Interline Brands Inc. is a leading direct marketing and specialty distribution company with headquarters in Jacksonville Florida. Interline provides maintenance repair and operations products to professional contractors facilities maintenance professionals hardware stores and other customers across North America and Central America. Interline Brands Inc. has a market cap of $473.92 million; its shares were traded at around $14.6 with a P/E ratio of 15.7 and P/S ratio of 0.4. Highlight of Business Operations: Selling, General and Administrative Expenses. SG&A expenses decreased by $22.4 million, or 8.6%, to $239.0 million in the nine months ended September 25, 2009 from $261.4 million in the nine months ended September 26, 2008. As a percent of sales, SG&A increased to 29.7% for the nine months ended September 25, 2009 compared to 28.5% for the nine months ended September 26, 2008. The increase in SG&A expenses as a percent of sales is primarily due to $3.8 million in increased bad debt expense primarily associated with a customer seeking Chapter 11 bankruptcy protection in March, $4.6 million in severance and distribution center closing costs associated with our previously discussed operational initiatives, such as headcount reductions, consolidation of certain distribution centers and closing of underperforming professional contractor centers and the write-off of $0.7 million in deferred acquisition costs due to the adoption of a new accounting standard on business combinations. We have increased our accounts receivable reserve to adjust for higher levels of risk in our portfolio stemming from an unprecedented market environment. These costs were partially offset by the cost savings derived from the reduction in workforce in the fourth quarter of 2008 and the first quarter of 2009, the closing of underperforming professional contractor centers and the consolidation of certain distribution centers during the last nine months of 2008 and the first nine months of 2009 and various efforts aimed at controlling costs. Accordingly, SG&A expenses for the three months ended September 26, 2008, included $2.1 million of costs associated with severance costs related to a reduction in workforce and closing of underperforming professional contractor centers as well as project expenses associated with the consolidation of certain distribution centers into our Auburn, Massachusetts, and Richmond, Virginia, locations.
Gain on Extinguishment of Debt. Gain on extinguishment of debt was $1.3 million in the nine months ended September 25, 2009. During the nine months ended September 25, 2009, we repurchased $36.4 million of our 81/8% senior subordinated notes at an average of 93.8% of par, or $34.2 million. In addition, we repaid $55.2 million of our term loan ahead of schedule. In connection with the repurchase of our 81/8% senior subordinated notes and the term loan payment, we recorded a gain on extinguishment of debt of $1.3 million net of $0.1 million and $0.9 million in original issue discount and deferred financing costs written-off, respectively. We did not extinguish debt in the nine months ended September 26, 2008.
We have outstanding $150.7 million of 81/8% senior subordinated notes due 2014 and we have a $330.0 million bank credit facility. The 81/8% senior subordinated notes mature on June 15, 2014 and interest is payable on June 15 and December 15 of each year. As of September 25, 2009, the 81/8% senior subordinated notes had an estimated fair market value of $147.3 million, or 97.75% of par. The bank credit facility consists of a $230.0 million 7-year term loan and a $100.0 million 6-year revolving credit facility of which a portion not exceeding $40.0 million is available in the form of letters of credit. As of September 25, 2009, Interline New Jersey had $8.5 million of letters of credit issued under the revolving loan facility and $159.2 million of aggregate principal outstanding under the term loan facility.
The debt instruments of Interline New Jersey, primarily the credit facility entered into on June 23, 2006 and the indenture governing the terms of the 81/8% senior subordinated notes, contain significant restrictions on the payment of dividends and distributions to us by Interline New Jersey. Interline New Jerseys credit facility allows it to pay dividends, make distributions to us or make investments in us in an aggregate amount not to exceed $2.0 million during any fiscal year, so long as Interline New Jersey is not in default or would be in default as a result of such payments. In addition, ordinary course distributions for overhead (up to $3.0 million annually) and taxes are permitted, as are annual payments of up to $7.5 million in respect of our stock option or other benefit plans for management or employees and (provided Interline New Jersey is not in default) aggregate payments of up to $40.0 million depending on the pro forma net leverage ratio as of the last day of the previous quarter. In addition, the indenture for the 81/8% senior subordinated notes generally restricts the ability of Interline New Jersey to pay distributions to us and to make advances to, or investments in, us to an amount generally equal to 50% of the net income of Interline New Jersey, plus an amount equal to the net proceeds from certain equity issuances, subject to compliance with a leverage ratio and no default having occurred and continuing. The indenture also contains certain permitted exceptions including (1) allowing us to pay our franchise taxes and other fees required to maintain our corporate existence, to pay for general corporate and overhead expenses and to pay expenses incurred in connection with certain financing, acquisition or disposition transactions, in an aggregate amount not to exceed $10.0 million per year; (2) allowing certain tax payments; and (3) allowing certain permitted distributions up to $75 million. For further description of the credit facility, see Credit Facility below.
Net cash provided by operating activities of $102.2 million in the nine months ended September 25, 2009 primarily consisted of net income of $19.8 million, adjustments for non-cash items of $31.0 million and cash provided by working capital items of $50.8 million. Adjustments for non-cash items primarily consisted of $14.2 million in depreciation and amortization of property, equipment and intangible assets, $7.3 million in bad debt expense, $6.1 million in deferred income taxes, $3.1 million in share-based compensation, $0.8 million in amortization of debt issuance costs and the write-off of $0.7 million in deferred acquisition costs due to the adoption of a new accounting standard on business combinations offset by $1.3 million in net gain from the repurchase of $36.4 million of our 81/8% senior subordinated notes and the repayment of $55.2 million of our term debt. The cash provided by working capital items primarily consisted of $26.7 million from decreased inventory levels as a result of decreased purchases associated with
lower demand, $16.1 million from increased trade payables balances as a result of the timing of purchases and related payments, $8.8 million from accrued expenses arising from the timing of the payment of certain expenses primarily from severance and distribution center closing costs associated with our previously discussed operational initiatives, such as headcount reductions, consolidation of certain distribution centers and closing of underperforming professional contractor centers as well as higher accrued compensation and related benefits at period-end, $4.5 million from decreased prepaid expenses and other current assets primarily from the collection of rebates from vendors, $1.3 million from the increase in income taxes and $2.4 million from timing of interest payments. These items were partially offset by $9.0 million in higher trade receivables resulting from increased sales activity during the three months ended September 25, 2009 compared to the three months ended De
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