Beacon Roofing Supply, Inc. (NASDAQ:BECN) announced results today for its third quarter ended June 30, 2017 and nine months ended June 30, 2017 of the fiscal year ending September 30, 2017 (“2017” or "Fiscal 2017").
Paul Isabella, the Company’s President and Chief Executive Officer, stated: “Record sales and EPS highlighted our solid third quarter results. Existing residential roofing sales produced a thirteenth consecutive quarter of year-to-year gains, exhibiting great consistency. Our complementary products business posted strong 6.3% existing market growth, reflecting the healthy residential market and our focus on expanding complementary product offerings across our entire footprint. Overall existing market sales growth was encouraging when viewed against the significant rain disruptions in the Eastern U.S., consecutive mild winters lessening demand across Northern markets, and the challenging comparison to last year’s Q3. Despite the demand pressures, gross margins improved meaningfully on a sequential basis and remained solid in the quarter, which is encouraging for Q4. We have been pleased to see our pricing show increased signs of stabilization, which is on target with our previous expectations. Our operating cost leverage highlights continued focus on tight expense control, even as we invest in key initiatives across the company. As I look ahead to Q4, I believe that Beacon is well positioned for a strong fourth quarter and delivery of another year of great performance and earnings for our shareholders.”
Third Quarter
Total sales increased 5.3% to a third quarter record of $1.21 billion in third quarter 2017, from $1.15 billion in 2016. Residential roofing product sales increased 8.3%, non-residential roofing product sales declined 4.7%, and complementary product sales increased 15.7% over the prior year. Existing markets same day sales, excluding acquisitions, increased 2.2% for the quarter. The third quarter 2017 had an identical number of business days as the year ago period (64 vs. 64 days).
Net income for the third quarter was $44.7 million, compared to $41.1 million in 2016. Third quarter EPS was $0.73, compared to $0.68 in 2016. Adjusted Net Income, after removing the impact of certain non-recurring costs related to acquisitions, was $51.4 million in the third quarter 2017, compared to $46.6 million in 2016. Third quarter Adjusted EPS was $0.84 (see included financial tables for a reconciliation of “Adjusted”), compared to $0.77 in 2016. Third quarter results were positively impacted by sustained strength in residential roofing, strong complementary products demand and attractive operating cost leverage. Operating performance was negatively impacted by a sales decline in non-residential roofing.
Nine Months
Total sales increased 4.5% to a nine-month record of $3.09 billion in 2017, from $2.95 billion in 2016. Residential roofing product sales increased 8.2%, non-residential roofing product sales decreased 8.1%, and complementary product sales increased 20.4% over the prior year. Existing market same day sales, excluding acquisitions, increased 1.3% year to date. The nine months of Fiscal 2017 and 2016 had 189 and 190 business days, respectively.
Net income for the nine months was $55.7 million, compared to $42.5 million in 2016. The nine-month EPS was $0.91, compared to $0.71 in 2016. Adjusted Net Income, after removing certain non-recurring costs related to acquisitions, was $75.8 million year to date, compared to $72.9 million in 2016. The nine-month Adjusted EPS was $1.24 (see included financial tables for a reconciliation of “Adjusted”) compared to $1.21 in 2016. The net income for the nine months was positively impacted by existing market growth in residential roofing and complementary products, and operating margin expansion. Results were negatively impacted by a sales decrease in non-residential roofing.
The Company will host a webcast and conference call today at 5:00 p.m. ET to discuss these results. The webcast link and call-in details are as follows:
| What: | Beacon Roofing Supply Third Quarter 2017 Earnings Results Webcast and Conference Call | ||
| When: | Wednesday, August 2, 2017 | ||
| Time: | 5:00 p.m. ET | ||
| Webcast: | http://ir.beaconroofingsupply.com/events.cfm (live and replay) | ||
| Live Call: | 720-634-9063, Conf. ID #59356720 | ||
To assure timely access, conference call participants should dial in prior to the 5:00 p.m. start time.
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. 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 latest Form 10-K. 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.
About Beacon Roofing Supply
Founded in 1928, Beacon Roofing Supply, Inc. is the largest publicly traded distributor of residential and commercial roofing materials and complementary building products, operating 385 branches throughout 48 states in the U.S. and 6 provinces in Canada. To learn more about Beacon and its family of regional brands, please visit www.becn.com.
BECN-F
BEACON ROOFING SUPPLY, INC. | ||||||||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||||||||
| (In thousands, except share and per share amounts) | ||||||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||
20171 | % of | 20162 | % of | 20171 | % of | 20162 | % of | |||||||||||||||||||||
| Net sales | $ | 1,213,894 | 100.0 | % | $ | 1,152,726 | 100.0 | % | $ | 3,086,802 | 100.0 | % | $ | 2,952,743 | 100.0 | % | ||||||||||||
| Cost of products sold | 916,140 | 75.5 | % | 870,651 | 75.5 | % | 2,333,504 | 75.6 | % | 2,241,716 | 75.9 | % | ||||||||||||||||
| Gross profit | 297,754 | 24.5 | % | 282,075 | 24.5 | % | 753,298 | 24.4 | % | 711,027 | 24.1 | % | ||||||||||||||||
| Operating expense | 212,883 | 17.5 | % | 203,696 | 17.7 | % | 624,526 | 20.2 | % | 601,921 | 20.4 | % | ||||||||||||||||
| Income from operations | 84,871 | 7.0 | % | 78,379 | 6.8 | % | 128,772 | 4.2 | % | 109,106 | 3.7 | % | ||||||||||||||||
| Interest expense, financing costs, and other | 13,397 | 1.1 | % | 12,226 | 1.1 | % | 39,239 | 1.3 | % | 41,508 | 1.4 | % | ||||||||||||||||
| Income before provision for income taxes | 71,474 | 5.9 | % | 66,153 | 5.7 | % | 89,533 | 2.9 | % | 67,598 | 2.3 | % | ||||||||||||||||
| Provision for income taxes | 26,815 | 2.2 | % | 25,027 | 2.2 | % | 33,800 | 1.1 | % | 25,073 | 0.8 | % | ||||||||||||||||
| Net income | $ | 44,659 | 3.7 | % | $ | 41,126 | 3.5 | % | $ | 55,733 | 1.8 | % | $ | 42,525 | 1.5 | % | ||||||||||||
| Weighted-average common stock outstanding: | ||||||||||||||||||||||||||||
| Basic | 60,311,923 | 59,615,121 | 60,131,546 | 59,293,500 | ||||||||||||||||||||||||
| Diluted | 61,350,843 | 60,619,809 | 61,163,591 | 60,276,695 | ||||||||||||||||||||||||
| Net income per share: | ||||||||||||||||||||||||||||
| Basic | $ | 0.74 | $ | 0.69 | $ | 0.93 | $ | 0.72 | ||||||||||||||||||||
| Diluted | $ | 0.73 | $ | 0.68 | $ | 0.91 | $ | 0.71 | ||||||||||||||||||||
1 | The third quarter 2017 operating results include $2.0 million ($1.2 million, net of taxes) of non-recurring charges, $7.9 million ($4.9 million, net of taxes) of additional amortization for acquired intangibles, and $1.1 million ($0.7 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to acquisitions completed in fiscal years 2016 and 2017. For the nine months ended June 30, 2017 operating results include $4.7 million ($2.9 million, net of taxes) of non-recurring charges, $23.7 million ($14.6 million, net of taxes) of additional amortization for acquired intangibles, and $4.3 million ($2.6 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to acquisitions completed in fiscal years 2016 and 2017. See “Adjusted Net Income (Loss) and Adjusted EPS” table for further details. | |
2 | The third quarter 2016 operating results include $2.2 million ($1.5 million, net of taxes) of non-recurring charges, $5.7 million ($3.6 million, net of taxes) of additional amortization for acquired intangibles, and $0.4 million ($0.3 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to acquisitions completed in fiscal year 2016. For the nine months ended June 30, 2016 operating results include $27.6 million ($16.7 million, net of taxes) of non-recurring charges, $17.1 million ($10.4 million, net of taxes) of additional amortization for acquired intangibles, and $5.5 million ($3.3 million, net of taxes) of interest expense, financing costs, and other for the recognition of certain costs related to acquisitions completed in fiscal year 2016. See “Adjusted Net Income (Loss) and Adjusted EPS” table for further details. | |
BEACON ROOFING SUPPLY, INC. | ||||||||||||
| Consolidated Balance Sheets | ||||||||||||
| (In thousands) | ||||||||||||
June 30, | September 30, | June 30, | ||||||||||
| 2017 | 2016 | 2016 | ||||||||||
| Assets | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 33,055 | $ | 31,386 | $ | 36,536 | ||||||
| Accounts receivable, net | 670,977 | 626,965 | 640,101 | |||||||||
| Inventories | 641,425 | 480,736 | 620,908 | |||||||||
| Prepaid expenses and other current assets | 221,477 | 163,103 | 205,073 | |||||||||
| Total current assets | 1,566,934 | 1,302,190 | 1,502,618 | |||||||||
| Property and equipment, net | 156,951 | 148,569 | 153,389 | |||||||||
| Goodwill | 1,256,014 | 1,197,565 | 1,200,206 | |||||||||
| Intangibles, net | 442,962 | 464,024 | 477,250 | |||||||||
| Other assets, net | 1,511 | 1,511 | 1,430 | |||||||||
| Total Assets | $ | 3,424,372 | $ | 3,113,859 | $ | 3,334,893 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 387,579 | $ | 360,915 | $ | 563,332 | ||||||
| Accrued expenses | 280,315 | 161,113 | 205,412 | |||||||||
| Current portion of long-term obligations | 13,762 | 14,811 | 12,605 | |||||||||
| Total current liabilities | 681,656 | 536,839 | 781,349 | |||||||||
| Borrowings under revolving lines of credit, net | 449,615 | 359,661 | 416,207 | |||||||||
| Long-term debt, net | 721,685 | 722,929 | 721,630 | |||||||||
| Deferred income taxes, net | 142,116 | 135,482 | 106,337 | |||||||||
| Long-term obligations under equipment financing and other, net | 28,412 | 35,121 | 39,720 | |||||||||
| Total liabilities | 2,023,484 | 1,790,032 | 2,065,243 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders' equity: | ||||||||||||
| Common stock | 603 | 598 | 597 | |||||||||
| Undesignated preferred stock | - | - | - | |||||||||
| Additional paid-in capital | 714,608 | 694,564 | 686,943 | |||||||||
| Retained earnings | 703,055 | 647,322 | 599,930 | |||||||||
| Accumulated other comprehensive loss | (17,378 | ) | (18,657 | ) | (17,820 | ) | ||||||
| Total stockholders' equity | 1,400,888 | 1,323,827 | 1,269,650 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 3,424,372 | $ | 3,113,859 | $ | 3,334,893 | ||||||
BEACON ROOFING SUPPLY, INC. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| Nine Months Ended June 30, | ||||||||
| 2017 | 2016 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 55,733 | $ | 42,525 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 86,238 | 73,027 | ||||||
| Stock-based compensation | 11,227 | 14,070 | ||||||
| Certain interest expense and other financing costs | 3,989 | 5,113 | ||||||
| Gain on sale of fixed assets | (726 | ) | (838 | ) | ||||
| Deferred income taxes | 6,625 | 1,460 | ||||||
| Other, net | - | (359 | ) | |||||
| Changes in operating assets and liabilities, net of the effects of businesses acquired: | ||||||||
| Accounts receivable | (28,309 | ) | (43,060 | ) | ||||
| Inventories | (141,942 | ) | (96,363 | ) | ||||
| Prepaid expenses and other assets | (55,973 | ) | (56,764 | ) | ||||
| Accounts payable and accrued expenses | 137,290 | 135,548 | ||||||
Net cash provided by operating activities | 74,152 | 74,359 | ||||||
| Investing activities: | ||||||||
| Purchases of property and equipment | (31,882 | ) | (21,553 | ) | ||||
| Acquisition of businesses | (128,533 | ) | (1,018,658 | ) | ||||
| Proceeds from sales of assets | 1,839 | 969 | ||||||
| Net cash used in investing activities | (158,576 | ) | (1,039,242 | ) | ||||
| Financing activities: | ||||||||
| Borrowings under revolving lines of credit, net of repayments | 88,357 | 403,052 | ||||||
| Borrowings under term loan, net of repayments | (3,375 | ) | 261,000 | |||||
| Borrowings under Senior Notes | - | 300,000 | ||||||
| Borrowings under equipment financing facilities and other, net of repayments | (7,759 | ) | (3,847 | ) | ||||
| Payment of deferred financing costs | - | (27,813 | ) | |||||
| Proceeds from exercise of options | 9,994 | 20,213 | ||||||
| Taxes paid related to net share settlement of equity awards | (1,172 | ) | - | |||||
| Excess tax benefit from stock-based compensation | - | 4,024 | ||||||
| Net cash provided by financing activities | 86,045 | 956,629 | ||||||
| Effect of exchange rate changes on cash | 48 | (871 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 1,669 | (9,125 | ) | |||||
| Cash and cash equivalents, beginning of period | 31,386 | 45,661 | ||||||
| Cash and cash equivalents, end of period | $ | 33,055 | $ | 36,536 | ||||
BEACON ROOFING SUPPLY, INC. | |||||||||||||||||||
| Consolidated Sales by Product Line | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Consolidated Sales by Product Line | |||||||||||||||||||
| Three Months Ended June 30, | |||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | ||||||||||||||
| Residential roofing products | $ | 669,437 | 55.1 | % | $ | 618,365 | 53.6 | % | $ | 51,072 | 8.3 | % | |||||||
| Non-residential roofing products | 344,792 | 28.4 | % | 361,790 | 31.4 | % | (16,998 | ) | -4.7 | % | |||||||||
| Complementary building products | 199,665 | 16.5 | % | 172,571 | 15.0 | % | 27,094 | 15.7 | % | ||||||||||
| $ | 1,213,894 | 100.0 | % | $ | 1,152,726 | 100.0 | % | $ | 61,168 | 5.3 | % | ||||||||
| Consolidated Sales by Product Line for Existing Markets1 | |||||||||||||||||||
| Three Months Ended June 30, | |||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | ||||||||||||||
| Residential roofing products | $ | 651,648 | 56.0 | % | $ | 617,873 | 54.2 | % | $ | 33,775 | 5.5 | % | |||||||
| Non-residential roofing products | 340,245 | 29.2 | % | 359,440 | 31.6 | % | (19,195 | ) | -5.3 | % | |||||||||
| Complementary building products | 172,070 | 14.8 | % | 161,827 | 14.2 | % | 10,243 | 6.3 | % | ||||||||||
| $ | 1,163,963 | 100.0 | % | $ | 1,139,140 | 100.0 | % | $ | 24,823 | 2.2 | % | ||||||||
| Existing Market1 Sales By Business Day2 | |||||||||||||||||||
| Three Months Ended June 30, | |||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | ||||||||||||||
| Residential roofing products | $ | 10,182 | 56.0 | % | $ | 9,654 | 54.2 | % | $ | 528 | 5.5 | % | |||||||
| Non-residential roofing products | 5,316 | 29.2 | % | 5,616 | 31.6 | % | (300 | ) | -5.3 | % | |||||||||
| Complementary building products | 2,689 | 14.8 | % | 2,529 | 14.2 | % | 160 | 6.3 | % | ||||||||||
| $ | 18,187 | 100.0 | % | $ | 17,799 | 100.0 | % | $ | 388 | 2.2 | % | ||||||||
1 | Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of the third quarter of fiscal year 2017. | |
2 | There were 64 business days in each of the quarters ended June 30, 2017 and 2016. | |
BEACON ROOFING SUPPLY, INC. | |||||||||||||||||||
| Consolidated Sales by Product Line | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Consolidated Sales by Product Line | |||||||||||||||||||
| Nine Months Ended June 30, | |||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | ||||||||||||||
| Residential roofing products | $ | 1,682,387 | 54.5 | % | $ | 1,554,717 | 52.6 | % | $ | 127,670 | 8.2 | % | |||||||
| Non-residential roofing products | 900,689 | 29.2 | % | 979,580 | 33.2 | % | (78,891 | ) | -8.1 | % | |||||||||
| Complementary building products | 503,726 | 16.3 | % | 418,446 | 14.2 | % | 85,280 | 20.4 | % | ||||||||||
| $ | 3,086,802 | 100.0 | % | $ | 2,952,743 | 100.0 | % | $ | 134,059 | 4.5 | % | ||||||||
| Consolidated Sales by Product Line for Existing Markets1 | |||||||||||||||||||
| Nine Months Ended June 30, | |||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | ||||||||||||||
| Residential roofing products | $ | 1,621,546 | 55.9 | % | $ | 1,533,170 | 53.2 | % | $ | 88,376 | 5.8 | % | |||||||
| Non-residential roofing products | 889,264 | 30.7 | % | 971,938 | 33.8 | % | (82,674 | ) | -8.5 | % | |||||||||
| Complementary building products | 388,932 | 13.4 | % | 372,895 | 13.0 | % | 16,037 | 4.3 | % | ||||||||||
| $ | 2,899,742 | 100.0 | % | $ | 2,878,003 | 100.0 | % | $ | 21,739 | 0.8 | % | ||||||||
| Existing Market1 Sales By Business Day2 | |||||||||||||||||||
| Nine Months Ended June 30, | |||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||
| Net Sales | Mix % | Net Sales | Mix % | $ | % | ||||||||||||||
| Residential roofing products | $ | 8,580 | 55.9 | % | $ | 8,069 | 53.2 | % | $ | 511 | 6.3 | % | |||||||
| Non-residential roofing products | 4,705 | 30.7 | % | 5,115 | 33.8 | % | (410 | ) | -8.0 | % | |||||||||
| Complementary building products | 2,058 | 13.4 | % | 1,963 | 13.0 | % | 95 | 4.8 | % | ||||||||||
| $ | 15,343 | 100.0 | % | $ | 15,147 | 100.0 | % | $ | 196 | 1.3 | % | ||||||||
1 | Excludes acquired branches that have not been under ownership for at least four fiscal quarters prior to the start of fiscal year 2017. | |
| 2 | There were 189 and 190 business days for the nine months ended June 30, 2017 and 2016, respectively. | |
BEACON ROOFING SUPPLY, INC. | ||||||||||||||||||||||||
Adjusted Net Income (Loss) and Adjusted EPS1 | ||||||||||||||||||||||||
(In thousands except per share amounts) | ||||||||||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| Amount | Per | Amount | Per | Amount | Per | Amount | Per | |||||||||||||||||
| Net income | $ | 44,659 | $ | 0.73 | $ | 41,126 | $ | 0.68 | $ | 55,733 | $ | 0.91 | $ | 42,525 | $ | 0.71 | ||||||||
| Company adjustments, net of income taxes: | ||||||||||||||||||||||||
| Acquisition costs2 | 6,761 | 0.11 | 5,444 | 0.09 | 20,075 | 0.33 | 30,405 | 0.50 | ||||||||||||||||
| Adjusted Net Income (Loss) | $ | 51,420 | $ | 0.84 | $ | 46,570 | $ | 0.77 | $ | 75,808 | $ | 1.24 | $ | 72,930 | $ | 1.21 | ||||||||
1 | Adjusted Net Income (Loss) is defined as net income excluding non-recurring costs and the incremental amortization of intangibles related to acquisitions completed in fiscal years 2016 and 2017. We believe that Adjusted Net Income (Loss) is an operating performance metric that is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. Adjusted net income per share or "Adjusted EPS" is calculated by dividing the Adjusted Net Income (Loss) for the period by the weighted-average diluted shares outstanding for the period (see Consolidated Statements of Operations for amounts). | |
| 2 | Acquisition costs reflect total non-recurring charges and the incremental amortization of intangibles related to acquisitions completed in fiscal years 2016 and 2017, net of $4.2 million and $2.9 million in tax for the three months ended June 30, 2017 and 2016, respectively and net of $12.6 million and $19.8 million in tax for the nine months ended June 30, 2017 and 2016, respectively. | |
While we believe Adjusted Net Income (Loss) and Adjusted EPS are useful measures for investors, these are not measurements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”). You should not consider Adjusted Net Income (Loss) or Adjusted EPS in isolation or as a substitute for net income and net income per share or diluted earnings per share calculated in accordance with GAAP.
BEACON ROOFING SUPPLY, INC. | ||||||||||||||||
Adjusted EBITDA1 | ||||||||||||||||
| (In thousands) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income | $ | 44,659 | $ | 41,126 | $ | 55,733 | $ | 42,525 | ||||||||
| Acquisition costs2 | 1,971 | 2,157 | 4,715 | 23,310 | ||||||||||||
| Interest expense, net | 13,614 | 12,508 | 40,098 | 41,836 | ||||||||||||
| Income taxes | 26,815 | 25,027 | 33,800 | 25,073 | ||||||||||||
| Depreciation and amortization | 29,283 | 25,375 | 86,238 | 73,019 | ||||||||||||
| Stock-based compensation | 3,653 | 3,374 | 11,227 | 14,070 | ||||||||||||
| Adjusted EBITDA | $ | 119,995 | $ | 109,567 | $ | 231,811 | $ | 219,833 | ||||||||
| Adjusted EBITDA as a % of net sales | 9.9 | % | 9.5 | % | 7.5 | % | 7.4 | % | ||||||||
1 | Adjusted EBITDA is defined as net income plus interest expense (net of interest income), income taxes, depreciation and amortization, adjustments to contingent consideration, stock-based compensation, and non-recurring acquisition costs from acquisitions completed in fiscal years 2016 and 2017. EBITDA is a measure commonly used in the distribution industry, and we present Adjusted EBITDA to enhance your understanding of our operating performance. Adjusted EBITDA is used in our bank covenants and we use Adjusted EBITDA as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe that Adjusted EBITDA is an operating performance measure that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Further, we believe that Adjusted EBITDA is a useful measure because it improves comparability of results of operations, since purchase accounting used for acquisitions can render depreciation and amortization non-comparable between periods. We use these supplemental measures to evaluate performance period over period and to analyze the underlying trends in our business and establish operational goals and forecasts that are used in allocating resources. We expect to compute our non-GAAP financial measures using the same consistent method from quarter-to-quarter and year-to-year. | |
| 2 | Acquisition costs reflect all non-recurring charges related to acquisitions completed in fiscal years 2016 and 2017 (excluding the impact of tax) that are not embedded in other balances of the table. Certain portions of the total acquisition costs incurred are included in interest expense, income taxes, depreciation and amortization, and stock-based compensation. | |
While we believe Adjusted EBITDA is a useful measure for investors, it is not a measurement presented in accordance with GAAP. You should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operations, or any other items calculated in accordance with GAAP. In addition, Adjusted EBITDA has inherent material limitations as a performance measure. It does not include interest expense. Because we have borrowed money, interest expense is a necessary element of our costs. In addition, Adjusted EBITDA does not include depreciation and amortization expense. Because we have capital and intangible assets, depreciation and amortization expense is a necessary element of our costs. Adjusted EBITDA also does not include stock-based compensation, which is a necessary element of our costs since we make stock awards to key members of management as an important incentive to maximize overall company performance and as a benefit. Moreover, Adjusted EBITDA does not include taxes, and payment of taxes is a necessary element of our operations. Accordingly, since Adjusted EBITDA excludes these items, it has material limitations as a performance measure. We separately monitor capital expenditures, which impact depreciation expense, as well as amortization expense, interest expense, stock-based compensation expense, and income tax expense. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170802006386/en/
Contacts:
Joseph Nowicki, 571-323-3940
Executive
VP & CFO
JNowicki@becn.com
