was influenced primarily by improvements in working capital requirements from strong receivable collections and increased inventory purchases with extended payable terms. Cash on hand increased by $17.3 million to $34.0 million at March 31, 2014, compared to $16.7 million at March 31, 2013. This increase was due primarily to continued robust operating cash flow and a reduction of cash used in investing activities in 2014, compared to 2013. As of March 31, 2014, we had available borrowings under our revolving lines of credit of $331.6 million.
