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Interline Brands, Inc. Announces First Quarter 2010 Sales and Earnings Results

JACKSONVILLE, Fla., April 30, 2010 /PRNewswire via COMTEX/ --Interline Brands, Inc. (NYSE: IBI) ("Interline" or the "Company"), a leading distributor and direct marketer of maintenance, repair and operations ("MRO") products, reported sales and earnings for the quarter ended March 26, 2010.

Sales for the first quarter of 2010 decreased 4.5% compared to the first quarter of 2009. Earnings per diluted share were $0.17 for the first quarter of 2010, an increase of 89% compared to earnings per diluted share of $0.09 for the same period last year.

Michael J. Grebe, Interline's Chairman and Chief Executive Officer, commented, "We continue to take advantage of the market environment to execute against strategic initiatives that will drive greater earnings leverage as conditions improve. In the first quarter, we opened our new Chicago distribution center which supports our ongoing efforts to strengthen our distribution network through efficiency gains." Mr. Grebe continued, "Our work to transform our distribution network, combined with our investment in inventory management and leading-edge technology, will enhance our scale by extending our customer reach at a lower fixed-cost position. Our efforts also afford us a substantial organic growth opportunity by enabling us to offer more products to more customers across the country."

Sales for the quarter ended March 26, 2010 were $245.2 million, a 4.5% decrease compared to sales of $256.8 million in the comparable 2009 period. Interline's facilities maintenance end-market, which comprised 72% of sales, declined 3.1% during the first quarter. The professional contractor end-market, which comprised 16% of sales, declined 8.9% for the quarter. The specialty distributor end-market, which comprised 12% of sales, declined 6.7% for the quarter.

"In the face of continued economic uncertainty and some challenges posed by weather, I am pleased with our progression during the quarter. We are by no means where we want to be yet, but we are encouraged by the direction of our performance," said Mr. Grebe. "We are beginning to see more stability in certain end-markets and we are confident that our competitive position will serve us well as conditions continue to improve."

Gross profit decreased $1.4 million, or 1.5%, to $95.1 million for the first quarter of 2010, compared to $96.6 million for the first quarter of 2009. As a percentage of net sales, gross profit increased 120 basis points to 38.8% compared to 37.6% for the first quarter of 2009.

"We are particularly pleased to have achieved significant gross margin expansion, on a year-over-year basis, in the first quarter of 2010," commented Kenneth D. Sweder, Interline's Chief Operating Officer. "We will continue to prudently manage our gross margin while ensuring our ongoing focus on growing the business."

Selling, general and administrative ("SG&A") expenses for the first quarter of 2010 decreased $6.7 million, or 8.0%, to $77.2 million from $83.9 million for the first quarter of 2009. As a percentage of net sales, SG&A expenses were 31.5% compared to 32.7% for the first quarter of 2009.

As a result, first quarter 2010 operating income of $13.2 million, or 5.4% of sales, increased 63.7% compared to $8.0 million, or 3.1% of sales, in the first quarter of 2009.

Diluted earnings per share for the first quarter of 2010 were $0.17, an increase of 89% compared to diluted earnings per share of $0.09 for the first quarter of 2009. Earnings per diluted share for the first quarter of 2010 included a $0.02 per diluted share charge associated with previously announced changes in the Company's executive management and a $0.01 per diluted share charge associated with ongoing efforts to enhance the Company's distribution network. Earnings per diluted share for the first quarter of 2009 included a $0.06 per diluted share charge associated with higher reserves for bad debt expense resulting from a customer seeking Chapter 11 bankruptcy protection, a $0.05 per diluted share charge associated with a reduction in force and consolidation of certain distribution centers, a $0.01 per diluted share charge associated with the adoption of a new accounting standard on business combinations, and a $0.03 per diluted share gain on the early extinguishment of debt.

During the quarter ended March 26, 2010, cash and cash equivalents increased $16.9 million to $116.2 million primarily from cash flow from operating activities of $16.1 million.

Business Outlook

Mr. Grebe stated, "We are encouraged by some additional early signs of recovery. Our sales have sequentially improved from the decline in the fourth quarter of 8.3%, to the decline in the first quarter of 4.5%, to an increase in sales so far this quarter of 0.8% through April. Regardless of the market trends, we continue to manage our business efficiently with our long-term objectives in mind."

"We are driving sustainable improvements to our business model that will position us favorably to capture profitability and market share gains as growth resumes. In addition, our supply chain improvements are driving tangible cost savings that will only become more pronounced in an environment of growth, and our capital efficiency will continue to yield greater returns as we further optimize our network. I am proud of our team's dedication to the tasks at hand and confident that we are advancing Interline Brands as a premier broad line MRO distributor."

Conference Call

Interline will host a conference call on April 30, 2010 at 9:00 a.m. Eastern Time. Interested parties may listen to the call toll free by dialing 1-800-427-0638 or 1-706-634-1170. A digital recording will be available for replay two hours after the completion of the conference call by calling 1-800-642-1687 or 1-706-645-9291 and referencing Conference I.D. Number 69985337. This recording will expire on May 14, 2010.

About Interline

Interline Brands, Inc. is a leading distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations products to a diversified customer base made up of facilities maintenance professionals, professional contractors, and specialty distributors primarily throughout North America, Central America and the Caribbean. For more information, visit the Company's website at http://www.interlinebrands.com.

Non-GAAP Financial Information

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Interline's management uses non-US GAAP measures in its analysis of the Company's performance. Investors are encouraged to review the reconciliation of non-US GAAP financial measures to the comparable US GAAP results available in the accompanying tables.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

The statements contained in this release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, or implied by, forward-looking statements. The Company has tried, whenever possible, to identify these forward-looking statements by using words such as "projects," "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. The risks and uncertainties involving forward-looking statements include, for example, economic slowdowns, general market conditions, credit market contractions, consumer spending and debt levels, adverse changes in trends in the home improvement and remodeling and home building markets, the failure to realize expected benefits from acquisitions, material facilities systems disruptions and shutdowns, the failure to locate, acquire and integrate acquisition candidates, commodity price risk, foreign currency exchange risk, interest rate risk, the dependence on key employees and other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2009. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this release are likely to cause these statements to become outdated with the passage of time. The Company does not currently intend, however, to update the information provided today prior to its next earnings release.



    CONTACT: John Ebner
    PHONE: 904-421-1441


    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    AS OF MARCH 26, 2010 AND DECEMBER 25, 2009
    (in thousands, except share and per share data)


                                                        March    December
                                                         26,        25,
                                                           2010       2009
                                                           ----       ----
    ASSETS
    Current Assets:
      Cash and cash equivalents                        $116,153    $99,223
      Short-term investments                              1,441      1,479
      Accounts receivable -trade (net of
       allowance for
        doubtful accounts of $11,144 and $12,975)       119,563    120,004
      Inventory                                         176,792    173,422
      Prepaid expenses and other current assets          18,371     18,552
      Deferred income taxes                              16,432     16,459
                                                         ------     ------
            Total current assets                        448,752    429,139

    Property and equipment, net                          47,695     46,804
    Goodwill                                            319,006    319,006
    Other intangible assets, net                        123,117    124,835
    Other assets                                          8,804      9,054
                                                          -----      -----
            Total assets                               $947,374   $928,838
                                                       ========   ========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
      Accounts payable                                  $89,328    $85,982
      Accrued expenses and other current
       liabilities                                       41,637     41,715
      Accrued interest                                    4,099      1,050
      Income taxes payable                                1,409      1,285
      Current portion of long-term debt                   1,500      1,590
      Capital lease - current                               159        222
                                                            ---        ---
            Total current liabilities                   138,132    131,844

    Long-Term Liabilities:
      Deferred income taxes                              40,430     40,369
      Long-term debt and capital lease, net of
       current portion                                  304,127    304,092
      Other liabilities                                     781        798
            Total liabilities                           483,470    477,103
    Commitments and contingencies
    Senior preferred stock; $0.01 par value,
     20,000,000 authorized; none                              -          -
       outstanding as of March 26, 2010 and
        December 25, 2009

    Stockholders' Equity:
      Common stock; $0.01 par value, 100,000,000
       authorized;                                          330        326
        32,998,168 issued and 32,878,797
         outstanding as of March 26,
        2010 and 32,640,957 issued and 32,524,251
         outstanding as of
        December 25, 2009
      Additional paid-in capital                        583,232    576,747
      Accumulated deficit                              (119,175)  (124,745)
      Accumulated other comprehensive income              1,629      1,483
      Treasury stock, at cost, 119,371 shares as
       of March 26, 2010                                 (2,112)    (2,076)
        and 116,706 as of December 25, 2009
            Total stockholders' equity                  463,904    451,735
                                                        -------    -------
            Total liabilities and stockholders' equity $947,374   $928,838
                                                       ========   ========


    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
    THREE MONTHS ENDED MARCH 26, 2010 AND MARCH 27, 2009
    (in thousands, except share and per share data)


                                              Three Months Ended
                                              ------------------
                                         March 26,        March 27,
                                               2010             2009
                                               ----             ----

    Net sales                              $245,218         $256,793
    Cost of sales                           150,071          160,197
                                            -------          -------
        Gross profit                         95,147           96,596

    Operating Expenses:
        Selling, general and
         administrative expenses             77,229           83,920
        Depreciation and amortization         4,751            4,634
                                              -----
           Total operating expenses          81,980           88,554
                                             ------           ------
    Operating income                         13,167            8,042

    Gain on extinguishment of
     debt, net                                    -            1,720
    Interest expense                         (4,353)          (5,379)
    Interest and other income                   424              290
                                                ---
        Income before income taxes            9,238            4,673
    Income taxes                              3,668            1,751
                                              -----            -----
    Net income                               $5,570           $2,922
                                             ======           ======

    Earnings Per Share:
      Basic                                   $0.17            $0.09
                                              =====            =====
      Diluted                                 $0.17            $0.09
                                              =====            =====

    Weighted-Average Shares
     Outstanding:
      Basic                              32,674,154       32,481,049
                                         ==========       ==========
      Diluted                            33,370,605       32,552,442
                                         ==========       ==========



    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
    THREE MONTHS ENDED MARCH 26, 2010 AND MARCH 27, 2009
    (in thousands)

                                                  Three Months Ended
                                                  ------------------
                                            March 26,           March 27,
                                                   2010                2009
                                                   ----                ----
     Cash Flows from Operating
      Activities:
       Net income                                $5,570              $2,922
       Adjustments to reconcile net
        income to net cash provided by
         operating activities:
          Depreciation and amortization           4,903               4,781
          Gain on extinguishment of debt,
           net                                        -              (1,720)
          Amortization of debt issuance
           costs                                    255                 287
          Amortization of discount on 81/8%
           senior subordinated                       37                  37
                   notes
          Write-off of deferred acquisition
           costs                                      -                 672
          Share-based compensation                  774                 823
          Excess tax benefits from share-
           based compensation                      (515)                  -
          Deferred income taxes                     124               1,261
          Provision for doubtful accounts         1,456               4,992
          Loss on disposal of property and
           equipment                                 17                   1

       Changes in assets and liabilities
        which provided (used)
           cash:
         Accounts receivable - trade               (981)              8,082
         Inventory                               (3,311)             11,557
         Prepaid expenses and other current
          assets                                    182               5,723
         Other assets                               249                  70
         Accounts payable                         3,337              17,858
         Accrued expenses and other current
          liabilities                               329               3,487
         Accrued interest                         3,049               2,481
         Income taxes                               603                (582)
         Other liabilities                          (12)               (157)
            Net cash provided by operating
             activities                          16,066              62,575
     Cash Flows from Investing
      Activities:
       Purchase of property and
        equipment, net                           (3,733)             (2,393)
       Purchase of short-term
        investments                              (1,342)                  -
       Proceeds from sales and maturities
        of short-term                             1,379                   -
          investments
       Purchase of businesses, net of
        cash acquired                                 -                (126)
            Net cash used in investing
             activities                          (3,696)             (2,519)
     Cash Flows from Financing
      Activities:
       Decrease in purchase card payable,
        net                                      (1,025)             (1,677)
       Repayment of term debt                       (90)             (6,163)
       Repayment of 81/8% senior
        subordinated notes                            -             (34,157)
       Payments on capital lease
        obligations                                 (64)                (58)
       Proceeds from stock options
        exercised                                 5,200                   -
       Excess tax benefits from share-
        based compensation                          515                   -
       Treasury stock acquired to satisfy
        minimum statutory tax                       (36)                  -
            withholding requirements
            Net cash provided by (used in)
             financing activities                 4,500             (42,055)
     Effect of exchange rate changes on
      cash and cash                                  60                 (34)
        equivalents                                 ---                 ---
     Net increase in cash and cash
      equivalents                                16,930              17,967
     Cash and cash equivalents at
      beginning of period                        99,223              62,724
     Cash and cash equivalents at end
      of period                                $116,153             $80,691
                                               ========             =======

     Supplemental Disclosure of Cash
      Flow Information:
       Cash paid during the period for:
         Interest                                  $945              $2,740
                                                   ====              ======
         Income taxes, net of refunds            $3,072              $1,181
                                                 ======              ======

     Schedule of Non-Cash Investing
      Activities:
         Property acquired through lease
          incentives                               $610              $2,412
                                                   ====              ======


    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    RECONCILIATION OF NON-US GAAP INFORMATION (UNAUDITED)
    THREE MONTHS ENDED MARCH 26, 2010 AND MARCH 27, 2009
     (in thousands)


    Free Cash Flow                          Three Months Ended
                                            ------------------
                                    March 26,         March 27,
                                           2010              2009
                                           ----              ----

    Net cash provided by
     operating                            $16,066           $62,575
       activities
      Less capital
       expenditures                      (3,733)           (2,393)
    Free cash flow                      $12,333           $60,182
                                        =======           =======



    We define free cash flow as net cash provided by operating activities,
     as defined under US GAAP, less capital expenditures. We believe that
     free cash flow is an important measure of our liquidity and therefore
     our ability to reduce debt and make strategic investments after
     considering the capital expenditures necessary to operate the
     business. We use free cash flow in the evaluation of the Company's
     business performance. A limitation of this measure, however, is that
     it does not reflect payments made in connection with investments and
     acquisitions, which reduce liquidity. To compensate for this
     limitation, management evaluates its investments and acquisitions
     through other return on capital measures.


    Daily Sales Calculations             Three Months Ended
                                         ------------------

                             March 26,       March 27,      % Variance
                                                            ----------
                                   2010            2009
                                   ----            ----

    Net sales                  $245,218        $256,793            -4.5%
                               ========        ========            ====

    Daily sales:
      Ship days                      64              64
      Average daily sales
       (1)                       $3,832          $4,012            -4.5%
                                 ======          ======            ====


    (1) Average daily sales are defined as sales for a period of time
    divided by the number of shipping days in that period of time.

    Adjusted EBITDA                         Three Months Ended
                                            ------------------

                                         March 26,      March 27,
                                               2010           2009
                                               ----           ----
    Adjusted EBITDA:
      Net income (GAAP)                        $5,570         $2,922
      Interest expense                          4,353          5,379
      Interest income                             (32)            (4)
      Gain on extinguishment of
       debt, net                                    -         (1,720)
      Income taxes                              3,668          1,751
      Depreciation and amortization             4,903          4,781
                                              -----          -----
        Adjusted EBITDA                     $18,462        $13,109
                                            =======        =======



    Adjusted EBITDA differs from Consolidated EBITDA per our credit
     facility agreement for purposes of determining our net leverage ratio.
     We define Adjusted EBITDA as net income plus interest expense
     (income), net, (gain) loss on extinguishment of debt, net, income
     taxes and depreciation and amortization. Adjusted EBITDA is presented
     herein because we believe it to be relevant and useful information to
     our investors since it is consistently used by our management to
     evaluate the operating performance of our business and to compare our
     operating performance with that of our competitors. Management also
     uses Adjusted EBITDA for planning purposes, including the preparation
     of annual operating budgets, and to determine appropriate levels of
     operating and capital investments. Adjusted EBITDA excludes certain
     items, which we believe are not indicative of our core operating
     results. We therefore utilize Adjusted EBITDA as a useful alternative
     to net income as an indicator of our operating performance compared to
     the Company's plan. However, Adjusted EBITDA is not a measure of
     financial performance under US GAAP. Accordingly, Adjusted EBITDA
     should not be used in isolation or as a substitute for other measures
     of financial performance reported in accordance with US GAAP, such as
     gross margin, operating income, net income, cash flows from operating,
     investing and financing activities or other income or cash flow
     statement data prepared in accordance with US GAAP. While we believe
     that some of the items excluded from Adjusted EBITDA are not
     indicative of our core operating results, these items do impact our
     income statement, and management therefore utilizes Adjusted EBITDA as
     an operating performance measure in conjunction with US GAAP measures,
     such as gross margin, operating income, net income, cash flows from
     operating, investing and financing activities or other income or cash
     flow statement data prepared in accordance with US GAAP.



SOURCE Interline Brands, Inc.

 
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