JACKSONVILLE, Fla. -- Interline Brands, Inc., a leading distributor and direct marketer of maintenance, repair and operations products, reported sales and earnings for the fourth quarter and fiscal year ended December 31, 2010.
"We made significant progress toward our goals in 2010, and exited the year a much stronger company. In particular, we completed a comprehensive refinancing that strengthens our liquidity and financial flexibility, we accelerated certain investments in key growth initiatives, and we acquired a great company in CleanSource that extends our national scale while enhancing our leadership position in the strategically important Janitorial and Sanitation market. In addition, we continued to streamline and improve our supply chain, and we made significant investments in our technology platform, all of which focused on improving the customer experience and positioning Interline as a stronger, broad-line supplier for our customers," commented Michael Grebe, Chairman and CEO.
Fourth Quarter 2010 Performance
Sales for the quarter ended December 31, 2010 were $294.8 million, a 15.8% increase compared to sales of $254.6 million in the comparable 2009 period. Interline's facilities maintenance end-market, which comprised 72% of sales, increased 16.9% during the fourth quarter. The professional contractor end-market, which comprised 16% of sales, increased 14.8% for the quarter. The specialty distributor end-market, which comprised 12% of sales, increased 12.7% for the quarter. Not including the CleanSource acquisition and taking into account the 53-week fiscal year in 2010, average organic daily sales increased 0.2% for the quarter.
"The market environment is stabilizing, and we are encouraged by the modest improvement we are seeing within certain markets. Our growth was primarily driven by a combination of organic growth and our recent acquisitions in the JanSan market, which now represents approximately one-third of our total revenue," said Mr. Grebe.
Gross profit increased $15.9 million, or 16.4%, to $112.7 million for the fourth quarter of 2010, compared to $96.8 million for the fourth quarter of 2009. As a percentage of net sales, gross profit increased 20 basis points to 38.2% compared to 38.0% for the fourth quarter of 2009.
Selling, general and administrative ("SG&A") expenses for the fourth quarter of 2010 increased $10.0 million, or 13.0%, to $87.1 million from $77.1 million for the fourth quarter of 2009. As a percentage of net sales, SG&A expenses were 29.6% compared to 30.3% for the fourth quarter of 2009.
Fourth quarter 2010 operating income of $20.0 million, or 6.8% of sales, increased 36.3% compared to $14.7 million, or 5.8% of sales, in the fourth quarter of 2009.
As a result, adjusted earnings per diluted share for the fourth quarter of 2010 were $0.27, excluding $0.20 in one-time charges and $0.02 in higher interest expense, both related to our November 2010 refinancing. Adjusted earnings per diluted share for the quarter were 42% higher compared to adjusted earnings per diluted share of $0.19 for the same period last year. GAAP earnings per diluted share were $0.05 for the fourth quarter of 2010, a decrease of 74% from the same period last year. Earnings per diluted share for the fourth quarters of 2010 and 2009 also include a $0.01 per diluted share charge associated with ongoing improvements to our distribution network.
Fourth quarter 2010 free cash flow was $43.5 million compared to $40.0 million in the fourth quarter of 2009. Cash flow from operating activities for the fourth quarter of 2010 was $48.3 million compared to $42.1 million for the fourth quarter of 2009.
Fiscal Year 2010 Performance
"We have enhanced our scale and breadth by consolidating smaller distribution centers with larger, more efficient regional centers throughout the year," commented Kenneth D. Sweder, Interline's President and Chief Operating Officer. "These centers yield attractive fixed cost savings while enabling us to offer more of our growing product portfolio to customers. We remain focused on driving improvements in the offering and value we provide to customers through supply chain enhancements, e-commerce investments and operational initiatives, so that we can enable greater levels of profitability as we grow."
Sales for the year ended December 31, 2010 were $1.09 billion, a 2.6% increase compared to sales of $1.06 billion for the year ended December 25, 2009. Not including the CleanSource acquisition and taking into account the 53-week fiscal year in 2010, average organic daily sales decreased 1.1% for the year.
Gross profit increased $20.3 million, or 5.2%, to $414.2 million for the year ended December 31, 2010, compared to $394.0 million in 2009. As a percentage of net sales, gross profit increased 90 basis points to 38.1% from 37.2% for the year ended December 25, 2009.
SG&A expenses for the year ended December 31, 2010 increased by $2.7 million, or 0.8%, to $318.8 million compared to $316.1 million for the year ended December 25, 2009. As a percentage of net sales, SG&A expenses were 29.3% compared to 29.8% in 2009.
Operating income was $75.2 million, or 6.9% of sales, for the year ended December 31, 2010 compared to $59.2 million, or 5.6% of sales, for the year ended December 25, 2009, a 26.9% increase.
Adjusted earnings per diluted share increased 36% to $1.05 in 2010 compared to adjusted earnings per diluted share of $0.77 for 2009. GAAP earnings per diluted share were $0.83 for 2010, an increase of 5% compared to GAAP earnings per diluted share of $0.79 for 2009.
Earnings per diluted share for the year ended December 31, 2010 include a $0.22 per diluted share impact from our November 2010 refinancing, a $0.06 per diluted share charge associated with ongoing efforts to enhance the Company's distribution network and a $0.02 per diluted share charge associated with previously announced changes in the Company's executive management. Earnings per diluted share for the year ended December 25, 2009 include a $0.06 per diluted share charge associated with higher reserves for bad debt expense resulting from a customer seeking Chapter 11 bankruptcy protection, a $0.09 per diluted share charge associated with a reduction in force and consolidation of certain distribution centers, a $0.01 per diluted share charge associated with the adoption of a new accounting standard on business combinations, and a $0.02 per diluted share gain on the early extinguishment of debt.
Cash flow from operating activities for the year ended December 31, 2010 was $60.8 million compared to $144.3 million for the year ended December 25, 2009.Business Outlook
Mr. Grebe stated, "Looking ahead to fiscal 2011, we recognize that our markets are stabilizing but still in recovery. We are encouraged by the trends within each of our markets and our January acquisition of Northern Colorado Paper, and we are optimistic about the future potential of our business. We are a much stronger company operationally and financially, and we are focused on leveraging our improved capabilities to achieve greater levels of profitability as we look to grow throughout the year. Our fiscal discipline remains, and we are as committed as ever to the creation of long-term shareholder value as we work to further strengthen Interline's position as a premier, broad-line MRO distributor."
