Announces Preliminary Results for Second
Quarter 2023 and Updates 2023 Outlook
Beacon (Nasdaq: BECN) (the “Company”, “we,” “us” or “our”) today
announced that it has reached an agreement with Clayton, Dubilier
& Rice, LLC ("CD&R") to repurchase all of the outstanding
shares of its Series A Cumulative Convertible Participating
Preferred Stock (the “Series A Preferred Stock”) held by CD&R’s
affiliate. Beacon is also announcing estimated preliminary results
for the quarter ended June 30, 2023 and updating its full year 2023
outlook.
Series A Preferred Stock Repurchase
The 400,000 outstanding shares of Series A Preferred Stock will
be repurchased from CD&R for an aggregate amount equal to
$804.5 million plus aggregate accrued and unpaid dividends as of
the repurchase date. The transaction is expected to be financed by
a mix of new and existing debt funding and cash on hand, with the
closing of the transaction to occur no later than August 11,
2023.
The Company’s board of directors evaluated and approved the
transaction, based on the recommendation of a special transaction
committee composed solely of disinterested directors.
The transaction is expected to provide substantial benefits to
Beacon and its common stockholders, including:
- Reducing diluted share count on an as converted basis by 9.69
million shares;
- Providing immediate accretion to earnings per share;
- Eliminating preferred dividends of $24.0 million per year;
and
- Simplifying Beacon’s capital structure.
After the transaction, CD&R will continue to own the 15.2
million shares of common stock it currently directly holds. As of
June 30, 2023, there were 63.4 million shares of common stock
outstanding, exclusive of customary dilutive elements.
Upon closing of the repurchase, Nathan Sleeper, CD&R’s CEO
and one of its representatives on the Company’s board of directors,
will resign from the Company’s board; and Philip Knisely, an
Operating Partner of CD&R and a CD&R representative on the
Company’s board, will remain on the Company’s board but will step
down as the Company’s non-executive board chair. Stuart Randle, the
Company’s lead independent director, will be named non-executive
board chair following the closing of the repurchase.
“This transaction marks an important milestone for our Company
and our stockholders,” said Julian Francis, Beacon’s President and
CEO. “This transaction further positions us to execute on our
strategic priorities and Ambition 2025 financial targets, to create
value for our customers, stockholders, employees, and other
stakeholders. We appreciate everything CD&R has done to bring
this transaction to fruition and look forward to its continued
support going forward.”
“The transaction announced today originated with CD&R’s
support in financing Beacon’s acquisition of Allied Building
Products in 2018 and reflects the impressive progress the Beacon
team has made,” added Mr. Sleeper. “It has been a distinct pleasure
to serve on Beacon’s board, and I look forward to the Beacon team’s
continued execution of the Ambition 2025 plan.”
“The transaction represents yet another step in Beacon’s
evolution, enhancing stockholder value, increasing independent
corporate governance and simplifying our capital structure,” said
Stuart Randle, the Company’s lead independent director and
chair-elect. “We thank Nate for his service as a valued board
member over the last five years and look forward to working with
Phil as he continues his directorship.”
J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC
served as financial advisors to Beacon in connection with the
transaction and Sidley Austin LLP and Squire Patton Boggs (US) LLP
served as the Company’s legal advisors. Debevoise & Plimpton
LLP served as CD&R’s legal advisor.
Preliminary Results for Second Quarter 2023 and 2023 Outlook
Update
Net sales for the quarter ended June 30, 2023 are expected to be
approximately $2.5 billion. Gross margins are expected to be
approximately 25.4%. Net income for the quarter ended June 30, 2023
is estimated to range between $147 and $154 million. Diluted net
income per share is expected to range between $1.88 and $1.97 per
share. Adjusted EBITDA for the quarter ended June 30, 2023 is
estimated to range between $280 and $290 million. A reconciliation
of the Company’s Adjusted EBITDA range to the most directly
comparable GAAP financial measure may be found attached to this
press release.
The Company anticipates announcing final earnings results for
the quarter ended June 30, 2023 after market close on Thursday,
August 3, 2023.
The Company now expects full year 2023 Adjusted EBITDA results
to range between $840 and $870 million, which represents the upper
half of our previously announced guidance range. A reconciliation
of the Company’s Adjusted EBITDA guidance to the most directly
comparable GAAP financial measure may be found attached to this
press release. The Company expects to further refine this guidance
in connection with its second quarter earnings release, reflecting,
among other things, the completion of quarter-end close procedures,
the Company’s performance in July 2023, expectations with respect
to recently announced shingle price increases, the Company’s
assessment of macroeconomic conditions and interest rates, as well
as the forecast for the second half of the year.
The Company expects its total gross debt less cash and cash
equivalents to be approximately $1.7 billion at June 30, 2023, with
net debt leverage on a trailing four quarter basis estimated to be
approximately 1.9x. A reconciliation of net debt leverage may be
found attached to this press release. Giving pro forma effect to
the repurchase of the Series A Preferred Stock and the expected
debt funding related to the repurchase, the Company expects its
total gross debt less cash and cash equivalents to be approximately
$2.5 billion at June 30, 2023, yielding estimated net debt leverage
of approximately 2.9x on a trailing four quarter basis. Pro forma
liquidity continues to support Beacon’s Ambition 2025 growth
objectives, including continued investment in greenfields and
tuck-in acquisitions as outlined at our February 2022 Investor
Day.
After the closing of this transaction, the Company does not
expect meaningful open market repurchases of its common stock
during the remainder of 2023 under the existing stock repurchase
authorization.
The above second quarter results are still preliminary and
subject to the Company’s detailed quarter-end close procedures. The
Company’s consolidated financial statements as of, and for the
three months ended, June 30, 2023 are not yet available.
Accordingly, the information presented above reflects the Company’s
preliminary estimates subject to the completion of the Company’s
financial closing procedures and any adjustments that may result
from the completion of the quarterly review of the Company’s
consolidated financial statements. As a result, these preliminary
estimates may differ from the actual results that will be reflected
in the Company’s consolidated financial statements for the second
quarter when they are completed and publicly disclosed. These
preliminary estimates may change and those changes may be material.
The Company’s expectations with respect to its unaudited results
for the period discussed above are based upon management estimates.
The Company’s independent registered public accounting firm has not
audited, reviewed or performed any procedures with respect to these
preliminary estimates and, accordingly, does not express an opinion
or any other form of assurance about them.
The preliminary full year 2023 financial outlook estimates
described above are based on information available to management as
of the date of this report, and as a result, these expectations
could change.
Forward-Looking Statements
This release contains information about management's view of the
Company's future expectations, plans and prospects that constitute
forward-looking statements for purposes of the safe harbor
provisions under the Private Securities Litigation Reform Act of
1995. In addition, oral statements made by our directors, officers
and employees to the investor and analyst communities, media
representatives and others, depending upon their nature, may also
constitute forward-looking statements. Forward-looking statements
can be identified by the fact that they do not relate strictly to
historic or current facts and often use words such as “anticipate,”
“estimate,” “expect,” “believe,” “will likely result,” “outlook,”
“project” and other words and expressions of similar meaning.
Examples of forward-looking statements include statements about the
Company’s expectations regarding its repurchase of all outstanding
shares of its Series A Preferred Stock held by CD&R and the
impact thereof, as well as the Company’s preliminary estimates for
its second quarter 2023 financial results and 2023 financial
outlook. Investors are cautioned not to place undue reliance on
forward-looking statements. Actual results may differ materially
from those indicated by such forward-looking statements as a result
of various important factors, including, but not limited to, those
set forth in the "Risk Factors" section of the Company's Form 10-K
for the fiscal year ended December 31, 2022 and subsequent filings
with the U.S. Securities and Exchange Commission. The Company may
not succeed in addressing these and other risks. Consequently, all
forward-looking statements in this release are qualified by the
factors, risks and uncertainties contained therein. In addition,
the forward-looking statements included in this press release
represent the Company's views as of the date of this press release
and these views could change. However, while the Company may elect
to update these forward-looking statements at some point, the
Company specifically disclaims any obligation to do so, other than
as required by federal securities laws. These forward-looking
statements should not be relied upon as representing the Company's
views as of any date subsequent to the date of this press
release.
Non-GAAP Financial Measures
This press release contains Company estimates of and outlook for
Adjusted EBITDA, a financial measure that is not presented in
accordance with United States Generally Accepted Accounting
Principles (“GAAP"). In addition, this press release contains
information concerning net debt leverage, a measure which is
derived in part from Adjusted EBITDA. For definitions of these
terms, an explanation of why we use the measure Adjusted EBITDA,
the material limitations of Adjusted EBITDA and a reconciliation of
Adjusted EBITDA to net income (loss), the most directly comparable
GAAP financial measure, and a calculation of net debt leverage,
please see the Appendix to this press release.
About Beacon
Founded in 1928, Beacon is a Fortune 500, publicly traded
distributor of building products, including roofing materials and
complementary products, such as siding and waterproofing. The
Company operates over 500 branches throughout all 50 states in the
U.S. and 6 provinces in Canada. Beacon serves an extensive base of
nearly 100,000 customers, utilizing its vast branch network and
diverse service offerings to provide high-quality products and
support throughout the entire business lifecycle. Beacon offers its
own private label brand, TRI-BUILT®, and has a proprietary digital
account management suite, Beacon PRO+, which allows customers to
manage their businesses online. Beacon’s stock is traded on the
Nasdaq Global Select Market under the ticker symbol BECN. To learn
more about Beacon, please visit www.becn.com.
BEACON ROOFING SUPPLY, INC.
Appendix
We define Adjusted EBITDA as net income (loss), the most
directly comparable financial measure as measured in accordance
with GAAP, less the impact of interest expense (net of interest
income), income taxes, depreciation and amortization, stock-based
compensation, and other adjusting items. The following table
presents a reconciliation of net income (loss) to Adjusted EBITDA
for each of the periods indicated, including the estimated expected
range for the quarter ended June 30, 2023:
Three Months Ended
(Unaudited; in millions)
9/30/2022
12/31/2022
3/31/2023
6/30/2023
Low
High
Net income (loss)
$
154.8
$
73.3
$
24.8
$
147
$
154
Income taxes
53.8
27.6
8.0
51
54
Interest expense, net
23.6
26.3
29.0
28
Depreciation and amortization
40.9
39.0
43.0
43
Stock-based compensation
7.9
6.6
6.0
8
Adjusting items1
3.2
5.7
2.2
3
Adjusted EBITDA
$
284.2
$
178.5
$
113.0
$
280
$
290
__________________________
- Adjusting items for the quarters ended September 30 and
December 31, 2022 are composed of acquisition costs, restructuring
costs, and costs directly related to the COVID-19 pandemic.
Adjusting items for the quarters ended March 31 and June 30, 2023
are composed of acquisition and restructuring costs. Beginning
January 1, 2023, the Company determined COVID-19 impacts should no
longer be considered an adjusting item, and the change was applied
prospectively.
The following table presents the estimated expected range of
Adjusted EBITDA for the year ending December 31, 2023:
Year Ending
December 31, 2023
(Unaudited; in millions)
Low
High
Net income (loss)
$
372
$
394
Income taxes
129
137
Interest expense, net
126
Depreciation and amortization
173
Stock-based compensation
28
Adjusting Items1
12
Adjusted EBITDA
$
840
$
870
__________________________
- Composed of acquisition and restructuring costs.
We use Adjusted EBITDA to evaluate financial performance,
analyze the underlying trends in our business and establish
operational goals and forecasts that are used when allocating
resources. We expect to compute Adjusted EBITDA consistently using
the same methods each period.
We believe that Adjusted EBITDA is a useful measure because it
permits investors to better understand changes over comparative
periods by providing financial results that are unaffected by
certain items that are not indicative of ongoing operating
performance.
While we believe Adjusted EBITDA is useful to investors when
evaluating our business, it is not prepared and presented in
accordance with United States Generally Accepted Accounting
Principles (“GAAP”), and therefore should be considered
supplemental in nature. Adjusted EBITDA should not be considered in
isolation or as a substitute for other financial performance
measures presented in accordance with GAAP. Adjusted EBITDA may
have material limitations including, but not limited to, the
exclusion of certain costs without a corresponding reduction of net
income for the income generated by the assets to which the excluded
costs relate. In addition, Adjusted EBITDA may differ from
similarly titled measures presented by other companies.
BEACON ROOFING SUPPLY, INC.
Appendix (continued)
We define net debt leverage as gross total debt less cash and
cash equivalents, divided by Adjusted EBITDA for the trailing four
quarters. The following table presents the estimated expected net
debt leverage as of June 30, 2023:
June 30, 2023
(Unaudited; in millions)
Gross total debt
$
1,718.0
Less: cash and cash equivalents
(58.0
)
Net debt
$
1,660.0
Adjusted EBITDA for the quarter ended:
9/30/2022
$
284.2
12/31/2022
178.5
3/31/2023
113.0
6/30/2023 (estimated)
285.0
TTM Adjusted EBITDA
$
860.7
Net debt leverage
1.9x
The Company is not able to provide a reconciliation of the
Company’s pro forma net debt leverage without unreasonable effort,
because of the inherent difficulty in forecasting and/or
quantifying certain amounts necessary for such a reconciliation.
These amounts include interest rate and amount of future debt
funding. Such items would reflect events that have not yet
occurred, are out of the Company’s control and/or cannot be
reasonably predicted, which are uncertain, depend on various
factors and could be material to the Company’s results computed in
accordance with GAAP.
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INVESTOR CONTACT Binit Sanghvi VP,
Capital Markets and Treasurer Binit.Sanghvi@becn.com
972-369-8005
MEDIA CONTACT Jennifer Lewis VP,
Communications and Corporate Social Responsibility
Jennifer.Lewis@becn.com 571-752-1048
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