JACKSONVILLE, Fla., Feb. 21 /PRNewswire-FirstCall/ -- Interline Brands, Inc. ("Interline" or the "Company") today reported record sales, earnings, and cash flow from operations for 2007.
Earnings per diluted share for 2007 increased 16% to $1.56 on net income of $51.0 million, compared to adjusted pro forma earnings per diluted share of $1.34 for 2006 on adjusted pro forma net income of $44.0 million. GAAP earnings per diluted share for 2007 increased 64%, compared to GAAP earnings per diluted share of $0.95 for 2006.
Michael Grebe, Interline's Chairman and Chief Executive Officer, commented, "2007 was another strong year for Interline Brands. Since going public in 2004, we have increased sales by over 65%, grown pro forma earnings per share 71%, and have continued to achieve strong returns on tangible capital. I would like to congratulate the entire team for their outstanding performance in a challenging market."
Sales for 2007 increased $171.5 million, or 16%, to a record $1.24 billion, compared to $1.07 billion for 2006. The acquisition of AmSan in July 2006 added $131.6 million in sales in the first half of 2007. Average organic daily sales growth for 2007 was 3.7%.
William Sanford, President and Chief Operating Officer, commented, "Solid execution in our facilities maintenance markets, which now represent 67% of Interline's sales, offset weakness in our pro-contractor and specialty distributor markets which resulted from deteriorating conditions in the housing industry."
Gross profit for 2007 increased $65.0 million, or 16%, to $473.9 million from $408.9 million in 2006. Gross profit as a percentage of sales was 38.2% in 2007 compared to 38.3% in 2006.
SG&A expenses for 2007 increased $52.5 million, or 18%, to $345.3 million from $292.8 million in 2006. The increase was primarily driven by expenses related to the AmSan acquisition, higher share-based compensation expense, and higher health care costs.
Operating income increased $12.4 million, or 12%, to a record $114.1 million in 2007 from $101.7 million in 2006. Operating income as a percentage of sales was 9.2% in 2007 versus 9.5% in 2006. Adjusted EBITDA increased 12% to a record $130.5 million in 2007 from $116.7 million in 2006.
Cash provided by operations was $57.7 million in 2007, compared to cash provided by operations of $29.9 million in 2006.
In the fourth quarter of 2007, earnings per diluted share increased 17% to $0.41 on net income of $13.6 million, compared to $0.35 on net income of $11.4 million in the same period last year.
Sales for the fourth quarter increased $6.9 million to $300.2 million, compared to $293.3 million in the fourth quarter of 2006. Average organic daily sales growth was 2.3% for the quarter. Interline's facilities maintenance market grew 12.0% on an average daily sales basis. The pro- contractor market, which represents 21% of sales, declined 12.5% in the quarter compared to the same period last year. The specialty distributor market, which represents 12% of sales, also experienced a 12.5% decline compared to the fourth quarter of last year.
As a percentage of sales, gross profit in the fourth quarter of 2007 was 39.4% compared to 38.7% for the same period last year. Operating income increased $2.7 million to $29.5 million, or 9.8% of sales, in the fourth quarter of 2007 from $26.8 million, or 9.1% of sales, for the same period in 2006.
Business Outlook
Mr. Grebe stated, "In 2007 we achieved record sales and earnings, as well as record free cash flow. We executed well across our key markets and delivered solid working capital results. We remain confident in our ability to grow sales and earnings over the long term.
In 2008, we continue to feel positive about our facilities maintenance business. Our multi-family housing business is expected to be strong and the addition of AmSan to our portfolio will create numerous opportunities to increase share in this very diverse market. We expect to continue to leverage our strong balance sheet to pursue well-run companies that represent a strategic fit with Interline. However, our optimism for 2008 is balanced considering the impact from soft economic conditions in our pro contractor and specialty distributor markets which we expect to continue throughout the year.
Importantly, our expectations also reflect continued investment in our business. In 2008, we expect to invest in our proven organic growth initiatives, as well as our logistics network and information systems platform. For example, the continuing integration of AmSan onto our common operating platform provides us with several additional opportunities to consolidate our distribution and logistics infrastructure. Over the long term, we expect these investments will increase our capacity, lower our future operating costs, help us further penetrate key markets, and significantly increase shareholder value.
For the full year 2008, exclusive of new acquisitions, we expect earnings per share for 2008 to be between $1.61 and $1.68, and earnings per share for the first quarter to be between $0.29 and $0.31."
Conference Call
Interline Brands will host a conference call February 22, 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 27977859. This recording will expire on March 7, 2008.
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, professional 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 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.
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 29, 2006 and the Company's Quarterly Reports filed on Form 10-Q. 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 28, 2007 AND DECEMBER 29, 2006 (in thousands, except share and per share data) December 28, December 29, 2007 2006 ASSETS Current Assets: Cash and cash equivalents $ 4,975 $ 6,852 Short-term investments 48,540 - Accounts receivable - trade (net of allowance for doubtful accounts of $7,268 and $10,224) 154,571 142,901 Inventory 190,974 201,662 Prepaid expenses and other current assets 23,664 22,915 Deferred income taxes 15,359 17,821 Total current assets 438,083 392,151 Property and equipment, net 37,131 31,754 Goodwill 313,462 313,077 Other intangible assets, net 136,734 143,440 Other assets 11,424 10,147 Total assets $ 936,834 $890,569 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 60,159 $ 67,493 Accrued expenses and other current liabilities 42,175 38,722 Accrued interest 838 3,516 Income taxes payable 1,173 2,486 Current portion of long-term debt 2,300 2,416 Capital lease - current 218 307 Total current liabilities 106,863 114,940 Long-Term Liabilities: Deferred income taxes 33,351 34,799 Long-term debt, net of current portion 416,290 418,650 Capital lease - long term 464 683 Other liabilities 2,452 818 Total liabilities 559,420 569,890 Commitments and contingencies Senior preferred stock; $0.01 par value, 20,000,000 shares authorized; no shares outstanding as of December 28, 2007 and December 29, 2006 - - Stockholders' Equity: Common stock; $0.01 par value, 100,000,000 authorized; 32,350,188 issued and 32,308,105 outstanding as of December 28, 2007 and 32,308,221 issued and 32,284,069 outstanding as of December 29, 2006 324 323 Additional paid-in capital 567,860 561,634 Accumulated deficit (191,666) (241,852) Accumulated other comprehensive income 1,751 1,072 Treasury stock, at cost, 42,083 shares as of December 28, 2007 and 24,152 shares as of December 29, 2006 (855) (498) Total stockholders' equity 377,414 320,679 Total liabilities and stockholders' equity $ 936,834 $ 890,569 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS THREE AND TWELVE MONTHS ENDED DECEMBER 28, 2007 AND DECEMBER 29, 2006 (in thousands, except share and per share data) Three Months Ended Twelve Months Ended Dec. 28, Dec. 29, Dec. 28, Dec. 29, 2007 2006 2007 2006 Net sales $ 300,184 $ 293,305 $ 1,239,027 $ 1,067,570 Cost of sales 181,983 179,720 765,137 658,698 Gross profit 118,201 113,585 473,890 408,872 Operating Expenses: Selling, general and administrative expenses 84,952 83,193 345,297 292,752 Depreciation and amortization 3,741 3,607 14,499 14,427 Total operating expense 88,693 86,800 359,796 307,179 Operating income 29,508 26,785 114,094 101,693 Loss on extinguishment of debt - (143) - (20,843) Interest expense (8,287) (8,627) (33,923) (31,367) Interest and other income 1,080 269 3,251 1,197 Income before income taxes 22,301 18,284 83,422 50,680 Income tax provision 8,742 6,894 32,460 19,495 Net income $ 13,559 $ 11,390 $ 50,962 $ 31,185 Earnings Per Share: Basic $ $0.42 $ 0.35 $ 1.58 $ $0.97 Diluted $ $0.41 $ 0.35 $ 1.56 $ $0.95 Weighted-Average Shares Outstanding: Basic 32,274,711 32,191,869 32,241,906 32,141,958 Diluted 32,816,399 32,827,777 32,703,430 32,748,400 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS TWELVE MONTHS ENDED DECEMBER 28, 2007 AND DECEMBER 29, 2006 (in thousands) Twelve Months Ended December 28, December 29, 2007 2006 Cash Flows from Operating Activities: Net income $ 50,962 $ 31,185 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,114 14,427 Amortization of debt issuance costs 1,094 1,352 Amortization of discount on 8 1/8 % senior subordinated notes 135 63 Write-off of debt issuance costs - 7,180 Tender and redemption premiums on 11 1/2% senior subordinated notes - 13,663 Share-based compensation 5,377 3,847 Deferred income taxes 516 (2,199) Provision for doubtful accounts 4,277 3,443 Loss on disposal of property and equipment 139 83 Excess tax benefits from share-based compensation (252) (478) Changes in assets and liabilities which provided (used) cash, net of business acquired: Accounts receivable - trade (15,030) (5,027) Inventory 11,098 (18,555) Prepaid expenses and other current assets (306) (1,971) Other assets (1,277) (546) Accounts payable (6,771) (18,571) Accrued expenses and other current liabilities (4,374) (324) Accrued interest (2,678) 1,271 Income taxes payable (396) 1,060 Other liabilities 102 43 Net cash provided by operating activities 57,730 29,946 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS-Continued TWELVE MONTHS ENDED DECEMBER 28, 2007 AND DECEMBER 29, 2006 (in thousands) Twelve Months Ended December 28, December 29, 2007 2006 Cash Flows from Investing Activities: Purchase of property and equipment, net (14,906) (7,813) Purchase of short-term investments (168,962) - Proceeds from sales and maturities of short-term investments 120,422 - Purchase of businesses, net of cash acquired (765) (131,485) Net cash used in investing activities (64,211) (139,298) Cash Flows from Financing Activities: Increase in purchase card payable, net 6,579 - Decrease in revolver, net - (3,000) Repayment of term debt (2,613) (160,008) Repayment of 111/2% senior subordinated notes - (130,000) Payment of tender and redemption premiums on 111/2% senior subordinated notes - (13,663) Proceeds from issuance of 8?% senior subordinated notes, net of discount - 198,566 Proceeds from issuance of term debt - 230,000 Payment of debt issuance costs (34) (9,724) Proceeds from stock options exercised 564 1,046 Excess tax benefits from share-based compensation 252 478 Payments on capital lease obligations (307) (439) Initial public offering costs - (30) Net cash provided by financing activities 4,441 113,226 Effect of exchange rate changes on cash and cash equivalents 163 20 Net (decrease) increase in cash and cash equivalents (1,877) 3,894 Cash and cash equivalents at beginning of period 6,852 2,958 Cash and cash equivalents at end of period $ 4,975 $ 6,852 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for : Interest $ 36,140 $ 29,232 Income taxes, net of refunds $ 32,646 $ 21,101 Schedule of Non-Cash Investing and Financing Activities: Treasury stock acquired with accrued expenses and other current liabilities $ 357 $ 498 Adjustments to liabilities assumed and goodwill on businesses acquired $ 305 $ 1,535 INTERLINE BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP INFORMATION THREE AND TWELVE MONTHS ENDED DECEMBER 28, 2007 AND DECEMBER 29, 2006 (in thousands, except share and per share data) Adjusted Pro Forma Net Income Three Months Ended December 28, December 29, 2007 2006 Income before income taxes (GAAP) $ 22,301 $ 18,284 Add back the following item: Loss on early extinguishment of debt Change in fair value of interest rate swaps - - Adjust interest expense associated with use of IPO proceeds to repay or redeem portions of the previously existing term loan and outstanding 11 1/2% notes and elimination of amortization of deferred financing fees - - Additional compensation for forgiveness of shareholder loans and one-time bonuses - - Loss on early extinguishment of debt - 143 Adjusted pro forma income before income taxes 22,301 18,427 Provision for income taxes 8,742 6,948 Adjusted pro forma net income $ 13,559 $ 11,479 Adjusted pro forma earnings per share - basic $ 0.42 $ 0.36 Adjusted pro forma earnings per share - diluted $ 0.41 $ 0.35 Shares outstanding - basic 32,274,711 32,191,869 Shares outstanding - diluted 32,816,399 32,827,777 Adjusted Pro Forma Net Income Twelve Months Ended Dec. 28, Dec. 29, Dec. 31, 2007 2006 2004 Income before income taxes (GAAP) $ 83,422 $ 50,680 $ 29,718 Add back the following item: Loss on early extinguishment of debt Change in fair value of interest rate swaps - - (8,232) Adjust interest expense associated with use of IPO proceeds to repay or redeem portions of the previously existing term loan and outstanding 11 1/2% notes and elimination of amortization of deferred financing fees - - 16,785 Additional compensation for forgiveness of shareholder loans and one-time bonuses - - 9,215 Loss on early extinguishment of debt - 20,843 660 Adjusted pro forma income before income taxes 83,422 71,523 48,146 Provision for income taxes 32,460 27,513 18,820 Adjusted pro forma net income $ 50,962 $ 44,010 $ 29,326 Adjusted pro forma earnings per share - basic $ 1.58 $ 1.37 $ 0.92 Adjusted pro forma earnings per share - diluted $ 1.56 $ 1.34 $ 0.91 Shares outstanding - basic 32,241,906 32,141,958 31,917,000 Shares outstanding - diluted 32,703,430 32,748,400 32,102,820 Adjusted pro forma net income reflects certain transactions that were associated with the Company's refinancing activities that affected the period-over-period comparability of the Company's financial statements as presented in conformity with GAAP. These transactions include: (1) the loss on early extinguishment of debt related to the Company's 2006 refinancing activities and prepayment of term debt and (2) the recording of IPO-related activities such as additional compensation expense for the forgiveness of shareholder loans and the payment of one-time IPO related bonuses, the termination of interest rate swap arrangements, the recording of the expense associated with the early extinguishment of debt as well as the timing effect of paying off debt at the time the IPO was funded. In order to present a meaningful comparison, the table above shows the estimated effect on the Company's net income excluding these items Adjusted pro forma net income is presented herein because we believe presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the financial results of our 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. Daily Sales Calculations Three Months Ended December 28, December 29, % 2007 2006 Variance Net sales $ 300,184 $ 293,305 2.3% Less acquisitions: AmSan - - Organic sales $ 300,184 $ 293,305 2.3% Daily sales: Ship days 61 61 Average daily sales (1) $ 4,921 $ 4,808 2.3% Average organic daily sales (2) $ 4,921 $ 4,808 2.3% Daily Sales Calculations Twelve Months Ended December 28, December 29, % 2007 2006 Variance Net sales $ 1,239,027 $ 1,067,570 16.1% Less acquisitions: AmSan (131,605) - Organic sales $ 1,107,422 $ 1,067,570 3.7% Daily sales: Ship days 252 252 Average daily sales (1) $ 4,917 $ 4,236 16.1% Average organic daily sales (2) $ 4,395 $ 4,236 3.7% (1) Average daily sales are defined as sales for a period of time divided by the number of shipping days in that period of time. (2) 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. Average organic daily sales is presented herein because we believe it to be relevant and useful information to our investors since it is used by management to evaluate the operating performance of our business, as adjusted to exclude the impact of the AmSan and Copperfield acquisitions, and compare our organic operating performance with that of our competitors. However, average organic daily sales is not a measure of financial performance under GAAP and it 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 sales. Management utilizes average organic daily sales as an operating performance measure in conjunction with GAAP measures such as net sales. INTERLINE BRANDS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP INFORMATION-Continued THREE AND TWELVE MONTHS ENDED DECEMBER 28, 2007 AND DECEMBER 29, 2006 (in thousands) Adjusted EBITDA Three Months Twelve Months Ended Ended Dec. 28, Dec. 29, Dec. 28, Dec. 29, 2007 2006 2007 2006 Adjusted EBITDA: Net income (GAAP) $ 13,559 $ 11,390 $ 50,962 $ 31,185 Interest expense 8,287 8,627 33,923 31,367 Interest income (624) (180) (2,007) (591) Loss on early extinguishment of debt - 143 - 20,843 Income tax provision 8,742 6,894 32,460 19,495 Depreciation and amortization 3,833 3,607 15,114 14,427 Adjusted EBITDA $ 33,797 $ 30,481 $ 130,452 $ 116,726 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.
