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8-K - 8-K - INTERLINE BRANDS, INC./DEa10-4152_18k.htm

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

February 19, 2010

 

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

 

Jacksonville, Fla. — February 19, 2010 - Interline Brands, Inc. (NYSE: IBI) (“Interline” or the “Company”), a leading distributor and direct marketer of maintenance, repair and operations products, reported sales and earnings for the fourth quarter and fiscal year ended December 25, 2009.

 

Sales for the fourth quarter of 2009 decreased 8.3% compared to the fourth quarter of 2008.  Earnings per diluted share were $0.19 for the fourth quarter of 2009, a decrease of 14% compared to earnings per diluted share of $0.22 for the same period last year.  Earnings per diluted share for the fourth quarter of 2009 included a $0.01 per diluted share charge associated with our ongoing efforts to improve our distribution network.  Earnings per diluted share for the fourth quarter of 2008 included a $0.05 per diluted share gain on the early extinguishment of debt and a $0.01 per diluted share charge associated with the closing of certain professional contractor showrooms.

 

Sales for 2009 decreased 11.4% compared to 2008.  Earnings per diluted share were $0.79 for 2009, a decrease of 37% compared to earnings per diluted share of $1.25 for 2008.

 

Michael Grebe, Interline’s Chairman and Chief Executive Officer, commented, “In 2009, we carefully evaluated our cost structure, our supply chain, and our go-to-market strategies.  We took decisive action throughout the year to strengthen the operations of our business to better serve our customers and offer greater earnings leverage to our

 



 

shareholders over time.”  Mr. Grebe continued, “We executed these initiatives while delivering record free cash flow and strengthening our balance sheet.  For the full year 2009, we generated over $133 million in free cash flow, and paid down $98 million of debt.  We are pleased to close out the year in a stronger financial position than when we entered it, and I am very optimistic about the future of our Company.”

 

Fourth Quarter 2009 Performance

 

Sales for the quarter ended December 25, 2009 were $254.6 million, an 8.3% decrease compared to sales of $277.6 million in the comparable 2008 period.  Interline’s facilities maintenance end-market, which comprised 71% of sales, declined 3.7% during the fourth quarter on an average daily sales basis.  The professional contractor end-market, which comprised 17% of sales, declined 20.2% for the quarter.  The specialty distributor end-market, which comprised 12% of sales, declined 15.0% for the quarter.

 

“Institutional sales were essentially flat compared to the fourth quarter of 2008, driven by the strength of our core MRO and janitorial-sanitation products.  In addition, multi-family housing sales were down approximately 3% for the quarter when excluding our Renovations Plus business, which focuses on larger discretionary multi-family housing remodeling projects,” said Mr. Grebe.

 

Gross profit decreased $6.0 million, or 5.9%, to $96.8 million for the fourth quarter of 2009, compared to $102.8 million for the fourth quarter of 2008.  As a percentage of net sales, gross profit increased 100 basis points to 38.0% compared to 37.0% for the fourth quarter of 2008.

 



 

Selling, general and administrative (“SG&A”) expenses for the fourth quarter of 2009 decreased $5.2 million, or 6.4%, to $77.1 million from $82.4 million for the fourth quarter of 2008.  As a percentage of net sales, SG&A expenses were 30.3% compared to 29.7% for the fourth quarter of 2008.

 

As a result, fourth quarter 2009 operating income of $14.7 million, or 5.8% of sales, decreased 7.8% compared to $15.9 million, or 5.7% of sales, in the fourth quarter of 2008.

 

Diluted earnings per share for the fourth quarter of 2009 were $0.19, a decrease of 14% compared to diluted earnings per share of $0.22 for the fourth quarter of 2008.

 

Fiscal Year 2009 Performance

 

“During 2009 we made significant progress towards streamlining our distribution platform and improving our working capital efficiency.  In 2010, we will continue to pursue our strategy of larger and more productive distribution centers that will enable us to further improve the customer experience and enhance our ability to scale our business as conditions improve,” commented Kenneth D. Sweder, Interline’s Chief Operating Officer.

 

Sales for the year ended December 25, 2009 were $1.06 billion, an 11.4% decrease compared to sales of $1.20 billion for the year ended December 26, 2008.  Average organic daily sales decreased 12.5% for the year.

 



 

Gross profit decreased $55.7 million, or 12.4%, to $394.0 million for the year ended December 25, 2009, compared to $449.6 million in 2008.  As a percentage of net sales, gross profit decreased to 37.2% from 37.6% for the year ended December 26, 2008.

 

SG&A expenses for the year ended December 25, 2009 were reduced by $27.7 million, or 8.0%, to $316.1 million compared to $343.8 million for the year ended December 26, 2008.  As a percentage of net sales, SG&A expenses were 29.8% compared to 28.8% in 2008.  SG&A expenses for 2009 include $4.6 million related to the previously announced reduction in force, consolidation of certain distribution centers, and closing of certain underperforming professional contractor showrooms; 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 a new accounting standard on business combinations.  SG&A expenses for 2008 include $3.0 million of costs related to employee separation benefits and the closing of certain professional contractor showrooms.

 

Operating income was $59.2 million, or 5.6% of sales, for the year ended December 25, 2009 compared to $89.0 million, or 7.4% of sales, for the year ended December 26, 2008, a 33.4% decrease.

 

Earnings per diluted share were $0.79 for the year ended December 25, 2009, a decrease of 37% compared to earnings per diluted share of $1.25 for the year ended December 26, 2008.

 



 

Cash flow from operating activities for the year ended December 25, 2009 was $144.3 million compared to $56.2 million for the year ended December 26, 2008. During the year ended December 25, 2009, the Company repaid $98.0 million of debt.

 

Business Outlook

 

Mr. Grebe stated, “We believe the worst may now be behind us, but visibility remains low and we anticipate continued variability within our end-markets.  Looking ahead to the first quarter of 2010, we expect the demand environment to remain similar to what we experienced over the past few months.”

 

“While cash flow generation remains a key focus for us, we do not expect to duplicate the record free cash flow we generated in 2009 as we enter the year leaner and more efficient from a working capital perspective.  However, we will continue to carefully manage our working capital, which in combination with our more streamlined distribution network, will yield productivity gains over time.  I am proud of the dedication and leadership that my teammates displayed in 2009, and I am encouraged by our execution of key efficiency actions, all aimed at strengthening our position in 2010 and beyond.”

 

Conference Call

 

Interline will host a conference call on February 19, 2010 at 9:00 a.m. Eastern Standard 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 55217734.  This recording will expire on March 5, 2010.

 



 

About Interline

 

Interline Brands, Inc. is a leading international distributor and direct marketer with headquarters in Jacksonville, Florida.  Interline provides maintenance, repair and operations (“MRO”) 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.

 

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 period ended September 25, 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: John Ebner

 

PHONE: 904-421-1441

 


 


 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 25, 2009 AND DECEMBER 26, 2008

(in thousands, except share and per share data)

 

 

 

December 25,

 

December 26,

 

 

 

2009

 

2008

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

99,223

 

$

62,724

 

Investments

 

1,479

 

 

Accounts receivable - trade (net of allowance for doubtful accounts of $12,975 and $12,140)

 

120,004

 

139,522

 

Inventory

 

173,422

 

211,200

 

Prepaid expenses and other current assets

 

18,552

 

22,884

 

Prepaid income taxes

 

 

1,452

 

Deferred income taxes

 

16,459

 

19,010

 

Total current assets

 

429,139

 

456,792

 

 

 

 

 

 

 

Property and equipment, net

 

46,804

 

46,033

 

Goodwill

 

319,006

 

317,117

 

Other intangible assets, net

 

124,835

 

132,787

 

Other assets

 

9,054

 

10,119

 

Total assets

 

$

928,838

 

$

962,848

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

85,982

 

$

68,255

 

Accrued expenses and other current liabilities

 

41,715

 

31,394

 

Accrued interest

 

1,050

 

1,072

 

Income taxes payable

 

1,285

 

 

Current portion of long-term debt

 

1,590

 

1,625

 

Capital lease - current

 

222

 

239

 

Total current liabilities

 

131,844

 

102,585

 

 

 

 

 

 

 

Long-Term Liabilities:

 

 

 

 

 

Deferred income taxes

 

40,369

 

37,210

 

Long-term debt, net of current portion

 

304,088

 

401,765

 

Capital lease - long term

 

4

 

226

 

Other liabilities

 

798

 

989

 

Total liabilities

 

477,103

 

542,775

 

Commitments and contingencies

 

 

 

 

 

Senior preferred stock; $0.01 par value, 20,000,000 authorized; none outstanding as of December 25, 2009 and December 26, 2008

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Common stock; $0.01 par value, 100,000,000 authorized; 32,640,957 issued and 32,524,251 outstanding as of December 25, 2009 and 32,561,360 issued and 32,449,946 outstanding as of December 26, 2008

 

326

 

326

 

Additional paid-in capital

 

576,747

 

571,868

 

Accumulated deficit

 

(124,745

)

(150,833

)

Accumulated other comprehensive income

 

1,483

 

695

 

Treasury stock, at cost, 116,706 shares as of December 25, 2009 and 111,414 as of December 26, 2008

 

(2,076

)

(1,983

)

Total shareholders’ equity

 

451,735

 

420,073

 

Total liabilities and shareholders’ equity

 

$

928,838

 

$

962,848

 

 



 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

THREE AND TWELVE MONTHS ENDED DECEMBER 25, 2009 AND DECEMBER 26, 2008

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 25,

 

December 26,

 

December 25,

 

December 26,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

254,617

 

$

277,584

 

$

1,059,278

 

$

1,195,663

 

Cost of sales

 

157,799

 

174,744

 

665,327

 

746,037

 

Gross profit

 

96,818

 

102,840

 

393,951

 

449,626

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

77,128

 

82,367

 

316,137

 

343,793

 

Depreciation and amortization

 

5,019

 

4,566

 

18,580

 

16,866

 

Total operating expense

 

82,147

 

86,933

 

334,717

 

360,659

 

Operating income

 

14,671

 

15,907

 

59,234

 

88,967

 

 

 

 

 

 

 

 

 

 

 

(Loss) Gain on extinguishment of debt, net

 

(38

)

2,775

 

1,257

 

2,775

 

Interest expense

 

(4,371

)

(6,682

)

(19,044

)

(28,482

)

Interest and other income

 

430

 

85

 

1,714

 

2,198

 

Income before income taxes

 

10,692

 

12,085

 

43,161

 

65,458

 

Provision for income taxes

 

4,379

 

4,837

 

17,073

 

24,625

 

Net income

 

$

6,313

 

$

7,248

 

$

26,088

 

$

40,833

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.19

 

$

0.22

 

$

0.80

 

$

1.26

 

Diluted

 

$

0.19

 

$

0.22

 

$

0.79

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

32,531,831

 

32,423,454

 

32,503,306

 

32,396,764

 

Diluted

 

33,154,625

 

32,439,039

 

32,908,510

 

32,573,552

 

 


 


 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

TWELVE MONTHS ENDED DECEMBER 25, 2009 AND DECEMBER 26, 2008

(in thousands)

 

 

 

Twelve Months Ended

 

 

 

December 25,

 

December 26,

 

 

 

2009

 

2008

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net income

 

$

26,088

 

$

40,833

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

19,174

 

17,414

 

Gain on extinguishment of debt, net

 

(1,257

)

(2,890

)

Amortization of debt issuance costs

 

1,084

 

1,143

 

Amortization of discount on 81/8% senior subordinated notes

 

145

 

148

 

Write-off of deferred acquisition costs

 

672

 

115

 

Share-based compensation

 

3,794

 

3,782

 

Excess tax benefits from share-based compensation

 

(45

)

(147

)

Deferred income taxes

 

5,684

 

(680

)

Provision for doubtful accounts

 

10,522

 

6,711

 

Loss on disposal of property and equipment

 

217

 

191

 

 

 

 

 

 

 

Changes in assets and liabilities which provided (used) cash:

 

 

 

 

 

Accounts receivable - trade

 

9,216

 

10,303

 

Inventory

 

38,098

 

(19,148

)

Prepaid expenses and other current assets

 

4,343

 

1,461

 

Other assets

 

394

 

661

 

Accounts payable

 

17,671

 

6,871

 

Accrued expenses and other current liabilities

 

5,880

 

(6,800

)

Accrued interest

 

(22

)

234

 

Income taxes

 

2,804

 

(2,558

)

Other liabilities

 

(180

)

(1,452

)

Net cash provided by operating activities

 

144,282

 

56,192

 

Cash Flows from Investing Activities:

 

 

 

 

 

Purchase of property and equipment, net

 

(11,157

)

(20,582

)

Purchase of short-term investments

 

(3,034

)

(35,531

)

Proceeds from sales and maturities of short-term investments

 

1,557

 

84,071

 

Purchase of businesses, net of cash acquired

 

(1,881

)

(10,243

)

Net cash (used in) provided by investing activities

 

(14,515

)

17,715

 

Cash Flows from Financing Activities:

 

 

 

 

 

Increase (Decrease) in purchase card payable, net

 

1,379

 

(2,909

)

Repayment of term debt

 

(61,535

)

(2,486

)

Repayment of 81/8% senior subordinated notes

 

(34,157

)

(9,984

)

Payments on capital lease obligations

 

(239

)

(218

)

Proceeds from stock options exercised

 

1,005

 

656

 

Excess tax benefits from share-based compensation

 

45

 

147

 

Treasury stock acquired to satisfy minimum statutory tax withholding requirements

 

(58

)

(1,050

)

Net cash used in financing activities

 

(93,560

)

(15,844

)

Effect of exchange rate changes on cash and cash equivalents

 

292

 

(314

)

Net increase in cash and cash equivalents

 

36,499

 

57,749

 

Cash and cash equivalents at beginning of period

 

62,724

 

4,975

 

Cash and cash equivalents at end of period

 

$

99,223

 

$

62,724

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

17,697

 

$

16,823

 

Income taxes, net of refunds

 

$

8,958

 

$

21,124

 

 

 

 

 

 

 

Schedule of Non-Cash Investing Activities:

 

 

 

 

 

Property acquired through lease incentives

 

$

3,009

 

$

 

Adjustments to liabilities assumed and goodwill on businesses acquired

 

$

8

 

$

1,027

 

 



 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-US GAAP INFORMATION

THREE AND TWELVE MONTHS ENDED DECEMBER 25, 2009 AND DECEMBER 26, 2008

(in thousands)

 

Free Cash Flow

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 25,

 

December 26,

 

December 25,

 

December 26,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

42,099

 

$

42,147

 

$

144,282

 

$

56,192

 

Less capital expenditures

 

(2,079

)

(1,870

)

(11,157

)

(20,582

)

Free cash flow

 

$

40,020

 

$

40,277

 

$

133,125

 

$

35,610

 

 

We define free cash flow as net cash provided by operating activities, as defined under US 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

 

Twelve Months Ended

 

 

 

December 25,

 

December 26,

 

 

 

December 25,

 

December 26,

 

 

 

 

 

2009

 

2008

 

% Variance

 

2009

 

2008

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

254,617

 

$

277,584

 

-8.3

%

$

1,059,278

 

$

1,195,663

 

-11.4

%

Less acquisitions:

 

 

 

 

 

(13,058

)

 

 

 

Organic sales

 

$

254,617

 

$

277,584

 

-8.3

%

$

1,046,220

 

$

1,195,663

 

-12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Ship days

 

61

 

61

 

 

 

252

 

252

 

 

 

Average daily sales (1)

 

$

4,174

 

$

4,551

 

-8.3

%

$

4,203

 

$

4,745

 

-11.4

%

Average organic daily sales (2)

 

$

4,174

 

$

4,551

 

-8.3

%

$

4,152

 

$

4,745

 

-12.5

%

 


(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 US GAAP and it should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with US GAAP, such as net sales. Management utilizes average organic daily sales as an operating performance measure in conjunction with US GAAP measures such as net sales.

 

Adjusted EBITDA

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 25,

 

December 26,

 

December 25,

 

December 26,

 

 

 

2009

 

2008

 

2009

 

2008

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Net income (GAAP)

 

$

6,313

 

$

7,248

 

$

26,088

 

$

40,833

 

Interest expense

 

4,371

 

6,682

 

19,044

 

28,482

 

Interest income

 

(64

)

(15

)

(215

)

(1,105

)

Loss (Gain) on extinguishment of debt

 

38

 

(2,775

)

(1,257

)

(2,775

)

Income tax provision

 

4,379

 

4,837

 

17,073

 

24,625

 

Depreciation and amortization

 

5,005

 

4,719

 

19,174

 

17,414

 

Adjusted EBITDA

 

$

20,042

 

$

20,696

 

$

79,907

 

$

107,474

 

 

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 US GAAP. Accordingly, Adjusted EBITDA should not be used in isolation or as a substitute for other measures of financial performance reported in accordance with US 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 US 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 US 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 US GAAP.