JACKSONVILLE, Fla., Oct. 30 /PRNewswire-FirstCall/ -- Interline Brands, Inc. ("Interline" or the "Company"), a leading distributor and direct marketer of maintenance, repair and operations ("MRO") products, reported sales and earnings for the quarter ended September 25, 2009.
Sales for the third quarter of 2009 decreased 12.5% compared to the prior year period. Earnings per diluted share were $0.32 for the third quarter of 2009, a decrease of 24% compared to earnings per diluted share of $0.42 in the third quarter of 2008.
Michael J. Grebe, Interline's Chairman and Chief Executive Officer, commented, "We delivered comparatively good revenue and profitability levels despite a soft demand environment. More importantly, we generated $26 million in free cash flow, which brings our year-to-date total to over $90 million; we strengthened our balance sheet by paying down an additional $30 million of debt this quarter; and we remain on track to deliver our stated full year savings from our cost and efficiency actions. While we have had success in managing our business through this challenging period, our leadership position and healthy financial profile afford us the opportunity to act in the long-term interests of our Company. We are focused on making permanent improvements in our business, and strengthening our foundation in order to deliver significant earnings leverage when market conditions improve."
Third Quarter 2009 Performance
Sales for the quarter ended September 25, 2009 were $277.9 million, a 12.5% decrease compared to sales of $317.5 million in the comparable 2008 period. Average organic daily sales decreased 13.6% for the quarter. Interline's facilities maintenance end-market, which comprised 75% of sales, declined 6.2% during the third quarter and 7.9% on an average organic daily sales basis. The professional contractor end-market, which comprised 15% of sales, declined 28.5% for the quarter and the specialty distributor end-market, which comprised 10% of sales, declined 24.0% for the quarter.
"We feel somewhat better about the market environment as a whole than we did earlier in the year, but visibility remains low, and various economic indicators suggest continued softness across some of our end markets. We continue to leverage our base of stable, non-discretionary products and focus on broadening and deepening our relationships with customers to serve a growing portion of their MRO needs going forward," said Mr. Grebe.
Gross profit decreased $18.7 million, or 15.5%, to $102.2 million for the third quarter of 2009. As a percentage of sales, gross profit was 36.8% compared to 38.1% for the third quarter of 2008.
SG&A expenses for the quarter were $76.2 million, down $11.6 million or 13.2% from the same period last year. SG&A expenses for the quarter represented 27.4% of sales compared to 27.7% in the third quarter of 2008.
As a result, third quarter 2009 operating income of $21.5 million, or 7.7% of sales, decreased 25.3% compared to $28.8 million, or 9.1% of sales, in the third quarter of 2008.
YTD 2009 Performance
"Optimizing our distribution network and improving our inventory efficiency continue to be key aspects of our long-term supply chain strategy. We are encouraged by our results in these areas to date, and look forward to realizing the full benefit of our actions when demand returns to more normalized levels," commented Kenneth D. Sweder, Interline's Chief Operating Officer.
Sales for the nine months ended September 25, 2009 were $804.7 million, a 12.4% decrease from sales of $918.1 million in the comparable 2008 period.
Gross profit decreased $49.7 million, or 14.3%, to $297.1 million for the nine months ended September 25, 2009, compared to $346.8 million in the prior year period. As a percentage of sales, gross profit decreased to 36.9% from 37.8% in the comparable 2008 period.
SG&A expenses for the nine months ended September 25, 2009 were $239.0 million, or 29.7% of sales, compared to $261.4 million, or 28.5% of sales, for the nine months ended September 26, 2008. SG&A expenses in 2009 included $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.
Operating income was $44.6 million, or 5.5% of sales, for the nine months ended September 25, 2009 compared to $73.1 million, or 8.0% of sales, for the nine months ended September 26, 2008, representing a decrease of 39.0%.
Earnings per diluted share were $0.60 for the nine months ended September 25, 2009, a decrease of 42% from earnings per diluted share of $1.03 for the nine months ended September 26, 2008.
Cash flow from operating activities for the nine months ended September 25, 2009 was $102.2 million compared to $14.0 million for the nine months ended September 26, 2008. During the nine months ended September 25, 2009, the Company repaid $92.9 million of debt.
Business Outlook
Mr. Grebe stated, "Looking ahead to the fourth quarter, we expect a similar setting to the past nine months, including low visibility and soft demand. That said, we are encouraged to see a few signs of signs of some stabilization. Revenue declines across our markets have moderated slightly. In addition, based on our strong cash flow generation year-to-date, we now expect free cash flow for the year to exceed $100 million. I am confident we are taking the right steps to maximize our cash flows, position Interline Brands for long-term success and to compete more effectively for the years to come."
Conference Call
Interline Brands will host a conference call on October 30, 2009 at 9:00 a.m. Eastern Daylight 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 36222460. This recording will expire on November 13, 2009.
About Interline
Interline Brands, Inc. is a leading national distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations products to a diversified customer base made up of professional contractors, facilities maintenance professionals, and specialty distributors primarily throughout the United States, Canada, the Caribbean and Central America.
Non-GAAP Financial Information
This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). Interline's management uses non-GAAP measures in its analysis of the Company's performance. Investors are encouraged to review the reconciliation of non-GAAP financial measures to the comparable 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 June 26, 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: Tom Tossavainen
PHONE: 904-421-1441
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 25, 2009 AND DECEMBER 26, 2008
(in thousands, except share and per share data)
September 25, December 26,
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $63,691 $62,724
Investments 1,623 -
Accounts receivable - trade (net of
allowance for doubtful accounts of
$13,070 and $12,140) 141,290 139,522
Inventory 184,707 211,200
Prepaid income taxes 129 1,452
Prepaid expenses and other current assets 18,414 22,884
Deferred income taxes 16,001 19,010
-------- --------
Total current assets 425,855 456,792
Property and equipment, net 48,461 46,033
Goodwill 318,229 317,117
Other intangible assets, net 126,598 132,787
Other assets 8,673 10,119
-------- --------
Total assets $927,816 $962,848
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $84,356 $68,255
Accrued expenses and other current
liabilities 44,867 31,394
Accrued interest 3,466 1,072
Current portion of long-term debt 1,638 1,625
Capital lease - current 260 239
-------- --------
Total current liabilities 134,587 102,585
Long-Term Liabilities:
Deferred income taxes 39,854 37,210
Long-term debt, net of current portion 309,051 401,765
Capital lease - long term 28 226
Other liabilities 835 989
-------- --------
Total liabilities 484,355 542,775
Commitments and contingencies
Senior preferred stock; $0.01 par value,
20,000,000 shares authorized; no shares
outstanding as of September 25, 2009 and
December 26, 2008 - -
-------- --------
Shareholders' Equity:
Common stock; $0.01 par value, 100,000,000
authorized; 32,574,463 issued and
32,459,156 outstanding as of September
25, 2009 and 32,561,360 issued and
32,449,946 outstanding as of December
26, 2008 326 326
Additional paid-in capital 574,996 571,868
Accumulated deficit (131,058) (150,833)
Accumulated other comprehensive income 1,249 695
Treasury stock, at cost, 115,307 shares
as of September 25, 2009 and
December 26, 2008 (2,052) (1,983)
-------- --------
Total shareholders' equity 443,461 420,073
-------- --------
Total liabilities and
shareholders' equity $927,816 $962,848
======== ========
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND NINE MONTHS ENDED SEPTEMBER 25, 2009 AND SEPTEMBER 26, 2008
(in thousands, except share and per share data)
Three Months Ended Nine Months Ended
------------------ -----------------
September 25, September 26, September 25, September 26,
2009 2008 2009 2008
------- ------- ------- -------
Net sales $277,948 $317,504 $804,661 $918,079
Cost of sales 175,726 196,568 507,528 571,293
------- ------- ------- -------
Gross profit 102,222 120,936 297,133 346,786
Operating Expenses:
Selling, general
and administrative
expenses 76,191 87,828 239,009 261,426
Depreciation and
amortization 4,535 4,319 13,561 12,300
------- ------- ------- -------
Total operating
expense 80,726 92,147 252,570 273,726
------- ------- ------- -------
Operating income 21,496 28,789 44,563 73,060
(Loss) Gain on
extinguishment of
debt, net (248) - 1,295 -
Interest expense (4,577) (7,054) (14,673) (21,800)
Interest and
other income 554 710 1,284 2,113
------- ------- ------- -------
Income before
income taxes 17,225 22,445 32,469 53,373
Income tax provision 6,794 8,709 12,694 19,788
------- ------- ------- -------
Net income $10,431 $13,736 $19,775 $33,585
======= ======= ======= =======
Earnings Per Share:
Basic $0.32 $0.42 $0.61 $1.04
===== ===== ===== =====
Diluted $0.32 $0.42 $0.60 $1.03
===== ===== ===== =====
Weighted-Average
Shares Outstanding:
Basic 32,511,597 32,412,280 32,493,797 32,387,865
========== ========== ========== ==========
Diluted 33,070,041 32,553,518 32,826,466 32,618,370
========== ========== ========== ==========
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 25, 2009 AND SEPTEMBER 26, 2008
(in thousands)
Nine Months Ended
-----------------
September 25, September 26,
2009 2008
---- ----
Cash Flows from Operating Activities:
Net income $19,775 $33,585
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,169 12,695
Gain on extinguishment of debt, net (1,295) -
Amortization of debt issuance costs 829 852
Amortization of discount on 8 1/8%
senior subordinated notes 108 109
Write-off of deferred acquisition costs 672 -
Share-based compensation 3,075 2,994
Excess tax benefits from share-based
compensation (1) (140)
Deferred income taxes 6,113 (667)
Provision for doubtful accounts 7,330 3,571
Loss on disposal of property and
equipment 13 79
Changes in assets and liabilities which
provided (used) cash:
Accounts receivable - trade (8,959) (16,230)
Inventory 26,720 (38,971)
Prepaid expenses and other current assets 4,478 1,703
Other assets 774 615
Accounts payable 16,061 8,428
Accrued expenses and other current
liabilities 8,751 2,159
Accrued interest 2,394 4,144
Income taxes 1,321 513
Other liabilities (145) (1,394)
------ ------
Net cash provided by operating
activities 102,183 14,045
Cash Flows from Investing Activities:
Purchase of property and equipment, net (9,078) (18,712)
Purchase of short-term investments (1,830) (35,531)
Proceeds from sales and maturities of
short-term investments 203 82,121
Purchase of businesses, net of cash
acquired (381) (10,330)
------ ------
Net cash (used in) provided by
investing activities (11,086) 17,548
Cash Flows from Financing Activities:
Increase (Decrease) in purchase card
payable, net 492 2,324
Repayment of term debt (56,488) (2,489)
Repayment of 8 1/8% senior subordinated notes (34,157) -
Payments on capital lease obligations (177) (164)
Proceeds from stock options exercised 17 611
Excess tax benefits from share-based
compensation 1 140
Treasury stock acquired to satisfy
minimum statutory tax withholding
requirements (34) (808)
------ ------
Net cash used in financing activities (90,346) (386)
Effect of exchange rate changes on cash
and cash equivalents 216 (70)
------ ------
Net increase in cash and cash equivalents 967 31,137
Cash and cash equivalents at beginning of
period 62,724 4,975
------ ------
Cash and cash equivalents at end of period $63,691 $36,112
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $11,278 $16,823
======= =======
Income taxes, net of refunds $5,371 $21,124
======= =======
Schedule of Non-Cash Investing Activities:
Property acquired through lease
incentives $3,009 $-
======= =======
Adjustments to liabilities assumed and
goodwill on businesses acquired $732 $-
======= =======
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND NINE MONTHS ENDED SEPTEMBER 25, 2009 AND SEPTEMBER 26, 2008
(in thousands)
Free Cash Flow Three Months Ended Nine Months Ended
------------------ -----------------
September 25, September 26, September 25, September 26,
2009 2008 2009 2008
---- ---- ---- ----
Net cash from
operating
activities $29,847 $(13,129) $102,183 $14,045
Less capital
expenditures (3,390) (5,172) (9,078) (18,712)
------ ------ ------ -------
Free cash flow $26,457 $(18,301) $93,105 $(4,667)
======= ======== ======= =======
We define free cash flow as net cash provided by operating activities, as
defined under 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
------------------
September 25, September 26,
2009 2008 % Variance
---- ---- ----------
Net sales $277,948 $317,504 -12.5%
Less acquisitions:
(3,718) -
------ ------
Organic sales $274,230 $317,504 -13.6%
======== ======== =====
Daily sales:
Ship days 63 63
Average daily
sales (1) $4,412 $5,040 -12.5%
====== ====== =====
Average organic
daily sales (2) $4,353 $5,040 -13.6%
====== ====== =====
Daily Sales Calculations Nine Months Ended
-----------------
September 25, September 26,
2009 2008 % Variance
---- ---- ----------
Net sales $804,661 $918,079 -12.4%
Less acquisitions:
(13,058) -
------- ---
Organic sales $791,603 $918,079 -13.8%
======== ======== =====
Daily sales:
Ship days 191 191
Average daily
sales (1) $4,213 $4,807 -12.4%
====== ====== =====
Average organic
daily sales (2) $4,145 $4,807 -13.8%
====== ====== =====
(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 GAAP
and it should be considered in addition to, but not as a substitute for,
other measures of financial performance reported in accordance with GAAP,
such as net sales. Management utilizes average organic daily sales as an
operating performance measure in conjunction with GAAP measures such as
net sales.
Adjusted EBITDA Three Months Ended Nine Months Ended
------------------ -----------------
September 25, September 26, September 25, September 26,
2009 2008 2009 2008
---- ---- ---- ----
Adjusted EBITDA:
Net income (GAAP) $10,431 $13,736 $19,775 $33,585
Interest expense 4,577 7,054 14,673 21,800
Interest income (76) (202) (151) (1,090)
Loss (Gain) on
extinguishment
of debt 248 - (1,295) -
Income tax provision 6,794 8,709 12,694 19,788
Depreciation
and amortization 4,847 4,457 14,169 12,695
----- ----- ------ ------
Adjusted EBITDA $26,821 $33,754 $59,865 $86,778
======= ======= ======= =======
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 GAAP. Accordingly,
Adjusted EBITDA should not be used in isolation or as a substitute for
other measures of financial performance reported in accordance with 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 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 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 GAAP.
Interline Brands, Inc.
