JACKSONVILLE, Fla., Feb. 22 /PRNewswire-FirstCall/ -- Interline Brands, Inc. ("Interline" or the "Company") today reported record sales and earnings for 2006.
Adjusted pro forma earnings per diluted share for 2006 increased 20% to $1.34 on adjusted pro forma net income of $44.0 million. This compares to adjusted pro forma earnings per diluted share of $1.12 for 2005 on adjusted pro forma net income of $36.3 million. GAAP earnings per diluted share was $0.95 on net income of $31.2 million in 2006 compared to GAAP earnings per diluted share of $0.89 in 2005 on net income of $28.8 million.
Sales for the year ended December 29, 2006 increased $215.6 million, or 25%, to a record $1.068 billion, compared to $851.9 million in 2005 on one less selling day. Average organic daily sales grew 8.3% as a result of strong execution of the company's strategic growth initiatives. The acquisition of AmSan in July 2006 added $129.8 million in sales in the second half of 2006 while the acquisition of Copperfield in July 2005 added $18.6 million in sales in the first half of 2006. As a result, average daily sales grew 25.8% in 2006.
Gross profit for 2006 increased $83.3 million, or 26%, to $408.9 million from $325.6 million in 2005. Gross profit as a percentage of sales increased to 38.3% in 2006 from 38.2% in 2005.
SG&A expenses increased $63.2 million or 28% in 2006 to $292.8 million from $229.6 million in 2005. SG&A expenses as a percentage of sales increased to 27.4% in 2006 from 27.0% in 2005. SG&A expenses in 2006 included $3.8 million in share-based compensation expense, which is $2.9 million more than in the prior year. In addition, 2006 included $43.1 million in incremental expense related to the operations of Copperfield and AmSan. Excluding share based compensation and incremental expense related to new acquisitions, SG&A expenses increased 7.5% on average organic daily sales growth of 8.3%.
Operating income increased $19.7 million or 24% to a record $101.7 million in 2006 from $82.0 million in 2005. Operating income as a percentage of sales was 9.5% in 2006 and 9.6% in 2005. Adjusted EBITDA increased 21% to a record $116.7 million in 2006 from $96.6 million in 2005.
Cash provided by operations was $29.9 million in 2006, compared to cash provided by operations of $38.8 million in 2005. The decrease in 2006 cash from operations is largely the result of an increase in net working capital deployed to support growth.
Michael Grebe, Interline's Chairman and Chief Executive Officer, stated, "We are extremely pleased with our performance in 2006, which was our second full fiscal year as a publicly traded company. I am very proud of the leadership, dedication, and strong execution shown by the Interline team. Our strong financial performance and high level of customer service continues to reflect the benefits of our diversified and proprietary business model."
In the fourth quarter of 2006, earnings per diluted share increased 25% to $0.35 on net income of $11.4 million for the fourth quarter of 2006 compared to $0.28 on $9.1 million in net income in the same period last year.
Sales for the fourth quarter increased $67.3 million, or 30%, to $293.3 million, compared to $226.0 million in the comparable 2005 period. Average daily sales growth was 29.8%. Average organic daily sales growth was 2.6%. Interline's facilities maintenance market, which represented 60% of sales in the fourth quarter of 2006, grew 11.5% in the quarter on an average organic daily sales basis and grew 70% including AmSan, which the company acquired in July of 2006. The pro contractor market, which represents 25% of sales, declined 2.5% in the quarter. The specialty distributor market, which represents 15% of sales, declined 7.9%.
William Sanford, Chief Operating Officer, commented "Revenue growth in our facilities maintenance markets was robust, as customer demand for our supply- chain management programs continued to increase during the quarter. After two years of double digit organic sales growth, our pro contractor market began to slow during the quarter. We feel that this is primarily a reflection of the slowing residential construction and remodeling markets, and partially due to our exceptionally strong performance in the fourth quarter of 2005, during which we had unusually high sales of chimney repair products, as well as storm-related sales which did not repeat in the 2006 fourth quarter."
As a percentage of sales, gross profit in the fourth quarter of 2006 was 38.7% compared to 38.4% for the same period last year. Operating income increased $5.9 million to $26.8 million, or 9.1% of sales in the fourth quarter of 2006 from $20.9 million, or 9.3% of sales for the same period last year.
Business Outlook
Mr. Grebe stated, "2006 was a very successful year for Interline Brands. We executed well across all of our markets and remain confident in our ability to grow sales and earnings over the long term. Despite current economic conditions in our pro contractor and specialty distributor markets, our underlying businesses remain strong. We plan to continue investing in our proven growth initiatives, as well as in our operations infrastructure, to ensure long-term revenue and earnings growth for Interline.
We feel very positive about our facilities maintenance business and believe we will continue to take market share. Our multi-family housing business is very strong and we feel that the addition of AmSan to our portfolio will create numerous opportunities to increase share in this very diverse market.
The refinancing that we completed in July of 2006 significantly strengthened our balance sheet and positions us well to make acquisitions as opportunities arise. M&A activity remains strong in the markets we serve, and our team is pursuing well-run companies that represent a strategic fit with Interline.
The integration of AmSan onto our common operating platform will be a major focus for fiscal year 2007. As part of this process, we will also be making upgrades to our distribution and logistics infrastructure in order to increase our capacity and lower our operating costs over the long-term.
Despite soft economic conditions in our pro contractor and specialty distributor markets, as well as a generally heavy level of investment spending throughout the year, we project that fiscal year 2007 earnings per share will be between $1.49 and $1.55.
The first quarter of the fiscal year will be challenging given economic conditions in the pro contractor and specialty distributor end markets, as well as our strong performance in the first quarter of 2006. We therefore project earnings per share for the first quarter of 2007 to be between $0.27 and $0.29."
Adjusted pro forma earnings per diluted share was $1.34 for fiscal year 2006 and excludes a $20.8 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.
GAAP earnings per diluted share was $0.95 for fiscal year 2006. GAAP earnings per diluted share was $0.26 for the first quarter of 2006.
Conference Call
Interline Brands will host a conference call February 23, 2007 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 6086838. This recording will expire on March 9, 2007.
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 200,000 facilities maintenance professionals, pro contractors 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, follow on secondary offering and refinancing activities 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 as well as any loss on early extinguishment of debt related to the Company's 2006 refinancing activities or prepayment of term debt. 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 periods presented and excluding loss on early extinguishment of debt and 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 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, commodity price risk, foreign currency exchange risk, interest rate risk, 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, the Company's Quarterly Reports filed on Form 10-Q, 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
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 29, 2006 AND DECEMBER 30, 2005
(in thousands, except share and per share data)
December 29, December 30,
2006 2005
ASSETS
Current Assets:
Cash and cash equivalents $6,852 $2,958
Accounts receivable - trade (net
of allowance for doubtful accounts
of $10,224 and $8,150) 142,901 113,271
Accounts receivable - other 15,663 12,163
Inventory 201,662 165,282
Prepaid expenses and other current
assets 7,252 5,498
Deferred income taxes 17,821 13,945
Total current assets 392,151 313,117
Property and equipment, net 31,754 29,865
Goodwill 313,077 249,574
Other intangible assets, net 143,440 104,244
Other assets 10,147 8,969
Total assets $890,569 $705,769
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $67,493 $69,182
Accrued expenses and other current
liabilities 33,240 21,574
Accrued merger expenses 5,482 5,408
Accrued interest 3,516 2,152
Income taxes payable 2,486 1,780
Revolver - 3,000
Current portion of long-term debt 2,416 1,400
Capital lease - current 307 452
Total current liabilities 114,940 104,948
Long-Term Liabilities:
Deferred income taxes 34,799 34,646
Long-term debt, net of current
portion 418,650 280,675
Capital lease - long term 683 958
Other liabilities 818 -
Total liabilities 569,890 421,227
Commitments and contingencies
Senior preferred stock, $0.01 par
value, 20,000,000 shares authorized,
no shares outstanding as of December
29, 2006 and December 30, 2005 - -
Stockholders' Equity:
Common stock; $0.01 par value,
100,000,000 authorized;
32,308,221 issued and 32,284,069
outstanding as of December 29, 2006
and 32,220,669 issued and outstanding
as of December 30, 2005 323 322
Additional paid-in capital 561,634 558,183
Accumulated deficit (241,852) (273,037)
Accumulated other comprehensive
income 1,072 992
Deferred compensation - (1,918)
Treasury stock, at cost, 24,152
shares as of December 29, 2006 (498) -
Total stockholders' equity 320,679 284,542
Total liabilities and
stockholders' equity $890,569 $705,769
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE AND TWELVE MONTHS ENDED DECEMBER 29, 2006 AND DECEMBER 30, 2005
(in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2006 2005 2006 2005
Net sales $293,305 $225,960 $1,067,570 $851,928
Cost of sales 179,720 139,270 658,698 526,334
Gross profit 113,585 86,690 408,872 325,594
Operating Expenses:
Selling, general and
administrative
expenses 83,193 62,401 292,752 229,595
Depreciation and
amortization 3,607 3,350 14,427 13,049
Secondary offering
costs - 9 - 932
Total operating
expense 86,800 65,760 307,179 243,576
Operating income 26,785 20,930 101,693 82,018
Loss on extinguishment of
debt (143) - (20,843) (10,340)
Interest expense (8,627) (6,709) (31,367) (25,419)
Interest income 180 64 591 236
Other income 89 165 606 639
Income before income
taxes 18,284 14,450 50,680 47,134
Income tax provision 6,894 5,327 19,495 18,335
Net income $11,390 $9,123 $31,185 $28,799
Earnings Per Share:
Basic $0.35 $0.28 $0.97 $0.90
Diluted $0.35 $0.28 $0.95 $0.89
Weighted-Average Shares
Outstanding:
Basic 32,191,869 32,077,904 32,141,958 32,004,007
Diluted 32,827,777 32,576,080 32,748,400 32,443,772
INTERLINE BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 29, 2006 AND DECEMBER 30, 2005
(in thousands)
Twelve Months Ended
December 29, December 30,
2006 2005
Cash Flows from Operating
Activities:
Net income $31,185 $28,799
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 14,427 13,049
Amortization of debt issuance costs 1,352 1,610
Amortization of discount on 8-1/8%
senior subordinated notes 63 -
Write-off of debt issuance costs 7,180 2,290
Tender and redemption premiums on
11-1/2% senior subordinated notes 13,663 8,050
Share-based compensation 3,847 965
Deferred income taxes (2,199) (2,364)
Provision for doubtful accounts 3,443 2,828
Loss on disposal of property and
equipment 83 53
Excess tax benefits from share-based
compensation (478) 215
Changes in assets and liabilities
which provided (used) cash, net of
business acquired:
Accounts receivable - trade (5,027) (13,874)
Accounts receivable - other (2,041) 3,521
Inventory (18,555) (10,175)
Prepaid expenses and other current
assets 70 (1,869)
Other assets (546) 99
Accounts payable (18,571) 11,282
Accrued expenses and other current
liabilities (107) 1,137
Accrued merger expenses (217) (428)
Accrued interest 1,271 (890)
Income taxes payable 1,060 (5,460)
Other liabilities 43 -
Net cash provided by operating
activities 29,946 38,838
Cash Flows from Investing
Activities:
Purchase of property and equipment, net (7,813) (7,920)
Purchase of businesses, net of cash
acquired (131,485) (73,213)
Net cash used in investing activities (139,298) (81,133)
Cash Flows from Financing Activities:
(Decrease) Increase in revolver, net (3,000) 3,000
Repayment of term debt (160,008) (1,200)
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 8-1/8% senior
subordinated notes, net of discount 198,566 -
Proceeds from issuance of term debt 230,000 50,000
Payment of debt issuance costs (9,724) (838)
Proceeds from stock options
exercised 1,046 1,693
Excess tax benefits from share-based
compensation 478 -
Payments on capital lease
obligations (439) (335)
Initial public offering costs (30) (665)
Proceeds from exercise of
underwriters over-allotment options - 2,333
Net cash provided by (used in)
financing activities 113,226 (24,062)
Effect of exchange rate changes on
cash and cash equivalents 20 137
Net increase (decrease) in cash and
cash equivalents 3,894 (66,220)
Cash and cash equivalents at
beginning of period 2,958 69,178
Cash and cash equivalents at end of
period $6,852 $2,958
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for:
Interest $29,232 $23,363
Income taxes, net of refunds $21,101 $26,003
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 $1,535 $8,443
INTERLINE BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
THREE AND TWELVE MONTHS ENDED DECEMBER 29, 2006 AND DECEMBER 30, 2005
(In thousands, except share and per share data)
Three Months Ended Twelve Months Ended
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2006 2005 2006 2005
Income before income taxes
(GAAP) $18,284 $14,450 $50,680 $47,134
Add back the following
item:
Loss on early
extinguishment of debt 143 - 20,843 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
Additional expense for
secondary offering - 9 - 932
Adjusted pro forma
income before income
taxes 18,427 14,459 71,523 58,862
Provision for income taxes 6,948 5,327 27,513 22,529
Adjusted pro forma net
income $11,479 $9,132 $44,010 $36,333
Adjusted pro forma
earnings per share -
basic $0.36 $0.28 $1.37 $1.14
Adjusted pro forma
earnings per share -
diluted $0.35 $0.28 $1.34 $1.12
Shares outstanding - basic 32,191,869 32,077,904 32,141,958 32,004,007
Shares outstanding -
diluted 32,827,777 32,576,080 32,748,400 32,443,772
Daily Sales Calculations
Three Months Ended Twelve Months Ended
Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2006 2005 Variance 2006 2005 Variance
Net Sales $293,305 $225,960 29.8% $1,067,570 $851,928 25.3%
Less
Acquisitions:
AmSan (61,489) - (129,752) -
Copperfield - - (18,615) -
Organic Sales $231,816 $225,960 2.6% $919,203 $851,928 7.9%
Daily Sales:
Ship Days 61 61 252 253
Average Daily
Sales $4,808 $3,704 29.8% $4,236 $3,367 25.8%
Average Organic
Daily Sales $3,800 $3,704 2.6% $3,648 $3,367 8.3%
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 Twelve Months Ended
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2006 2005 2006 2005
Adjusted EBITDA:
Net income (GAAP) $11,390 $9,123 $31,185 $28,799
Interest expense 8,627 6,709 31,367 25,419
Interest income (180) (64) (591) (236)
Loss on early extinguishment of debt 143 - 20,843 10,340
Additional expense for secondary
offering - 9 - 932
Income tax provision 6,894 5,327 19,495 18,335
Depreciation and amortization 3,607 3,350 14,427 13,049
Adjusted EBITDA $30,481 $24,454 $116,726 $96,638
