Jacksonville, FL - Interline Brands, Inc. reported sales and earnings for the fiscal quarter ended June 28, 2013.
Michael J. Grebe, Chairman and Chief Executive Officer commented, "In the second quarter all of our end-markets grew, and Adjusted EBITDA increased nearly 7%. We continue to see growth across our facilities maintenance end-markets, and we are encouraged by current signs of a recovery in the residential market. As we look to the second half of the year, we continue to feel positive about our position in the attractive markets we serve, and will remain focused on expanding and executing our strategic growth initiatives while enhancing our scale and supply chain capabilities."
Second Quarter 2013 Results
Sales for the quarter ended June 28, 2013 were $405.7 million, a 21.2% increase compared to sales of $334.8 million for the quarter ended June 29, 2012. On an organic sales basis, sales increased 1.8% for the quarter. Sales to institutional facilities customers, comprising 51% of sales, increased 48.2% for the quarter, and 1.6% on an organic sales basis. Sales to multi-family housing facilities customers, comprising 30% of sales, increased 2.4% for the quarter. Sales to residential facilities customers, comprising 19% of sales, increased 2.0% for the quarter.
Gross profit increased $17.3 million, or 14.3%, to $138.3 million for the second quarter of 2013, compared to $121.1 million for the second quarter of 2012. As a percentage of sales, gross profit decreased 210 basis points to 34.1% compared to 36.2%. On an organic basis, gross margin decreased 40 basis points to 35.8%.
Selling, general and administrative ("SG&A") expenses for the second quarter of 2013 increased $16.1 million, or 17.5%, to $108.1 million from $92.0 million for the second quarter of 2012. As a percentage of sales, SG&A expenses were 26.6% compared to 27.5%, a decrease of 90 basis points. On an organic basis and excluding distribution center consolidation and restructuring costs, acquisition costs and share-based compensation, SG&A as a percentage of sales increased by 20 basis points year-over-year.
Second quarter 2013 Adjusted EBITDA of $33.2 million, or 8.2% of sales, increased 6.8% compared to $31.1 million, or 9.3% of sales, in the second quarter of 2012.
Kenneth D. Sweder, President and Chief Operating Officer commented, "We continue to build on our core strengths to further improve our long-term competitiveness and to position the business for additional growth. Specifically, we are encouraged by our increased success in national accounts, which remain an important driver of our business. We are uniquely positioned to address these opportunities given our national sales and distribution footprint, the breadth and depth of our product portfolio, strong technology solutions and our commitment to best in class supply chain services. In addition, we continue to focus on capturing synergies associated with our recent acquisitions. Building on our successes to date, we expect to increase our investment in capabilities and personnel across our end-markets, with an emphasis on national accounts, residential supply chain, product expansion and key geographic areas."
Including merger-related expenses of $0.2 million as well as increased interest expense and depreciation and amortization expense associated with the previously disclosed acquisition of Interline, net income for the second quarter of 2013 was $1.2 million compared to net income of $9.0 million for the second quarter of the comparable 2012 period.
Year-To-Date 2013 Results
Sales for the six months ended June 28, 2013 were $786.5 million, a 21.3% increase compared to sales of $648.4 million for the six months ended June 29, 2012. On an average organic daily sales basis, sales increased 2.6% for the six months ended June 28, 2013. Sales to our institutional facilities customers, comprising 51% of sales, increased 49.2% for the six months ended June 28, 2013, and 3.2% on an organic daily sales basis. Sales to our multi-family housing facilities customers, comprising 29% of sales, increased 2.2% for the six months ended June 28, 2013, and 3.0% on an average daily sales basis. Sales to our residential facilities customers, comprising 20% of sales, increased by 0.9% for the six months ended June 28, 2013, and 1.7% on an average daily sales basis.
Gross profit increased $33.4 million, or 14.1%, to $270.0 million for the six months ended June 28, 2013, compared to $236.7 million for the six months ended June 29, 2012. As a percentage of sales, gross profit decreased 220 basis points to 34.3% compared to 36.5% in the comparable 2012 period. On an organic basis, gross margin decreased 30 basis points to 36.2%.
SG&A expenses for the six months ended June 28, 2013 increased $33.7 million, or 18.4%, to $217.2 million from $183.5 million for the six months ended June 29, 2012. As a percentage of sales, SG&A expenses were 27.6% compared to 28.3%, a decrease of 70 basis points. On an organic basis and excluding distribution center consolidation and restructuring costs, acquisition costs and share-based compensation, SG&A as a percentage of sales increased by 30 basis points year-over-year.
Adjusted EBITDA of $59.4 million, or 7.6% of sales for the six months ended June 28, 2013, increased 4.2% compared to $57.0 million, or 8.8% of sales, for the six months ended June 29, 2012.
Including merger-related expenses of $1.0 million as well as increased interest expense and depreciation and amortization expense associated with the previously disclosed acquisition of Interline, net loss for the six months ended June 28, 2013 was $0.3 million compared to net income of $16.5 million for the six months ended June 29, 2012.
Operating Free Cash Flow and Leverage
Cash flow provided by operating activities for the six months ended June 28, 2013 was $0.1 million compared to $8.5 million for the six months ended June 29, 2012. Operating Free Cash Flow generated for the six months ended June 28, 2013 was $22.5 million compared to $18.9 million during the six months ended June 29, 2012.
John K. Bakewell, Chief Financial Officer commented, "Our capital structure and liquidity position continue to strengthen with cash and cash equivalents of $10 million and excess availability under the asset-based credit facility of $136 million, which represents a $15 million improvement in total liquidity compared to the first quarter. We also remain pleased with our operating free cash flow generation, which was over $22 million for the first half of the year, and our ability to reduce net debt, which declined $5 million during the quarter."
Merger
On September 7, 2012, Interline was acquired by affiliates of GS Capital Partners LP and P2 Capital Partners, LLC. The acquisition is referred to as the "Merger." As a result of the Merger, the Company applied the acquisition method of accounting and established a new basis of accounting on September 8, 2012. Periods presented prior to the Merger represent the operations of the predecessor company ("Predecessor") and periods presented after the Merger represent the operations of the successor company ("Successor"). The comparability of the financial statements of the Predecessor and Successor periods has been impacted by the application of acquisition accounting and changes in the Company's capital structure resulting from the Merger. See our Quarterly Report on Form 10-Q for a presentation of Predecessor and Successor financial statements.
