INTERLINE BRANDS INC 
By JACKSONVILLE, Fla., Nov. 13, 2012 (GLOBE NEWSWIRE) -- Interline Brands, Inc. ("Interline" or the "Company"), a leading distributor and direct marketer of broad-line maintenance, repair and operations ("MRO") products, reported sales and earnings for the fiscal quarter ended September 28, 2012(1).
Third Quarter 2012 Highlights:
- Sales increased 5.7%, driven by growth in facilities maintenance of 8.1%
- Adjusted EBITDA increased 9.9% to $37.5 million or 10.7% of sales
- Net debt(2) totaled $722.4 million
- During the quarter, affiliates of Goldman Sachs Capital Partners ("GS Capital Partners") and P2 Capital Partners, LLC ("P2 Capital Partners" or "P2") completed the acquisition of Interline
"I am very pleased with our performance this quarter as we realized additional traction in our growth initiatives and higher yields from our strategic investments. We generated solid top-line growth driven by continued strength in our core facilities maintenance market, and we delivered an Adjusted EBITDA margin of nearly 11% for the quarter. We believe these results further underscore our value creation potential and strengthen our confidence in our ability to continue driving operating leverage over the long-term," commented Michael J. Grebe, Chairman and Chief Executive Officer.
Mr. Grebe continued, "The third quarter also represented a very important period for our Company, as we completed our transition to a privately-held business. We remain excited to have entered this new chapter in our Company's history. We look forward to maintaining the momentum we've generated and to further enhancing our long-term growth profile. I'd like to take this time to recognize our dedicated associates for their hard work and continued efforts to building a better business that is positioned for long-term value creation."
Third Quarter 2012 Results
Sales for the quarter ended September 28, 2012 were $350.3 million, a 5.7% increase compared to sales of $331.3 million in the comparable 2011 period. On an organic basis, sales increased 5.2% for the quarter. The facilities maintenance end-market, which comprised 78% of sales, increased 8.1% for the quarter, and 7.5% on an organic basis. The professional contractor end-market, which comprised 13% of sales, decreased 0.6% for the quarter. The specialty distributor end-market, which comprised 9% of sales, decreased 4.5% for the quarter.
Gross profit increased $5.0 million, or 4.1%, to $127.4 million for the third quarter of 2012, compared to $122.3 million for the third quarter of 2011. As a percentage of sales, gross profit decreased 50 basis points to 36.4% compared to 36.9% for the third quarter of 2011.
Selling, general and administrative ("SG&A") expenses for the third quarter of 2012 increased $1.9 million, or 2.1%, to $92.2 million from $90.3 million for the third quarter of 2011. As a percentage of sales, SG&A expenses were 26.3% compared to 27.2% for the third quarter of 2011, a decrease of 90 basis points.
Operating loss of $26.8 million for the third quarter of 2012, compared to operating income of $26.2 million in the comparable 2011 period, was impacted by $54.6 million in merger-related expenses associated with the previously disclosed acquisition of Interline. Excluding these items, Adjusted Operating Income increased 6.1% to $27.7 million.
Third quarter 2012 Adjusted EBITDA of $37.5 million, or 10.7% of sales, increased 9.9% compared to $34.1 million, or 10.3% of sales, in the third quarter of 2011.
Net loss for the third quarter of 2012 was $28.4 million compared to net income of $12.4 million in the comparable 2011 period. Net loss for the third quarter of 2012 included a $54.6 million impact due to merger-related expenses associated with the previously disclosed acquisition of Interline and a related $2.2 million loss on the extinguishment of debt.
Kenneth D. Sweder, President and Chief Operating Officer commented, "During the third quarter, we maintained our focus on key growth initiatives, including expanding our national accounts program, offering larger product bundles to our institutional customers and adding incremental revenue from recent personnel investments. Additionally, we were pleased to generate additional scale from our operating network at higher levels of growth."
Operating Free Cash Flow and Leverage
Cash flow used in operating activities for the third quarter of 2012 was $12.9 million compared to cash flow provided by operating activities of $15.1 million for the third quarter of 2011. Cash flow used in operating activities for the third quarter of 2012 included a $34.3 million cash impact due to merger-related expenses associated with the previously disclosed acquisition of Interline. Third quarter 2012 Operating Free Cash Flow increased $8.8 million, or 43.6%, to $28.9 million compared to $20.1 million in the third quarter of 2011.
John A. Ebner, Chief Financial Officer, commented, "Our strong cash flows during the quarter permitted us to repay $11 million in debt and reduce our leverage. Additionally, our capital structure and liquidity position remain strong, which allows us the flexibility to continue to invest and grow our business."
Key capital structure highlights for the third quarter include:
- Quarter-end net-debt to last twelve months Further Adjusted EBITDA ratio of 5.8x
- Cash and cash equivalents of $12.5 million
- Excess availability under revolving credit facility of $156.1 million, net of $69.0 million in borrowings
Year-To-Date 2012 Results
Sales for the nine months ended September 28, 2012 were $998.7 million, a 5.5% increase over sales of $946.4 million in the comparable 2011 period. On an organic basis, sales increased 5.0% for the nine months ended September 28, 2012.
Gross profit increased $14.6 million, or 4.2%, to $364.0 million for the nine months ended September 28, 2012, compared to $349.4 million in the prior year period. As a percentage of sales, gross profit decreased to 36.5% from 36.9% in the comparable 2011 period.
SG&A expenses for the nine months ended September 28, 2012 were $275.7 million, or 27.6% of sales, compared to $266.6 million, or 28.2% of sales, for the nine months ended September 30, 2011.
Operating income of $11.5 million for the nine months ended September 28, 2012, compared to $65.3 million in the comparable 2011 period, was impacted by $56.7 million in merger-related expenses associated with the previously disclosed acquisition of Interline. Excluding these items, Adjusted Operating Income increased to $68.3 million.
Adjusted EBITDA of $94.5 million, or 9.5% of sales, for the nine months ended September 28, 2012 increased 5.8% compared to $89.4 million, or 9.4% of sales, for the nine months ended September 30, 2011.
Net loss for the nine months ended September 28, 2012 was $11.9 million compared to net income of $29.1 million in the comparable 2011 period. Net loss during the nine months ended September 28, 2012 included a $56.7 million impact from merger-related expenses associated with the previously disclosed acquisition of Interline and a related $2.2 million loss on extinguishment of debt.
Cash flow used in operating activities for the nine months ended September 28, 2012 was $4.4 million compared to cash flow generated of $43.1 million for the nine months ended September 30, 2011. Cash flow used in operating activities and free cash flow for the nine months ended September 28, 2012 included a $36.5 million cash impact due to merger-related expenses associated with the previously disclosed acquisition of Interline. Operating Free Cash Flow in the nine months ended September 28, 2012 was $47.8 million compared to Operating Free Cash Flow of $46.5 million in the comparable 2011 period.
About Interline
Interline Brands, Inc. is a leading distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides broad-line MRO products to a diversified customer base 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.
Recent releases and other news, reports and information about the Company can be found on the "Investor Relations" page of the Company's website at http://ir.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 June 29, 2012 and in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2011. 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 to update the information provided today prior to its next earnings release.
(1) To facilitate comparability with the prior year periods, the attached financial statements present combined Successor (September 8, 2012 to September 28, 2012) and Predecessor (June 30, 2012 to September 7, 2012) information for the three months ended September 28, 2012 and Successor (September 8, 2012 to September 28, 2012) and Predecessor (December 31, 2011 to September 7, 2012) information for the nine months ended September 28, 2012. We present the combined information to assist readers in understanding and assessing the trends and significant changes in our results of operations on a comparable basis. The combined presentation does not comply with accounting principles generally accepted in the United States of America, but we believe this combined presentation is appropriate because it provides a more meaningful comparison and more relevant analysis of our results of operations for the three- and nine-month periods ended September 28, 2012, compared to the three and nine month periods ended September 30, 2011, than a presentation of separate historical results for the Predecessor and Successor periods would provide. See our Quarterly Report on Form 10-Q for a presentation of Predecessor and Successor financial statements.
(2) Net debt is comprised of long-term debt of $756.3 million plus $0.9 million of capital leases less cash and cash equivalents of $12.5 million and $22.3 million of unamortized fair value premium resulting from the acquisition of Interline.
| INTERLINE BRANDS, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| AS OF SEPTEMBER 28, 2012 AND DECEMBER 30, 2011 | ||
| (in thousands, except share and per share data) | ||
| September 28, | December 30, | |
| 2012 | 2011 | |
| ASSETS | ||
| Current Assets: | ||
| Cash and cash equivalents | $ 12,509 | $ 97,099 |
| Accounts receivable - trade (net of allowance for doubtful accounts of $22 and $6,457) | 155,496 | 128,383 |
| Inventories | 218,905 | 221,225 |
| Prepaid expenses and other current assets | 27,048 | 26,285 |
| Income taxes receivable | 23,886 | 1,123 |
| Deferred income taxes | 15,094 | 16,738 |
| Total current assets | 452,938 | 490,853 |
| Property and equipment, net | 57,135 | 57,728 |
| Goodwill | 492,445 | 344,478 |
| Other intangible assets, net | 452,549 | 134,377 |
| Other assets | 9,462 | 9,022 |
| Total assets | $ 1,464,529 | $ 1,036,458 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current Liabilities: | ||
| Accounts payable | $ 104,176 | $ 109,438 |
| Accrued expenses and other current liabilities | 47,379 | 51,864 |
| Accrued interest | 13,553 | 2,933 |
| Current portion of capital leases | 554 | 669 |
| Total current liabilities | 165,662 | 164,904 |
| Long-Term Liabilities: | ||
| Deferred income taxes | 181,425 | 51,776 |
| Long-term debt, net of current portion | 756,311 | 300,000 |
| Capital leases, net of current portion | 340 | 726 |
| Other liabilities | 3,998 | 4,607 |
| Total liabilities | 1,107,736 | 522,013 |
| Commitments and contingencies | ||
| Senior preferred stock; $0.01 par value, 20,000,000 authorized; none outstanding as of December 30, 2011 (Predecessor) | -- | -- |
| Stockholders' Equity: | ||
| Common stock; $0.01 par value, 2,500,000 authorized; 1,468,762.5373 issued and outstanding as of September 28, 2012 (Successor) | 15 | -- |
| Common stock; $0.01 par value, 100,000,000 authorized; 33,558,842 issued and 31,596,615 outstanding as of December 30, 2011 (Predecessor) | -- | 335 |
| Additional paid-in capital | 381,533 | 599,923 |
| Accumulated deficit | (24,714) | (59,150) |
| Accumulated other comprehensive (loss) income | (41) | 1,688 |
| Treasury stock, at cost, 1,962,227 as of December 30, 2011 (Predecessor) | -- | (28,351) |
| Total stockholders' equity | 356,793 | 514,445 |
| Total liabilities and stockholders' equity | $ 1,464,529 | $ 1,036,458 |
| INTERLINE BRANDS, INC. AND SUBSIDIARIES | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| THREE AND NINE MONTHS ENDED SEPTEMBER 28, 2012 AND SEPTEMBER 30, 2011 | ||||
| (in thousands, except share and per share data) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 28, | September 30, | September 28, | September 30, | |
| 2012 | 2011 | 2012 | 2011 | |
| Net sales | $ 350,250 | $ 331,349 | $ 998,653 | $ 946,445 |
| Cost of sales | 222,895 | 209,008 | 634,634 | 597,029 |
| Gross profit | 127,355 | 122,341 | 364,019 | 349,416 |
| Operating Expenses: | ||||
| Selling, general and administrative expenses | 92,191 | 90,253 | 275,680 | 266,592 |
| Depreciation and amortization | 7,415 | 5,926 | 20,074 | 17,531 |
| Merger-related expenses | 54,559 | -- | 56,744 | -- |
| Total operating expenses | 154,165 | 96,179 | 352,498 | 284,123 |
| Operating (loss) income | (26,810) | 26,162 | 11,521 | 65,293 |
| Loss on extinguishment of debt | (2,214) | -- | (2,214) | -- |
| Interest expense | (8,588) | (6,138) | (20,690) | (18,327) |
| Interest and other income | 639 | 399 | 1,651 | 1,188 |
| (Loss) income before income taxes | (36,973) | 20,423 | (9,732) | 48,154 |
| Income tax (benefit) provision | (8,597) | 8,041 | 2,158 | 19,033 |
| Net (loss) income | $ (28,376) | $ 12,382 | $ (11,890) | $ 29,121 |
| INTERLINE BRANDS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||||||||||
| NINE MONTHS ENDED SEPTEMBER 28, 2012 AND SEPTEMBER 30, 2011 | ||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||
| September 28, | September 30, | |||||||||||||||||||||||||||||
| 2012 | 2011 | |||||||||||||||||||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||||||||||||||||
| Net (loss) income | $ (11,890) | $ 29,121 | ||||||||||||||||||||||||||||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||||||||
| Depreciation and amortization | 20,074 | 17,531 | ||||||||||||||||||||||||||||
| Amortization of deferred lease incentive obligation | (601) | (596) | ||||||||||||||||||||||||||||
| Amortization of deferred debt financing costs | 1,245 | 1,020 | ||||||||||||||||||||||||||||
| Amortization of OpCo Notes fair value adjustment | (189) | -- | ||||||||||||||||||||||||||||
| Loss on extinguishment of debt, net | 2,214 | -- | ||||||||||||||||||||||||||||
| Share-based compensation | 22,182 | 4,425 | ||||||||||||||||||||||||||||
| Excess tax benefits from share-based compensation | (1,083) | (858) | ||||||||||||||||||||||||||||
| Deferred income taxes | 12,221 | 6,571 | ||||||||||||||||||||||||||||
| Provision for doubtful accounts | 1,344 | 2,256 | ||||||||||||||||||||||||||||
| (Gain) loss on disposal of property and equipment | (126) | 107 | ||||||||||||||||||||||||||||
| Other | (500) | (6) | ||||||||||||||||||||||||||||
| Changes in assets and liabilities which provided (used) cash, net of businesses acquired: | ||||||||||||||||||||||||||||||
| Accounts receivable - trade | (27,858) | (25,690) | ||||||||||||||||||||||||||||
| Inventories | (577) | (2,751) | ||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | (759) | 4,406 | ||||||||||||||||||||||||||||
| Other assets | 38 | 187 | ||||||||||||||||||||||||||||
| Accounts payable | (5,068) | 614 | ||||||||||||||||||||||||||||
| Accrued expenses and other current liabilities | (772) | (3,952) | ||||||||||||||||||||||||||||
| Accrued interest | 7,482 | 5,521 | ||||||||||||||||||||||||||||
| Income taxes | (21,764) | 5,394 | ||||||||||||||||||||||||||||
| Other liabilities | (35) | (238) | ||||||||||||||||||||||||||||
| Net cash (used in) provided by operating activities | (4,422) | 43,062 | ||||||||||||||||||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||||||||||||||||||
| Acquisition of Interline Brands, Inc. | (825,717) | -- | ||||||||||||||||||||||||||||
| Purchases of property and equipment, net | (13,260) | (15,036) | ||||||||||||||||||||||||||||
| Proceeds from sales and maturities of short-term investments | -- | 100 | ||||||||||||||||||||||||||||
| Purchase of businesses, net of cash acquired | (3,278) | (9,695) | ||||||||||||||||||||||||||||
| Net cash used in investing activities | (842,255) | (24,631) | ||||||||||||||||||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||||||||||||||||
| Proceeds from equity contributions, net | 350,886 | -- | ||||||||||||||||||||||||||||
| (Decrease) increase in purchase card payable, net | (1,021) | 3,341 | ||||||||||||||||||||||||||||
| Proceeds from issuance of senior notes | 365,000 | -- | ||||||||||||||||||||||||||||
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Repayment of 8
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