JACKSONVILLE, Fla., Feb. 23 /PRNewswire-FirstCall/ -- Interline Brands, Inc. ("Interline" or the "Company") today reported record net sales and net income for 2005.
Adjusted pro forma net income per diluted share for 2005 increased 23% to $1.12 on adjusted pro forma net income of $36.3 million, compared to $0.91 adjusted pro forma net income per diluted share for 2004 on adjusted pro forma net income of $29.3 million last year. GAAP net income per diluted share was $0.89 on net income of $28.8 million in 2005 compared to a loss per diluted share of $25.21 in 2004 on a net loss applicable to common stockholders of $36.3 million.
Net sales for the year ended December 30, 2005 increased $108.0 million, or 15%, to $851.9 million, compared to $743.9 million in 2004. Average organic daily sales grew 11.2% as a result of strong execution of the company's strategic growth initiatives, particularly in professional contractor markets. The acquisition of Copperfield in July 2005 also added $34.3 million in sales in 2005.
Gross profit for the year ended December 30, 2005 increased $40.2 million, or 14%, to $325.6 million from $285.4 million in 2004. Gross profit as a percentage of net sales decreased to 38.2% in 2005 from 38.4% in 2004.
SG&A expenses increased $27.5 million or 14% in 2005 to $229.6 million from $202.1 million in 2004. SG&A expenses as a percentage of net sales decreased to 27.0% in 2005 from 27.2% in 2004. During fiscal year 2005 the Company expended approximately $1.1 million in third party compliance costs associated with Sarbanes-Oxley internal control evaluation requirements.
Operating income increased $20.5 million or 33% to $82.0 million in 2005 from $61.5 million in 2004. Operating income as a percentage of sales was 9.6% in 2005 and 8.3% in 2004. Adjusted operating income, which excludes secondary offering and IPO related expenses, increased $12.3 million, or 17% to $83.0 million in 2005 from $70.7 million in 2004. Adjusted operating income as a percentage of net sales increased to 9.7% in 2005 from 9.5% in 2004. Adjusted EBITDA increased 15% to $96.6 million in 2005 from $83.8 million in 2004.
Cash provided by operations was $38.8 million in 2005, compared to cash used in operating activities of $1.4 million in 2004. The increase in 2005 cash from operations is the result of higher operating income, lower interest expense on lower average debt balances, and lower working capital requirements compared to 2004.
Michael Grebe, Interline's President and Chief Executive Officer, stated, "We are very pleased with such strong performance in 2005, which was our first full fiscal year as a publicly traded company. I am very proud of the leadership and dedication shown by my teammates at Interline. We feel that this performance and our integrated operating platform positions Interline well for the future, and we look forward to strong growth prospects in 2006."
In the fourth quarter of 2005, net sales increased $30.4 million, or 16%, to $226.0 million, compared to $195.5 million in the comparable 2004 period. William Sanford, Chief Operating Officer, commented "Superior revenue growth in the fourth quarter was driven in part by 16% average organic daily sales growth in the Company's pro contractor business. We are excited about our growth opportunities in this key customer base. Additionally, as the cost of home heating rose over the prior year, seasonal demand for Copperfield's alternative home heating products was at record levels."
As a percentage of net sales, gross profit in the fourth quarter of 2005 was 38.4% compared to 38.6% for the same period last year. Operating income increased $11.8 million to $20.9 million, or 9.3% of sales in 2005 from $9.1 million, or 4.7% of sales in 2004. Adjusted operating income for the fourth quarter of 2005 was $20.9 million, or 9.3% of sales compared to $18.3 million, or 9.4% of sales in the same period last year. Adjusted operating income in the fourth quarter included $0.4 million in third party compliance costs associated with Sarbanes-Oxley requirements. Adjusted pro forma earnings per diluted share increased 17% to $0.28 on adjusted pro forma net income of $9.1 million for the fourth quarter of 2005 compared to $0.24 on $7.7 million in adjusted pro forma net income in the same period last year. GAAP earnings per diluted share were $0.28 on net income of $9.1 million in 2005 compared to a loss per diluted share of $2.33 in 2004 on a net loss applicable to common stockholders of $12.3 million.
Business Outlook
Mr. Grebe stated, "We are very pleased with our financial performance in 2005, and look forward to continued strong growth in 2006. We will continue to invest in our successful strategic growth initiatives. We expect to leverage our sales capabilities and distribution network to grow earnings at a higher rate than sales. Our first quarter of 2005 was a very strong quarter and will prove to be a tough comparable period given the dramatic shifts in weather across the Northeast during the first part of 2006. Additionally, Copperfield sales also slow considerably in the first quarter due to seasonality. We therefore expect net income per diluted share for the first quarter of 2006 to be $0.25 - $0.27 and full year 2006 net income per diluted share of $1.26 - $1.29."
In 2006, Statement of Financial Accounting Standard No. 123, "Share-based Payments", requires options to be expensed. The earnings guidance above excludes the effect of expensing options in 2006.
Conference Call
Interline Brands will host a conference call February 24, 2006 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 5291011. This recording will expire on March 10, 2006.
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 approximately 150,000 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 GAAP. Interline's management uses non-GAAP measures in its analysis of the Company's performance. There were certain transactions that were associated with the Company's IPO and follow on secondary offering that affected the period-over-period comparability of the Company's financial statements as presented in conformity with generally accepted accounting principles. These transactions included the recording of IPO and secondary offering related activities such as the expense associated with the early extinguishment of debt and the termination of interest rate swap arrangements, the timing effect of paying off debt with proceeds from the IPO and secondary offering expenses. In order to present a meaningful comparison, the accompanying table below shows the estimated effect on the Company's net income and operating income of recording the IPO transactions as if they had occurred at the beginning of the periods presented and excluding secondary offering expenses. Management believes presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the financial results of the business. These disclosures should not be viewed as a substitute for operating income or net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Investors are encouraged to review the reconciliation of these and other non- GAAP financial measures to the comparable GAAP results available in the accompanying table.
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 material facilities systems disruptions and shutdowns, the failure to locate, acquire and integrate acquisition candidates, the dependence on key employees and other risks described in the Company's Registration Statement on Form S-1 (Commission File No. 333-126515). 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
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 30, 2005 AND DECEMBER 31, 2004
(in thousands except share data)
December 30, 2005 December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,958 $69,178
Accounts receivable - trade (net
of allowance for doubtful
accounts of $8,150 and $6,929) 113,271 98,511
Accounts receivable - other 12,163 17,828
Inventory 165,282 145,532
Prepaid expenses and other
current assets 5,498 3,204
Deferred income taxes 13,945 12,084
Total current assets 313,117 346,337
PROPERTY AND EQUIPMENT, net 29,865 28,767
GOODWILL and OTHER INTANGIBLE ASSETS,
net 353,818 289,209
OTHER ASSETS 8,969 9,067
TOTAL ASSETS $705,769 $673,380
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolver $3,000 $--
Current portion of long-term debt 1,400 1,000
Accounts payable 69,182 53,260
Accrued expenses and other
current liabilities 22,026 22,180
Accrued interest payable 2,152 3,042
Accrued merger expenses 5,408 6,131
Accrued income taxes payable 1,780 7,372
Total current liabilities 104,948 92,985
LONG TERM LIABILITIES:
Deferred income taxes 34,646 25,221
Long-term debt, net of current
portion 280,675 302,275
Capital leases 958 --
TOTAL LIABILITIES 421,227 420,481
COMMITMENTS AND CONTINGENCIES
SENIOR PREFERRED STOCK, $0.01 par
value, 20,000,000 shares authorized,
no shares outstanding as of
December 30, 2005 and December 31,
2004 -- --
STOCKHOLDERS' EQUITY:
Common stock; $0.01 par value,
100,000,000 authorized;
32,220,669 issued and outstanding
as of December 30, 2005 and
32,102,820 as
of December 31, 2004 322 321
Accumulated deficit (273,037) (301,836)
Additional paid-in capital 558,184 556,346
Deferred compensation (1,919) (2,787)
Accumulated other comprehensive
income 992 855
TOTAL STOCKHOLDERS' EQUITY 284,542 252,899
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $705,769 $673,380
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND TWELVE MONTHS ENDED DECEMBER 30, 2005 AND DECEMBER 31, 2004
(in thousands, except share and per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
2005 2004 2005 2004
NET SALES $225,960 $195,522 $851,928 $743,905
COST OF SALES 139,270 119,987 526,334 458,516
Gross Profit 86,690 75,535 325,594 285,389
OPERATING EXPENSES :
Selling, general and
administrative expenses 62,401 54,022 229,595 202,084
Depreciation and
amortization 3,350 3,186 13,049 12,600
Secondary offering and
IPO related expenses 9 9,215 932 9,215
Total Operating
Expense 65,760 66,423 243,576 223,899
OPERATING INCOME 20,930 9,112 82,018 61,490
CHANGE IN FAIR VALUE OF
INTEREST RATE SWAPS -- 2,031 -- 8,232
LOSS ON EXTINGUISHMENT OF
DEBT -- (660) (10,340) (660)
INTEREST EXPENSE (6,709) (9,370) (25,419) (39,933)
INTEREST INCOME 64 70 236 135
OTHER INCOME 165 154 639 454
Income before income
taxes 14,450 1,337 47,134 29,718
PROVISION FOR INCOME TAXES 5,327 371 18,335 11,617
NET INCOME 9,123 966 28,799 18,101
PREFERRED STOCK DIVIDENDS -- (13,234) -- (54,389)
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCKHOLDERS $9,123 $(12,268) $28,799 $(36,288)
INCOME (LOSS) PER COMMON
SHARE - BASIC $0.28 $(2.33) $0.90 $(25.21)
INCOME (LOSS) PER COMMON
SHARE - DILUTED $0.28 $(2.33) $0.89 $(25.21)
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 32,077,904 5,265,970 32,004,007 1,439,322
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 32,576,080 5,265,970 32,443,772 1,439,322
INTERLINE BRANDS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
YEARS ENDED DECEMBER 30, 2005 AND DECEMBER 31, 2004
(in thousands)
2005 2004
OPERATING ACTIVITIES:
Net Income $28,799 $18,101
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,049 12,600
Amortization and write-off of debt
issuance costs 3,900 2,558
Redemption premium on 11.5% senior
subordinated notes 8,050 --
Stock based compensation 965 --
Loss on disposal of property and
equipment 53 10
Change in fair value of interest
rate swaps -- (12,793)
Interest income on shareholder notes -- (30)
Deferred income taxes (2,364) 1,709
Provision for doubtful accounts 2,828 2,040
Income tax effect from exercise of
stock options 215 --
Forgiveness of shareholder notes -- 1,875
Changes in assets and liabilities,
net of business acquired:
Accounts receivable - trade (13,874) (16,866)
Accounts receivable - other 3,521 (2,863)
Inventory (10,175) (26,231)
Prepaid expenses and other
current assets (1,869) 1,056
Other assets 99 484
Accrued interest payable (890) (2,760)
Accounts payable 11,282 10,080
Accrued expenses and other
current liabilities 1,137 2,846
Accrued merger expenses (428) (591)
Accrued income taxes payable (5,460) 7,372
Net cash provided by (used in)
operating activities 38,838 (1,403)
INVESTING ACTIVITIES :
Purchase of property and
equipment, net (7,920) (6,763)
Purchase of business, net of
cash acquired (73,213) (566)
Net cash used in investing
activities (81,133) (7,329)
FINANCING ACTIVITIES :
Increase in revolver, net 3,000 --
Repayment of long-term debt (71,200) (38,250)
Proceeds from financing
transaction 50,000 --
Payment of redemption premium
on 11.5% senior subordinated
notes (8,050) --
Payment of debt issuance costs (838) (1,296)
Initial public offering costs (665) (4,057)
Proceeds from sale of common
stock -- 174,609
Redemption of preferred stock -- (55,000)
Proceeds from stock options
exercised 1,693 --
Proceeds from exercise of
underwriters over-
allotment options 2,333 --
Payments on capital lease
obligations (335) --
Net cash (used in) provided by
financing activities (24,062) 76,006
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 137 292
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (66,220) 67,566
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 69,178 1,612
CASH AND CASH EQUIVALENTS, END OF
PERIOD $2,958 $69,178
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for :
Interest $23,363 $40,726
Income taxes (net of refunds) $26,003 $1,937
SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Dividends on preferred stock $-- $54,389
Adjustment to goodwill on
business acquired $8,443 $2,193
Exercise of underwriters
over-allotment options $-- $2,333
Conversion of preferred stock
to common stock $-- $379,001
INTERLINE BRANDS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Information (Unaudited)
(In thousands, except share and per share data)
Three Months Ended Fiscal Year
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
2005 2004 2005 2004
Income before income
taxes (GAAP) $14,450 $1,337 $47,134 $29,718
Add back the following
items:
Eliminate the change in
fair value of interest
rate swaps -- (2,031) -- (8,232)
Loss on early
extinguishment
of debt -- 660 10,340 660
Adjust interest expense
associated with use of
IPO proceeds -- 3,190 456 16,785
to repay or redeem
portions of the
previously existing term
loan and outstanding
11.5% notes and elimination
of amortization of deferred
financing fees
Additional expense
for secondary offering 9 -- 932 --
Additional compensation
expense for forgiveness
of -- 9,215 -- 9,215
shareholder loans and
one-time bonuses
Adjusted pro forma income
before income taxes 14,459 12,371 58,862 48,146
Income taxes 5,327 4,685 22,529 18,820
Adjusted pro forma net income $9,132 $7,686 $36,333 $29,326
Adjusted pro forma net
income per share -- basic $0.28 $0.24 $1.14 $0.92
Adjusted pro forma net
income per share -- diluted $0.28 $0.24 $1.12 $0.91
Weighted Average Shares
outstanding -- basic 32,077,904 31,917,000 32,004,007 31,917,000
Weighted Average Shares
outstanding -- diluted 32,576,080 32,102,820 32,443,772 32,102,820
Three Months Ended Fiscal Year
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
Adjusted Operating Income 2005 2004 2005 2004
Net Sales $225,960 $195,522 $851,928 $743,905
Operating Income 20,930 9,112 82,018 61,490
Secondary Offering and
IPO related expenses 9 9,215 932 9,215
Adjusted Operating Income 20,939 18,327 82,950 70,705
Adjusted Operating Income
percentage of net sales 9.3% 9.4% 9.7% 9.5%
Daily Sales Calculations Three Months Ended
Dec. 30, Dec. 31,
2005 2004 % Variance
Net Sales $225,960 $195,522 15.6%
Less : Acquisition $(22,544)
Organic Sales $203,416 $195,522 4.0%
Daily Sales:
Ship Days 61 65
Average Daily Sales $3,704 $3,008 23.1%
Average Organic
Daily Sales $3,335 $3,008 10.9%
Daily Sales Calculations Fiscal Year
Dec. 30, Dec. 31,
2005 2004 % Variance
Net Sales $851,928 $743,905 14.5%
Less : Acquisition $(34,250)
Organic Sales $817,678 $743,905 9.9%
Daily Sales:
Ship Days 253 256
Average Daily Sales $3,367 $2,906 15.9%
Average Organic
Daily Sales $3,232 $2,906 11.2%
Average daily sales are defined as sales for a period of time divided by the number of shipping days in that period of time.
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.
Three Months Ended Fiscal Year
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
2005 2004 2005 2004
Adjusted EBITDA:
Net income (GAAP) $9,123 $966 $28,799 $18,101
Interest expense 6,709 9,370 25,419 39,933
Interest income (64) (70) (236) (135)
Change in fair value
of interest rate swaps -- (2,031) -- (8,232)
Loss on extinguishment
of debt -- 660 10,340 660
Secondary offering and
IPO related expenses 9 9,215 932 9,215
Provision for income taxes 5,327 371 18,335 11,617
Depreciation and
amortization 3,350 3,186 13,049 12,600
Adjusted EBITDA $24,454 $21,667 $96,638 $83,759
Adjusted EBITDA is presented herein because we believe it to be relevant and useful information to our investors because it is used by our management to evaluate the operating performance of our business and 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, including change in fair value of interest rate swaps, loss on extinguishment of debt, and secondary offering and IPO related expenses 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. However, Adjusted EBITDA is not a measure of financial performance under GAAP and Adjusted EBITDA 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 income. 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 net income and gross margin.
CONTACT: Tom Tossavainen
904-421-1441
First Call Analyst:
FCMN Contact: toneal@interlinebrands.com
