Interline Brands, Inc. Announces Fourth Quarter and Fiscal 2008 Sales and Earnings Results
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
Sales for the fourth quarter of 2008 decreased 7.5% compared to the
comparable 2007 period. Earnings per diluted share were
quarter of 2008, a decrease of 46% compared to earnings per diluted share of
quarter of 2008 include a
extinguishment of debt and a
the closing of certain professional contractor showrooms.
Sales for 2008 decreased 3.5% compared to 2007. Earnings per diluted
share were
share of
gain on the early extinguishment of debt as well as
costs associated with previously announced employee separation benefits, the
closing of certain underperforming professional contractor showrooms, and the
consolidation and expansion of certain logistics operations.
commented, “Overall, I am pleased with how our team has responded to the
challenging environment. In spite of headwinds outside of our control, we
continued to manage the business prudently by adjusting our cost structure and
maximizing cash flow generation.” Mr. Grebe continued, “I am pleased to
report that we generated over
quarter alone, ahead of our previously stated expectations. In addition,
before related one-time costs, we have announced
since August of last year. We are taking the appropriate steps to weather this
challenging environment and I am confident we will emerge a stronger, more
profitable company over the long term.”
Fourth Quarter 2008 Performance
Sales for the quarter ended
decrease compared to sales of
Average organic daily sales decreased 9.3% for the quarter. Interline’s
facilities maintenance end-market, which comprised 67% of sales, declined 5.7%
during the fourth quarter on an average daily sales basis, and declined 8.4%
on an average organic daily sales basis. The pro contractor end-market, which
comprised 20% of sales, declined 14.6% in the quarter and the specialty
distributor end-market, which comprised 13% of sales, declined 5.5% for the
quarter.
“During the fourth quarter we continued to see solid performance in
certain areas, including everyday repair and maintenance items as well as
janitorial and sanitation products. However, these pockets of strength were
offset by declines in larger ticket items resulting from tighter customer
budgets. In addition, larger renovation projects are being put on hold by
customers, and product upgrades viewed as discretionary are being cut
entirely. Going forward, we will continue to further align our sales efforts
strategically with the dynamics of the market to capitalize on all potential
sales opportunities, and will continue to seek favorable cross-selling
opportunities of our broad product offerings to our diverse customer base,”
said Mr. Grebe.
Gross profit decreased
quarter of 2008. As a percentage of net sales, gross profit was 37.0%
compared to 39.4% for the fourth quarter of 2007.
Selling, general and administrative expenses (“SG&A”) for the fourth
quarter of 2008 included
closing certain professional contractor showrooms. Including these expenses,
selling, general and administrative expenses for the fourth quarter of 2008
decreased
quarter of 2007. As a percentage of net sales, SG&A expenses were 29.7%
compared to 28.3% in the comparable period of 2007. This percentage increase
was the result of the
debt provisions, as well as rent and related occupancy expenses on a lower
sales base.
As a result, fourth quarter 2008 operating income of
5.7% of sales, decreased 46.1% compared to
the fourth quarter of 2007.
Diluted earnings per share for the fourth quarter of 2008 were
decrease of 46% over diluted earnings per share of
quarter of 2007. Fourth quarter earnings include a
gain on the early extinguishment of debt, as the Company opportunistically
used
senior subordinated notes due in 2014.
Fiscal Year 2008 Performance
Sales for the year ended
decrease compared to sales of
sales decreased 4.3% for the year.
Gross profit decreased
year ended
percentage of net sales, gross profit decreased to 37.6% from 38.2% in 2007.
SG&A expenses for the year ended
compared to
expenses for 2008 include
benefits and closing certain professional contractor showrooms. As a
percentage of net sales, SG&A expenses were 28.8% compared to 27.9% in 2007.
The percentage increase was primarily due to the planned costs associated with
the operational initiatives, higher bad debt provisions, the cost of further
consolidating and improving the logistics network, as well as rent and related
occupancy expenses on a lower sales base.
Operating income was
ended
Earnings per diluted share were
2008
ended
gain on the early extinguishment of debt as well as
associated with previously announced employee separation benefits, the closing
of certain underperforming professional contractor showrooms, the
consolidation of the logistics operations in
the opening of the new west coast national distribution center in
City, UT
Business Outlook
Mr. Grebe stated, “As we look ahead, we see continued but varying levels
of resistance in each of our core end markets. We have taken steps to prepare
the Company for what we expect will be a difficult environment in 2009 by
continuing to prudently manage the business, with a particular focus on
generating significant cash flow.
“Despite the very challenging business climate in which we are all
operating, it is important to reiterate our strong underlying business model,
which is based on high quality brands focused in repair and replacement, the
increasing efficiency of our distribution network and our continued effective
management of capital. For these reasons, I am confident in our fundamentals
and I believe we are doing what is necessary both to navigate the current
environment as well as to continue to build a more efficient and profitable
company for the long term.”
Conference Call
Interline Brands will host a conference call on
a.m. Eastern Standard Time
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 84758115. This recording will expire on
About Interline
Interline Brands, Inc. is a leading national distributor and direct
marketer with headquarters in
maintenance, repair and operations products to a diversified customer base
made up of professional contractors, facilities maintenance professionals, and
specialty distributors primarily throughout
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 period ended
2008
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 DECEMBER 26, 2008 AND DECEMBER 28, 2007
(in thousands, except share and per share data)
December 26, December 28,
2008 2007
ASSETS
Current Assets:
Cash and cash equivalents $62,724 $4,975
Short-term investments - 48,540
Accounts receivable - trade (net
of allowance for doubtful accounts
of $12,140 and $7,268) 139,522 154,571
Inventory 211,200 190,974
Income tax receivable 1,452 -
Prepaid expenses and other current assets 22,884 23,664
Deferred income taxes 19,010 15,359
Total current assets 456,792 438,083
Property and equipment, net 46,033 37,131
Goodwill 317,117 313,462
Other intangible assets, net 132,787 136,734
Other assets 10,119 11,424
Total assets $962,848 $936,834
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $68,255 $60,159
Accrued expenses and other current
liabilities 31,394 42,175
Accrued interest 1,072 838
Income tax payable - 1,173
Current portion of long-term debt 1,625 2,300
Capital lease - current 239 218
Total current liabilities 102,585 106,863
Long-Term Liabilities:
Deferred income taxes 37,210 33,351
Long-term debt, net of current portion 401,765 416,290
Capital lease - long term 226 464
Other liabilities 989 2,452
Total liabilities 542,775 559,420
Commitments and contingencies
Senior preferred stock; $0.01 par
value, 20,000,000 shares authorized;
no shares outstanding as of December
26, 2008 and December 28, 2007 - -
Shareholders' Equity:
Common stock; $0.01 par value, 100,000,000
authorized; 32,561,360 issued and 32,449,946
outstanding as of December 26, 2008 and
32,350,188 issued and 32,308,105 outstanding
as of December 28, 2007 326 324
Additional paid-in capital 571,868 567,860
Accumulated deficit (150,833) (191,666)
Accumulated other comprehensive
income 695 1,751
Treasury stock, at cost, 111,414
shares as of December 26, 2008
and 42,083 shares as of December
28, 2007 (1,983) (855)
Total shareholders' equity 420,073 377,414
Total liabilities and
shareholders' equity $962,848 $936,834
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND TWELVE MONTHS ENDED DECEMBER 26, 2008 AND DECEMBER 28, 2007
(in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
December December December December
26, 2008 28, 2007 26, 2008 28, 2007
Net sales $277,584 $300,184 $1,195,663 $1,239,027
Cost of sales 174,744 181,983 746,037 765,137
Gross profit 102,840 118,201 449,626 473,890
Operating Expenses:
Selling, general and
administrative
expenses 82,367 84,952 343,793 345,297
Depreciation and
amortization 4,566 3,741 16,866 14,499
Total operating
expense 86,933 88,693 360,659 359,796
Operating income 15,907 29,508 88,967 114,094
Gain on extinguishment of
debt, net 2,775 - 2,775 -
Interest expense (6,682) (8,287) (28,482) (33,923)
Interest and other income 85 1,080 2,198 3,251
Income before income
taxes 12,085 22,301 65,458 83,422
Income tax provision 4,837 8,742 24,625 32,460
Net income $7,248 $13,559 $40,833 $50,962
Earnings Per Share:
Basic $0.22 $0.42 $1.26 $1.58
Diluted $0.22 $0.41 $1.25 $1.56
Weighted-Average Shares
Outstanding:
Basic 32,384,785 32,274,711 32,364,492 32,241,906
Diluted 32,439,039 32,816,399 32,573,552 32,703,430
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 26, 2008 AND DECEMBER 28, 2007
(in thousands)
Twelve Months Ended
December 26, December 28,
2008 2007
Cash Flows from Operating Activities:
Net income $40,833 $50,962
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 17,414 15,114
Gain on extinguishment of debt, net (2,775) -
Amortization of debt issuance costs 1,143 1,094
Amortization of discount on 8 1/8%
senior subordinated notes 148 135
Share-based compensation 3,782 5,377
Excess tax benefits from share-based
compensation (147) (252)
Deferred income taxes (680) 516
Provision for doubtful accounts 6,711 4,277
Loss on disposal of property
and equipment 191 139
Changes in assets and liabilities
which provided (used) cash, net of
business acquired:
Accounts receivable - trade 10,303 (15,030)
Inventory (19,148) 11,098
Prepaid expenses and other current assets 1,461 (306)
Other assets 661 (1,277)
Accounts payable 6,871 (6,771)
Accrued expenses and other current
liabilities (6,800) (4,374)
Accrued interest 234 (2,678)
Income taxes (2,558) (396)
Other liabilities (1,452) 102
Net cash provided by operating
activities 56,192 57,730
Cash Flows from Investing Activities:
Purchase of property and equipment, net (20,582) (14,906)
Purchase of short-term investments (35,531) (168,962)
Proceeds from sales and maturities
of short-term investments 84,071 120,422
Purchase of businesses, net of cash
acquired (10,243) (765)
Net cash provided by (used in)
investing activities 17,715 (64,211)
Cash Flows from Financing Activities:
(Decrease) Increase in purchase card
payable, net (2,909) 6,579
Repayment of term debt (2,486) (2,613)
Repayment of 8 1/8% senior subordinated
notes (9,984) -
Payment of debt issuance costs - (34)
Proceeds from stock options exercised 656 564
Excess tax benefits from share-based
compensation 147 252
Treasury stock acquired to satisfy
minimum statutory tax withholding
requirements (1,050) -
Payments on capital lease obligations (218) (307)
Net cash (used in) provided by
financing activities (15,844) 4,441
Effect of exchange rate changes on
cash and cash equivalents (314) 163
Net increase in cash and cash equivalents 57,749 (1,877)
Cash and cash equivalents at
beginning of period 4,975 6,852
Cash and cash equivalents at end of period $62,724 $4,975
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for :
Interest $26,864 $36,140
Income taxes, net of refunds $28,905 $32,646
Schedule of Non-Cash Investing and
Financing Activities:
Adjustments to liabilities assumed
and goodwill on businesses acquired $1,027 $305
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND TWELVE MONTHS ENDED DECEMBER 26, 2008 AND DECEMBER 28, 2007
(in thousands)
Free Cash Flow Three Months Twelve Months
Ended Ended
December 26, December 26,
2008 2008
Net cash from operating activities $42,147 $56,192
Less capital expenditures (1,870) (20,582)
Free cash flow $40,277 $35,610
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 Twelve Months Ended
December December % December December %
26, 2008 28, 2007 Variance 26, 2008 28, 2007 Variance
Net sales $277,584 $300,184 -7.5% $1,195,663 $1,239,027 -3.5%
Less
acquisitions: (5,399) - (9,434) -
Organic sales $272,185 $300,184 -9.3% $1,186,229 $1,239,027 -4.3%
Daily sales:
Ship days 61 61 252 252
Average daily
sales (1) $4,551 $ 4,921 -7.5% $4,745 $4,917 -3.5%
Average organic
daily sales
(2) $4,462 $ 4,921 -9.3% $4,707 $4,917 -4.3%
(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.
Adjusted EBITDA Three Months Ended Twelve Months Ended
December December December December
26, 2008 28, 2007 26, 2008 28, 2007
Adjusted EBITDA:
Net income (GAAP) $7,248 $13,559 $40,833 $50,962
Interest expense 6,682 8,287 28,482 33,923
Interest income (15) (624) (1,105) (2,007)
Gain on extinguishment of debt (2,775) - (2,775) -
Income tax provision 4,837 8,742 24,625 32,460
Depreciation and amortization 4,719 3,833 17,414 15,114
Adjusted EBITDA $20,696 $33,797 $107,474 $130,452
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, change
in fair value of interest rate swaps, cumulative effect of change in
accounting principle, (gain) loss on extinguishment of debt, secondary
offering and IPO related expenses, provision for income taxes and
depreciation and amortization. Adjusted EBITDA is presented herein because
we believe it to be relevant and useful information 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.
SOURCE Interline Brands, Inc.