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8-K - 8-K - INTERLINE BRANDS, INC./DE | a12-17495_18k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
August 3, 2012
Interline Brands Announces Second Quarter 2012 Sales and Earnings Results
Jacksonville, Fla. August 3, 2012 - Interline Brands, Inc. (NYSE: IBI) (Interline or the Company), a leading distributor and direct marketer of broad-line maintenance, repair and operations (MRO) products, reported sales and earnings for the fiscal quarter ended June 29, 2012.
We were pleased to see continued sales growth in the second quarter driven by our strategic investments and further improvement in our end-markets. We will continue to execute on our growth strategy as we seek to further establish Interline Brands as a premier broad-line MRO distributor, commented Michael J. Grebe, Chairman and CEO.
Second Quarter 2012 Performance
Sales for the quarter ended June 29, 2012 were $334.8 million, a 5.4% increase compared to sales of $317.7 million in the comparable 2011 period. The facilities maintenance end-market, which comprised 78% of sales, increased 7.2% for the quarter. The professional contractor end-market, which comprised 13% of sales, increased 2.4% for the quarter. The specialty distributor end-market, which comprised 9% of sales, decreased 3.7% for the quarter.
Gross profit increased $4.9 million, or 4.2%, to $121.1 million for the second quarter of 2012, compared to $116.1 million for the second quarter of 2011. As a percentage of sales, gross profit decreased 40 basis points to 36.2% compared to 36.6% for the second quarter of 2011.
Selling, general and administrative (SG&A) expenses for the second quarter of 2012 increased $5.9 million, or 6.7%, to $94.2 million from $88.3 million for the second quarter of 2011. As a percentage of sales, SG&A expenses were 28.1% compared to 27.8% for the second quarter of 2011, an increase of 30 basis points. SG&A expenses during the quarter included $2.2 million of fees and expenses, representing approximately 0.7% of sales, associated with the previously disclosed transaction contemplated by the Agreement and Plan of Merger entered into on May 29, 2012.
Second quarter 2012 Adjusted EBITDA of $27.3 million, or 8.2% of sales, decreased 3.3% compared to $28.3 million, or 8.9% of sales, in the second quarter of 2011.
Net income for the second quarter of 2012 decreased $0.8 million to $9.0 million compared to $9.9 million in the comparable 2011 period.
Earnings per diluted share for the second quarter of 2012 were $0.28, a decrease of 3% compared to earnings per diluted share of $0.29 for the second quarter of 2011. Earnings per diluted share for the second quarter of 2012 included a $0.04 per diluted share impact due to fees and expenses associated with the previously disclosed transaction contemplated by the Agreement and Plan of Merger entered into on May 29, 2012. Earnings per diluted share for the second quarter of 2011 included a $0.01 per diluted share charge associated with ongoing improvements to the Companys distribution network.
Cash flow provided by operating activities for the second quarter of 2012 was $15.8 million compared to cash flow provided by operating activities of $14.5 million for the
second quarter of 2011. Second quarter 2012 free cash flow generated was $11.4 million compared to free cash flow generated of $9.4 million in the second quarter of 2011.
Year-To-Date 2012 Performance
Sales for the six months ended June 29, 2012 were $648.4 million, a 5.4% increase over sales of $615.1 million in the comparable 2011 period. On an organic basis, sales increased 4.9% for the six months ended June 29, 2012.
Gross profit increased $9.6 million, or 4.2%, to $236.7 million for the six months ended June 29, 2012, compared to $227.1 million in the prior year period. As a percentage of sales, gross profit decreased to 36.5% from 36.9% in the comparable 2011 period.
SG&A expenses for the six months ended June 29, 2012 were $185.7 million, or 28.6% of sales, compared to $176.3 million, or 28.7% of sales, for the six months ended July 1, 2011. SG&A expenses during the six months ended June 29, 2012 included $2.2 million of fees and expenses, representing approximately 0.3% of sales, associated with the previously disclosed transaction contemplated by the Agreement and Plan of Merger entered into on May 29, 2012.
Adjusted EBITDA of $52.0 million, or 8.0% of sales, for the six months ended June 29, 2012 increased 0.9% compared to $51.5 million, or 8.4% of sales, for the six months ended July 1, 2011.
Net income for the six months ended June 29, 2012 decreased $0.3 million to $16.5 million compared to $16.7 million in the comparable 2011 period.
Earnings per diluted share were $0.51 for the six months ended June 29, 2012, an increase of 4% over earnings per diluted share of $0.49 for the six months ended July 1, 2011. Earnings per diluted share for the six months ended June 29, 2012 included a $0.04 per diluted share impact due to fees and expenses associated with the previously disclosed transaction contemplated by the Agreement and Plan of Merger entered into on May 29, 2012. Earnings per diluted share for the six months ended July 1, 2011 included a $0.02 per diluted share charge associated with ongoing efforts to enhance the Companys distribution network.
Cash flow from operating activities for the six months ended June 29, 2012 was $8.5 million compared to $28.0 million for the six months ended July 1, 2011. Free cash flow generated for the six months ended June 29, 2012 was $0.8 million compared to $17.4 million in the comparable 2011 period.
About Interline
Interline Brands, Inc. is a leading distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides broad-line MRO 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 Companys 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 Companys 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). Interlines management uses non-US GAAP measures in its analysis of the Companys 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 Companys 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 Companys Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2012 and in the Companys Annual Report on Form 10-K for the fiscal year ended December 30, 2011. These statements reflect the Companys 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 JUNE 29, 2012 AND DECEMBER 30, 2011
(in thousands, except share and per share data)
|
|
June 29, |
|
December 30, |
| ||
|
|
2012 |
|
2011 |
| ||
ASSETS |
|
|
|
|
| ||
Current Assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
97,582 |
|
$ |
97,099 |
|
Accounts receivable - trade (net of allowance for doubtful accounts of $4,742 and $6,457) |
|
148,252 |
|
128,383 |
| ||
Inventories |
|
223,475 |
|
221,225 |
| ||
Prepaid expenses and other current assets |
|
22,513 |
|
26,285 |
| ||
Income taxes receivable |
|
2,437 |
|
1,123 |
| ||
Deferred income taxes |
|
15,253 |
|
16,738 |
| ||
Total current assets |
|
509,512 |
|
490,853 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
|
56,073 |
|
57,728 |
| ||
Goodwill |
|
344,478 |
|
344,478 |
| ||
Other intangible assets, net |
|
130,433 |
|
134,377 |
| ||
Other assets |
|
9,251 |
|
9,022 |
| ||
Total assets |
|
$ |
1,049,747 |
|
$ |
1,036,458 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
101,667 |
|
$ |
109,438 |
|
Accrued expenses and other current liabilities |
|
51,038 |
|
51,864 |
| ||
Accrued interest |
|
2,973 |
|
2,933 |
| ||
Income taxes payable |
|
1,818 |
|
|
| ||
Current portion of capital leases |
|
584 |
|
669 |
| ||
Total current liabilities |
|
158,080 |
|
164,904 |
| ||
|
|
|
|
|
| ||
Long-Term Liabilities: |
|
|
|
|
| ||
Deferred income taxes |
|
51,916 |
|
51,776 |
| ||
Long-term debt, net of current portion |
|
300,000 |
|
300,000 |
| ||
Capital leases, net of current portion |
|
457 |
|
726 |
| ||
Other liabilities |
|
4,069 |
|
4,607 |
| ||
Total liabilities |
|
514,522 |
|
522,013 |
| ||
Commitments and contingencies |
|
|
|
|
| ||
Senior preferred stock; $0.01 par value, 20,000,000 authorized; none outstanding as of June 29, 2012 and December 30, 2011 |
|
|
|
|
| ||
|
|
|
|
|
| ||
Stockholders Equity: |
|
|
|
|
| ||
Common stock; $0.01 par value, 100,000,000 authorized; 33,967,800 issued and 31,930,637 outstanding as of June 29, 2012, and 33,558,842 issued and 31,596,615 outstanding as of December 30, 2011 |
|
340 |
|
335 |
| ||
Additional paid-in capital |
|
605,672 |
|
599,923 |
| ||
Accumulated deficit |
|
(42,664 |
) |
(59,150 |
) | ||
Accumulated other comprehensive income |
|
1,676 |
|
1,688 |
| ||
Treasury stock, at cost, 2,037,163 as of June 29, 2012, and 1,962,227 as of December 30, 2011 |
|
(29,799 |
) |
(28,351 |
) | ||
Total stockholders equity |
|
535,225 |
|
514,445 |
| ||
Total liabilities and stockholders equity |
|
$ |
1,049,747 |
|
$ |
1,036,458 |
|
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND SIX MONTHS ENDED JUNE 29, 2012 AND JULY 1, 2011
(in thousands, except share and per share data)
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 29, |
|
July 1, |
|
June 29, |
|
July 1, |
| ||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
|
$ |
334,821 |
|
$ |
317,679 |
|
$ |
648,403 |
|
$ |
615,096 |
|
Cost of sales |
|
213,768 |
|
201,545 |
|
411,739 |
|
388,021 |
| ||||
Gross profit |
|
121,053 |
|
116,134 |
|
236,664 |
|
227,075 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating Expenses: |
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative expenses |
|
94,157 |
|
88,252 |
|
185,674 |
|
176,339 |
| ||||
Depreciation and amortization |
|
6,351 |
|
5,853 |
|
12,659 |
|
11,605 |
| ||||
Total operating expenses |
|
100,508 |
|
94,105 |
|
198,333 |
|
187,944 |
| ||||
Operating income |
|
20,545 |
|
22,029 |
|
38,331 |
|
39,131 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
(6,056 |
) |
(6,093 |
) |
(12,102 |
) |
(12,189 |
) | ||||
Interest and other income |
|
420 |
|
382 |
|
1,012 |
|
789 |
| ||||
Income before income taxes |
|
14,909 |
|
16,318 |
|
27,241 |
|
27,731 |
| ||||
Provision for income taxes |
|
5,888 |
|
6,462 |
|
10,755 |
|
10,992 |
| ||||
Net income |
|
$ |
9,021 |
|
$ |
9,856 |
|
$ |
16,486 |
|
$ |
16,739 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings Per Share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.28 |
|
$ |
0.29 |
|
$ |
0.52 |
|
$ |
0.50 |
|
Diluted |
|
$ |
0.28 |
|
$ |
0.29 |
|
$ |
0.51 |
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-Average Shares Outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
31,993,530 |
|
33,451,011 |
|
31,900,510 |
|
33,404,735 |
| ||||
Diluted |
|
32,711,649 |
|
34,119,482 |
|
32,559,220 |
|
34,139,992 |
|
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 29, 2012 AND JULY 1, 2011
(in thousands)
|
|
June 29, |
|
July 1, |
| ||
|
|
2012 |
|
2011 |
| ||
Cash Flows from Operating Activities: |
|
|
|
|
| ||
Net income |
|
$ |
16,486 |
|
$ |
16,739 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
12,659 |
|
11,605 |
| ||
Amortization of deferred lease incentive obligation |
|
(401 |
) |
(395 |
) | ||
Amortization of debt issuance costs |
|
701 |
|
677 |
| ||
Share-based compensation |
|
2,668 |
|
2,831 |
| ||
Excess tax benefits from share-based compensation |
|
(1,082 |
) |
(860 |
) | ||
Deferred income taxes |
|
1,625 |
|
4,252 |
| ||
Provision for doubtful accounts |
|
594 |
|
1,772 |
| ||
(Gain) loss on disposal of property and equipment |
|
(91 |
) |
75 |
| ||
Other |
|
(227 |
) |
(82 |
) | ||
|
|
|
|
|
| ||
Changes in assets and liabilities which provided (used) cash, net of businesses acquired: |
|
|
|
|
| ||
Accounts receivable - trade |
|
(20,464 |
) |
(22,216 |
) | ||
Inventories |
|
(2,253 |
) |
(4,777 |
) | ||
Prepaid expenses and other current assets |
|
3,772 |
|
7,123 |
| ||
Other assets |
|
(23 |
) |
8 |
| ||
Accounts payable |
|
(7,765 |
) |
8,680 |
| ||
Accrued expenses and other current liabilities |
|
848 |
|
(1,829 |
) | ||
Accrued interest |
|
45 |
|
365 |
| ||
Income taxes |
|
1,418 |
|
3,989 |
| ||
Other liabilities |
|
(14 |
) |
10 |
| ||
Net cash provided by operating activities |
|
8,496 |
|
27,967 |
| ||
Cash Flows from Investing Activities: |
|
|
|
|
| ||
Purchases of property and equipment, net |
|
(7,670 |
) |
(10,543 |
) | ||
Proceeds from sales and maturities of short-term investments |
|
|
|
100 |
| ||
Purchase of businesses, net of cash acquired |
|
|
|
(9,496 |
) | ||
Net cash used in investing activities |
|
(7,670 |
) |
(19,939 |
) | ||
Cash Flows from Financing Activities: |
|
|
|
|
| ||
(Decrease) increase in purchase card payable, net |
|
(1,781 |
) |
969 |
| ||
Repayment of 81/8% senior subordinated notes |
|
|
|
(13,358 |
) | ||
Payment of debt issuance costs |
|
(1 |
) |
(34 |
) | ||
Payments on capital lease obligations |
|
(354 |
) |
(337 |
) | ||
Proceeds from stock options exercised |
|
2,170 |
|
626 |
| ||
Excess tax benefits from share-based compensation |
|
1,082 |
|
860 |
| ||
Purchases of treasury stock |
|
(1,448 |
) |
(1,030 |
) | ||
Net cash used in financing activities |
|
(332 |
) |
(12,304 |
) | ||
Effect of exchange rate changes on cash and cash equivalents |
|
(11 |
) |
88 |
| ||
Net increase (decrease) in cash and cash equivalents |
|
483 |
|
(4,188 |
) | ||
Cash and cash equivalents at beginning of period |
|
97,099 |
|
86,981 |
| ||
Cash and cash equivalents at end of period |
|
$ |
97,582 |
|
$ |
82,793 |
|
|
|
|
|
|
| ||
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
| ||
Cash paid during the period for: |
|
|
|
|
| ||
Interest |
|
$ |
11,277 |
|
$ |
11,081 |
|
Income taxes, net of refunds |
|
$ |
7,681 |
|
$ |
3,238 |
|
|
|
|
|
|
| ||
Schedule of Non-Cash Investing and Financing Activities: |
|
|
|
|
| ||
Property acquired through lease incentives |
|
$ |
|
|
$ |
475 |
|
Adjustments to liabilities assumed and goodwill on business acquired |
|
$ |
|
|
$ |
163 |
|
Contingent consideration associated with purchase of business |
|
$ |
|
|
$ |
250 |
|
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND SIX MONTHS ENDED JUNE 29, 2012 AND JULY 1, 2011
(in thousands, except per share data)
Free Cash Flow
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 29, |
|
July 1, |
|
June 29, |
|
July 1, |
| ||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net cash from operating activities |
|
$ |
15,754 |
|
$ |
14,469 |
|
$ |
8,496 |
|
$ |
27,967 |
|
Less capital expenditures |
|
(4,349 |
) |
(5,116 |
) |
(7,670 |
) |
(10,543 |
) | ||||
Free cash flow |
|
$ |
11,405 |
|
$ |
9,353 |
|
$ |
826 |
|
$ |
17,424 |
|
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 Companys business performance. However, a limitation of this measure 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 29, |
|
July 1, |
|
|
|
June 29, |
|
July 1, |
|
|
| ||||
|
|
2012 |
|
2011 |
|
% Variance |
|
2012 |
|
2011 |
|
% Variance |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
|
$ |
334,821 |
|
$ |
317,679 |
|
5.4 |
% |
$ |
648,403 |
|
$ |
615,096 |
|
5.4 |
% |
Less acquisition: |
|
|
|
|
|
|
|
(3,469 |
) |
|
|
|
| ||||
Organic sales |
|
$ |
334,821 |
|
$ |
317,679 |
|
5.4 |
% |
$ |
644,934 |
|
$ |
615,096 |
|
4.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Daily sales: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Ship days |
|
64 |
|
64 |
|
|
|
129 |
|
129 |
|
|
| ||||
Average daily sales (1) |
|
$ |
5,232 |
|
$ |
4,964 |
|
5.4 |
% |
$ |
5,026 |
|
$ |
4,768 |
|
5.4 |
% |
Average organic daily sales (2) |
|
$ |
5,232 |
|
$ |
4,964 |
|
5.4 |
% |
$ |
4,999 |
|
$ |
4,768 |
|
4.9 |
% |
(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 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 |
|
Six Months Ended |
| ||||||||
|
|
June 29, |
|
July 1, |
|
June 29, |
|
July 1, |
| ||||
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
| ||||
Net income (GAAP) |
|
$ |
9,021 |
|
$ |
9,856 |
|
$ |
16,486 |
|
$ |
16,739 |
|
Interest expense |
|
6,056 |
|
6,093 |
|
12,102 |
|
12,189 |
| ||||
Interest income |
|
(3 |
) |
(5 |
) |
(11 |
) |
(11 |
) | ||||
Income tax provision |
|
5,888 |
|
6,462 |
|
10,755 |
|
10,992 |
| ||||
Depreciation and amortization |
|
6,351 |
|
5,853 |
|
12,659 |
|
11,605 |
| ||||
Adjusted EBITDA |
|
$ |
27,313 |
|
$ |
28,259 |
|
$ |
51,991 |
|
$ |
51,514 |
|
Adjusted EBITDA margin |
|
8.2 |
% |
8.9 |
% |
8.0 |
% |
8.4 |
% |
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 Companys 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 income, 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.