Interline Brands, Inc., a leading distributor and direct marketer of MRO products to the facilities maintenance end-market, reported sales and earnings for the fiscal quarter ended June 27, 2014.
Michael J. Grebe, Chairman and Chief Executive Officer commented, "Momentum continued throughout our business during the second quarter driven by the execution of our strategic growth initiatives as well as healthier fundamentals in our key end-markets. New customer wins, solid growth from our national accounts program, successful onboarding of new sales associates in targeted regions, and strong demand for our supply chain solutions all contributed nicely to our results for the quarter. Importantly, we generated higher levels of growth across all of our end-markets during the second quarter, demonstrating recovery from the weather-related impacts in early 2014."
Mr. Grebe added, "As we have discussed previously, investments in our growth initiatives are gaining traction, driving higher levels of revenue growth and enhancing our competitive position and market share. We expect these investments to produce even higher returns over time as our expense structure begins to normalize next year. As we look forward to the second half of the year, we remain confident in our market position, the overall health of our key end-markets, and our ability to continue to successfully execute our strategic plan."
Second Quarter 2014 Results
Sales for the quarter ended June 27, 2014 were $425.5 million, a 4.9% increase compared to sales of $405.7 million for the quarter ended June 28, 2013. Sales to our institutional facilities customers, comprising 50% of sales, increased 5.8% for the quarter. Sales to our multi-family housing facilities customers, comprising 31% of sales, increased 5.9% for the quarter. Sales to our residential facilities customers, comprising 19% of sales, increased 2.0% for the quarter.
Gross profit increased $7.2 million, or 5.2%, to $145.6 million for the second quarter of 2014, compared to $138.3 million for the second quarter of 2013. As a percentage of sales, gross profit increased 10 basis points to 34.2% from 34.1%.
Selling, general and administrative ("SG&A") expenses for the second quarter of 2014 increased $6.2 million, or 5.7%, to $114.2 million from $108.1 million for the second quarter of 2013. As a percentage of sales, SG&A expenses were 26.8% compared to 26.6%, an increase of 20 basis points. SG&A expenses in the second quarter include approximately $3.5 million of expenses primarily related to our expansion initiatives during the quarter.
Second quarter 2014 Adjusted EBITDA increased 4.0% to $34.7 million compared to $33.4 million in the second quarter of 2013. As a percentage of sales, Adjusted EBITDA of 8.2% remained unchanged from prior year.
During the second quarter of 2014 Interline made a strategic marketing decision to rebrand certain trademark assets and begin to consolidate several brands under a new national brand name within its institutional customer end-market.
Kenneth D. Sweder, President and Chief Operating Officer commented, "We took another important step in the ongoing integration of our institutional businesses with our decision to begin to consolidate our institutional brands under a single national brand. We believe this is an exciting and critical step in our efforts to simplify and better scale our business, and to achieve our vision of a market leading institutional business that provides a differentiated suite of products with full national account reach, national supply chain capabilities and robust procurement technology - all delivered through what we feel is the best sales team in the business. We look forward to unveiling our new institutional brand later this year with expectations that the transition will be completed in 2015."
As a result of the rebranding initiative the Company recorded a non-cash write-off of $67.5 million during the second quarter of 2014 related to the impairment of certain indefinite-lived trademark assets due to a change in the expected useful life of the intangible assets.
Including the non-cash write-off of other intangible assets of $67.5 million, net loss for the second quarter of 2014 was $38.6 million compared to net income of $1.2 million for the second quarter of 2013.
Year-To-Date 2014 Results
Sales for the six months ended June 27, 2014 were $818.0 million, a 4.0% increase compared to sales of $786.5 million for the six months June 28, 2013. Sales to our institutional facilities customers, our multi-family housing facilities customers and our residential facilities customers increased 4.4%, 5.5%, and 1.3%, respectively, for the six months ended June 27, 2014 compared to the comparable prior year period. Sales breakdown for our institutional facilities customers, our multi-family housing facilities customers and our residential facilities customers was 51%, 30% and 19%, respectively, for the six months ended June 27, 2014.
Gross profit increased by $11.3 million, or 4.2%, to $281.4 million for the six months ended June 27, 2014 from $270.0 million for the six months ended June 28, 2013. As a percentage of sales, gross profit increased 10 basis points to 34.4% from 34.3%.
SG&A expenses for the six months ended June 27, 2014 increased $11.0 million, or 5.1%, to $228.2 million for the six months ended June 27, 2014 from $217.2 million for the six months ended June 28, 2013. As a percentage of sales, SG&A expenses were 27.9% compared to 27.6%, an increase of 30 basis points. SG&A expenses during the six months ended June 27, 2014 include approximately $6.4 million of expenses primarily related to our expansion initiatives during the period. Excluding distribution center consolidation and restructuring costs, acquisition costs, share-based compensation and litigation related costs, but including the cost of the expansion initiatives, SG&A as a percentage of sales increased by 10 basis points year-over-year.
Adjusted EBITDA for the six months ended June 27, 2014 of $61.5 million, or 7.5% of sales, increased 2.8% compared to $59.8 million, or 7.6% of sales, for the six months ended June 28, 2013.
Including the non-cash write-off of other intangible assets of $67.5 million during the second quarter of 2014 and the loss on extinguishment of debt of $4.2 million associated with the financing activities during the first quarter of 2014, net loss for the six months ended June 27, 2014 was $44.7 million compared to $0.3 million for the six months ended June 28, 2013.
