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Interline Brands, Inc. Announces Second Quarter 2009 Sales and Earnings Results

July 31, 2009 | About:

Press Release: Interline Brands, Inc. Announces Second Quarter 2009 Sales and Earnings Results

JACKSONVILLE, Fla., July 31 /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 26, 2009. Sales for the second quarter of 2009 decreased 13.3% compared to the prior year period. Earnings per diluted share were $0.20 for the second quarter of 2009, a decrease of 41% compared to earnings per diluted share of $0.34 in the second quarter of 2008. Earnings per diluted share for the second quarter of 2009 included a $0.04 per diluted share charge associated with the previously announced consolidation of certain distribution centers and closing of certain underperforming professional contractor showrooms ("distribution network consolidations"). Michael J. Grebe, Interline\'s Chairman and Chief Executive Officer, commented, "I continue to be very encouraged by the results of our ongoing efforts to optimize our distribution network, improve the efficiency of our operations, and generate free cash flow. We remain highly focused on executing against our plans to remove $37 million in annual operating costs from the business and to drive additional working capital improvements. We have already begun to realize the benefits of these cost and efficiency actions - delivering $0.07 in net benefits to our bottom line in the second quarter - and we remain on track to deliver $0.31 in net benefits for 2009. In addition, we generated over $6 million in free cash flow, ahead of our previously stated expectations, and paid down an additional $20 million of debt during the quarter. We are very pleased to be making permanent improvements to our operations that will enhance our long-term competitive position, and I am confident that we will be well positioned when market conditions improve." Second Quarter 2009 Performance Sales for the quarter ended June 26, 2009 were $269.9 million, a 13.3% decrease compared to sales of $311.4 million in the comparable 2008 period. Average organic daily sales decreased 14.7% for the quarter. Interline\'s facilities maintenance end-market, which comprised 74% of sales, declined 7.8% during the second quarter on an average daily sales basis, and declined 9.9% on an average organic daily sales basis. The professional contractor end-market, which comprised 16% of sales, declined 28.4% in the quarter and the specialty distributor end-market, which comprised 10% of sales, declined 20.6% for the quarter. "Overall, the sales environment remained at levels consistent with what we experienced during the first quarter. Our revenues were impacted by continuing weakness in the housing sector and increasing softness in the apartment market. Despite these headwinds, certain maintenance, repair, and operations products, particularly our janitorial and sanitation offering, as well as our new institutional MRO offering, have held up relatively well. We continue to focus our sales channels on these products and end-markets. As residential and remodeling activity resumes to more normalized levels, we look forward to significant performance improvements across a number of our end-markets," said Mr. Grebe. Gross profit decreased $17.5 million, or 15.1%, to $98.3 million for the second quarter of 2009. As a percentage of sales, gross profit was 36.4% compared to 37.2% for the second quarter of 2008. SG&A expenses for the quarter were $78.9 million, down $9.7 million or 10.9% from the same period last year. SG&A expenses for the quarter represented 29.2% of sales compared to 28.4% in the second quarter of 2008. SG&A expenses included $2.1 million of expenses related to the planned distribution network consolidations. As a result, second quarter 2009 operating income of $15.0 million, or 5.6% of sales, decreased 35.0% compared to $23.1 million, or 7.4% of sales, in the second quarter of 2008. YTD 2009 Performance "The team has made great progress this year towards our goal of improving our distribution network and supply chain efficiency," commented Kenneth D. Sweder, Interline\'s Chief Operating Officer. "Since the start of 2009, we have closed 18 centers and remain focused on additional network improvements to drive higher profitability and enhance our long-term market position and competitiveness." Sales for the six months ended June 26, 2009 were $526.7 million, a 12.3% decrease over sales of $600.6 million in the comparable 2008 period. Gross profit decreased $30.9 million, or 13.7%, to $194.9 million for the six months ended June 26, 2008, compared to $225.9 million in the prior year period. As a percentage of sales, gross profit decreased to 37.0% from 37.6% in the comparable 2008 period. SG&A expenses for the six months ended June 26, 2009 were $162.8 million, or 30.9% of sales, compared to $173.6 million, or 28.9% of sales, for the six months ended June 27, 2008. SG&A expenses in 2009 included $4.5 million related to our previously announced reduction in force and planned distribution network consolidations; a $3.0 million charge for bad debt resulting from a customer seeking Chapter 11 bankruptcy protection; and a $0.7 million charge associated with the adoption of FAS 141R - a new accounting standard on business combinations. Operating income was $23.1 million, or 4.4% of sales, for the six months ended June 26, 2009 compared to $44.3 million, or 7.4% of sales, for the six months ended June 27, 2008, representing a decrease of 47.9%. Earnings per diluted share were $0.29 for the six months ended June 26, 2009, a decrease of 52% over earnings per diluted share of $0.61 for the six months ended June 27, 2008. Cash flow from operating activities for the six months ended June 26, 2009 was $72.3 million compared to $27.2 million for the six months ended June 27, 2008. During the six months ended June 26, 2009, the Company repaid $26.2 million of term debt and used $34.2 million to repurchase and retire $36.4 million principal amount of 8 1/8% senior subordinated notes, generating a $0.03 per diluted share gain on the early extinguishment of debt. Business OutlookMr. Grebe stated, "We do not expect the third quarter sales environment to be significantly different than the first half of the year. However, based on our cash flow generation year-to-date, we now expect free cash flow for the year of at least $70 million. Additionally, we are pushing ahead to drive improvements in our Company from top to bottom. We are strategically aligning our sales efforts, streamlining our distribution network, executing against our cost and efficiency actions, more efficiently managing our working capital, reducing debt, and generating solid cash flow. These initiatives will ensure we continue to progress towards our long-term vision, and I am confident we are positioned well to deliver improving value to our shareholders over the long term." Conference CallInterline Brands will host a conference call on July 31, 2009 at 9:00 a.m. Eastern Daylight 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 20865099. This recording will expire on August 14, 2009. About InterlineInterline Brands, Inc. is a leading national distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations products to a diversified customer base made up of professional contractors, facilities maintenance professionals, and specialty distributors primarily throughout the United States, Canada, the Caribbean and Central America. Non-GAAP Financial Information This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). Interline\'s management uses non-GAAP measures in its analysis of the Company\'s performance. Investors are encouraged to review the reconciliation of non-GAAP financial measures to the comparable GAAP results available in the accompanying tables. SafeHarbor Statement under the Private Securities Litigation Reform Act of 1995The 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 27, 2009 and in the Company\'s Annual Report on Form 10-K for the fiscal year ended December 26, 2008. 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: Tom Tossavainen    PHONE: 904-421-1441


INTERLINE BRANDS, INC. AND SUBSIDIARIES    CONSOLIDATED BALANCE SHEETS    AS OF JUNE 26, 2009 AND DECEMBER 26, 2008    (in thousands, except share and per share data)                                                      June 26,    December 26,                                                        2009          2008                                                     -----------  ------------    ASSETS    Current Assets:      Cash and cash equivalents                         $69,374       $62,724      Accounts receivable - trade (net of allowance       for doubtful accounts of $12,703 and $12,140)    137,934       139,522      Inventory                                         198,476       211,200      Income tax receivable                                   -         1,452      Prepaid expenses and other current assets          20,461        22,884      Deferred income taxes                              19,564        19,010                                                     -----------  ------------        Total current assets                            445,809       456,792    Property and equipment, net                          48,085        46,033    Goodwill                                            318,229       317,117    Other intangible assets, net                        128,604       132,787    Other assets                                          9,637        10,119                                                     -----------  ------------        Total assets                                   $950,364      $962,848                                                     ===========  ============    LIABILITIES AND SHAREHOLDERS\' EQUITY    Current Liabilities:      Accounts payable                                  $95,701       $68,255      Accrued expenses and other current       liabilities                                       40,337        31,394      Accrued interest                                      388         1,072      Income tax payable                                    506             -      Current portion of long-term debt                   1,963         1,625      Capital lease - current                               253           239                                                     -----------  ------------        Total current liabilities                       139,148       102,585    Long-Term Liabilities:      Deferred income taxes                              39,645        37,210      Long-term debt, net of current portion            339,015       401,765      Capital lease - long term                              96           226      Other liabilities                                     842           989                                                     -----------  ------------        Total liabilities                               518,746       542,775    Commitments and contingencies    Senior preferred stock; $0.01 par value,     20,000,000 shares authorized; no shares     outstanding as of June 26, 2009 and     December 26, 2008                                        -             -                                                     -----------  ------------    Shareholders\' Equity:      Common stock; $0.01 par value, 100,000,000       authorized; 32,563,211 issued and 32,451,797       outstanding as of June 26, 2009 and 32,561,360       issued and 32,449,946 outstanding as of       December 26, 2008                                    326           326      Additional paid-in capital                        573,823       571,868      Accumulated deficit                              (141,489)     (150,833)      Accumulated other comprehensive income                941           695      Treasury stock, at cost, 111,414 shares as of       June 26, 2009 and December 26, 2008               (1,983)       (1,983)                                                     -----------  ------------        Total shareholders\' equity                      431,618       420,073                                                     -----------  ------------        Total liabilities and         shareholders\' equity                          $950,364      $962,848                                                     ===========  ============    INTERLINE BRANDS, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF EARNINGS    THREE AND SIX MONTHS ENDED JUNE 26, 2009 AND JUNE 27, 2008    (in thousands, except share and per share data)                                  Three Months Ended     Six Months Ended                               ----------------------- -----------------------                                 June 26,    June 27,    June 26,    June 27,                                  2009        2008        2009        2008                               ----------- ----------- ----------- -----------    Net sales                    $269,920    $311,429    $526,713    $600,575    Cost of sales                 171,605     195,629     331,802     374,725                               ----------- ----------- ----------- -----------        Gross profit               98,315     115,800     194,911     225,850    Operating Expenses:        Selling, general and         administrative         expenses                  78,898      88,585     162,818     173,598        Depreciation and         amortization               4,392       4,102       9,026       7,981                               ----------- ----------- ----------- -----------          Total operating            expense                83,290      92,687     171,844     181,579                               ----------- ----------- ----------- -----------    Operating income               15,025      23,113      23,067      44,271    (Loss) Gain on extinguishment     of debt, net                    (177)          -       1,543           -    Interest expense               (4,717)     (7,004)    (10,096)    (14,746)    Interest and other income         440         708         730       1,403                               ----------- ----------- ----------- -----------        Income before income         taxes                     10,571      16,817      15,244      30,928    Income tax provision            4,149       5,642       5,900      11,079                               ----------- ----------- ----------- -----------    Net income                     $6,422     $11,175      $9,344     $19,849                               =========== =========== =========== ===========    Earnings Per Share:      Basic                         $0.20       $0.35       $0.29       $0.61                               =========== =========== =========== ===========      Diluted                       $0.20       $0.34       $0.29       $0.61                               =========== =========== =========== ===========    Weighted-Average Shares     Outstanding:      Basic                    32,441,081  32,369,031  32,440,035  32,348,109                               =========== =========== =========== ===========      Diluted                  32,856,916  32,657,047  32,704,682  32,650,806                               =========== =========== =========== ===========    INTERLINE BRANDS, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF CASH FLOWS    SIX MONTHS ENDED JUNE 26, 2009 AND JUNE 27, 2008    (in thousands)                                                      Six Months Ended                                              --------------------------------                                                June 26,            June 27,                                                  2009                2008                                              ------------        ------------    Cash Flows from Operating Activities:       Net income                                  $9,344             $19,849       Adjustments to reconcile net income        to net cash provided by         operating activities:           Depreciation and amortization            9,322               8,238           Gain on extinguishment of debt, net     (1,543)                  -           Amortization of debt issuance costs        562                 565           Amortization of discount on 8 1/8%            senior subordinated notes                  72                  72           Write-off of deferred            acquisition costs                         672                   -           Share-based compensation                 1,955               2,353           Excess tax benefits from            share-based compensation                    -                (147)           Deferred income taxes                    2,340              (1,003)           Provision for doubtful accounts          6,324               2,255           Loss on disposal of property and            equipment                                  12                  19       Changes in assets and liabilities which        provided (used) cash:         Accounts receivable - trade               (4,673)            (15,480)         Inventory                                 12,830             (19,533)         Prepaid expenses and other current          assets                                    2,747               1,663         Other assets                                (190)              1,573         Accounts payable                          27,428              31,071         Accrued expenses and other current          liabilities                               4,002              (3,758)         Accrued interest                            (684)                  7         Income taxes                               1,957                 832         Other liabilities                           (141)             (1,402)                                              ------------        ------------             Net cash provided by              operating activities                 72,336              27,174     Cash Flows from Investing Activities:       Purchase of property and equipment, net     (5,688)            (13,540)       Purchase of short-term investments               -             (35,531)       Proceeds from sales and maturities of        short-term investments                          -              80,121       Purchase of businesses, net of        cash acquired                                (381)               (536)                                              ------------        ------------             Net cash (used in)              provided by investing              activities                           (6,069)             30,514     Cash Flows from Financing Activities:       Increase (Decrease) in purchase card        payable, net                                  726                (643)       Repayment of term debt                     (26,162)             (2,150)       Repayment of 8 1/8% senior subordinated        notes                                     (34,157)                  -       Payments on capital lease obligations         (116)               (108)       Proceeds from stock options exercised            -                 586       Excess tax benefits from share-based        compensation                                    -                 147       Treasury stock acquired to satisfy        minimum statutory tax withholding        requirements                                    -                (772)                                              ------------        ------------             Net cash used in financing              activities                          (59,709)             (2,940)     Effect of exchange rate changes on cash      and cash equivalents                             92                 (40)                                              ------------        ------------     Net increase in cash and cash      equivalents                                   6,650              54,708     Cash and cash equivalents at      beginning of period                          62,724               4,975                                              ------------        ------------     Cash and cash equivalents at end of      period                                      $69,374             $59,683                                              ============        ============     Supplemental Disclosure of Cash      Flow Information:       Cash paid during the period for:         Interest                                 $10,196             $14,431                                              ============        ============         Income taxes, net of refunds              $1,749             $12,315                                              ============        ============     Schedule of Non-Cash Investing Activities:         Property acquired through lease          incentives                               $3,009                  $-                                              ============        ============         Adjustments to liabilities          assumed and goodwill on          businesses acquired                        $732                  $-                                              ============        ============    INTERLINE BRANDS, INC. AND SUBSIDIARIES    RECONCILIATION OF NON-GAAP INFORMATION    THREE AND SIX MONTHS ENDED JUNE 26, 2009 AND JUNE 27, 2008     (in thousands)    Free Cash Flow           Three Months Ended     Six Month Ended                             ------------------     ---------------                             June 26,    June 27,  June 26,  June 27,                               2009       2008      2009      2008                              ------     ------    ------    ------    Net cash from operating     activities               $9,761     $(1,937)  $72,336   $27,174      Less capital       expenditures           (3,295)     (7,040)   (5,688)  (13,540)                              ------      ------    ------   -------    Free cash flow            $6,466     $(8,977)  $66,648   $13,634                              ======     =======   =======   =======    We define free cash flow as net cash provided by operating activities,    as defined under 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         Six Months Ended                           ------------------         ----------------                       June 26, June 27,   %     June 26,  June 27,    %                        2009     2008   Variance   2009      2008   Variance                       ------    ------ -------- --------  -------- --------    Net sales        $269,920  $311,429   -13.3% $526,713  $600,575   -12.3%      Less       acquisitions:   (4,420)        -            (9,340)        -                     --------  --------          --------  --------    Organic sales    $265,500  $311,429   -14.7% $517,373  $600,575   -13.9%                     ========  ========   =====  ========  ========   =====    Daily sales:      Ship days            64        64               128       128      Average daily        sales(1)       $4,218    $4,866   -13.3%   $4,115    $4,692   -12.3%                     ========  ========   =====  ========  ========   =====      Average organic       daily sales(2)  $4,148    $4,866   -14.7%   $4,042    $4,692   -13.9%                     ========  ========   =====  ========  ========   =====      (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.      (2) Average organic daily sales are defined as sales for a period of          time divided by the number of shipping days in that period of          time excluding any sales from acquisitions made subsequent to the          beginning of the prior year period.    Average organic daily sales is presented herein because we believe it    to be relevant and useful information to our investors since it is used    by management to evaluate the operating performance of our business, as    adjusted to exclude the impact of acquisitions, and compare our organic    operating performance with that of our competitors. However, average    organic daily sales is not a measure of financial performance under    GAAP and it should be considered in addition to, but not as a    substitute for, other measures of financial performance reported in    accordance with GAAP, such as net sales. Management utilizes average    organic daily sales as an operating performance measure in conjunction    with GAAP measures such as net sales.    Adjusted EBITDA                Three Months Ended    Six Months Ended                                   ------------------    ----------------                                   June 26,   June 27,   June 26,  June 27,                                    2009        2008      2009      2008                                    ----        ----      ----      ----    Adjusted EBITDA:      Net income (GAAP)             $6,422     $11,175    $9,344   $19,849      Interest expense               4,717       7,004    10,096    14,746      Interest income                  (71)       (353)      (75)     (888)      Loss (Gain) on extinguishment       of debt                         177           -    (1,543)        -      Income tax provision           4,149       5,642     5,900    11,079      Depreciation and       amortization                  4,541       4,245     9,322     8,238                                   -------     -------   -------   -------        Adjusted EBITDA            $19,935     $27,713   $33,044   $53,024                                   =======     =======   =======   =======    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, provision for 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 GAAP. Accordingly, Adjusted EBITDA should not be used in    isolation or as a substitute for other measures of financial    performance reported in accordance with 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 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 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 GAAP.    End-Market Classification Adjustment    During the first quarter of 2009, we reported end-market sales for the    professional contractor and specialty distributor end markets using a    slightly different customer classification than used historically. This    change impacted the first quarter of 2009 and not prior year periods. The    impact was that $2.0 million of sales was moved from our professional    contractor end-market to our specialty distributor end-market. Excluding    this change in classification, professional contractor end-market sales    declined 23.6% and specialty distributor end-market sales declined 14.2%    during the first quarter of 2009. For the remainder of 2009, including the    second quarter of 2009, we will report using our historical classification    for comparability purposes.


Source: PRNewsWire

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