10-Q 1 becn-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to __________

Commission File Number 000-50924

 

BEACON ROOFING SUPPLY, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

36-4173371

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

505 Huntmar Park Drive, Suite 300, Herndon, VA 20170

(Address of Principal Executive Offices) (Zip Code)

(571) 323-3939

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

 

 

 

Common Stock, $0.01 par value

BECN

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of April 30, 2022, 68,741,689 shares of common stock, par value $0.01 per share, of the registrant were outstanding.

1


BEACON ROOFING SUPPLY, INC.

FORM 10-Q

For the Quarter Ended March 31, 2022

 

TABLE OF CONTENTS

 

PART I.

 

Financial Information (unaudited)

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

 

 

Condensed Consolidated Statements of Operations

 

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income

 

5

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

Item 4.

 

Controls and Procedures

 

32

PART II.

 

Other Information

 

 

 

 

Item 1.

 

Legal Proceedings

 

33

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

 

Item 6.

 

Exhibits

 

34

Signatures

 

35

 

 

2


PART I. Financial Information (Unaudited)

Item 1. Condensed Consolidated Financial Statements

BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Balance Sheets

(Unaudited; in millions, except per share amounts)

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

2022

 

 

2021

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

52.4

 

 

$

225.8

 

 

$

619.3

 

Accounts receivable, less allowance of $15.5, $16.1 and $21.0 as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively

 

1,008.5

 

 

 

855.2

 

 

 

759.5

 

Inventories, net

 

1,462.1

 

 

 

1,161.7

 

 

 

1,087.1

 

Prepaid expenses and other current assets

 

388.4

 

 

 

367.2

 

 

 

312.2

 

Total current assets

 

2,911.4

 

 

 

2,609.9

 

 

 

2,778.1

 

Property and equipment, net

 

281.9

 

 

 

256.3

 

 

 

218.9

 

Goodwill

 

1,776.7

 

 

 

1,777.4

 

 

 

1,761.3

 

Intangibles, net

 

399.6

 

 

 

421.0

 

 

 

465.0

 

Operating lease right-of-use assets, net

 

419.7

 

 

 

413.9

 

 

 

368.5

 

Deferred income taxes, net

 

58.5

 

 

 

61.9

 

 

 

90.2

 

Other assets, net

 

1.1

 

 

 

8.9

 

 

 

6.4

 

Total assets

$

5,848.9

 

 

$

5,549.3

 

 

$

5,688.4

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

$

1,052.2

 

 

$

794.2

 

 

$

689.0

 

Accrued expenses

 

410.8

 

 

 

472.1

 

 

 

572.8

 

Current portion of operating lease liabilities

 

89.6

 

 

 

89.0

 

 

 

85.2

 

Current portion of finance lease liabilities

 

9.6

 

 

 

6.4

 

 

 

3.0

 

Current portion of long-term debt/obligations

 

10.0

 

 

 

10.0

 

 

 

10.7

 

Total current liabilities

 

1,572.2

 

 

 

1,371.7

 

 

 

1,360.7

 

Borrowings under revolving lines of credit, net

 

145.6

 

 

 

 

 

 

 

Long-term debt, net

 

1,611.2

 

 

 

1,612.9

 

 

 

2,079.3

 

Deferred income taxes, net

 

0.9

 

 

 

0.8

 

 

 

 

Operating lease liabilities

 

333.3

 

 

 

326.3

 

 

 

283.0

 

Finance lease liabilities

 

40.7

 

 

 

26.0

 

 

 

12.9

 

Total liabilities

 

3,703.9

 

 

 

3,337.7

 

 

 

3,735.9

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Convertible Preferred Stock (voting); $0.01 par value; aggregate liquidation preference $400.0; 0.4 shares authorized, issued and outstanding as of March 31, 2022, December 31, 2021 and March 31, 2021 (Note 6)

 

399.2

 

 

 

399.2

 

 

 

399.2

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock (voting); $0.01 par value; 100.0 shares authorized; 68.7, 70.4 and 69.8 shares issued and outstanding as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively

 

0.7

 

 

 

0.7

 

 

 

0.7

 

Undesignated preferred stock; 5.0 shares authorized, none issued or outstanding

 

 

 

 

 

 

 

 

Additional paid-in capital

 

1,135.9

 

 

 

1,148.6

 

 

 

1,126.2

 

Retained earnings

 

619.3

 

 

 

682.5

 

 

 

451.2

 

Accumulated other comprehensive income (loss)

 

(10.1

)

 

 

(19.4

)

 

 

(24.8

)

Total stockholders' equity

 

1,745.8

 

 

 

1,812.4

 

 

 

1,553.3

 

Total liabilities and stockholders' equity

$

5,848.9

 

 

$

5,549.3

 

 

$

5,688.4

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

3


BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Operations

(Unaudited; in millions, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Net sales

$

1,686.9

 

 

$

1,318.0

 

Cost of products sold

 

1,247.4

 

 

 

985.2

 

Gross profit

 

439.5

 

 

 

332.8

 

Operating expense:

 

 

 

 

 

Selling, general and administrative

 

309.3

 

 

 

267.8

 

Depreciation

 

17.5

 

 

 

14.6

 

Amortization

 

21.4

 

 

 

27.6

 

Total operating expense

 

348.2

 

 

 

310.0

 

Income (loss) from operations

 

91.3

 

 

 

22.8

 

Interest expense, financing costs, and other

 

16.6

 

 

 

28.6

 

Loss on debt extinguishment

 

 

 

 

9.5

 

Income (loss) from continuing operations before income taxes

 

74.7

 

 

 

(15.3

)

Provision for (benefit from) income taxes

 

18.9

 

 

 

(4.8

)

Net income (loss) from continuing operations

 

55.8

 

 

 

(10.5

)

Net income (loss) from discontinued operations1

 

 

 

 

4.2

 

Net income (loss)

 

55.8

 

 

 

(6.3

)

Dividends on Preferred Stock

 

6.0

 

 

 

6.0

 

Net income (loss) attributable to common stockholders

$

49.8

 

 

$

(12.3

)

 

 

 

 

 

 

Weighted-average common stock outstanding2:

 

 

 

 

 

Basic

 

70.1

 

 

 

69.6

 

Diluted

 

71.3

 

 

 

69.6

 

 

 

 

 

 

 

Net income (loss) per share2:

 

 

 

 

 

Basic - Continuing operations

$

0.62

 

 

$

(0.24

)

Basic - Discontinued operations

 

 

 

 

0.06

 

Basic net income (loss) per share

$

0.62

 

 

$

(0.18

)

 

 

 

 

 

 

Diluted - Continuing operations

$

0.61

 

 

$

(0.24

)

Diluted - Discontinued operations

 

 

 

 

0.06

 

Diluted net income (loss) per share

$

0.61

 

 

$

(0.18

)

______________________________

1 See Note 4 for additional information.

2 See Note 6 for detailed calculations and further discussion.

 

See accompanying Notes to Condensed Consolidated Financial Statements

4


BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited; in millions)

 

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Net income (loss)

$

55.8

 

 

$

(6.3

)

Other comprehensive income (loss):

 

 

 

 

 

Foreign currency translation adjustment

 

1.5

 

 

 

1.0

 

Unrealized gain (loss) due to change in fair value of derivatives, net of tax

 

7.8

 

 

 

3.4

 

Total other comprehensive income (loss)

 

9.3

 

 

 

4.4

 

Comprehensive income (loss)

$

65.1

 

 

$

(1.9

)

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

5


BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited; in millions)

 

 

Common Stock

 

 

 

 

 

Retained

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

APIC1

 

 

Earnings

 

 

AOCI2

 

 

Total

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021

 

70.4

 

 

$

0.7

 

 

$

1,148.6

 

 

$

682.5

 

 

$

(19.4

)

 

$

1,812.4

 

Repurchase and retirement of common stock, net3

 

(1.9

)

 

 

 

 

 

 

 

 

(113.0

)

 

 

 

 

 

(113.0

)

Equity forward contract3

 

 

 

 

 

 

 

(25.0

)

 

 

 

 

 

 

 

 

(25.0

)

Issuance of common stock, net of shares withheld for taxes

 

0.2

 

 

 

 

 

 

7.2

 

 

 

 

 

 

 

 

 

7.2

 

Stock-based compensation

 

 

 

 

 

 

 

5.1

 

 

 

 

 

 

 

 

 

5.1

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

9.3

 

 

 

9.3

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

55.8

 

 

 

 

 

 

55.8

 

Dividends on Preferred Stock

 

 

 

 

 

 

 

 

 

 

(6.0

)

 

 

 

 

 

(6.0

)

Balance as of March 31, 2022

 

68.7

 

 

$

0.7

 

 

$

1,135.9

 

 

$

619.3

 

 

$

(10.1

)

 

$

1,745.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

69.4

 

 

$

0.7

 

 

$

1,109.8

 

 

$

463.5

 

 

$

(29.2

)

 

$

1,544.8

 

Issuance of common stock, net of shares withheld for taxes

 

0.4

 

 

 

 

 

 

9.1

 

 

 

 

 

 

 

 

 

9.1

 

Stock-based compensation

 

 

 

 

 

 

 

7.3

 

 

 

 

 

 

 

 

 

7.3

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

4.4

 

 

 

4.4

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

(6.3

)

 

 

 

 

 

(6.3

)

Dividends on Preferred Stock

 

 

 

 

 

 

 

 

 

 

(6.0

)

 

 

 

 

 

(6.0

)

Balance as of March 31, 2021

 

69.8

 

 

$

0.7

 

 

$

1,126.2

 

 

$

451.2

 

 

$

(24.8

)

 

$

1,553.3

 

____________________________________

1.
Additional Paid-in Capital (“APIC”).
2.
Accumulated Other Comprehensive Income (Loss) ("AOCI").
3.
See Note 8 for additional information.

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

6


BEACON ROOFING SUPPLY, INC.

Condensed Consolidated Statements of Cash Flows1

(Unaudited; in millions)

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Operating Activities

 

 

 

 

 

Net income (loss)

$

55.8

 

 

$

(6.3

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

38.9

 

 

 

42.4

 

Stock-based compensation

 

5.1

 

 

 

7.3

 

Certain interest expense and other financing costs

 

1.3

 

 

 

2.7

 

Loss on debt extinguishment

 

 

 

 

9.5

 

Gain on sale of fixed assets and other

 

(1.2

)

 

 

(0.8

)

Deferred income taxes

 

1.4

 

 

 

(78.7

)

Loss on sale of business

 

 

 

 

2.4

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(153.0

)

 

 

(11.9

)

Inventories

 

(299.9

)

 

 

(137.7

)

Prepaid expenses and other current assets

 

(19.6

)

 

 

27.4

 

Accounts payable and accrued expenses

 

202.1

 

 

 

59.9

 

Other assets and liabilities

 

7.1

 

 

 

(0.2

)

Net cash provided by (used in) operating activities

 

(162.0

)

 

 

(84.0

)

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Purchases of property and equipment

 

(22.8

)

 

 

(14.1

)

Acquisition of business, net

 

(0.4

)

 

 

 

Proceeds from sale of business

 

 

 

 

837.0

 

Proceeds from the sale of assets

 

1.2

 

 

 

0.8

 

Net cash provided by (used in) investing activities

 

(22.0

)

 

 

823.7

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Borrowings under revolving lines of credit

 

296.0

 

 

 

 

Payments under revolving lines of credit

 

(143.5

)

 

 

(157.0

)

Payments under term loan

 

(2.5

)

 

 

(426.4

)

Payments under equipment financing facilities and finance leases

 

(2.2

)

 

 

(1.7

)

Repurchase and retirement of common stock, net

 

(113.0

)

 

 

 

Advance payment for equity forward contract

 

(25.0

)

 

 

 

Payment of dividends on Preferred Stock

 

(6.0

)

 

 

(6.0

)

Proceeds from issuance of common stock related to equity awards

 

7.3

 

 

 

10.6

 

Payment of taxes related to net share settlement of equity awards

 

(0.1

)

 

 

(1.5

)

Net cash provided by (used in) financing activities

 

11.0

 

 

 

(582.0

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(0.4

)

 

 

0.2

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(173.4

)

 

 

157.9

 

Cash and cash equivalents, beginning of period

 

225.8

 

 

 

461.4

 

Cash and cash equivalents, end of period

$

52.4

 

 

$

619.3

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Operating cash flows provided by (used in) discontinued operations

$

 

 

 

(21.8

)

Cash paid during the period for:

 

 

 

 

 

Interest

$

8.2

 

 

$

9.4

 

Income taxes, net of refunds2

$

2.4

 

 

$

15.9

 

______________________________

1.
Unless otherwise noted, amounts include both continuing and discontinued operations.
2.
Three months ended March 31, 2021 amount includes $3.3 million related to the Interior Products divestiture.

See accompanying Notes to Condensed Consolidated Financial Statements

7


BEACON ROOFING SUPPLY, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited; in millions, except per share amounts or otherwise indicated)

1. Company Overview

Beacon Roofing Supply, Inc. (“Beacon” or the “Company”) was incorporated in the state of Delaware on August 22, 1997 and is the largest publicly traded distributor of residential and non-residential roofing materials and complementary building products in the United States and Canada.

On February 10, 2021, the Company completed the sale of its interior products and insulation businesses (“Interior Products”) to Foundation Building Materials Holding Company LLC (“FBM”), pursuant to that certain Equity Purchase Agreement, dated as of December 20, 2020 (the “Purchase Agreement”), by and between the Company and ASP Sailor Acquisition Corp. (“ASP”), for approximately $850 million in cash (subject to a working capital and certain other adjustments as set forth in the Purchase Agreement). On January 29, 2021, ASP assigned the Purchase Agreement to FBM. Unless otherwise noted, the Company has reflected Interior Products as discontinued operations for the three months ended March 31, 2021. For additional information, see Notes 2 and 4.

The Company operates its business primarily under the trade name "Beacon Building Products" and services customers in all 50 states throughout the U.S. and 6 provinces in Canada. The Company’s material subsidiaries are Beacon Sales Acquisition, Inc. and Beacon Roofing Supply Canada Company.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company prepared the condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the requirements of the Securities and Exchange Commission (“SEC”). As permitted under those rules, certain footnotes or other financial information have been condensed or omitted. Additionally, the Company has reflected Interior Products as discontinued operations for the three months ended March 31, 2021. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company's continuing operations. Certain prior period amounts have been reclassified to conform to current period presentation.

The balance sheet as of March 31, 2021 has been presented for a better understanding of the impact of seasonal fluctuations on the Company’s financial condition. The three-month periods ended March 31, 2022 and 2021 each had 63 business days.

On August 11, 2021, the Company’s Board of Directors approved a change in its fiscal year end from September 30 to December 31. The Company’s 2022 fiscal year began on January 1, 2022 and will end on December 31, 2022. This change better aligns the Company’s financial reporting calendar with many of its industry peers and provides internal benefits by shifting the timing of the budgeting, physical inventory, and performance review cycles away from the Company’s busiest time of year.