JACKSONVILLE, Fla., Aug. 7 /PRNewswire-FirstCall/ -- Interline Brands, Inc. ("Interline" or the "Company"), a leading distributor and direct marketer of maintenance, repair and operations products, reported earnings for the fiscal quarter ended June 30, 2006. Sales for the second quarter of 2006 increased 15.6% over the comparable 2005 period, on the same number of shipping days. Adjusted pro forma earnings per diluted share were $0.30 for the second quarter of 2006, an increase of 15% over earnings per diluted share of $0.26 in the same period last year. GAAP loss per share was $0.09 for the second quarter of 2006 compared to GAAP earnings per diluted share of $0.26 for the second quarter of 2005. As previously disclosed, the Company recorded a $20.7 million loss on early extinguishment of debt in connection with the refinancing of its indebtedness on June 23, 2006.
Michael Grebe, Interline's President and Chief Executive Officer, commented, "Interline's business remained strong in the second quarter. We benefited from favorable business conditions in our key customer markets in most regions of the country. The most important recent event for Interline was the acquisition of AmSan, a leading national distributor and direct marketer of janitorial and sanitation products, with annual revenue of approximately $245 million. AmSan is off to a good start, and our integration efforts are proceeding according to our expectations. We are very excited to enter this $23 billion market by acquiring this high-quality organization and we look forward to a bright future with our new associates from AmSan."
Second Quarter 2006 Performance
Sales for the quarter ended June 30, 2006 were $235.4 million, a 15.6% increase over sales of $203.7 million in the comparable 2005 period. Average organic daily sales growth for the second quarter was 11.8%.
"Our revenue growth in the second quarter was driven by strong organic growth in our two largest customer end markets. Facilities maintenance grew ten percent organically, while the professional contractor market grew fourteen percent", said William Sanford, Chief Operating Officer.
Gross profit increased $12.2 million to $89.5 million for the second quarter of 2006, up from $77.3 million in the comparable period of 2005. As a percentage of net sales, gross profit improved to 38.0% during the quarter, up from 37.9% in the comparable 2005 period.
SG&A expenses for the second quarter of 2006 were $63.3 million compared to $54.5 million for the second quarter of 2005. As a percentage of net sales, SG&A expenses were 26.9% compared to 26.8% in the comparable 2005 period. SG&A expenses in the second quarter of 2006 included $0.9 million in share-based compensation expense, which is $0.7 million more than in the prior year quarter.
"Our sales and operations teams performed exceptionally well in the quarter," said Mr. Grebe. "We were able to keep operating expenses in line despite rising fuel costs and fluctuating raw material prices."
Operating income was $22.7 million, or 9.6% of sales, for the second quarter of 2006 compared to $19.5 million, or 9.6% of sales, for the second quarter of 2005, a 16.2% increase. Excluding $0.7 million of incremental share-based compensation, operating income for the second quarter of 2006 was 9.9% of sales, and increased 19.6% over the comparable prior year period.
YTD 2006 Performance
Sales for the six months ended June 30, 2006 were $460.1 million, a 15.0% increase over sales of $400.2 million in the comparable 2005 period. The first six months of 2006 included one less shipping day than the prior year period. Average daily sales for the first six months of 2006 increased 15.9%. Average organic daily sales growth for the six months was 11.2%.
Gross profit increased $22.5 million, or 14.7%, to $175.2 million for the six months ended June 30, 2006, compared to $152.7 million in the comparable period of 2005. As a percentage of net sales, gross profit decreased to 38.1% from 38.2% in the comparable 2005 period, primarily as a result of product mix.
SG&A expenses for the six months ended June 30, 2006 were $125.0 million compared to $108.3 million for the six months ended July 1, 2005. As a percentage of net sales, SG&A expenses were 27.2% compared to 27.1% in the comparable 2005 period. SG&A expenses in the six months ended June 30, 2006 included $1.6 million in share-based compensation expense, which is $1.1 million more than in the prior year period.
Operating income was $43.3 million, or 9.4% of sales, for the six months ended June 30, 2006 compared to $38.1 million, or 9.5% of sales, for the six months ended July 1, 2005, a 13.4% increase. Excluding $1.1 million of incremental share-based compensation, operating income for the six months ended June 30, 2006 was 9.7% of sales, and increased 16.4% over the comparable prior year period.
Adjusted pro forma earnings per diluted share was $0.56 for the six months ended June 30, 2006, an increase of approximately 10% over adjusted pro forma earnings per diluted share of $0.51 in the same period last year. Including a charge of $0.39 per share related to the early extinguishment of debt, GAAP earnings per diluted share was $0.17 for the six months ended June 30, 2006 compared to GAAP earnings per diluted share of $0.31 for the six months ended July 1, 2005.
Business Outlook
Mr. Grebe stated, "Based on our performance so far in 2006, our favorable refinancing, and our confidence in the AmSan acquisition, we are increasing our earnings guidance for the full year. We expect earnings per diluted share for the third quarter to be between $0.38 - $0.40, which includes the estimated effect of all share-based compensation expense. Adjusted pro forma earnings per share for fiscal year 2006 are expected to be $1.29 - $1.31." This estimate of adjusted pro forma earnings per share for fiscal year 2006 of $1.29 - $1.31 excludes a $20.7 million loss on early extinguishment of debt, or $0.39 per share, which was incurred in June 2006 when the Company refinanced its 11 1/2% senior subordinated notes and its senior bank credit facility.
Adjusted pro forma net income per diluted share was $1.12 for fiscal year 2005 and $0.33 for the 3rd quarter of 2005.
GAAP net income per diluted share is projected to be $0.90 - $0.92 for fiscal year 2006 compared to GAAP net income per diluted share of $0.89 for fiscal 2005. GAAP net income per diluted share for the 3rd quarter of 2005 was $0.30.
Conference Call
Interline Brands will host a conference call on August 8, 2006 at 9 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 2968004. This recording will expire on August 22, 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 160,000 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 events which affected the period-over-period comparability of the Company's financial statements as presented in conformity with generally accepted accounting principles. These events include equity offering and refinancing related activities such as losses associated with the early extinguishment of debt, expenses associated with securities offerings, and the timing effect of paying off debt with proceeds from the Company's IPO in the first quarter of 2005. In order to present a meaningful comparison, the accompanying table below shows the estimated effect on the Company's net income of recording the IPO transactions as if they had occurred at the beginning of the first quarter of 2005 and the exclusion of losses associated with the early extinguishment of debt. 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 the failure to realize expected benefits from the American Sanitary acquisition, 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 Annual Report on Form 10-K for the fiscal year ended December 30, 2005 and the Company's Registration Statement on Form S-3 filed May 24, 2006. 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
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF JUNE 30, 2006 AND DECEMBER 30, 2005
(in thousands, except share and per share data)
June 30, December 30,
2006 2005
ASSETS
Current Assets:
Cash and cash equivalents $7,625 $2,958
Accounts receivable - trade (net
of allowance for doubtful accounts
of $9,155 and $8,150) 127,684 113,271
Accounts receivable - other 9,168 12,163
Inventory 171,095 165,282
Prepaid expenses and other current
assets 6,713 5,498
Income taxes receivable 5,767 --
Deferred income taxes 15,562 13,945
Total current assets 343,614 313,117
Property and equipment, net 29,103 29,865
Goodwill 248,708 249,574
Other intangible assets, net 101,208 104,244
Other assets 10,152 8,969
Total assets $732,785 $705,769
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $75,276 $69,182
Accrued expenses and other current
liabilities 23,582 21,574
Accrued merger expenses 4,210 5,408
Accrued interest 493 2,152
Income taxes payable -- 1,780
Revolver -- 3,000
Current portion of long-term debt 1,000 1,400
Capital lease - current 452 452
Total current liabilities 105,013 104,948
Long-Term Liabilities:
Deferred income taxes 33,661 34,646
Long-term debt, net of current portion 300,841 280,675
Capital lease - long term 754 958
Total liabilities 440,269 421,227
Commitments and contingencies
Senior preferred stock, $0.01 par
value, 20,000,000 shares authorized,
no shares outstanding as of June 30,
2006 and December 30, 2005 -- --
Stockholders' equity:
Common stock; $0.01 par value,
100,000,000 authorized;
32,266,349 issued
and 32,242,197 outstanding as of
June 30, 2006 and 32,220,669
issued and outstanding as of
December 30, 2005 323 322
Additional paid-in capital 558,988 558,183
Accumulated deficit (267,461) (273,037)
Accumulated other comprehensive
income 1,164 992
Deferred compensation -- (1,918)
Treasury stock, at cost, 24,152
shares as of June 30, 2006 (498) --
Total stockholders' equity 292,516 284,542
Total liabilities and
stockholders' equity $732,785 $705,769
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND JULY 1, 2005
(in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, July 1, June 30, July 1,
2006 2005 2006 2005
Net sales $235,409 $203,666 $460,083 $400,157
Cost of sales 145,913 126,411 284,879 247,416
Gross profit 89,496 77,255 175,204 152,741
Operating Expenses:
Selling, general and
administrative
expenses 63,303 54,516 124,981 108,256
Depreciation and
amortization 3,509 3,222 6,954 6,338
Total operating
expense 66,812 57,738 131,935 114,594
Operating income 22,684 19,517 43,269 38,147
Loss on extinguishment of
debt (20,700) -- (20,700) (10,340)
Interest expense (6,982) (5,746) (13,934) (12,015)
Interest income 174 6 234 126
Other income 129 119 255 286
(Loss) Income before
income taxes (4,695) 13,896 9,124 16,204
Income tax (benefit)
provision (1,830) 5,331 3,548 6,246
Net (loss) income $(2,865) $8,565 $5,576 $9,958
(Loss) Earnings Per Share:
Basic $(0.09) $0.27 $0.17 $0.31
Diluted $(0.09) $0.26 $0.17 $0.31
Weighted-Average Shares
Outstanding:
Basic 32,121,936 31,959,119 32,106,534 31,938,147
Diluted 32,121,936 32,364,012 32,667,695 32,328,273
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2006 AND JULY 1, 2005
(in thousands)
Six Months Ended
June 30, July 1,
2006 2005
Cash Flows from Operating
Activities:
Net income $5,576 $9,958
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 6,954 6,338
Amortization of debt issuance costs 821 774
Write-off of debt issuance costs 7,037 2,290
Tender and redemption premiums on
11 1/2% senior subordinated notes 13,663 8,050
Share-based compensation 1,622 477
Deferred income taxes (2,390) (855)
Provision for doubtful accounts 1,684 1,176
Loss on disposal of property and
equipment 30 --
Income tax effect from exercise of
stock options -- 215
Changes in assets and liabilities,
net of business acquired:
Accounts receivable - trade (16,097) (18,705)
Accounts receivable - other 2,995 3,519
Inventory (5,813) (4,407)
Prepaid expenses and other current
assets (1,215) (1,401)
Other assets (1,183) (281)
Accounts payable 6,094 9,194
Accrued expenses and other current
liabilities 1,539 (594)
Accrued merger expenses (102) (206)
Accrued interest (1,753) (1,035)
Income taxes payable (7,547) (2,722)
Net cash provided by operating
activities 11,915 11,785
Cash Flows from Investing Activities:
Purchase of property and equipment,
net (3,711) (3,900)
Purchase of businesses, net of cash
acquired (355) (1,602)
Net cash used in investing
activities (4,066) (5,502)
Cash Flows from Financing
Activities:
(Decrease) Increase in revolver, net (3,000) --
Repayment of term debt (148,800) (500)
Repayment of 11 1/2% senior
subordinated notes (130,000) (70,000)
Payment of tender and redemption
premiums on 11 1/2% senior
subordinated notes (13,663) (8,050)
Proceeds from issuance of 8?% senior
subordinated notes, net of discount 198,566 --
Proceeds from issuance of term debt 100,000 --
Payment of debt issuance costs (7,326) --
Proceeds from stock options
exercised 685 1,693
Excess tax benefits from share-based
compensation 388 --
Payments on capital lease
obligations (204) --
Initial public offering costs -- (616)
Proceeds from exercise of
underwriters over-allotment options -- 2,333
Net cash used in financing
activities (3,354) (75,140)
Effect of exchange rate changes on
cash and cash equivalents 172 (68)
Net increase (decrease) in cash and
cash equivalents 4,667 (68,925)
Cash and cash equivalents at
beginning of period 2,958 69,178
Cash and cash equivalents at end of
period $7,625 $253
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for:
Interest $14,854 $10,842
Income taxes, net of refunds $13,526 $9,708
Schedule of Non-Cash Investing and
Financing Activities:
Treasury stock acquired with accrued
expenses and other current
liabilities $498 $--
Adjustments to liabilities assumed
and goodwill on businesses acquired $866 $(16)
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND JULY 1, 2005
(In thousands, except share and per share data)
Three Months Ended
Jun 30, July 1,
2006 2005
(Loss) Income before income taxes
(GAAP) $(4,695) $13,896
Add back the following item:
Loss on early extinguishment of debt 20,700 --
Adjust interest expense associated
with the use of IPO proceeds
to redeem a portion of previously
outstanding 11 1/2% senior
subordinated notes -- --
Additional expense for secondary
offering -- --
Adjusted pro forma income
before income taxes 16,005 13,896
Provision for income taxes 6,224 5,331
Adjusted pro forma net income $9,781 $8,565
Adjusted pro forma earnings per share
- basic $0.30 $0.27
Adjusted pro forma earnings per share
- diluted $0.30 $0.26
Shares outstanding - basic 32,121,936 31,959,119
Shares outstanding - diluted 32,750,882 32,364,012
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND JULY 1, 2005
(In thousands, except share and per share data)
Fiscal
Six Months Ended Year Ended
Jun 30, July 1, December 30,
2006 2005 2005
(Loss) Income before income taxes
(GAAP) $9,124 $16,204 $47,134
Add back the following item:
Loss on early extinguishment of debt 20,700 10,340 10,340
Adjust interest expense associated
with the use of IPO proceeds
to redeem a portion of previously
outstanding 11 1/2% senior
subordinated notes -- 456 456
Additional expense for secondary
offering -- -- 932
Adjusted pro forma income
before income taxes 29,824 27,000 58,862
Provision for income taxes 11,599 10,403 22,529
Adjusted pro forma net income $18,225 $16,597 $36,333
Adjusted pro forma earnings per share
- basic $0.57 $0.52 $1.14
Adjusted pro forma earnings per share
- diluted $0.56 $0.51 $1.12
Shares outstanding - basic 32,106,534 31,938,147 32,004,007
Shares outstanding - diluted 32,667,695 32,328,273 32,443,772
Daily Sales
Calculations Three Months Ended Six Months Ended
Jun 30, July 1, % Jun 30, July 1, %
2006 2005 Variance 2006 2005 Variance
Net Sales $235,409 $203,666 15.6% $460,083 $400,157 15.0%
Less: Acquisition (7,653) (18,615)
Organic Sales $227,756 $203,666 11.8% $441,468 $400,157 10.3%
Daily Sales:
Ship Days 64 64 128 129
Average Daily
Sales $3,678 $3,182 15.6% $3,594 $3,102 15.9%
Average Daily
Organic Sales $3,559 $3,182 11.8% $3,449 $3,102 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 Six Months Ended
Jun 30, July 1, Jun 30, July 1,
2006 2005 2006 2005
Adjusted EBITDA:
Net (loss) income (GAAP) $(2,865) $8,565 $5,576 $9,958
Interest expense 6,892 5,746 13,934 12,015
Interest income (74) (6) (234) (126)
Loss on extinguishment of debt 20,700 -- 20,700 10,340
Income tax (benefit) provision (1,830) 5,331 3,548 6,246
Depreciation and amortization 3,509 3,222 6,954 6,338
Adjusted EBITDA $26,322 $22,858 $50,478 $44,771
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, to determine appropriate levels
of operating and capital investments. Adjusted EBITDA excludes certain
items, including loss on extinguishment of debt and additional stock-based
compensation, 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.
