Transcript Financials for Q1 ended December 2008 Investor Presentation Robert Buck Chairman and Chief Executive Officer David Grace Chief Financial Officer Winter 2009

Financials for Q1 ended December 2008
Investor Presentation
Robert Buck
Chairman and Chief Executive Officer
David Grace
Chief Financial Officer
Winter 2009
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 our 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 on forwardlooking statements, which reflect our analysis only and speak only 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 forwardlooking statements to reflect subsequent events or circumstances.
1
Company Overview
Robert Buck
Chairman and Chief Executive Officer
2
Beacon Overview
Founded in 1928, Beacon Roofing Supply, Inc. has grown to be one of the
largest distributors of residential and non-residential roofing materials in
the United States and Canada
 A leader in key metropolitan markets in the Northeast, Mid-Atlantic,
Midwest, Central Plains, Southeast and Southwest regions in the
United States and in Eastern Canada
 170 branches across 35 U.S. states and 3 Canadian provinces
 Over 40,000 customers
 Broad product offering of up to 10,000 SKUs
 Strong long-term historical performance
 FY 2008 Sales of $1.78 billion (11-year CAGR 37%)
 FY 2008 Operating Income of $94.7 million (11-year CAGR 14%)
 FY 2008 Sales growth of 8.4%, organic growth of 1.3%
 Successfully completed 17 acquisitions since 1997
3
Significant Strategic Accomplishments
Key accomplishments since IPO
At IPO
Today
Number of branches
66
170
Number of operating states
12
35
7,500
10,000
>18,000
>40,000
5 - 10% (expected)
6.4% (realized *)
$950mm (opportunity)
>$830mm (realized)
SKU count
Number of customers
Average internal growth
Targeted acquisitions ($sales)
* Through fiscal 2008
 Beacon successfully completed 11 strategic acquisitions since our IPO
 Opened 22 new greenfield locations since the IPO
4
March Across North America
1997
2001
2004
5
Today
Comprehensive assortment of products for all
external residential and commercial building needs
Revenue product mix1
Complete product offering
1 Steep Slope Roofing
System
Non-residential
roofing
41%
Complementary
building
products
17%
2 Underlayment
3 Custom Metals
4 Substrates
5 Wood & vinyl Siding
6 Flat Roof Systems
7 Rigid Insulations
8 Air & Vapor Barriers
9 Pressure Treated Lumber
Residential
roofing
42%
10 Cavity Wall Air & Vapor
Barrier Systems
11 Doors & Windows
1
Reflects net revenue for FY 2008
12 Through Wall Flashings
13 Expansion Joints
14 Below Grade
Waterproofing System
15 Below Grade Drainage
Systems
16 Waterstop
17 Concrete Sealers &
Coatings
 10,000 SKUs offered
 Selected relationships with manufacturers to
achieve substantial volume discounts
 Historically re-roofing makes up
approximately 70% and 80% of residential
and non-residential demand*
18 Ground Barriers
*source – Freedonia April 2008
6
Why Invest in Beacon?
 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 11-year sales CAGR: 37% (1998-2008)
 CAGR internal sales growth since our IPO: 6.4%
 Strong EBITDA margins: 7.5% in 2008
 Results-oriented management, corporate culture and controls
7
Large and Attractive Market
U.S. roofing materials market
Overview
 $13.7 billion industry in the U.S. with a
Non-residential
38%
projected growth rate of 2.6% annually through
2012
 Re-roofing (vs. new construction) accounts for
approximately 70% of roofing expenditures
 In 2007 re-roofing made up approximately 77%
and 78% of residential and non-residential
demand, respectively
 Roofing demand has grown every year since
Residential
62%
2007 Total = $13.7bn *
Source: The Freedonia Group – April 2008
1993
 Grown through four years of declining
building construction expenditures (1995,
2001, 2002, 2007)
 Almost two-thirds of the U.S. housing stock was
built prior to 1980, with a median age of 30
years
*represents sales by manufacturers
Roofing market is somewhat insulated from swings in the overall building cycle
8
Re-Roofing Concentration Drives Stable Growth
Roofing Demand Compared to Interest Rates
$12.0
9.0%
8.4%
$10.0
$8.0
8.5%
8.0%
8.0%
8.1%
7.3%
7.8%
7.5%
7.6%
7.4%
$6.0
7.0%
7.0%
6.9%
$4.0
6.5%
6.5%
6.2%
$2.0
6.4% 6.3%
5.5%
5.8% 5.8%
$7.4
$7.7
$7.9
$8.2
$8.5
$8.8
$9.1
$9.2
$9.4
$9.6
$10.0
$10.4
6.0%
$10.7
$11.1
$11.8
$0.0
5.0%
1993 1994 1995 1996 1997 1998 1999
2000 2001 2002 2003 2004 2005 2006 2007
Roofing Demand ($'s in billions)
Interest Rates

Total roofing demand is very 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

There is virtually no correlation between interest rates and demand for roofing
Source: Global Industry Analysts
9
Re-Roofing Concentration Drives Stable Growth
Construction Spending Growth by Category
20.0%
16.0%
12.0%
8.0%
4.0%
Ju
-4.0%
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0.0%
-8.0%
-12.0%
-16.0%
Non-Resdiential Construction YoY %
Roofing Demand YoY %
Residential Construction YoY %

Residential new construction activity has been volatile

Commercial new construction is also volatile and closely follows economic cycles

Demand for roofing, due to the large installed base of aging structures, remains very stable
and consistent despite the construction cycles
Source: Global Industry Analysts
10
Highly Fragmented Market is Ripe for Consolidation
Roofing Distributors
Key Considerations
 Beacon is among the three largest
roofing distributors in North America
 Although over 1,500 distributors serve
< 5% are
regional
the roofing materials market, fewer
than 5% are regional
 Consolidation driven by customer
demands and needs
Market Share by Revenue
Beacon
7%
Total number of roofing distributors > 1,500
Other Top 3
20 %
Source: IBIS World Pty Ltd.
All Other
73 %
Source: Company estimate
11
Strong Platform for Growth and Acquisitions
5–10% “organic” average annual growth potential
New branch
openings
(e.g., Boston/
Houston)
 Targeted number: 6-12
locations per year
 Incremental sales
+
Existing market
growth
 Market plans by
location
 Sales rep productivity
effect: $12–25mm
 EBITDA impact:
Typically breakeven in
year one
 Identify new prospects
 New product offerings
15–25%
10–15%
3–5%
2–5%
+
Acquisitions
1,500+
distributors
=
 Compelling customer-driven
rationale for industry
consolidation
Potential
average annual
growth
 Actual sales 11-year
CAGR: 37%
 Acquisition opportunities are
identified and actionable
 Highly fragmented
market
 Over 1,500 players
 Long history of successful
integration
 Margin and revenue
improvement
 Scalable platform
12
Growth Through New Branch Openings
Selective geographic expansion through new branch openings
 Disciplined approach to new branch openings in contiguous markets
 Most branches opened by Beacon have been successful
 33 branches opened since 1997, only one of which has closed
 Low initial investment: $600,000 – $1,000,000
 Rapid breakeven – typically cash flow positive within one year
 New markets are consistently being identified and evaluated
 22 branches have been opened since the IPO
 Others in location identification stage
 Branch managers have been identified
13
Acquisitions Come with Significant Synergy Potential
Revenue
Expansion
Sophisticated
Uniform IT
Platform
Best Practices
Large
Operational Scale
Beacon has a Highly Scalable Business Model
14
Financial overview
David Grace
Chief Financial Officer
15
Significant sales growth
Net Sales ($ in millions)
Fiscal years
$2,000
YTD 2009
$1,784.5
$1,645.8
$1,500.6
$1,500
$1,000
$850.9
$652.9
$549.9
$500
$559.5
$415.1
$398.4
$463.3
$224.0
$127.0
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Q1
2008
Q1
2009
16
Operating Income
($ in millions)
YTD 2009
Fiscal years
$120
$100.3
$94.7
$100
$80
$69.8
$60.7
$60
$42.3
$40
$18.7
$20
$8.5
$10.4
1999
2000
$37.7
$29.4 $31.3
$15.8
$0
2001
2002
2003
PF
2004
2005
2006
2007
2008
Q1
2008
Q1
2009
Note: Operating income for pro forma 2004 excludes certain stock-based-compensation of $9.0mm.
17
Margin Analysis
Gross profit margin
30%
24.7%
19.7% 22.6%
25.2% 25.4% 24.3% 24.3% 24.3% 22.7% 23.5% 23.0% 25.0%
2000
2003
2004
2005
PF
2005
2006
5.6%
6.5%
7.1%
5.8%
6.7%
2003
PF
2004
2005
PF
2005
2006
15%
0%
2001
2002
2007
2008
Q1
2008
4.2%
5.3%
4.0%
2007
2008
Q1
2008
Q1
2009
Operating income margin
12%
8%
4%
0%
4.6%
4.5%
5.3%
2000
2001
2002
8.1%
Q1
2009
Note: Operating income for pro forma 2004 excludes certain stock-based-compensation of $9.0mm.
18
Financial Review
($ millions)
YoY
Change
Q1
2008
Q1
2009
YoY
Change
FY 2007
FY 2008
$1,645.8
$1,784.5
8.4%
$398.4
$463.3
16.3%
373.9
22.7%
420.0
23.5%
12.3%
91.7
23.0%
116.0
25.0%
26.5%
Operating Income
% margin
69.8
4.2%
94.7
5.3%
35.7%
15.8
4.0%
37.7
8.1%
138.8%
Net Income
% margin
25.3
1.5%
40.3
2.3%
59.4%
5.2
1.3%
18.6
4.0%
255.7%
Adjusted EBITDA (1)
% margin
107.7
6.5%
133.8
7.5%
24.3%
26.0
6.5%
46.6
10.1%
79.0%
Diluted EPS
$0.56
$0.90
60.7%
$0.12
$0.41
241.7%
Net Sales
Gross Profit
% margin
(1) For a reconciliation of Adjusted EBITDA to Net Income, please reference our press
releases dated December 2, 2008 and February 6, 2009
19
Financially Positioned to Deliver on Growth
 Ample Liquidity
 $150 million U.S. revolving line of credit and CDN $15 million Canadian revolving line
of credit, with initial term loans totaling $350 million, through October 2013
 $149 million available at December 31, 2008, plus approximately $22 million in cash
 Conservative Capital Structure
 Strong free cash flow
 Net debt/Total capital ratio of 46% at December 31, 2008
 Net debt to Adjusted EBITDA ratio(1) of 2.25 to 1 as of December 31, 2008
 Robust Financial Controls
 Systems integrated
 Sarbanes-Oxley compliant
 Disciplined financial approach
 2008 bad debt expense of 0.6% of net sales
 Minimal Capital Expenditures of Less than 2% of Sales
 $23.1 million in FY 2007, $5.7 million in FY 2008
(1) Calculated as defined under our credit facilities.
20
Financial Performance Objectives
 Average annual sales growth goal of 5%-10%
(excluding acquisitions)
 Gross margin goals between 23%–24.5%
 Operating margin goals between 6%-8%
 Capital expenditures of less than 2% of sales
21
Beacon – A Company of Substance
Benchmarking
Fundamentals
Culture
Forecasting &
Excellent
Accountability
Track Record
Routines
22
Our Company Values and Culture
23