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8-K - 8-K - INTERLINE BRANDS, INC./DEa11-29218_18k.htm

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

November 4, 2011

 

Interline Brands Announces Third Quarter 2011 Sales and Earnings Results

 

Jacksonville, Fla. — November 4, 2011 - Interline Brands, Inc. (NYSE: IBI) (“Interline” or the “Company”), a leading distributor and direct marketer of maintenance, repair and operations products (“MRO”), reported sales and earnings for the fiscal quarter ended September 30, 2011.

 

“Our results for the third quarter reflect the relative stability of our end-markets and solid execution.  Our efforts to build a premier, broad-line MRO distributor continue to gain momentum, complemented by the prudent investments we are making in capabilities that are specifically designed to improve the customer experience and generate incremental revenue.  In addition, our recent acquisitions are delivering solid results and additional operating benefits,” commented Michael J. Grebe, Chairman and Chief Executive Officer.

 

Third Quarter 2011 Performance

 

Sales for the quarter ended September 30, 2011 were $331.3 million, a 19.7% increase compared to sales of $276.8 million in the comparable 2010 period.  On an organic basis, sales increased 3.7% for the quarter.  Interline’s facilities maintenance end-market, which comprised 77% of sales, increased 25.6% during the third quarter, and 3.5% on an organic basis.  The professional contractor end-market, which comprised 13% of sales, increased 6.6% for the quarter. The specialty distributor end-market, which comprised 10% of sales, increased 0.5% for the quarter.

 



 

Gross profit increased $17.5 million, or 16.7%, to $122.3 million for the third quarter of 2011, compared to $104.8 million for the third quarter of 2010.  As a percentage of sales, gross profit decreased 100 basis points to 36.9% compared to 37.9% for the prior year quarter.  This decrease was related to the recent acquisitions of CleanSource, Inc. (“CleanSource”) and Northern Colorado Paper, Inc. (“NCP”), as they have lower gross profit margins due primarily to their product mix and relative size.

 

“Our measured investments in additional sales professionals, key operations and technology initiatives, and recent acquisitions are improving our national and integrated MRO selling platform.  While we will continue to adjust our plans as macro-economic conditions warrant, we are convinced these initiatives will position Interline for long-term revenue growth and enhanced profitability,” commented Kenneth D. Sweder, Interline’s President and Chief Operating Officer.

 

Selling, general and administrative (“SG&A”) expenses for the third quarter of 2011 increased $13.3 million, or 17.2%, to $90.3 million from $77.0 million for the third quarter of 2010.  As a percentage of sales, SG&A expenses were 27.2% compared to 27.8% for the third quarter of 2010.

 

Third quarter 2011 operating income of $26.2 million, or 7.9% of sales, increased 14.4% compared to $22.9 million, or 8.3% of sales, in the third quarter of 2010.

 

Earnings per diluted share for the third quarter of 2011 were $0.37, an increase of 9% compared to earnings per diluted share of $0.34 for the third quarter of 2010.

 



 

During the third quarter of 2011, the Company repurchased 805,438 shares of its common stock at an aggregate cost of $11.0 million, or an average cost of $13.70 per share, under a $25.0 million share repurchase program authorized by the Board of Directors.

 

Year-To-Date 2011 Performance

 

Sales for the nine months ended September 30, 2011 were $946.4 million, a 19.5% increase over sales of $792.2 million in the comparable 2010 period.  Not including the acquisitions of CleanSource and NCP, average organic daily sales increased 3.3% for the nine months ended September 30, 2011.

 

Gross profit increased $47.9 million, or 15.9%, to $349.4 million for the nine months ended September 30, 2011, compared to $301.5 million in the prior year period.  As a percentage of sales, gross profit decreased to 36.9% from 38.1% in the comparable 2010 period.

 

SG&A expenses for the nine months ended September 30, 2011 were $266.6 million, or 28.2% of sales, compared to $231.7 million, or 29.2% of sales, for the nine months ended September 24, 2010.

 

Operating income was $65.3 million, or 6.9% of sales, for the nine months ended September 30, 2011 compared to $55.2 million, or 7.0% of sales, for the nine months ended September 24, 2010, representing an increase of 18.3%.

 



 

Earnings per diluted share were $0.86 for the nine months ended September 30, 2011, an increase of 10% over earnings per diluted share of $0.78 for the nine months ended September 24, 2010.

 

Earnings per diluted share for the nine months ended September 30, 2011 included a $0.02 per diluted share charge associated with ongoing efforts to enhance the Company’s distribution network.  Earnings per diluted share for the nine months ended September 24, 2010 included a $0.05 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 changes in the Company’s executive management.

 

Cash flow from operating activities for the nine months ended September 30, 2011 was $43.1 million compared to $12.4 million for the nine months ended September 24, 2010.

 

Business Outlook

 

Mr. Grebe stated, “Although we are encouraged by the relative stability we are seeing in our end markets, we are keeping a critical eye on broader economic trends.  Bearing this in mind, we remain focused on driving permanent improvements in our business that will enable us to grow more efficiently while delivering incremental operating leverage over time.”

 

Conference Call

 

Interline will host a conference call on November 4, 2011 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 22008775.  This recording will expire on November 18, 2011.

 

About Interline

 

Interline Brands, Inc. is a leading distributor and direct marketer with headquarters in Jacksonville, Florida.  Interline provides janitorial sanitation and maintenance, repair and operations products to a diversified customer base 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.

 

Recent releases and other news, reports and information about the Company can be found on the “Investor Relations” page of the Company’s website at http://ir.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 July 1, 2011 and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.  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

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

(in thousands, except share and per share data)

 

 

 

September 30,

 

December 31,

 

 

 

2011

 

2010

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

85,128

 

$

86,981

 

Investments

 

 

100

 

Accounts receivable - trade (net of allowance for doubtful accounts of $7,310 and $9,088)

 

149,925

 

122,619

 

Inventory

 

210,506

 

203,269

 

Prepaid expenses and other current assets

 

23,545

 

28,816

 

Income taxes receivable

 

853

 

2,086

 

Deferred income taxes

 

15,422

 

17,381

 

Total current assets

 

485,379

 

461,252

 

 

 

 

 

 

 

Property and equipment, net

 

57,433

 

54,546

 

Goodwill

 

344,645

 

341,168

 

Other intangible assets, net

 

136,350

 

141,562

 

Other assets

 

8,999

 

9,081

 

Total assets

 

$

1,032,806

 

$

1,007,609

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

100,555

 

$

96,878

 

Accrued expenses and other current liabilities

 

45,262

 

45,181

 

Accrued interest

 

8,377

 

2,852

 

Income tax payable

 

3,255

 

819

 

Current portion of long-term debt

 

 

13,358

 

Current portion of capital leases

 

523

 

607

 

Total current liabilities

 

157,972

 

159,695

 

 

 

 

 

 

 

Long-Term Liabilities:

 

 

 

 

 

Deferred income taxes

 

48,872

 

44,045

 

Long-term debt, net of current portion

 

300,000

 

300,000

 

Capital leases, net of current portion

 

523

 

906

 

Other liabilities

 

6,620

 

6,731

 

Total liabilities

 

513,987

 

511,377

 

Commitments and contingencies

 

 

 

 

 

Senior preferred stock; $0.01 par value, 20,000,000 shares authorized; no shares outstanding as of September 30, 2011 and December 31, 2010

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

Common stock; $0.01 par value, 100,000,000 authorized; 33,529,227 issued and 32,554,823 outstanding as of September 30, 2011 and 33,336,373 issued and 33,214,073 outstanding as of December 31, 2010

 

335

 

333

 

Additional paid-in capital

 

598,954

 

593,031

 

Accumulated deficit

 

(67,703

)

(96,824

)

Accumulated other comprehensive income

 

1,470

 

1,865

 

Treasury stock, at cost, 974,404 shares as of September 30, 2011 and 122,300 as of December 31, 2010

 

(14,237

)

(2,173

)

Total shareholders’ equity

 

518,819

 

496,232

 

Total liabilities and shareholders’ equity

 

$

1,032,806

 

$

1,007,609

 

 



 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 24, 2010

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 24,

 

September 30,

 

September 24,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

331,349

 

$

276,821

 

$

946,445

 

$

792,193

 

Cost of sales

 

209,008

 

171,991

 

597,029

 

490,649

 

Gross profit

 

122,341

 

104,830

 

349,416

 

301,544

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

90,253

 

76,987

 

266,592

 

231,686

 

Depreciation and amortization

 

5,926

 

4,981

 

17,531

 

14,667

 

Total operating expense

 

96,179

 

81,968

 

284,123

 

246,353

 

Operating income

 

26,162

 

22,862

 

65,293

 

55,191

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(6,138

)

(4,373

)

(18,327

)

(13,092

)

Interest and other income

 

399

 

541

 

1,188

 

1,266

 

Income before income taxes

 

20,423

 

19,030

 

48,154

 

43,365

 

Provision for income taxes

 

8,041

 

7,518

 

19,033

 

17,192

 

Net income

 

$

12,382

 

$

11,512

 

$

29,121

 

$

26,173

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.37

 

$

0.35

 

$

0.87

 

$

0.79

 

Diluted

 

$

0.37

 

$

0.34

 

$

0.86

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

33,271,753

 

33,084,756

 

33,359,746

 

32,931,814

 

Diluted

 

33,860,017

 

33,796,615

 

34,045,996

 

33,685,652

 

 


 


 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 24, 2010

(in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

September 24,

 

 

 

2011

 

2010

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net income

 

$

29,121

 

$

26,173

 

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

 

 

 

 

 

Depreciation and amortization

 

17,531

 

14,970

 

Amortization of debt issuance costs

 

1,020

 

775

 

Amortization of discount on 81/8% senior subordinated notes

 

 

115

 

Share-based compensation

 

4,425

 

3,299

 

Excess tax benefits from share-based compensation

 

(858

)

(775

)

Deferred income taxes

 

6,571

 

1,270

 

Provision for doubtful accounts

 

2,256

 

3,629

 

Loss on disposal of property and equipment

 

107

 

129

 

 

 

 

 

 

 

Changes in assets and liabilities which provided (used) cash, net of business acquired:

 

 

 

 

 

Accounts receivable - trade

 

(25,690

)

(16,499

)

Inventory

 

(2,751

)

(33,756

)

Prepaid expenses and other current assets

 

4,406

 

(5,670

)

Other assets

 

181

 

(97

)

Accounts payable

 

614

 

9,235

 

Accrued expenses and other current liabilities

 

(4,548

)

6,691

 

Accrued interest

 

5,521

 

2,609

 

Income taxes

 

5,394

 

345

 

Other liabilities

 

(238

)

6

 

Net cash provided by operating activities

 

43,062

 

12,449

 

Cash Flows from Investing Activities:

 

 

 

 

 

Purchase of property and equipment, net

 

(15,036

)

(12,937

)

Purchase of short-term investments

 

 

(3,002

)

Proceeds from sales and maturities of short-term investments

 

100

 

4,012

 

Purchase of businesses, net of cash acquired

 

(9,695

)

(145

)

Net cash used in investing activities

 

(24,631

)

(12,072

)

Cash Flows from Financing Activities:

 

 

 

 

 

Increase (decrease) in purchase card payable, net

 

3,341

 

(1,463

)

Repayment of term debt

 

 

(1,590

)

Repayment of 81/8% senior subordinated notes

 

(13,358

)

 

Payment of debt issuance costs

 

(34

)

 

Payments on capital lease obligations

 

(467

)

(198

)

Proceeds from stock options exercised

 

641

 

7,211

 

Excess tax benefits from share-based compensation

 

858

 

775

 

Purchases of treasury stock

 

(11,108

)

(97

)

Net cash (used in) provided by financing activities

 

(20,127

)

4,638

 

Effect of exchange rate changes on cash and cash equivalents

 

(157

)

66

 

Net (decrease) increase in cash and cash equivalents

 

(1,853

)

5,081

 

Cash and cash equivalents at beginning of period

 

86,981

 

99,223

 

Cash and cash equivalents at end of period

 

$

85,128

 

$

104,304

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

11,469

 

$

9,410

 

Income taxes, net of refunds

 

$

8,111

 

$

15,644

 

 

 

 

 

 

 

Schedule of Non-Cash Investing Activities:

 

 

 

 

 

Treasury stock acquired through accrued liabilities

 

$

957

 

$

 

Property acquired through lease incentives

 

$

475

 

$

2,445

 

Adjustments to liabilities assumed and goodwill on businesses acquired

 

$

163

 

$

 

Contingent consideration associated with purchase of business

 

$

250

 

$

 

 



 

INTERLINE BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP INFORMATION

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 24, 2010

(in thousands, except per share data)

 

Free Cash Flow

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 24,

 

September 30,

 

September 24,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net cash from operating activities

 

$

15,095

 

$

(3,675

)

$

43,062

 

$

12,449

 

Less capital expenditures

 

(4,493

)

(4,709

)

(15,036

)

(12,937

)

Free cash flow

 

$

10,602

 

$

(8,384

)

$

28,026

 

$

(488

)

 

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

 

Nine Months Ended

 

 

 

September 30,

 

September 24,

 

 

 

September 30,

 

September 24,

 

 

 

 

 

2011

 

2010

 

% Variance

 

2011

 

2010

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

331,349

 

$

276,821

 

19.7

%

$

946,445

 

$

792,193

 

19.5

%

Less acquisitions:

 

(44,313

)

 

 

 

(123,635

)

 

 

 

Organic sales

 

$

287,036

 

$

276,821

 

3.7

%

$

822,810

 

$

792,193

 

3.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Ship days

 

63

 

63

 

 

 

192

 

191

 

 

 

Average daily sales (1)

 

$

5,260

 

$

4,394

 

19.7

%

$

4,929

 

$

4,148

 

18.8

%

Average organic daily sales (2)

 

$

4,556

 

$

4,394

 

3.7

%

$

4,285

 

$

4,148

 

3.3

%

 


(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

 

Nine Months Ended

 

 

 

September 30,

 

September 24,

 

September 30,

 

September 24,

 

 

 

2011

 

2010

 

2011

 

2010

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Net income (GAAP)

 

$

12,382

 

$

11,512

 

$

29,121

 

$

26,173

 

Interest expense

 

6,138

 

4,373

 

18,327

 

13,092

 

Interest income

 

(8

)

(29

)

(19

)

(83

)

Income tax provision

 

8,041

 

7,518

 

19,033

 

17,192

 

Depreciation and amortization

 

5,926

 

5,040

 

17,531

 

14,970

 

Adjusted EBITDA

 

$

32,479

 

$

28,414

 

$

83,993

 

$

71,344

 

Adjusted EBITDA margin

 

9.8

%

10.3

%

8.9

%

9.0

%

 

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, net, 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. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.