Interline Brands To Cut Jobs And Consolidate DCs
Interline Brands, a leading distributor and direct marketer of maintenance, repair and operations products, announced an update on business performance for the fourth quarter of 2008 and a comprehensive plan focused on additional expense reduction and efficiency gains across its operating platform.
Based on unaudited results, the company anticipates reporting net sales for its fourth quarter ended December 26, 2008 of approximately $277 million, and gross profit in the range of $101 to $103 million. Additionally, the company expects to report a strong cash position of over $60 million as of Dec. 26, 2008.
Commenting on current business conditions, Interline Chairman and Chief Executive Officer Michael Grebe said, "Our core end-markets were adversely impacted by macroeconomic headwinds that intensified throughout the quarter. Accordingly, we will not meet our previously issued earnings per share range of $0.30 to $0.35 for the fourth quarter of 2008. However, we have been through difficult times before and will continue to prudently manage the business by adjusting our cost structure and maximizing cash flow generation. We have a strong cash balance, and we are well on track to meet the high end of our previously stated goal of generating $30 to $40 million in free cash flow over the six-month period ending March 2009."
In response to the challenging environment, the company recently announced the implementation of several cost actions, including the elimination of 85 full-time positions. As a result of the workforce reduction and other expense control actions, the company expects to generate annualized savings of approximately $12 million. In the first quarter of 2009, Interline expects to record one-time severance charges totaling approximately $1.0 million resulting from these actions.
"The decision to downsize is never easy to make, and we thank our affected employees for their many important contributions. However, these actions are necessary to ensure that our cost structure aligns with current and expected market dynamics," added Grebe.
In an effort to further improve the long-term efficiency of its operating platform, Interline also announced that it will accelerate the streamlining of its distribution and logistics network by consolidating 10 distribution centers over the next six months. These consolidations are in addition to those included in Project 20/20, the company's previously announced cost- savings and efficiency plan. Interline expects to realize annualized savings of approximately $4 million as a result of these consolidations, and will record one-time severance and other charges totaling approximately $1.0 million in the first half of 2009. The company will continue to review its distribution footprint for optimal efficiency and scale.
Grebe continued, "With these consolidations, we have a great opportunity to reduce our fixed cost structure and to improve our scale. As important, we will continue to provide excellent customer service because we are not exiting any geographic markets. Streamlining our distribution network is the right decision regardless of present market conditions, and we are very excited by the prospect of establishing a more profitable operating platform. We will execute this plan in an orderly fashion, taking into consideration seasonality of demand and other market dynamics, and by timing the consolidations with lease expirations to minimize associated costs."
Grebe concluded, "I am confident the actions announced today reinforce our continued focus on prudent expense controls and underscore our ongoing commitment to operational excellence. I look forward to discussing more of the specifics of today's announced actions, as well as our full fourth quarter 2008 results, on our quarterly conference call next month."
The Company expects to release fourth quarter and full year 2008 results on Feb. 19, 2009, and host a conference call on Feb. 20, 2009, at 9 a.m. Eastern Time.
Source: Interline Brands Inc.