• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Interline Brands, Inc. Announces First Quarter 2009 Sales and Earnings Results

Posted on: Friday, 1 May 2009, 05:53 CDT

JACKSONVILLE, Fla., May 1 /PRNewswire-FirstCall/ --Interline Brands, 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 quarter ended March 27, 2009.

Sales for the first quarter of 2009 decreased 11.2% compared to the comparable 2008 period. Earnings per diluted share were $0.09 for the first quarter of 2009, a decrease of 67% compared to earnings per diluted share of $0.27 in the same period last year. Earnings per diluted share for the first quarter of 2009 include a $0.06 per diluted share charge associated with higher reserves for bad debt expense resulting from a customer seeking Chapter 11 bankruptcy protection, a $0.05 per diluted share charge associated with the previously announced reduction in force and consolidation of certain distribution centers, a $0.01 per diluted share charge associated with the adoption of FAS 141R - a new accounting standard on business combinations, and a $0.03 per diluted share gain on the early extinguishment of debt.

Michael Grebe, Interline's Chairman and Chief Executive Officer, commented, "The team here at Interline has continued to manage the business carefully in this current turbulent environment, responding to market conditions in the near-term without compromising our long-term strategy and vision. Since the beginning of the economic downturn our focus has been, and will continue to be, managing the business prudently by adjusting our cost structure, driving productivity and maximizing cash flow generation." Mr. Grebe continued, "We generated a record $60 million in free cash flow during the first quarter for a total of over $100 million in free cash flow over the past two quarters. This far exceeds our previously stated target of $30 to $40 million of free cash flow generated over the same 6 month period. We also delivered a 2 cent net benefit in cost actions in the quarter, and are well on our way to delivering a 31 cent net benefit to earnings in 2009 from our various cost initiatives. I am confident we are taking the appropriate steps to build a more cost effective and flexible operating platform to navigate today's economy, while positioning our company to maximize its long-term potential."

Sales for the quarter ended March 27, 2009 were $256.8 million, an 11.2% decrease compared to sales of $289.1 million in the comparable 2008 period. Average organic daily sales decreased 12.9% for the quarter. Interline's facilities maintenance end-market, which comprised 72% of sales, declined 6.7% during the first quarter on an average daily sales basis, and declined 9.2% on an average organic daily sales basis. The pro contractor end-market, which comprised 16% of sales, declined 27.3% in the quarter and the specialty distributor end-market, which comprised 12% of sales, declined 9.4% for the quarter.

"Overall, visibility remains low and the environment continues to be challenged by broader economic headwinds that we do not expect to abate in the near term. Certain maintenance, repair, and operations products, particularly our janitorial and sanitation offering, remain a more steady part of our portfolio. We continue to focus our sales channels to capitalize on these products and the relative stability of their demand. Unfortunately, continued weakness in the housing sector coupled with increasing softness in the apartment market have adversely impacted our performance and more than offset relative gains in our institutional markets. As residential and remodeling activity resumes to more normalized levels, we look forward to significant performance improvements in these areas," said Mr. Grebe.

Gross profit decreased $13.5 million to $96.6 million for the first quarter of 2009. As a percentage of net sales, gross profit was 37.6% compared to 38.1% for the first quarter of 2008.

SG&A expenses for the quarter were $83.9 million, down $1.1 million or 1.3% from the same period last year, and represented 32.7% of sales for the quarter. SG&A expenses included a $3.0 million charge for bad debt resulting from a customer seeking Chapter 11 bankruptcy protection, $2.4 million of expenses related to our previously announced reduction in force and the planned consolidation of certain distribution centers, and a $0.7 million charge associated with the adoption of FAS 141R - a new accounting standard on business combinations.

As a result, first quarter 2009 operating income of $8.0 million, or 3.1% of sales, decreased 62.0% compared to $21.2 million, or 7.3% of sales, in the first quarter of 2008.

Cash flow from operating activities for the first quarter of 2009 was $62.6 million compared to $29.1 million for the first quarter of 2008. During the first quarter of 2009, the Company opportunistically used $34.2 million to repurchase and retire $36.4 million of its 8.125% senior subordinated notes due in 2014 in the open market, generating a $0.03 per diluted share gain on the early extinguishment of debt.

Business Outlook

Mr. Grebe stated, "Looking ahead, we expect to see continued soft demand in most of our major markets, but we are confident that we are positioned well to compete successfully in both the near and long term. We are working to strengthen our sales efforts in our most stable markets; we are executing our cost actions to drive higher profitability; and we are continuing our ongoing rationalization of our distribution network to improve our efficiencies.

"Based on our exceptional cash flow generation year-to-date, we are providing a revised cash flow forecast for the full year 2009. We now expect to generate at least $65 million in free cash flow for the year, up significantly compared to our previous target of at least $35 million. Our revised cash flow guidance reflects the seasonality of our cash flows since we typically invest in inventory to support higher demand during the seasonally stronger second and third quarters. We expect this to be the case in 2009, but at more modest levels than prior years."

Conference Call

Interline Brands will host a conference call on May 1, 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 95696101. This recording will expire on May 14, 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 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.

INTERLINE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH 27, 2009 AND DECEMBER 26, 2008 (in thousands, except share and per share data) March 27, December 26, 2009 2008 ASSETS Current Assets: Cash and cash equivalents $80,691 $62,724 Accounts receivable - trade (net of allowance for doubtful accounts of $16,576 and $12,140) 126,414 139,522 Inventory 199,598 211,200 Income tax receivable 2,035 1,452 Prepaid expenses and other current assets 17,595 22,884 Deferred income taxes 18,812 19,010 Total current assets 445,145 456,792 Property and equipment, net 47,550 46,033 Goodwill 317,242 317,117 Other intangible assets, net 130,556 132,787 Other assets 9,378 10,119 Total assets $949,871 $962,848 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $86,106 $68,255 Accrued expenses and other current liabilities 36,045 31,394 Accrued interest 3,553 1,072 Current portion of long-term debt - 1,625 Capital lease - current 246 239 Total current liabilities 125,950 102,585 Long-Term Liabilities: Deferred income taxes 38,273 37,210 Long-term debt, net of current portion 360,943 401,765 Capital lease - long term 161 226 Other liabilities 829 989 Total liabilities 526,156 542,775 Commitments and contingencies Senior preferred stock; $0.01 par value, 20,000,000 shares authorized; no shares outstanding as of March 27, 2009 and December 26, 2008 - - Shareholders' Equity: Common stock; $0.01 par value, 100,000,000 authorized; 32,562,497 issued and 32,451,083 outstanding as of March 27, 2009 and 32,561,360 issued and 32,449,946 outstanding as of December 26, 2008 326 326 Additional paid-in capital 572,691 571,868 Accumulated deficit (147,911) (150,833) Accumulated other comprehensive income 592 695 Treasury stock, at cost, 111,414 shares as of March 27, 2009 and December 26, 2008 (1,983) (1,983) Total shareholders' equity 423,715 420,073 Total liabilities and shareholders' equity $949,871 $962,848 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS THREE MONTHS ENDED MARCH 27, 2009 AND MARCH 28, 2008 (in thousands, except share and per share data) Three Months Ended March 27, March 28, 2009 2008 Net sales $256,793 $289,146 Cost of sales 160,197 179,096 Gross profit 96,596 110,050 Operating Expenses: Selling, general and administrative expenses 83,920 85,013 Depreciation and amortization 4,634 3,879 Total operating expense 88,554 88,892 Operating income 8,042 21,158 Gain on extinguishment of debt, net 1,720 - Interest expense (5,379) (7,742) Interest and other income 290 695 Income before income taxes 4,673 14,111 Income tax provision 1,751 5,437 Net income $2,922 $8,674 Earnings Per Share: Basic $0.09 $0.27 Diluted $0.09 $0.27 Weighted-Average Shares Outstanding: Basic 32,438,989 32,327,187 Diluted 32,552,442 32,644,551 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 27, 2009 AND MARCH 28, 2008 (in thousands) Three Months Ended March 27, March 28, 2009 2008 Cash Flows from Operating Activities: Net income $2,922 $8,674 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,781 3,993 Gain on extinguishment of debt, net (1,720) - Amortization of debt issuance costs 287 281 Amortization of discount on 8 1/8% senior subordinated notes 37 36 Write-off of deferred acquisition costs 672 - Share-based compensation 823 552 Excess tax benefits from share-based compensation - (24) Deferred income taxes 1,261 396 Provision for doubtful accounts 4,992 1,077 Loss on disposal of property and equipment 1 - Changes in assets and liabilities which provided (used) cash: Accounts receivable - trade 8,082 1,341 Inventory 11,557 67 Prepaid expenses and other current assets 5,723 3,231 Other assets 70 1,865 Accounts payable 17,858 4,943 Accrued expenses and other current liabilities 3,487 (3,284) Accrued interest 2,481 4,114 Income taxes (582) 1,830 Other liabilities (157) 19 Net cash provided by operating activities 62,575 29,111 Cash Flows from Investing Activities: Purchase of property and equipment, net (2,393) (6,500) Purchase of short-term investments - (35,531) Proceeds from sales and maturities of short- term investments - 80,071 Purchase of businesses, net of cash acquired (126) (8) Net cash (used in) provided by investing activities (2,519) 38,032 Cash Flows from Financing Activities: Decrease in purchase card payable, net (1,677) (841) Repayment of term debt (6,163) (1,575) Repayment of 8 1/8% senior subordinated notes (34,157) - Proceeds from stock options exercised - 505 Excess tax benefits from share-based compensation - 141 Payments on capital lease obligations (58) (53) Net cash used in financing activities (42,055) (1,823) Effect of exchange rate changes on cash and cash equivalents (34) (59) Net increase in cash and cash equivalents 17,967 65,261 Cash and cash equivalents at beginning of period 62,724 4,975 Cash and cash equivalents at end of period $80,691 $70,236 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $2,740 $3,706 Income taxes, net of refunds $1,181 $2,990 Schedule of Non-Cash Investing Activities: Property acquired through lease incentives and on account $2,412 $- INTERLINE BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP INFORMATION THREE MONTHS ENDED MARCH 27, 2009 AND MARCH 28, 2008 (in thousands) Free Cash Flow Three Months Three Months Six Months Ended Ended Ended March 27, December 26, March 27, 2009 2008 2009 Net cash from operating activities $62,575 $42,147 $104,722 Less capital expenditures (2,393) (1,870) (4,263) Free cash flow $60,182 $40,277 $100,459 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 March 27, March 28, 2009 2008 % Variance Net sales $256,793 $289,146 -11.2% Less acquisitions: (4,920) - Organic sales $251,873 $289,146 -12.9% Daily sales: Ship days 64 64 Average daily sales (1) $4,012 $4,518 -11.2% Average organic daily sales (2) $3,936 $4,518 -12.9% (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 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 March 27, March 28, 2009 2008 Adjusted EBITDA: Net income (GAAP) $2,922 $8,674 Interest expense 5,379 7,742 Interest income (4) (535) Gain on extinguishment of debt (1,720) - Income tax provision 1,751 5,437 Depreciation and amortization 4,781 3,993 Adjusted EBITDA $13,109 $25,311 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.

CONTACT: Tom Tossavainen PHONE: 904-421-1441

SOURCE Interline Brands, Inc.

Source: PR Newswire

More News in this Category