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8-K - 8-K - INTERLINE BRANDS, INC./DEa12-17495_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 Company’s 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 Company’s 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 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 March 30, 2012 and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2011.  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 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 Company’s 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 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 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.