x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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DELAWARE
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36-4173371
|
|
(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
|
|
One
Lakeland Park Drive,
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||
Peabody,
Massachusetts
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01960
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|
(Address
of principal executive offices)
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(Zip
Code)
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Large
accelerated filer o
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Accelerated
filer x
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Non-accelerated
filer o
(Do not check if a smaller reporting
company)
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Smaller
reporting company o
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Part I.
|
Financial Information
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2 | |||
Item 1.
|
Condensed Consolidated Financial Statements
(Unaudited)
|
2 | |||
Consolidated Balance Sheets
|
2 | ||||
Consolidated Statements of
Operations
|
3 | ||||
Consolidated Statements of Cash
Flows
|
4 | ||||
Notes to Condensed Consolidated Financial
Statements
|
5 | ||||
Item 2.
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Management's Discussion and Analysis of Financial
Condition And Results of Operations
|
10 | |||
Overview
|
10 | ||||
Results of Operations
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11 | ||||
Seasonality and Quarterly
Fluctuations
|
14 | ||||
Liquidity and Capital
Resources
|
15 | ||||
Cautionary Statement
|
17 | ||||
Item 3.
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Quantitative and Qualitative Disclosures about
Market Risk
|
18 | |||
Interest Rate Risk
|
18 | ||||
Foreign Exchange Risk
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18 | ||||
Item 4.
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Controls and Procedures
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18 | |||
Part II.
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Other Information
|
19 | |||
Item 6.
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Exhibits
|
19 | |||
Signature
Page
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20 | ||||
Index
to Exhibits
|
21 |
(Unaudited)
|
(Unaudited)
|
(Note)
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||||||||||
March
31,
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March
31,
|
September
30,
|
||||||||||
2009
|
2008
|
2008
|
||||||||||
(Dollars
in thousands)
|
||||||||||||
Assets
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
and cash equivalents
|
$ | 98,106 | $ | 10,574 | $ | 26,038 | ||||||
Accounts
receivable, less allowance of $14,216 at March 31, 2009, $10,925 at March
31, 2008, and $12,978 at September 30, 2008
|
166,939 | 173,039 | 283,652 | |||||||||
Inventories
|
207,042 | 194,551 | 209,255 | |||||||||
Prepaid
expenses and other assets
|
38,195 | 26,545 | 45,799 | |||||||||
Deferred
income taxes
|
22,664 | 19,276 | 18,126 | |||||||||
Total
current assets
|
532,946 | 423,985 | 582,870 | |||||||||
Property
and equipment, net
|
51,850 | 61,384 | 56,712 | |||||||||
Goodwill
|
352,319 | 354,727 | 354,269 | |||||||||
Other
assets, net
|
67,093 | 85,886 | 73,965 | |||||||||
Total
assets
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$ | 1,004,208 | $ | 925,982 | $ | 1,067,816 | ||||||
Liabilities
and stockholders' equity
|
||||||||||||
Current
liabilities:
|
||||||||||||
Accounts
payable
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$ | 158,166 | $ | 128,386 | $ | 198,429 | ||||||
Accrued
expenses
|
63,376 | 60,262 | 89,755 | |||||||||
Current
portion of long-term obligations
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15,066 | 12,828 | 19,926 | |||||||||
Total
current liabilities
|
236,608 | 201,476 | 308,110 | |||||||||
Senior
notes payable, net of current portion
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330,750 | 341,250 | 332,500 | |||||||||
Deferred
income taxes
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34,858 | 36,450 | 35,362 | |||||||||
Long-term
obligations under equipment financing and other, net of current
portion
|
22,924 | 30,801 | 25,143 | |||||||||
Commitments
and contingencies
|
||||||||||||
Stockholders'
equity:
|
||||||||||||
Common
stock (voting); $.01 par value; 100,000,000 shares authorized; 45,072,897
issued at March 31, 2009, 44,281,312 at March 31, 2008 and 44,820,550 at
September 30, 2008
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451 | 443 | 448 | |||||||||
Undesignated
preferred stock; 5,000,000 shares authorized, none issued or
outstanding
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- | - | - | |||||||||
Additional
paid-in capital
|
222,982 | 214,188 | 219,669 | |||||||||
Retained
earnings
|
163,145 | 103,749 | 146,946 | |||||||||
Accumulated
other comprehensive loss
|
(7,510 | ) | (2,375 | ) | (362 | ) | ||||||
Total
stockholders' equity
|
379,068 | 316,005 | 366,701 | |||||||||
Total
liabilities and stockholders' equity
|
$ | 1,004,208 | $ | 925,982 | $ | 1,067,816 |
Three Months Ended March
31,
|
Six Months Ended March 31,
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|||||||||||||||
2009
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2008
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2009
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2008
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|||||||||||||
Unaudited
|
||||||||||||||||
(Dollars
in thousands, except per share data)
|
||||||||||||||||
Net
sales
|
$ | 319,303 | $ | 304,251 | $ | 782,632 | $ | 702,647 | ||||||||
Cost
of products sold
|
245,025 | 235,859 | 592,356 | 542,561 | ||||||||||||
Gross
profit
|
74,278 | 68,392 | 190,276 | 160,086 | ||||||||||||
Operating
expenses
|
72,820 | 75,332 | 151,143 | 151,249 | ||||||||||||
Income
(loss) from operations
|
1,458 | (6,940 | ) | 39,133 | 8,837 | |||||||||||
Interest
expense
|
5,589 | 6,728 | 11,738 | 13,737 | ||||||||||||
Income
(loss) before income taxes
|
(4,131 | ) | (13,668 | ) | 27,395 | (4,900 | ) | |||||||||
Income
tax expense (benefit)
|
(1,688 | ) | (5,536 | ) | 11,196 | (2,009 | ) | |||||||||
Net
income (loss)
|
$ | (2,443 | ) | $ | (8,132 | ) | $ | 16,199 | $ | (2,891 | ) | |||||
Net
income (loss) per share:
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||||||||||||||||
Basic
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$ | (0.05 | ) | $ | (0.18 | ) | $ | 0.36 | $ | (0.07 | ) | |||||
Diluted
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$ | (0.05 | ) | $ | (0.18 | ) | $ | 0.36 | $ | (0.07 | ) | |||||
Weighted
average shares used in computing net income (loss) per
share:
|
||||||||||||||||
Basic
|
44,941,782 | 44,280,600 | 44,881,846 | 44,276,916 | ||||||||||||
Diluted
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44,941,782 | 44,280,600 | 45,339,821 | 44,276,916 |
Six Months Ended March 31,
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||||||||
2009
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2008
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|||||||
Unaudited
(in thousands)
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||||||||
Operating
activities:
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||||||||
Net
income (loss)
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$ | 16,199 | $ | (2,891 | ) | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
15,311 | 17,488 | ||||||
Stock-based
compensation
|
2,385 | 2,590 | ||||||
Deferred
income taxes
|
(317 | ) | (1,049 | ) | ||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable
|
113,356 | 93,889 | ||||||
Inventories
|
269 | (29,008 | ) | |||||
Prepaid
expenses and other assets
|
7,255 | 6,075 | ||||||
Accounts
payable and accrued expenses
|
(69,613 | ) | (57,609 | ) | ||||
Net
cash provided by operating activities
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84,845 | 29,485 | ||||||
Investing
activities:
|
||||||||
Purchases
of property and equipment, net of sales proceeds
|
(4,761 | ) | (1,214 | ) | ||||
Net
cash used in investing activities
|
(4,761 | ) | (1,214 | ) | ||||
Financing
activities:
|
||||||||
Repayments
under revolving lines of credit, net
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(4,627 | ) | (21,053 | ) | ||||
Net
repayments under senior notes payable, and other
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(4,188 | ) | (2,898 | ) | ||||
Proceeds
from exercise of options
|
845 | 15 | ||||||
Income
tax benefit from stock-based compensation deductions in excess of the
associated compensation costs
|
86 | 16 | ||||||
Net
cash used by financing activities
|
(7,884 | ) | (23,920 | ) | ||||
Effect
of exchange rate changes on cash
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(132 | ) | (246 | ) | ||||
Net
increase in cash and cash equivalents
|
72,068 | 4,105 | ||||||
Cash
and cash equivalents at beginning of year
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26,038 | 6,469 | ||||||
Cash
and cash equivalents at end of period
|
$ | 98,106 | $ | 10,574 | ||||
Cash
paid during the year for:
|
||||||||
Interest
|
$ | 6,414 | $ | 3,212 | ||||
Income
taxes, net of refunds
|
32,907 | 8,924 |
Three Months Ended March
31,
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Six Months Ended March 31,
|
|||||||||||||||
2009
|
2008
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2009
|
2008
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|||||||||||||
Weighted-average
common shares outstanding for basic
|
44,941,782 | 44,280,600 | 44,881,846 | 44,276,916 | ||||||||||||
Dilutive
effect of stock options
|
- | - | 457,975 | - | ||||||||||||
Weighted-average
shares assuming dilution
|
44,941,782 | 44,280,600 | 45,339,821 | 44,276,916 |
Six Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Risk-free
interest rate
|
2.49 | % | 3.92 | % | ||||
Expected
life in years
|
7 | 6 | ||||||
Expected
volatility
|
48.00 | % | 45.00 | % | ||||
Dividend
yield
|
0.00 | % | 0.00 | % |
Weighted-
|
||||||||||||||||
Weighted-
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Number
of
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||
Shares
|
Price
|
Life
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Value
|
|||||||||||||
(in
Millions)
|
||||||||||||||||
Outstanding
at September 30, 2008
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3,082,080 | $ | 12.90 | |||||||||||||
Granted
|
873,356 | 12.20 | ||||||||||||||
Exercised
|
(252,347 | ) | 3.34 | |||||||||||||
Canceled
|
(78,861 | ) | $ | 16.87 | ||||||||||||
Outstanding
at March 31, 2009
|
3,624,228 | $ | 13.31 | 7.4 | $ | 9.2 | ||||||||||
Vested
or Expected to Vest at March 31, 2009
|
3,519,682 | $ | 13.33 | 7.4 | $ | 9.0 | ||||||||||
Exercisable
at March 31, 2009
|
2,130,718 | $ | 13.68 | 6.3 | $ | 6.5 |
Unaudited
|
Three
Months Ended March 31,
|
Six
Months Ended March 31,
|
||||||||||||||
(Dollars
in thousands, except per share data)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Net
income (loss)
|
$ | (2,443 | ) | $ | (8,132 | ) | $ | 16,199 | $ | (2,891 | ) | |||||
Foreign
currency translation adjustment, net of tax effect of $402 and $513 for
the three months and $2,091 and $473 for the six months
|
(746 | ) | (953 | ) | (3,884 | ) | (878 | ) | ||||||||
Unrealized
gain (loss) on financial derivatives, net of tax effect of $(104) and
$2,863 for the three months and $2,197 and $4,508 for the six
months
|
155 | (4,253 | ) | (3,264 | ) | (6,697 | ) | |||||||||
Comprehensive
income (loss)
|
$ | (3,034 | ) | $ | (13,338 | ) | $ | 9,051 | $ | (10,466 | ) |
|
•
|
a senior secured credit facility
in the U.S.;
|
|
•
|
a Canadian senior secured credit
facility; and
|
|
•
|
an
equipment financing facility.
|
Three
Months Ended March 31,
|
Six
Months Ended March 31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of products sold
|
76.7 | 77.5 | 75.7 | 77.2 | ||||||||||||
Gross
profit
|
23.3 | 22.5 | 24.3 | 22.8 | ||||||||||||
Operating
expenses
|
22.8 | 24.8 | 19.3 | 21.5 | ||||||||||||
Income
(loss) from operations
|
0.5 | (2.3 | ) | 5.0 | 1.3 | |||||||||||
Interest
expense
|
(1.8 | ) | (2.2 | ) | (1.5 | ) | (2.0 | ) | ||||||||
Income
(loss) before income taxes
|
(1.3 | ) | (4.5 | ) | 3.5 | (0.7 | ) | |||||||||
Income
tax benefit (expense)
|
0.5 | 1.8 | (1.4 | ) | 0.3 | |||||||||||
Net
income (loss)
|
(0.8 | )% | (2.7 | )% | 2.1 | % | (0.4 | )% |
|
·
|
higher year-over-year prices,
especially in residential roofing products;
and
|
|
·
|
strong
re-roofing activity in the areas affected by Hurricane
Ike;
|
|
·
|
weakness
in non-residential roofing activity, partially due to adverse winter
conditions in our markets that have the largest concentration of
commercial business;
|
|
·
|
continued
weakness in new residential roofing activity in most
markets;
|
|
·
|
continued
weak complementary product sales in most markets;
and
|
|
·
|
eight fewer branches and one less
business day than in 2008.
|
March
31, 2009
|
March
31, 2008
|
|||||||||||||||||||||||
Sales
|
Mix
|
Sales
|
Mix
|
Change
|
||||||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||||||
Residential
roofing products
|
$ | 172,155 | 53.9 | % | $ | 125,493 | 41.2 | % | $ | 46,662 | 37.2 | % | ||||||||||||
Non-residential
roofing products
|
101,302 | 31.7 | % | 115,905 | 38.1 | % | (14,603 | ) | -12.6 | |||||||||||||||
Complementary
building products
|
45,846 | 14.4 | % | 62,853 | 20.7 | % | (17,007 | ) | -27.1 | |||||||||||||||
$ | 319,303 | 100.0 | % | $ | 304,251 | 100.0 | % | $ | 15,052 | 4.9 | % |
|
March
31,
|
March
31,
|
||||||||||||||||||
2009
|
2008
|
Change
|
||||||||||||||||||
(dollars
in millions)
|
||||||||||||||||||||
Gross
profit
|
$ | 74.3 | $ | 68.4 | $ | 5.9 | 8.6 | % | ||||||||||||
|
||||||||||||||||||||
Gross
margin
|
23.3 | % | 22.5 | % | 0.8 | % |
March 31,
|
March 31,
|
|||||||||||||||||||
2009
|
2008
|
Change
|
||||||||||||||||||
(dollars in millions)
|
||||||||||||||||||||
Operating
expenses
|
$ | 72.8 | $ | 75.3 | $ | (2.5 | ) | -3.3 | % | |||||||||||
Operating
expenses as a % of sales
|
22.8 | % | 24.8 | % |
-2.0%
|
|
·
|
savings of $1.3 million in
selling expenses, primarily from lower fuel
costs;
|
|
·
|
savings
of $1.1 million in general & administrative expenses, primarily from
lower insurances costs; and
|
|
·
|
reduced
depreciation and amortization expense of $1.0 million due to lower
amortization of intangible assets and the impact of very low capital
expenditures in fiscal year 2008;
|
|
·
|
an increase of $0.4 million in
payroll and related costs, primarily from higher incentive-based pay
accruals, partially offset by the benefit from a lower headcount;
and
|
|
·
|
an increase of $0.5 million
in warehouse expenses, mostly due to costs associated with the closing of
the two branches.
|
March 31, 2009
|
March 31, 2008
|
|||||||||||||||||||||||
Sales
|
Mix
|
Sales
|
Mix
|
Change
|
||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
Residential
roofing products
|
$ | 406,637 | 52.0 | % | $ | 273,546 | 38.9 | % | $ | 133,091 | 48.7 | % | ||||||||||||
Non-residential
roofing products
|
266,015 | 34.0 | % | 288,649 | 41.1 | % | (22,634 | ) | -7.8 | |||||||||||||||
Complementary
building products
|
109,980 | 14.1 | % | 140,452 | 20.0 | % | (30,472 | ) | -21.7 | |||||||||||||||
$ | 782,632 | 100.0 | % | $ | 702,647 | 100.0 | % | $ | 79,985 | 11.4 | % |
March 31,
|
March 31,
|
||||||||||||||||
2009
|
2008
|
Change
|
|||||||||||||||
(dollars in millions)
|
|||||||||||||||||
Gross
Profit
|
$ | 190.3 | $ | 160.1 | $ | 30.2 | 18.9 | % | |||||||||
Gross
Margin
|
24.3 | % | 22.8 | % |
1.5
|
% |
March 31,
|
March 31,
|
||||||||||||||||
2009
|
2008
|
Change
|
|||||||||||||||
(dollars in millions)
|
|||||||||||||||||
Operating
Expenses
|
$ | 151.1 | $ | 151.2 | $ | (0.1 | ) | -0.1 | % | ||||||||
Operating
Expenses as a % of Sales
|
19.3 | % | 21.5 | % |
-2.2
|
% |
|
·
|
savings of $1.1 million in
selling expenses, primarily from lower fuel costs, partially offset by an
increase in certain other selling expenses such as credit card fees
(associated with the higher
sales);
|
·
|
savings
of $1.2 million in general & administrative expenses, primarily from
lower insurance costs; and
|
|
·
|
reduced
depreciation and amortization expense of $2.2 million due to lower
amortization of intangible assets and the impact of very low capital
expenditures in fiscal year 2008;
|
|
·
|
an increase of $3.1 million in
payroll and related costs primarily from higher incentive-based pay
accruals, including profit-sharing, and less favorable medical insurance
claims experience, partially offset by the benefit from a lower headcount;
and
|
|
·
|
an
increase of $1.3 million in warehouse expenses, mostly due to costs
associated with the closing of the six
branches;
|
Fiscal
Year 2009
|
Fiscal
Year 2008
|
|||||||||||||||||||||||
Qtr
1
|
Qtr
2
|
Qtr
1
|
Qtr
2
|
Qtr
3
|
Qtr
4
|
|||||||||||||||||||
(dollars
in millions, except per share data)
|
||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||
Net
sales
|
$ | 463.3 | $ | 319.3 | $ | 398.4 | $ | 304.3 | $ | 514.6 | $ | 567.2 | ||||||||||||
Gross
profit
|
116.0 | 74.3 | 91.7 | 68.4 | 120.2 | 139.7 | ||||||||||||||||||
Income
(loss) from operations
|
37.7 | 1.5 | 15.8 | (6.9 | ) | 36.9 | 48.9 | |||||||||||||||||
Net
income (loss)
|
$ | 18.6 | $ | (2.4 | ) | $ | 5.2 | $ | (8.1 | ) | $ | 18.3 | $ | 24.9 | ||||||||||
Earnings
(loss) per share - basic
|
$ | 0.42 | $ | (0.05 | ) | $ | 0.12 | $ | (0.18 | ) | $ | 0.41 | $ | 0.56 | ||||||||||
Earnings
(loss) per share - fully diluted
|
$ | 0.41 | $ | (0.05 | ) | $ | 0.12 | $ | (0.18 | ) | $ | 0.41 | $ | 0.55 | ||||||||||
Quarterly
sales as % of year's sales
|
22.3 | % | 17.1 | % | 28.8 | % | 31.8 | % | ||||||||||||||||
Quarterly
gross profit as % of year's gross profit
|
21.8 | % | 16.3 | % | 28.6 | % | 33.3 | % | ||||||||||||||||
Quarterly
income (loss) from operations as % of
|
||||||||||||||||||||||||
year's
income (loss) from operations
|
16.7 | % | -7.3 | % | 39.0 | % | 51.6 | % |
|
·
|
the
adequacy of available bank lines of
credit;
|
|
·
|
the ability to attract long-term
capital with satisfactory
terms;
|
|
·
|
cash flows generated from
operating activities;
|
|
·
|
acquisitions;
and
|
|
·
|
capital
expenditures.
|
|
•
|
a senior secured credit facility
in the U.S.;
|
|
•
|
a Canadian senior secured credit
facility; and
|
|
•
|
an
equipment financing facility.
|
|
·
|
the base rate (that is the higher
of (a) the base rate for corporate loans quoted in The Wall Street Journal
or (b) the Federal Reserve overnight rate plus 1/2 of 1%) plus a margin of
0.75% for the Term Loan.
|
|
·
|
the current LIBOR Rate plus a
margin of 1.00% (for U.S. Revolver loans) or 2.00% (for Term
Loan).
|
|
·
|
an index rate (that is the higher
of (1) the Canadian prime rate as quoted in The Globe and Mail and
(2) the 30-day BA Rate plus 0.75%),
or
|
|
·
|
the BA rate as described in the
Canadian facility plus
1.00%.
|
DIRECTOR NOMINEE
|
VOTES FOR
|
VOTES WITHHELD
|
||||||
Robert
R. Buck
|
39,447,518 | 1,161,359 | ||||||
Andrew
R. Logie
|
40,078,659 | 530,218 | ||||||
H.
Arthur Bellows, Jr.
|
37,134,431 | 3,474,446 | ||||||
James
J. Gaffney
|
40,213,934 | 394,943 | ||||||
Peter
M. Gotsch
|
37,656,529 | 2,952,348 | ||||||
Stuart
A. Randle
|
40,217,382 | 391,495 | ||||||
Wilson
B. Sexton
|
39,617,068 | 991,809 |
Exhibit
Number
|
Document Description
|
|
31.1
|
Certification
by Robert R. Buck pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.2
|
Certification
by David R. Grace pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.1
|
Certification
by Robert R. Buck and David R. Grace pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
BEACON
ROOFING SUPPLY, INC.
|
|
BY:
|
/s/ DAVID R. GRACE
|
David R. Grace, Senior Vice President & Chief Financial Officer, and duly
authorized signatory on behalf of the Registrant
|
Exhibit
Number
|
Document Description
|
|
31.1
|
Certification
by Robert R. Buck pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.2
|
Certification
by David R. Grace pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.1
|
Certification
by Robert R. Buck and David R. Grace pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|