Beacon Roofing Supply Inc (BECN) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Beacon Roofing Supply's fiscal year 2011 fourth-quarter and year-end conference call. My name is Andrea, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. At that time, I will give you instructions on how to ask a question.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

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 10-K. The Company has posted a summary financial slide presentation on the investor section of its website, under events and presentations, that will be referenced during Management's review of the financial results.

On the call today for Beacon Roofing Supply will be Mr. Paul Isabella, President and CEO; and Mr. David Grace, Executive Vice President and Chief Financial Officer. I would now like to turn the call to Mr. Paul Isabella, President and CEO. Please proceed, Mr. Isabella.

Thank you, Andrea. Good morning. Welcome to our fiscal year 2011 fourth-quarter earnings call. We delivered another solid quarter, thanks to strong markets and strong execution by our team. Our quarterly EPS results of $0.56 and $1.16 for the year, without a one-time tax gain, exceeded both our internal target and prior-year results. David will go through the details of the tax gain and other details during his portion of the call, as he always does.

Our two largest product groups, residential and commercial roofing, continued to deliver double-digit growth in the quarter, as both reroofing and storm repair were strong, and overall pricing had a positive impact. Our commercial business has shown double-digit growth over the last six quarters, while residential achieved a very strong 25% growth in the current quarter. We are very pleased to report that, even in regions outside of store markets, we have had strong residential and commercial growth. This reinforced the fact that reroofing plays a critical role in the overall market, as new construction levels are still depressed. In terms of storm volume for the year, we believe it was somewhat a normal year, in the range of $40 million to $60 million. Historically, storm volume has been more consistent year to year, however, the last five years, it has been erratic. We continue to believe years without storm damage, like 2010, are the anomaly.

We believe the operating plan we have built compensates for this volume in 2012 by our continued focus on branch growth, acquisitions, and some storm demand. This storm work has continued into October and November in most of the storm markets we serve. It will slow down as winter approaches, and, at this time, we can't predict what volumes will be left over in the spring. Pricing for both residential and commercial products increased approximately 5% year over year for the fourth quarter, and shingle prices are up even higher sequentially since the third quarter. Our manufacturers have increased prices due to the demand from hail damage repair and increases in demand for commercial and residential reroofing. As we have received these price increases from the manufacturer, we have increased our prices to our customers.

Our gross margins were up in the quarter, ending at 23.1%. This is more in line with our historic levels for our current product mix. They're aided by the strong volume, solid mix of shingles in our sales, and by our ability to capitalize on our Q3 inventory. During Q4 we intentionally decreased our inventory from $269 million to $200 million as we prepared for the winter and also saw proposed shingle price increases wane.

Cash generation was strong in the quarter, as we ended at $143 million. The balance sheet remains strong, with net debt down to $186 million and full availability under our revolver. During the quarter, we continued to work on the integration of the Enercon acquisition in western Canada, acquired during our fiscal third quarter, and over the last two months, have added two other acquisitions -- the first is located in Halifax, Nova Scotia, The Roofing Connection, a one-branch company that gives us a presence east of our existing locations in Quebec; and the second, Denver-based Fowler & Peth, with eight branches located in Colorado, Wyoming, and Nebraska.

We're very proud to have these three fine companies join the Beacon family. Growth through acquisition remains one of our key business strategies. In terms of our acquired markets, we're making good progress, as we delivered 8.5% operating income during the quarter, and for the full year of 2011, they were profitable. The teams in each of the acquired businesses are doing a solid job of driving improvement as they execute the business plan.

To give you an update on our first quarter 2012, organically, October was 17% above prior year, and gives us a good start to the year. November month-to-date is following a similar trend, although we are entering our winter period, and weather will be an influence, as it is every year. For the full year, we see earnings continuing to be strong, with 10% to 15% EPS growth, excluding the one-time gain. We believe we can have another strong year fueled by organic branch growth and acquisition growth, and having another normal storm year would also be very helpful. And, as always, we will continue to focus on our core initiatives -- providing solid customer service to our contractor customers; sales growth, both organic and acquisitive; and operational and people excellence as we begin the new year.

As we have said in the past, we are in a very solid market that has historically shown growth, due to the large portion of reroof that exists. We believe we are well positioned to grow and generate solid earnings, due to our product and geographic diversity, our solid customer service, and the strong culture of execution by our team. Now, I would like to turn the call over to David Grace. After he is finished, we'll take any questions you might have. David?

Thanks, Paul. If you are using our slides to follow along, let's begin with slide 1. Our fiscal 2011 fourth-quarter organic sales, which reflect our existing markets by excluding sales at branches acquired since the beginning of last year's fourth quarter, they increased 15.6% to $555.3 million. Total sales for this quarter, which isn't shown in the slides, increased 19.3% to $575.6 million from $482.6 million in 2010. It was another strong quarter for most of our regions, and above our expectations overall.

In our existing markets' lines of businesses, residential roofing sales increased 25.7%, and nonresidential roofing increased 10.8%. Our fourth-quarter roofing sales this year were favorably impacted by higher industry-wide selling prices and incremental residential roofing business in several markets that experienced significant spring hail storms. The impact from storms is always hard for us to evaluate, but we estimate that it has increased sales by about $30 million to $40 million for the quarter, and $50 million to $60 million for the year. Nonresidential roofing sales growth continued strong, although not quite as high as in recent quarters. Complementary product sales declined 1%.

Regionally, we saw strong double-digit sales growth in the West, Midwest, Southwest, and Southeast, with Canada and the Northeast up around 10%, and the Mid-Atlantic up 7%. We estimate inflation in our net product cost, based upon our current inventory product mix and invoice cost, net of short-term buying programs, compared to the similar cost of the same products a year ago. Based upon this estimate, our overall net product costs were up about 5% as compared to September 2010 levels. Residential roofing and complementary products were up around 4%, while nonresidential roofing products were up about 7%.

We had the same number of business days in this year's fourth quarter as last year, while we operated a total of 185 branches as of the end of the quarter, compared to 179 last year. We opened one branch and closed one in this quarter, while we acquired two branches during last year's fourth quarter. Total gross profit was $132.9 million, compared to $106.4 million in 2010, a 24.9% increase. Existing market gross margin increased to 22.9% from 21.9% in 2010. The higher average selling prices and increased demand in most markets, along with our ability to build inventory prior to some vendor price increases, helped to return this year's fourth-quarter gross margin rate to a more seasonally-normal rate. In addition, we had a slightly higher concentration of residential sales, which typically have higher gross margins.

Existing market operating expenses, which is slide 2, increased by 6.5 million, or 8.6%, to $81.3 million from $74.8 million in 2010. Acquired market operating expenses increased $3.2 million. Payroll and related costs, including incentive-based pay, overtime, and profit sharing, increased 4.2 million in our existing markets, mainly due to gross profit and operating income exceeding our expectations, and to service the increase in sales, especially in the storm markets. Selling expenses increased $2.4 million, mainly due to increased fuel costs, higher outsourced transportation costs, mainly in the storm markets, and increased credit card costs, due to the higher revenues. Bad debts were up about $0.5 million, and we also had other expense increases of about $0.4 million across various categories. Depreciation and amortization decreased $1.0 million, due to a drop-off in amortization related to purchase accounting, and lower depreciation due to lower capital expenditures in recent years. Operating expenses as a percentage of net sales dropped to 14.6% overall, and 15.6% in our existing markets, due primarily to the favorable impact of the higher sales, but partially offset by the expense increases I have just mentioned.

Interest expense declined $0.1 million in 2010, due mostly to lower outstanding debt. Income tax expense was $13 million, reflecting an effective rate of only 29.3%, compared to 38.1% in 2010. As more fully discussed in our Form 10-K, our 2011 income tax expense includes a one-time benefit of $5.1 million from converting our Canadian entity into a controlled foreign corporation for US tax purposes, while 2010 included a benefit from a discrete item. Without the significant one-time benefit in this year's fourth quarter, our tax rate would be approximately 40.8%. We expect our future income tax rate to be approximately 39.0% to 39.5%. As a result of all that I have mentioned, our net income was $31.3 million for the quarter, compared to $16.9 million in 2010.

Our diluted net income per share increased by 81%, to $0.67 from $0.36 in 2010. Excluding the one-time tax benefit, net income would have been $26.2 million, and diluted earnings per share $0.56, as presented in slide 3. Our earnings before interest, taxes, depreciation, amortization, and stock-based compensation, our adjusted EBITDA, which is reconciled to our GAAP net income in our press release, was $55.4 million from 2011, as compared to $38.9 million in 2010.

As for our fiscal year results, which are shown beginning with slide 4, our fiscal 2011 existing market sales increased 9.3%, 8.8% on a same number of days business basis. Total sales, not shown in the slide, increased 12.9%, to $1.82 billion from $1.61 billion in 2010. In our existing markets, lines of business, based upon the same business days, nonresidential roofing sales increased 12.4%, while residential and complementary products increased 8.4% and 1.3% respectively. Regionally, we saw the strongest sales growth in the Midwest, West, Northeast, and Mid-Atlantic, while the Southwest was up slightly less, and Canada and Southeast saw only small gains. Total gross profit was $519.6 million, compared to $360.1 million in 2010, a 16.5% increase. Existing market gross margins was 23.1%, compared to 22.4%.

Existing market operating expenses, which is slide 5, increased by $16.3 million, or 5.8%, to $296.7 million from $280.3 million in 2010. Acquired market operating expenses increased $13.0 million. Payroll and related costs increased $12.0 million in our existing markets, mostly in the same categories mentioned for the quarter. Selling expenses increased $5.4 million, mainly due to increased transportation and credit costs. Our annual bad debt expense increased $3.3 million, due primarily to an increased allowance for potential bad debts. Depreciation and amortization decreased $3.8 million, due to the same factors mentioned for the quarter, while warehouse expenses were down $0.5 million from lower maintenance costs.

Operating expenses as a percentage of net sales declined to 17.1% from 17.7% in our existing markets, due primarily to the impact of the higher sales, but partially offset by the impact of the expense increases I just mentioned. Interest expense declined $4.8 million in 2011, due mostly to the lower debt and lower interest rate hedges that went into effect in April of this past year. 2011 income tax expense was $31.2 million, reflecting an effective tax rate of 34.5% compared to 37.6% in 2010. As I mentioned for the quarter, 2011 had a one-time tax benefit of $5.1 million, related to our Canadian entity. Without that benefit, income tax expense would have been $36.3 million, or an effective rate of 40.1%. Last year's rate benefited from the reversals of certain discrete items; and, again, we expect our future rate to be 39% to 39.5%.

As a result of all I have mentioned, our fiscal 2011 net income was $59.2 million, compared to $34.5 million in 2010. Our net income per share was $1.27, compared to $0.75 in 2010. Excluding the one-time tax benefit, net income would have been $54.1 million, and diluted earnings per share $1.16, as presented in slide 6. Our adjusted EBITDA was $134.9 million, or 7.4% of sales for 2011, as compared to $106.3 million or 6.6% in 2010.

On to slide 7, cash flows from operations was $79.3 million in 2011, as compared to $73.9 million in 2010. The higher cash from operations was primarily due to year-over-year increase in operating income, offset somewhat by an increase in working capital use. A favorable increase in accounts payable and accrued expenses, along with a favorable decrease in prepaid expenses and other assets, was more than offset by unfavorable increases in accounts receivable in inventory. Our day sales outstanding in accounts receivable were down slightly, mainly due to higher sales in the fourth quarter.

Inventory turns were relatively flat year over year, as the impact of this year's larger build-up of inventory was offset by the effect of the higher sales. Capital expenditures in 2011 were $14.4 million, compared to $10.3 million in 2010. Cash used for acquisitions was $34.9 million, compared to $9.3 million in 2010. Our net cash used by financing activities was $5.0 million in 2011, compared to a cash used of $10.8 million in 2010. The current year amount was net of cash proceeds of approximately $3.2 million from new equipment financings.

To summarize a few key points for my presentation, organic sales were up 15.6% for the quarter, with organic gross margins at 22.9%, compared to 21.9% in 2010. Organic operating expenses as a percentage of sales were down to 14.6% from 15.6% in 2010. Diluted net income per share, excluding the one-time tax gain benefit, increased 51%, to $0.56 from 37% (sic - see slide 3). 2011 had record earnings, and an increase of cash of $26 million, despite spending $35 million on acquisitions. Great execution by our team and a strong balance sheet formed a solid foundation for future growth and for building value for our investors. Paul?

I think now we're going to open the call up to questions, any questions you might have.

Thank you. (Operator Instructions). Our first question will come from Michael Rehaut with JPMorgan.

Good morning, everyone. First question. I was wondering if you can -- you mentioned the gross margins benefiting from prebuy of inventory ahead of the price increases. I was wondering if you could kind of give us what you estimate that might have helped in the quarter? And looking forward into the first quarter of 2012, how should we think about gross margins, given that I think the price increases are out there in the market, and maybe you can potentially still hold what you have achieved in the last quarter to -- just any help directionally there would be appreciated.

Sure. This quarter was a little bit strange, and we did build up inventory at the end of June. One, we knew that the storm markets would need that inventory to sell, but also at that point in time, we were expecting some further price increases from the manufacturers. So, early on, we had a pretty good benefit from those -- selling the cheaper product we had bought in a market that had increased prices. But as the quarter went on, that flattened out. So, it's a little difficult to give you an exact number that we think pricing affected for the quarter -- in the 10s of basis points, though, Mike, not as much as it would have seen if those prices had held up, and we had seen some further price increases. We're pretty comfortable that the gross margin of 22.9% for the existing markets was more of a normal rate for us, and there is a little bit of increase in there from buying the inventory, but not as much as you would expect.

As for the second piece of your question, about next year. We think we have a benefit going for at least Q1 and Q2 year over year with those price increases. They are in the 5% to 6% range, so that should help us a little bit with inflation. After we round those price increases starting next April, May, and June, we just don't know. If there are some further price increases, we could get some inflation effect. That seems to be the trend, a little bit, with the commercial guys pushing for price lately, but the residential guys -- it's just too hard to predict for us.

Yes, and Mike, as we are getting into our winter period, it makes it maybe a little more difficult for us to determine. I think it will depend on how harsh the winter is. Right now we're positive that we're carrying price through into Q1. The question will be -- how much demand is there going to be as we exit the winter and into the spring.

Okay. Appreciate that. And the second question, working off of your comments on -- with regards to the acquisition focus, I was wondering if you could, first off, and I apologize if this was already disclosed, but the Denver acquisition, the amount of sales that that is associated with, and if that is slightly accretive or how should we think about potential accretion for 2012 or beyond? And I guess maybe if there's any incremental detail you can give us in terms of how you're thinking about the M&A market for 2012, and what type of size of activity that we might be able to expect from you guys in the next 12 months?

F&P was an acquisition which is a little bit different than our normal, adding a new region. That will actually be absorbed into Shelter Midwest, which is run by a great group of guys that we have working for us, and have done a good job in assimilating some of the acquisitions into their region in the past. We have sales of about $60 million for that company. We believe it will add a couple of cents to next year's EPS. It won't be anything great, again, because we have purchase accounting amortization, which obviously we have to deduct for GAAP purposes. The purchase price is probably a little bit higher than we have paid in the past, based upon their EBITDA run rate. But again, it's going into a region, so we think we have some great synergies that will come aboard as we put that and integrate it into that region.

And moving forward, from an M&A perspective, our pipeline is as full and strong as it has been. We continue to talk to prospects, and our expected range of companies would be in the $60 million to $100 million. So, we're very active, and the hope is that during 2012, that we'll do a couple of acquisitions.

So, each would be in the $60 million to $100 million range, you're saying?

Yes, roughly. And the idea, Mike, is to get back into that 10% to 15% growth from acquisition that we have talked about since the IPO, and with some things happening with the storm markets getting a little bit better, and some of these companies will -- their earnings will come up so that we can pay a reasonable EBITDA multiple for them and get some deals done. It's hopefully the start of an optimistic time. I know we have been saying that for a couple of years, but we have done quite a bit in the last year-and-a-half, and we hope to push forward with that a little bit harder.

Great. Thank you.

Our next question will come from Keith Hughes with SunTrust.

Yes, on the 10% to 15% EPS guidance, can you give us some details of what you are assuming in that? Are you assuming storm damage is similar to what we saw here in 2011, and what kind of organic growth rates?

Well, one, we think we have, like we just said, we think we have some price for at least the first two quarters that will help with that organic growth rate. We're seeing growth outside of the storm markets in other regions, which we think will continue into next year, and hopefully the economy will get a little bit better. As Paul said during his prepared comments, we think in our model that we have replaced the higher storm levels that we have seen. Does it require a normal storm season? Somewhat, but if it's not there, we'll go after other business, and try to build the market that way, and to make our goals.

So, in that number, the assumption is minimal storm volume. As Dave said, we'll have some carrying through Q1, just based on the fact that it really revved up in Q4 for us.

Okay, and then the nonresidential, are you assuming any kind of drop-off in that business, forgetting storms, just in terms of inherent activity?

No, I think the manufacturers have been pretty positive about the combination of continued decent reroof activity in the low single digits, and then a little bit of price. So, no, we're hopeful that mid-single-digit growth on the commercial side. Although, again, ourselves, we will be hitting these higher comps as we have talked about the six straight quarters of double-digit growth.

And the only thing I would add to that, Keith, is the price increases for the commercial have come later in our fiscal year than the residential ones. So, we do have that advantage of price, too.

So, you're going into the year with a lot of positives; that number just struck me as fairly low. So, really, we're not assuming, in the second half of your fiscal year, some massive drop-off other than the fact that you have tougher comps. Is that fair to say?

Yes.

Okay. That's all for me, thank you.

We'll hear next from Ryan Merkel with William Blair.

Thanks. My first question is on pricing. Did all of the Fall residential OEM price increases push through, or where do we stand there?

Fall residential?

Yes.

No, we had -- there were two, and really both I think it fizzled. The last one was pushed into November, which is not going to occur. The earlier one, the August increase has -- I think as we went through the year, and some of the storm volume might have dropped off a bit. In general, I think that did not get into the market. So, the earlier ones are the ones that were driving the increase for the year.

What is the reason the price increases didn't go through? Is it higher competition?

It's demand. As the demand dropped off in those storm markets, they just didn't think they could push them through. And with people, again, building the inventory in June, you saw how much ours came down from $269 million to $200 million. Distribution, I think, is being a little more rational, and saying -- if you're not going to give us a deal on prices, we're not going to build inventory.

I don't think it's a case of competition, although that's always a factor. I think it's more as Dave said, the demand piece and inventory reduction.

Okay.

And the fact that we're entering, pretty soon here, although the weather has been somewhat mild, we're going to be entering a winter period in some markets.

Okay. So, it's maybe reasonable that the price increases could come back next spring, at least on the resi side, because it didn't go through here in the fall?

They always take a look at that in the spring as they are wont to do, and I think if the economy gets a little better, the price of oil is going to go up, and the raw materials will increase. I think the real good news here is that the commercial business looks like it's coming back a little bit more normal gross margins and some price increases because there hasn't been many over the last three to four years.

And as always, Ryan, it will really depend on how much demand there is as we get into and exit the winter into the spring. And then as Dave said, if anything occurs dramatically with asphalt pricing, it will be more specific. It's held at a relatively high level between $400 and $500 a ton. So if that moves up at all, that could influence price. But demand is also, as we found out in 2010, demand is a big piece of this also.

Okay. Then second question was on gross margins. I was a little surprised they weren't up sequentially, given the inventory prebuys, and also a better mix. Can you talk about the puts and takes, or what kind of explains that?

Like I said, when we went through the quarter, we built the inventory ahead of it, expecting more price increases, and when those didn't come we sold that into the marketplace. I think what's happened a little bit in the industry is people follow, and they hear us talking about building inventory, so they know that if they don't build inventory, they're going to be at a disadvantage. So, buying ahead of things, I don't think is critical for gross margin expansion as it used to be in the past. Now, you need to buy ahead to stay competitive, and I think that is more like the marketplace is today.

Okay. But the mix was certainly a positive, given how strong residential was.

Yes, it's quite positive. It's 20 to 30 basis points, or in that range. Remember, it only went up 4%, and we said in the past, it's on the commercial side, 1,000 basis point difference, but it's less on the complementary, which was the drop-off in the mix. So, that 4% times 1,000 basis points is 40 basis points.

Okay, thank you.

Our next question will come from Sam Darkatsh with Raymond James.

Two questions. First off -- talk about what you think -- I think we're all dancing around this, but your market share, or what the market did at the distribution level during the quarter. Obviously, Carlisle and Owens Corning showed considerably greater growth in their roofing segments during the quarter. And if the prebuying was happening, or the inventory build was happening in June or even into July, I'm trying to reconcile what your organic growth rate was versus what they were reporting in their September quarter.

The biggest factor there for the residential guys is we're just not in every market that they're in. And if you're talking about Owens Corning specifically, remember, they can ship much larger quantities into storm areas than we have branches. And they can also ship that storm damage, like into Arizona, which had a pretty big storm, and some other markets we just are not in. So, I can't speak for their increases.

The commercial guys, we are pretty close to, except for the price increases, which we didn't see as big of price increases as Carlisle did in theirs. Remember, ours is an end-of-quarter increase in price, and they said they had 5% of price throughout the whole quarter. That is pretty substantial, a little bit more than we saw. Again, it could be that the different markets that they are in down south, and some of those storm markets that we don't buy as much Carlisle in, and we use Firestone in those markets, that they had bigger increases there. I'm not so sure it speaks to market share at all.

Next question -- to talk about the spread of gross margin. Last quarter I think it was 9 points between resi and non-resi. Is that similar here? What was the delta on a sequential basis between the two segments?

We have always said it's about a 1,000 to 1,200 basis points. The commercial stuff finally had an increase, and we also saw a slight increase in the resi margins, but they're still about the same percentage apart.

Thanks much.

Next we'll hear from Kathryn Thompson with Thompson Research Group.

Good morning, this is Jamie Baskin on the line for Kathryn. Can you talk about how shingle prices are now compared to what you had for your average prices during the quarter, especially on the residential side?

You mean for our Q1?

Yes, I mean, how are prices trending right now compared to what you experienced during Q4, your average price? Have those come down, or are they holding up?

What's typical for this quarter is there's still -- October and November are very good roofing months, as people try to get stuff finished for the winter. You won't see much price reflection in this quarter, so it will be sequentially flat.

And as we said, October was up, as Dave is alluding to, 17%; month-to-date November is similar. So, we have strong volume, which typically, typically means pricing will hold. I would assume other distributors are seeing similar volume, I don't know. But as Dave said, October is typically a strong month for us, so no, pricing has remained flat as we have gone through.

And remember, roofers don't carry much inventory. It's job to job, so they can't put a big buy together and put it in stock. Now, they can group jobs together, but the biggest advantage they could have is if they could carry inventory like we do. But there's a cost to that, of course.

Yes. Can you talk about the difference between the inventory levels that you have in storm-related areas versus the non-storm? is there a big divergence?

Yes. The storm markets, until we head into the winter period, will carry much higher inventory. Of course, they're turning that quickly, but they need their inventory on the ground to service their customers quickly. It could perhaps be double the inventory that they would normally carry during this time of the year.

I think just one additional comment. I think we have proven that we can effectively reduce inventory when the need exists, so as we get into the winter period, we'll make, as we are doing now, we'll make determinations of where that inventory needs to be December and January.

Okay, thank you.

Next we'll hear from David Manthey with Robert W. Baird.

First off, in terms of the guidance, I was also interested in your outlook in terms of acquisitions, and I think you outlined what you thought they would be, but beyond the contribution from acquisitions, as you are looking at that 10% to 15% EPS growth, I guess that probably would translate to similar top-line growth. What is the gap between that sort of guidance and the long-term 15% to 25% revenue growth that you would normally expect, as you look at the pieces of that and build it up?

Well, one, it doesn't include current year acquisitions. We never put that into our guidance, and even though we know at F&P right now, that excludes that. In reality, we don't see 10% to 15% revenue growth. One, if a chunk of this comes from price, especially the first half of the year, as you know, we can leverage that greater and push more of it to the bottom line. I think that we have reasonable, in the 5% to 10% range, growth as we have always said we would do for our branches. We need to push them, and hopefully the branch growth and the market share growth will make up for some of the loss, if the storm isn't there next year. That is what we're pushing for, and I think that 10% to 15%, if we can get there, is a good goal.

Okay, so you're saying that regardless of what you start at on the top line, you're not including any acquisitions, even though you hope to do a couple of $50 million to $100 million acquisitions. None of that is in the 10% to 15%, nor would it be in your theoretical top line goal?

Yes, that's correct. And then my comments about the storm volume is minimal. I mean we don't have any projections built into that budget of $50 million to $100 million of storm volume. I think there's a reality in some of these heavier storm markets, like Denver and Oklahoma, they normally see things every year, so there's just a minimal amount of storm dollars in that kind of 15% number that we gave you.

Okay. Do you care to talk about what your expectation is for top line growth relative to that 10% to 15%?

You mean for the acquisitions?

No. Just overall for the year. You're saying 10% to 15% EPS growth. Normally you would have talked about revenue growth. Is there a corresponding revenue range you would like to talk about?

Yes. 5% to 10%, and that includes Enercon for a full year. But remember, Enercon is in Canada, and we have already seen a good chunk of what they can do for a year, because October through March for them isn't that strong of a period.

Okay, thanks, Dave. That's helpful. And the second piece is -- you talked about growth being strong in non-storm areas. Are there any metrics you can hang around that, or quantify it at all?

Yes, I think if you look at the slides we presented, the northeast, it's on page 1. The northeast was over 9%. The mid-Atlantic, which has a mix in it, has shown some growth. Southeast, which virtually had very little storm, was up double-digit, 20% or so. Southwest had storms. Midwest had storms. The west was up 50%-plus, which is our Pacific location out in California. And then Canada saw 11%. So, we saw good levels of growth, even outside of the storm markets, which, again, I think points to the strength of reroofing, and the fact that that continues to drive sales.

Yes. It's encouraging. All right. Thanks a lot, guys.

(Operator Instructions). We'll now go to Jim Barrett with CL King & Associates.

Paul, in your most recent acquisitions, have you seen -- did you have any competition, or was that simply a one-to-one type transaction?

I think -- it was split. In the one in Canada, we [lost] the relationship, where there wasn't any other folks involved. And the acquisition in Denver, there were a number of other companies that went after it. And we do what we typically do, and that's tell our story, and then of course, pay a competitive price. And we ended up winning that. So, it was mixed.

Okay, good. And now that we are 18 months beyond the Bradco acquisition by ABC, can you sort of comment generally to what extent, if any, that changed the competitive landscape, changed the industry?

One, I'm sure, just based on what we go through here, they have a lot longer to complete their integration. ABC is a very good company, so as we have said on past calls, we think it's a real positive for the industry because from a process improvement standpoint, pricing improvement standpoint, I think it's going to be good. Other than that, I don't think there's any other large dynamic -- Bradco had a -- other than Bradco had a very large commercial portion in their business, and now that adds to ABC's residential. And again, I think it goes back to the discipline of pricing, discipline of customer service that ABC will bring to the Bradco group. So, I think in general, it's going to help pro distribution.

Okay, well, thank you very much. That's helpful.

And we'll go next to Jack Kasprzak with BB&T.

Thank you. Can you tell us how many new branches you opened in fiscal 2011, and how many you plan to open in fiscal 2012?

We did three in 2011, and 2012 we have some on the drawing board, but none reporting to our budgeting process yet. That will be decided in the spring, as we see how those branches around those areas that we picked do. And it's typical for us to try to open them in an area that we do real well in, and add to our market share within that market.

Yes, we typically just don't go to a stand-alone city, like we wouldn't necessarily go to Portland. It's a function of, as Dave alluded to, with a contiguous market, excess capacity that we have in all of our branches. So, as the branches get more full, let's say, in any of our regions, that is when we would get back on the normal track. That doesn't preclude us from opening a branch, as we did in Denver, which was different for us, back in 2009, and it happened to bode well because we did the Fowler & Peth acquisition, which now added to our market presence there. But typically we'll do it within 50 miles, 40 miles of existing branches as they become full, and can't necessarily service the customer like we like, and then we'll move that volume out to the new branch.

Right. Okay. With regard to new home construction, you talked about reroofing, you talked about storms. But are you guys seeing any indication that new home construction could be a little better next year? Any talk in the industry? Any planning? Any scuttlebutt of that kind?

No, I think as you look at the industry publications and industry intelligence, it says there's going to be modest growth with new construction, both single family, more so on multi-family. So I think it really -- not much, in my view, is going to change year to year. Maybe some areas like Houston, which saw some good starts single and multi-family this past year, will see some decent volume, and maybe somewhere in the Carolinas, but we don't see any major change, given that we're around 500,000 or so of, roughly, starts. The projection is that it will take a number of years to get back up even to 700,000 per year.

Okay. Thanks very much.

We do have time for only a few more questions. With that, we'll go next to Ken Zener with KeyBanc Capital Markets.

Good morning, this is [Paul Gonzalez] on for Ken. I just want to go back to pricing real quick. I wonder if you can talk about what the pricing is on a per-square basis. If you would say that's around $86, more or less? Thanks.

You mean for shingles?

Yes.

Yes, it is so different from market to market. It can be anywhere from $75 to $80, to $100 to $110. And plus, all the shingles, for the different types of shingles, vary too. If you are talking about the typical 30-years, it's definitely in that range, but it varies drastically by region.

Okay, so there's no average for across all of the markets, then?

No, it is vastly different.

We could certainly aggregate it, but we don't because the business is done in the field. It's done in that market in that region.

Okay, thanks.

And we'll go next to Brent Rakers with Morgan Keegan.

Good morning. I guess I'm going to harp more on some of the pricing issues. If you guys can maybe take us back through calendar 2011, I believe on the residential side there were four announced price increases. Were two of those or three of those affected into the marketplace?

Well, there was two initially, which, when they said they were going to go through in February and March, those really didn't go through until April or May. The second one, which they had first predicted for May went through some time in June. And what happened then was, they announced the price increase for August, which really wasn't an established invoice price increase. They were going to take away some of the special buy discounts. What happened was, as the summer went through, those special buys came back into play because the demand wasn't there. The one for September, they delayed until November, and that never went through either, in our estimation. I mean, I think I listened to Owens Corning's call, and I think they were pretty much on-board that the second two never came into play either.

So then, Dave, effectively two of them are incorporated into current pricing. Is that correct?

Yes, anywhere from a low of maybe 8% or 9% on the low end, to 11% to 12%, depending on the marketplace.

Okay, then, Dave, given that, can you explain the disconnect between your disclosed 4% price number for the quarter, and two combined increases that were both mid to high single digits.

Remember, it's year-over-year comparison, and what happened last year was prices actually dipped during the May through June period, and then came back up. So, if you were to look at sequentially, the prices have gone up even more than that 4%, as Paul mentioned during his comments, probably in the range that you are talking about, that 9% to 10%. The problem is, last year we didn't follow the same track. Prices dipped at an earlier period where they were going up a bit now, and then came back later in the year.

Dave, just for a last point of clarification on this. I believe the biggest thrust of the negative pricing that Beacon disclosed was actually in Q1 of 2011 and Q2 of 2011. That is when you were dropping the 4% to 7%. So, I would assume as you go into this comp period, the number that could be disclosed for next quarter on price, might be that 8% to 9% to 10%, when you fully anniversary these, quote, easy comps on the pricing side?

That's correct. And remember, we carried much of that inventory we bought at that 4% to 7% lower prices, because we had built a huge amount of inventory last June in 2010.

Okay. Great. Okay. Thanks a lot, Dave.

We do have time for one more follow-up question. That question will come from Michael Rehaut with JPMorgan.

Thanks. I just wanted to make sure I heard it correctly. In terms of what was the -- for the fourth quarter, on a total sales basis, and per the three -- roofing, commercial, and complementary, what price had, as far as an impact percentage, year-over-year impact on sales?

On sales, it's in that 5% to 6% range. Gross margins went up slightly during the quarter. We said that manufacturing price increases were approximately 5%, so our prices to our customers went up slightly higher than that. But 10s of basis points.

And the impact, is that all -- is it a disproportionate amount in the residential side?

No, it's actually a little stronger for the non-res, because as I said in my prepared, it was only 4% to 5% for the residential, and then 7% for the non-res.

Okay. And then just on the EPS guidance. Number one, obviously I assume that's off of the $1.16, excluding the tax benefit?

Yes, it's off of the $1.16.

And also in terms of the guidance overall, just again to be clear, it excludes the Denver acquisition, has a minimal amount of storm volume assumptions, and also any -- a couple of pennies accretion from that Denver acquisition, as well?

That's correct.

Great. Thank you.

And that does conclude the questions for today. I would like to turn the call back over to Mr. Isabella for his closing remarks.

Great, thank you. Let me just make a couple of points, most of which we went over in the questions and the prepared remarks. Adjusted EPS for the quarter ended at $0.56 versus $0.37 in 2010. Full-year adjusted EPS ended at $1.16 versus $0.75 in 2010. Gross margins were strong, ending at 23.1% for the quarter, and full-year up 70 basis points versus last year, as we said, aided by demand and vendor price increases. Price had a positive impact in the quarter for both residential and commercial products, and currently we expect these price gains to carry through a portion of 2012.

Residential and commercial growth for the quarter was strong, coming in at 26% and 11%, respectively, and non-storm markets were also very strong. Full-year growth, including acquisitions, was 13%; for the fourth quarter, it was 19%. Cash, as we talked about, remained strong at $143 million. We continue executing a key part of our growth strategy with the recent acquisition of Denver-based Fowler & Peth, and our acquisition pipeline is still full. We're confident we'll continue to purchase quality companies.

We're proud of the results our team has been able to generate for the quarter and full year. I would like to thank all the employees of Beacon for their hard work and dedication. Once again, it's this team that delivers the results. We're off to a good start in October, and look forward to another solid year. As always, thank you for your interest in our Company. David and I are available for any other questions you might have, in our Peabody office. Thank you very much, and this concludes the call.

And once again, ladies and gentlemen, with that, that does conclude today's call. Thank you for your participation, and have a great day.