As filed with the Securities and Exchange Commission on December 15, 2005

Registration No. 333-128919

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


Amendment No. 3

to
FORM S-3

REGISTRATION STATEMENT
Under
Securities Act of 1933


BEACON ROOFING SUPPLY, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

5033

 

36-4173371

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification No.)

 

 

1 Lakeland Park Drive
Peabody, MA 01960
(877) 645-7663

 

 

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 


Robert R. Buck
President and Chief Executive Officer
Beacon Roofing Supply, Inc.
1 Lakeland Park Drive
Peabody, MA  01960
(877) 645-7663

(Name, address, including zip code, and telephone number
including area code, of agent for service)


Copies of all communications, including communications sent to agent for service, should be sent to:

David McCarthy
Schiff Hardin LLP
6600 Sears Tower
Chicago, Illinois 60606

 

Leland Hutchinson
Winston & Strawn LLP
35 W. Wacker Drive
Chicago, Illinois 60601

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than in connection with dividend or interest reinvestment plans, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. o

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o


The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 




Subject to completion, dated December 15, 2005

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell, and we are not soliciting an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.

Prospectus

8,750,000 shares

GRAPHIC

Common stock

We are selling 2,000,000 shares of common stock, and the selling stockholders identified in this prospectus are selling an additional 6,750,000 shares. We will not receive any of the proceeds from the sale of the shares by the selling stockholders.

Our common stock is quoted on The Nasdaq National Market under the symbol “BECN.” On December 14, 2005, the last reported sale price of our common stock on The Nasdaq National Market was $27.26 per share.

 

 

Per share

 

Total

 

 

 

Public offering price

 

$              

 

$         

 

 

 

Underwriting discounts and commissions

 

$              

 

$         

 

 

 

Proceeds to Beacon, before expenses

 

$              

 

$         

 

 

 

Proceeds to selling stockholders, before expenses

 

$              

 

$         

 

 

 

 

Certain stockholders have granted the underwriters an option for a period of 30 days to purchase up to 1,312,500 additional shares of our common stock on the same terms and conditions set forth above to cover over-allotments, if any.

Investing in our common stock involves a high degree of risk. See “Risk factors” beginning on page 6.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to investors on December   , 2005.

JPMorgan

William Blair & Company


 

Robert W. Baird & Co.

 

 

 

BB&T Capital Markets

 

 

Morgan Keegan & Company, Inc.

 

December   , 2005




GRAPHIC




Table of contents

 

   Page

 

Prospectus summary

 

1

 

 

Risk factors

 

6

 

 

Forward-looking statements

 

11

 

 

Use of proceeds

 

12

 

 

Price range of common stock

 

12

 

 

Dividend policy

 

12

 

 

Capitalization

 

13

 

 

Selected consolidated financial data

 

14

 

 

Unaudited pro forma consolidated financial data

 

15

 

 

Management’s discussion and analysis of financial condition and results
of operations

 

23

 

 

Business

 

42

 

 

Management

 

55

 

 

Selling stockholders

 

59

 

 

Description of capital stock

 

61

 

 

Underwriting

 

62

 

 

Legal matters

 

65

 

 

Experts

 

65

 

 

Where you can find more information

 

66

 

 

Index to financial statements

 

F-Index

 

 

 

i




Prospectus summary

You should read the following summary in conjunction with the more detailed information contained elsewhere in this prospectus and the documents incorporated by reference in this prospectus, including the information contained in the “Risk factors” section beginning on page 6. All statistical information, such as number of branches, customers, states in which we operate and stock keeping units, gives effect to our October 2005 acquisition of SDI Holding, Inc., except as otherwise noted. All historical financial information relates solely to Beacon Roofing Supply, Inc., except as otherwise noted.

Beacon Roofing Supply, Inc.

We are one of the largest distributors of residential and non-residential roofing materials in the United States and Canada. We also distribute other complementary building materials, including siding, windows, specialty lumber products and waterproofing systems, for residential and non-residential building exteriors. We operate 138 branches in 29 states and three Canadian provinces, carrying up to 8,500 stock keeping units, or SKUs, and serving more than 30,000 customers. We are a leading distributor of roofing materials in key metropolitan markets in the Northeast, Mid-Atlantic, Midwest, Central Plains, Southeast and Southwest regions of the United States and in Eastern Canada.

We also provide our customers with a comprehensive array of value-added services related to the products we sell. We believe that our ability to provide these additional services efficiently and reliably strengthens our relationships with our customers, improves our gross profit margins and distinguishes us from our competition. We have earned a reputation for a high level of product availability, excellent employees, professionalism and high quality service.

Our diverse customer base represents a significant majority of the residential and non-residential roofing contractors in our markets. We utilize a branch-based operating model in which branches maintain local customer relationships but benefit from centralized functions such as information technology, accounting, financial reporting, credit, purchasing, legal and tax services. This allows us to provide customers with specialized products and personalized local services tailored to a geographic region, while benefiting from the resources and scale efficiencies of a national distributor.

We have achieved our growth through a combination of nine strategic and complementary acquisitions between 1998 and 2005, opening new branch locations, acquiring branches and broadening our product offering. We have grown from $76.7 million in sales in fiscal year 1998 to $850.9 million in sales in fiscal year 2005, which represents a compound annual growth rate of 41.0%. Our internal growth, which includes growth from existing and newly opened branches but excludes growth from acquired branches, was 5.9% per annum over the same period. Acquired branches are excluded from internal growth measures until they have been under our ownership for at least one full fiscal year. During this seven-year period, we opened thirteen new branch locations and our same store sales increased an average of 2.6% per annum. Same store sales is defined as the aggregate sales from branches open for the entire comparable annual periods within the seven-year period. Income from operations has increased from $5.3 million in fiscal year 1998 to $60.7 million in fiscal year 2005, which represents a compound annual growth rate of 41.7%. We believe that our proven business model will continue to deliver industry-leading growth and operating profit margins.

1




Our strengths

We believe that our sales and earnings growth has been and will continue to be driven by our primary competitive strengths, which include the following:

·  national scope combined with regional expertise;

·  diversified business model that reduces impact of economic downturns;

·  superior customer service;

·  strong platform for growth and acquisition;

·  sophisticated IT platform;

·  industry-leading management team; and

·  extensive product offering and strong supplier relationships.

Growth strategies

Our objective is to become the preferred supplier of roofing and other exterior building product materials in the U.S. and Canadian market while continuing to increase our revenue base and maximize our profitability. We plan to attain these goals by executing the following strategies:

·  expand geographically through new branch openings;

·  pursue acquisitions of regional market-leading roofing materials distributors; and

·  expand product and service offerings.

Recent developments

On October 14, 2005, our subsidiary, Beacon Sales Acquisition, Inc., completed its acquisition of the business of SDI Holding, Inc. (“Shelter”). Shelter, which is a leading distributor of roofing and other building products, currently operates 53 branches in 15 states throughout the Midwest, Central Plains and Southwest regions of the United States. Shelter had sales of approximately $248.3 million for the year ended December 31, 2004 and income from operations of approximately $5.4 million over the same period. Shelter has approximately 766 employees. The transaction was structured as a purchase of the stock of Shelter, which owns all of the issued and outstanding stock of Shelter Distribution, Inc., Shelter’s operating company. The purchase price was $170.3 million in cash, subject to a post-closing adjustment for working capital and other items. Based upon Shelter’s performance for the remainder of 2005, the sellers may also qualify for an earn-out payment of up to $10 million, which would be payable during the second quarter of our 2006 fiscal year.

The acquisition allowed us to expand into different areas of the country that we had targeted for expansion. The combined companies have minimal branch overlap, with only two overlapping branches in their operating markets.

In connection with our acquisition of Shelter, we amended and restated our credit facilities on October 14, 2005. Our credit facilities mature on October 14, 2010 and consist of a $230.0 million

2




United States revolving line of credit and a CDN $15 million Canadian revolving line of credit and term loans totaling $80.0 million outstanding at October 14, 2005.

Our corporate information

Our company was incorporated in Delaware in 1997 as the successor to a company founded in 1928. Our principal executive office is located at 1 Lakeland Park Drive, Peabody, Massachusetts 01960, and our telephone number at that address is (877) 645-7663. We maintain a website on the Internet at www.beaconroofingsupply.com. The information contained in our website is not a part of, and should not be considered as being incorporated by reference into, this prospectus.

3




The offering

Common stock offered by Beacon 

 

2,000,000 shares

Common stock offered by the selling stockholders

 

6,750,000 shares

Common stock to be outstanding after this offering

 

28,896,685 shares

Use of proceeds

 

We intend to use the net proceeds from this offering to repay debt. We will not receive any of the proceeds from the sale of common stock by the selling stockholders. See “Use of Proceeds.”

Nasdaq National Market symbol

 

“BECN”

 

The number of shares of common stock to be outstanding after this offering excludes:

·  2,123,151 shares of common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $9.97 per share; and

·  1,411,725 additional shares of common stock that are reserved for future grants, awards or sale under our stock plan.

Unless otherwise indicated, all information contained in this prospectus assumes the underwriters’ over-allotment option will not be exercised.

Risk factors

See “Risk factors” and the other information included in this prospectus for a discussion of the factors you should consider carefully before deciding to invest in shares of our common stock.

4




Summary consolidated financial data

The following table presents a summary of our historical financial information. When you read this summary consolidated financial data, it is important that you read along with it the historical financial statements and related notes, as well as the sections titled “Management’s discussion and analysis of financial condition and results of operations” and the “Unaudited pro forma consolidated financial data” included elsewhere in this prospectus.

 

 

Fiscal year ended

 

(dollars in thousands,
except per share data)

 

Sept. 29,
 2001

 

Sept. 28,
2002

 

Sept. 27,
2003

 

Sept. 25,
2004

 

Sept. 24,
2005

 

Pro forma
 as adjusted 
Sept. 24,
2005(1)
 (unaudited)

 

 

 

(53 weeks)

 

 

 

 

 

 

 

 

 

 

 

Statement of operations data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

415,089 

 

$

549,873 

 

$

559,540 

 

652,909

 

$

850,928 

 

 

$

1,163,961 

 

 

Cost of products sold

 

321,153

 

413,925

 

418,662

 

487,200

 

643,733

 

 

881,239

 

 

Gross profit

 

93,936

 

135,948

 

140,878

 

165,709

 

207,195

 

 

282,722

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

75,209

 

105,998

 

109,586

 

120,738

 

145,786

 

 

214,310

 

 

Stock-based compensation 

 

 

522

 

 

10,299

 

690

 

 

690

 

 

 

 

75,209

 

106,520

 

109,586

 

131,037

 

146,476

 

 

215,000

 

 

Income from operations

 

18,727

 

29,428

 

31,292

 

34,672

 

60,719

 

 

67,722

 

 

Interest expense

 

(15,702

)

(15,308

)

(14,052

)

(11,621

)

(4,911

)

 

(11,188

)

 

Change in value of warrant
derivatives (2)

 

(116

)

(2,756

)

(2,614

)

(24,992

)

 

 

 

 

Loss on early extinguishment of debt

 

(2,487

)

 

 

(3,285

)

(915

)

 

(915

)

 

Income taxes

 

(798

)

(6,153

)

(7,521

)

(10,129

)

(21,976

)

 

(22,267

)

 

Net income (loss)(3)

 

$

(376 

)

$

5,211 

 

$

7,105 

 

$

(15,355 

)

$

32,917 

 

 

$

33,352 

 

 

Net income (loss) per share(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03 

)

$

0.29 

 

$

0.40 

 

$

(0.86 

)

$

1.24 

 

 

$

1.17 

 

 

Diluted

 

$

(0.03 

)

$

0.29 

 

$

0.39 

 

$

(0.86 

)

$

1.20 

 

 

$

1.13 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

15,019,783

 

17,697,484

 

17,841,976

 

17,905,203

 

26,477,955

 

 

28,477,955

 

 

Diluted

 

15,019,783

 

17,891,673

 

18,230,455

 

17,905,203

 

27,412,629

 

 

29,412,629

 

 

Other financial and operating data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

6,239 

 

$

5,851 

 

$

6,047 

 

$

6,922 

 

$

8,748 

 

 

$

17,032 

 

 

Capital expenditures (excluding acquisition)

 

$

4,504 

 

$

4,538 

 

$

4,978 

 

$

5,127 

 

$

9,583 

 

 

$

13,409 

 

 

Number of locations at end of period

 

60

 

62

 

65

 

67

 

84

 

 

138

 

 

 

As of September 24,  2005
(in thousands)

 

 

 

Actual

 

Pro forma
as adjusted(4)

 

Balance sheet data:

 

 

 

 

 

 

 

Cash

 

$

 

 

 

$

4,079 

 

 

Total assets

 

384,437

 

 

623,241

 

 

Current debt

 

9,905

 

 

36,832

 

 

Long-term debt, net of current portion

 

85,593

 

 

181,199

 

 

Stockholders’ equity

 

178,745

 

 

232,680

 

 

(1)   Pro forma as adjusted to reflect the completion of this offering, the application of the net proceeds, the refinancing of our credit facility and the acquisition of Shelter as of the beginning of the fiscal year ended September 24, 2005. The pro forma information does not give effect to other acquisitions made by us and Shelter in the periods presented.

(2)   The change in value of warrant derivatives represents changes in the fair market value of certain warrants issued in connection with debt financings that were redeemed on September 28, 2004.

(3)   Pro forma net income and pro forma net income per share represents income from continuing operations and income from continuing operations per share and excludes Shelter’s loss from discontinued operations.

(4)   Pro forma as adjusted to reflect the completion of this offering, the application of the net proceeds, the refinancing of our credit facility and the acquisition of Shelter.

5




Risk factors

You should carefully consider the risks and uncertainties described below and other information included in this prospectus and the documents incorporated by reference in this prospectus in evaluating us and our business. If any of the events described below occur, our business and financial results could be adversely affected in a material way. This could cause the trading price of our common stock to decline, perhaps significantly.

Risks relating to our business and industry

We may not be able to effectively integrate newly acquired businesses into our operations or achieve expected profitability from our acquisitions.

Our growth strategy includes acquiring other roofing materials distributors. Acquisitions, such as our recently completed Shelter acquisition, involve numerous risks, including:

·  unforeseen difficulties in integrating operations, technologies, services, accounting and personnel;

·  diversion of financial and management resources from existing operations;

·  unforeseen difficulties related to entering geographic regions where we do not have prior experience;

·  potential loss of key employees;

·  unforeseen liabilities associated with businesses acquired; and

·  inability to generate sufficient revenue to offset acquisition or investment costs.

As a result, if we fail to evaluate and execute acquisitions properly, we might not achieve the anticipated benefits of these acquisitions, and we may incur costs in excess of what we anticipate. These risks may be greater in the case of our acquisition of Shelter, given the number of Shelter’s branches and the addition of new geographic regions.

We may not be able to successfully identify acquisition candidates, which would slow our growth rate.

We continually seek additional acquisition candidates in selected markets and from time to time engage in exploratory discussions with potential candidates. If we are not successful in finding attractive acquisition candidates that we can acquire on satisfactory terms, or if we cannot complete those acquisitions that we identify, it is unlikely that we will sustain the historical growth rates of our business.

An inability to obtain the products that we distribute could result in lost revenues and reduced margins and damage relationships with customers.

We distribute roofing and other exterior building materials that are manufactured by a number of major suppliers. Although we believe that our relationships with our suppliers are strong and that we would have access to similar products from competing suppliers should products be unavailable from current sources, any disruption in our sources of supply, particularly of the most

6




commonly sold items, could result in a loss of revenues and reduced margins and damage relationships with customers. Supply shortages may occur as a result of unanticipated demand or production or delivery difficulties. When shortages occur, roofing material suppliers often allocate products among distributors.

Loss of key personnel or our inability to attract and retain new qualified personnel could hurt our ability to operate and grow successfully.

Our success is highly dependent upon the services of Robert Buck, our President and Chief Executive Officer, David Grace, our Chief Financial Officer, and historically Andrew Logie, our Chairman of the Board. Our success will continue to depend to a significant extent on our executive officers and key management personnel, including our regional vice presidents. We do not have key man life insurance covering any of our executive officers. We may not be able to retain our executive officers and key personnel or attract additional qualified management. The loss of any of our executive officers or our other key management personnel or our inability to recruit and retain qualified personnel could hurt our ability to operate and make it difficult to execute our acquisition and internal growth strategies.

A change in vendor rebates could adversely affect our income and gross margins.

The terms on which we purchase product from many of our vendors entitle us to receive a rebate based on the volume of our purchases. These rebates effectively reduce our costs for products. If market conditions change, vendors may adversely change the terms of some or all of these programs. Although these changes would not affect the amounts at which we have recorded product already purchased, it may lower our gross margins on products we sell or income we realize in future periods.

Cyclicality in our business could result in lower revenues and reduced profitability.

We sell a portion of our products for new residential and non-residential construction. The strength of these markets depends on new housing starts and business investment, which are a function of many factors beyond our control, including interest rates, employment levels, availability of credit and consumer confidence. Future downturns in the regions and markets that we serve could result in lower revenues and, since much of our overhead and expense are fixed, profitability.

Seasonality in the construction and re-roofing industry generally results in second quarter losses.

Our second quarter is typically adversely affected by winter construction cycles and weather patterns in colder climates as the level of activity in the new construction and re-roofing markets decreases. Because much of our overhead and expense remains relatively fixed throughout the year, we generally record a loss during our second quarter. We expect that these seasonal variations will continue in the future.

7




If we encounter difficulties with our management information systems, we could experience problems with inventory, collections, customer service, cost control and business plan execution.

We believe our management information systems are a competitive advantage in maintaining our leadership positions in the roofing distribution industry. If we experience problems with our management information systems, we could experience product shortages or an increase in accounts receivable. Any failure by us to maintain our management information systems could adversely impact our ability to attract and serve customers and would cause us to incur higher operating costs and experience delays in the execution of our business plan.

Our failure to compete successfully could cause our revenue or market share to decline.

We currently compete in the distribution of roofing materials primarily with smaller distributors, but we also face competition from a number of multi-regional distributors of roofing materials and national distributors of building products that are larger and have greater financial resources than us. Our competitors’ greater financial resources may enable them to offer higher levels of service or a broader selection of inventory than we can. As a result, we may not be able to continue to compete effectively with our competition, leading to reduced revenues and market share.

An impairment of goodwill or other intangible assets could reduce net income.

Acquisitions frequently result in the recording of goodwill and other intangible assets. At September 24, 2005, goodwill represented approximately 28% of our total assets. Goodwill is no longer amortized and is subject to impairment testing at least annually using a fair value based approach. The identification and measurement of goodwill impairment involves the estimation of the fair value of our single reporting unit. Our accounting for impairment contains uncertainty because management must use judgment in determining appropriate assumptions to be used in the measurement of fair value. We determine fair value using a market approach to value our business.

We evaluate the recoverability of goodwill for impairment in between our annual tests when events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Any impairment of goodwill will reduce net income in the period in which the impairment is recognized.

Being a public company has increased our administrative costs and diverted management time and attention, particularly to comply with new regulatory requirements implemented by the Securities and Exchange Commission and The Nasdaq National Market.

As a public company, we are incurring significant legal, accounting and other costs that we did not incur as a private company. We are incurring all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws. In addition to the requirements of the Sarbanes-Oxley Act of 2002, we are subject to a series of new rules and regulations that the Securities and Exchange Commission and The Nasdaq National Market have adopted. In addition to increasing costs, our compliance efforts have made some activities more time-consuming and have diverted management time and attention away from our core business. We are expanding our operational and financial systems and controls as part of our compliance efforts.

8




We might need to raise capital, which might not be available, thus limiting our growth prospects.

We may require additional equity or debt financing in order to consummate an acquisition or for additional working capital for expansion or if we suffer losses. In the event additional financing is unavailable to us, we may be unable to expand or make acquisitions and our stock price may decline as a result of the perception that we have more limited growth prospects.

Risks relating to this offering

If securities or industry analysts cease publishing research or reports about our business or publish negative research, or our results are below analysts’ estimates, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our stock or our results are below analysts’ estimates, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Shares eligible for public sale after this offering could adversely affect our stock price.

Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. The shares of our common stock outstanding prior to this offering will be eligible for sale in the public market at various times in the future. Up to 26,630,576 shares of our common stock, including 8,750,000 shares of common stock sold in this offering, will be available for resale immediately. All of our executive officers and directors and the selling stockholders have agreed, subject to limited exceptions, not to sell any shares of our common stock for a period of 90 days after the date of this prospectus without the prior written consent of J.P. Morgan Securities Inc. Code, Hennessy & Simmons III, L.P. may make distributions of up to approximately 1.3 million shares of our common stock (approximately 200,000 shares if the over-allotment option is exercised in full) to its partners 30 days after the date of this prospectus, and its limited partners may resell immediately without restriction. Upon expiration of the lock-up periods described above, and subject to the provisions of Rule 144, all of our shares will be available for sale in the public market.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote and be dilutive to earnings.

Following the closing of this offering, our board of directors has the authority, without action or vote of our stockholders, except as required by The Nasdaq National Market, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options. Issuances of common stock would reduce your influence over matters on which our stockholders vote and could be dilutive to earnings.

9




Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and by-laws may have the effect of delaying or preventing a change of control or changes in our management. In addition, as a Delaware corporation, we are subject to certain Delaware anti-takeover provisions, including restrictions on our ability to engage in a business combination with any holder of 15% or more of our capital stock. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.

A proposed acquisition could be at a premium to current market prices of our common stock, and our ability to prevent or delay an acquisition could deprive our stockholders of the ability to obtain such a premium.

A portion of the proceeds of this offering will be used to benefit affiliates.

Our affiliates Code, Hennessy & Simmons III, L.P. and certain directors and executive officers will receive net proceeds from the sale in this offering of shares of common stock owned by them.

10




Forward-looking statements

The matters discussed in this prospectus that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 are based on current management expectations that involve substantial risks and uncertainties, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should,” “will be,” “will continue,” “will likely result,” “would” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. You should read statements that contain these words carefully, because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other “forward-looking” information.

We believe that it is important to communicate our future expectations to our investors. However, there are events in the future that we are not able to accurately predict or control. The factors listed under “Risk factors,” as well as any cautionary language in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially from those in the forward looking statements as a result of various factors, including, but not limited to, those described above under the heading “Risk factors” and elsewhere in this prospectus. Before you invest in our common stock, you should read this prospectus completely and with the understanding that our actual future results may be materially different from what we expect.

Forward-looking statements speak only as of the date of this prospectus. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this prospectus, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this prospectus or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

11




Use of proceeds

We estimate that our net proceeds from the sale of shares by us in this offering will be approximately $51.6 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholders.

We intend to use all of the net proceeds to us from this offering to pay down our U.S. revolving credit facility, which matures on October 14, 2010 and which had $166.0 million outstanding as of November 30, 2005 bearing interest at a weighted annual interest rate of 6.0%. Amounts repaid under the revolving credit facility may be redrawn from time to time for general corporate purposes, including acquisitions. Any future acquisitions are expected to be in businesses engaged in the distribution of roofing materials and complementary building products.

Price range of common stock

Our common stock has been traded on The Nasdaq National Market under the symbol “BECN” since September 23, 2004. Prior to that time there was no public market for our stock. The following table lists quarterly information on the price range of our common stock based on the high and low reported sale prices for our common stock as reported by The Nasdaq National Market for the periods indicated below.

 

 

High

 

Low

 

Year ended September 25, 2004:

 

 

 

 

 

Fourth quarter (from September 23, 2004)

 

$

16.39 

 

$

14.25 

 

Year ended September 24, 2005:

 

 

 

 

 

First quarter

 

$

21.65 

 

$

15.75 

 

Second quarter

 

$

23.19 

 

$

18.77 

 

Third quarter

 

$

29.39 

 

$

21.02 

 

Fourth quarter

 

$

33.55 

 

$

24.25 

 

Year ended September 30, 2006:

 

 

 

 

 

First quarter (through December 14, 2005)

 

$

33.24 

 

$

25.61 

 

 

The last reported sale price of our common stock on The Nasdaq National Market was $27.26 per share on December 14, 2005. There were 51 holders of record of our common stock as of December 12, 2005.

Dividend policy

We have not paid cash dividends on our common stock and do not anticipate paying dividends in the foreseeable future. Our board of directors currently intends to retain any future earnings for reinvestment in our business. Our revolving credit facilities currently prohibit the payment of dividends without the prior written consent of our lender. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends, and any other factors our board of directors deems relevant.

12




Capitalization

The following table sets forth our cash and our consolidated capitalization as of September 24, 2005:

·  on an actual basis;

·  on a pro forma basis to reflect the Shelter acquisition and the applicable pro forma adjustments described in “Unaudited pro forma consolidated financial data;” and

·  on a pro forma as adjusted basis to reflect this offering and the application of the net proceeds as described in “Unaudited pro forma consolidated financial data.”

You should read the data set forth below in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

As of September 24, 2005
(in thousands)

 

Actual

 

Pro forma
acquisition
(unaudited)

 

Pro forma
as adjusted
(unaudited)

 

Cash

 

$        —

 

 

$   4,079

 

 

$   4,079

 

Current debt:

 

 

 

 

 

 

 

 

 

Cash overdraft

 

3,557

 

 

12,492

 

 

12,492

 

Current portions of long-term debt and capital lease obligations

 

6,348

 

 

24,340

 

 

24,340

 

 

 

9,905

 

 

36,832

 

 

36,832

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Borrowings under revolving lines of credit

 

63,769

 

 

177,298

 

 

123,363

 

Senior notes payable, net of current portion

 

20,156

 

 

56,168

 

 

56,168

 

Long-term obligations under capital leases, net of current portions

 

1,668

 

 

1,668

 

 

1,668

 

 

 

85,593

 

 

235,134

 

 

181,199

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock (voting); $.01 par value; 100,000,000 shares authorized; 26,911,573 shares issued (actual and pro forma acquisition); 28,911,573 shares issued on a pro forma as adjusted basis

 

269

 

 

269

 

 

289

 

Undesignated preferred stock; 5,000,000 shares authorized, none issued or outstanding

 

 

 

 

 

 

Additional paid-in capital

 

142,173

 

 

142,173

 

 

196,088

 

Treasury stock (232,861 shares of common stock)

 

(515

)

 

(515

)

 

(515

)

Retained earnings

 

32,050

 

 

32,050

 

 

32,050

 

Accumulated other comprehensive income

 

4,768

 

 

4,768

 

 

4,768

 

Total stockholders’ equity

 

178,745

 

 

178,745

 

 

232,680

 

Total capitalization

 

$ 274,243

 

 

$ 450,711

 

 

$ 450,711

 


 

13




Selected consolidated financial data

You should read the following selected financial information together with our financial statements and the related notes at the end of this prospectus and the sections titled “Management’s discussion and analysis of financial condition and results of operations” and “Unaudited pro forma consolidated financial data” included elsewhere in this prospectus. We have derived the statement of operations data for the years ended September 27, 2003, September 25, 2004 and September 24, 2005 from our audited financial statements which are included in this prospectus. We have derived the statements of operations data for the years ended September 29, 2001 and September 28, 2002 from our audited financial statements, which are not included in this prospectus.

 

 

 

 

 

 

 

 

 

 

Fiscal  year  ended

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma as

 

 

 

 

 

 

 

 

 

 

 

 

 

adjusted

 

 

 

 

 

 

 

 

 

 

 

 

Sept. 24,

 

(dollars in thousands,

 

Sept. 29,

 

Sept 28,

 

Sept. 27,

 

Sept. 25,

 

Sept. 24,

 

2005(1)

 

except per share data)

 

2001

 

2002

 

2003

 

2004

 

2005

 

(unaudited)

 

 

 

(53 weeks)

 

 

 

 

 

 

 

 

 

 

 

Statement of operations data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

415,089

 

$

549,873

 

$

559,540

 

652,909

 

$

850,928

 

$

1,163,961

 

Cost of products sold

 

321,153

 

413,925

 

418,662

 

487,200

 

643,733

 

881,239

 

Gross profit

 

93,936

 

135,948

 

140,878

 

165,709

 

207,195

 

282,722

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

75,209

 

105,998

 

109,586

 

120,738

 

145,786

 

214,310

 

Stock-based compensation

 

 

522

 

 

10,299

 

690

 

690

 

 

 

75,209

 

106,520

 

109,586

 

131,037

 

146,476

 

215,000

 

Income from operations

 

18,727

 

29,428

 

31,292

 

34,672

 

60,719

 

67,722

 

Interest expense

(15,702

)

(15,308

)

(14,052

)

(11,621

)

(4,911

)

(11,188

)

Change in value of warrant derivatives (2)

(116

)

(2,756

)

(2,614

)

(24,992

)

 

 

Loss on early extinguishment of debt

(2,487

)

 

 

(3,285

)

(915

)

(915

)

Income taxes

(798

)

(6,153

)

(7,521

)

(10,129

)

(21,976

)

(22,267

)

Net income (loss)(3)

$

(376

)

$

5,211

 

$

7,105

 

$

(15,355

)

$

32,917

 

$

33,352

 

Net income (loss) per share(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.03

)

$

0.29

 

$

0.40

 

$

(0.86

)

$

1.24

 

$

1.17

 

Diluted

$

(0.03

)

$

0.29

 

$

0.39

 

$

(0.86

)

$

1.20

 

$

1.13

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

15,019,783

 

17,697,484

 

17,841,976

 

17,905,203

 

26,477,955

 

28,477,955

 

Diluted

 

15,019,783

 

17,891,673

 

18,230,455

 

17,905,203

 

27,412,629

 

29,412,629

 

Other financial and operating data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

6,239

 

$

5,851

 

$

6,047

 

$

6,922

 

$

8,748

 

$

17,032

 

Capital expenditures (excluding acquisition)

 

$

4,504

 

$

4,538

 

$

4,978

 

$

5,127

 

$

9,583

 

$

13,409

 

Number of locations at end of period

 

60

 

62

 

65

 

67

 

84

 

138

 

 

As of September 24,  2005
(in thousands)

 

Actual

 

Pro forma
as adjusted(4)

 

Balance sheet data:

 

 

 

 

 

 

 

Cash

 

$

 

 

$

4,079

 

 

Total assets

 

384,437

 

 

623,241

 

 

Current debt

 

9,905

 

 

36,832

 

 

Long-term debt, net of current portion

 

85,593

 

 

181,199

 

 

Stockholders’ equity

 

178,745

 

 

232,680

 

 

(1)   Pro forma as adjusted to reflect the completion of this offering, the application of the net proceeds, the refinancing of our credit facility and the acquisition of Shelter as of the beginning of the fiscal year ended September 24, 2005. The pro forma information does not give effect to other acquisitions made by us and Shelter in the periods presented.

(2) The change in value of warrant derivatives represents changes in the fair market value of certain warrants issued in connection with debt financings that were redeemed on September 28, 2004.

(3)   Pro forma net income and pro forma net income per share represents income from continuing operations and income from continuing operations per share and excludes Shelter’s loss from discontinued operations.

(4) Pro forma as adjusted to reflect the completion of this offering, the application of the net proceeds, the refinancing of our credit facility and the acquisition of Shelter.

14




Unaudited pro forma consolidated financial data

The following unaudited pro forma consolidated financial statements have been prepared to give effect to our acquisition of Shelter using the purchase method of accounting and to give effect to this offering. The assumptions and adjustments included in these statements are described in the accompanying notes to the unaudited pro forma consolidated financial statements.

The unaudited pro forma consolidated balance sheet assumes that each of the events listed below occurred on September 24, 2005. The unaudited pro forma consolidated statements of operations for the year ended September 24, 2005 assume that each of the following events occurred on September 26, 2004:

·       the acquisition of Shelter;

·       the refinancing of our credit facilities; and

·       this offering.

The unaudited pro forma consolidated statement of operations for the year ended September 24, 2005 reflects our historical consolidated statement of operations for the fiscal year ended September 24, 2005 and Shelter’s historical consolidated statements of operations for the nine months ended September 30, 2005 and the fourth quarter of Shelter’s fiscal year ended December 31, 2004, which period we believe has been adjusted for all material effects of unusual charges or adjustments.

No pro forma adjustments have been made to either unaudited consolidated statements of operations for our December 2004 acquisition of JGA Corp. and April 2005 acquisition of Insulation Systems, Inc. of Virginia and Shelter’s December 2004 acquisition of Forest Siding Supply. These acquisitions were not considered significant for purposes of the pro forma statements.

The unaudited pro forma consolidated financial data is for informational purposes only and is not necessarily indicative of either the financial position or the results of operations that would have been achieved had the acquisition of Shelter, refinancing, and offering for which we are giving pro forma effect actually occurred on the dates or for the periods described in the accompanying notes, nor is such unaudited pro forma consolidated financial data necessarily indicative of the results to be expected for the full year or any future period. A number of factors may affect our results. See ‘‘Risk factors’’ and ‘‘Forward-looking statements.’’

The pro forma adjustments are based on preliminary estimates and currently available information and assumptions that management believes are reasonable. In determining the appropriate interest rate for our variable rate credit facilities, we have applied the interest formula in our credit facilities to the interest indices in effect during the pro forma periods presented. The notes to the unaudited pro forma consolidated statements of operations and balance sheet provide a detailed discussion of how such adjustments were derived and are presented in the unaudited pro forma consolidated financial data. This unaudited pro forma consolidated financial data should be read in conjunction with ‘‘Prospectus summary—The offering,’’ ‘‘Selected consolidated financial data,’’ and ‘‘Management’s discussion and analysis of

15




financial condition and results of operations’’ and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

Except for the elimination of certain management fees and CEO compensation, which are described in the notes below, and which were contractually terminated as a result of the acquisition of Shelter, the unaudited pro forma consolidated financial statements do not include potential cost savings from operating efficiencies or synergies that may result from the acquisition. The services performed for the management fees and CEO compensation will be performed by existing Beacon staff and are not incremental to their existing duties.

16




Unaudited pro forma consolidated balance sheet
as of September 24, 2005

 

 

 

 

 

 

 

 

Pro forma

 

 

 

 

 

Pro forma

 

 

 

 

 

Beacon Roofing

 

SDI Holdings, Inc

 

Adjustment

 

acquisition

 

Pro forma

 

Adjustment

 

offering

 

Pro forma

 

(dollars in thousands)

 

Supply, Inc

 

and Subsidiaries

 

reference

 

adjustments

 

acquisition

 

reference

 

adjustments

 

as adjusted

 

 

 

 

 

(unaudited)

 

 

 

 

(unaudited)

 

 

 

 

 

(unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 

$

 

 

$

4,079

 

 

 

 

$

 

 

$

4,079

 

 

 

 

$

 

 

$

4,079

 

Accounts receivable, less allowance for doubtful accounts

 

 

123,345

 

 

53,268

 

 

 

 

 

 

 

176,613

 

 

 

 

 

 

 

176,613

 

Inventories

 

 

82,423

 

 

52,117

 

 

 

 

 

 

 

134,540

 

 

 

 

 

 

 

134,540

 

Prepaid expenses and other assets

 

 

20,106

 

 

9,644

 

 

 

 

 

 

 

29,750

 

 

 

 

 

 

 

29,750

 

Deferred income taxes

 

 

4,339

 

 

3,652

 

(1

)

 

558

 

 

8,549

 

 

 

 

 

 

 

8,549

 

Total current assets

 

 

230,213

 

 

122,760

 

 

 

 

558

 

 

353,531

 

 

 

 

 

 

 

353,531

 

Property and equipment, net

 

 

31,767

 

 

11,114

 

(1

)

 

3,694

 

 

46,575

 

 

 

 

 

 

 

46,575

 

Goodwill, net

 

 

108,553

 

 

37,619

 

(1

)

 

35,505

 

 

181,677

 

 

 

 

 

 

 

181,677

 

Other assets

 

 

13,904

 

 

19,491

 

(1),(3

)

 

8,063

 

 

41,458

 

 

 

 

 

 

 

41,458

 

Total assets

 

 

$

384,437

 

 

$

190,984

 

 

 

 

$

47,820

 

 

$

623,241

 

 

 

 

$

 

 

$

623,241

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank overdraft

 

 

$

3,557

 

 

$

8,935

 

 

 

 

$

 

 

$

12,492

 

 

 

 

$

 

 

$

12,492

 

Borrowings under revolving lines of credit

 

 

 

 

58,985

 

(2

)

 

(58,985

)

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

70,158

 

 

45,310

 

 

 

 

 

 

 

115,468

 

 

 

 

 

 

 

115,468

 

Accrued expenses

 

 

29,146

 

 

8,492

 

 

 

 

 

 

 

37,638

 

 

 

 

 

 

 

37,638

 

Current portions of long-term debt and capital lease obligations

 

 

6,348

 

 

5,633

 

(2),(3

)

 

12,359

 

 

24,340

 

 

 

 

 

 

 

24,340

 

Total current liabilities

 

 

109,209

 

 

127,355

 

 

 

 

(46,626

)

 

189,938

 

 

 

 

 

 

189,938

 

Borrowings under revolving lines of credit

 

 

63,769

 

 

 

 

(3

)

 

113,529

 

 

177,298

 

(5

)

 

(53,935

)

 

123,363

 

Senior notes payable, net of current portion

 

 

20,156

 

 

1,625

 

(2),(3

)

 

34,387

 

 

56,168

 

 

 

 

 

 

 

56,168

 

Subordinated notes payable

 

 

 

 

13,960

 

(2

)

 

(13,960

)

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

10,890

 

 

5,389

 

(1

)

 

3,145

 

 

19,424

 

 

 

 

 

 

 

19,424

 

Long-term obligations under capital leases, net of current portions

 

 

1,668

 

 

34

 

(2

)

 

(34

)

 

1,668

 

 

 

 

 

 

 

1,668

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

269

 

 

400

 

(1

)

 

(400

)

 

269

 

(4

)

 

20

 

 

289

 

Preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

142,173

 

 

39,418

 

(1

)

 

(39,418

)

 

142,173

 

(4

)

 

53,915

 

 

196,088

 

Warrants outstanding

 

 

 

 

 

2,148

 

(1

)

 

(2,148

)

 

 

 

 

 

 

 

 

 

Deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock

 

 

(515

)

 

 

 

 

 

 

 

 

(515

)

 

 

 

 

 

 

(515

)

Retained earnings

 

 

32,050

 

 

476

 

(1

)

 

(476

)

 

32,050

 

 

 

 

 

 

 

32,050

 

Accumulated other comprehensive income

 

 

4,768

 

 

179

 

(1

)

 

(179

)

 

4,768

 

 

 

 

 

 

 

4,768

 

Total stockholders’ equity

 

 

178,745

 

 

42,621

 

 

 

 

(42,621

)

 

178,745

 

 

 

 

53,935

 

 

232,680

 

Total liabilities and stockholders’ equity

 

 

$

384,437

 

 

$

190,984

 

 

 

 

$

47,820

 

 

$

623,241

 

 

 

 

$

 

 

$

623,241

 

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

 

17

 




Unaudited pro forma
consolidated statement of operations
for the year ended September 24, 2005

 

 

 

Beacon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Roofing

 

SDI Holdings, Inc

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supply, Inc

 

and Subsidiaries

 

 

 

Pro forma

 

Pro forma

 

 

 

Pro forma

 

Pro

 

(dollars in thousands, except

 

year ended

 

year ended

 

Adjustment

 

acquisition

 

acquisition

 

Adjustment

 

offering

 

forma

 

per share data)

 

September 24, 2005

 

September 30, 2005

 

reference

 

adjustments

 

combined

 

reference

 

adjustments

 

combined

 

 

 

 

 

(unaudited)

 

 

 

 

(unaudited)

 

 

 

 

 

(unaudited)

 

Net sales

 

 

$

850,928

 

 

$

313,033

 

 

 

 

 

$

 

$

1,163,961

 

 

 

 

 

$

 

$

1,163,961

 

Cost of products sold

 

 

643,733

 

 

237,506

 

 

 

 

 

 

881,239

 

 

 

 

 

 

881,239

 

Gross profit

 

 

207,195

 

 

75,527

 

 

 

 

 

 

282,722

 

 

 

 

 

 

282,722

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

145,786

 

 

68,518

 

 

(a),(b)

 

 

6

 

214,310

 

 

 

 

 

 

214,310

 

Stock-based compensation

 

 

690

 

 

 

 

 

 

 

 

690

 

 

 

 

 

 

690

 

 

 

 

146,476

 

 

68,518

 

 

 

 

 

6

 

215,000

 

 

 

 

 

 

215,000

 

Income from operations

 

 

60,719

 

 

7,009

 

 

 

 

 

(6

)

67,722

 

 

 

 

 

 

 

67,722

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,885

 

 

5,521

 

 

(c)

 

 

3,766

 

14,172

 

 

(e)

 

 

(3,010

)

11,162

 

Interest expense, related party

 

 

26

 

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

26

 

Loss on early retirement of debt 

 

 

915

 

 

 

 

 

 

 

 

 

915

 

 

 

 

 

 

 

915

 

 

 

 

5,826

 

 

5,521

 

 

 

 

 

3,766

 

15,113

 

 

 

 

 

(3,010

)

12,103

 

Income (loss) before income
taxes

 

 

54,893

 

 

1,488

 

 

 

 

 

(3,772

)

52,609

 

 

 

 

 

3,010

 

55,619

 

Income taxes

 

 

21,976

 

 

562

 

 

(d)

 

 

(1,476

)

21,062

 

 

(d)

 

 

1,205

 

22,267

 

Income (loss) from continuing operations

 

 

$

32,917

 

 

$

926

 

 

 

 

 

$

(2,296

)

$

31,547

 

 

 

 

 

$

1,805

 

$

33,352

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

1.24

 

 

 

 

 

 

 

 

 

 

$

1.19

 

 

(f)

 

 

 

 

$

1.17

 

Diluted

 

 

$

1.20

 

 

 

 

 

 

 

 

 

 

$

1.15

 

 

(f)

 

 

 

 

$

1.13

 

Weighted average shares used in computing net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

26,477,955

 

 

 

 

 

 

 

 

 

 

26,477,955

 

 

(f)

 

 

2,000,000

 

28,477,955

 

Diluted

 

 

27,412,629

 

 

 

 

 

 

 

 

 

 

27,412,629

 

 

(f)

 

 

2,000,000

 

29,412,629

 

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements

18

 




Notes to unaudited pro forma
consolidated financial data
(dollars in thousands, except per share data)

1.   Basis of presentation

The unaudited pro forma consolidated balance sheet at September 24, 2005 presents our consolidated financial position assuming the consummation of the acquisition of Shelter, the refinancing of our credit facilities and this offering of common stock and the repayment of certain of our existing debt with proceeds from this offering. Our unaudited pro forma consolidated statements of operations for the year ended September 24, 2005 present our consolidated results of operations assuming that the acquisition of Shelter, refinancing and the offerings had been completed on September 26, 2004. In our opinion, these statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of the acquisition of Shelter, refinancing of our credit facilities and this offering on our historical financial information. The pro forma adjustments set forth in the unaudited pro forma consolidated balance sheet and unaudited pro forma consolidated statements of operations are described more fully in Note 3, ‘‘Pro forma adjustments’’ below.

This unaudited pro forma consolidated financial data should be read in conjunction with ‘‘Management’s discussion and analysis of financial condition and results of operations’’ and our consolidated financial statements and the related notes included elsewhere in this prospectus. Our unaudited pro forma consolidated financial data has been presented for informational purposes only and does not necessarily reflect our results of operations or financial position that would have existed had we operated with the acquisition of Shelter, refinancing and the offering for the periods presented and should not be relied upon as being indicative of our future results after the acquisition, refinancing and the offering.

2.   Purchase price allocation

The following represents the preliminary allocation of the purchase price paid for Shelter based upon the estimated fair values of the acquired assets and assumed liabilities of Shelter as of September 30, 2005. Actual fair values will be determined as more detailed analysis is completed and additional information on the fair values of Shelter’s assets and liabilities becomes available.

19




The unaudited pro forma consolidated financial statements reflect a total initial purchase price of $165,833 (the “Initial Purchase Price”), consisting of the following: (i) the payment of the initial cash consideration of $152,500, (ii) a reduction of $4,856 for the cash overdraft at September 30, 2005, (iii) the payment of $17,165 for the estimated working capital adjustment based on the September 30, 2005 balance sheet, and (iv) estimated transaction costs of $1,024. On the closing date of October 14, 2005, the estimated purchase price increased to $170.3 million due to estimated working capital adjustments. Under the purchase method of accounting, the Initial Purchase Price is allocated to Shelter’s net tangible assets based upon their estimated fair value as of the date of the acquisition. The Initial Purchase Price does not include any contingent earn-out amounts, which could increase the purchase price by up to $10,000 if Shelter reaches certain financial performance goals for the twelve months ended December 31, 2005. The preliminary purchase price allocation as of September 30, 2005 is as follows:

Tangible assets:

 

 

 

Accounts receivable

 

$

53,268

 

Inventory

 

52,117

 

Prepaid and other current assets

 

9,644

 

Deferred taxes

 

4,210

 

Property and equipment

 

14,808

 

Total tangible assets

 

134,047

 

Intangible assets:

 

 

 

Customer relationships

 

25,035

 

Non-compete

 

819

 

Goodwill

 

73,124

 

Total intangible assets

 

98,978

 

Liabilities assumed:

 

 

 

Cash overdraft

 

$

(4,856

)

Accounts payable

 

(45,310

)

Accrued expenses

 

(8,492

)

Deferred taxes

 

(8,534

)

Total liabilities assumed

 

(67,192

)

Net assets acquired

 

$

165,833

 

 

The allocation of the purchase price is based upon a preliminary evaluation of assets acquired and liabilities assumed of Shelter based upon its September 30, 2005 balance sheet. Changes in these assets and liabilities from that date to the closing date will affect both the purchase price and its allocation. The valuation of the property and equipment and intangible assets was based in part on assistance from independent valuation firms.

We have preliminarily allocated approximately $25,035 of the purchase price to a “Customer relationships” intangible asset, which will be amortized on an accelerated basis over an estimated useful life of twelve years, and approximately $819 of the purchase price to a “Non-compete” intangible asset, which will be amortized over an estimated useful life of 27 months. The fair values of these intangible assets were determined using the “income” valuation approach.

A preliminary estimate of $73,124 has also been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible assets acquired. In

20




accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill will not be amortized but will be tested for impairment at least annually. The purchase price allocation presented above is preliminary and final allocation of the purchase price will be based upon the actual fair values of the net tangible and intangible assets acquired, as well as liabilities assumed as of the date of the acquisition. Any change in the fair value of the net assets of Shelter will change the amount of the purchase price allocable to goodwill. The final purchase accounting adjustments may differ materially from the pro forma adjustments presented herein.

There were no historical transactions between us and Shelter.

3.   Pro forma adjustments

The unaudited pro forma consolidated balance sheet and the statements of operations give effect to the following pro forma adjustments:

Balance sheet

1.             To reflect the acquisition of the outstanding common stock of Shelter for the Initial Purchase Price of $165,833, allocated as indicated in Note 2, “Purchase price allocation.”

2.                To eliminate assets, liabilities and debt not assumed in the acquisition of Shelter.

3.             To recognize the refinancing of our credit facilities as described in “Management’s discussion and analysis of financial condition and results of operations—Indebtedness,” and related fees of $1,700.

4.             To recognize the receipt of the net proceeds of $53,935 from the offering, representing gross proceeds of $57,000, less $2,565 for the underwriting discounts and $500 for transactions costs, assuming an offering price of $28.50 per share.

5.             To recognize the repayment of our borrowings under revolving lines of credit from the estimated net proceeds of the offering.

Statements of operations

a.             To recognize the adjustment of depreciation and amortization from the purchase price allocation adjustment of assets in the amount of $1,405 for the year ended September 24, 2005.

b.            To recognize the elimination of $799 of management fees paid to the former majority stockholder of Shelter, principally for treasury and financial management services which will be performed by existing Beacon personnel at no incremental cost to Beacon. Also, to recognize the elimination of $600 in salary, benefits and expenses paid to Shelter’s former CEO, who resigned at the closing. These functions will be performed by our CEO with no incremental cost to Beacon. Both of these eliminated contractual arrangements were terminated as a direct result of the acquisition.

21




c.              To recognize the elimination of Shelter’s interest expense of $5,521, due to the retirement of all of Shelter’s existing debt at the closing. Also, to adjust interest due to the increase in borrowings required to fund the acquisition of Shelter as follows:

<

Facility

 

Additional
borrowings

 

Interest
rate

 

Interest
expense

 

Senior note payable—Term A

 

 

$

10,693

 

 

4.84

%

 

$

518

 

Senior note payable—Term B

 

 

43,313

 

 

5.84

%

 

2,529

 

Revolving line of credit

 

 

111,828

 

 

5.58

%

 

6,240

 

 

 

 

$

165,834