Beacon Roofing Supply(US:BECN)2020-08-08 00:01Financial Performance - Net sales decreased by 6.9% to $1.79 billion in 2020, down from $1.92 billion in 2019, influenced by softer demand due to COVID-19 restrictions [120]. - Net income attributable to common shareholders was a loss of $12.725 million for the three months ended June 30, 2020, compared to a profit of $24.987 million in the same period of 2019 [116]. - Net income (loss) for the three months ended June 30, 2020, was $(6.7) million, compared to $31.0 million in 2019, resulting in a net loss attributable to common shareholders of $(12.7) million [128]. - Net sales for the nine months ended June 30, 2020, decreased by 2.9% to $4.93 billion from $5.08 billion in 2019, influenced by reduced demand due to COVID-19 restrictions [134]. - Net income (loss) was $(152.8) million in 2020, compared to $(38.0) million in 2019, with net income attributable to common shareholders at $(170.8) million [145]. - Adjusted Net Income (Loss) for the nine months ended June 30, 2020, was $85.3 million, compared to $94.2 million in the same period of 2019 [152]. - The company experienced a net margin of (0.4%) for the three months ended June 30, 2020, compared to a net margin of 1.6% for the same period in 2019 [167]. Sales and Product Performance - Average daily sales for the three months ended June 30, 2020, decreased by 6.9% compared to the prior year, with July 2020 sales down approximately 1.4% [114]. - Net sales by product line showed a decline in all categories, with residential roofing products down 1.3%, non-residential roofing products down 9.6%, and complementary building products down 12.5% [122]. - Net sales by product line showed a decrease in residential roofing products by $37.9 million (1.7%) and complementary building products by $111.3 million (6.5%) for the nine months ended June 30, 2020 [136]. Cost Management and Expenses - The company has implemented cost-cutting measures, including reductions in hiring and salaries, to manage the financial impact of the COVID-19 pandemic [115]. - Operating expenses decreased by 10.3% to $357.2 million in 2020 from $398.3 million in 2019, primarily due to cost-cutting measures related to the COVID-19 pandemic [124]. - Operating expense increased by 7.3% to $1.27 billion in 2020, compared to $1.19 billion in 2019, representing 25.8% of net sales [139]. - The increase in operating expense was primarily due to a $121.5 million rise in amortization expense related to the Rebranding [139]. - The company implemented aggressive cost-cutting measures, resulting in an $18.5 million decrease in payroll and employee benefit costs and a $14.5 million decrease in selling expenses [140]. Gross Profit and Margins - Gross profit margin decreased to 24.1% in Q2 2020 from 24.6% in Q2 2019, reflecting changes in sales and cost of products sold [118]. - Gross profit for the three months ended June 30, 2020, was $432.1 million, a decrease of $40.4 million (8.6%) from $472.5 million in 2019, with a gross margin of 24.1%, down from 24.6% [123]. - Gross margin for the nine months ended June 30, 2020, was 24.1%, down from 24.5% in 2019, influenced by a price decrease of less than 1% and a product mix shift [138]. - The adjusted EBITDA margin remained stable at 8.2% for both the three months ended June 30, 2020, and 2019 [167]. Branch Operations and Expansion - The company operated 524 branches across all 50 states in the U.S. and 6 provinces in Canada as of June 30, 2020 [107]. - The company opened five new branches in fiscal year 2020, including locations in Georgia, Louisiana, Ohio, Oregon, and Virginia [110]. - As of June 30, 2020, the company operated 524 branches, all acquired prior to the start of fiscal year 2019, meeting the existing market definition [133]. Financing and Debt Management - The company executed a private offering of $300.0 million aggregate principal amount of 4.50% Senior Notes due 2026, maturing on November 15, 2026 [179]. - The proceeds from the 2026 Senior Notes were used to redeem all $300.0 million of the 2023 Senior Notes at a redemption price of 103.188%, resulting in a loss on debt extinguishment of $14.7 million [181][182]. - The company entered into financing arrangements totaling $3.57 billion for the Allied Acquisition, including a $1.30 billion asset-based revolving line of credit and a $970.0 million term loan [184]. - The company raised $1.30 billion through the issuance of 4.875% Senior Notes due 2025, with an outstanding balance of $1.29 billion as of June 30, 2020 [194]. - As of June 30, 2020, the company had cash and cash equivalents of $1.02 billion and available borrowings of approximately $329.0 million under asset-based revolving lines of credit [170]. - The company was in compliance with the Fixed Charge Coverage Ratio covenant under the 2023 ABL as of June 30, 2020 [187]. Tax Provisions - The income tax provision increased to $46.6 million in 2020 from $5.2 million in 2019, mainly due to a $32.8 million tax provision adjustment related to the CARES Act [127]. - The income tax benefit rose to $44.8 million in 2020 from $21.0 million in 2019, largely due to deferred tax adjustments of $36.5 million related to the Rebranding [143]. - The effective tax rate for 2020 was (18.3%), down from 36.5% in 2019, with expectations for 2020 to range from (18.0%) to (20.0%) excluding discrete items [144]. Cash Flow - Cash provided by operating activities was $250.4 million for the nine months ended June 30, 2020, compared to cash used of $(194.9) million in the same period of 2019, showing a positive change of $445.3 million [175]. - Net cash used in investing activities decreased to $(23.7) million in 2020 from $(202.1) million in 2019, primarily due to a significant payment related to the Allied Acquisition in 2019 [176]. - Net cash provided by financing activities increased to $719.6 million in 2020 from $294.8 million in 2019, driven by a $436.3 million increase in net borrowings under revolving lines of credit [177].