2008-08-04 17:00:00
Interline Brands, Inc. Announces Second Quarter 2008 Sales and Earnings Results
JACKSONVILLE, Fla., Aug. 4 /EMWNews/ -- 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 June 27, 2008. Sales for the second quarter of 2008 decreased 0.6% compared to the comparable 2007 period. Earnings per diluted share were $0.34 for the second quarter of 2008, a decrease of 8% compared to earnings per diluted share of $0.37 in the same period last year. Michael Grebe, Interline's Chairman and Chief Executive Officer commented, "We were pleased to have met our previously stated expectations for the quarter, despite a challenging domestic economy and very tough conditions in several of our end-markets. We are prudently addressing our cost position in the near term to ensure we weather the current economic environment while we build a leaner, more efficient platform from which sustainable value can be created over the long term." Mr. Grebe continued, "At the beginning of this year, we announced that we would continue to invest in our logistics and information infrastructure, as well as in select growth initiatives in the facilities maintenance end-market, in order to ensure long-term, profitable sales and earnings growth for Interline Brands. Our plans are to continue supporting these initiatives. While we have discussed many of these initiatives over the past year, we are stepping out this quarter with a more detailed roadmap. We are announcing plans that should allow us to reduce our annual operating costs by $20 million, and reduce working capital by $20 million over the next several years. We look forward to sharing the details of our plans on our second quarter earnings call tomorrow." Second Quarter 2008 Performance Sales for the quarter ended June 27, 2008 were $311.4 million, a 0.6% decrease compared to sales of $313.2 million in the comparable 2007 period. Interline's facilities maintenance end-market, which comprised 70% of sales, grew 2.5% during the second quarter on an average daily sales basis. This growth was offset by continued weakness in the pro contractor and specialty distributor end-markets. The pro contractor end-market, which comprised 19% of sales, declined 8.7% in the quarter. The specialty distributor end-market, which comprised 11% of sales, declined 4.5% for the quarter. "Sales to the facilities maintenance end-market posted positive growth during the quarter. Sales to the multi-family housing market grew despite extremely difficult 20% organic growth comparables for 2007, while sales in the institutional market continued to grow at a level consistent with historical performance. These results were offset by continued declines in the smaller pro contractor and specialty distributor end-markets," said Mr. Grebe. Gross profit decreased $2.2 million to $115.8 million for the second quarter of 2008. As a percentage of net sales, gross profit was 37.2 percent, a 50 basis point decline compared to the second quarter of 2007. The decline in gross margin was primarily due to a shift in sales mix, particularly related to HVAC products. Selling, general and administrative expenses for the second quarter of 2008 were $88.6 million compared to $86.9 million for the second quarter of 2007. As a percentage of net sales, SG&A expenses were 28.4% compared to 27.8% in the comparable period of 2007. The 60 basis point increase was primarily a result of planned costs related to our Boston, Richmond, and Salt Lake City distribution center consolidations and investments, as well as the two cent per share charge announced on June 16, 2008, associated with the cost to amend certain stock option and employment agreements with William Sanford. As a result, second quarter 2008 operating income of $23.1 million, or 7.4% of sales, decreased 15.5% compared to $27.4 million, or 8.7% of sales in the second quarter of 2007. Diluted earnings per share for the second quarter of 2008 included a $0.03 per share gain due to favorable tax settlements, offset in part by the $0.02 per share charge related to Mr. Sanford. YTD 2008 Performance Sales for the six months ended June 27, 2008 were $600.6 million, a 1.3% decrease over sales of $608.7 million in the comparable 2007 period. Gross profit decreased $4.4 million, or 1.9%, to $225.9 million for the six months ended June 27, 2008, compared to $230.3 million in the comparable 2007 period. As a percentage of net sales, gross profit decreased to 37.6% from 37.8% in the comparable 2007 period. SG&A expenses for the six months ended June 27, 2008 were $173.6 million compared to $172.2 million for the six months ended June 29, 2007. As a percentage of net sales, SG&A expenses were 28.9% compared to 28.3% in the comparable period of 2007. The 60 basis point increase was primarily due to the planned investments, the charge related to Mr. Sanford, as well as higher fixed costs related to rent and other occupancy expenses. Operating income was $44.3 million, or 7.4% of sales, for the six months ended June 27, 2008 compared to $50.8 million, or 8.3% of sales, for the six months ended June 28, 2007, a 12.9% decrease. Earnings per diluted share was $0.61 for the six months ended June 27, 2008, a decrease of 8% over earnings per diluted share of $0.66 for the six months ended June 29, 2007. Business Outlook Mr. Grebe stated, "As we look ahead to the second half of the year we are faced with similar trends that affected our performance in the first half of 2008. On a relative basis, profitability in the second half of the year will be higher than the first half due to a seasonally stronger third and fourth quarter. We therefore expect earnings per share for the third quarter of 2008 to be between 41 and 46 cents. Due to one-time costs including the two cents per share charge related to Mr. Sanford, and four cents per share related to our operational initiatives, which will be discussed in our conference call tomorrow, we expect earnings per share for the full year 2008 to be between $1.40 and $1.50." Conference Call Interline Brands will host a conference call on August 5, 2008 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 54851696. This recording will expire on August 19, 2008. For reference during the call, the Company expects to post certain supplemental slides on the Investor Relations page of its website at http://www.interlinebrands.com.
About Interline
Interline Brands, Inc. is a leading national 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 professional contractors, facilities maintenance
professionals, and specialty distributors across North America 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. References to average daily
sales are defined as sales for a period of time divided by the number of
shipping days in that period of time.
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 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, 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
the AmSan acquisition, 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 June 27, 2008
and in the Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 2007. 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: Tom Tossavainen
PHONE: 904-421-1441
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 27, 2008 AND DECEMBER 28, 2007
(in thousands, except share and per share data)
June 27, December 28,
2008 2007
ASSETS
Current Assets:
Cash and cash equivalents $59,683 $4,975
Short-term investments 3,950 48,540
Accounts receivable - trade (net
of allowance for doubtful accounts
of $8,677 and $7,268) 167,732 154,571
Inventory 210,737 190,974
Prepaid expenses and other
current assets 21,997 23,664
Deferred income taxes 17,702 15,359
Total current assets 481,801 438,083
Property and equipment, net 45,287 37,131
Goodwill 313,638 313,462
Other intangible assets, net 133,346 136,734
Other assets 9,851 11,424
Total assets $983,923 $936,834
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $91,212 $60,159
Accrued expenses and other
current liabilities 37,767 42,175
Accrued interest 845 838
Income taxes payable 1,861 1,173
Current portion of long-term debt 2,300 2,300
Capital lease - current 221 218
Total current liabilities 134,206 106,863
Long-Term Liabilities:
Deferred income taxes 34,808 33,351
Long-term debt, net of current
portion 414,212 416,290
Capital lease - long term 354 464
Other liabilities 1,045 2,452
Total liabilities 584,625 559,420
Commitments and contingencies
Senior preferred stock; $0.01 par
value, 20,000,000 shares authorized;
no shares outstanding as of June
27, 2008 and December 28, 2007 - -
Shareholders' Equity:
Common stock; $0.01 par value,
100,000,000 authorized; 32,470,659
issued and 32,388,966 outstanding
as of June 27, 2008 and 32,350,188
issued and 32,308,105 outstanding
as of December 28, 2007 325 324
Additional paid-in capital 570,827 567,860
Accumulated deficit (171,817) (191,666)
Accumulated other comprehensive
income 1,598 1,751
Treasury stock, at cost, 81,693
shares as of June 27, 2008 and
42,083 shares as of
December 28, 2007 (1,635) (855)
Total shareholders' equity 399,298 377,414
Total liabilities and
shareholders' equity $983,923 $936,834
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND SIX MONTHS ENDED JUNE 27, 2008 AND JUNE 29, 2007
(in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
Net sales $311,429 $313,247 $600,575 $608,650
Cost of sales 195,629 195,280 374,725 378,389
Gross profit 115,800 117,967 225,850 230,261
Operating Expenses:
Selling, general and
administrative expenses 88,585 86,935 173,598 172,240
Depreciation and
amortization 4,102 3,667 7,981 7,218
Total operating expense 92,687 90,602 181,579 179,458
Operating income 23,113 27,365 44,271 50,803
Interest expense (7,004) (8,487) (14,746) (17,047)
Interest and other income 708 743 1,403 1,348
Income before income taxes 16,817 19,621 30,928 35,104
Income tax provision 5,642 7,646 11,079 13,689
Net income $11,175 $11,975 $19,849 $21,415
Earnings Per Share:
Basic $0.35 $0.37 $0.61 $0.66
Diluted $0.34 $0.37 $0.61 $0.66
Weighted-Average Shares
Outstanding:
Basic 32,369,031 32,226,176 32,348,109 32,219,593
Diluted 32,657,047 32,704,448 32,650,806 32,651,384
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 27, 2008 AND JUNE 29, 2007
(in thousands)
Six Months Ended
June 27, June 29,
2008 2007
Cash Flows from Operating Activities:
Net income $19,849 $21,415
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,238 7,644
Amortization of debt issuance costs 565 541
Amortization of discount on 8?%
senior subordinated notes 72 66
Share-based compensation 2,353 3,193
Excess tax benefits from share-based
compensation (147) (196)
Deferred income taxes (1,003) (965)
Provision for doubtful accounts 2,255 1,753
Loss (Gain) on disposal of property
and equipment 19 (12)
Changes in assets and liabilities
which provided (used) cash, net of
business acquired:
Accounts receivable - trade (15,480) (25,383)
Inventory (19,533) (3,327)
Prepaid expenses and other current assets 1,663 2,764
Other assets 1,573 (326)
Accounts payable 31,071 27,904
Accrued expenses and other current
liabilities (3,758) (1,237)
Accrued interest 7 (2,790)
Income taxes payable 832 11
Other liabilities (1,402) 55
Net cash provided by operating
activities 27,174 31,110
Cash Flows from Investing Activities:
Purchase of property and equipment, net (13,540) (7,978)
Purchase of short-term investments (35,531) -
Proceeds from sales and maturities
of short-term investments 80,121 -
Purchase of businesses, net of cash
acquired (536) (3)
Net cash provided by (used in)
investing activities 30,514 (7,981)
Cash Flows from Financing Activities:
(Decrease) Increase in purchase card
payable, net (643) 4,291
Repayment of term debt (2,150) (1,208)
Payment of debt issuance costs - (34)
Proceeds from stock options
exercised 586 349
Excess tax benefits from share-based
compensation 147 196
Treasury stock acquired to satisfy
minimum statutory tax withholding
requirements (772) -
Payments on capital lease obligations (108) (205)
Net cash (used in) provided by
financing activities (2,940) 3,389
Effect of exchange rate changes on
cash and cash equivalents (40) 67
Net increase in cash and cash
equivalents 54,708 26,585
Cash and cash equivalents at
beginning of period 4,975 6,852
Cash and cash equivalents at end of
period $59,683 $33,437
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $14,431 $19,562
Income taxes, net of refunds $12,315 $14,942
Schedule of Non-Cash Investing and Financing Activities:
Adjustments to liabilities assumed
and goodwill on businesses acquired $- $1,298
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND SIX MONTHS ENDED JUNE 27, 2008 AND JUNE 29, 2007
(in thousands)
Adjusted EBITDA Three Months Ended Six Months Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
Adjusted EBITDA:
Net income (GAAP) $11,175 $11,975 $19,849 $21,415
Interest expense 7,004 8,487 14,746 17,047
Interest income (353) (589) (888) (989)
Income tax provision 5,642 7,646 11,079 13,689
Depreciation and amortization 4,245 3,883 8,238 7,644
Adjusted EBITDA $27,713 $31,402 $53,024 $58,806
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, 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 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.
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