Interline Brands, Inc. Announces Record First Quarter 2005 Results

JACKSONVILLE, Fla., May 10 /PRNewswire-FirstCall/ -- Interline Brands, Inc. ("Interline" or the "Company"), a leading distributor and direct marketer of maintenance, repair and operations products, reported another quarter of record sales for the fiscal quarter ended April 1, 2005. Sales for the first quarter 2005 increased 13.8% over the same period in the prior year. Adjusted pro forma earnings per diluted share was $0.24 for first quarter 2005, an increase of 41% over adjusted pro forma earnings per diluted share of $0.17 in the same period in the prior year. GAAP earnings per diluted share was $0.04 for the quarter as compared to a loss per diluted share of $153.00 in the first quarter of 2004.

Michael Grebe, Interline's President and Chief Executive Officer, commented, "We are very pleased with our sales performance and operating results for the first quarter of 2005. Virtually all of our key performance metrics showed significant positive trends in the quarter, bolstered by continued strong performance in our facilities maintenance and pro contractor markets."

First Quarter 2005 Performance

Sales for the fiscal quarter ended April 1, 2005 were $196.5 million, a 13.8% increase over sales of $172.6 million in the comparable 2004 period. The first quarter of 2005 included one more shipping day than the prior year period. Average organic daily sales for the first quarter of 2005 increased by 12.1% compared to the same period in 2004.

"Our pro contractor business had an exceptionally strong quarter, with daily sales growth of over 18%," said William Sanford, Chief Operating Officer. "Our facilities maintenance markets also continued to improve, with daily sales growth of 11.4%. In both cases we feel that we are taking market share from competitors due to the success of our national accounts and supply chain management programs."

Gross profit increased $9.8 million to $75.5 million for the first quarter of 2005, up from $65.7 million in the 2004 comparable period. As a percentage of net sales, gross profit improved by 30 basis points in the first quarter of 2005 to 38.4%, up from 38.1% in the comparable period last year.

SG&A expenses for the first quarter of 2005 were $53.7 million compared to $48.3 million for the first quarter of 2004. As a percentage of net sales, SG&A expenses were 27.3% in the first quarter of 2005 compared to 28.0% in the first quarter of 2004. Michael Grebe stated, "Our operations team has performed exceptionally over the last several quarters and is continuing to find ways to lower costs while also improving service levels to our customers." Operating income was $18.6 million, or 9.5% of sales, for the first quarter of 2005 compared to $14.5 million, or 8.4% of sales, for the first quarter of 2004, a 28.6% increase.

Business Outlook

Mr. Grebe stated, "This is the first full quarter after our IPO, and we are very pleased to have started the year with such strong results. We remain optimistic for the future and reaffirm our projection of pro forma net income per diluted share of $1.03 - $1.06 for 2005. We project net income per diluted share of $0.24 - $0.26 for the 2nd quarter of 2005."

Adjusted pro forma net income per diluted share was $0.91 for fiscal year 2004 and $0.23 for the 2nd quarter of 2004.

GAAP net income per diluted share is projected to be $0.84 - $0.87 for fiscal year 2005 compared to a GAAP net loss per diluted share of $25.21 for fiscal 2004. GAAP net loss per diluted share for the 2nd quarter of 2004 was $102.88.

The pro forma net income per diluted share amount for the fiscal year 2005 business outlook excludes a $10.3 million loss on early extinguishment of debt, which was incurred in January 2005 when the Company used part of the proceeds from the IPO to redeem $70.0 million principal amount of its 11.5% senior subordinated notes. This redemption was made thirty days after the closing of the initial public offering, which was in line with the 30-day irrevocable notice period required by the indenture governing the 11.5% senior subordinated notes.

Conference Call

Interline Brands will host a conference call on May 11, 2005 at 9 a.m. Eastern Time. Interested parties may listen to the call toll free by dialing 1-800-427-0638 or 1-706-634-1170. A digital recording will be available for replay two hours after the completion of the conference call by calling 1-800-642-1687 or 1-706-645-9291 and referencing Conference I.D. Number 5523773. This recording will expire on May 25, 2005.

About Interline

Interline Brands, Inc. is a leading national distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations (MRO) products to approximately 150,000 professional contractors, facilities maintenance professionals, hardware stores, and other customers across North America and Central America.

Non-GAAP Financial Information

This press release contains financial information determined by methods other than in accordance with GAAP. Interline's management uses non-GAAP measures in its analysis of the Company's performance. There were certain transactions that were associated with the Company's IPO that affected the period-over-period comparability of the Company's financial statements as presented in conformity with generally accepted accounting principles. These transactions included the recording of IPO-related activities such as the recording of the expense associated with the early extinguishment of debt and the termination of interest rate swap arrangements, as well as the timing effect of paying off debt with proceeds from the IPO. In order to present a meaningful comparison, the table below shows the estimated effect on the Company's net income of recording the IPO transactions as if they had occurred at the beginning of the periods presented. Management believes presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the financial results of the business. These disclosures should not be viewed as a substitute for operating income or net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Investors are encouraged to review the reconciliation of these and other non-GAAP financial measures to the comparable GAAP results available in the accompanying table.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

The statements contained in this release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in, or implied by, forward-looking statements. The Company has tried, whenever possible, to identify these forward-looking statements using words such as "projects," "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. The risks and uncertainties involving forward-looking statements include material facilities systems disruptions and shutdowns, the failure to locate, acquire and integrate acquisition candidates, the dependence on key employees and other risks described in the Company's Form 10-K, (Commission File No. 001-32380). These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this release are likely to cause these statements to become outdated with the passage of time. The Company does not currently intend, however, to update the information provided today prior to its next earnings release.

CONTACT: Tom Tossavainen PHONE: 904-421-1441 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) AS OF APRIL 1, 2005 AND DECEMBER 31, 2004 (In thousands, except share and per share data) April 1, 2005 December 31, 2004 ASSETS CURRENT ASSETS: Cash and cash equivalents $10,198 $69,178 Accounts receivable - trade (net of allowance for doubtful accounts of $7,014 and $6,929) 105,685 98,511 Accounts receivable - other 13,961 17,828 Inventory 146,000 145,532 Prepaid expenses and other current assets 5,092 3,204 Deferred income taxes 11,405 12,084 Total current assets 292,341 346,337 PROPERTY AND EQUIPMENT, net 28,195 28,767 GOODWILL 203,848 203,848 OTHER INTANGIBLE ASSETS, net 81,673 85,361 OTHER ASSETS 9,610 9,067 TOTAL ASSETS $615,667 $673,380 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Revolver $17,000 $ -- Current portion of long-term debt 1,000 1,000 Accounts payable 53,926 53,260 Accrued expenses and other current liabilities 19,218 22,180 Accrued interest payable 5,852 3,042 Accrued merger expenses 5,994 6,131 Accrued income taxes payable 1,339 7,372 Total Current Liabilities 104,329 92,985 LONG TERM LIABILITIES: Deferred income taxes 24,899 25,221 Long-term debt, net of current portion 232,025 302,275 TOTAL LIABILITIES 361,253 420,481 COMMITMENTS AND CONTINGENCIES SENIOR PREFERRED STOCK, $0.01 par value, 20,000,000 shares authorized, no shares outstanding as of April 1, 2005 and December 31, 2004 -- -- STOCKHOLDERS' EQUITY: Common stock; $0.01 par value, 100,000,000 authorized; 32,102,820 issued and outstanding as of April 1, 2005 and December 31, 2004 321 321 Accumulated deficit (300,443) (301,836) Additional paid-in capital 556,268 556,346 Deferred compensation (2,549) (2,787) Accumulated other comprehensive income 817 855 TOTAL STOCKHOLDERS' EQUITY 254,414 252,899 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $615,667 $673,380 INTERLINE BRANDS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED APRIL 1, 2005 AND MARCH 26, 2004 (in thousands, except share and per share data) Three Months Ended April 1, 2005 March 26, 2004 NET SALES $196,491 $172,604 COST OF SALES 121,005 106,881 Gross Profit 75,486 65,723 OPERATING EXPENSES: Selling, general and administrative expenses 53,740 48,257 Depreciation and amortization 3,117 2,983 Total Operating Expense 56,857 51,240 OPERATING INCOME 18,629 14,483 CHANGE IN FAIR VALUE OF INTEREST RATE SWAPS -- 1,104 LOSS ON EXTINGUISHMENT OF DEBT (10,340) -- INTEREST EXPENSE (6,270) (10,194) INTEREST INCOME 120 8 OTHER INCOME 168 136 Income before income taxes 2,307 5,537 PROVISION FOR INCOME TAXES 914 2,286 NET INCOME 1,393 3,251 PREFERRED STOCK DIVIDENDS -- (13,261) NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $1,393 $(10,010) INCOME (LOSS) PER COMMON SHARE - BASIC $0.04 $(153.00) INCOME (LOSS) PER COMMON SHARE - DILUTED $0.04 $(153.00) WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 31,917,175 65,425 WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 32,313,188 65,425 INTERLINE BRANDS, INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED APRIL 1, 2005 AND MARCH 26, 2004 (in thousands) Three Months Ended April 1, 2005 March 26, 2004 OPERATING ACTIVITIES: Net Income $1,393 $3,251 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,117 2,983 Amortization and write-off of debt issuance costs 2,685 487 Redemption premium on 11.5% senior subordinated notes 8,050 -- Stock based compensation 238 -- Change in fair value of interest rate swaps -- (1,104) Interest income on shareholder notes -- 12 Deferred income taxes 356 140 Changes in assets and liabilities, net of effects of acquisition: Accounts receivable - trade (7,174) (8,408) Accounts receivable - other 1,536 4,411 Inventory (468) 817 Prepaid expenses and other current assets (1,888) 602 Other assets (543) (150) Accrued interest payable 2,810 5,477 Accounts payable 665 6,493 Accrued expenses and other current liabilities (1,478) 179 Accrued merger expenses (111) (88) Accrued income taxes payable (6,033) 1,138 Net cash provided by operating activities 3,155 16,240 INVESTING ACTIVITIES: Purchase of property and equipment, net (1,543) (1,429) Purchase of business, net of cash acquired (1,009) (289) Net cash used in investing activities (2,552) (1,718) FINANCING ACTIVITIES: Increase in revolver and swingline, net 17,000 -- Repayment of long-term debt (70,250) (1,750) Payment of redemption premium on 11.5% senior subordinated notes (8,050) -- Payment of debt issuance costs -- (218) Initial public offering costs (578) Proceeds from exercise of underwriters over-allotment options 2,333 -- Net cash used in financing activities (59,545) (1,968) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (38) (23) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (58,980) 12,531 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 69,178 1,612 CASH AND CASH EQUIVALENTS, END OF PERIOD $10,198 $14,143 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $1,611 $4,209 Income taxes (net of refunds) $6,595 $270 SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Dividends on preferred stock $ -- $13,261 INTERLINE BRANDS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Information (In thousands, except share and per share data) Three Months Ended April 1, March 26, 2005 2004 Income before income taxes (GAAP) $2,307 $5,537 Add back the following items: Eliminate the change in fair value of interest rate swaps -- (1,104) Loss on early extinguishment of debt 10,340 -- Adjust interest expense associated with use of IPO proceeds 456 4,571 to repay or redeem portions of the previously existing term loan and outstanding 11.5% notes and elimination of amortization of deferred financing fees Adjusted pro forma income before income taxes 13,103 9,004 Income taxes 5,189 3,641 Adjusted pro forma net income $7,914 $5,363 Adjusted pro forma net income per share - basic $0.25 $0.17 Adjusted pro forma net income per share - diluted $0.24 $0.17 Shares outstanding - basic 31,917,175 31,917,000 Shares outstanding - diluted 32,313,188 32,102,820 Daily Sales Calculations Three Months Ended April 1, March 26, % 2005 2004 Variance Net Sales $196,491 $172,604 13.8% Daily Sales: Ship Days 65 64 Average Daily Sales $3,023 $2,697 12.1% Average Organic Daily Sales $3,023 $2,697 12.1%

Average daily sales are defined as sales for a period of time divided by the number of shipping days in that period of time. Average organic daily sales are defined as sales for a period of time divided by the number of shipping days in that period of time excluding any sales from acquisitions made subsequent to the beginning of the prior year period and excluding the effect of the freight reclassification announced in the third quarter of 2003.

Three Months Ended April 1, March 26, 2005 2004 Adjusted EBITDA: Net income (GAAP) $1,393 $3,251 Interest expense 6,270 10,194 Interest income (120) (8) Change in fair value of interest rate swaps -- (1,104) Loss on extinguishment of debt 10,340 -- Provision (benefit) for income taxes 914 2,286 Depreciation and amortization 3,117 2,983 Adjusted EBITDA $21,914 $17,602

Adjusted EBITDA is presented herein because we believe it to be relevant and useful information to our investors because it is used by our management to evaluate the operating performance of our business and compare our operating performance with that of our competitors. Management also uses Adjusted EBITDA for planning purposes, including the preparation of annual operating budgets, to determine appropriate levels of operating and capital investments. Adjusted EBITDA excludes certain items, including change in fair value of interest rate swaps and loss on extinguishment of debt, which we believe are not indicative of our core operating results. We therefore utilize Adjusted EBITDA as a useful alternative to net income as an indicator of our operating performance. However, Adjusted EBITDA is not a measure of financial performance under GAAP and Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as net income. While we believe that some of the items excluded from Adjusted EBITDA are not indicative of our core operating results, these items do impact our income statement, and management therefore utilizes Adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income and gross margin.