Interline Brands Inc. Reports Operating Results (10-Q)
Interline Brands Inc. has a market cap of $681.34 million; its shares were traded at around $20.81 with a P/E ratio of 22.14 and P/S ratio of 0.64. IBI is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Gain on Extinguishment of Debt. We did not extinguish debt in the three months ended March 26, 2010. Gain on extinguishment of debt was $1.7 million in the three months ended March 27, 2009. During the three months ended March 27, 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, during the three months ended March 27, 2009, we repaid $5.2 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 $1.7 million net of $0.5 million in original issue discount and deferred financing costs written-off.
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 March 26, 2010, the 81/8% senior subordinated notes had an estimated fair market value of $151.4 million, or 100.5% 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 March 26, 2010, Interline New Jersey had
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 $16.1 million in the three months ended March 26, 2010 primarily consisted of net income of $5.6 million, adjustments for non-cash items of $7.1 million and cash provided by working capital items of $3.2 million. Adjustments for non-cash items primarily consisted of $4.9 million in depreciation and amortization of property, equipment and intangible assets, $1.5 million in bad debt expense and $0.8 million in share-based compensation. The cash provided by working capital items primarily consisted of $3.3 million from increased trade payables balances as a result of the timing of purchases and related payments, $3.0 million from timing of interest payments and $0.6 million from the increase in income taxes resulting from an increase in income before taxes. These items were partially offset by $3.3 million from increased inventory levels as a result of the stocking of our new distribution center in Chicago, Illinois, and $1.0 million from increased trade receivables, net of changes in our allowance for doubtful accounts, resulting from the timing of collections.
Net cash provided by operating activities of $62.6 million in the three months ended March 27, 2009 primarily consisted of net income of $2.9 million, adjustments for non-cash items of $11.2 million and cash provided by working capital items of $48.5 million. Adjustments for non-cash items primarily consisted of $4.8 million in depreciation and amortization of property, equipment and intangible assets, $4.9 million in bad debt expense, $1.3 million in deferred income taxes, $0.8 million in share-based compensation and $0.3 million in amortization of debt issuance costs offset by $1.7 million in net gain from the repurchase of $36.4 million of our 81/8% senior subordinated notes and the repayment of $5.2 million of our term debt. The cash provided by working capital items primarily consisted of $8.1 million in lower trade receivables resulting from increased collections and the decline in sales, $11.6 million from decreased inventory levels as a result of decreased purchases associated with expected demand, $5.8 million from decreased prepaid expenses and other current assets primarily from the collection of rebates from vendors, $17.9 million from increased trade payables balances as a result of the timing of purchases and related payments, $3.5 million from accrued expenses primarily from higher accrued compensation and related benefits at period-end and $2.5 million from accrued interest. These items were partially offset by $0.6 million used for income taxes.
As of March 26, 2010, we had $33.1 million of availability under Interline New Jerseys $100.0 million revolving credit facility after the limitation under the bank credit facilitys ratio of net total indebtedness to adjusted consolidated EBITDA, as defined by the credit facility. As of March 26, 2010, we had $117.6 million of total cash on hand and permitted investments (including $25.0 million in cash that, for the covenant compliance ratio, is netted against debt).
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