Interline Brands, Inc. Announces Fourth Quarter and Fiscal 2009 Sales and Earnings Results
JACKSONVILLE, Fla., Feb. 19 /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 fourth quarter and fiscal year ended December 25, 2009.
Sales for the fourth quarter of 2009 decreased 8.3% compared to the fourth quarter of 2008. Earnings per diluted share were $0.19 for the fourth quarter of 2009, a decrease of 14% compared to earnings per diluted share of $0.22 for the same period last year. Earnings per diluted share for the fourth quarter of 2009 included a $0.01 per diluted share charge associated with our ongoing efforts to improve our distribution network. Earnings per diluted share for the fourth quarter of 2008 included a $0.05 per diluted share gain on the early extinguishment of debt and a $0.01 per diluted share charge associated with the closing of certain professional contractor showrooms.
Sales for 2009 decreased 11.4% compared to 2008. Earnings per diluted share were $0.79 for 2009, a decrease of 37% compared to earnings per diluted share of $1.25 for 2008.
Michael Grebe, Interline's Chairman and Chief Executive Officer, commented, "In 2009, we carefully evaluated our cost structure, our supply chain, and our go-to-market strategies. We took decisive action throughout the year to strengthen the operations of our business to better serve our customers and offer greater earnings leverage to our shareholders over time." Mr. Grebe continued, "We executed these initiatives while delivering record free cash flow and strengthening our balance sheet. For the full year 2009, we generated over $133 million in free cash flow, and paid down $98 million of debt. We are pleased to close out the year in a stronger financial position than when we entered it, and I am very optimistic about the future of our Company."
Fourth Quarter 2009 Performance
Sales for the quarter ended December 25, 2009 were $254.6 million, an 8.3% decrease compared to sales of $277.6 million in the comparable 2008 period. Interline's facilities maintenance end-market, which comprised 71% of sales, declined 3.7% during the fourth quarter on an average daily sales basis. The professional contractor end-market, which comprised 17% of sales, declined 20.2% for the quarter. The specialty distributor end-market, which comprised 12% of sales, declined 15.0% for the quarter.
"Institutional sales were essentially flat compared to the fourth quarter of 2008, driven by the strength of our core MRO and janitorial-sanitation products. In addition, multi-family housing sales were down approximately 3% for the quarter when excluding our Renovations Plus business, which focuses on larger discretionary multi-family housing remodeling projects," said Mr. Grebe.
Gross profit decreased $6.0 million, or 5.9%, to $96.8 million for the fourth quarter of 2009, compared to $102.8 million for the fourth quarter of 2008. As a percentage of net sales, gross profit increased 100 basis points to 38.0% compared to 37.0% for the fourth quarter of 2008.
Selling, general and administrative ("SG&A") expenses for the fourth quarter of 2009 decreased $5.2 million, or 6.4%, to $77.1 million from $82.4 million for the fourth quarter of 2008. As a percentage of net sales, SG&A expenses were 30.3% compared to 29.7% for the fourth quarter of 2008.
As a result, fourth quarter 2009 operating income of $14.7 million, or 5.8% of sales, decreased 7.8% compared to $15.9 million, or 5.7% of sales, in the fourth quarter of 2008.
Diluted earnings per share for the fourth quarter of 2009 were $0.19, a decrease of 14% compared to diluted earnings per share of $0.22 for the fourth quarter of 2008.
Fiscal Year 2009 Performance
"During 2009 we made significant progress towards streamlining our distribution platform and improving our working capital efficiency. In 2010, we will continue to pursue our strategy of larger and more productive distribution centers that will enable us to further improve the customer experience and enhance our ability to scale our business as conditions improve," commented Kenneth D. Sweder, Interline's Chief Operating Officer.
Sales for the year ended December 25, 2009 were $1.06 billion, an 11.4% decrease compared to sales of $1.20 billion for the year ended December 26, 2008. Average organic daily sales decreased 12.5% for the year.
Gross profit decreased $55.7 million, or 12.4%, to $394.0 million for the year ended December 25, 2009, compared to $449.6 million in 2008. As a percentage of net sales, gross profit decreased to 37.2% from 37.6% for the year ended December 26, 2008.
SG&A expenses for the year ended December 25, 2009 were reduced by $27.7 million, or 8.0%, to $316.1 million compared to $343.8 million for the year ended December 26, 2008. As a percentage of net sales, SG&A expenses were 29.8% compared to 28.8% in 2008. SG&A expenses for 2009 include $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. SG&A expenses for 2008 include $3.0 million of costs related to employee separation benefits and the closing of certain professional contractor showrooms.
Operating income was $59.2 million, or 5.6% of sales, for the year ended December 25, 2009 compared to $89.0 million, or 7.4% of sales, for the year ended December 26, 2008, a 33.4% decrease.
Earnings per diluted share were $0.79 for the year ended December 25, 2009, a decrease of 37% compared to earnings per diluted share of $1.25 for the year ended December 26, 2008.
Cash flow from operating activities for the year ended December 25, 2009 was $144.3 million compared to $56.2 million for the year ended December 26, 2008. During the year ended December 25, 2009, the Company repaid $98.0 million of debt.
Business Outlook
Mr. Grebe stated, "We believe the worst may now be behind us, but visibility remains low and we anticipate continued variability within our end-markets. Looking ahead to the first quarter of 2010, we expect the demand environment to remain similar to what we experienced over the past few months."
"While cash flow generation remains a key focus for us, we do not expect to duplicate the record free cash flow we generated in 2009 as we enter the year leaner and more efficient from a working capital perspective. However, we will continue to carefully manage our working capital, which in combination with our more streamlined distribution network, will yield productivity gains over time. I am proud of the dedication and leadership that my teammates displayed in 2009, and I am encouraged by our execution of key efficiency actions, all aimed at strengthening our position in 2010 and beyond."
Conference Call
Interline will host a conference call on February 19, 2010 at 9:00 a.m. Eastern Standard 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 55217734. This recording will expire on March 5, 2010.
About Interline
Interline Brands, Inc. is a leading international distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations ("MRO") products to a diversified customer base made up of facilities maintenance professionals, professional contractors, and specialty distributors primarily throughout North America, Central America and the Caribbean.
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 period ended September 25, 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: John Ebner
PHONE: 904-421-1441
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 25, 2009 AND DECEMBER 26, 2008
(in thousands, except share and per share data)
December 25, December 26
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $99,223 $62,724
Investments 1,479 -
Accounts receivable - trade (net of
allowance for doubtful accounts
of $12,975 and $12,140) 120,004 139,522
Inventory 173,422 211,200
Prepaid expenses and other
current assets 18,552 22,884
Prepaid income taxes - 1,452
Deferred income taxes 16,459 19,010
------ ------
Total current assets 429,139 456,792
Property and equipment, net 46,804 46,033
Goodwill 319,006 317,117
Other intangible assets, net 124,835 132,787
Other assets 9,054 10,119
----- ------
Total assets $928,838 $962,848
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $85,982 $68,255
Accrued expenses and other
current liabilities 41,715 31,394
Accrued interest 1,050 1,072
Income taxes payable 1,285 -
Current portion of long-term
debt 1,590 1,625
Capital lease - current 222 239
--- ---
Total current liabilities 131,844 102,585
Long-Term Liabilities:
Deferred income taxes 40,369 37,210
Long-term debt, net of
current portion 304,088 401,765
Capital lease - long term 4 226
Other liabilities 798 989
--- ---
Total liabilities 477,103 542,775
Commitments and contingencies
Senior preferred stock; $0.01 par
value, 20,000,000 authorized;
none outstanding as of December 25,
2009 and December 26, 2008 - -
Shareholders' Equity:
Common stock; $0.01 par value,
100,000,000 authorized; 32,640,957
Issued and 32,524,251 outstanding as
of December 25, 2009 and 32,561,360
issued and 32,449,946 outstanding as
of December 26, 2008 326 326
Additional paid-in capital 576,747 571,868
Accumulated deficit (124,745) (150,833)
Accumulated other
comprehensive income 1,483 695
Treasury stock, at cost, 116,706
shares as of December 25, 2009
and 111,414 as of December 26,
2008 (2,076) (1,983)
----- -----
Total shareholders' equity 451,735 420,073
------- -------
Total liabilities and
shareholders' equity $928,838 $962,848
======== ========
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND TWELVE MONTHS ENDED DECEMBER 25, 2009 AND DECEMBER 26, 2008
(in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
--------------------- ----------------------
December December December December
25, 2009 26, 2008 25, 2009 26, 2008
-------- -------- -------- --------
Net sales $254,617 $277,584 $1,059,278 $1,195,663
Cost of sales 157,799 174,744 665,327 746,037
------- ------- ------- -------
Gross profit 96,818 102,840 393,951 449,626
Operating
Expenses:
Selling, general
and adminis-
trative expenses 77,128 82,367 316,137 343,793
Depreciation
and amortization 5,019 4,566 18,580 16,866
----- ----- ------ ------
Total
operating
expense 82,147 86,933 334,717 360,659
------ ------ ------- -------
Operating
income 14,671 15,907 59,234 88,967
(Loss) Gain
on extinguishment
of debt, net (38) 2,775 1,257 2,775
Interest expense (4,371) (6,682) (19,044) (28,482)
Interest and
other income 430 85 1,714 2,198
--- --- ----- -----
Income before
income taxes 10,692 12,085 43,161 65,458
Provision for
Income taxes 4,379 4,837 17,073 24,625
----- ----- ------ ------
Net income $6,313 $7,248 $26,088 $40,833
====== ====== ======= =======
Earnings Per Share:
Basic $0.19 $0.22 $0.80 $1.26
===== ===== ===== =====
Diluted $0.19 $0.22 $0.79 $1.25
===== ===== ===== =====
Weighted-Average Shares
Outstanding:
Basic 32,531,831 32,423,454 32,503,306 32,396,764
========== ========== ========== ==========
Diluted 33,154,625 32,439,039 32,908,510 32,573,552
========== ========== ========== ==========
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 25, 2009 AND DECEMBER 26, 2008
(in thousands)
Twelve Months Ended
-------------------
December 25, December 26,
2009 2008
---- ----
Cash Flows from
Operating Activities:
Net income $26,088 $40,833
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 19,174 17,414
Gain on extinguishment
of debt, net (1,257) (2,890)
Amortization of debt
issuance costs 1,084 1,143
Amortization of discount
on 8-1/8% senior
subordinated notes 145 148
Write-off of deferred
acquisition costs 672 115
Share-based
compensation 3,794 3,782
Excess tax benefits from
share-based
compensation (45) (147)
Deferred income taxes 5,684 (680)
Provision for doubtful
accounts 10,522 6,711
Loss on disposal of
property and equipment 217 191
Changes in assets and
liabilities which
provided (used) cash:
Accounts receivable -
trade 9,216 10,303
Inventory 38,098 (19,148)
Prepaid expenses and
other current assets 4,343 1,461
Other assets 394 661
Accounts payable 17,671 6,871
Accrued expenses and
other current
liabilities 5,880 (6,800)
Accrued interest (22) 234
Income taxes 2,804 (2,558)
Other liabilities (180) (1,452)
---- ------
Net cash provided by
operating activities 144,282 56,192
Cash Flows from
Investing Activities:
Purchase of property and
equipment, net (11,157) (20,582)
Purchase of short-term
investments (3,034) (35,531)
Proceeds from sales and
maturities of short-
term investments 1,557 84,071
Purchase of businesses,
net of cash acquired (1,881) (10,243)
------ -------
Net cash (used in)
provided by investing
activities (14,515) 17,715
Cash Flows from
Financing Activities:
Increase (Decrease) in
purchase card payable,
net 1,379 (2,909)
Repayment of term debt (61,535) (2,486)
Repayment of 8-1/8% senior
subordinated notes (34,157) (9,984)
Payments on capital
lease obligations (239) (218)
Proceeds from stock
options exercised 1,005 656
Excess tax benefits from
share-based
compensation 45 147
Treasury stock acquired
to satisfy minimum
statutory tax
withholding
requirements (58) (1,050)
--- ------
Net cash used in
financing activities (93,560) (15,844)
Effect of exchange rate
changes on cash and
cash equivalents 292 (314)
--- ----
Net increase in cash and
cash equivalents 36,499 57,749
Cash and cash
equivalents at
beginning of period 62,724 4,975
------ -----
Cash and cash
equivalents at end of
period $99,223 $62,724
======= =======
Supplemental Disclosure
of Cash Flow
Information:
Cash paid during the
period for:
Interest $17,697 $16,823
======= =======
Income taxes, net of
refunds $8,958 $21,124
====== =======
Schedule of Non-Cash
Investing Activities:
Property acquired
through lease
incentives $3,009 $-
====== ===
Adjustments to
liabilities assumed and
goodwill on businesses
acquired $8 $1,027
=== ======
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-US GAAP INFORMATION
THREE AND TWELVE MONTHS ENDED DECEMBER 25, 2009 AND DECEMBER 26, 2008
(in thousands)
Free Cash Flow Three Months Ended Twelve Months Ended
------------------ -------------------
December December December December
25, 2009 26, 2008 25, 2009 26, 2008
-------- -------- -------- --------
Net cash provided by
operating activities $42,099 $42,147 $144,282 $56,192
Less capital expenditures (2,079) (1,870) (11,157) (20,582)
------ ------ ------- -------
Free cash flow $40,020 $40,277 $133,125 $35,610
======= ======= ======== =======
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. 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 %
25, 2009 26, 2008 Variance 25, 2009 26, 2008 Variance
------- -------- -------- -------- -------- --------
Net sales $254,617 $277,584 -8.3% $1,059,278 $1,195,663 -11.4%
Less acqui-
sitions: - - (13,058) -
--- --- ------- ---
Organic sales $254,617 $277,584 -8.3% $1,046,220 $1,195,663 -12.5%
======== ======== ==== ========== ========== =====
Daily sales:
Ship days 61 61 252 252
Average daily
sales (1) $4,174 $4,551 -8.3% $4,203 $4,745 -11.4%
====== ====== ==== ====== ====== ====
Average
organic
daily
sales (2) $4,174 $4,551 -8.3% $4,152 $4,745 -12.5%
====== ====== ==== ====== ====== ====
(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 Twelve Months Ended
------------------ -------------------
December December December December
25, 2009 26, 2008 25, 2009 26, 2008
-------- -------- -------- --------
Adjusted EBITDA:
Net income (GAAP) $6,313 $7,248 $26,088 $40,833
Interest expense 4,371 6,682 19,044 28,482
Interest income (64) (15) (215) (1,105)
Loss (Gain) on
extinguishment of debt 38 (2,775) (1,257) (2,775)
Income tax provision 4,379 4,837 17,073 24,625
Depreciation and
amortization 5,005 4,719 19,174 17,414
----- ----- ------ ------
Adjusted EBITDA $20,042 $20,696 $79,907 $107,474
======= ======= ======= ========
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
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 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.
SOURCE Interline Brands, Inc.
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