Beacon Roofing Supply, Inc. (BECN)
F4Q08 Earnings Call
December 2, 2008 10:00 am ET
Robert R. Buck - Chairman of the Board, Chief Executive Officer
David R. Grace - Chief Financial Officer, Senior Vice President
Paul M. Isabella - President, Chief Operating Officer
Analyst for Michael Rehaut - J.P. Morgan
Michael Cox - Piper Jaffray
John Kasprzak - BB&T Capital Markets
Theodor Kundtz - Needham & Company
Analyst for David Manthey - Robert W. Baird & Co., Inc.
[Scott Picarelli] - RBC Capital Markets
[Robert Nicholson - Pine Cobble Capital]
Analyst for Brent Rakers - Morgan Keegan & Company, Inc.
Robert Kelly - Sidoti & Company
[Adam Light - Tiger Management]
Previous Statements by BECN
» Beacon Roofing Supply Inc. F3Q09 (Qtr End 06/30/09) Earnings Call Transcript
» Beacon Roofing Supply F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
» Beacon Roofing Supply, Inc. F3Q08 (Qtr End 06/30/08) Earnings Call Transcript
On this call, Beacon Roofing Supply may make forward-looking statements including statements about its plans and objectives and future economic performance. Forward-looking statements are subject to a number of risks and uncertainties. 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 10K.
On the call today for Beacon Roofing Supply will be Mr. Robert Buck, Chairman and CEO, Mr. Paul Isabella, President and COO, and Mr. David Grace, Chief Financial Officer. I would now like to turn the call over to Mr. Robert Buck, Chairman and CEO.
Robert R. Buck
Welcome everyone to our fourth quarter and fiscal year 2008 earnings call. As you might imagine we are excited to announce these results and we’re particularly excited for our loyal shareholders and fellow employees. A lot of hard work went into making these results possible.
I will begin the call with a few summary comments and then David Grace, our CFO, will present the financial details for the quarter and the fiscal year. When David is finished, Paul Isabella, our President and COO, will answer prepared questions that we know you want answered during this call. Then when Paul is finished, we will open the call for additional questions you may have.
At the conclusion of our third quarter earnings call a few months back if you recall, I stated that our fourth quarter was off to a strong start and you can see from our just released earnings the fourth quarter remained strong. Our growth was strong, our margins improved and we controlled costs in a manner that you have grown to expect from us.
EPS for the quarter is higher than even the high assessments, many of which were updated recently. Again we are grateful for this performance in these tough financial and economic times.
The first quarter of fiscal ’09 is off to a very good start and I sense a good feeling in our company that we will have another successful fiscal year.
I will now turn the call over to David and he will present the financial details for the quarter and the fiscal year.
David R. Grace
For the first time in quite a while, all of our results for the quarter are from our existing markets. Sales increased 14.9% to $567.2 million from $493.8 million in 2007 with residential and non-residential roofing product sales increasing 36.8% and 6.6% respectively while complimentary product sales declined 11.8%.
Roofing product sales benefited from unusually large and frequent rises in price during the fourth quarter, mostly in residential shingles. We also saw strong re-roofing activity in storm-affected regions and continued growth in commercial roofing activities in most markets. Complimentary product sales which we believe are much more discretionary in nature than roofing products continued to be negatively impacted by both the slowdown in the economy and lower levels of new residential construction.
We estimate inflation in our product costs based upon our current inventories product mix and invoice costs as compared to the invoice costs of the same products a year ago. Based upon this estimate, our product costs were up 11% to 14% compared to 2007 levels while pricing to customers increased slightly ahead of those product cost increases. While there was very little inflation impact on our complimentary products, we estimate that about 75% of our roofing product sales growth in the quarter came from inflation.
We closed two branches and did not open any during the current quarter with one branch opened in the fourth quarter of 2007. We operated a total of 175 branches as of the end of this quarter compared to 178 last year. We had 64 business days in 2008 compared to 63 days in 2007 which we estimate boosted our sales growth by 1.8%.
Fourth quarter gross profit was $139.7 million for 2008 as compared to $108.2 million in 2007, a 29.2% increase, with gross margins increasing to 24.6% from 21.9% in 2007. We use the weighted average cost method in valuing our inventory and the impact of that method combined with buying ahead of the price increases allowed us to increase gross margins as we increased our pricing in concert with the vendor announced price increases. The effects of the price increases along with increased demand in the storm-affected regions and a slight mix change towards residential roofing products led to significantly higher gross margins.