investor presentation bob buck chairman and ceo summer 2010
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Investor Presentation
Bob BuckChairman and CEO
Summer 2010
Financials Q3 ended June 2010
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 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 forward-
looking 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 forward-looking statements to reflect subsequent events or circumstances.
1
Company Overview
Paul IsabellaPresident and COO
3
4
Beacon Overview
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 179 branches across 37 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 2009 Sales of $1.73 billion (10-year CAGR 30%) FY 2009 Operating Income of $109.2 million (10-year CAGR 29%) FY 2009 Operating margin of 6.3%
Successfully completed 12 major acquisitions since our IPO in 2004
Opened 25 new greenfield locations since the IPO
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
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March Across North America
6
Comprehensive assortment of products for all external residential and commercial building needs
Complete product offering
1 Steep Slope Roofing System
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
10 Cavity Wall Air & Vapor Barrier Systems
11 Doors & Windows
12 Through Wall Flashings
13 Expansion Joints
14 Below Grade Waterproofing System
15 Below Grade Drainage Systems
16 Waterstop
17 Concrete Sealers & Coatings
18 Ground Barriers
Revenue product mix1
Residential roofing
52%
Non-residential roofing
34%
Complementary building products
14%
1 Reflects net revenue for FY 2009
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*
*source – Freedonia April 2008
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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 10-year sales CAGR: 30% (2000-2009) CAGR internal sales growth since our IPO: 4.1% Strong EBITDA margins: 8.3% in 2009
Results-oriented management, corporate culture and controls
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Large and Attractive Market
$15.0 billion industry* in the U.S. with a projected growth rate of 2.4% annually through 2014
Re-roofing (vs. new construction) accounts for approximately 70% of roofing expenditures
In 2009 re-roofing made up approximately 90% and 79% of residential and non-residential demand, respectively
The median age of the housing stock as of 2009 is 35 years old.
Roofing demand has grown every year since 1993 Grown through four years of declining
building construction expenditures (1995, 2001, 2002, 2007)
Residential58%
Non-residential
42%
U.S. roofing materials market (SQS)
Source: The Freedonia Group – March 2010 *represents sales by manufacturers
Overview
1980's
12.5%
pre-1960
31.7%
2000's
12.4%
1990's
12.2%
1960's
11.7%
1970s
19.5%
Year of construction of housing stock,
2009 (129.5 million units)
Roofing market is somewhat insulated from swings in the overall building cycle
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Re-Roofing Concentration Drives Stable GrowthRoofing Demand Compared to 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: The Freedonia Group
$7.4 $7.7 $7.6 $8.2 $8.4 $9.3 $9.5 $9.8 $10.2 $10.5 $11.4 $12.1 $13.8 $13.9 $13.7 $15.8 $15.0
7.3%
8.4%
7.8%7.6%
8.1%8.0%
5.1%
6.1%6.3%
6.4%6.2%
5.8%5.8%
6.5%
7.0%6.9%
7.4%
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20095.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
Roofing Demand ($'s in billions) Interest Rates
10
Re-Roofing Concentration Drives Stable GrowthConstruction Spending Growth by Category
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
-40.0%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%D
ec-9
3
Dec-9
4
Dec-9
5
Dec-9
6
Dec-9
7
Dec-9
8
Dec-9
9
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Non-Residential Construction YoY % Residential Construction YoY % Roofing Demand YoY %
Source: The Freedonia Group
11
Highly Fragmented Market is Ripe for Consolidation
Source: IBIS World Pty Ltd.
< 5% are regional
Key Considerations
Beacon is the second largest roofing distributor in North America
Although over 1,500 distributors serve the roofing materials market, fewer than 5% are regional
Consolidation driven by customer demands and needs
Total number of roofing distributors > 1,500
Roofing Distributors
Market Share by Revenue
Source: Company estimate
Beacon7 %
All Other73 %
Other Top 320 %
12
Strong Platform for Growth and Acquisitions
New branch openings
(e.g., Boston/Houston)
Existing market growth
Acquisitions
1,500+ distributors
+ + =Potential
average annual growth
2–5% 3–5% 10–15% 15–25%
Targeted number: 6-12 locations per year
Incremental sales effect: $12–25mm
EBITDA impact: Typically breakeven in year one
Compelling customer-driven rationale for industry consolidation
Acquisition opportunities are identified and actionable Highly fragmented
market Over 1,500 players
Long history of successful integration Margin and revenue
improvement Scalable platform
Market plans by location
Sales rep productivity
Identify new prospects
New product offerings
5–10% “organic” average annual growth potential
Actual sales 10-year CAGR: 30%
13
Growth Through New Branch Openings
Disciplined approach to new branch openings in contiguous markets
Most branches opened by Beacon have been successful
36 branches opened since 1997, only one of which has closed
Low initial investment: $600,000 – $1,000,000
Rapid breakeven – typically cash flow positive within one year
New markets are consistently being identified and evaluated
25 branches have been opened since the IPO
Others in location identification stage
Branch managers have been identified
Selective geographic expansion through new branch openings
14
Acquisitions Come with Significant Synergy Potential
Sophisticated Uniform IT Platform
Beacon has a Highly Scalable Business Model
Revenue Expansion
Best Practices
Large Operational Scale
Financial overview
15
16
Significant sales growth
Net Sales ($ in millions)
$127.0$224.0
$415.1
$549.9 $559.5$652.9
$1,500.6
$1,645.8
$1,784.5$1,734.0
$1,246.2
$1,127.4
$850.9
$0
$500
$1,000
$1,500
$2,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q32009
Q32010
2000–2009 30% CAGR
Fiscal years YTD 2010
9.5% Contraction
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$8.5 $10.4
$31.3
$100.3
$69.8
$94.7
$109.2
$72.7
$42.8
$29.4
$60.7
$42.3
$18.7
$0
$20
$40
$60
$80
$100
$120
1999 2000 2001 2002 2003 PF2004
2005 2006 2007 2008 2009 Q32009
Q32010
Operating Income
($ in millions)
2000—2009 30% CAGR
Note: Operating income for pro forma 2004 excludes certain stock-based-compensation of $9.0mm.
Fiscal years YTD 2010
41.2% Contraction
18
19.7% 22.6% 25.4% 22.7% 23.5% 23.7% 23.9% 22.5%24.7% 24.3% 24.3%25.2%
0%
15%
30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD2009
YTD2010
Margin Analysis
Gross profit margin
4.6% 4.5% 5.3% 5.6% 6.5% 7.1% 6.7%4.2% 5.3% 6.3% 5.8%
3.8%
0%
4%
8%
2000 2001 2002 2003 PF2004
2005 2006 2007 2008 2009 YTD2009
YTD2010
Operating income margin
Note: Operating income for pro forma 2004 excludes certain stock-based-compensation of $9.0mm.
19
Financial Review
(1) For a reconciliation of Adjusted EBITDA to Net Income, please reference our press
releases dated December 1, 2009 and August 5, 2010
($ millions, except EPS)
YoY YTD YTD YoYFY 2008 FY 2009 Change 2009 2010 Change
Net Sales 1,784.5$ 1,734.0$ -2.8% 1,246.2$ 1,127.4$ -9.5%
Gross Profit 420.0 411.1 -2.1% 298.1 253.7 -14.9% % margin 23.5% 23.7% 23.9% 22.5%
Operating Income 94.7 109.2 15.3% 72.7 42.8 -41.2% % margin 5.3% 6.3% 5.8% 3.8%
Net Income 40.3 52.4 30.0% 33.4 17.7 -47.1% % margin 2.3% 3.0% 2.7% 1.6%
Adjusted EBITDA (1) 133.8 144.4 7.9% 99.2 67.4 -32.1% % margin 7.5% 8.3% 8.0% 6.0%
Diluted EPS 0.90$ 1.15$ 28.0% 0.74$ 0.38$ -48.6%
20
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 $159 million available at June 30, 2010, plus approximately $82 million in cash
Conservative Capital Structure Strong free cash flow Net Debt/Total capital ratio of 36% at June 30, 2010 Net debt to Adjusted EBITDA ratio(1) of 2.33 to 1 as of June 30, 2010
Robust Financial Controls Systems integrated Sarbanes-Oxley compliant Disciplined financial approach 2009 bad debt expense of 0.4% of net sales
Minimal Capital Expenditures of Less than 2% of Sales
$23.1 million in 2007, $5.7 million in 2008, $13.7 million in 2009
(1) Calculated as defined under our credit facilities.
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Annual Financial Performance Objectives
Long-term average sales growth goal of 5%-10% (excluding acquisitions)
Gross margin between 22.5%–24%
Operating margin between 6%-8%
Capital expenditures of less than 2% of sales
22
Beacon – A Company of Substance
Culture
Forecasting &
Accountability
Excellent
Track Record
Routines
Benchmarking
Fundamentals
23
Our Company Values and Culture
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