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

JACKSONVILLE, Fla., July 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 June 25, 2010.

Sales for the second quarter of 2010 increased 0.1% compared to the second quarter of 2009. Earnings per diluted share were $0.27 for the second quarter of 2010, an increase of 35% compared to earnings per diluted share of $0.20 for the same period last year. Earnings per diluted share for the second quarter of 2010 included a $0.02 per diluted share charge associated with ongoing improvements to our distribution network. Earnings per diluted share for the second quarter of 2009 included charges for similar distribution network enhancements totaling $0.04 per diluted share.

Michael J. Grebe, Interline's Chairman and Chief Executive Officer, commented, "Overall, we are pleased to report further signs of market stabilization, as well as improved financial results driven by our strategic initiatives." Mr. Grebe continued, "We achieved significant year-over-year margin expansion in the second quarter, generating a gross margin of 37.6%, up 120 basis points, and improving our EBITDA margin by 170 basis points to 9.1%. We remain encouraged by some important trends this quarter, and we are pleased to deliver improved operational performance as we continue to bring more products to more customers from a single platform."

Second Quarter 2010 Performance

Sales for the quarter ended June 25, 2010 were $270.2 million, a 0.1% increase compared to sales of $269.9 million in the comparable 2009 period. Interline's facilities maintenance end-market, which comprised 74% of sales, declined 0.7% during the second quarter. The professional contractor end-market, which comprised 15% of sales, increased 1.1% for the quarter. The specialty distributor end-market, which comprised 11% of sales, increased 3.2% for the quarter.

"Although not broad-based, certain markets returned to modest growth this quarter - including the multi-family housing, professional contractor, and specialty distributor markets. Importantly, within multi-family housing we were pleased to see an improving renovation environment, which was adversely impacted during the height of the economic crisis," said Mr. Grebe.

Gross profit increased $3.3 million, or 3.3%, to $101.6 million for the second quarter of 2010, compared to $98.3 million for the second quarter of 2009. As a percentage of net sales, gross profit increased 120 basis points to 37.6% compared to 36.4% for the second quarter of 2009.

"We are continuing to improve Interline's competitive position by strengthening our customer capabilities, improving our operating scale, and reducing the capital requirements of our business," commented Kenneth D. Sweder, Interline's Chief Operating Officer. "In particular, we have reduced our fixed cost base with the introduction of larger, more efficient distribution centers across our network. These newer distribution centers will enable us to maximize near-term cost savings while facilitating additional organic growth opportunities and greater profitability as we provide our customers access to even more products that can be delivered quickly."

Selling, general and administrative ("SG&A") expenses for the second quarter of 2010 decreased $1.4 million, or 1.8%, to $77.5 million from $78.9 million for the second quarter of 2009. As a percentage of net sales, SG&A expenses were 28.7% compared to 29.2% for the second quarter of 2009.

As a result, second quarter 2010 operating income of $19.2 million, or 7.1% of sales, increased 27.5% compared to $15.0 million, or 5.6% of sales, in the second quarter of 2009.

Year-To-Date 2010 Performance

Sales for the six months ended June 25, 2010 were $515.4 million, a 2.2% decrease over sales of $526.7 million in the comparable 2009 period.

Gross profit increased $1.8 million, or 0.9%, to $196.7 million for the six months ended June 25, 2010, compared to $194.9 million in the prior year period. As a percentage of sales, gross profit increased to 38.2% from 37.0% in the comparable 2009 period.

SG&A expenses for the six months ended June 25, 2010 were $154.7 million, or 30.0% of sales, compared to $162.8 million, or 30.9% of sales, for the six months ended June 26, 2009.

Operating income was $32.3 million, or 6.3% of sales, for the six months ended June 25, 2010 compared to $23.1 million, or 4.4% of sales, for the six months ended June 26, 2009, representing an increase of 40.2%.

Earnings per diluted share were $0.44 for the six months ended June 25, 2010, an increase of 52% over earnings per diluted share of $0.29 for the six months ended June 26, 2009.

Earnings per diluted share for the six months ended June 25, 2010 included a $0.03 per diluted share charge associated with ongoing efforts to enhance the Company's distribution network and a $0.02 per diluted share charge associated with previously announced changes in the Company's executive management. Earnings per diluted share for the six months ended June 26, 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 six months ended June 25, 2010, cash and cash equivalents increased $12.4 million to $111.6 million primarily from cash flow from operating activities of $16.1 million.

Business Outlook

Mr. Grebe stated, "We continue to have a level of cautious optimism for continued signs of a market recovery, though it remains challenging to assess its trajectory. Irrespective of the timing of a full recovery, we remain laser-focused on the execution of our key initiatives with precision and speed. We continue to expand sales and operating capabilities with the goal of delivering greater value to our customers, and we have the financial strength to invest in growth and efficiency initiatives for the long term."

Conference Call

Interline will host a conference call on July 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 88732570. This recording will expire on August 13, 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 Quarterly Report on Form 10-Q for the quarterly period ended March 26, 2010 and 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: Lev Cela
    PHONE: 904-421-1441



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

                                                    June 25,    December 25,
                                                      2010          2009
                                                      ----          ----
    ASSETS
    Current Assets:
         Cash and cash equivalents                $111,622     $99,223
         Short-term investments                      1,312       1,479
         Accounts receivable -trade (net of
          allowance for doubtful accounts of
          $10,485 and $12,975)                     135,608     120,004
         Inventory                                 191,453     173,422
         Prepaid expenses and other current assets  20,252      18,552
         Deferred income taxes                      17,085      16,459
                                                    ------      ------
                            Total current assets   477,332     429,139

    Property and equipment, net                     49,582      46,804
    Goodwill                                       319,151     319,006
    Other intangible assets, net                   121,413     124,835
    Other assets                                     9,004       9,054
                                                     -----       -----
                            Total assets          $976,482    $928,838
                                                  ========    ========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
         Accounts payable                         $108,387     $85,982
         Accrued expenses and other current
          liabilities                               42,909      41,715
          Accrued interest                             980       1,050
          Income taxes payable                       2,637       1,285
          Current portion of long-term debt              -       1,590
          Capital lease - current                       94         222
                                                       ---         ---
                         Total current liabilities 155,007     131,844

    Long-Term Liabilities:
         Deferred income taxes                      40,374      40,369
         Long-term debt and capital lease, net
          of current portion                       304,164     304,092
          Other liabilities                            794         798
                            Total liabilities      500,339     477,103
    Commitments and contingencies
    Senior preferred stock; $0.01 par value,
     20,000,000 authorized; none outstanding as of
     June 25, 2010 and December 25, 2009                 -           -

    Stockholders' Equity:
         Common stock; $0.01 par value,
          100,000,000 authorized; 33,127,211
          Issued and 33,004,911 outstanding as of
          June 25, 2010 and 32,640,957 issued
          and 32,524,251 outstanding as of
          December 25, 2009                            331         326
         Additional paid-in capital                586,490     576,747
         Accumulated deficit                      (110,084)   (124,745)
         Accumulated other comprehensive income      1,579       1,483
         Treasury stock, at cost, 122,300
          shares as of June 25, 2010 and
          116,706 as of December 25, 2009           (2,173)     (2,076)
                                                   -------      -------
                            Total stockholders'
                             equity                476,143     451,735
                                                   -------     -------
                            Total liabilities and
                             stockholders' equity $976,482    $928,838
                                                  ========    ========

    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
    THREE AND SIX MONTHS ENDED JUNE 25, 2010 AND JUNE 26, 2009
    (in thousands, except share and per share data)


                                           Three Months Ended
                                           ------------------
                                         June 25,     June 26,
                                              2010         2009
                                              ----         ----

    Net sales                             $270,154     $269,920
    Cost of sales                          168,587      171,605
                                           -------      -------
        Gross profit                       101,567       98,315

    Operating Expenses:
        Selling, general and
         administrative expenses            77,470       78,898
        Depreciation and amortization        4,935        4,392
                                             -----
           Total operating expenses         82,405       83,290
                                            ------       ------
    Operating income                        19,162       15,025

    (Loss) Gain on extinguishment of
     debt, net                                   -         (177)
    Interest expense                        (4,366)      (4,717)
    Interest and other income                  301          440
                                               ---
        Income before income taxes          15,097       10,571
    Income taxes                             6,006        4,149
                                             -----        -----
    Net income                              $9,091       $6,422
                                            ======       ======

    Earnings Per Share:
      Basic                                  $0.28        $0.20
                                             =====        =====
      Diluted                                $0.27        $0.20
                                             =====        =====

    Weighted-Average Shares
     Outstanding:
      Basic                             33,036,531   32,488,744
                                        ==========   ==========
      Diluted                           33,888,918   32,856,916
                                        ==========   ==========




                                            Six Months Ended
                                            ----------------
                                         June 25,     June 26,
                                              2010         2009
                                              ----         ----

    Net sales                             $515,372     $526,713
    Cost of sales                          318,658      331,802
                                           -------      -------
        Gross profit                       196,714      194,911

    Operating Expenses:
        Selling, general and
         administrative expenses           154,699      162,818
        Depreciation and amortization        9,686        9,026
           Total operating expenses        164,385      171,844
                                           -------      -------
    Operating income                        32,329       23,067

    (Loss) Gain on extinguishment of
     debt, net                                   -        1,543
    Interest expense                        (8,719)     (10,096)
    Interest and other income                  725          730
        Income before income taxes          24,335       15,244
    Income taxes                             9,674        5,900
                                             -----        -----
    Net income                             $14,661       $9,344
                                           =======       ======

    Earnings Per Share:
      Basic                                  $0.45        $0.29
                                             =====        =====
      Diluted                                $0.44        $0.29
                                             =====        =====

    Weighted-Average Shares
     Outstanding:
      Basic                             32,855,343   32,484,897
                                        ==========   ==========
      Diluted                           33,629,770   32,704,682
                                        ==========   ==========



    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
    SIX MONTHS ENDED JUNE 25, 2010 AND JUNE 26, 2009
    (in thousands)

                                                          Six Months Ended
                                                          ----------------
                                                              June 25,      June 26,
                                                                      2010        2009
                                                                      ----        ----
     Cash Flows from Operating
      Activities:
       Net income                                                  $14,661      $9,344
       Adjustments to reconcile net
        income to net cash provided by
         operating activities:
          Depreciation and amortization                              9,930       9,322
          Gain on extinguishment of debt,
           net                                                           -      (1,543)
          Amortization of debt issuance
           costs                                                       515         562
          Amortization of discount on 81/8%
           senior subordinated notes                                    74          72
          Write-off of deferred
           acquisition costs                                             -         672
          Share-based compensation                                   2,021       1,955
          Excess tax benefits from share-
           based compensation                                         (754)          -
          Deferred income taxes                                       (579)      2,340
          Provision for doubtful accounts                            2,419       6,324
          Loss on disposal of property and
           equipment                                                    54          12

       Changes in assets and
        liabilities which provided
        (used) cash:
         Accounts receivable - trade                               (18,002)     (4,673)
         Inventory                                                 (17,997)     12,830
         Prepaid expenses and other
          current assets                                            (1,699)      2,747
         Other assets                                                   50        (190)
         Accounts payable                                           22,399      27,428
         Accrued expenses and other
          current liabilities                                        1,033       4,002
         Accrued interest                                              (70)       (684)
         Income taxes                                                2,065       1,957
         Other liabilities                                               4        (141)
              Net cash provided by operating
               activities                                           16,124      72,336
     Cash Flows from Investing
      Activities:
       Purchase of property and
        equipment, net                                              (8,228)     (5,688)
       Purchase of short-term
        investments                                                 (2,678)          -
       Proceeds from sales and
        maturities of short-term
        investments                                                  2,845           -
       Purchase of businesses, net of
        cash acquired                                                 (145)       (381)
              Net cash used in investing
               activities                                           (8,206)     (6,069)
     Cash Flows from Financing
      Activities:
       (Decrease) Increase in purchase
        card payable, net                                           (1,463)        726
       Repayment of term debt                                       (1,590)    (26,162)
       Repayment of 81/8% senior
        subordinated notes                                               -     (34,157)
       Payments on capital lease
        obligations                                                   (130)       (116)
       Proceeds from stock options
        exercised                                                    6,972           -
       Excess tax benefits from share-
        based compensation                                             754           -
       Treasury stock acquired to
        satisfy minimum statutory tax
        withholding requirements                                       (97)          -
            Net cash provided by (used in)
             financing activities                                    4,446     (59,709)
     Effect of exchange rate changes
      on cash and cash equivalents                                      35          92
                                                                       ---         ---
     Net increase in cash and cash
      equivalents                                                   12,399       6,650
     Cash and cash equivalents at
      beginning of period                                           99,223      62,724
     Cash and cash equivalents at end
      of period                                                   $111,622     $69,374
                                                                  ========     =======

     Supplemental Disclosure of Cash
      Flow Information:
       Cash paid during the period for:
         Interest                                                   $8,066     $10,196
                                                                    ======     =======
         Income taxes, net of refunds                               $7,938      $1,749
                                                                    ======      ======

     Schedule of Non-Cash Investing
      Activities:
         Property acquired through lease
          incentives                                                $1,620      $3,009
                                                                    ======      ======
         Adjustments to liabilities
          assumed and goodwill on
          businesses acquired                                           $-        $732
                                                                       ===        ====



    INTERLINE BRANDS, INC. AND SUBSIDIARIES
    RECONCILIATION OF NON-US GAAP INFORMATION (UNAUDITED)
    THREE AND SIX MONTHS ENDED JUNE 25, 2010 AND JUNE 26, 2009
     (in thousands)


    Free Cash Flow                       Three Months Ended
                                         ------------------
                                     June 25,    June 26,
                                          2010        2009
                                          ----        ----

    Net cash provided by
     operating activities                    $58      $9,761
      Less capital expenditures           (4,495)     (3,295)
    Free cash flow                       $(4,437)     $6,466
                                         =======      ======




    Free Cash Flow                        Six Months Ended
                                          ----------------
                                     June 25,    June 26,
                                          2010        2009
                                          ----        ----

    Net cash provided by
     operating activities                $16,124     $72,336
      Less capital expenditures           (8,228)     (5,688)
    Free cash flow                        $7,896     $66,648
                                          ======     =======




    Daily Sales
     Calculations                       Three Months Ended
                                        ------------------
                            June 25,        June 26,
                                 2010            2009      % Variance
                                 ----            ----      ----------

    Net sales                $270,154        $269,920             0.1%
                             ========        ========             ===

    Daily sales:
      Ship days                    64              64
      Average daily sales
       (1)                     $4,221          $4,218             0.1%
                               ======          ======             ===




    Daily Sales
     Calculations                        Six Months Ended
                                         ----------------
                            June 25,        June 26,
                                 2010            2009      % Variance
                                 ----            ----      ----------

    Net sales                $515,372        $526,713            -2.2%
                             ========        ========            ====

    Daily sales:
      Ship days                   128             128
      Average daily sales
       (1)                     $4,026          $4,115            -2.2%
                               ======          ======            ====




    Adjusted EBITDA                          Three Months Ended
                                             ------------------
                                       June 25,        June 26,
                                            2010            2009
                                            ----            ----
    Adjusted EBITDA:
      Net income (GAAP)                     $9,091          $6,422
      Interest expense                       4,366           4,717
      Interest income                          (22)            (71)
      Gain on extinguishment of debt,
       net                                       -             177
      Income taxes                         6,006           4,149
      Depreciation and amortization        5,027           4,541
                                           -----           -----
        Adjusted EBITDA                  $24,468         $19,935
                                         =======         =======
        Adjusted EBITDA margin               9.1%            7.4%
                                             ===             ===




    Adjusted EBITDA                           Six Months Ended
                                              ----------------
                                       June 25,        June 26,
                                            2010            2009
                                            ----            ----
    Adjusted EBITDA:
      Net income (GAAP)                    $14,661          $9,344
      Interest expense                       8,719          10,096
      Interest income                          (54)            (75)
      Gain on extinguishment of debt,
       net                                       -          (1,543)
      Income taxes                         9,674           5,900
      Depreciation and amortization        9,930           9,322
                                           -----           -----
        Adjusted EBITDA                  $42,930         $33,044
                                         =======         =======
        Adjusted EBITDA margin               8.3%            6.3%
                                             ===             ===



SOURCE Interline Brands, Inc.

 
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