Beacon Roofing Supply, Inc. (BECN) reported results for the first quarter of fiscal 2010. The company reported earnings of 17 cents per share, which was below the Zacks Consensus Estimate of 19 cents and down 58.5% from earnings of 41 cents in the first quarter of fiscal 2009. 

Quarterly sales declined 20.6% to $367.7 million from $463.3 million last year. Sales were down in double digits in all the three major product lines. Residential roofing sales dropped 26.2% year over year as new residential construction continues to be at all-time lows. Moreover, last year, the company benefited from strong re-roofing activity in storm-affected regions, especially from Hurricane Ike in Texas.
 
Sales in the non-residential roofing and complementary building products declined 15.5% and 13.5% respectively. Non-residential roofing sales were down due to a significant slowdown in commercial activity. Complementary product sales, which are more discretionary in nature than roofing products, continue to be negatively impacted by both the slowdown in the economy and lower levels of new residential construction. 

Beacon posted gross profit of $88.3 million or 24.0% of sales, compared to previous year’s gross profit of $116.0 million or 25.0% of sales due to lower sales volumes. Also a major part of this year over year difference was attributed to large price increases in asphalt roofing shingles in the first quarter of fiscal 2009. Operating income was down to $18.5 million or 5.0% of sales, from $37.7 million or 8.1% of sales last year.
 
Beacon generated operating cash flow of $29.6 million compared to $5.0 million in the first quarter of fiscal 2009. The cash flow growth was primarily driven by a decline in inventory and accounts receivables. As of December 31, 2009, Beacon had $110.2 million in cash and cash equivalents and $157.7 million and a debt-to-total capital ratio of 45%. 

Beacon is witnessing lower residential and non-residential roofing sales volumes in most of the regions due to a significant decline in housing starts and weak commercial construction activity in these markets. With significant declines in housing prices and less equity to tap for repair, end-users are delaying project repair work on items outside of roofing such as doors, windows and siding. We see continued weakness in the company’s end markets for the next couple of quarters.
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