Q1 2014 - Investors Presentation Paul Isabella - Chief Executive - - PowerPoint PPT Presentation

1

Q1 2014 - Investors Presentation Paul Isabella - Chief Executive Officer

The EXPERIENCE You Want. The SERVICE You Expect. The VALUE You Deserve.

2

Forward Looking Statements

This presentation contains “forward-looking statements”. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause

• ur actual results, levels of activity, performance or achievements

expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance

• n forward-looking statements, which reflect our analysis only and speak
• nly as of the date of this presentation, and you should refer to the “Risk

Factors” section of our latest Form 10K. We undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

3

Company Overview

4

Beacon’s Expansion Across North America

5

• A leader in many key metropolitan markets in the United States and

across Canada

• 240 branches across 39 U.S. states and 6 Canadian provinces
• Over 47,000 customers
• Broad product offering of up to 10,000 SKUs per branch
• Strong long-term historical performance
• FY 2013 Sales of $2.24 billion (10-year CAGR 14.7%)
• FY 2013 Operating Income of $129.7 million (10-year CAGR 13.3%)
• FY 2013 Operating margin of 5.8%
• Successfully completed 25 acquisitions since our IPO in 2004
• Opened 43 new greenfield locations since the IPO

Beacon Overview

Complete Residential Building Envelope

Roofing:

Asphalt, Metal, Slate, Tile, Vents, Underlayments

Windows:

Wood, Vinyl, Aluminum, Skylights, Replacement & New Construction

Gutters:

Aluminum, Copper

Siding:

Vinyl, Fiber Cement, Aluminum

Fascia:

Fiber Cement, Aluminum

Decking & Railing:

Composite, Vinyl

Columns:

Wood, Aluminum & Fiberglass

Doors:

Exterior & Patio Doors

6

Complete Commercial Building Envelope

Roofing:

EPDM, TPO, PVC, Built Up, Single Ply, Metal, Asphalt, Garden, Ventilation, Underlayments

Roof Insulation:

Tapered Panels, Fiberboard, Nailboard, Polyiso

Custom Metals:

Gutters, Downspouts, Drip Edge

Air & Vapor Barriers: Below Grade Waterproofing:

Sheet & Liquid Membranes, Sealants

Below Grade Drainage Systems: Ground Barriers:

Vapor Barriers, Radon Barriers, Pond Liners

Concrete Sealers & Coatings:

Pedestrian & Vehicular Deck Coatings

7

8

• Up to 11,000 SKU’s offered
• Selected relationships with manufacturers to achieve substantial volume discounts
• Historically re-roofing makes up approximately 76% and 80% of residential and non-residential

demand.*

Comprehensive Assortment Of Products For All External Residential And Commercial Building Needs

37% 49% 14%

Revenue Product Mix

Non-Residential Roofing Residential Roofing Complementary Building Products

Reflects net revenue for FY 2013

* Source: Freedonia September 2013

9

Offering The Top Brands That Contractors Rely On

10

• High value-added distributor performing a critical role in the roofing

supply chain

• Market leader in an attractive, growing and fragmented industry
• Highly scalable platform and proven business model with minimal capital

expenditures

• Superior financial performance highlighted by attractive growth and

margins

• Historical 10-year sales CAGR: 14.7% (2004-2013)
• CAGR internal sales growth since our IPO: 3.7%
• Strong EBITDA margins: 7.6% in 2013
• Results-oriented management, corporate culture and controls

Why Invest In Beacon?

11

Residential 58% Non-Residential 42%

Large And Attractive Market

$20.2 billion industry* in the U.S. with a projected growth rate of 6.2% annually through 2017 to $27.2 billion.

Source: The Freedonia Group – September 2013 *represents sales by manufacturers

U.S. Roofing Materials Market

12

• Traditionally, over 78% of expenditures in

the roofing market are for re-roofing projects, with the balance being for new construction.

• In 2012 re-roofing made up approximately

86% and 84% of residential and non- residential demand, respectively

• The median age of the housing stock as of

2012 is over 37 years old.

• Re-roofing demand provides stability and

the potential for growth even during periods

• f declining building construction

expenditures.

• In 2011, the roofing market experienced

growth while building construction expenditures contracted.

Aging Housing Market Leads To Re-Roof Demand

1960’s 11.6% 1970’s 18.6% 1980’s 12.6% 1990’s 12.1% 2000 or later 14.3%

Year of construction of housing stock

2012 (131.8 million units)

Pre - 1960 30.9%

Source: The Freedonia Group – September 2013

13

Re-Roofing Concentration Drives Stable Growth

Source: The Freedonia Group September 2013

• Total roofing demand is stable
• Installed base of existing homes and commercial buildings is large and growing
• Re-roofing is not a luxury expenditure, and it is not discretionary

33% 33% 14% 11% 7% 2%

Leaks Old Weather Damage Upgrade Appearance Deteriorating Other

14

Drivers of Re-Roofing

88% of U.S. re-roofing demand is non-discretionary and insulated from broader economic conditions.

Source: ELK, F.W. Dodge

$0 $500 $1,000 $1,500 $2,000 $2,500 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

U.S. Property Damage Due To Hail ($M)

15

Drivers of Re-Roofing

U.S. property damage due to hail is an element of annual re-roofing demand.

Source: National Oceanic and Atmospheric Administration, Insurance Information Institute

Source: National Climatic Data Center Source: National Climatic Data Center

Strategically Located To Serve Severe Weather Markets

Billion Dollar Weather Disasters

1980 - 2012

1 - 10 11- 20 21 - 30 31 - 40 41+

16

Number of Events

Source: National Climatic Data Center

17

Home Improvements

When Faced With A Choice, Many Homeowners Decide To Improve Their Homes, Rather Than Move

Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development, 2011 American Housing Survey.

$3.5 Billion $13.4 Billion $23.1 Billion $24.1 Billion $33.2 Billion $34.0 Billion $35.7 Billion $43.7 Billion Recreation Room Patio/Terrace/Detached Deck Bathrooms Remodels Windows / Doors Flooring/Paneling/Ceiling HVAC Kitchen Remodels Roofing

Total Expenditures

.5 Million 3.5 Million 5.0 Million 8.9 Million 18.8 Million 9.8 Million 3.7 Million 7.5 Million

Number of Projects

Beacon 10% ABC, Allied, RSG, SRS 40% All Other 50%

• Beacon is the second largest roofing

distributor in North America

• Consolidation driven by customer

demands and needs

• Although over 1,500 distributors serve

the roofing materials market, fewer than 5% are regional

18

Highly Fragmented Market Is Ripe for Consolidation

Less Than 5% Of Roofing Distributors Are Regional Market Share By Revenue

New Branch Openings New Branch Openings Existing Market Growth Existing Market Growth Acquisitions Acquisitions Target Average Annual Growth Target Average Annual Growth

+ + =

5 - 10% “organic” average growth potential

2-5% 3-5%

• EBITDA impact =

Typically break-even in year one.

Strong Platform For Growth And Acquisitions

• Market plans by location
• Sales rep productivity
• Identify new prospects
• New product offerings
• Acquisition opportunities

are identified and accountable.

• Highly fragmented

market

• Over 1,500 players
• Long history of successful

integration

• Margin and revenue

improvement

• Scalable platform
• Actual sales 10-year

CAGR: 13.4%

19

20

• Disciplined approach to new branch openings in contiguous markets
• Most branches opened by Beacon have been successful
• 43 branches opened since 1997, of which only three have closed.
• Low initial investment: $600,000 – $1,000,000
• Rapid breakeven – typically cash flow positive within one year
• New markets are consistently being identified and evaluated
• 35 branches have been opened since the IPO
• Others in location identification stage
• Potential new branch managers have been identified

Growth Through New Branch Openings

Revenue Expansion Revenue Expansion Large Operational Scale Large Operational Scale Best Practices Best Practices Sophisticated Uniform IT Platform Sophisticated Uniform IT Platform

Acquisitions Come With Significant Synergy Potential

21

22

Financial Overview

$653 $851 $1,501 $1,646 $1,785 $1,734 $1,610 $1,817 $2,044 $2,241

$0 $500 $1,000 $1,500 $2,000 $2,500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

23

Net Sales ($ in millions)

Significant Sales Growth

25.4% 24.3% 24.3% 22.7% 23.5% 23.7% 22.4% 23.1% 24.5% 23.7%

15.0% 22.0% 29.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

24

Fiscal Years

Margin Analysis By Fiscal Year

Gross Profit Margin

6.5% 7.1% 6.7% 4.2% 5.3% 6.3% 4.6% 5.7% 7.0% 5.8%

0.0% 5.0% 10.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fiscal Years

Operating Income Margin

$42.3 $60.7 $100.3 $69.8 $94.7 $109.2 $73.5 $103.7 $143.7 $129.7 $0 $20 $40 $60 $80 $100 $120 $140 $160 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

25

Operating Income

($ in millions)

FY 2012 FY 2013 Change Q1 2013 Q1 2014 Change

Net Sales $2,044 $2,241 9.6% $514 $552 7.5% Gross Profit $501 $531 6.0% $127 $127 0.1% % margin 24.5% 23.7% 24.7% 23.0% Operating Income $144 $130 (9.7)% $32 $27 (16.0%) % margin 7.0% 5.8% 6.3% 4.9% Net Income $76 $73 (3.9)% $18 $15 (17.8%) % margin 3.7% 3.2% 3.5% 2.7% Adjusted EBITDA (1) $176 $170 (3.3)% $42 $37 (10.4%) % margin 8.6% 7.6% 8.1% 6.8% Adjusted Diluted EPS (1) $1.67 $1.45 (13.0)% $0.37 $0.30 (18.9%)

26

Financial Review

(1) For reconciliations of reported Diluted EPS to Adjusted Diluted EPS and Net Income to Adjusted EBITDA, please reference our press release dated February 7, 2014.

27

• Ample Liquidity
• $325 million U.S. revolving line of credit and CDN $15 million Canadian revolving line of credit, with

initial term loan totaling $225 million, through March 2017.

• $332.1 million available at December 31, 2013, plus approximately $56.4 million in cash.
• Conservative Capital Structure
• Strong free cash flow
• Net Debt / Total Capital ratio of 18% at December 31, 2013
• Debt to Adjusted EBITDA ratio of 1.42 to 1 (a) as of December 31, 2013
• Robust Financial Controls
• Systems integrated
• Sarbanes-Oxley compliant
• Disciplined financial approach
• Historical bad debt expense less than 0.1% of net sales
• Minimal Capital Expenditures of Less than 1.5% of Sales
• $17.4 million in 2012, $26.1 million in 2013 and $5.4 million in Q1 2014

Financially Positioned To Deliver On Growth

(a) Calculated as defined under our credit facilities

28

• Average sales growth goal of 5% - 10% (excluding acquisitions)
• Gross margin between 23.0% - 25.0%
• Operating margin between 6% - 8%
• Capital expenditures of approximately 1 – 1.5% of sales

Long Term Annual Financial Performance Objectives

29

Beacon Roofing Supply A Company Of Substance

Benchmarking Culture Excellent Track Record Fundamentals Forecasting & Accountability Routines