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Beacon Roofing Supply Inc. (BECN)
F3Q09 Earnings Call
August 7, 2009 10:00 am ET
Robert Buck – Chairman and Chief Executive Officer
David R. Grace – Senior Vice President and Chief Financial Officer
Paul M. Isabella – President and Chief Operating Officer
Katherine Thompson – Thompson Research Group.
Michael Cox – Piper Jaffray
Michael Rehaut – JP Morgan
Ivan Marcuse - KeyBanc Capital Markets
Ryan Merkel – William Blair
Ivan Holman – RBC Capital Markets
David Manthey – Robert W. Baird & Co
Brent Rakers – Morgan Keegan
Saul Ludwig – Key Banc
Joe Gagan – Atlantic Equity Research
Previous Statements by BECN
» Beacon Roofing Supply F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
» Beacon Roofing Supply, Inc. F4Q08 (Quarter End 9/30/08) Earnings Call Transcript
» Beacon Roofing Supply, Inc. F3Q08 (Qtr End 06/30/08) Earnings Call Transcript
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.
This was another solid quarter for Beacon with profits much higher than Street estimates. We delivered great expense controls, along with very strong cash flows. And now with nine months under our belt, it's gratifying to all of us here in the leadership team to report that profits this year are nearly double the same period last year.
This is no time for extended celebrations or high-fives around the office because we still have a lot of work to do. However, I certainly don't think there's any wrong if I say a big thank you to all of our employees, many of whom might be listening who worked so hard to achieve these results this quarter and for the nine months. We do have a wonderful team here at Beacon who are really getting the job done in very tough economic times.
As has been our custom on these earnings calls in the past, our CFO David Grace presents the financial details right after I speak. In the past we would provide answers to nine or ten prepared questions that we believe were tops on your list. And that's worked very well for us and I've received a lot of good feedback.
But in an effort to keep these calls fresh and relevant and meaningful to you, I've decided to change the format a bit for this quarter's call. So after David's presentation, we will go right into a Q&A and we will not be using prepared questions and answers like we've done in the past.
Our third quarter results were very encouraging to us. David will point out how our attention to the fundamentals of our business is paying off, and it's paying off in regards to strong cash flows, lower operating expenses and strong earnings per share. We have a solid business plan still in effect that will keep us on track the rest of the year and into 2010.
I would like to remind everyone that our business model does serve us well because we're balancing good results in residential roofing with soft demand in commercial. And also our geographic diversity also gives us stability in much the same way, so just a few other points. Gross margins are firm. We continue to receive notices of price increases from various vendors. Our balance sheet is strong because of our attention to accounts receivable, management of inventory, and our efforts to improve debt ratios and return on assets and equity.
What I'd like to do now is turn the call over to our sterling CFO who will led us through the financial results and he will do that in his normal proper New England tone. So everyone, here's David Grace and I'll be back after he gives more details about the financials.
David R. Grace
Just as a reminder, all of our results for fiscal 2009 are from existing markets and considered organic. For the third quarter, sales decreased 9.9% $463.6 million from $514.6 million in 2008 with residential roofing sales increasing 10.4% as we benefited from the higher year-over-year prices partially offset by volume drops in most of our regions.
On residential roofing declined 25.6% as commercial activity has slowed significantly and we did not experience the expected pickup after a rough winter season. Complementary products, which we believe are more discretionary in nature, were down 25.1% and continued to be negatively impacted by both the slowdown in the economy and lower levels of residential construction and remodeling.
Regional sales were down, except for in our Southeast area, Southwest and in Canada before the effects of the exchange rate. We estimate inflation in our product cost based upon our current inventory's product mix and invoice cost as compared to the invoice cost of the same products a year ago. Based upon this estimate, our product costs were up 11% to 13% compared to 2008 levels.
We also had 64 business days in both 2009 and 2008. We did not open or close any branches during the current quarter or during last year's third quarter. We operated a total of 169 branches at the end of this quarter compared to 177 last year.