Jacksonville, FL - Interline Brands, Inc. reported sales and earnings for the fiscal quarter ended March 28, 2014.
Michael J. Grebe, Chairman and Chief Executive Officer commented, "While tough weather somewhat impacted our results this quarter, I am pleased to report a good start to the year. Weather during the first two months of the year affected customer demand and our ability to ship product, which resulted in lower sales growth in January and February of 1.5% and 0.9%, respectively. However, revenue growth rebounded nicely in March, increasing 5.1% year-over-year and this momentum carried over into the second quarter with sales in April up over 5%."
Mr. Grebe continued, "I continue to be encouraged by the strength of the market fundamentals across all of our facilities maintenance end-markets. More importantly, the investments we have made in our strategic growth plan have led to above-market growth, particularly in our institutional and multi-family businesses. In multi-family, we continue to enhance our market share as we secure larger national accounts. Across our institutional end market, we continue to advance our national accounts program and onboard new field sales associates, both of which have contributed nicely to our growth in underpenetrated markets and our ability to cross-sell a larger product bundle. Lastly, investments in technology and supply chain programs continue to produce excellent returns. For example, we signed a record number of new supply chain agreements in the residential market during the quarter, with opportunities to bring this offering into the institutional and multi-family markets. We feel very good about our position in the markets we serve. Although we expect our investment spend to begin to taper off late in the year, we will continue to prudently invest in our business and opportunities that advance our strategic initiatives and market position."
First Quarter 2014 Results
Sales for the quarter ended March 28, 2014 were $392.5 million, a 3.1% increase compared to sales of $380.8 million for the quarter ended March 29, 2013. Sales to our institutional facilities customers, comprising 51% of sales, increased 2.9% for the quarter. Sales to our multi-family housing facilities customers, comprising 29% of sales, increased 4.9% for the quarter. Sales to our residential facilities customers, comprising 20% of sales, increased 0.7% for the quarter.
Gross profit increased $4.1 million, or 3.1%, to $135.8 million for the first quarter of 2014, compared to $131.7 million for the first quarter of 2013. As a percentage of sales, gross profit remained flat at 34.6% compared to the comparable prior year quarter.
Selling, general and administrative ("SG&A") expenses for the first quarter of 2014 increased $4.8 million, or 4.4%, to $114.0 million from $109.2 million for the first quarter of 2013. As a percentage of sales, SG&A expenses were 29.0% compared to 28.7%, an increase of 30 basis points. SG&A expenses in the first quarter include approximately $2.8 million of expenses primarily related to our expansion initiatives during the quarter. 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.
First quarter 2014 Adjusted EBITDA of $26.8 million, or 6.8% of sales, increased 1.3% compared to $26.4 million, or 6.9% of sales, in the first quarter of 2013. Excluding the net impact of $1.2 million associated with our expansion initiatives, Adjusted EBITDA would have been $28.0 million.
Kenneth D. Sweder, President and Chief Operating Officer commented, "We made good progress this quarter with the integration of our institutional businesses, as we advance closer to our goal of having one team, one process, and one national platform with the best distribution capabilities in the industry. Our efforts around our team and processes are well underway, and we will ultimately work off the same system once we complete our upcoming technology integrations. We also added additional sales associates to our team this quarter to further penetrate markets, enhance our key customer programs and accelerate our long-term growth rate. These additions will continue throughout 2014. As Mike mentioned, our supply chain solutions continue to gain traction within the residential market. We are now building out this core capability across the multi-family and institutional end markets, as we believe this presents a compelling growth opportunity in an area of our business where we have a very competitive solution and technology offering. Finally, we completed another distribution center move in the first quarter to get more inventory closer to our customers and to capture additional scale benefits."
Including the loss on extinguishment of $4.2 million associated with the financing activities and the impact of our expansion initiatives, net loss for the first quarter of 2014 was $6.1 million compared to $1.5 million for the first quarter of 2013.
Operating Free Cash Flow and Leverage
Cash flow used in operating activities for the quarter ended March 28, 2014 was $9.9 million compared to cash flow used in operating activities of $10.7 million for the quarter ended March 29, 2013. Operating Free Cash Flow generated during the quarter ended March 28, 2014 was $2.8 million compared to $11.0 million during the quarter ended March 29, 2013 due to investments in working capital to support sales growth and the timing of sales during the quarter.
Michael Grebe commented, "During the quarter, we announced the refinancing of our 7.5% notes due November 2018 with a term loan due March 2021, which we expect will result in an annual cash interest savings of $8.5 million. With liquidity of over $166 million as of quarter end, our capital structure and liquidity position remain strong."