Jacksonville, FL - Interline Brands, Inc. reported sales and earnings for the fiscal quarter ended March 29, 2013.
Michael J. Grebe, Chairman and Chief Executive Officer commented, "We are pleased with our results for the first quarter and the broad-based growth we achieved throughout our facilities maintenance end-market. Momentum behind our strategic growth initiatives continued during the quarter, which helped us achieve solid organic growth, particularly from sales to our institutional facilities customers. Inclusive of our recently completed acquisition of JanPak, growth within this end-market was over 50% for the quarter. As we continue to integrate JanPak, we look forward to realizing additional synergies and growth opportunities. While our end-markets remain relatively healthy, cold weather conditions that persisted into March affected our performance in the month as purchasing decisions on certain seasonal products like HVAC equipment were deferred. We continue to feel very good about our position in the markets we serve, and will remain focused on executing our strategic initiatives to grow national accounts, leverage our investments in talent and technology, and bring more products closer to our customers."
First Quarter 2013 Results
Sales for the quarter ended March 29, 2013 were $380.8 million, a 21.4% increase compared to sales of $313.6 million for the quarter ended March 30, 2012. On an average organic daily sales basis, sales increased 3.5% for the quarter. Sales to our institutional facilities customers, comprising 52% of sales, increased 50.3% for the quarter, and 5.0% on an average organic daily sales basis. Sales to our multi-family housing facilities customers, comprising 28% of sales, increased 1.9% for the quarter, and 3.4% on an average daily sales basis. Sales to our residential facilities customers, comprising 20% of sales, decreased 0.2% for the quarter, and increased 1.4% on an average daily sales basis.
Gross profit increased $16.1 million, or 13.9%, to $131.7 million for the first quarter of 2013, compared to $115.6 million for the first quarter of 2012. As a percentage of sales, gross profit decreased 230 basis points to 34.6% compared to 36.9%. On an organic basis, gross margin decreased 40 basis points to 36.5%.
Selling, general and administrative ("SG&A") expenses for the first quarter of 2013 increased $17.7 million, or 19.3%, to $109.2 million from $91.5 million for the first quarter of 2012. As a percentage of sales, SG&A expenses were 28.7% compared to 29.2%, a decrease of 50 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 40 basis points year-over-year.
First quarter 2013 Adjusted EBITDA of $26.2 million, or 6.9% of sales, increased 1.0% compared to $26.0 million, or 8.3% of sales, in the first quarter of 2012.
Kenneth D. Sweder, President and Chief Operating Officer, commented, "We are excited to complete the first quarter with JanPak as a member of the Interline family. On a combined basis, our annual revenues now approach $1.6 billion, with what is now one of the larger national institutional facilities maintenance platforms in the industry. We plan to further expand our national account, supply chain and MRO product investments across our end-markets for the benefit of our customers. Our Adjusted EBITDA margin was somewhat impacted by the full contribution of JanPak's results and by one less selling day during the period combined with the same number of expense days. Excluding these factors, our Adjusted EBITDA margin would have been nearly 8% for the quarter."
Including merger-related expenses of $0.8 million as well as increased interest expense and depreciation and amortization expense associated with the previously disclosed acquisition of Interline, net loss for the first quarter of 2013 was $1.5 million compared to net income of $7.5 million for the first quarter of the comparable 2012 period.
Operating Free Cash Flow and Leverage
Cash flow used in operating activities for the first quarter of 2013 was $10.7 million compared to $7.3 million for the first quarter of 2012. First quarter 2013 Operating Free Cash Flow generated was $10.8 million compared to Operating Free Cash Flow used during the first quarter of 2012 of $5.0 million.
David C. Serrano, Interim Chief Financial Officer, commented, "Our capital structure and liquidity position remain strong with cash and cash equivalents of $10 million and excess availability under the asset-based credit facility of $121 million. Although we typically use cash in the first and second quarter to fund inventory and other working capital requirements in support of the seasonally stronger second and third quarters, we generated almost $11 million in operating free cash flow and slightly increased our liquidity position during the quarter. Going forward, our financial flexibility will allow us to invest in the growth of our business while we opportunistically manage our balance sheet over time."
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.
