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May 6, 2011

Interline Brands Announces First Quarter 2011 Sales and Earnings Results

JACKSONVILLE, Fla., May 6, 2011 (GLOBE NEWSWIRE) -- Interline Brands, Inc. (NYSE:IBI) ("Interline" or the "Company"), a leading distributor and direct marketer of maintenance, repair and operations products ("MRO"), reported sales and earnings for the fiscal quarter ended April 1, 2011.

"Our first quarter results reflect broad-based improvement, and we are encouraged to report organic growth in all of our end-markets. As the market environment continues to improve, we are focused on the execution of key initiatives that will enable us to generate long-term shareholder value," commented Michael Grebe, Chairman and CEO.

First Quarter 2011 Performance

Sales for the quarter ended April 1, 2011 were $297.4 million, a 21.3% increase compared to sales of $245.2 million in the comparable 2010 period. Interline's facilities maintenance end-market, which comprised 75% of sales, increased 26.4% during the first quarter. The professional contractor end-market, which comprised 14% of sales, increased 9.1% for the quarter. The specialty distributor end-market, which comprised 11% of sales, increased 6.3% for the quarter. Not including the acquisitions of CleanSource and Northern Colorado Paper and taking into account an additional shipping day in the first quarter of 2011, average organic daily sales increased 4.3% for the quarter. 

"Overall trends remain positive in our end-markets, and we have witnessed a meaningful change in the confidence levels of our customers. We continue to leverage our recent acquisitions in the jan-san space to drive cross-selling opportunities and expand into underpenetrated geographies," said Mr. Grebe. 

Gross profit increased $15.8 million, or 16.6%, to $110.9 million for the first quarter of 2011, compared to $95.1 million for the first quarter of 2010.  As a percentage of net sales, gross profit decreased 150 basis points to 37.3% compared to 38.8% for the first quarter of 2010.

"The transformation of our distribution network is progressing on plan as we implement our larger regional replenishment centers," commented Kenneth D. Sweder, Interline's President and Chief Operating Officer. "With these centers, we have achieved some of the highest customer fill rates in our history as a company, and we expect to see continued improvements to our inventory management as the year progresses."

Selling, general and administrative ("SG&A") expenses for the first quarter of 2011 increased $10.9 million, or 14.1%, to $88.1 million from $77.2 million for the first quarter of 2010. As a percentage of net sales, SG&A expenses were 29.6% compared to 31.5% for the first quarter of 2010. 

First quarter 2011 operating income of $17.1 million, or 5.8% of sales, increased 29.9% compared to $13.2 million, or 5.4% of sales, in the first quarter of 2010.

Earnings per diluted share for the first quarter of 2011 were $0.20, an increase of 18% compared to earnings per diluted share of $0.17 for the first quarter of 2010. Earnings per diluted share for the first quarters of 2011 and 2010 include a $0.01 per diluted share charge associated with ongoing improvements to our distribution network. Earnings per diluted share for the first quarter of 2010 also included a $0.02 per diluted share charge associated with previously announced changes in the Company's executive management.

First quarter 2011 free cash flow was $8.1 million compared to $12.3 million in the first quarter of 2010. Cash flow from operating activities for the first quarter of 2011 was $13.5 million compared to $16.1 million for the first quarter of 2010.

Business Outlook

Mr. Grebe stated, "Looking ahead, we recognize that our end-markets are still in the early stage of a recovery. Though we have not yet hit our full stride, we are encouraged by the progress within our business to become more efficient as we grow. We remain confident in our direction and our ability to execute against our initiatives to strengthen Interline's position as a premier, broad-line MRO distributor." 

Conference Call

Interline will host a conference call on May 6, 2011 at 9:00 a.m. Eastern Standard 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 62624663. This recording will expire on May 20, 2011.

About Interline

Interline Brands, Inc. is a leading distributor and direct marketer with headquarters in Jacksonville, Florida. Interline provides maintenance, repair and operations products to a diversified customer base of facilities maintenance professionals, professional contractors, and specialty distributors primarily throughout North America, Central America and the Caribbean. For more information, visit the Company's website at http://www.interlinebrands.com.

Recent releases and other news, reports and information about the Company can be found on the "Investor Relations" page of the Company's website at http://ir.interlinebrands.com/.

Non-GAAP Financial Information

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Interline's management uses non-US GAAP measures in its analysis of the Company's performance. Investors are encouraged to review the reconciliation of non-US GAAP financial measures to the comparable US GAAP results available in the accompanying tables.

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 by 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, for example, economic slowdowns, general market conditions, credit market contractions, consumer spending and debt levels, adverse changes in trends in the home improvement and remodeling and home building markets, the failure to realize expected benefits from acquisitions, material facilities systems disruptions and shutdowns, the failure to locate, acquire and integrate acquisition candidates, commodity price risk, foreign currency exchange risk, interest rate risk, the dependence on key employees and other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010. 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.

INTERLINE BRANDS, INC. AND SUBSIDIARIES    
CONSOLIDATED BALANCE SHEETS    
AS OF APRIL 1, 2011 AND DECEMBER 31, 2010    
(in thousands, except share and per share data)    
     
 April 1,
2011		December 31,
2010
ASSETS    
Current Assets:    
Cash and cash equivalents  $ 74,307  $ 86,981
Investments  --   100
Accounts receivable - trade (net of allowance for doubtful accounts of $9,189 and $9,088)  132,383 122,619
Inventory  209,567 203,269
Prepaid income taxes  1,000  2,086
Prepaid expenses and other current assets  17,857 28,816
Deferred income taxes  17,599 17,381
Total current assets 452,713 461,252
     
Property and equipment, net 56,380 54,546
Goodwill 344,017 341,168
Other intangible assets, net 140,247 141,562
Other assets 9,444 9,081
Total assets  $ 1,002,801  $ 1,007,609
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current Liabilities:    
Accounts payable  $ 94,553  $ 96,878
Accrued expenses and other current liabilities 39,329 45,181
Accrued interest 8,042 2,852
Income tax payable  734  819
Current portion of long-term debt  --  13,358
Current portion of capital leases 607 607
Total current liabilities 143,265 159,695
     
Long-Term Liabilities:    
Deferred income taxes 46,583 44,045
Long-term debt, net of current portion 300,000 300,000
Capital leases, net of current portion 719 906
Other liabilities 7,188 6,731
Total liabilities 497,755 511,377
Commitments and contingencies    
Senior preferred stock; $0.01 par value, 20,000,000 shares authorized; no shares outstanding as of April 1, 2011 and December 31, 2010  --   -- 
     
Shareholders' Equity:    
Common stock; $0.01 par value, 100,000,000 authorized; 33,525,463 issued and 33,356,761 outstanding as of April 1, 2011 and 33,336,373 issued and 33,214,073 outstanding as of December 31, 2010  335 333
Additional paid-in capital  595,758  593,031
Accumulated deficit  (89,941)  (96,824)
Accumulated other comprehensive income  2,097  1,865
Treasury stock, at cost, 168,702 shares as of April 1, 2011 and 122,300 as of December 31, 2010 (3,203) (2,173)
Total shareholders' equity 505,046 496,232
Total liabilities and shareholders' equity  $ 1,002,801  $ 1,007,609
   
INTERLINE BRANDS, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF EARNINGS  
THREE MONTHS ENDED APRIL 1, 2011 AND MARCH 26, 2010
(in thousands, except share and per share data)    
     
 Three Months Ended
 April 1,
2011		March 26,
2010
   
Net sales  $ 297,417  $ 245,218
Cost of sales  186,476  150,071
Gross profit  110,941  95,147
     
Operating Expenses:    
Selling, general and administrative expenses  88,087  77,229
Depreciation and amortization  5,752  4,751
Total operating expense  93,839  81,980
Operating income  17,102  13,167
     
Interest expense  (6,096)  (4,353)
Interest and other income  407  424
Income before income taxes  11,413  9,238
Provision for income taxes  4,530  3,668
Net income   $ 6,883  $ 5,570
     
Earnings Per Share:    
Basic  $ 0.21  $ 0.17
Diluted  $ 0.20  $ 0.17
     
Weighted-Average Shares Outstanding:    
Basic  33,356,472  32,674,154
Diluted  34,158,121  33,370,605
     
INTERLINE BRANDS, INC. AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF CASH FLOWS    
THREE MONTHS ENDED APRIL 1, 2011 AND MARCH 26, 2010    
(in thousands)    
     
 Three Months Ended
 April 1,
2011		March 26,
2010
 Cash Flows from Operating Activities:     
 Net income   $ 6,883  $ 5,570
 Adjustments to reconcile net income to net cash provided by operating activities:     
 Depreciation and amortization   5,752  4,903
 Amortization of debt issuance costs   337  255
 Amortization of discount on 8⅛% senior subordinated notes   --   37
 Share-based compensation   1,265  774
 Excess tax benefits from share-based compensation   (853)  (515)
 Deferred income taxes   2,229  124
 Provision for doubtful accounts   1,094  1,456
 Loss on disposal of property and equipment   63  17
     
 Changes in assets and liabilities which provided (used) cash:     
 Accounts receivable - trade   (6,851)  (981)
 Inventory   (1,446)  (3,311)
 Prepaid expenses and other current assets   10,966  182
 Other assets   (281)  249
 Accounts payable   (4,854)  3,337
 Accrued expenses and other current liabilities   (8,192)  329
 Accrued interest   5,188  3,049
 Income taxes   1,863  603
 Other liabilities   335  (12)
 Net cash provided by operating activities   13,498  16,066
 Cash Flows from Investing Activities:     
 Purchase of property and equipment, net   (5,427)  (3,733)
 Purchase of short-term investments   --   (1,342)
 Proceeds from sales and maturities of short-term investments   100  1,379
 Purchase of businesses, net of cash acquired   (9,496)  -- 
 Net cash used in investing activities   (14,823)  (3,696)
 Cash Flows from Financing Activities:     
 Increase (decrease) in purchase card payable, net   1,707  (1,025)
 Repayment of term debt   --   (90)
 Repayment of 8⅛% senior subordinated notes   (13,358)  -- 
 Payment of debt issuance costs   (34)  -- 
 Payments on capital lease obligations   (188)  (64)
 Proceeds from stock options exercised   611  5,200
 Excess tax benefits from share-based compensation   853  515
 Treasury stock acquired to satisfy minimum statutory tax withholding requirements   (1,030)  (36)
 Net cash (used in) provided by financing activities   (11,439)  4,500
 Effect of exchange rate changes on cash and cash equivalents   90  60
 Net (decrease) increase in cash and cash equivalents   (12,674)  16,930
 Cash and cash equivalents at beginning of period   86,981  99,223
 Cash and cash equivalents at end of period   $ 74,307  $ 116,153
     
 Supplemental Disclosure of Cash Flow Information:     
 Cash paid during the period for:     
 Interest   $ 252  $ 945
 Income taxes, net of refunds   $ 630  $ 3,072
     
 Schedule of Non-Cash Investing Activities:     
 Property acquired through lease incentives   $ 475  $ 610
 Contingent consideration associated with purchase of business   $ 250  $ -- 
       
INTERLINE BRANDS, INC. AND SUBSIDIARIES      
RECONCILIATION OF NON-GAAP INFORMATION      
THREE MONTHS ENDED APRIL 1, 2011 AND MARCH 26, 2010    
 (in thousands, except per share data)      
       
Free Cash Flow      
 Three Months Ended  
 April 1,
2011		March 26,
2010		  
       
Net cash from operating activities  $ 13,498  $ 16,066  
Less capital expenditures  (5,427)  (3,733)  
Free cash flow  $ 8,071  $ 12,333  
       
We define free cash flow as net cash provided by operating activities, as defined under US GAAP, less capital expenditures. We believe that free cash flow is an important measure of our liquidity and therefore our ability to reduce debt and make strategic investments after considering the capital expenditures necessary to operate the business. We use free cash flow in the evaluation of the Company's business performance. A limitation of this measure, however, is that it does not reflect payments made in connection with investments and acquisitions, which reduce liquidity. To compensate for this limitation, management evaluates its investments and acquisitions through other return on capital measures.
       
Daily Sales Calculations      
 Three Months Ended
 April 1,
2011		March 26,
2010		% Variance
    
Net sales  $ 297,417  $ 245,218 21.3%
Less acquisitions:  (37,606)  --  
Organic sales  $ 259,811  $ 245,218 6.0%
       
Daily sales:      
 Shipping days  65  64  
 Average daily sales (1)  $ 4,576  $ 3,832 19.4%
 Average organic daily sales (2)  $ 3,997  $ 3,832 4.3%
       
(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.
(2) 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.
       
Average organic daily sales is presented herein because we believe it to be relevant and useful information to our investors since it is used by management to evaluate the operating performance of our business, as adjusted to exclude the impact of acquisitions, and compare our organic operating performance with that of our competitors. However, average organic daily sales is not a measure of financial performance under US GAAP and it should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with US GAAP, such as net sales. Management utilizes average organic daily sales as an operating performance measure in conjunction with US GAAP measures such as net sales.      
       
Adjusted EBITDA      
 Three Months Ended  
 April 1,
2011		March 26,
2010		  
Adjusted EBITDA:      
Net income (GAAP)  $ 6,883  $ 5,570  
Interest expense  6,096 4,353  
Interest income  (6) (32)  
Income tax provision  4,530 3,668  
Depreciation and amortization  5,752 4,903  
Adjusted EBITDA  $ 23,255  $ 18,462  
Adjusted EBITDA margin 7.8% 7.5%  
       
Adjusted EBITDA differs from Consolidated EBITDA per our credit facility agreement for purposes of determining our net leverage ratio. We define Adjusted EBITDA as net income plus interest expense (income), net, (gain) loss on extinguishment of debt, net, income taxes and depreciation and amortization. Adjusted EBITDA is presented herein because we believe it to be relevant and useful information to our investors since it is consistently used by our management to evaluate the operating performance of our business and to compare our operating performance with that of our competitors. Management also uses Adjusted EBITDA for planning purposes, including the preparation of annual operating budgets, and to determine appropriate levels of operating and capital investments. Adjusted EBITDA excludes certain items, 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 compared to the Company's plan. However, Adjusted EBITDA is not a measure of financial performance under US GAAP. Accordingly, Adjusted EBITDA should not be used in isolation or as a substitute for other measures of financial performance reported in accordance with US GAAP, such as gross margin, operating income, net income, cash flows from operating, investing and financing activities or other income or cash flow statement data prepared in accordance with US GAAP. 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 US GAAP measures, such as gross margin, operating income, net income, cash flows from operating, investing and financing activities or other income or cash flow statement data prepared in accordance with US GAAP. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. 
CONTACT: Lev Cela

         PHONE: 904-421-1441


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