Interline Brands, Inc. Announces Second Quarter 2010 Sales and Earnings Results
JACKSONVILLE, Fla., July 30 /PRNewswire-FirstCall/ -- Interline Brands, Inc. (NYSE: IBI) ("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 June 25, 2010.
Sales for the second quarter of 2010 increased 0.1% compared to the second quarter of 2009. Earnings per diluted share were $0.27 for the second quarter of 2010, an increase of 35% compared to earnings per diluted share of $0.20 for the same period last year. Earnings per diluted share for the second quarter of 2010 included a $0.02 per diluted share charge associated with ongoing improvements to our distribution network. Earnings per diluted share for the second quarter of 2009 included charges for similar distribution network enhancements totaling $0.04 per diluted share.
Michael J. Grebe, Interline's Chairman and Chief Executive Officer, commented, "Overall, we are pleased to report further signs of market stabilization, as well as improved financial results driven by our strategic initiatives." Mr. Grebe continued, "We achieved significant year-over-year margin expansion in the second quarter, generating a gross margin of 37.6%, up 120 basis points, and improving our EBITDA margin by 170 basis points to 9.1%. We remain encouraged by some important trends this quarter, and we are pleased to deliver improved operational performance as we continue to bring more products to more customers from a single platform."
Second Quarter 2010 Performance
Sales for the quarter ended June 25, 2010 were $270.2 million, a 0.1% increase compared to sales of $269.9 million in the comparable 2009 period. Interline's facilities maintenance end-market, which comprised 74% of sales, declined 0.7% during the second quarter. The professional contractor end-market, which comprised 15% of sales, increased 1.1% for the quarter. The specialty distributor end-market, which comprised 11% of sales, increased 3.2% for the quarter.
"Although not broad-based, certain markets returned to modest growth this quarter - including the multi-family housing, professional contractor, and specialty distributor markets. Importantly, within multi-family housing we were pleased to see an improving renovation environment, which was adversely impacted during the height of the economic crisis," said Mr. Grebe.
Gross profit increased $3.3 million, or 3.3%, to $101.6 million for the second quarter of 2010, compared to $98.3 million for the second quarter of 2009. As a percentage of net sales, gross profit increased 120 basis points to 37.6% compared to 36.4% for the second quarter of 2009.
"We are continuing to improve Interline's competitive position by strengthening our customer capabilities, improving our operating scale, and reducing the capital requirements of our business," commented Kenneth D. Sweder, Interline's Chief Operating Officer. "In particular, we have reduced our fixed cost base with the introduction of larger, more efficient distribution centers across our network. These newer distribution centers will enable us to maximize near-term cost savings while facilitating additional organic growth opportunities and greater profitability as we provide our customers access to even more products that can be delivered quickly."
Selling, general and administrative ("SG&A") expenses for the second quarter of 2010 decreased $1.4 million, or 1.8%, to $77.5 million from $78.9 million for the second quarter of 2009. As a percentage of net sales, SG&A expenses were 28.7% compared to 29.2% for the second quarter of 2009.
As a result, second quarter 2010 operating income of $19.2 million, or 7.1% of sales, increased 27.5% compared to $15.0 million, or 5.6% of sales, in the second quarter of 2009.
Year-To-Date 2010 Performance
Sales for the six months ended June 25, 2010 were $515.4 million, a 2.2% decrease over sales of $526.7 million in the comparable 2009 period.
Gross profit increased $1.8 million, or 0.9%, to $196.7 million for the six months ended June 25, 2010, compared to $194.9 million in the prior year period. As a percentage of sales, gross profit increased to 38.2% from 37.0% in the comparable 2009 period.
SG&A expenses for the six months ended June 25, 2010 were $154.7 million, or 30.0% of sales, compared to $162.8 million, or 30.9% of sales, for the six months ended June 26, 2009.
Operating income was $32.3 million, or 6.3% of sales, for the six months ended June 25, 2010 compared to $23.1 million, or 4.4% of sales, for the six months ended June 26, 2009, representing an increase of 40.2%.
Earnings per diluted share were $0.44 for the six months ended June 25, 2010, an increase of 52% over earnings per diluted share of $0.29 for the six months ended June 26, 2009.
Earnings per diluted share for the six months ended June 25, 2010 included a $0.03 per diluted share charge associated with ongoing efforts to enhance the Company's distribution network and a $0.02 per diluted share charge associated with previously announced changes in the Company's executive management. Earnings per diluted share for the six months ended June 26, 2009 included 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 a reduction in force and consolidation of certain distribution centers, a $0.01 per diluted share charge associated with the adoption of a new accounting standard on business combinations, and a $0.03 per diluted share gain on the early extinguishment of debt.
During the six months ended June 25, 2010, cash and cash equivalents increased $12.4 million to $111.6 million primarily from cash flow from operating activities of $16.1 million.
Business Outlook
Mr. Grebe stated, "We continue to have a level of cautious optimism for continued signs of a market recovery, though it remains challenging to assess its trajectory. Irrespective of the timing of a full recovery, we remain laser-focused on the execution of our key initiatives with precision and speed. We continue to expand sales and operating capabilities with the goal of delivering greater value to our customers, and we have the financial strength to invest in growth and efficiency initiatives for the long term."
Conference Call
Interline will host a conference call on July 30, 2010 at 9:00 a.m. Eastern 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 88732570. This recording will expire on August 13, 2010.
About Interline
Interline Brands, Inc. is a leading distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations 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. For more information, visit the Company's website at http://www.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 26, 2010 and in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 2009. 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 |
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PHONE: 904-421-1441 |
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INTERLINE BRANDS, INC. AND SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||
AS OF JUNE 25, 2010 AND DECEMBER 25, 2009 |
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(in thousands, except share and per share data) |
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June 25, |
December 25, |
|||||||
2010 |
2009 |
|||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ 111,622 |
$ 99,223 |
||||||
Short-term investments |
1,312 |
1,479 |
||||||
Accounts receivable - trade (net of allowance for |
||||||||
doubtful accounts of $10,485 and $12,975) |
135,608 |
120,004 |
||||||
Inventory |
191,453 |
173,422 |
||||||
Prepaid expenses and other current assets |
20,252 |
18,552 |
||||||
Deferred income taxes |
17,085 |
16,459 |
||||||
Total current assets |
477,332 |
429,139 |
||||||
Property and equipment, net |
49,582 |
46,804 |
||||||
Goodwill |
319,151 |
319,006 |
||||||
Other intangible assets, net |
121,413 |
124,835 |
||||||
Other assets |
9,004 |
9,054 |
||||||
Total assets |
$ 976,482 |
$ 928,838 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities: |
||||||||
Accounts payable |
$ 108,387 |
$ 85,982 |
||||||
Accrued expenses and other current liabilities |
42,909 |
41,715 |
||||||
Accrued interest |
980 |
1,050 |
||||||
Income taxes payable |
2,637 |
1,285 |
||||||
Current portion of long-term debt |
- |
1,590 |
||||||
Capital lease - current |
94 |
222 |
||||||
Total current liabilities |
155,007 |
131,844 |
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Long-Term Liabilities: |
||||||||
Deferred income taxes |
40,374 |
40,369 |
||||||
Long-term debt and capital lease, net of current portion |
304,164 |
304,092 |
||||||
Other liabilities |
794 |
798 |
||||||
Total liabilities |
500,339 |
477,103 |
||||||
Commitments and contingencies |
||||||||
Senior preferred stock; $0.01 par value, 20,000,000 authorized; |
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none outstanding as of June 25, 2010 and December 25, 2009 |
- |
- |
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Stockholders' Equity: |
||||||||
Common stock; $0.01 par value, 100,000,000 authorized; 33,127,211 issued |
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and 33,004,911 outstanding as of June 25, 2010 and 32,640,957 issued |
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and 32,524,251 outstanding as of December 25, 2009 |
331 |
326 |
||||||
Additional paid-in capital |
586,490 |
576,747 |
||||||
Accumulated deficit |
(110,084) |
(124,745) |
||||||
Accumulated other comprehensive income |
1,579 |
1,483 |
||||||
Treasury stock, at cost, 122,300 shares as of June 25, 2010 |
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and 116,706 as of December 25, 2009 |
(2,173) |
(2,076) |
||||||
Total stockholders' equity |
476,143 |
451,735 |
||||||
Total liabilities and stockholders' equity |
$ 976,482 |
$ 928,838 |
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INTERLINE BRANDS, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) |
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THREE AND SIX MONTHS ENDED JUNE 25, 2010 AND JUNE 26, 2009 |
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(in thousands, except share and per share data) |
|||||
Three Months Ended |
Six Months Ended |
||||
June 25, |
June 26, |
June 25, |
June 26, |
||
2010 |
2009 |
2010 |
2009 |
||
Net sales |
$ 270,154 |
$ 269,920 |
$ 515,372 |
$ 526,713 |
|
Cost of sales |
168,587 |
171,605 |
318,658 |
331,802 |
|
Gross profit |
101,567 |
98,315 |
196,714 |
194,911 |
|
Operating Expenses: |
|||||
Selling, general and administrative expenses |
77,470 |
78,898 |
154,699 |
162,818 |
|
Depreciation and amortization |
4,935 |
4,392 |
9,686 |
9,026 |
|
Total operating expenses |
82,405 |
83,290 |
164,385 |
171,844 |
|
Operating income |
19,162 |
15,025 |
32,329 |
23,067 |
|
(Loss) Gain on extinguishment of debt, net |
- |
(177) |
- |
1,543 |
|
Interest expense |
(4,366) |
(4,717) |
(8,719) |
(10,096) |
|
Interest and other income |
301 |
440 |
725 |
730 |
|
Income before income taxes |
15,097 |
10,571 |
24,335 |
15,244 |
|
Income taxes |
6,006 |
4,149 |
9,674 |
5,900 |
|
Net income |
$ 9,091 |
$ 6,422 |
$ 14,661 |
$ 9,344 |
|
Earnings Per Share: |
|||||
Basic |
$ 0.28 |
$ 0.20 |
$ 0.45 |
$ 0.29 |
|
Diluted |
$ 0.27 |
$ 0.20 |
$ 0.44 |
$ 0.29 |
|
Weighted-Average Shares Outstanding: |
|||||
Basic |
33,036,531 |
32,488,744 |
32,855,343 |
32,484,897 |
|
Diluted |
33,888,918 |
32,856,916 |
33,629,770 |
32,704,682 |
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INTERLINE BRANDS, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
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SIX MONTHS ENDED JUNE 25, 2010 AND JUNE 26, 2009 |
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(in thousands) |
||||
Six Months Ended |
||||
June 25, |
June 26, |
|||
2010 |
2009 |
|||
Cash Flows from Operating Activities: |
||||
Net income |
$ 14,661 |
$ 9,344 |
||
Adjustments to reconcile net income to net cash provided by |
||||
operating activities: |
||||
Depreciation and amortization |
9,930 |
9,322 |
||
Gain on extinguishment of debt, net |
- |
(1,543) |
||
Amortization of debt issuance costs |
515 |
562 |
||
Amortization of discount on 8⅛% senior subordinated notes |
74 |
72 |
||
Write-off of deferred acquisition costs |
- |
672 |
||
Share-based compensation |
2,021 |
1,955 |
||
Excess tax benefits from share-based compensation |
(754) |
- |
||
Deferred income taxes |
(579) |
2,340 |
||
Provision for doubtful accounts |
2,419 |
6,324 |
||
Loss on disposal of property and equipment |
54 |
12 |
||
Changes in assets and liabilities which provided (used) cash: |
||||
Accounts receivable - trade |
(18,002) |
(4,673) |
||
Inventory |
(17,997) |
12,830 |
||
Prepaid expenses and other current assets |
(1,699) |
2,747 |
||
Other assets |
50 |
(190) |
||
Accounts payable |
22,399 |
27,428 |
||
Accrued expenses and other current liabilities |
1,033 |
4,002 |
||
Accrued interest |
(70) |
(684) |
||
Income taxes |
2,065 |
1,957 |
||
Other liabilities |
4 |
(141) |
||
Net cash provided by operating activities |
16,124 |
72,336 |
||
Cash Flows from Investing Activities: |
||||
Purchase of property and equipment, net |
(8,228) |
(5,688) |
||
Purchase of short-term investments |
(2,678) |
- |
||
Proceeds from sales and maturities of short-term investments |
2,845 |
- |
||
Purchase of businesses, net of cash acquired |
(145) |
(381) |
||
Net cash used in investing activities |
(8,206) |
(6,069) |
||
Cash Flows from Financing Activities: |
||||
(Decrease) Increase in purchase card payable, net |
(1,463) |
726 |
||
Repayment of term debt |
(1,590) |
(26,162) |
||
Repayment of 8⅛% senior subordinated notes |
- |
(34,157) |
||
Payments on capital lease obligations |
(130) |
(116) |
||
Proceeds from stock options exercised |
6,972 |
- |
||
Excess tax benefits from share-based compensation |
754 |
- |
||
Treasury stock acquired to satisfy minimum statutory tax withholding requirements |
(97) |
- |
||
Net cash provided by (used in) financing activities |
4,446 |
(59,709) |
||
Effect of exchange rate changes on cash and cash equivalents |
35 |
92 |
||
Net increase in cash and cash equivalents |
12,399 |
6,650 |
||
Cash and cash equivalents at beginning of period |
99,223 |
62,724 |
||
Cash and cash equivalents at end of period |
$ 111,622 |
$ 69,374 |
||
Supplemental Disclosure of Cash Flow Information: |
||||
Cash paid during the period for: |
||||
Interest |
$ 8,066 |
$ 10,196 |
||
Income taxes, net of refunds |
$ 7,938 |
$ 1,749 |
||
Schedule of Non-Cash Investing Activities: |
||||
Property acquired through lease incentives |
$ 1,620 |
$ 3,009 |
||
Adjustments to liabilities assumed and goodwill on businesses acquired |
$ - |
$ 732 |
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INTERLINE BRANDS, INC. AND SUBSIDIARIES |
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RECONCILIATION OF NON-US GAAP INFORMATION (UNAUDITED) |
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THREE AND SIX MONTHS ENDED JUNE 25, 2010 AND JUNE 26, 2009 |
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(in thousands) |
|||||||
Free Cash Flow |
Three Months Ended |
Six Months Ended |
|||||
June 25, |
June 26, |
June 25, |
June 26, |
||||
2010 |
2009 |
2010 |
2009 |
||||
Net cash provided by operating activities |
$ 58 |
$ 9,761 |
$ 16,124 |
$ 72,336 |
|||
Less capital expenditures |
(4,495) |
(3,295) |
(8,228) |
(5,688) |
|||
Free cash flow |
$ (4,437) |
$ 6,466 |
$ 7,896 |
$ 66,648 |
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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. |
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Daily Sales Calculations |
Three Months Ended |
Six Months Ended |
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June 25, |
June 26, |
June 25, |
June 26, |
|||||||||
2010 |
2009 |
% Variance |
2010 |
2009 |
% Variance |
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Net sales |
$ 270,154 |
$ 269,920 |
0.1% |
$ 515,372 |
$ 526,713 |
-2.2% |
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Daily sales: |
||||||||||||
Ship days |
64 |
64 |
128 |
128 |
||||||||
Average daily sales (1) |
$ 4,221 |
$ 4,218 |
0.1% |
$ 4,026 |
$ 4,115 |
-2.2% |
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(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. |
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Adjusted EBITDA |
Three Months Ended |
Six Months Ended |
||||||||
June 25, |
June 26, |
June 25, |
June 26, |
|||||||
2010 |
2009 |
2010 |
2009 |
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Adjusted EBITDA: |
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Net income (GAAP) |
$ 9,091 |
$ 6,422 |
$ 14,661 |
$ 9,344 |
||||||
Interest expense |
4,366 |
4,717 |
8,719 |
10,096 |
||||||
Interest income |
(22) |
(71) |
(54) |
(75) |
||||||
Gain on extinguishment of debt, net |
- |
177 |
- |
(1,543) |
||||||
Income taxes |
6,006 |
4,149 |
9,674 |
5,900 |
||||||
Depreciation and amortization |
5,027 |
4,541 |
9,930 |
9,322 |
||||||
Adjusted EBITDA |
$ 24,468 |
$ 19,935 |
$ 42,930 |
$ 33,044 |
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Adjusted EBITDA margin |
9.1% |
7.4% |
8.3% |
6.3% |
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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 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. |
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SOURCE Interline Brands, Inc.
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