Published: July 30, 2010
Interline Brands, Inc. Announces Second Quarter 2010 Sales and Earnings Results
JACKSONVILLE, Fla., July 30 /PRNewswire-FirstCall/ -- 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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