Jacksonville, FL - Interline Brands, Inc., a leading distributor and direct marketer of broad-line maintenance, repair and operations products, reported sales and earnings for the fiscal quarter ended September 28, 2012(1).
Third Quarter 2012 Highlights:
- Sales increased 5.7%, driven by growth in facilities maintenance of 8.1%
- Adjusted EBITDA increased 9.9% to $37.5 million or 10.7% of sales
- Net debt(2) totaled $722.4 million
- During the quarter, affiliates of Goldman Sachs Capital Partners ("GS Capital Partners") and P2 Capital Partners, LLC ("P2 Capital Partners" or "P2") completed the acquisition of Interline
"I am very pleased with our performance this quarter as we realized additional traction in our growth initiatives and higher yields from our strategic investments. We generated solid top-line growth driven by continued strength in our core facilities maintenance market, and we delivered an Adjusted EBITDA margin of nearly 11% for the quarter. We believe these results further underscore our value creation potential and strengthen our confidence in our ability to continue driving operating leverage over the long-term," commented Michael J. Grebe, Chairman and Chief Executive Officer.
Mr. Grebe continued, "The third quarter also represented a very important period for our Company, as we completed our transition to a privately-held business. We remain excited to have entered this new chapter in our Company's history. We look forward to maintaining the momentum we've generated and to further enhancing our long-term growth profile. I'd like to take this time to recognize our dedicated associates for their hard work and continued efforts to building a better business that is positioned for long-term value creation."
Third Quarter 2012 Results
Sales for the quarter ended September 28, 2012 were $350.3 million, a 5.7% increase compared to sales of $331.3 million in the comparable 2011 period. On an organic basis, sales increased 5.2% for the quarter. The facilities maintenance end-market, which comprised 78% of sales, increased 8.1% for the quarter, and 7.5% on an organic basis. The professional contractor end-market, which comprised 13% of sales, decreased 0.6% for the quarter. The specialty distributor end-market, which comprised 9% of sales, decreased 4.5% for the quarter.
Gross profit increased $5.0 million, or 4.1%, to $127.4 million for the third quarter of 2012, compared to $122.3 million for the third quarter of 2011. As a percentage of sales, gross profit decreased 50 basis points to 36.4% compared to 36.9% for the third quarter of 2011.
Selling, general and administrative ("SG&A") expenses for the third quarter of 2012 increased $1.9 million, or 2.1%, to $92.2 million from $90.3 million for the third quarter of 2011. As a percentage of sales, SG&A expenses were 26.3% compared to 27.2% for the third quarter of 2011, a decrease of 90 basis points.
Operating loss of $26.8 million for the third quarter of 2012, compared to operating income of $26.2 million in the comparable 2011 period, was impacted by $54.6 million in merger-related expenses associated with the previously disclosed acquisition of Interline. Excluding these items, Adjusted Operating Income increased 6.1% to $27.7 million.
Third quarter 2012 Adjusted EBITDA of $37.5 million, or 10.7% of sales, increased 9.9% compared to $34.1 million, or 10.3% of sales, in the third quarter of 2011.
Net loss for the third quarter of 2012 was $28.4 million compared to net income of $12.4 million in the comparable 2011 period. Net loss for the third quarter of 2012 included a $54.6 million impact due to merger-related expenses associated with the previously disclosed acquisition of Interline and a related $2.2 million loss on the extinguishment of debt.
Kenneth D. Sweder, President and Chief Operating Officer commented, "During the third quarter, we maintained our focus on key growth initiatives, including expanding our national accounts program, offering larger product bundles to our institutional customers and adding incremental revenue from recent personnel investments. Additionally, we were pleased to generate additional scale from our operating network at higher levels of growth."
Operating Free Cash Flow and Leverage
Cash flow used in operating activities for the third quarter of 2012 was $12.9 million compared to cash flow provided by operating activities of $15.1 million for the third quarter of 2011. Cash flow used in operating activities for the third quarter of 2012 included a $34.3 million cash impact due to merger-related expenses associated with the previously disclosed acquisition of Interline. Third quarter 2012 Operating Free Cash Flow increased $8.8 million, or 43.6%, to $28.9 million compared to $20.1 million in the third quarter of 2011.
John A. Ebner, Chief Financial Officer, commented, "Our strong cash flows during the quarter permitted us to repay $11 million in debt and reduce our leverage. Additionally, our capital structure and liquidity position remain strong, which allows us the flexibility to continue to invest and grow our business."
Key capital structure highlights for the third quarter include:
Quarter-end net-debt to last twelve months Further Adjusted EBITDA ratio of 5.8x
Cash and cash equivalents of $12.5 million
Excess availability under revolving credit facility of $156.1 million, net of $69.0 million in borrowings
Year-To-Date 2012 Results
Sales for the nine months ended September 28, 2012 were $998.7 million, a 5.5% increase over sales of $946.4 million in the comparable 2011 period. On an organic basis, sales increased 5.0% for the nine months ended September 28, 2012.
Gross profit increased $14.6 million, or 4.2%, to $364.0 million for the nine months ended September 28, 2012, compared to $349.4 million in the prior year period. As a percentage of sales, gross profit decreased to 36.5% from 36.9% in the comparable 2011 period.
SG&A expenses for the nine months ended September 28, 2012 were $275.7 million, or 27.6% of sales, compared to $266.6 million, or 28.2% of sales, for the nine months ended September 30, 2011.
Operating income of $11.5 million for the nine months ended September 28, 2012, compared to $65.3 million in the comparable 2011 period, was impacted by $56.7 million in merger-related expenses associated with the previously disclosed acquisition of Interline. Excluding these items, Adjusted Operating Income increased to $68.3 million.
Adjusted EBITDA of $94.5 million, or 9.5% of sales, for the nine months ended September 28, 2012 increased 5.8% compared to $89.4 million, or 9.4% of sales, for the nine months ended September 30, 2011.
Net loss for the nine months ended September 28, 2012 was $11.9 million compared to net income of $29.1 million in the comparable 2011 period. Net loss during the nine months ended September 28, 2012 included a $56.7 million impact from merger-related expenses associated with the previously disclosed acquisition of Interline and a related $2.2 million loss on extinguishment of debt.
Cash flow used in operating activities for the nine months ended September 28, 2012 was $4.4 million compared to cash flow generated of $43.1 million for the nine months ended September 30, 2011. Cash flow used in operating activities and free cash flow for the nine months ended September 28, 2012 included a $36.5 million cash impact due to merger-related expenses associated with the previously disclosed acquisition of Interline. Operating Free Cash Flow in the nine months ended September 28, 2012 was $47.8 million compared to Operating Free Cash Flow of $46.5 million in the comparable 2011 period.
