UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

|(Mark One)                                                       |                                                                                         
|---------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                                | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 28, 2007                     
|or                                                              
|o                                                                | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                                to

Commission file number: 001-32380

INTERLINE BRANDS, INC.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)             |  | 03-0542659(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------------------- |  | ----------------------------------------------
|801 West Bay Street, Jacksonville, Florida(Address of principal executive offices) |  | 32204(Zip Code)                               
|(904) 421 1400(Registrant's telephone number, including area code)                
|Securities registered pursuant to Section 12(b) of the Act:                       

|Title of each class                    |  | Name of each exchange on which registered
|-------------------------------------- |  | -----------------------------------------
|Common Stock, $.01 par value per share |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer ý |  | Accelerated filer o |  | Non-accelerated filer o (Do not check if a smaller reporting company) |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of June 29, 2007, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was
$794.5 million based on the closing sale price as reported on the New York Stock Exchange.

As
of February 22, 2008, there were 32,341,750 shares of the registrant's common stock outstanding (excluding 42,083 shares held in treasury), par value $0.01.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be held May 8, 2008 is incorporated by reference in Part III of
this Form 10-K.



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TABLE OF CONTENTS

|ITEM |  |                                                                                                              |  | PAGE
|---- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|     |  | PART I                                                                                                       |  |     
|1.   |  | Business                                                                                                     |  | 2   
|1A.  |  | Risk Factors                                                                                                 |  | 13  
|1B.  |  | Unresolved Staff Comments                                                                                    |  | 21  
|2.   |  | Properties                                                                                                   |  | 21  
|3.   |  | Legal Proceedings                                                                                            |  | 23  
|4.   |  | Submission of Matters to a Vote of Security Holders                                                          |  | 23  
|     |  | PART II                                                                                                      |  |     
|5.   |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 24  
|6.   |  | Selected Financial Data                                                                                      |  | 27  
|7.   |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 30  
|7A.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 44  
|8.   |  | Financial Statements and Supplementary Data                                                                  |  | 45  
|9.   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 45  
|9A.  |  | Controls and Procedures                                                                                      |  | 45  
|9B.  |  | Other Information                                                                                            |  | 46  
|     |  | PART III                                                                                                     |  |     
|10.  |  | Directors, Executive Officers and Corporate Governance                                                       |  | 47  
|11.  |  | Executive Compensation                                                                                       |  | 47  
|12.  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 47  
|13.  |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 47  
|14.  |  | Principal Accounting Fees and Services                                                                       |  | 47  
|     |  | PART IV                                                                                                      |  |     
|15.  |  | Exhibits, Financial Statement Schedules                                                                      |  | 48  
|16.  |  | Signatures                                                                                                   |  | 49  

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PART I

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act") that are subject to risks and uncertainties. You should not place undue reliance on those statements because they are subject to numerous uncertainties and
factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning
our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as "may," "believe," "expect," "anticipate," "intend,"
"plan," "estimate" or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends,
current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this report, you should understand that these statements
are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you
should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.
These factors include:



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You
should keep in mind that any forward-looking statement made by us in this report, or elsewhere, speaks only as of the date on which we make it. New risks and uncertainties arise from
time to time, and it is impossible for us to predict these events or how they may affect us. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made
in this report or elsewhere might not occur. Notwithstanding the foregoing, all information contained in this report is materially accurate as of the date of this report.

ITEM 1.    Business

Our Company

We are a leading national distributor and direct marketer of maintenance, repair and operations, or MRO, products. We sell to approximately 200,000 active
customer accounts and stock over 85,000 MRO products in the following categories: plumbing, janitorial and sanitary, electrical, lighting, hardware, security, heating, ventilation and air
conditioning, and other miscellaneous products. Our products are primarily used for the repair, maintenance, remodeling and refurbishment of properties and non-industrial facilities. We
are able to realize higher operating margins by focusing on repair, maintenance, remodeling and refurbishment customers, who generally make smaller, more frequent purchases and require high levels of
service. Our diverse customer base includes facilities maintenance customers, which consist of multi-family housing facilities, educational institutions, lodging and health care facilities, government
properties and building service contractors; professional contractors who are primarily involved in the repair, remodeling and construction of residential and non-industrial facilities;
and specialty distributors, including plumbing and hardware
retailers. Our customers range in size from individual contractors and independent hardware stores to apartment management companies and national purchasing groups.

We
market and sell our products primarily through ten distinct and targeted brands, each of which is nationally recognized in the markets we serve for providing premium products at
competitive prices with reliable same-day or next-day delivery. Wilmar, Sexauer, Maintenance USA and AmSan brands generally serve our facilities maintenance customers; Barnett,
U.S. Lock, Sun Star and Copperfield brands generally serve our professional contractor customers; Hardware Express and AF Lighting brands generally serve our specialty distributors customers. Our
multi-brand operating model, which we believe is unique in the industry, allows us to use a single platform to deliver tailored products and services to meet the individual needs of each respective
customer group served. We reach our markets using a variety of sales channels, including a sales force of over 650 field sales representatives, over 500 telesales and customer service representatives,
a direct marketing program of approximately five million pieces annually, brand-specific websites and a national accounts sales program. We deliver our products through our network of 74 regional
distribution centers, 39 professional contractor showrooms located throughout the United States and Canada, a national distribution center, or NDC, in Nashville, Tennessee, 21 vendor managed inventory
locations at large professional contractor customer locations and a dedicated fleet of trucks. Our broad distribution network allows us the ability to provide reliable, same-day or
next-day delivery service to 98% of the U.S. population.

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Our
information technology and logistics platform supports our major business functions, allowing us to market and sell our products at varying price points depending on the customer's
service requirements. While we market our products under a variety of branded catalogs, generally our brands draw from the same inventory within common distribution centers and share associated
employee and transportation costs. In addition, we have centralized marketing, purchasing and catalog production operations to support our brands. We believe that our information technology and
logistics platform also benefits our customers by allowing us to offer a broad product selection at highly competitive prices while maintaining the unique customer appeal of each of our targeted
brands. Overall, our common operating platform has enabled us to improve customer service, maintain lower operating costs, efficiently manage working capital and support our growth initiatives.

In
this document, unless otherwise indicated, "we" refers to Interline Brands, Inc., a Delaware corporation, and its consolidated subsidiaries; and "Interline New Jersey" refers
to Interline Brands, Inc., a New Jersey corporation through which we conduct our business.

Strategy

Our objective is to become the leading supplier of MRO products to our three principal end markets: facilities maintenance, professional contractor and specialty
distributor. In pursuing this objective, we plan to increase our net sales, earnings and return on invested capital by capitalizing on our information technology and logistics platform to successfully
execute our organic growth, geographic expansion, operating efficiency and strategic acquisition initiatives.



Industry and Market Overview

The MRO distribution industry is over $300 billion in size according to a U.S. BancorpPiper Jaffray Research Report and encompasses the supply
of a wide range of products, including plumbing and electrical supplies, hand-tools, janitorial supplies, safety equipment and many other categories. Customers served by the MRO
distribution industry include heavy industrial manufacturers that use MRO supplies for the repair and overhaul of
production equipment and machinery; owners and managers of facilities such as apartment complexes, office buildings, schools, hotels and hospitals that use MRO supplies largely for maintenance, repair
and refurbishment; and professional contractors. The size of our addressable market in facilities maintenance, including janitorial and sanitation, and repair and remodeling market, which generally
excludes new commercial and residential construction and heavy industrial manufacturing, is approximately $53 billion.

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Within
the MRO distribution industry, we focus on serving customers in three principal end markets: facilities maintenance, professional contractors and specialty distributors. Our
customers are primarily engaged in the repair, maintenance, remodeling, refurbishment and construction of properties and non-industrial facilities, as opposed to the maintenance of heavy
industrial facilities and machinery. Our facilities maintenance customers are individuals and entities responsible for the maintenance and repair of various commercial properties, including apartment
buildings, schools, hotels and health care facilities. Our professional contractor customers buy our products to provide plumbing, electrical, heating, ventilation and air conditioning, or HVAC, and
mechanical services to their residential and commercial customers. Our specialty distributor customers consist primarily of hardware stores and small plumbing and electrical distributors that purchase
our products for resale.

As
MRO customers grow in size and sophistication, they continue to seek new ways to generate additional efficiencies. The application of information technology to supply chain management
has become increasingly important for this purpose. We believe that our supply chain management solutions result in material savings for our MRO customers. For example, we offer our customers the
option of receiving invoices electronically. For customers that place frequent orders and have the ability to receive electronic invoices, this program can dramatically reduce ordering costs by
eliminating invoice handling and automating the matching and payment process. We believe that by offering services such as electronic purchasing and invoicing, which remove transaction costs from the
supply chain, we encourage our customers to use us as their single source for MRO supplies.

Our Products

We stock over 85,000 standard and specialty MRO products in a number of product categories, including plumbing, janitorial and sanitary supplies, electrical and
lighting, heating, ventilation and air conditioning, appliances and parts, security, hardware and tools, window and floor coverings and paint accessories. We offer a broad range of brand name and
exclusive brand products.



The approximate percentages of our net sales for the fiscal year ended December 28, 2007 by product category were as follows:

Product Category

Percent of
Net SalesPlumbing

31
%Janitorial and sanitary

23Electrical and lighting

10Heating, ventilation and air conditioning

10Appliances and parts

6Security

5Hardware and tools

5Other

10Total

100
%


The
following is a discussion of our principal product categories:

Plumbing Products.We sell a broad range of plumbing products, from individual faucet parts to complete bathroom renovation
kits. In addition, we sell both brand name and exclusive brand products. For example, we sell brand name products from manufacturers including Moen and Delta. We also sell
exclusive brand plumbing products under various proprietary trademarks, including Premier faucets and water heaters, DuraPro tubular products and ProPlus retail plumbing accessories.

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Janitorial and Sanitary Products.Our comprehensive selection of janitorial and sanitary products includes brooms, mops,
trash can liners, cleaning chemicals, paper towels and bath tissue. We offer a number of products from leading janitorial and sanitary manufacturers, such as Kimberly-Clark and Georgia-Pacific. We
also offer exclusive brand janitorial and sanitary products under the Renown brand.

Electrical and Lighting Products.Our comprehensive selection of electrical and lighting products range from electrical wire
and breakers to light fixtures and light bulbs. We offer brand name products from leading electrical supply manufacturers, including Eaton, Sylvania and Leviton, as well as a number of exclusive brand
electrical products, such as Lumination Lighting and Preferred Industries.

Heating, Ventilation and Air Conditioning Products.We offer a variety of HVAC products, including condensing units,
thermostats, fans and motors under both brand and exclusive brand names. Manufacturers include Nordyne, Goodman and Honeywell. We also offer specialty ventilation and chimney maintenance products
through our Copperfield brand.

Appliances and Parts.Our comprehensive range of appliances and parts includes stoves, washer/dryer components, garbage
disposers, refrigerators and range hoods. We sell a number of brand name products of leading appliance manufacturers, including General Electric and Whirlpool. We also sell a number of
high-quality replacement parts from a number of different suppliers.

Security Products.We sell a broad range of security hardware products, from individual lock-sets to computerized
master-key systems. We sell a number of brand name products of leading security hardware manufacturers, including Kwikset and Schlage. We also sell a number of exclusive brand security
hardware products, such as U.S. Lock hardware, Legend locks and Rx master keyways.

Hardware and Tools.We sell a variety of hardware products and tools, including hinges, power tools and mini blinds. Our
brand name products include DeWalt, Channellock and Hagar Hinge. Our exclusive brand hardware products include Yukon, Legend and Anvil Mark.



Our size and reputation have enabled us to develop and market various lines of exclusive brand products, which we believe offer our customers high quality,
low-cost alternatives to the brand name products we sell. Third-party manufacturers, primarily in Asia and the United States, using our proprietary branding and packaging design,
manufacture our exclusive brand products to our specifications. Our sales force, catalogs and promotional flyers emphasize the comparative value of our exclusive brand products. Since our exclusive
brand products are typically less expensive for us to purchase from suppliers, we are able to improve our profit margin with the sale of these products, despite the fact that we sell them to our
customers at a discount to our non-exclusive brand product offerings. In addition, we have found that we develop strong relationships with our exclusive brand customers and generate
increased repeat business, as exclusive brand customers generally return to us for future service and replacement parts on previously purchased products.



We constantly monitor and evaluate our product offerings both to assess the sales performance of our existing products and to discontinue products that fail to
meet specified sales criteria. We also create new product offerings in response to customer requirements by adjusting our product portfolio within existing product lines as well as by establishing new
product line categories. These categories can either be new to Interline or new to a brand. For example, as we integrate AmSan into Interline we will look to add certain AmSan products to our other
brands where appropriate. Through these efforts, we are able to address our customers' changing product needs and thereby retain and attract customers. Further, by introducing new product lines, we
provide our customers with additional

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opportunities
for cost savings and a one-stop shopping outlet with broad product offerings. We believe that introducing new products in existing product lines and creating new product
lines are both strategies which enable us to increase penetration of existing customer accounts, as well as attract new customers to our brands.

Our Brands

We market and sell products to our customers primarily through ten distinct and targeted brands: Wilmar®, Sexauer®, Maintenance
USA®, AmSan, Barnett®, Hardware Express®, U.S. Lock®, SunStar®, Copperfield and AF
Lighting. Each of our brands is focused on serving a particular customer group. Wilmar, Sexauer, Maintenance USA and AmSan brands generally serve facilities maintenance customers;
Barnett, U.S. Lock, SunStar and Copperfield brands generally serve our professional contractor customers; Hardware Express and AF Lighting brands generally serve our specialty distributor customers.
Our brands are distinguished not only by the type of products offered, but also by the levels of service provided to customers. We have brands that market a wide range of product categories, such as
Wilmar, as well as brands that specialize in a particular group of products, such as U.S. Lock, which focuses on security hardware, SunStar, which focuses on specialty lighting, and Copperfield, which
focuses on chimney repair and maintenance products. We have brands that market complementary services to our customers, including inventory management and technical assistance, and brands that offer
products without support services. We believe that our brand-based business model effectively allows us to offer a deep product offering to very targeted customer end-markets. We have core
competencies in almost all of the sales channels available to a distributor including national account sales professionals, outside sales representatives, outbound and inbound telesales and customer
service representatives, direct marketing via catalog and flyers, professional contractor showroom, vendor managed inventory locations, and internet-based service capabilities. This allows us to
effectively compete for a broad range of customers across our industry by offering our customers the service and delivery platform they prefer and often require.



We serve our facilities maintenance customers primarily through our Wilmar, Sexauer and Maintenance USA brands. Facilities maintenance customers buy our products
for maintenance, repair and remodeling, and often need to obtain products with minimal delay. In many cases, our facilities maintenance customers also look to us for support services such as inventory
management, management of procurement contracts, technical advice and assistance and equipment servicing and training.

Wilmar.Our Wilmar brand specializes in sales of maintenance products to the multi-family housing market. Through its master
catalog, Wilmar is able to act as a one-stop shopping resource for multi-family housing maintenance managers by offering one of the industry's most extensive selections of standard and
specialty plumbing, hardware, electrical, janitorial and related products. Wilmar provides same-day or next-day delivery in local markets on our own trucks served by our
distribution centers, and ships by parcel delivery services or other carriers to other areas. The Wilmar brand sells primarily through field sales representatives, as well as through direct marketing
and telesales. We also have a successful national accounts program at Wilmar where national account managers market to high level officers at real estate investment trusts, or REITs, and other
property management companies. Through this program, we assist large multi-location customers in reducing total supply chain costs.

Sexauer.Our Sexauer brand markets and sells specialty plumbing and facility maintenance products to institutional customers,
including education, lodging, health care and other facilities maintenance customers. We believe that the catalog of Sexauer products is well known in the industry as a comprehensive source of
specialty plumbing and facility maintenance products. In addition to a broad
product portfolio, Sexauer offers customers an extensive selection of service and procurement solutions, drawing upon our product and supply management expertise.

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Maintenance USA.Through our Maintenance USA brand, we offer a broad portfolio of MRO products to facilities, including
multi-family housing, lodging and institutional customers. Since Maintenance USA sells our products primarily through telesales and direct marketing, it represents a low cost supply alternative to
smaller property managers and more cost-conscious customers requiring minimal support services.

AmSan.Our AmSan brand markets and sells a comprehensive range of janitorial and sanitary products to institutional
facilities, such as schools and universities, health care sites, lodging and government properties and building service contractors. We sell AmSan products primarily through field sales
representatives supported by a full line catalog, which includes national brand product offerings as well as AmSan's exclusive brand product line Renown. In addition, AmSan provides
customers with reliable technical support, equipment repair services, and customized training programs, all of which make AmSan an important supplier to our customers. AmSan provides
same-day or next-day delivery in local markets served by our distribution centers and ships by parcel delivery services or other carriers to other areas.



We serve our professional contractor customers through our Barnett, U.S. Lock, SunStar and Copperfield brands and our specialty distributor customers through our
Hardware Express and AF Lighting brands. Professional contractors generally purchase our products for specific job assignments and/or to resell the product to end-customers.

Barnett.Our Barnett brand markets and sells a broad range of MRO products to professional contractors, including plumbing,
electrical, building and HVAC contractors, typically for repair, remodeling and construction applications. The Barnett brand also sells its products to specialty distributors, which are generally
smaller and carry fewer products than Barnett. Sales are made primarily through catalogs, telesales, field sales and direct marketing. In addition, Barnett has field sales representatives and regional
sales managers in select markets throughout the United States. Customers can also receive technical support and assistance in selecting products by calling our customer service centers. In addition to
next-day delivery, Barnett also offers customers the convenience of a network of local professional contractor showrooms or Pro Centers as well as on-site vendor managed
inventory capabilities.

U.S. Lock.Our U.S. Lock brand sells security hardware products to professional locksmiths. Our primary marketing vehicle for
U.S. Lock products is our U.S. Lock dealer program, in which professional locksmiths receive incentives such as rebates and favored pricing on proprietary items in return for paying an annual
membership, guaranteeing annual purchase volume, displaying our U.S. Lock logo in their stores and assisting in other promotional activities. Sales are made primarily through telesales and direct
marketing.

Copperfield.Our Copperfield brand markets and sells specialty ventilation and chimney maintenance products to chimney
professionals and hearth retailers, through direct marketing, outbound telesales and field sales representatives. Copperfield offers more than 5,000 brand name and exclusive brand repair and
replacement items including chimney replacement and relining products, specialty ventilation components, hearth products, gas and electrical appliances and an assortment of gas and solid fuel burning
appliances.

Hardware Express.Our Hardware Express brand markets and sells our full range of products primarily to retail hardware
stores. While Hardware Express customers may order our products for general inventory purposes, we also specialize in working with independent stores to sell our exclusive brand products through
custom designed retail display sets. We believe that our retail hardware store customers prefer our exclusive brand products because they are priced more competitively than

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non-exclusive
brand products. In addition, our retail display program enables our hardware customers to present an entire line of products in a professional and organized manner. Hardware
Express sells its products through a catalog, supplemented by direct marketing and telesales personnel, and a specialty display sales program of exclusive brand products which is coordinated by field
sales representatives.

SunStar/AF Lighting.Our SunStar and AF Lighting brands sell residential lighting and electrical products to electrical
contractors, electrical distributors, lighting showrooms and mass merchants through direct marketing, outbound telesales and a network of manufacturer's representatives.

Sales and Marketing

We market our products nationally and internationally through a variety of channels. The majority of our sales to facilities maintenance customers are made
through field sales representatives, and the majority of our sales to professional contractors and specialty distributors are made through telesales supported by catalog and promotional mailings, and
field sales in major metropolitan markets. We also serve our facilities maintenance and professional contractor customers with brand-specific websites, though the majority of customer orders are
received through the other channels discussed above. For a
more detailed description of our approach to e-commerce, see "Management Information System."

Our
marketing strategy involves targeting our marketing channels and efforts to specific customer groups. As a result of our long-standing relationships with customers, we
have been able to assemble a database of customer purchasing information, such as end market purchasing trends, product and pricing preferences and support service requirements. In addition, we are
able to track information such as customer retention and reactivation as well as new account acquisitions. We are also able to track the success of a particular marketing effort once it is implemented
by analyzing the purchases of the customers targeted by that effort. Our information systems allow us to use this data to develop more effective sales and marketing programs. For example, our
understanding of the preferences of our large, multi-family housing customers led to our development of a national accounts program, through which field sales representatives focus on developing
contacts with national accounts. We will continue to leverage our customer knowledge and shared brand information system to develop successful sales and marketing strategies.



Our direct sales force markets and sells to all levels of the customer's organization, including senior property management executives, local and regional
property managers, on-site maintenance managers, and owners and managers of professional plumbing, electrical and HVAC contractors. Our direct sales force marketing efforts are designed to
establish and solidify customer relationships through frequent contact, while emphasizing our broad product selection, reliable same-day or next-day delivery, high level of
customer service and competitive pricing.

We
maintain one of the largest direct sales forces in our industry, with over 650 field sales representatives covering markets throughout the United States, Canada and Central America.
We have found that we obtain a greater percentage of our customers' overall spending on MRO products in markets serviced by local sales representatives, particularly in regions where these
representatives are supported by a nearby distribution center that enables same-day or next-day delivery of our product line.

Our
field sales representatives are expected not only to generate orders, but also to act as problem solving customer service representatives. Our field sales representatives are trained
and qualified to assist customers in shop organization, special orders, part identification and complaint resolution. We compensate the majority of our field sales representatives based on a
commission program or on a combination of salary and bonus program. Increasingly, these representatives target senior management

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at
multi-location companies in order to acquire long-term customers that make large volume purchases. We will continue to seek additional opportunities where we can leverage the strength
of our field sales force to generate additional sales from our customers.



Our telesales operation has been designed to make ordering our products as convenient and efficient as possible. We divide our telesales staff into outbound and
inbound groups. Our outbound telesales representatives are responsible for maintaining relationships with existing customers and prospecting for new customers. These representatives are assigned
individual accounts in specified territories and have frequent contact with existing and prospective customers in order to make telesales presentations, notify customers of current promotions and
encourage additional purchases. Our inbound telesales representatives are trained to process orders quickly from existing customers, provide technical support and expedite and process new customer
applications, as well as handle all other customer service requests. We offer our customers nationwide toll-free telephone numbers and brand-specific telesales representatives who are
familiar with a particular brand's markets, products and customers. Our call centers are staffed by over 500 telesales, customer service and technical support personnel, who utilize our proprietary,
on-line order processing system. This sophisticated software provides the telesales staff with detailed customer profiles and information about products, pricing, promotions and
competition.



Our catalogs and direct marketing promotional flyers are key marketing tools that allow us to communicate our product offerings to both existing and potential
customers. We create catalogs, some of which exceed 1,000 pages, for most of our brands and mail them on an annual or semi-annual basis to our existing customers. We often supplement these
catalog mailings by sending our customers promotional flyers. Most of our branded catalogs have been distributed for over three decades and we believe that these catalog titles have achieved a high
degree of recognition among our customers.

In
targeting potential direct marketing customers, we sometimes make our initial contact through promotional flyers, rather than by sending a complete catalog. We obtain mailing lists of
prospective customers from outside marketing information services and other sources. We are able to gauge the effectiveness of our promotional flyer mailings through the use of proprietary database
analysis methods, as well as through our telesales operations. Once customers begin to place orders with us, we typically send an initial catalog and include the customer on our periodic mailing list
for updated catalogs and promotional materials. We believe that this approach is a cost-effective way for us to contact large numbers of potential customers and to determine which
customers should be targeted for continuous marketing.

We
produce the design and layout for our catalogs and promotional mailings using a sophisticated catalog content database and software system. Our catalogs are indexed and illustrated to
provide simplified pricing information and to highlight new product offerings. Our promotional mailings introduce new product offerings, sale-promotion items and other periodic offerings.
Illustrations, photographs and copy are shared among brand catalogs and mailings or customized for a specific brand, allowing for fast and efficient production of multi-branded media. In addition, we
frequently build custom catalogs designed specifically for the needs of our larger customers.

Operations and Logistics



We have a network of 74 regional distribution centers and 39 professional contractor showrooms strategically located to serve the largest metropolitan areas
throughout the United States and Canada,

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and
a national distribution center, or NDC, in Nashville, Tennessee. In addition, we have 21 vendor managed inventory locations at large professional contractor customer locations. We also maintain a
dedicated fleet of trucks to assist in local delivery of products. The geographic scope of our distribution network and the efficiency of our information system enable us to provide reliable,
same-day or next-day delivery service to over 98% of the U.S. population.

Our
regional distribution centers are central to our operations and range in size from approximately 7,500 square feet to approximately 147,300 square feet. Our regional distribution
centers are typically
maintained under operating leases in commercial or industrial centers, and primarily consist of warehouse and shipping facilities. We have also had success with opening professional contractor
showrooms in existing distribution centers and in freestanding locations, which allow customers to obtain products from a fixed location without ordering in advance.



Our 317,100 square feet NDC in Nashville, Tennessee receives the majority of our supplier shipments and efficiently re-distributes products to our
regional distribution centers. Some over-sized or seasonal products are directly shipped to regional distribution centers by suppliers. Our use of the NDC has significantly reduced
regional distribution center replenishment lead times while simultaneously improving our customer fill rates.



Once a telesales or customer service representative enters an order into our computer system, the order is picked and processed in the distribution center nearest
to the customer. For customers located within the local delivery radius of a distribution center, our own trucks or third-party carriers will deliver the products directly to the customer the next
day. For customers located outside the local delivery radius of a distribution center, we deliver products via parcel delivery companies, such as UPS. Large orders, or orders that cannot be delivered
via parcel delivery, are delivered by common carriers. We generally arrange for pick-up of returns at no charge to the customer in the local delivery radius. For customers outside the
local delivery radius, we provide parcel service pick-up of the returns at no charge and also provide a full refund if the return is the result of our error. Portions of our sales are
delivered direct from the supplier.

Suppliers and Purchasing

Our suppliers play an important role in our success; therefore, we work closely with our supplier base to ensure product merchandising and costs are managed
effectively. Wherever possible, we seek to develop long-standing relationships with our suppliers. We also manage sourcing risk by developing multiple sources of competitive product supply
for many key products. Due to our high volume of purchases, we are able to obtain purchase terms we believe to be more favorable than those available to most local suppliers of MRO products.

We
buy our products from over 3,000 suppliers located in the United States and throughout the world. A majority of our purchases are from primarily domestic supplier partners with the
remainder from foreign-based suppliers primarily located throughout Asia and South America.

With
regard to inventory, our customer-centric strategy balances the need for high fill rates with the aggressive management of inventory levels. Our goals are to continue to increase
our inventory efficiency over the long term as we grow, further optimize our distribution network, manage SKU complexity and leverage our common information technology and logistics platforms. We also
balance inventory efficiency with global sourcing opportunities, which have longer supply lead times than domestic relationships.

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In
addition to our inventory management team, our purchasing process is managed through an inventory management system which forecasts demand based on customer ordering patterns. This
system monitors our inventory and alerts our purchasing managers of items approaching low levels of stock. We balance ordering and carrying costs in an effort to minimize total inventory costs. When
an item reaches a re-order point, it is re-ordered either automatically or through a purchasing manager. Demand forecasting is automated and is primarily based on historical
sales and/or seasonally adjusted demand and supply lead times, which in turn are key inputs into setting safety stock levels.

Management Information Systems

We operate a customer service and inventory management system that allows us to manage customer relationships and to administer and distribute thousands of
products. Our systems encompass all major business functions for each of our brands and enable us to receive and process orders, manage inventory, verify credit and payment history, generate customer
invoices, receive payments and manage our proprietary customer lists. We have consistently invested in our information technology, as we believe that the efficiency and flexibility of our information
system are critical to the success of our business.

Our
information systems have been instrumental in our efforts to streamline our inventory management processes. Our information systems track each item of our inventory and its location
within our distribution network. By monitoring inventory levels, we are able to quickly re-order products or shift inventory through our distribution network in order to ensure product
availability. Our systems also allow us to monitor sales of products, enabling us to eliminate products that do not perform to our sales targets. Our information systems have also allowed us to create
a more efficient order fulfillment process. Our local distribution centers are linked to our information systems, which
provide them with real-time access to inventory availability, order tracking and customer creditworthiness.

We
constantly seek new ways to generate additional efficiencies, such as by utilizing e-commerce. With brand-specific websites, our customers can browse our catalogs and use
the internet to send electronic purchase orders to our order entry system. Additionally, we integrate with industry-leading business-to-business portals that allow customers to
receive real-time inventory visibility and order product. Our customers can integrate these systems into their own purchase order systems, thereby making their supply chain operate more
seamlessly. In addition, we offer our customers the option of receiving invoices electronically. For customers that place frequent orders and have the ability to receive electronic invoices, this
program can dramatically reduce ordering costs by eliminating invoice handling and automating the matching and payment process. We believe that by offering services like electronic purchasing and
invoicing, which remove transaction costs from the supply chain, we encourage our customers to use us as their single source for MRO supplies.

Competition

The MRO product distribution industry is highly competitive. Competition in our industry is primarily based upon product line breadth, product availability,
service capabilities and price. We face significant competition from national and regional distributors, such as HD Supply, Inc., Ferguson and W.W. Grainger, Inc. These
competitors market their products through the use of direct sales forces as well as direct marketing and catalogs. In addition, we face competition from traditional channels of distribution such as
retail outlets, small wholesalers and large warehouse stores, including Home Depot and Lowe's. We also compete with buying groups formed by smaller distributors, internet-based procurement service
companies, auction businesses and trade exchanges.

We
expect that competition in our industry will continue to be strong in the future. The MRO product distribution industry is consolidating, as traditional MRO product distributors
attempt to

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achieve
economies of scale and increase efficiency. Furthermore, MRO product customers are continuing to seek low cost alternatives to replace traditional methods of purchasing and sources of supply.
We believe that the current trend is for customers to reduce the number of suppliers and rely on lower cost alternatives such as direct marketing and/or integrated supply arrangements, which will
contribute to competition in our industry.

Environmental Matters

Some of the products we handle and sell, such as cleaning chemicals, are considered hazardous materials. Accordingly, we are subject to certain federal, state and
local environmental laws and regulations, including those governing the management and disposal of, and exposure to, hazardous materials and the cleanup of contaminated sites. While we could incur
costs as a result of liabilities under, or violations of, such environmental laws and regulations or arising out of the presence of hazardous materials in the environment, including the discovery of
any such materials resulting from historical operations at our sites, we do not believe that we are subject to any such costs that are material. Furthermore, we believe that we are in compliance in
all material respects with all environmental laws and regulations applicable to our facilities and operations.

Trademarks and Other Intellectual Property

We have registered and nonregistered trade names and trademarks covering the principal brand names and product lines under which our products are marketed,
including AF LightingSM, AmSan®, Barnett®, WilmarSM, Copperfield®, Hardware Express®, LeranSM, Maintenance
MartSM, Maintenance USA®, Renovations Plus®, Sexauer®, SunStar Lighting®, Trayco®, U.S. Lock®, and
Wilmar®. We also own several patents for certain products manufactured and marketed under our Copperfield brand. We believe that our trademarks and other intellectual property rights are
important to our success and our competitive position. Accordingly, our policy is to pursue and maintain registration of our trade names, trademarks and other intellectual property whenever
appropriate and to oppose vigorously any infringement or dilution of our trade names, trademarks and other intellectual property.

Employees

As of December 28, 2007, we had 3,801 employees, of whom 119 were unionized. Currently, we have two labor agreements in place: one for our Mt. Laurel, New
Jersey distribution center and one for our Elkridge, Maryland distribution center. The Mt. Laurel, New Jersey agreement was renegotiated on October 18, 2007 and will expire on
October 17, 2010. The total number of employees within this bargaining unit is 62. The Elkridge, Maryland agreement was renegotiated on November 1, 2007 and will expire on
October 31, 2010. The total number of employees within this bargaining unit is 57. We have not experienced any work stoppages resulting from management or union disagreements and believe that
our employee relations are satisfactory.

Available Information

Our internet address is www.interlinebrands.com. We make available, free of charge, through our internet site, via a hyperlink to the 10KWizard.com web site, our
annual reports on Form 10-K; quarterly reports on Form 10-Q; current reports on Form 8-K; and any amendments to those reports filed or
furnished pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the
Securities and Exchange Commission ("SEC").

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ITEM 1A.    Risk Factors

The following risk factors should be read carefully in connection with evaluating us and this annual report on
Form 10-K. Certain statements in "Risk Factors" are forward-looking statements. See "Forward-Looking Statements" above.

Risks Relating to Our Business

Slowdowns in general economic activity and other unforeseen events may detrimentally impact our customers and thereby significantly reduce our revenues
and profitability.

The MRO product distribution industry is affected by changes in economic conditions outside our control, including national, regional and local slowdowns in
general economic activity and job markets, which can result in increased vacancies in the residential rental housing market and a general decrease in product demand from professional contractors and
specialty distributors. For example, the current slow down in economic activity in the residential housing and remodeling market has resulted in lower average order sizes and lower revenues in our
professional contractor and specialty distributor business. In addition, the slowdown in economic activity during 2002 and 2003 resulted in less apartment unit refurbishment and renovation which
reduced demand for our products and depressed revenue growth during that period. Economic slowdowns, adverse economic conditions or cyclical trends in our customer markets and other unforeseen events,
such as terrorist attacks or armed hostilities, could negatively affect our industry or the industries in which our customers operate and significantly reduce our revenues and profitability.

One of the key markets in which we operate is impacted by trends in home improvement, home remodeling and home building. Adverse changes in economic
factors specific to these industries may negatively impact the rate of growth of our net sales.

The professional contractor market is impacted by trends in home improvement, home remodeling and new home construction. Trends in these areas are in turn
dependent upon a number of factors, including demographic trends, interest rates, tax policy, employment levels, consumer confidence and the economy generally. Unfavorable changes in demographics or a
weakening of the national economy or of any regional or local economy in which we operate could adversely affect consumer spending, result in decreased demand for repair, improvement, remodeling or
construction products and adversely affect our business. For example, during 2007 our average organic daily sales rate in the professional contractor and specialty distributor markets was down 9.7%
and 10.2%, respectively.

We operate in a highly competitive industry, and if we are unable to compete successfully we could lose customers, and our sales may decline.

The MRO product distribution industry is highly competitive. We face significant competition from national and regional distributors which market their products
through the use of direct sales forces as well as direct marketing and catalogs. In addition, we face competition from traditional channels of distribution such as retail outlets, small dealerships
and large warehouse stores and from buying groups formed by smaller distributors, internet-based procurement service companies, auction businesses and trade exchanges. We expect that new competitors
may develop over time as internet-based enterprises become more established and reliable and refine their service capabilities.

In
addition, the MRO product distribution industry is undergoing changes driven by industry consolidation and increased customer demands. Traditional MRO product distributors are
consolidating operations and acquiring or merging with other MRO product distributors to achieve economies of scale and increase efficiency. This consolidation trend could cause the industry to become
more competitive and make it more difficult for us to maintain our operating margins.

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Competition
in our industry is primarily based upon product line breadth, product availability, service capabilities and price. To the extent that existing or future competitors seek to
gain or retain market share by reducing price or by increasing support service offerings, we may be required to lower our prices or to make additional expenditures for support services, thereby
reducing our profitability.

Fluctuations in the cost of raw materials, fuel prices or in currency exchange rates could significantly reduce our revenues and profitability.

As a distributor of manufactured products, our profitability is related to the prices we pay to the manufacturers from which we purchase our products and to the
cost of transporting the products to us and our customers. The price that our suppliers charge us for our products is dependent in part upon the availability and cost of the raw materials used to
produce those products. Such raw materials are often subject to price fluctuations, frequently due to factors beyond our control, including changes in supply and demand, general U.S. and international
economic conditions, labor costs, competition and government regulations. Increases in the cost of raw materials, such as copper, oil, stainless steel, aluminum, zinc, plastic and PVC and other
commodities and raw materials, have occurred in the past and adversely impacted our operating results. Transportation prices are significantly dependent on fuel prices, which generally change due to
factors beyond our control, such as changes in worldwide demand, disruptions in supply, changes in the political climate in the Middle East and other regions and changes in government regulations.
Fluctuations in raw materials and fuel prices may increase our costs and significantly reduce our revenues and profitability.

A
significant decline in raw materials, fuel and transportation costs may also adversely affect us. For example, during 2005 and 2006, the cost of our products has increased materially
because of raw materials, fuel and transportation cost increases and other demand factors. During this period, a significant portion of our sales growth has resulted from our price increases related
to these increased costs. The nature and extent of such an impact is difficult to predict, quantify and measure. To the extent the costs of products increase or decrease, the prices we charge for our
products may correspondingly increase or decrease, adversely affecting our revenues and profitability.

In
addition, many of our suppliers price their products in currencies other than the U.S. dollar or incur costs of production in non-U.S. currencies. Accordingly,
depreciation of the U.S. dollar against foreign currencies could increase the price we pay for these products. For example, a substantial portion of our products are sourced from suppliers in China
and the value of the Chinese Yuan has increased relative to the U.S. Dollar since July 2005, when it was allowed to fluctuate against a basket of foreign currencies. Most experts believe that the
value of the Yuan will continue to increase relative to the U.S. Dollar over the next few years. Such a move would most likely result in an increase in the cost of products that are sourced from
suppliers in China.

Loss of key suppliers, lack of product availability or loss of delivery sources could decrease our revenues and profitability.

We believe our ability to offer a combination of well recognized product lines and high-quality low-priced exclusive brand product lines
has been a significant factor in attracting and retaining many of our customers and is one of our core competitive strengths. Our ability to offer a wide variety of products to our customers is
dependent upon our ability to obtain adequate product supply from manufacturers or other suppliers. While in many instances we have agreements, including supply chain agreements, with our suppliers,
these agreements are generally terminable by either party on limited notice. The loss of, or a substantial decrease in the availability of, products from our suppliers, or the loss of our key supplier
agreements, could cause our revenues and profitability to decrease. In addition, supply interruptions could arise from shortages of raw materials, labor disputes or weather conditions affecting
products or shipments, transportation disruptions or other factors beyond our control. Loss of a key foreign supplier could disrupt our supply chain for approximately 60 to 90 days, or longer,
and

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loss
of key suppliers from an individual country could result in disruptions of approximately 120 to 150 days, or longer. Short and long term disruptions in our supply chain would result in
higher inventory levels as we replace similar product domestically, a higher cost of product and ultimately a decrease in our revenues and profitability. Although no individual supplier represents
more than 6% of our total purchases, a disruption in the timely availability of our product by our key suppliers could result in a decrease in our revenues and profitability.

We could face potential product quality and product liability claims relating to the products we distribute, which could result in a decline in revenues
and profitability and negatively impact customer confidence.

We rely on manufacturers and other suppliers to provide us with the products we sell and distribute. As we do not have direct control over the quality of the
products manufactured or supplied by such third party suppliers, we are exposed to risks relating to the quality of the products we distribute. It is possible that inventory from a manufacturer or
supplier could be sold to our customers and later be alleged to have quality problems or to have caused personal injury, subjecting us to potential claims from customers or third parties. The risk of
claims may be greater with respect to our exclusive brand products, as these products are customarily manufactured by third party suppliers outside the United States, particularly in China. We have
been subject to claims in the past, which have been resolved without material financial impact. Product liability claims can be expensive to defend and can divert the attention of management and other
personnel for significant time periods, regardless of the ultimate outcome. An unsuccessful product liability defense could be highly costly and accordingly result in a decline in revenues and
profitability. In addition, uncertainties with respect to the Chinese legal system may adversely affect us in resolving claims arising from our exclusive brand products manufactured in China. Because
many laws and regulations are relatively new and the Chinese legal system is still evolving, the interpretations of many laws, regulations and rules are not always uniform. Finally, even if we are
successful in defending any claim relating to the products we distribute, claims of this nature could negatively impact customer confidence in our products and our company.

If the government of China were to reduce or withdraw the tax benefits they provide our Chinese suppliers, the cost of some of our products could
increase and therefore our profitability may be significantly reduced.

China's turnover tax system consists of value-added tax, or VAT, consumption tax and business tax. Export sales are exempted under VAT rules and an exporter who
incurs input VAT on the manufacture of goods can claim a tax rebate from Chinese tax authorities. Currently, our Chinese suppliers benefit from the tax rebates that China provides them to export their
products. If these tax rebates are reduced or eliminated, some of our Chinese-sourced products could become more expensive for us, thereby reducing our profitability.

In some cases, we are dependent on long supply chains, which may subject us to interruptions in the supply of many of the products that we distribute.

A significant portion of the products that we distribute is imported from foreign countries, including China. We are thus dependent on long supply chains for the
successful delivery of many of our products. The length and complexity of these supply chains make them vulnerable to numerous risks, many of which are beyond our control, which could cause
significant interruptions or delays in delivery of our products. Factors such as labor disputes, currency fluctuations, changes in tariff or import policies, severe weather or terrorist attacks or
armed hostilities may disrupt these supply chains. We expect more of our name brand and exclusive brand products will be imported in the future, which will further increase these risks. A significant
interruption in our supply chains caused by any of the above factors could result in increased costs or delivery delays and result in a decrease in our revenues and profitability.

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Our ability to both maintain our existing customer base and to attract new customers is dependent in many cases upon our ability to deliver products and
fulfill orders in a timely and cost-effective manner.

To ensure timely delivery of our products to our customers, we frequently rely on third parties, including couriers such as UPS and other national shippers as
well as various local and regional trucking contractors and logistics consulting and management companies. Outsourcing this activity generates a number of risks, including decreased control over the
delivery process and service timeliness and quality. Any sustained inability of these third parties to deliver our products to our
customers could result in the loss of customers or require us to seek alternative delivery sources, if they are available, which may result in significantly increased costs and delivery delays.
Furthermore, the need to identify and qualify substitute service providers or increase our internal capacity could result in unforeseen operations problems and additional costs. Moreover, if demand
for our products increases, we may be unable to secure sufficient additional capacity from our current service providers, or others, on commercially reasonable terms, if at all.

The loss of any of our significant customers could significantly reduce our revenues and profitability.

Our 10 largest customers generated approximately $77.6 million, or approximately 6%, of our sales in the year ended December 28, 2007, and our
largest customer accounted for approximately 3% of our sales in the year ended December 28, 2007. The loss of one or more of our significant customers or deterioration in our relations with any
of them could significantly reduce our revenues and profitability.

We may not be able to protect our trademarks, which could diminish the strength of our trademarks or limit our ability to use our trademarks and,
accordingly, undermine our competitive position.

We believe that our trademarks are important to our success and our competitive position. For instance, we market and sell products primarily through ten distinct
and targeted brands: Wilmar®, Sexauer®, Maintenance USA®, Barnett®, Hardware Express®, U.S. Lock®, SunStar®,
AmSan, Copperfield and AF Lighting. We believe many of our customers have developed strong consumer loyalty to these targeted brands. Accordingly, we devote
resources to the establishment and protection of our trademarks, including with respect to our brand names and our exclusive brand products. However, the actions we have taken may be inadequate to
prevent imitation of our brands and concepts by others or to prevent others from claiming violations of their trademarks and proprietary rights by us. In addition, others may assert rights in our
trademarks. Our exclusive rights to our trademarks are subject to the common law rights of any other person who began using the trademark (or a confusingly similar mark) prior to the date of federal
registration. Future actions by third parties may diminish the strength of our trademarks or limit our ability to use our trademarks and, accordingly, undermine our competitive position.

We may not be able to facilitate our growth strategy by identifying or completing transactions with attractive acquisition candidates, which could
impede our revenues and profitability.

Our acquisitions of Barnett in 2000, Florida Lighting in 2003, Copperfield in 2005 and AmSan in 2006 have contributed significantly to our growth. An important
element of our growth strategy is to continue to seek additional businesses to acquire in order to add new customers within our existing
markets and to acquire brands in new markets. We cannot assure you that we will be able to identify attractive acquisition candidates or complete the acquisition of any identified candidates at
favorable prices and upon advantageous terms and conditions. Furthermore, we believe that our industry is currently in a process of consolidation, and competition for attractive acquisition candidates
is therefore likely to escalate, thereby limiting the number of acquisition candidates or increasing the overall costs of making acquisitions. Difficulties we may face in identifying or completing
acquisitions could impede our revenue growth and profitability.

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We cannot assure you that AmSan will be successfully integrated by us.

If we cannot successfully integrate the operations of AmSan with our existing operations, we may experience material negative consequences to our business,
financial condition or results of operations. The integration of companies that have previously been operated separately involves a number of risks, including, but not limited to:



Prior
to the acquisition, AmSan and Interline Brands operated as separate entities. We may not be able to maintain the levels of revenue, earnings or operating efficiency that each
entity had achieved or might achieve separately. Successful integration of AmSan's operations will depend on our ability to manage those operations, realize opportunities for revenue growth presented
by strengthened product offerings and to eliminate redundant and excess costs.

We cannot assure you that we will be able to successfully complete the integration of future acquisitions or manage other consequences of our
acquisitions, which could impede our ability to remain competitive and, ultimately, our revenues and profitability.

Acquisitions involve significant risks and uncertainties, including difficulties integrating acquired personnel and other corporate cultures into our business,
difficulties associated with information systems conversions, the potential loss of key employees, customers or suppliers, the assumption of liabilities and exposure to unforeseen liabilities of
acquired companies, the difficulties in achieving target synergies and the diversion of management attention and resources from existing operations. Although we have been successful in the past in
integrating acquisitions, we may not be able to fully integrate the operations of future acquired businesses with our own in an efficient and cost-effective manner or without significant
disruption to our existing operations. We may also be required to incur additional debt in order to consummate acquisitions in the future. Such debt may be substantial and may limit our flexibility in
using our cash flow from operations. Our failure to integrate future acquired businesses effectively or to manage other consequences of our acquisitions, including increased indebtedness, could impede
our ability to remain competitive and, ultimately, our revenues and profitability.

Disruption in our information technology systems could significantly lower our revenues and profitability.

Our operations are dependent upon our information technology systems that encompass all of our major business functions. We rely upon our information technology
systems to manage and replenish inventory, to fill and ship customer orders on a timely basis and to coordinate our sales and marketing activities across all of our brands. We believe that our
information technology systems play a key role in our ability to achieve operating and financial efficiencies. Any substantial disruption of our information technology systems for any prolonged time
period could result in delays in receiving inventory and supplies or filling customer orders and, accordingly, could significantly lower our revenues and profitability.

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Disruption in our national distribution center could significantly lower our revenues and profitability.

We currently maintain a national distribution center located in Nashville, Tennessee, which is essential to the efficient operation of our national distribution
network. Any serious disruption to this distribution center due to fire, earthquake, act of terrorism or any other cause could damage a significant portion of our inventory and could materially impair
our ability to distribute our products to our customers. In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our customers during
the time that it takes for us to reopen or replace the center. As a result, any such disruption could significantly lower our revenues and profitability.

We may be unable to retain senior executives and attract and retain other qualified employees which might hinder our growth and could impede our ability
to run our business and potentially reduce our revenues and profitability.

Our success depends in part on our ability to attract, hire, train and retain qualified managerial, sales and marketing personnel. We face significant competition
for these types of personnel in our industry. We may be unsuccessful in attracting and retaining the personnel we require to conduct and expand our operations successfully and, in such an event, our
revenues and profitability could decline. In addition, key personnel may leave us and compete against us. Our success also depends, to a significant extent, on the continued service of our senior
management team. The loss of any member of our senior management team or other qualified employees could impair our ability to execute our business plan and growth strategy, cause us to lose customers
and reduce our net sales, or lead to employee morale problems and/or the loss of key employees.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a
result, current and potential stockholders could lose confidence in our financial reporting, which would harm the trading price of our stock.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inadequate internal controls could also cause
investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

If an auction fails for amounts we have invested in auction rate securities or variable rate demand notes, our investment will not be liquid. If the
issuer is unable to successfully close future auctions and their credit rating deteriorates, we may be required to adjust the carrying value of our investment through an impairment charge.

Our short-term investments portfolio is comprised of auction rate securities and variable rate demand notes. As of December 28, 2007, we had
$48.5 million in short-term investments. If an auction fails for amounts we have invested in auction rate securities or variable rate demand notes, our investment will not be liquid. In the
event we need to access these funds, we will not be able to until a future auction on our investment is successful. If the issuer is unable to successfully close future auctions and their credit
rating deteriorates, we may be required to adjust the carrying value of our investment through an impairment charge.

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Risks Relating to Our Indebtedness

Our indebtedness may limit our cash flow available to invest in the ongoing needs of our business, which could prevent us from fulfilling our
obligations.

As of December 28, 2007, our total indebtedness was $430.7 million, of which $12.1 million was outstanding in the form of letters of credit.
We had $228.7 million of senior indebtedness outstanding and $87.9 million in additional revolving loan availability under our $100.0 million revolving loan facility.

Our
indebtedness could have important consequences, including:



Our
level of indebtedness increases the possibility that we may be unable to generate sufficient cash to pay when due the principal of, interest on or other amounts due in respect of our
indebtedness. In addition, we may incur additional debt from time to time to finance strategic acquisitions, investments or for other purposes, subject to the restrictions contained in the documents
governing our indebtedness. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase. We cannot be certain that our earnings will
be sufficient to allow us to pay principal and interest on our debt and meet our other obligations. If we do not have sufficient earnings, we may be required to refinance all or part of our existing
debt, sell assets, borrow more money or sell more securities, none of which we can guarantee we will be able to do. Our ability to incur additional debt will be limited by the terms and conditions of
our credit facility. On June 23, 2006 we completed a series of refinancing transactions consisting of (1) an offering of $200.0 million of 81/8% senior subordinated
notes due 2014 and (2) entered into a $330.0 million bank credit facility. The new bank credit facility consists of a $100.0 million 7-year term loan, a
$130.0 million 7-year delayed draw term loan and a $100.0 million 6-year revolving credit facility of which a portion not exceeding $40.0 million is
available in the form of letters of credit. In July 2006, we utilized, within the terms of our credit agreement, the incremental $130.0 million term loan to fund the AmSan acquisition. In
addition, the credit facility provides for an additional incremental term loan and revolver borrowings,

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limited
by certain restrictions, in the aggregate principal amount of up to $100.0 million and $50.0 million, respectively. Each incremental term loan must be in a minimum principal
amount of $25.0 million.

Despite our level of indebtedness, we may be able to incur substantially more debt. This could further exacerbate the risks described above.

We may be able to incur significant additional indebtedness in the future. Although the indenture governing our 81/8% senior subordinated notes due
2014 and the credit agreement governing our credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and
exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Specifically, the indenture permits us to incur all the indebtedness provided for in our new
revolving loan facility. Furthermore, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness, as defined in the applicable agreement. To the extent new
debt is added to our current debt levels, the substantial leverage risks described above would increase.

The terms of our credit facility and the indenture governing the 81/8% senior subordinated notes may restrict our current and future
operations, particularly our ability to respond to changes in our business or to take certain actions.

Our credit facility and the indenture governing the 81/8% senior subordinated notes contain, and any future indebtedness of ours would likely
contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:



The
credit facility also requires us to maintain certain financial ratios, which become more restrictive over time. A failure by us to comply with the covenants or financial ratios
contained in the credit facility could result in an event of default under the facility which could materially and adversely affect our operating results and our financial condition. In the event of
any default under our credit facility, the lenders under our credit facility are not required to lend any additional amounts to us and could elect to declare all borrowings outstanding, together with
accrued and unpaid interest and fees, to be due and payable, require us to apply all of our available cash to repay these borrowings or prevent us from making debt service payments on the
81/8% senior subordinated notes, any of which could result in an event of default under the 81/8% senior subordinated notes. If the indebtedness under our credit facility
or the 81/8% senior subordinated notes were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.

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We may not be able to generate sufficient cash flow to meet our debt service obligations.

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt obligations will depend on our future financial performance,
which will be affected by a range of economic, competitive, regulatory, legislative and business factors, many of which are beyond our control. Our indebtedness under the credit facility bears
interest at a variable rate.

Historically,
we have funded our debt service obligations and other capital requirements through internally generated cash flow and funds borrowed under our credit agreement. We expect
our cash flow from operations and the loan availability under our credit agreement to be our primary source of funds in the future. If we do not generate sufficient cash flow from operations to
satisfy our debt obligations, including payments on the 81/8% senior subordinated notes, we may have to undertake alternative financing plans, such as refinancing or restructuring our
debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible, that any assets could be sold, or,
if sold, of the timing of the sales and the amount of proceeds realized from those sales, or that additional financing could be obtained on acceptable terms, if at all. Our inability to generate
sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial condition and results of
operations, as well as on our ability to satisfy our obligations in respect of the 81/8% senior subordinated notes.

ITEM 1B.    Unresolved Staff Comments

None.

ITEM 2.    Properties

We operate out of 144 locations throughout the United States, Canada and Puerto Rico consisting of 74 regional distribution centers, 39 professional contractor
showrooms, 21 vendor-managed inventory locations, 6 administrative and support facilities, three cross-dock facilities and one NDC.

We
lease 120 properties. The majority of these leases are for terms of five to ten years. We own our corporate headquarters located in Jacksonville, Florida, and regional distribution
centers in Long Island, New York and Louisville, Kentucky, both of which have attached administrative and support facilities. None of the owned properties are subject to any mortgages. The 21
vendor-managed inventory locations are customer specific locations whereby we assist those customers with their MRO inventory management process.

We
believe that our properties are in good operating condition and adequately serve our current business operations.

The
ranges in size of the locations we operate out of are as follows (not including vendor-managed inventory locations and cross-dock facilities):

Size
(in square feet)National distribution center

317,100Regional distribution centers

7,500-147,300Professional contractor showrooms

2,600-  27,000Administrative and support facilities

3,200-  37,000


21

---



The
following table sets forth the states, territories and provinces we operate out of (not including vendor-managed inventory locations and cross-dock facilities):

Location

National and
Regional
Distribution
Centers

Professional
Contractor
Showrooms

Administrative
and Support
LocationsU.S. StateAlabama

1

1Arizona

1California

5

2Colorado

1

1Florida

8

6

2Georgia

1

1Illinois

4

3Indiana

1Iowa



3Kansas

2Kentucky

3Louisiana

2Maryland

2

1Massachusetts

2

1Michigan

1Minnesota

2

1Missouri

2Montana



2Nebraska

1

1Nevada

1

1New Jersey

3

2

1New York

2North Carolina

3

1Ohio

3Oklahoma

2

1

1Oregon

1

2

1Pennsylvania

2

1South Carolina

1Tennessee

4Texas

6

5

1Washington

5

2Wisconsin



1Subtotal

72

39

6U.S. TerritoryPuerto Rico

1Subtotal

1

0

0Canadian ProvinceAlberta

1Ontario

1Subtotal

2

0

0Total

75

39

6


22

---



ITEM 3.    Legal Proceedings

We are involved in various legal proceedings in the normal course of our business. In the opinion of management, none of the proceedings is material in relation
to our consolidated financial statements.

ITEM 4.    Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders during the fourth quarter of our year ended December 28, 2007, through the solicitation of proxies or
otherwise.

23

---





PART II

ITEM 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



Since December 16, 2004, our common stock has been publicly traded on the New York Stock Exchange, or NYSE, under the symbol "IBI".

As
of February 22, 2008, there were approximately 50 holders of record of our outstanding common stock.



The following Performance Graph and related information shall not be deemed "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor shall such information be incorporated by
reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference
into such filing.

The
following performance graph compares the performance of our common stock with the performance of the New York Stock Exchange Composite and the Standard & Poor's Small Cap 600
Index, during the period from the Company's initial public offering on December 16, 2004 through December 28, 2007. The Company has chosen the Standard and Poor's Small Cap 600 Index for
comparison because the Standard and Poor's Small Cap 600 Index includes companies of similar capitalization to the Company. The graph plots the changes in value of an initial $100 investment over the
indicated time period, assuming all dividends are reinvested.

GRAPHIC

24

---



|                                  |  | December 16,
2004 |        | December 31,
2004 |   | December 30,
2005 |  | December 29,
2006 |        | December 28,
2007
|--------------------------------- |  | ----------------- | ------ | ----------------- | - | ----------------- |  | ----------------- | ------ | -----------------
|IBI                               |  | $                 | 100.00 |                   | $ | 101.68            |  | $                 | 131.50 |                  
|Standard and Poor's Small Cap 600 |  |                   | 100.00 |                   |   | 101.58            |  |                   | 108.34 |                  
|New York Stock Exchange Composite |  |                   | 100.00 |                   |   | 101.66            |  |                   | 108.72 |                  

The
following table sets forth the high and low sale price per share of our common stock during the periods indicated:

High

LowFiscal Year 2007First quarter ended March 30, 2007

$
23.19

$
20.08Second quarter ended June 29, 2007

$
27.18

$
21.31Third quarter ended September 28, 2007

$
28.13

$
21.93Fourth quarter ended December 28, 2007

$
25.10

$
21.71Fiscal Year 2006First quarter ended March 31, 2006

$
26.10

$
22.58Second quarter ended June 30, 2006

$
27.54

$
21.66Third quarter ended September 29, 2006

$
25.99

$
21.22Fourth quarter ended December 29, 2006

$
27.19

$
22.36




We have never declared dividends on our common stock. Our ability to declare and pay dividends on our common stock is subject to the requirements of Delaware law.
In addition, we are a parent company with no business operations of our own. Accordingly, our sources of cash are dividends and distributions with respect to our ownership interest in Interline New
Jersey that are derived from the earnings and cash flow generated by our businesses. The ability of Interline New Jersey to pay dividends to us is restricted under certain of its debt and other
agreements.



The following table sets forth information as of December 28, 2007 regarding compensation plans under which our equity securities are authorized for
issuance.

|                                                           |  | (a)       |  | (b) |       | (c) |          
|---------------------------------------------------------- |  | --------- |  | --- | ----- | --- | ---------
|
|Equity compensation plans approved by security holders     |  | 2,989,429 |  | $   | 19.05 |     | 1,362,245
|Equity compensation plans not approved by security holders |  |          |  |     |      |     |         
|                                                           |  |           |  |     |       |     |          
|Total                                                      |  | 2,989,429 |  | $   | 19.05 |     | 1,362,245
|                                                           |  |           |  |     |       |     |          

---

25

---





The following table summarizes repurchases of our stock, comprising entirely of shares of unvested forfeited restricted stock awards returned to us, during the
three months ended December 28, 2007:

|Period                    |       | Total Number of Shares Purchased |       | Average Price Paid per Share |       | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |   | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|------------------------- | ----- | -------------------------------- | ----- | ---------------------------- | ----- | -------------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------
|October 2007              |       |                                  |       |                              |       |                                                                                  |   |                                                                               
|(September 29-October 26) |       |                                 |       |                              |      |                                                                                  |  |                                                                               
|November 2007             |       |                                  |       |                              |       |                                                                                  |   |                                                                               
|(October 27-November 23)  |       |                                 |       |                              |      |                                                                                  |  |                                                                               
|December 2007             |       |                                  |       |                              |       |                                                                                  |   |                                                                               
|(November 24-December 28) |       | 2,683                            |       | $                            | 15.00 |                                                                                  |  |                                                                               
|                          |       |                                  |       |                              |       |                                                                                  |   |                                                                               
|                          | Total |                                  | 2,683 |                              | $     | 15.00                                                                            |   |                                                                              

26

---



ITEM 6.    Selected Financial Data

The table below presents our selected historical consolidated financial data for 2007, 2006, 2005, 2004 and 2003. The information presented below should be read
in conjunction with "Management's Discussion and Analysis of Financial Conditions and Results of Operations" and the consolidated financial statements included elsewhere in this report.

|                                               |                                                     | Fiscal Year Ended |          
|---------------------------------------------- | --------------------------------------------------- | ----------------- | ---------
|
|
|Income Statement Data:                         |                                                     |                   |          
|Net sales                                      |                                                     | $                 | 1,239,027
|Cost of sales                                  |                                                     |                   | 765,137  
|                                               |                                                     |                   |          
|                                               | Gross profit                                        |                   |          
|Operating expenses                             |                                                     |                   | 359,796  
|Secondary offering and IPO related expenses(3) |                                                     |                   |         
|Special costs and expenses(3)                  |                                                     |                   |         
|                                               |                                                     |                   |          
|                                               | Operating income                                    |                   |          
|Interest and other expense, net                |                                                     |                   | (30,672  
|Change in fair value of interest rate swaps    |                                                     |                   |         
|Loss on extinguishment of debt                 |                                                     |                   |         
|                                               |                                                     |                   |          
|                                               | Income before income taxes                          |                   |          
|Provision for income taxes                     |                                                     |                   | 32,460   
|                                               |                                                     |                   |          
|                                               | Net income                                          |                   |          
|Preferred stock dividends                      |                                                     |                   |         
|                                               |                                                     |                   |          
|                                               | Net income (loss) applicable to common stockholders |                   | $        
|                                               |                                                     |                   |          
|Earnings (loss) per share:                     |                                                     |                   |          
|                                               | Basic                                               |                   | $        
|                                               |                                                     |                   |          
|                                               | Diluted                                             |                   | $        
|                                               |                                                     |                   |          
|Cash dividends declared per share              |                                                     | $                 |         
|                                               |                                                     |                   |          
|Cash Flow Data:                                |                                                     |                   |          
|Net cash provided by (used in):                |                                                     |                   |          
|                                               | Operating activities                                |                   | $        
|                                               | Investing activities                                |                   |          
|                                               | Financing activities                                |                   |          
|Capital expenditures                           |                                                     |                   | 14,906   
|Balance Sheet Data (as of end of period):      |                                                     |                   |          
|Cash and cash equivalents                      |                                                     | $                 | 4,975    
|Total assets                                   |                                                     |                   | 936,834  
|Total debt(4)                                  |                                                     |                   | 418,590  
|Stockholders' equity (deficit)                 |                                                     |                   | 377,414  
|Other Data:                                    |                                                     |                   |          
|Depreciation and amortization                  |                                                     | $                 | 15,114   
|Adjusted EBITDA(5)                             |                                                     |                   | 130,452  

---

27

---





28

---





Fiscal Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005

December 31,
2004

December 26,
2003Net income

$
50,962

$
31,185

$
28,799

$
18,101

$
7,152Interest expense, net


31,916


30,776


25,183


39,798


40,317Change in fair value of interest rate swaps











(8,232
)

(5,272
)Loss on extinguishment of debt





20,843


10,340


660


14,893Secondary offering and IPO related expenses








932


9,215


Provision for income
taxes


32,460


19,495


18,335


11,617


4,547Depreciation and amortization


15,114


14,427


13,049


12,600


10,949$
130,452

$
116,726

$
96,638

$
83,759

$
72,586


Reconciliation of Average Organic Daily Sales to Net Sales

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. The computation of average organic daily sales is as follows (dollar amounts in thousands):

|                   |                                | Fiscal Year Ended |           | Fiscal Year Ended |  
|------------------ | ------------------------------ | ----------------- | --------- | ----------------- | -
|
|Net Sales          |                                | $                 | 1,239,027 |                   | $
|Less Acquisitions: |                                |                   |           |                   |  
|                   | AmSan                          |                   |           | (131,605          | )
|                   | Copperfield                    |                   |           |                  |  
|                   |                                |                   |           |                   |  
|Organic Sales      |                                | $                 | 1,107,422 |                   | $
|                   |                                |                   |           |                   |  
|Daily Sales:       |                                |                   |           |                   |  
|                   | Ship Days                      |                   |           | 252               |  
|                   | Average Daily Sales(1)         |                   | $         | 4,917             |  
|                   |                                |                   |           |                   |  
|                   | Average Organic Daily Sales(2) |                   | $         | 4,395             |  
|                   |                                |                   |           |                   |  

---

29

---





ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with "Selected Financial Data" and our consolidated financial statements included
elsewhere in this report. Some of the statements in the following discussion are forward-looking statements. See "Forward-Looking Statements" above.

Overview

We are a leading national distributor and direct marketer of MRO products. We market and sell our products primarily through ten distinct and targeted brands. Our
multi-brand operating model, which we believe is unique in the industry, allows us to use a single platform to deliver tailored products and services to meet the individual needs of each respective
customer group served.

We
sell to approximately 200,000 active customer accounts and stock over 85,000 MRO products in the following categories: plumbing, electrical, hardware, security hardware, heating,
ventilation and air conditioning, janitorial and sanitary and other miscellaneous products. Our products are primarily used for the repair, maintenance, remodeling, refurbishment and construction of
properties and non-industrial facilities.

Our
highly diverse customer base includes facilities maintenance customers, professional contractors and specialty distributors. Our customers range in size from individual contractors
and independent hardware stores to apartment management companies and national purchasing groups. No single customer accounted for more than 3% of our sales during 2007.

Results of Operations

The following table presents information derived from the consolidated statements of earnings expressed as a percentage of revenues for the periods indicated:

|                               |                               | % of Net Sales          |      |       |      | % of Net Sales |      |       |     
|------------------------------ | ----------------------------- | ----------------------- | ---- | ----- | ---- | -------------- | ---- | ----- | ----
|
|
|
|Net sales                      |                               | 100.0                   | %    | 100.0 | %    | 16.1           | %    | 100.0 | %   
|Cost of sales                  |                               | 61.8                    |      | 61.7  |      | 16.2           |      | 61.7  |     
|                               |                               |                         |      |       |      |                |      |       |     
|                               | Gross profit                  |                         | 38.2 |       | 38.3 |                | 15.9 |       | 38.3
|Operating Expenses:            |                               |                         |      |       |      |                |      |       |     
|                               | Selling, general and          |                         |      |       |      |                |      |       |     
|                               |                               | administrative expenses |      | 27.9  |      | 27.4           |      | 17.9  |     
|                               | Depreciation and amortization |                         | 1.2  |       | 1.4  |                | 0.5  |       | 1.4 
|                               | Secondary offering costs      |                         |     |       |     |                |     |       |    
|                               |                               |                         |      |       |      |                |      |       |     
|                               |                               | Total operating expense |      | 29.0  |      | 28.8           |      | 17.1  |     
|                               |                               |                         |      |       |      |                |      |       |     
|Operating income               |                               | 9.2                     |      | 9.5   |      | 12.2           |      | 9.5   |     
|Loss on extinguishment of debt |                               |                        |      | (2.0  | )    | (100.0         | )    | (2.0  | )   
|Interest expense               |                               | (2.7                    | )    | (2.9  | )    | 8.1            |      | (2.9  | )   
|Interest and other income      |                               | 0.3                     |      | 0.1   |      | 171.6          |      | 0.1   |     
|                               |                               |                         |      |       |      |                |      |       |     
|                               | Income before income taxes    |                         | 6.7  |       | 4.7  |                | 64.6 |       | 4.7 
|Income tax provision           |                               | (2.6                    | )    | (1.8  | )    | 66.5           |      | (1.8  | )   
|                               |                               |                         |      |       |      |                |      |       |     
|Net income                     |                               | 4.1                     | %    | 2.9   | %    | 63.4           | %    | 2.9   | %   
|                               |                               |                         |      |       |      |                |      |       |     

---

The following discussion refers to the term average daily sales and average organic daily sales. Average daily sales are defined as sales for a
period of time divided by the number of shipping days in

30

---



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. For a reconciliation of average organic daily sales growth to GAAP-based financial measures, see "Item 6. Selected Financial
DataReconciliation of Average Organic Daily Sales."



Overview.Net sales for 2007 increased $171.5 million, or 16.1%, to a record $1,239.0 million from
$1,067.6 million in 2006. On an average daily sales basis, net sales for 2007 increased 16.1%. The increase of net sales was driven by a combination of acquisition growth associated with our
July 2006 acquisition of AmSan and strong sales growth in our facilities maintenance end-market offset by a sales decline in our professional contractor and specialty distributor
end-markets. Average organic daily sales grew 14.2% in our facilities maintenance end-market, which represents approximately 67% of our sales as we continued to benefit from
strong demand for our products and our continued investment in this faster growing part of our business where we have added field sales capabilities, expanded our national account base and executed
well on our supply chain management capabilities. Our growth was offset in part by a 9.7% and 10.2% decrease in average organic daily sales to our professional contractor and specialty distributor
customers, respectively. Sales to these two end-markets made up a smaller 21% and 12% of our sales, respectively, and were negatively impacted by the continued slow-down in the
residential housing and remodeling market. Average organic daily sales, which exclude $131.6 million in net sales from AmSan in the first half of the year, grew 3.7%.

Selling,
general and administrative, or SG&A, expenses in 2007 increased as a percentage of sales to 27.9% from 27.4% in 2006 primarily reflecting the effect of our AmSan acquisition,
which had a higher operating expense cost structure than the rest of our business. In addition, SG&A expenses were impacted by higher share-based compensation, increased health-care costs
and increased rent expense, which arose from our expansion of various regional distribution centers, offset in part by lower sales and marketing expenses associated with the decline in sales demand in
our professional contractor and specialty distributor end-markets. Operating income increased $12.4 million, or 12.2%, over the prior year to $114.1 million in 2007 from
$101.7 million in 2006. Adjusted EBITDA increased $13.7 million, or 11.8%, to $130.5 million in 2007 from $116.7 million in 2006. Adjusted EBITDA is not a measure of
financial performance under GAAP. For a reconciliation of EBITDA to GAAP-based financial measures, see "Item 6. Selected Financial Data."

As
a result of strong facilities maintenance end-market sales performance, operating expense control and focus on efficiently managing working capital, we generated
$57.7 million in cash from operations and continued to provide improving year-over-year returns on tangible capital, or ROTC, which we define as Adjusted EBITDA divided
by the trailing five quarter average of accounts receivable, inventory and property, plant and equipment less accounts payable.

Net Sales.Net sales increased by $171.5 million, or 16.1%, to $1,239.0 million in 2007 from
$1,067.6 million in 2006. Average daily sales were $4.9 million in 2007 and $4.2 million in 2006, a 16.1% increase. The $171.5 million sales increase included
$131.6 million from our AmSan acquisition in July 2006. The remaining increase was attributable to improved demand for our products, growth initiatives and price increases.

Gross Profit.Gross profit increased by $65.0 million, or 15.9%, to $473.9 million in 2007 from
$408.9 million in 2006. Gross profit margins decreased a modest 0.1% to 38.2% in 2007 from 38.3% in 2006. This decrease in our gross profit margins is primarily related to the decrease in
freight revenue as a result of the decrease in sales activity to our professional contractor and specialty distributor end-markets.

31

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Selling, General and Administrative Expenses.SG&A expenses increased by $52.5 million, or 17.9%, to
$345.3 million in 2007 from $292.8 million in 2006. The largest increase in SG&A expenses were related in part to our acquisition of AmSan, which accounted for $38.2 million in
higher costs. Certain expenses within SG&A, such as delivery expenses and the costs of running our pro contractor showrooms and regional distribution centers, not including rent expense, fluctuate
with sales volume. These items along with higher share-based compensation associated with grants of equity awards during the year, increased rent expense arising from our expansion of various regional
distribution centers and higher health-care costs, accounted for the remainder of the increase. As a result, SG&A expenses increased as a percentage of sales to 27.9% of sales in 2007 from
27.4% of sales in 2006.
Specifically, share-based compensation, rent expense and health-care costs accounted for thirteen basis points, seventeen basis points and ten basis points, respectively, of the increase in SG&A
expenses as a percent of sales.

Depreciation and Amortization.Depreciation and amortization expense increased by $0.1 million, or 0.5%, to
$14.5 million in 2007 from $14.4 million in 2006. This was primarily due to the depreciation and amortization associated with our AmSan acquisition. In 2007, we had $8.9 million
of depreciation and $5.6 million of amortization compared to $8.7 million and $5.7 million in 2006, respectively.

Operating Income.As a result of the foregoing, operating income increased by $12.4 million, or 12.2%, to
$114.1 million in 2007 from $101.7 million in 2006.

Loss on Extinguishment of Debt.We did not incur a loss on extinguishment of debt in 2007. Loss on extinguishment of debt was
$20.8 million in 2006. In connection with the offering of $200.0 million of 81/8% senior subordinated notes and entering into a $330.0 million bank credit facility
in June 2006, we repurchased the 111/2% senior subordinated notes of Interline New Jersey and repaid the indebtedness under the prior credit facility of Interline New Jersey. The
111/2% senior subordinated notes were repurchased at a price equal to 110.51% of their principal amount. In connection with the repurchase of the 111/2% senior
subordinated notes and the repayment of the prior credit facility, we recorded a loss on early extinguishment of debt of $20.7 million. The loss was comprised of $13.7 million in tender
premiums associated with the repurchase of the 111/2% senior subordinated notes and a non-cash charge of $7.0 million in deferred financing costs associated with the
repurchase of the 111/2% senior subordinated notes and the repayment of the prior credit facility. In addition, in December 2006, we recorded a non-cash charge of
$0.1 million in deferred financing costs associated with the repayment of $10.0 million of the $230.0 million of the outstanding term debt.

Interest Expense.Interest expense increased by $2.5 million in 2007 to $33.9 million from $31.4 million
in 2006. This increase was attributed to higher overall debt balances resulting from the additional $130.0 million term loan incurred in July 2006 associated with our AmSan acquisition offset
in part by a related favorable refinancing transaction which significantly reduced the rate of our fixed rate notes and our overall weighted average cost of debt.

Interest and Other Income.Interest and other income increased by $2.1 million in 2007 to $3.3 million from
$1.2 million in 2006. This increase was primarily attributable to higher interest income earned on excess cash balances which we invested in short-term investments.

Provision for Income Taxes.The provision for income taxes was $32.5 million in 2007 compared to a provision of
$19.5 million in 2006. The effective tax rate for 2007 increased by 0.4% to 38.9% compared to 38.5% for 2006. The increase in the effective tax rate was primarily due to the additional
liability associated with unrecognized tax benefits arising from the adoption of Financial Accounting Standards Board ("FASB") Interpretation No. 48,Accounting for
Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109, ("FIN 48") partially offset by tax-free income
generated from our short-term investments and the decrease of non-deductible expenses associated with decreases in travel and entertainment expenses incurred.

32

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Overview.Driven by strong organic and acquisition growth, net sales for 2006 increased $215.6 million, or 25.3%, to
$1,067.6 million from $851.9 million in 2005. On an average daily sales basis, net sales for 2006 increased 25.8%. The increase of net sales was as a result of the strong execution of
our strategic growth initiatives and the acquisition of AmSan in July 2006. Average organic daily sales, which exclude $129.8 million in net sales in the second half of the year from AmSan and
$18.6 million in net sales in the first half of the year from Copperfield, grew 8.3% as we continued to invest in proven growth drivers in each of our facilities maintenance, professional
contractor and specialty distributor end-markets. Our facilities maintenance markets had the largest average organic daily growth for the year, compared to our other markets that we serve,
as we continued to execute well on our national accounts and supply chain management initiatives. Our average organic daily growth in our facilities maintenance market, which represents approximately
60% of our sales, grew 10.1%. Average organic daily sales growth in our professional contractor market, which represents approximately 25% of our sales, and our specialty distributor market, which
represents approximately 15% of our sales, grew 8.3% and 3.2%, respectively, in a slower residential repair and remodeling market.

Selling,
general and administrative, or SG&A, expenses in 2006 increased as a percentage of sales to 27.4% from 27.0% in 2005 primarily reflecting the effect of our AmSan acquisition and
higher share-based compensation. Operating income increased $19.7 million, or 24.0%, over the prior year to $101.7 million in 2006 from $82.0 million in 2005. Adjusted EBITDA
increased $20.1 million, or 20.8%, to $116.7 million in 2006 from $96.6 million in 2005. Adjusted EBITDA is not a measure of financial performance under GAAP. For a reconciliation
of EBITDA to GAAP-based financial measures, see "Item 6. Selected Financial Data."

As
a result of our strong sales performance, operating expense control and focus on efficiently managing working capital, we generated $29.9 million in cash from operations and
continued to provide improving year-over-year returns on tangible capital, or ROTC, which we define as earnings before interest, taxes, depreciation and amortization divided by
the trailing five
quarter average of accounts receivable, inventory and property, plant and equipment less accounts payable.

Net Sales.Net sales increased by $215.6 million, or 25.3%, to $1,067.6 million in 2006 from
$851.9 million in 2005. During 2006, we had one less shipping day than the prior year. Average daily sales were $4.2 million in 2006 and $3.4 million in 2005, a 25.8% increase.
The $215.6 million sales increase included $129.8 million from our AmSan acquisition in July 2006 and $18.6 million from our Copperfield acquisition in July 2005. The remaining
increase was attributable to improved demand for our products, new sales and growth initiatives and price increases.

Gross Profit.Gross profit increased by $83.3 million, or 25.6%, to $408.9 million in 2006 from
$325.6 million in 2005. Gross profit margins increased to 38.3% in 2006 from 38.2% in 2005. This increase in our gross profit margins is primarily related to slightly higher gross margins at
AmSan, sales mix, and our continued efforts to expand our exclusive brand programs. We expect gross margins generated from AmSan to remain strong as a result of our integration process as we
consolidate suppliers and expand our sourcing capabilities with respect to janitorial and sanitary products.

Selling, General and Administrative Expenses.SG&A expenses increased by $63.2 million, or 27.5%, to
$292.8 million in 2006 from $229.6 million in 2005. Increased SG&A expenses were related in part to our acquisitions of AmSan and Copperfield, which accounted for $43.1 million,
and an additional $2.9 million in share-based compensation expense. Certain expenses within SG&A, such as the costs of running our regional distribution centers, pro contractor showrooms,
delivery expenses and selling expenses fluctuate with sales volume. These items along with increased investment in new sales and marketing initiatives accounted for the remainder of the increase. SG&A
expenses increased as a

33

---



percentage
of sales to 27.4% of sales in 2006 from 27.0% of sales in 2005 as a result of our AmSan and Copperfield acquisitions and higher share-based compensation.

Depreciation and Amortization.Depreciation and amortization expense increased by $1.4 million, or 10.6%, to
$14.4 million in 2006 from $13.0 million in 2005. This was primarily due to the depreciation and amortization associated with our AmSan acquisition. In 2006, we had $8.7 million
of depreciation and $5.7 million of amortization compared to $8.5 million and $4.5 million in 2005, respectively.

Secondary Offering Expenses.We incurred secondary offering related expenses of $0.9 million during 2005 as a result
of a secondary offering by certain of our stockholders in August 2005. We did not incur any such expenses during 2006.

Operating Income.As a result of the foregoing, operating income increased by $19.7 million, or 24.0%, to
$101.7 million in 2006 from $82.0 million in 2005.

Loss on Extinguishment of Debt.Loss on extinguishment of debt was $20.8 million in 2006 compared to
$10.3 million in 2005. In connection with the offering of $200.0 million of 81/8% senior subordinated notes and entering into a $330.0 million bank credit facility
in June 2006, we repurchased the 111/2% senior subordinated notes of Interline New Jersey and repaid the indebtedness under the prior credit facility of Interline New Jersey. The
111/2% senior subordinated notes were repurchased at a price equal to 110.51% of their principal amount. In connection with the repurchase of the 111/2% senior
subordinated notes and the repayment of the prior credit facility, we recorded a loss on early extinguishment of debt of $20.7 million. The loss was comprised of $13.7 million in tender
premiums associated with the repurchase of the 111/2% senior subordinated notes and a non-cash charge of $7.0 million in deferred financing costs associated with the
repurchase of the 111/2% senior subordinated notes and the repayment of the prior credit facility. In addition, in December 2006, we recorded a non-cash charge of
$0.1 million in deferred financing costs associated with the repayment of $10.0 million of the $230.0 million of the outstanding term debt. During 2005, we recorded a
$10.3 million loss on the early extinguishment of debt consisting of $8.1 million in redemption premium and $2.3 million of deferred financing written-off. The
$10.3 million loss was recorded due to our redemption of $70.0 million of the 111/2% senior subordinated notes. The redemption was made 30 days after the closing of
our initial public offering, or IPO, in accordance with the redemption provision of the indenture governing the 111/2% senior subordinated notes.

Interest Expense.Interest expense increased by $5.9 million in 2006 to $31.4 million from $25.4 million
in 2005. This increase was attributed to higher overall debt balances resulting from the additional $130.0 million term loan incurred in July 2006 associated with our AmSan acquisition and
higher market interest rates on our variable rate term debt compared to the prior year, offset in part by a favorable refinancing transaction which significantly reduced the rate of our fixed rate
notes and our overall weighted average cost of debt.

Interest and Other Income.Interest and other income increased by $0.3 million in 2006 to $1.2 million from
$0.9 million in 2005. This increase was attributable to interest income on higher average cash balances in 2006 compared to 2005.

Provision for Income Taxes.The provision for income taxes was $19.5 million in 2006 compared to a provision of
$18.3 million in 2005. The effective tax rate for 2006 decreased by 0.4% to 38.5% compared to 38.9% for 2005. This decrease in the effective tax rate was primarily due to our having a slightly
higher effective tax rate in 2005 as a result of the incurrence of non-deductible expenses associated with our secondary offering offset in part by the reduction of $0.4 million of
our tax reserves during 2005 as well as changes in our state apportionment mix related in part to our AmSan acquisition.

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Seasonality

We experience some seasonal fluctuations as sales of our products typically increase in the second and third fiscal quarters of the year due to increased
apartment turnover and related maintenance and repairs in the multi-family residential housing sector during these periods. Typically, November, December and January sales are lower across most of our
brands because customers may defer purchases at year-end as their budget limits are met and because of the winter holiday season between Thanksgiving Day and New Year's Day. Our
Copperfield brand, which we acquired in July 2005, experiences approximately two-thirds of sales between July and December. As such, our first quarter sales and earnings typically tend to
be lower than the remaining three quarters of the year.

Liquidity and Capital Resources



We are a holding company whose only asset is the stock of our subsidiaries. We conduct virtually all of our business operations through Interline New Jersey.
Accordingly, our only material sources of cash are dividends and distributions with respect to our ownership interests in Interline New Jersey that are derived from the earnings and cash flow
generated by Interline New Jersey.

We
have $200.0 million of 81/8% senior subordinated notes due 2014 and a $330.0 million bank credit facility. The bank credit facility consists of a
$230.0 million 7-year term loan and a $100.0 million 6-year revolving credit facility of which a portion not exceeding $40.0 million is available in the
form of letters of credit.

The
81/8% senior subordinated notes were priced at 99.3%, or $198.6 million, of their principal amount, representing a yield to maturity of 81/4%. We
are amortizing the discount of $1.4 million over the term of the 81/8% senior subordinated notes. The 81/8% senior subordinated notes mature on June 15,
2014 and interest is payable on June 15 and December 15 of each year. As of December 28, 2007, the 81/8% senior subordinated notes had a fair market value of
$198.0 million or 99.0% of par.

The
debt instruments of Interline New Jersey, primarily the credit facility entered into on June 23, 2006 and the indenture governing the terms of the 81/8% senior
subordinated notes, contain significant restrictions on the payment of dividends and distributions to us by Interline New Jersey. Interline New Jersey's credit facility allows it to pay dividends,
make distributions to us or make investments in us in an aggregate amount not to exceed $2.0 million during any fiscal year, so long as Interline New Jersey is not in default or would be in
default as a result of such payments. In addition, ordinary course distributions for overhead (up to $3.0 million annually) and taxes are permitted, as are annual payments of up to
$7.5 million in respect of our stock option or other benefit plans for management or employees and (provided Interline New Jersey is not in default) aggregate payments of up to
$40.0 million depending on the pro forma net leverage ratio as of the last day of the previous quarter. In addition, the indenture for the 81/8% senior subordinated notes
generally restricts the ability of Interline New Jersey to pay distributions to us and to make advances to, or investments in, us to an amount generally equal to 50% of the net income of Interline New
Jersey, plus an amount equal to the net proceeds from certain equity issuances, subject to compliance with a leverage ratio and no default having occurred and continuing. The indenture also contains
certain permitted exceptions including (1) allowing us to pay our franchise taxes and other fees required to maintain our corporate existence, to pay for general corporate and overhead expenses
and to pay expenses incurred in connection with certain financing, acquisition or disposition transactions, in an aggregate amount not to exceed $10.0 million per year; (2) allowing
certain tax payments; and (3) allowing certain permitted distributions up to $75 million. For a further description of the new credit facility, see "Credit Facility" below.

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Working capital increased by $54.0 million to $331.2 million as of December 28, 2007 from $277.2 million as of December 29,
2006. The increase in working capital was primarily funded by cash flows from operating activities.



Operating Activities.Net cash provided by operating activities was $57.7 million during the year ended
December 28, 2007 compared to net cash provided by operating activities of $29.9 million during the year ended December 29, 2006 and net cash provided by operating activities of
$38.8 million during the year ended December 30, 2005.

Net
cash provided by operating activities during the year ended December 28, 2007 was $27.8 million higher than net cash provided by operating activities during the year
ended December 29, 2006 primarily as a result of stronger operating performance and improved working capital management. In addition to higher net income, the key drivers of cash from operating
activities are our working capital position, more specifically changes in our trade receivables, inventory holding levels and the timing of trade accounts payable payments. In 2007, trade accounts
receivable balances increased compared to 2006 by $10.0 million on increased demand from our facilities maintenance customers while inventory and trade payables balances decreased by $29.7 and
$11.8 million, respectively, on improved inventory turns and lower inventory needs associated with lower sales demand from our professional contractor and specialty distributor customers.

Net
cash provided by operating activities during the year ended December 29, 2006 was $8.9 million lower than net cash provided by operating activities during the year
ended December 30, 2005 primarily as a result of a higher net use of working capital to support the growth of our business. In addition to
higher net income, the key drivers of cash from operating activities are our working capital position, more specifically changes in our trade receivables, inventory holding levels and the timing of
trade accounts payable payments. In 2006, trade accounts receivable balances decreased compared to 2005 by $8.8 million on improved days sales outstanding while inventory balances increased
$8.4 million and our trade payables balances decreased $30.7 million primarily due to lower product purchase volumes.

Investing Activities.Net cash used in investing activities was $64.2 million during the year ended
December 28, 2007 compared to net cash used in investing activities of $139.3 million during the year ended December 29, 2006 and net cash used in investing activities of
$81.1 million during the year ended December 30, 2005.

Net
cash used in investing activities during the year ended December 28, 2007 was attributable to $48.5 million in net purchases of short-term investments
comprised of tax exempt auction rate securities and variable rate demand notes as well as $14.9 million in capital expenditures made in the ordinary course of business. In addition, we incurred
costs related to purchases of businesses, net of cash acquired, of $0.8 million, including $0.7 for AmSan.

Net
cash used in investing activities during the year ended December 29, 2006 was attributable to capital expenditures made in the ordinary course of business of
$7.8 million and costs related to purchases of businesses, net of cash acquired, of $131.5 million, including $130.8 for AmSan.

Net
cash used in investing activities during the year ended December 30, 2005 was attributable to capital expenditures made in the ordinary course of business of
$7.9 million and costs related to purchases of businesses, net of cash acquired, of $73.2 million, including $69.5 million for Copperfield in July 2005 and $3.6 million
related to our November 2003 acquisition of Florida Lighting.

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Financing Activities.Net cash provided by financing activities totaled $4.4 million during the year ended
December 28, 2007 compared to net cash provided by financing activities of $113.2 million during the year ended December 29, 2006 and net cash used in financing activities of
$24.1 million during the year ended December 30, 2005.

Net
cash provided by financing activities during the year ended December 28, 2007 was primarily attributable to the net increase in purchase card payable of $6.6 million
offset by our repayment of $2.9 million of borrowings on our credit facility and capital lease obligations offset by $0.8 million of proceeds from stock options exercised and excess tax
benefits from share-based compensation.

Net
cash provided by financing activities during the year ended December 29, 2006 was primarily attributable to our June refinancing transaction, which included the repayment of
$160.0 million of term debt, our repurchase of $130.0 million of our 111/2% senior subordinated notes and $13.7 million in redemption premiums offset by the
issuance of $198.6 million of 81/8% senior subordinated notes, net of $1.4 million discount, and $230.0 million of term debt, less $9.7 million in debt
issuance costs associated with the issuance of the 81/8% senior subordinated notes and the term debt. In addition, we repaid $3.4 million of borrowings on our revolving credit
facility and capital lease obligations partially offset by $1.5 million from stock options exercised and excess tax benefits from share-based compensation.

Net
cash used in financing activities during the year ended December 30, 2005 was primarily due to the early redemption of $70.0 million of Interline New Jersey's
111/2% senior subordinated notes and $8.1 million in related redemption premiums, partially offset by $50.0 million of term debt, less $0.9 million in debt issuance
costs, $3.0 million increase on our revolving line of credit, $2.3 million received in January 2005 for the over-allotment of shares sold to underwriters, net of expenses, in
conjunction with our IPO, $1.7 million of proceeds received from stock options exercised.



Capital expenditures were $14.9 million in 2007, $7.8 million in 2006 and $7.9 million in 2005. Capital expenditures as a percentage of sales
were 1.2%, 0.7% and 0.9% in 2007, 2006 and 2005, respectively. The increase in capital expenditures during 2007 was due to the expansion of existing distribution centers and warehouse equipment and
investments in our information technology systems necessary for the integration of our AmSan acquisition.

Acquisition
expenditures were $0.8 million in 2007, which consisted primarily of $0.7 million related to our AmSan acquisition in July 2006, $131.5 million in 2006,
which consisted primarily of 130.8 million related to our AmSan acquisition, and $73.2 million in 2005, which consisted of $69.5 million related to our Copperfield acquisition in
July 2005 and $3.6 million related to our Florida Lighting acquisition in November 2003.



Borrowings under the term loan and the new revolving credit facility bear interest, at Interline New Jersey's option, at either LIBOR plus 1.75% or at the
alternate base rate, which is the greater of the Prime Rate or the Federal Funds Effective Rate plus 0.50%, plus 0.75%. As of December 28, 2007, the interest rate in effect with respect to the
term loan was 6.60% for the LIBOR option and 8.00% for the alternate base rate option. Outstanding letters of credit under the revolving credit facility are
subject to a per annum fee equal to the applicable margin under the revolving credit facility. The interest rate margin is subject to pricing adjustments at the end of each fiscal quarter based on net
total indebtedness to consolidated EBITDA. The term loan matures on June 23, 2013 and the revolving loan facility matures on June 23, 2012. Amounts under the term loan are due and
payable in quarterly installments equal to 1.0% of the original principal amount on an annual basis through June 23, 2013, with the balance payable in one final installment at the maturity
date.

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The
bank credit facility, which is secured by substantially all of the assets of Interline New Jersey and is guaranteed by us and by the domestic subsidiaries of Interline New Jersey,
contains affirmative, negative and financial covenants that limit Interline New Jersey's ability to incur additional indebtedness, pay dividends on its common stock or redeem, repurchase or retire its
common stock or subordinated indebtedness, make certain investments, sell assets, and consolidate, merge or transfer assets, and that require Interline New Jersey to maintain certain financial ratios
as of the last day of each fiscal quarter, including a minimum ratio based on an adjusted and consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") to consolidated
cash interest expense and a maximum ratio of net total indebtedness to an adjusted consolidated EBITDA. Interline New Jersey and the Company were in compliance with all covenants at
December 28, 2007.

In
connection with the bank credit facility, Interline New Jersey is required to pay administrative fees, commitment fees, letter of credit issuance and administration fees and certain
expenses and to provide certain indemnities, all of which are customary for financings of this type. The bank credit facility also allows for certain incremental term loans and incremental commitments
under the revolving credit facility which are available to Interline New Jersey to repay indebtedness and make acquisitions if certain conditions, including various financial ratios are met.

As
of December 28, 2007, Interline New Jersey had $12.1 million of letters of credit issued under the new revolving loan facility and $216.6 million aggregate
principal outstanding under the new term loan facility.



Historically, our capital requirements have been for debt service obligations, working capital requirements, including for inventory, accounts receivable and
accounts payable, acquisitions, the expansion and maintenance of our distribution network and upgrades of our information systems. We expect this to continue in the foreseeable future. Historically,
we have funded these requirements through cash flow generated from operating activities and funds borrowed under our credit facility. We
expect our cash and short-term investments on hand as well as cash flow from operations and loan availability under our credit facility to be our primary source of funds in the future.
Letters of credit, which are issued under the revolving loan facility under our credit facility, are used to support payment obligations incurred for our general corporate purposes.

As
of December 28, 2007, we had approximately $87.9 million of availability under Interline New Jersey's $100.0 million revolving credit facility.

We
believe that cash and short-term investments on hand, cash flow from operations and available borrowing capacity under our credit facility will be adequate to finance our
ongoing operational cash flow needs and debt service obligations in the foreseeable future.

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Contractual Obligations and Off-Balance Sheet Arrangements

The following table sets forth our contractual obligations as of December 28, 2007 (in thousands):

|                                           |  | Total |         | Less than 1 year |   | 2 - 3 years |  | 4 - 5 years |        | After 5 years
|------------------------------------------ |  | ----- | ------- | ---------------- | - | ----------- |  | ----------- | ------ | -------------
|Term debt                                  |  | $     | 219,825 |                  | $ | 2,300       |  | $           | 7,875  |              
|81/8% senior subordinated notes            |  |       | 200,000 |                  |   |            |  |             |       |              
|Revolving credit facility(1)               |  |       |        |                  |   |            |  |             |       |              
|Interest                                   |  |       | 184,140 |                  |   | 31,022      |  |             | 61,490 |              
|Operating leases                           |  |       | 51,507  |                  |   | 18,520      |  |             | 20,841 |              
|Capital leases                             |  |       | 801     |                  |   | 285         |  |             | 512    |              
|Non-compete agreement                      |  |       | 400     |                  |   | 200         |  |             | 200    |              
|Employment agreements                      |  |       | 5,740   |                  |   | 4,451       |  |             | 1,289  |              
|Deferred compensation and retirement plans |  |       | 1,018   |                  |   | 107         |  |             | 214    |              
|                                           |  |       |         |                  |   |             |  |             |        |              
|Total contractual cash obligations(2)(3)   |  | $     | 663,431 |                  | $ | 56,885      |  | $           | 92,421 |              
|                                           |  |       |         |                  |   |             |  |             |        |              

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As
of December 28, 2007, except for operating leases and letters of credit, we had no material off-balance sheet arrangements.

Critical Accounting Policies

In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to
make certain estimates, judgments and assumptions. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities, including the disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. On an ongoing basis, we evaluate these estimates and assumptions.
We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable at the

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time
we make the estimates and assumptions. Actual results may differ from these estimates and assumptions under different circumstances or conditions. The significant accounting policies that we
believe are the most critical in order to fully understand and evaluate our financial position and results of operations include the following policies.



While our recognition of revenue is predominantly derived from routine transactions and does not involve significant judgment, revenue recognition represents an
important accounting policy for us. We recognize a sale when the product has been shipped and risk of loss has passed to the customer, collection of the resulting receivable is probable, persuasive
evidence of an arrangement exists, and the price is fixed or determinable. Sales are recorded net of estimated discounts, rebates and returns. A portion of our sales is delivered directly from the
supplier to our customers. These direct-shipment sales are recorded on a gross basis, with the corresponding cost of goods sold, in accordance with the guidance in Emerging Issues Task Force ("EITF")
Issue No. 99-19,Reporting Revenues Gross as a Principal versus Net as an Agent, ("EITF 99-19"). We provide
limited product return and protection rights to certain customers. We accrue product return reserves. A provision is made for estimated product returns based on sales volumes and our experience.
Actual returns have not varied materially from amounts provided historically.



We account for vendor rebates in accordance with EITF Issue 02-16,Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor, ("EITF 02-16"). Many of our arrangements with our vendors provide for us to receive a rebate of a specified amount,
payable to us when we achieve any of a number of measures generally
related to the volume of purchases from our vendors. We account for these rebates as a reduction of the prices of the related vendors' products, which reduces the inventory cost until the period in
which we sell the product, at which time these rebates reduce cost of sales in our income statement. Throughout the year, we estimate the amount of rebates receivable based upon the expected level of
purchases. We continually revise these estimates to reflect actual rebates earned based on actual purchase levels. Historically, our actual rebates have been within our expectations used for our
estimates. If we fail to achieve a measure which is required to obtain a vendor rebate, we will have to record a charge in the period that we determine the criteria or measure for the vendor rebate
will not be met to the extent the vendor rebate was estimated and included as a reduction to cost of sales. If market conditions were to change, vendors may change the terms of some or all of these
programs. Although these changes would not affect the amounts which we have recorded related to products already purchased, it may impact our gross margin on products we sell or revenues earned in
future periods.



We maintain allowances for doubtful accounts for estimated losses resulting from the inability to collect outstanding amounts from customers. The allowances
include specific amounts for those accounts that are likely to be uncollectible, such as accounts of customers in bankruptcy and general allowances for those accounts that management currently
believes to be collectible but may later become uncollectible. Estimates are used to determine the allowances for bad debts and are based on historical collection experience, current economic trends,
credit worthiness of customers and changes in customer payment terms. Adjustments to credit limits are made based upon payment history and our customers' current credit worthiness. If the financial
condition of our customers were to deteriorate, allowances may be needed that will increase selling, general and administrative expenses and decrease accounts receivable.

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Inventories are valued at the lower of cost or market. We determine inventory cost using the average cost method. We adjust inventory for excess and obsolete
inventory and for the difference by which the cost of the inventory exceeds the estimated market value. In order to determine the adjustments, management reviews inventory quantities on hand, slow
movement reports and sales history reports. Management estimates the required adjustment based on estimated demand for products and market conditions. To the extent historical results are not
indicative of future results and if events occur that affect our relationships with suppliers or the salability of our products, additional write-offs may be needed that will increase our
cost of sales and decrease inventory.



Management assesses the recoverability of our goodwill, identifiable intangibles and other long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. The following factors, if present, may trigger an impairment review: (1) significant underperformance relative to expected
historical or projected future operating results; (2) significant negative industry or economic trends; (3) a significant increase in competition; and (4) a significant increase
in interest rates on debt. If the recoverability of these assets is unlikely because of the existence of one or more of the above-mentioned factors, an impairment analysis is performed using a
projected discounted cash flow method. Management must make assumptions regarding estimated future cash flows and other factors to determine the fair value of these respective assets. If these
estimates or related assumptions change in the future, we may be required to record an impairment charge. Impairment charges would be included in our statements of operations, and would result in
reduced carrying amounts of the related assets in our balance sheets.



We account for share-based compensation in accordance with FASB Statement No. 123 (revised 2004),Share-Based
Payment, ("FAS 123R"). Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value
of the award and is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

We
currently use the Black-Scholes option pricing model to determine the fair value of stock options. The fair value of restricted stock awards, restricted share units and deferred stock
units is based on the fair market values of the underlying stock on the dates of grant. The determination of the fair value of stock-based awards on the date of grant using an option pricing model is
affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the expected term of the
awards, actual and projected employee stock option exercise behaviors, risk-free interest rate, estimated forfeitures and expected dividends.

We
estimate the expected term of options granted by calculating the average term from our historical stock option exercise experience. We estimate the volatility of our common stock
based on the historical performance of our common stock. We base the risk-free interest rate on zero-coupon yields implied from U.S. Treasury issues with remaining terms
similar to the expected term on the options. We do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model.
We are required to
estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting
option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. See Note 13. Share-Based Compensation to our audited consolidated financial
statements included in this report.

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If
we use different assumptions for estimating stock-based compensation expense in future periods or if actual forfeitures differ materially from our estimated forfeitures, the change in
our stock-based compensation expense could materially affect our operating income, net income and net income per share.



We account for income taxes in accordance with FASB Statement No. 109,Accounting for Income Taxes,
("FAS 109"). Significant judgment is required in determining our provision for income taxes, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable
income for purposes of assessing our ability to realize future benefit from our deferred tax assets. A valuation allowance is established to reduce our deferred tax assets to the amount that is
considered more likely than not to be realized through the generation of future taxable income and other tax planning opportunities. To the extent that a determination is made to establish or adjust a
valuation allowance, the expense or benefit is recorded in the period in which the determination is made.

Our
accounting for income taxes requires us to exercise judgment for known issues under discussion with tax authorities and transactions yet to be settled. Effective December 30,
2006, we adopted the provisions of FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement
No. 109, ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FAS 109. FIN 48 clarifies
the application of FAS 109 by defining criteria that an individual tax position must meet for any part of the benefit of that position to be recognized in the financial statements.
Additionally, FIN 48 provides guidance on the measurement, derecognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. See
Note 17. Income Taxes to our audited consolidated financial statements included in this report.

Future
rulings by tax authorities and future changes in tax laws and their interpretation, changes in projected levels of taxable income and future tax planning strategies could impact
our actual effective tax rate and our recorded tax balances. If actual results differ from estimates we have used, or if we
adjust these estimates in future periods, our operating results and financial position could be materially affected.



From time to time, in the course of our business, we become involved in legal proceedings. In accordance with FASB Statement No. 5, Accounting for
Contingencies, ("FAS 5") if it is probable that, as a result of a pending legal claim, an asset had been impaired or a liability
had been incurred at the date of the financial statements and the amount of the loss is estimable, an accrual for the costs to resolve the claim is recorded in accrued expenses in our balance sheets.
Professional fees related to legal claims are included in selling, general and administrative expenses in our statements of operations. Management, with the assistance of outside counsel, determines
whether it is probable that a liability from a legal claim has been incurred and estimates the amount of loss. The analysis is based upon potential results, assuming a combination of litigation and
settlement strategies. As discussed in Note 15. Commitments and Contingencies to our audited consolidated financial statements included in this report, management does not believe that
currently pending proceedings will have a material adverse effect on our consolidated financial position. It is possible, however, that future results of operations for any particular period could be
materially affected by changes in our assumptions related to these proceedings.

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Recent Accounting Standards

In September 2006, the FASB issued FASB Statement No. 157,Fair Value Measurements, ("FAS 157").
FAS 157 defines fair value, establishes a framework for measuring fair value with accounting principles generally accepted in the United States of America and expands disclosures about fair
value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, FAS 157 does not require any new fair value
measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007 with early adoption permitted. We are currently evaluating the impact that adoption of
FAS 157 will have on our financial position, results of operations and cash flows.

In
February 2007, the FASB issued FASB Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities,
("FAS 159"). FAS 159 permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for
many financial assets and liabilities and certain other items including property and casualty insurance contracts. Entities electing the fair value option would be required to recognize changes in
fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. Entities electing the fair value option are required to distinguish on
the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another
measurement attribute. An entity can accomplish this by either reporting the fair value and non-fair-value carrying amounts as separate line items or aggregate those amounts
and disclose parenthetically the amount of fair value included in the aggregate amount. FAS 159 is effective for fiscal years beginning after November 15, 2007. Upon adoption, an entity
is permitted to elect the fair value option irrevocably for any existing asset or liability within the scope of the standard. The adjustment to reflect the difference between the fair value and the
carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. Retrospective application would not be permitted. We are currently
evaluating the impact that adoption of FAS 159 will have on our financial position, results of operations and cash flows. Currently, we do not intend to apply the provisions of FAS 159
to any of our existing financial assets or liabilities.

In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007),Business Combinations, ("FAS 141R"), which replaces
FASB Statement No. 141,Business Combinations, ("FAS 141"). FAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. FAS 141R
also establishes disclosure requirements that will enable
users to evaluate the nature and financial effects of the business combination. FAS 141R is effective for fiscal years beginning after December 15, 2008 with early adoption prohibited.
We are currently evaluating the impact that adoption of FAS 141R will have on our financial position, results of operations and cash flows.

In
December 2007, the FASB issued FASB Statement No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51, ("FAS 160"). FAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest, and the valuation of retained noncontrolling equity
investments when a subsidiary is deconsolidated. FAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of
the noncontrolling owners. FAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only
those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. FAS 160 is effective for fiscal years beginning after
December 15, 2008 with early adoption prohibited. We are

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currently
evaluating the impact that adoption of FAS 160 will have on our financial position, results of operations and cash flows.

Certifications

Our Chief Executive Officer has certified to the New York Stock Exchange that he is not aware of any violations by the company of NYSE corporate governance
listing standards. We have included as exhibits to this Annual Report on Form 10-K certificates of our Chief Executive Officer and Chief Financial Officer certifying the quality of
our public disclosure.

ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk



We are aware of the potentially unfavorable effects inflationary pressures may create through higher product and material costs, higher asset replacement costs
and related depreciation and higher interest rates. In addition, our operating performance is affected by price fluctuations in copper, oil, stainless steel, aluminum, zinc, plastic and PVC and other
commodities and raw materials. We seek to minimize the effects of inflation and changing prices through economies of purchasing and inventory management resulting in cost reductions and productivity
improvements as well as price increases to maintain reasonable profit margins. However, such commodity price fluctuations have from time to time created cyclicality in our financial performance, and
could continue to do so in the future. In addition, our use of priced catalogs may not allow us to offset such cost increases quickly, resulting in a decrease in gross margins and profit.



Our short-term investments portfolio is comprised of high-grade tax exempt auction rate securities and variable rate demand notes, which are debt
instruments, such as municipal bonds, with long-term scheduled maturities and periodic interest rate reset dates. As of December 28, 2007, we had $48.5 million in short-term
investments. The values of these investments are subject to changes in interest rates. However, because the interest rates on these securities are typically reset to market prevailing rates every
35 days or less, and in some cases every 7 days or less, we do not believe the interest rate risk inherent in our portfolio was material as of December 28, 2007. Although our
auction rate securities and variable rate demand notes have been readily marketable, if an auction were to fail, we may not be able to sell these securities on the planned reset date thereby
increasing our holding period.

All
of the auction rate securities and variable rate demand notes we held as of December 28, 2007 were sold subsequent to December 28, 2007. However, recent uncertainties
in the credit markets have prevented us and other investors from liquidating some of our holdings in auction rate securities. In February 2008, auctions failed for $6.0 million of our auction
rate securities that were acquired subsequent to December 28, 2007. As of February 22, 2008, we had liquidated all of our auction rate securities and variable rate demand notes except
$10.0 million in auction rate securities, including $4.0 million of the failed auctions. There is no assurance that currently successful auctions on the other auction rate securities in
our investment portfolio will continue to succeed and as a result our ability to liquidate our investment and fully recover the carrying value of our investment in the near term may be limited or not
exist. An auction failure means that the parties wishing to sell securities could not. All of our auction rate securities and variable rate demand notes, including those subject to the failure, are
currently rated AAA, the highest rating, by a rating agency. If the issuers are unable to successfully close future auctions and their credit ratings deteriorate, we may in the future be required to
record an impairment charge on these investments. We believe we will be able to liquidate our investments without significant loss within the next year, and we currently believe these securities are
not

44

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significantly
impaired as they are collateralized by the bonds and credit rating of the underlying issuer and insured against loss of principal and interest by bond insurers with AAA ratings. However,
it could take until the final maturity of the underlying notes (over 30 years) to realize our investments' recorded value. Based on our expected operating cash flows, and our other sources of
cash, we do not anticipate the potential lack of liquidity on these investments will affect our ability to execute our current business plan.

Our
variable rate term debt is sensitive to changes in the general level of interest rates. As of December 28, 2007, the interest rate in effect with respect to our
$216.6 million variable rate term debt was 6.60% for the LIBOR option and 8.00% for the alternate base rate option. While our variable rate term debt obligations expose us to the risk of rising
interest rates, we do not believe that the potential exposure is material to our overall financial performance or results of operations. Based on the outstanding variable rate term debt as of
December 28, 2007, a 1.0% annual increase or decrease in current market interest rates would have the effect of causing a $2.1 million pre-tax change to our statement of
operations.

The
fair market value of our fixed rate debt is subject to interest rate risk. As of December 28, 2007, the fair market value of our $200.0 million 81/8%
senior subordinated notes was $198.0 million or 99% of par.



The majority of our purchases from foreign-based suppliers are from China and other countries in Asia and are transacted in U.S. dollars. Accordingly, our risk to
foreign currency exchange rates was not material as of December 28, 2007.



As of December 28, 2007, we did not have any interest rate swap exchange agreements, or swaps. Historically, we have entered into derivative financial
instruments from time to time, including interest rate exchange agreements, to manage our exposure to fluctuations in interest rates on our debt. Under our former swap agreements, we paid a fixed rate
on the notional amount to our banks and the banks paid us a variable rate on the notional amount equal to a base LIBOR rate.

We
periodically evaluate the costs and benefits of any changes in our interest rate risk. Based on such evaluation, we may enter into new interest rate swaps to manage our interest rate
exposure. Our derivative activities, all of which are for purposes other than trading, are initiated within the guidelines of corporate risk-management policies.

ITEM 8.    Financial Statements and Supplementary Data

Our consolidated financial statements are provided in part IV, Item 15 of this filing.

ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A.    Controls and Procedures



Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial
officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
December 28, 2007. Based on this evaluation, our Chief Executive Officer and

45

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Chief
Financial Officer concluded that, as of December 28, 2007, our disclosure controls and procedures were effective to (1) ensure that material information disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure and (2) ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.



Management's report on internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) is included on page F-1 of this Annual Report on Form 10-K. The report of our independent registered public accounting firm related to the effectiveness of
internal control over financial reporting is included on page F-2 of this Annual Report on Form 10-K.



No change in our internal control over financial reporting occurred during the quarter ended December 28, 2007 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.



Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of a
control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The design of a control system
is also based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Our disclosure controls are designed to provide reasonable assurance of achieving
their objectives.

ITEM 9B.    Other Information

None.

46

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PART III

ITEM 10.    Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference from our definitive proxy statement to be filed not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K pursuant to Regulation 14A.

ITEM 11.    Executive Compensation

The information required by this item is incorporated by reference from our definitive proxy statement to be filed not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K pursuant to Regulation 14A.

ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference from our definitive proxy statement to be filed not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K pursuant to Regulation 14A.

ITEM 13.    Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from our definitive proxy statement to be filed not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K pursuant to Regulation 14A.

ITEM 14.    Principal Accounting Fees and Services

The information required by this item is incorporated by reference from our definitive proxy statement to be filed not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K pursuant to Regulation 14A.

47

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PART IV

ITEM 15.    Exhibits, Financial Statement Schedules

Management's Report on Internal Control over Financial Reporting

F-1Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets

F-4Consolidated Statements of Earnings

F-5Consolidated Statements of Stockholders' Equity

F-6Consolidated Statements of Cash Flows

F-7Notes to Consolidated Financial Statements

F-9 to F-48




48

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ITEM 16.    Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  | INTERLINE BRANDS, INC.
| |  | ----------------------
| |  | By:                   

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and
on the dates indicated.

|Signature                                     |  | Title                                                                                  |  | Date             
|--------------------------------------------- |  | -------------------------------------------------------------------------------------- |  | -----------------
|                                              |  |                                                                                        |  |                  
|/s/MICHAEL J. GREBEMichael J. Grebe           |  | Chairman of the Board and Chief
Executive Officer (Principal Executive Officer)        |  | February 26, 2008
|/s/THOMAS J. TOSSAVAINENThomas J. Tossavainen |  | Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) |  | February 26, 2008
|/s/GIDEON ARGOVGideon Argov                   |  | Director                                                                               |  | February 26, 2008
|/s/MICHAEL E. DEDOMENICOMichael E. DeDomenico |  | Director                                                                               |  | February 26, 2008
|/s/JOHN J. GAVINJohn J. Gavin                 |  | Director                                                                               |  | February 26, 2008
|/s/BARRY J. GOLDSTEINBarry J. Goldstein       |  | Director                                                                               |  | February 26, 2008
|/s/ERNEST K. JACQUETErnest K. Jacquet         |  | Director                                                                               |  | February 26, 2008
|/s/CHARLES W. SANTOROCharles W. Santoro       |  | Director                                                                               |  | February 26, 2008
|/s/DREW T. SAWYERDrew T. Sawyer               |  | Director                                                                               |  | February 26, 2008

49

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EXHIBIT INDEX

|1.1 |  | Underwriting Agreement dated as of August 3, 2005 among Interline Brands, Inc., the several selling stockholders named on Schedule A thereto and the several underwriters named on Schedule B thereto, for whom Credit Suisse First
Boston LLC and Lehman Brothers, Inc. acted as representatives (incorporated by reference to exhibit 1.1 to Interline Brand, Inc.'s Amendment No. 1 to Registration Statement on Form S-1 filed on July 22, 2005
(No. 333-126515)).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2 |  | Underwriting Agreement, dated as of June 9, 2006, among Interline Delaware, Interline New Jersey and certain subsidiary guarantors listed in Schedule 2 thereto, Lehman Brothers Inc. and J.P. Morgan Securities Inc, as representatives of
the several underwriters listed in Schedule 1 thereto (incorporated by reference to the Company's interim report on Form 8-K filed June 13, 2006).                                                                        
|2.1 |  | Agreement and Plan of Merger dated December 21, 2004 (incorporated by reference to Exhibit 2.1 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).                                                                                                                                                                                                                                                                   
|2.2 |  | Stock Purchase and Sale Agreement, dated as of July 7, 2005, by and among Copperfield, the shareholders listed therein and Interline Opco (incorporated by reference to Exhibit 10.1 to Interline Brands, Inc.'s Current Report on
Form 8-K filed on July 13, 2005).                                                                                                                                                                                                  
|2.3 |  | Securities Purchase Agreement, dated as of May 23, 2006, by and among American Sanitary Incorporated, AmSan, LLC, Golder, Thoma, Cressey, Rauner Fund V, L.P., GTCR Associates V, GTCR Capital Partners, L.P. and Interline New Jersey
(incorporated by reference to the Company's interim report on Form 8-K filed July 10, 2006).                                                                                                                                   
|3.1 |  | Amended and Restated Certificate of Incorporation of Interline Brands, Inc. (incorporated by reference to Exhibit 3.1 to Interline Brands, Inc.'s Form S-3 Registration Statement filed on May 24, 2006 (No. 333-134415)
).                                                                                                                                                                                                                                           
|3.2 |  | Amended and Restated By-Laws of Interline Brands, Inc. (incorporated by reference to Exhibit 3.2 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).                                                                                                                                                                                                                                                                 
|4.1 |  | Indenture, dated as of May 23, 2003, among Interline Opco, the Subsidiary Guarantors thereto and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                                                                                                                              
|4.2 |  | Credit Agreement, dated as of May 29, 2003, among Interline Opco, the Lender Parties thereto, Credit Suisse First Boston, as Administrative Agent, and JPMorgan Chase Bank, as Syndication Agent (incorporated by reference to Exhibit 10.1 to
Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                                                              
|4.3 |  | Amendment No. 1, dated as of December 19, 2003, to the Credit Agreement dated as of May 29, 2003, among Interline Opco, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Interline Brands, Inc.'s
Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                                                                                                         

50

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|4.4  |  | Amendment No. 2, dated as of December 21, 2004, to the Credit Agreement dated as of May 29, 2003, among Interline Opco and the lenders party thereto, and the related Amendment and Restatement Agreement dated as of December 21,
2004, among Interline Opco and the lenders party thereto (incorporated by reference to Exhibit 10.6 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).                                                                                                                                                                                                        
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5  |  | Form of Specimen Certificate (incorporated by reference to Exhibit 4.2 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4.6  |  | Supplemental Indenture, dated as of July 8, 2005, among Interline Opco, CCS Enterprises, Inc., Copperfield Chimney Supply, Inc., Riverton Machine & Foundry, Inc., the other subsidiary guarantors thereto and the Bank of
New York, as trustee (incorporated by reference to Exhibit 10.52 of Interline Brands, Inc.'s Amendment No. 1 to Form S-1 filed on July 22, 2005 (No. 333-126515)).                                                                                                                                                                                                                                                      
|4.7  |  | Incremental Facility Amendment, dated as of July 7, 2005, among Interline Brands, Inc., Interline Opco, the lenders named therein and Credit Suisse as administrative agent (incorporated by reference to Exhibit 10.53 of Interline Brands,
 Inc.'s Amendment No. 1 to Form S-1 filed on July 22, 2005 (No. 333-126515)).                                                                                                                                                                                                                                                                                                                         
|4.8  |  | Second Supplemental Indenture, dated as of June 7, 2006, among Interline New Jersey, Wilmar Holdings, Inc., Wilmar Financial, Inc., Glenwood Acquisition LLC and The Bank of New York, as trustee (incorporated by reference to the
Company's interim report on Form 8-K filed June 13, 2006).                                                                                                                                                                                                                                                                                                                                                     
|4.9  |  | Credit Agreement, dated June 23, 2006 among Interline Delaware, Interline Brands, Inc., a wholly-owned subsidiary of Interline Delaware ("Interline New Jersey"), as borrower, the lenders party therein, JPMorgan Chase Bank, N.A., as
administrative agent, Lehman Commercial Paper Inc., as syndication agent, Credit Suisse, Bank of America, N.A., Wachovia Bank, National Association and SunTrust Bank, each as a co-documentation agent and J.P. Morgan Securities Inc. and
Lehman Brothers Inc. as joint bookrunners and joint-lean arrangers (incorporated by reference to the Company's interim report on Form 8-K filed June 26, 2006).
|4.10 |  | Guarantee and Collateral Agreement, dated as of June 23, 2006, among Interline Delaware, Interline New Jersey, certain subsidiaries of Interline New Jersey and JPMorgan Chase Bank, N.A., as collateral agent (incorporated by reference to the
Company's interim report on Form 8-K filed June 26, 2006).                                                                                                                                                                                                                                                                                                                                        
|4.11 |  | Base Indenture, dated as of June 23, 2006, among Interline New Jersey, Interline Delaware, as guarantor, certain subsidiaries of Interline Delaware and the Bank of New York Trust Company, N.A., as trustee (incorporated by reference to the
Company's interim report on Form 8-K filed June 26, 2006).                                                                                                                                                                                                                                                                                                                                          
|4.12 |  | First Supplemental Indenture, dated as of June 23, 2006, among Interline New Jersey, Interline Delaware, as guarantor, certain subsidiaries of Interline Delaware and the Bank of New York Trust Company, N.A., as trustee (incorporated by reference
to the Company's interim report on Form 8-K filed June 26, 2006).                                                                                                                                                                                                                                                                                                                            
|4.13 |  | Second Supplemental Indenture, dated as of July 3, 2006, by and among Interline New Jersey, Interline Delaware, AmSan as a subsidiary guarantor, certain other subsidiaries of Interline New Jersey and the Bank of New York Trust Company, N.A., as
trustee (incorporated by reference to the Company's interim report on Form 8-K filed July 10, 2006).                                                                                                                                                                                                                                                                                          

51

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|4.14  |  | Supplement No.1, dated as of July 3, 2006, to the Guarantee and Collateral Agreement, dated June 23, 2006, between AmSan, LLC and JPMorgan Chase Bank, N.A., as collateral agent (incorporated by reference to the Company's interim report
on Form 8-K filed July 10, 2006).                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1  |  | Amended and Restated Shareholders' Agreement dated as of September 29, 2000 among Interline Opco and certain of its shareholders (incorporated by reference to Exhibit 9.1 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                
|10.2  |  | Amendment No. 1 to Amended and Restated Shareholders' Agreement dated as of March 15, 2004 among Interline Opco and certain of its shareholders (incorporated by reference to Exhibit 9.2 to Interline Brands, Inc.'s Amendment
No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                 
|10.3  |  | Amendment No. 2 to Amended and Restated Shareholders' Agreement dated as of December 21, 2004 among Interline Opco and certain of its shareholders (incorporated by reference to Exhibit 10.3 to Interline Brands, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31, 2004).                                                     
|10.4  |  | Guarantee and Collateral Agreement, dated as of May 29, 2003, among Interline Opco, the Subsidiaries of Interline Brands, Inc. named therein and Credit Suisse First Boston LLC (incorporated by reference to Exhibit 10.3 to
Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).
|10.5  |  | Incentive Stock Option Agreement, dated as of May 16, 2000, by and between Wilmar Industries, Inc. and William E. Sanford (incorporated by reference to Exhibit 10.5 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                      
|10.6  |  | Incentive Stock Option Agreement of Michael J. Grebe, dated as of May 16, 2000 (incorporated by reference to Exhibit 10.11 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on
December 14, 2004 (No. 333-116482)).                                                                                                
|10.7  |  | Restricted Stock Award Agreement under the 2000 Stock Award Plan, dated as of September 29, 2000, between William R. Pray and Wilmar Industries, Inc. (incorporated by reference to Exhibit10.23 to Interline Brands, Inc.'s Amendment
No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                          
|10.8  |  | 2000 Stock Award Plan, as amended and restated July, 2000 (incorporated by reference to Exhibit 10.24 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004
(No. 333-116482)).                                                                                                                     
|10.9  |  | Employment Agreement, dated as of January 7, 2004, by and between Interline Opco and Fred Bravo (incorporated by reference to Exhibit 10.25 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed
on December 14, 2004 (No. 333-116482)).                                                                               
|10.10 |  | Employment Agreement, dated as of January 7, 2004, by and between Interline Opco and Pamela L. Maxwell (incorporated by reference to Exhibit 10.26 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement
filed on December 14, 2004 (No. 333-116482)).                                                                        
|10.11 |  | 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10.27 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).                                                                                                                                                    

52

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|10.12 |  | Employment Agreement, dated as of May 17, 2004, by and between Interline Opco and Laurence Howard (incorporated by reference to Exhibit 10.28 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement
filed on December 14, 2004 (No. 333-116482)).                             
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13 |  | Employment Agreement, dated as of June 18, 2004, by and between Interline Brands, Inc. and Charles Blackmon (incorporated by reference to Exhibit 10.30 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration
Statement filed on December 14, 2004 (No. 333-116482)).                   
|10.14 |  | Separation Agreement and Release of All Claims, dated March 17, 2005, by and between Interline Brands, Inc. and Charles Blackmon (incorporated by reference to Exhibit 10.20 to Interline Brands, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 2004).                      
|10.15 |  | Employment Agreement, dated as of August 13, 2004, by and between Interline Brands, Inc. and William E. Sanford (incorporated by reference to Exhibit 10.31 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).               
|10.16 |  | Employment Agreement, dated as of August 13, 2004, by and between Interline Brands, Inc. and Michael J. Grebe (incorporated by reference to Exhibit 10.32 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).                 
|10.17 |  | Employment Agreement, dated as of September 23, 2004 by and between Interline Brands, Inc. and William R. Pray (incorporated by reference to Exhibit 10.33 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).                
|10.18 |  | Amendment and Restated Employment Agreement, dated as of December 15, 2004, by and between Interline Brands, Inc. and William R. Pray (incorporated by reference to Exhibit 10.24 to Interline Brands, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 2004).                 
|10.19 |  | Amendment to Employment Agreement, dated September 27, 2004, by and between Interline Brands, Inc. and Fred Bravo (incorporated by reference to Exhibit 10.34 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).             
|10.20 |  | Amendment to Employment Agreement, dated September 27, 2004, by and between Interline Brands, Inc. and Laurence W. Howard (incorporated by reference to Exhibit 10.35 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).     
|10.21 |  | Amendment to Employment Agreement, dated as of September 27, 2004, by and between Interline Brands, Inc. and Pamela L. Maxwell (incorporated by reference to Exhibit 10.36 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).
|10.22 |  | Amendment to Employment Agreement, dated as of December 2, 2004, by and between Interline Brands, Inc. and Michael J. Grebe (incorporated by reference to Exhibit 10.37 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).   

53

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|10.23 |  | Amendment to Employment Agreement, dated as of December 2, 2004, by and between Interline Brands, Inc. and William E. Sanford (incorporated by reference to Exhibit 10.38 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).  
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.24 |  | Amendment to Employment Agreement, dated as of December 2, 2004, by and between Interline Brands, Inc. and Pamela L. Maxwell (incorporated by reference to Exhibit 10.37 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).   
|10.25 |  | Amendment to Employment Agreement, dated as of December 2, 2004, by and between Interline Brands, Inc. and Fred Bravo (incorporated by reference to Exhibit 10.40 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).          
|10.26 |  | Management Agreement, dated May 16, 2000, by and between Wilmar Industries, Inc. and Parthenon Capital, Inc. (incorporated by reference to Exhibit 10.41 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1
Registration Statement filed on December 14, 2004 (No. 333-116482)).                   
|10.27 |  | Amendment to Management Agreement, dated September 29, 2000, by and between Wilmar Industries, Inc. and Parthenon Capital, Inc. (incorporated by reference to Exhibit 10.42 to Interline Brands, Inc.'s Amendment No. 5 to
Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)).
|10.28 |  | Employment Agreement, dated May 12, 2004 between Interline Opco and Thomas J. Tossavainen (incorporated by reference to Exhibit 10.34 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 2004).                                                              
|10.29 |  | Amendment to Employment Agreement, dated November 10, 2004, between Interline Brands, Inc. and Thomas J. Tossavainen (incorporated by reference to Exhibit 10.35 to Interline Brands, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 2004).                                   
|10.30 |  | Employment Agreement, dated July 25, 2005, between Interline Opco and Thomas J. Tossavainen (incorporated by reference to Exhibit 10.55 of Interline Brands, Inc.'s Amendment No. 2 to Form S-1 filed on August 1, 2005
(No. 333-126515)).                                                              
|10.31 |  | Form of Executive Stock Option Agreement (incorporated by reference to Exhibit 10.43 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)
).                                                                                      
|10.32 |  | Form of Management Restricted Stock Agreement (incorporated by reference to Exhibit 10.44 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)
).                                                                                 
|10.33 |  | Form of Non-Employee Directors Option Agreement (incorporated by reference to Exhibit 10.45 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004 (No. 333-116482)
).                                                                               
|10.34 |  | Form of Non-Employee Directors Restricted Stock Agreement (incorporated by reference to Exhibit 10.46 to Interline Brands, Inc.'s Amendment No. 5 to Form S-1 Registration Statement filed on December 14, 2004
(No. 333-116482)).                                                                      

54

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|10.35 |  | Amendment, dated September 9, 2005, to Employment Agreement, dated as of December 15, 2004, between Interline Opco and William R. Pray (incorporated by reference to Exhibit 10.56 to Interline Brands, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.36 |  | Form of Deferred Stock Unit Agreement and Notice of Election for Non-employee Directors (incorporated by reference to Exhibit 10.36 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 30,
2005).                                               
|10.37 |  | 2004 Equity Incentive Plan (incorporated by reference to Appendix A to the Company's definitive proxy statement for its annual meeting of stockholders held on May 11, 2006, Commission File No. 1-32380).                                                                             
|10.38 |  | Executive Cash Incentive Plan (incorporated by reference to Appendix B to the Company's definitive proxy statement for its annual meeting of stockholders held on May 11, 2006, Commission File No. 1-32380).                                                                          
|10.39 |  | Form of stock option agreement (executive) (incorporated by reference to the Company's interim report filed on Form 8-K March 17, 2006).                                                                                                                                               
|10.40 |  | Form of stock option agreement (non-executive) (incorporated by reference to the Company's interim report filed on Form 8-K March 17, 2006).                                                                                                                                           
|10.41 |  | Form of restricted share unit agreement (incorporated by reference to the Company's interim report filed on Form 8-K March 17, 2006).                                                                                                                                                  
|10.42 |  | Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.42 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 29, 2006).                                                                                         
|10.43 |  | Amendment to the 2004 Incentive Plan (incorporated by reference to Exhibit 10.43 to Interline Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 29, 2006).                                                                                                  
|11.1  |  | Computation of earnings per share information included in Note 2 to the Consolidated Financial Statements (furnished herewith).                                                                                                                                                        
|21.1  |  | List of Subsidiaries of Interline Brands, Inc. (furnished herewith).                                                                                                                                                                                                                   
|23.1  |  | Consent of Deloitte & Touche LLP (furnished herewith).                                                                                                                                                                                                                                 
|31.1  |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (furnished herewith).                                                                                                   
|31.2  |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (furnished herewith).                                                                                                   
|32.1  |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).                                                                     
|32.2  |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).                                                                     

55

---





MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our evaluation, under the Internal ControlIntegrated Framework, our management concluded that our internal control over
financial reporting was effective as of December 28, 2007.

F-1

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Interline Brands, Inc.
Jacksonville, Florida

We
have audited the accompanying consolidated balance sheets of Interline Brands, Inc. and subsidiaries (the "Company") as of December 28, 2007 and December 29,
2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 28, 2007. We also have audited the
Company's internal control over financial reporting as of December 28, 2007, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

F-2

---



In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Interline Brands, Inc. and subsidiaries
as of December 28, 2007 and December 29, 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2007, in
conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 28, 2007, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

As
discussed in Note 2 to the consolidated financial statements, the Company adopted FASB Statement No. 123 (revised 2004), Share-Based Payment, on December 31,
2005. As discussed in Note 17 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48,Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109, on December 30, 2006.

/s/DELOITTE & TOUCHE LLP

---

Certified Public Accountants

Jacksonville,
Florida
February 26, 2008

F-3

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES    CONSOLIDATED BALANCE SHEETS    AS OF DECEMBER 28, 2007 AND DECEMBER 29, 2006    (in thousands, except share and per share data)

|                                                                                                                                           |                                                                                                                                                                                                      | December 28, 2007                          |         | December 29, 2006 |        
|------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -------
|ASSETS                                                                                                                                     |                                                                                                                                                                                                      |                                            |         |                   |        
|Current Assets:                                                                                                                            |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           | Cash and cash equivalents                                                                                                                                                                            |                                            | $       | 4,975             |        
|                                                                                                                                           | Short-term investments                                                                                                                                                                               |                                            |         | 48,540            |        
|                                                                                                                                           | Accounts receivabletrade (net of allowance for doubtful accounts of $7,268 and $10,224)                                                                                                             |                                            |         | 154,571           |        
|                                                                                                                                           | Inventory                                                                                                                                                                                            |                                            |         | 190,974           |        
|                                                                                                                                           | Prepaid expenses and other current assets                                                                                                                                                            |                                            |         | 23,664            |        
|                                                                                                                                           | Deferred income taxes                                                                                                                                                                                |                                            |         | 15,359            |        
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      | Total current assets                       |         |                   | 438,083
|Property and equipment, net                                                                                                                |                                                                                                                                                                                                      |                                            | 37,131  |                   |        
|Goodwill                                                                                                                                   |                                                                                                                                                                                                      |                                            | 313,462 |                   |        
|Other intangible assets, net                                                                                                               |                                                                                                                                                                                                      |                                            | 136,734 |                   |        
|Other assets                                                                                                                               |                                                                                                                                                                                                      |                                            | 11,424  |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      | Total assets                               |         | $                 | 936,834
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                       |                                                                                                                                                                                                      |                                            |         |                   |        
|Current Liabilities:                                                                                                                       |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           | Accounts payable                                                                                                                                                                                     |                                            | $       | 60,159            |        
|                                                                                                                                           | Accrued expenses and other current liabilities                                                                                                                                                       |                                            |         | 42,175            |        
|                                                                                                                                           | Accrued interest                                                                                                                                                                                     |                                            |         | 838               |        
|                                                                                                                                           | Income taxes payable                                                                                                                                                                                 |                                            |         | 1,173             |        
|                                                                                                                                           | Current portion of long-term debt                                                                                                                                                                    |                                            |         | 2,300             |        
|                                                                                                                                           | Capital leasecurrent                                                                                                                                                                                |                                            |         | 218               |        
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      | Total current liabilities                  |         |                   | 106,863
|Long-Term Liabilities:                                                                                                                     |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           | Deferred income taxes                                                                                                                                                                                |                                            |         | 33,351            |        
|                                                                                                                                           | Long-term debt, net of current portion                                                                                                                                                               |                                            |         | 416,290           |        
|                                                                                                                                           | Capital leaselong term                                                                                                                                                                              |                                            |         | 464               |        
|                                                                                                                                           | Other liabilities                                                                                                                                                                                    |                                            |         | 2,452             |        
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      | Total liabilities                          |         |                   | 559,420
|Commitments and contingencies                                                                                                              |                                                                                                                                                                                                      |                                            |         |                   |        
|Senior preferred stock; $0.01 par value, 20,000,000 shares authorized; no shares outstanding as of December 28, 2007 and December 29, 2006 |                                                                                                                                                                                                      |                                            |        |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|Stockholders' Equity:                                                                                                                      |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           | Common stock; $0.01 par value, 100,000,000 authorized; 32,350,188 issued and 32,308,105 outstanding as of December 28, 2007 and 32,308,221 issued and 32,284,069 outstanding as of December 29, 2006 |                                            |         | 324               |        
|                                                                                                                                           | Additional paid-in capital                                                                                                                                                                           |                                            |         | 567,860           |        
|                                                                                                                                           | Accumulated deficit                                                                                                                                                                                  |                                            |         | (191,666          | )      
|                                                                                                                                           | Accumulated other comprehensive income                                                                                                                                                               |                                            |         | 1,751             |        
|                                                                                                                                           | Treasury stock, at cost, 42,083 shares as of December 28, 2007 and 24,152 shares as of December 29, 2006                                                                                             |                                            |         | (855              | )      
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      | Total stockholders' equity                 |         |                   | 377,414
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        
|                                                                                                                                           |                                                                                                                                                                                                      | Total liabilities and stockholders' equity |         | $                 | 936,834
|                                                                                                                                           |                                                                                                                                                                                                      |                                            |         |                   |        

See accompanying notes to consolidated financial statements.

F-4

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF EARNINGS    YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005    (in thousands, except share and
per share data)

|                                     |                                              | 2007                    |           | 2006       |         | 2005      |           
|------------------------------------ | -------------------------------------------- | ----------------------- | --------- | ---------- | ------- | --------- | ----------
|Net sales                            |                                              | $                       | 1,239,027 |            | $       | 1,067,570 |           
|Cost of sales                        |                                              |                         | 765,137   |            |         | 658,698   |           
|                                     |                                              |                         |           |            |         |           |           
|                                     | Gross profit                                 |                         |           | 473,890    |         |           | 408,872   
|Operating Expenses:                  |                                              |                         |           |            |         |           |           
|                                     | Selling, general and administrative expenses |                         |           | 345,297    |         |           | 292,752   
|                                     | Depreciation and amortization                |                         |           | 14,499     |         |           | 14,427    
|                                     | Secondary offering costs                     |                         |           |           |         |           |          
|                                     |                                              |                         |           |            |         |           |           
|                                     |                                              | Total operating expense |           |            | 359,796 |           |           
|                                     |                                              |                         |           |            |         |           |           
|Operating income                     |                                              |                         | 114,094   |            |         | 101,693   |           
|Loss on extinguishment of debt       |                                              |                         |          |            |         | (20,843   | )         
|Interest expense                     |                                              |                         | (33,923   | )          |         | (31,367   | )         
|Interest and other income            |                                              |                         | 3,251     |            |         | 1,197     |           
|                                     |                                              |                         |           |            |         |           |           
|                                     | Income before income taxes                   |                         |           | 83,422     |         |           | 50,680    
|Income tax provision                 |                                              |                         | 32,460    |            |         | 19,495    |           
|                                     |                                              |                         |           |            |         |           |           
|Net income                           |                                              | $                       | 50,962    |            | $       | 31,185    |           
|                                     |                                              |                         |           |            |         |           |           
|Earnings Per Share:                  |                                              |                         |           |            |         |           |           
|                                     | Basic                                        |                         | $         | 1.58       |         | $         | 0.97      
|                                     |                                              |                         |           |            |         |           |           
|                                     | Diluted                                      |                         | $         | 1.56       |         | $         | 0.95      
|                                     |                                              |                         |           |            |         |           |           
|Weighted-Average Shares Outstanding: |                                              |                         |           |            |         |           |           
|                                     | Basic                                        |                         |           | 32,241,906 |         |           | 32,141,958
|                                     |                                              |                         |           |            |         |           |           
|                                     | Diluted                                      |                         |           | 32,703,430 |         |           | 32,748,400
|                                     |                                              |                         |           |            |         |           |           

See
accompanying notes to consolidated financial statements.

F-5

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY    YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005    (in thousands,
except share data)

|                             |                                                                           | Common Stock                                           |                            |   |     |   |   |         |        |   |          |      |        |       |   
|---------------------------- | ------------------------------------------------------------------------- | ------------------------------------------------------ | -------------------------- | - | --- | - | - | ------- | ------ | - | -------- | ---- | ------ | ----- | --
|
|
|Balance at December 31, 2004 |                                                                           | 32,102,820                                             |                            | $ | 321 |   | $ | 556,346 |        | $ | (301,836 | )    | $      | 855   |   
|                             | Offering costs                                                            |                                                        |                            |   |     |   |   |         | (165   | ) |          |      |        |       |   
|                             | Share-based compensation                                                  |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             | Issuance of restricted stock                                              |                                                        | 5,000                      |   |     |  |   |         | 96     |   |          |      |        |       |   
|                             | Issuance of common stock from exercise of stock options                   |                                                        | 112,849                    |   |     | 1 |   |         | 1,691  |   |          |      |        |       |   
|                             | Tax benefits on stock options exercised                                   |                                                        |                            |   |     |   |   |         | 215    |   |          |      |        |       |   
|                             | Comprehensive income:                                                     |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           | Net income                                             |                            |   |     |   |   |         |        |   |          |      | 28,799 |       |   
|                             |                                                                           | Foreign currency translation                           |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           |                                                        | Total comprehensive income |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|Balance at December 30, 2005 |                                                                           | 32,220,669                                             |                            |   | 322 |   |   | 558,183 |        |   | (273,037 | )    |        | 992   |   
|                             | Offering costs                                                            |                                                        |                            |   |     |   |   |         | (30    | ) |          |      |        |       |   
|                             | Reclassification to adopt FAS 123R                                        |                                                        |                            |   |     |   |   |         | (1,918 | ) |          |      |        |       |   
|                             | Share-based compensation                                                  |                                                        |                            |   |     |   |   |         | 3,847  |   |          |      |        |       |   
|                             | Issuance of restricted stock                                              |                                                        | 17,800                     |   |     |  |   |         |       |   |          |      |        |       |   
|                             | Issuance of common stock from exercise of stock options                   |                                                        | 69,752                     |   |     | 1 |   |         | 1,074  |   |          |      |        |       |   
|                             | Tax benefits on stock options exercised                                   |                                                        |                            |   |     |   |   |         | 284    |   |          |      |        |       |   
|                             | Tax benefits on other vested share- based payments                        |                                                        |                            |   |     |   |   |         | 194    |   |          |      |        |       |   
|                             | Repurchase of common stock                                                |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             | Adjustment to initially apply FAS 158                                     |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       | 90
|                             | Comprehensive income:                                                     |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           | Net income                                             |                            |   |     |   |   |         |        |   |          |      | 31,185 |       |   
|                             |                                                                           | Foreign currency translation                           |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           |                                                        | Total comprehensive income |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|Balance at December 29, 2006 |                                                                           | 32,308,221                                             |                            |   | 323 |   |   | 561,634 |        |   | (241,852 | )    |        | 1,072 |   
|                             | Share-based compensation                                                  |                                                        |                            |   |     |   |   |         | 5,377  |   |          |      |        |       |   
|                             | Issuance of restricted stock                                              |                                                        | 4,600                      |   |     |  |   |         |       |   |          |      |        |       |   
|                             | Issuance of common stock from exercise of stock options                   |                                                        | 37,367                     |   |     | 1 |   |         | 597    |   |          |      |        |       |   
|                             | Tax benefits on stock options exercised                                   |                                                        |                            |   |     |   |   |         | 128    |   |          |      |        |       |   
|                             | Tax benefits on other vested share- based payments                        |                                                        |                            |   |     |   |   |         | 124    |   |          |      |        |       |   
|                             | Repurchase of common stock                                                |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             | Cumulative impact of change in accounting for uncertainty in income taxes |                                                        |                            |   |     |   |   |         |        |   |          | (776 | )      |       |   
|                             | Comprehensive income:                                                     |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           | Net income                                             |                            |   |     |   |   |         |        |   |          |      | 50,962 |       |   
|                             |                                                                           | Amortization of unrecognized gain on employee benefits |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           | Foreign currency translation                           |                            |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           |                                                        | Total comprehensive income |   |     |   |   |         |        |   |          |      |        |       |   
|                             |                                                                           |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   
|Balance at December 28, 2007 |                                                                           | 32,350,188                                             |                            | $ | 324 |   | $ | 567,860 |        | $ | (191,666 | )    | $      | 1,751 |   
|                             |                                                                           |                                                        |                            |   |     |   |   |         |        |   |          |      |        |       |   

See accompanying notes to consolidated financial statements.

F-6

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005        (in
thousands)

|                                      |                                                                                         | 2007                                                               |                                           | 2006   |          | 2005    |       
|------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------- | ------ | -------- | ------- | ------
|Cash Flows from Operating Activities: |                                                                                         |                                                                    |                                           |        |          |         |       
|                                      | Net income                                                                              |                                                                    | $                                         | 50,962 |          | $       | 31,185
|                                      | Adjustments to reconcile net income to net cash provided by operating activities:       |                                                                    |                                           |        |          |         |       
|                                      |                                                                                         | Depreciation and amortization                                      |                                           |        | 15,114   |         |       
|                                      |                                                                                         | Amortization of debt issuance costs                                |                                           |        | 1,094    |         |       
|                                      |                                                                                         | Amortization of discount on 81/8% senior subordinated notes        |                                           |        | 135      |         |       
|                                      |                                                                                         | Write-off of debt issuance costs                                   |                                           |        |         |         |       
|                                      |                                                                                         | Tender and redemption premiums on 111/2% senior subordinated notes |                                           |        |         |         |       
|                                      |                                                                                         | Share-based compensation                                           |                                           |        | 5,377    |         |       
|                                      |                                                                                         | Deferred income taxes                                              |                                           |        | 516      |         |       
|                                      |                                                                                         | Provision for doubtful accounts                                    |                                           |        | 4,277    |         |       
|                                      |                                                                                         | Loss on disposal of property and equipment                         |                                           |        | 139      |         |       
|                                      |                                                                                         | Excess tax benefits from share-based compensation                  |                                           |        | (252     | )       |       
|                                      | Changes in assets and liabilities which provided (used) cash, net of business acquired: |                                                                    |                                           |        |          |         |       
|                                      |                                                                                         | Accounts receivabletrade                                          |                                           |        | (15,030  | )       |       
|                                      |                                                                                         | Inventory                                                          |                                           |        | 11,098   |         |       
|                                      |                                                                                         | Prepaid expenses and other current assets                          |                                           |        | (306     | )       |       
|                                      |                                                                                         | Other assets                                                       |                                           |        | (1,277   | )       |       
|                                      |                                                                                         | Accounts payable                                                   |                                           |        | (6,771   | )       |       
|                                      |                                                                                         | Accrued expenses and other current liabilities                     |                                           |        | (4,374   | )       |       
|                                      |                                                                                         | Accrued interest                                                   |                                           |        | (2,678   | )       |       
|                                      |                                                                                         | Income taxes payable                                               |                                           |        | (396     | )       |       
|                                      |                                                                                         | Other liabilities                                                  |                                           |        | 102      |         |       
|                                      |                                                                                         |                                                                    |                                           |        |          |         |       
|                                      |                                                                                         |                                                                    | Net cash provided by operating activities |        |          | 57,730  |       
|Cash Flows from Investing Activities: |                                                                                         |                                                                    |                                           |        |          |         |       
|                                      |                                                                                         | Purchase of property and equipment, net                            |                                           |        | (14,906  | )       |       
|                                      |                                                                                         | Purchase of short-term investments                                 |                                           |        | (168,962 | )       |       
|                                      |                                                                                         | Proceeds from sales and maturities of short-term investments       |                                           |        | 120,422  |         |       
|                                      |                                                                                         | Purchase of businesses, net of cash acquired                       |                                           |        | (765     | )       |       
|                                      |                                                                                         |                                                                    |                                           |        |          |         |       
|                                      |                                                                                         |                                                                    | Net cash used in investing activities     |        |          | (64,211 | )     

F-7

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

(in thousands)

|Cash Flows from Financing Activities:                        |                                                                               |                                                     |        |        |        |       |          |         |         |        
|------------------------------------------------------------ | ----------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ------ | ------ | ----- | -------- | ------- | ------- | -------
|                                                             | Increase in purchase card payable, net                                        |                                                     | $      | 6,579  |        | $     |         |         | $       |       
|                                                             | (Decrease) Increase in revolver, net                                          |                                                     |        |       |        |       | (3,000   | )       |         | 3,000  
|                                                             | Repayment of term debt                                                        |                                                     |        | (2,613 | )      |       | (160,008 | )       |         | (1,200 
|                                                             | Repayment of 111/2% senior subordinated notes                                 |                                                     |        |       |        |       | (130,000 | )       |         | (70,000
|                                                             | Payment of tender and redemption premiums on 111/2% senior subordinated notes |                                                     |        |       |        |       | (13,663  | )       |         | (8,050 
|                                                             | Proceeds from issuance of 81/8% senior subordinated notes, net of discount    |                                                     |        |       |        |       | 198,566  |         |         |       
|                                                             | Proceeds from issuance of term debt                                           |                                                     |        |       |        |       | 230,000  |         |         | 50,000 
|                                                             | Payment of debt issuance costs                                                |                                                     |        | (34    | )      |       | (9,724   | )       |         | (838   
|                                                             | Proceeds from stock options exercised                                         |                                                     |        | 564    |        |       | 1,046    |         |         | 1,693  
|                                                             | Excess tax benefits from share-based compensation                             |                                                     |        | 252    |        |       | 478      |         |         |       
|                                                             | Payments on capital lease obligations                                         |                                                     |        | (307   | )      |       | (439     | )       |         | (335   
|                                                             | Initial public offering costs                                                 |                                                     |        |       |        |       | (30      | )       |         | (665   
|                                                             | Proceeds from exercise of underwriters over-allotment options                 |                                                     |        |       |        |       |         |         |         | 2,333  
|                                                             |                                                                               |                                                     |        |        |        |       |         
|                                                             |                                                                               | Net cash provided by (used in) financing activities |        |        | 4,441  |       |          | 113,226 |         |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                               |                                                     | 163    |        |        | 20    |          |         | 137     |        
|                                                             |                                                                               |                                                     |        |        |        |       |         
|Net (decrease) increase in cash and cash equivalents         |                                                                               |                                                     | (1,877 | )      |        | 3,894 |          |         | (66,220 | )      
|Cash and cash equivalents at beginning of period             |                                                                               |                                                     | 6,852  |        |        | 2,958 |          |         | 69,178  |        
|                                                             |                                                                               |                                                     |        |        |        |       |         
|Cash and cash equivalents at end of period                   |                                                                               | $                                                   | 4,975  |        | $      | 6,852 |          | $       | 2,958   |        
|                                                             |                                                                               |                                                     |        |        |        |       |         
|Supplemental Disclosure of Cash Flow Information:            |                                                                               |                                                     |        |        |        |       |          |         |         |        
|                                                             | Cash paid during the period for:                                              |                                                     |        |        |        |       |          |         |         |        
|                                                             |                                                                               | Interest                                            |        | $      | 36,140 |       | $        | 29,232  |         | $      
|                                                             |                                                                               |                                                     |        |        |        |       |         
|                                                             |                                                                               | Income taxes, net of refunds                        |        | $      | 32,646 |       | $        | 21,101  |         | $      
|                                                             |                                                                               |                                                     |        |        |        |       |         
|Schedule of Non-Cash Investing and Financing Activities:     |                                                                               |                                                     |        |        |        |       |          |         |         |        
|                                                             | Adjustments to liabilities assumed and goodwill on businesses acquired        |                                                     | $      | 305    |        | $     | 1,535    |         | $       | 8,443  
|                                                             |                                                                               |                                                     |        |        |        |       |         
|                                                             | Treasury stock acquired with accrued expenses and other current liabilities   |                                                     | $      | 357    |        | $     | 498      |         | $       |       
|                                                             |                                                                               |                                                     |        |        |        |       |         

See
accompanying notes to consolidated financial statements.

F-8

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

1. DESCRIPTION OF THE BUSINESS AND BACKGROUND

Description of Business

Interline Brands, Inc., a Delaware corporation, and its subsidiaries ("Interline" or the "Company") is a direct marketer and specialty distributor of
maintenance, repair and operations, ("MRO") products. The Company sells plumbing, electrical, hardware, security, heating, ventilation and air conditioning, janitorial and sanitary and other MRO
products. Interline's highly diverse customer base consists of multi-family housing, educational, lodging, government and health care facilities, professional contractors and specialty distributors.

The
Company markets and sells its products primarily through ten distinct and targeted brands. The Company utilizes a variety of sales channels, including a direct sales force, telesales
representatives, a direct marketing program, brand-specific websites and a national accounts sales program. The Company delivers its products through its network of regional distribution centers and
professional contractor showrooms located throughout the United States and Canada, a national distribution center in Nashville, Tennessee, vendor managed inventory locations at large professional
contractor customer locations and its dedicated fleet of trucks. Through its broad distribution network, the Company provides same day/next day delivery service to 98% of the U.S. population.

Background

In December 2004, the Company completed its initial public offering (the "IPO"). Immediately prior to the closing of the IPO, a reincorporation merger occurred
and the Company became the holding company of the Interline group of businesses, including its principal operating subsidiary, Interline Brands, Inc., a New Jersey corporation ("Interline New
Jersey").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Interline Brands, Inc. and all of its wholly-owned subsidiaries. These statements have been
prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year

The Company operates on a 52-53 week fiscal year, which ends on the last Friday in December. The fiscal years ended December 28, 2007,
December 29, 2006 and December 30, 2005 were fifty-two week years. References herein to 2007, 2006 and 2005 are for the fiscal years ended December 28, 2007,
December 29, 2006 and December 30, 2005, respectively.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ from those estimates and assumptions.

F-9

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate fair value because of
the short maturities of these items. The carrying values of variable rate notes payable and long-term debt are reasonable estimates of their fair values. Estimated fair values of fixed
rate notes payable and long-term debt are determined by quoted market prices as the debt is publicly traded.

Foreign Currency Translation

Assets and liabilities of the Company's foreign subsidiary, where the functional currency is the local currency, are translated into United States dollars at the
year end exchange rate. The related translation adjustments are recorded as a component of other comprehensive income. Revenues and expenses are translated using average exchange rates prevailing
during the year.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less.

Short-Term Investments

The Company accounts for investments in accordance with FASB Statement No. 115,Accounting for Certain Investments in Debt and
Equity Securities, ("FAS 115"). The Company's short-term investments primarily include investments in high-grade tax exempt auction rate
securities and variable rate demand notes, which are debt instruments, such as municipal bonds, with long-term scheduled maturities and periodic interest rate reset dates. The interest
rates on these investments are typically reset to market prevailing rates every 35 days or less, and in some cases every 7 days or less. Due to the liquidity provided by the interest
rate reset mechanism and the
short-term nature of the Company's investment in these investments, they have been classified as current assets. The Company's short-term investments are classified as
available-for-sale and the carrying value approximates the fair value. Changes in the fair value, if any, are included in accumulated other comprehensive income, net of
applicable taxes. As of December 28, 2007, there were no unrealized gains and loses associated with these investments. During 2007, all income generated from short-term investments
was recorded as interest income.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of accounts receivable. The Company's accounts
receivable are principally from facilities maintenance, professional contractor and specialty distributor customers in the United States and Canada. Concentration of credit risk with respect to
accounts receivable, however, is limited due to the large number of customers comprising the Company's customer base. The Company performs credit evaluations of its customers; however, the Company's
policy is not to require collateral. As of December 28, 2007 and December 29, 2006, the Company had no significant concentrations of credit risk.

F-10

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventories

Inventories, consisting substantially of finished goods, are valued at the lower of cost or market. Inventory cost is determined using the weighted-average cost
method. The Company adjusts inventory for excess and obsolete inventory and for the difference by which the cost of the inventory exceeds the estimated market value. In order to determine the
adjustments, management reviews inventory quantities on hand, slow movement reports and sales history reports. Management estimates the required adjustment based on estimated demand for products and
market conditions. To the extent historical results are not indicative of future results and if events occur that affect the Company's relationships with suppliers or the salability of their products,
additional write-offs may be needed that will increase cost of sales and decrease inventory.

Vendor Rebates

The Company accounts for vendor rebates in accordance with the Emerging Issues Task Force ("EITF") Issue No. 02-16, Accounting by a Customer (Including a
Reseller) for Certain Consideration Received from a Vendor, ("EITF 02-16"). Many of the
Company's arrangements with its vendors provide for the Company to receive a rebate of a specified amount of consideration, payable to the Company when the Company achieves any of a number of
measures, generally related to the volume level of purchases from its vendors. The Company accounts for such rebates as a reduction of the prices of the vendor's products and therefore as a reduction
of inventory until it sells the product, at which time such rebates reduce cost of sales in the Company's statement of operations. Throughout the year, the Company estimates the amount of the rebate
earned based on estimated purchases to date relative to the purchase levels that mark the Company's progress toward earning the rebates. The Company continually revises these estimates to reflect
actual rebates earned based on actual purchase levels.

Property and Equipment

Property and equipment purchased in the normal course of business is stated at cost, net of accumulated depreciation and amortization. Expenditures for additions,
renewals and betterments are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Property and equipment acquired in connection with acquisitions are recorded at
amounts which approximate fair market value as of the date of the acquisition. Upon the retirement or disposal of assets, the cost and accumulated depreciation or amortization is eliminated from the
accounts and the resulting gain or loss is credited or charged to operations. Leasehold improvements and assets under capital leases are amortized, using the straight-line method, over the
lesser of the estimated useful lives or the term of the lease.

Depreciation
and amortization, including assets under capital leases, is computed using the straight-line method based upon estimated useful lives of the assets as follows:

Buildings

39-40 yearsMachinery and equipment

5-7 yearsOffice furniture and equipment

5-7 yearsVehicles

5 yearsLeasehold improvements

1-10 years


F-11

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Costs of Computer Software Developed or Obtained for Internal Use

The Company capitalizes costs related to internally developed software in accordance with Statement of Position ("SOP") No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, ("SOP 98-1"). Only costs incurred during the
development stage, including design, coding, installation and testing are capitalized. These capitalized costs primarily represent internal labor costs for employees directly associated with the
software development. Upgrades or modifications that result in additional functionality are capitalized. Capitalized costs were $1.8 million, $0.8 million and $1.0 million for
2007, 2006 and 2005, respectively. As of December 28, 2007 and December 29, 2006, there was $4.3 million and $3.3 million, respectively, of unamortized capitalized software
costs. During 2007, 2006 and 2005, amortization expense associated with capitalized software costs was $1.4 million, $0.9 million and $0.6 million, respectively.

Goodwill

Goodwill represents the excess of the costs of acquired companies over the fair value of their net tangible assets. In accordance with Financial Accounting
Standards Board ("FASB") Statement No. 142,Goodwill and Other Intangible Assets, ("FAS 142") the Company does not amortize goodwill but
is required to annually evaluate goodwill for impairment. Goodwill is tested for impairment at least annually, or whenever events of changes in circumstances indicate that the carrying amount may not
be recoverable. The Company has elected to perform its annual goodwill impairment test as of the last day of each year. No impairment was identified as a result of its impairment test for any year
presented.

Other Intangible Assets

Other intangible assets include amounts assigned to trademarks, customer lists, non-compete agreements and deferred debt issuance costs. Other
intangibles are
amortized on a straight-line basis over their useful lives, 13 to 20 years for customer lists and 5 to 10 years for non-compete agreements. Deferred debt issuance
costs are amortized as a component of interest expense over the term of the related debt using the effective interest method or a method that approximates the effective interest method. Effective
September 30, 2006, the Company determined that its trademarks had indefinite lives and discontinued the amortization of its trademarks. The Company has elected to perform its annual impairment
test on long-lived assets as of the last day of each year. No impairment was identified as a result of its impairment test for any year presented.

Impairment of Long-Lived Assets

The Company evaluates its intangible assets for impairment on an annual basis or when an event occurs or circumstances change that would indicate that the fair
value of the intangible asset has reduced below its carrying amount. Such evaluations include an assessment of customer retention, cash flow projections and other factors the Company believes are
relevant. The discounted future expected net cash flows of each identifiable asset are used to measure impairment losses. The Company has not identified any impairment losses with respect to
long-lived assets for any year presented.

Risk Insurance

The Company has a $0.3 million self-insured retention per occurrence in connection with its workers' compensation policy ("Risk Insurance").
The Company accrues its estimated cost in

F-12

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

connection
with its portion of its Risk Insurance losses using an actuarial methodology based on claims filed, historical development factors and an estimate of claims incurred but not yet reported.
The Company does not discount its workers compensation reserve. Claims paid are charged against the reserve.

Taxes Collected and Remitted

The Company records non-income taxes collected from customers and remitted to governmental agencies on a net basis.

Revenue Recognition

The Company recognizes revenue in accordance with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition
in Financial Statements, ("SAB 101") as amended by SAB No. 104,Revenue Recognition, corrected
copy, ("SAB 104"). The SEC requires that the following four basic criteria must be met before the Company recognizes revenue:



The
Company recognizes a sale when the risk of loss has passed to the customer. For goods shipped by third party carriers, the Company recognizes revenue upon shipment since the terms
are generally FOB shipping point. For goods delivered on the Company's dedicated fleet of trucks, the Company recognizes revenue upon delivery to the customer. Sales are recorded net of estimated
discounts, rebates and returns. A portion of the Company's sales are delivered direct from the suppliers. These direct-shipment sales are recorded on a gross basis, with the corresponding cost of
goods sold, in accordance with the guidance in EITF Issue No. 99-19,Reporting Revenues Gross as a Principal verses Net as an Agent,
("EITF 99-19"). The Company bills some shipping and handling costs to its customers and has included this amount in revenue. The Company provides product return and protection
rights to certain customers. A provision is made for estimated product returns based on sales volumes and our experience. Actual returns have not varied materially from amounts provided historically.

Cost of Sales

Cost of sales includes merchandise costs less vendor rebates, freight-in and operating costs related to the Company's National Distribution Center.

Shipping and Handling Costs

Shipping and handling costs have been included in selling, general and administrative expenses on the consolidated statements of operations. Shipping and handling
costs were $58.9 million, $52.0 million, and $40.6 million in 2007, 2006 and 2005, respectively.

F-13

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising Costs

Costs of producing and distributing sales catalogs and promotional flyers are capitalized and charged to expense over the life of the related catalog and
promotional flyers. Advertising expenses, net of co-op advertising, were $3.1 million, $3.8 million, and $2.7 million in 2007, 2006 and 2005, respectively.
Co-op advertising was $2.5 million in 2007 and $2.3 million in 2006 and 2005.

Share-Based Compensation

Effective December 31, 2005, the Company adopted the provisions of FASB Statement No. 123 (revised 2004),Share-Based
Payment, ("FAS 123R") using the modified prospective application transition method. Under this method, the share-based compensation cost recognized beginning
December 31, 2005 includes compensation cost for (1) all share-based payments granted prior to, but not vested as of December 31, 2005, based on the grant date fair value
originally estimated in accordance with the provisions of FASB Statement No. 123,Accounting for Stock-Based Compensation, ("FAS 123") and
(2) all share-based payments granted subsequent to December 30, 2005, based on the grant date fair value estimated in accordance with the provisions of FAS 123R. Compensation cost
under FAS 123R is recognized ratably using the straight-line attribution method over the expected vesting period or to the retirement eligibility date, if less than the vesting
period when vesting is not contingent
upon any future performance. In addition, pursuant to FAS 123R, the Company is required to estimate the amount of expected forfeitures when calculating the compensation costs, instead of
accounting for forfeitures as incurred, which was the method previously used by the Company. As of December 31, 2005, the cumulative effect of adopting the estimated forfeiture method was not
significant. Prior periods are not restated under this transition method.

FAS 123R
also requires the Company to reflect the tax benefit from the exercise of stock options in the statement of cash flows as a cash inflow from financing activities and as a
cash outflow from operating activities. Prior to the adoption of FAS 123R, these tax benefits have been reflected as a cash inflow from operating activities. The prior years' statements of cash
flows have not been restated. The tax benefit from the exercise of stock options was $0.1 million, $0.3 million and $0.2 million in 2007, 2006 and 2005, respectively.

Prior
to December 31, 2005, the Company accounted for share-based compensation plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25,Accounting for Stock Issued to Employees, ("APB 25") as permitted by FAS 123. The Company elected to use the intrinsic
value method of accounting for employee and director share-based compensation expense for its nonqualified employee and director stock option awards and did not recognize compensation expense for the
issuance of options with an exercise price equal to or greater than the market price of the underlying common stock at the date of grant. Had the Company elected to adopt the fair value approach as
prescribed by FAS 123, which charges earnings for the estimated fair value of stock

F-14

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

options,
the pro forma net income and pro forma earnings per share for 2005 would have been as follows (in thousands, except per share amounts):

Net income as reported

$
28,799Add: Share-based compensation expense included in reported net income, net of related tax effects


589Deduct: Total share-based compensation expense determined under the fair value-based method for all awards, net of related tax effects


(734
)Pro forma net income


28,654Earnings per share:Basic-as reported

$
0.90Basic-pro forma

$
0.90Diluted-as reported

$
0.89Diluted-pro forma

$
0.88


As
a result of adopting FAS 123R on December 31, 2005, the Company's income before income taxes and net income for 2006, are $0.9 million and $0.6 million
lower, respectively, than if the Company had continued to account for share-based compensation under APB 25. Basic and diluted earnings per share are $0.02 lower for 2006 than if the Company
had continued to account for share-based compensation under APB 25.

The
total share-based compensation expense, which is included in the consolidated statement of earnings, was $5.4 million, $3.8 million and $1.0 million for 2007,
2006 and 2005, respectively. See Note 13. Share-Based Compensation for more information.

Income Taxes

Taxes on income are provided using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and
liabilities are computed for differences between the financial statement carrying values and the tax bases of assets and liabilities that will result in taxable or deductible amounts in the future.
Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for uncertainty in income taxes in accordance with FASB
Interpretation No. 48,Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109,
("FIN 48"). See Note 17. Income Taxes for more information.

Earnings per Share

Earnings per share for all years has been computed in accordance with FASB Statement No. 128,Earnings per
Share, ("FAS 128"). Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the year. Diluted
earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the
year as adjusted for the potential dilutive effect of stock options and non-vested shares of restricted stock, restricted share units and deferred stock units using the treasury stock
method.

F-15

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
following summarizes the shares of common stock used to calculate earnings per share including the potentially dilutive impact of stock options, restricted stock, restricted stock
units and deferred stock units, calculated using the treasury stock method, as included in the calculation of diluted weighted-average shares:

Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005Weighted average shares outstandingbasic

32,241,906

32,141,958

32,004,007Dilutive shares resulting from:Stock options

358,561

497,042

363,937Restricted stock

17,991

48,959

75,828Restricted stock units

73,946

59,199

Deferred stock uits

11,026

1,242

Weighted average shares outstandingdiluted

32,703,430

32,748,400

32,443,772


During
2007, 2006 and 2005, options to purchase 1,022,405 shares, 266,788 shares and 452,942 shares of common stock, respectively, were excluded from the computations of diluted
weighted-average shares outstanding because the exercise prices of those options are greater than the average market value of common stock and the effect would be anti-dilutive.

Segment Information

In accordance with FASB Statement No.131,Disclosure about Segments of an Enterprise and Related Information,
("FAS 131"), the Company has two operating segments: Interline Brands and AmSan. These segments are aggregated into one reportable segment, the distribution of MRO products, because they
possess similar economic characteristics and have common products, customers and methods of distribution. During 2007, the Company began to integrate AmSan's operations onto the Company's information
systems platform. The Company's net sales by product category were as follows (in thousands):

Year EndedProduct Category

December 28,
2007

December 29,
2006

December 30,
2005Plumbing

$
380,522

$
378,512

$
358,670Janitorial and sanitary


283,416


149,632


21,072Electrical and lighting


129,019


127,511


120,198Heating, ventilation and air conditioning


119,416


123,568


101,519Appliances and parts


72,312


59,548


51,093Security


62,247


56,262


54,076Hardware and tools


56,748


51,075


49,875Other


135,347


121,462


95,425Total

$
1,239,027

$
1,067,570

$
851,928


The
Company's revenues and assets outside the United States are not significant.

F-16

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements

In September 2006, the FASB issued FASB Statement No. 157,Fair Value Measurements, ("FAS 157").
FAS 157 defines fair value, establishes a framework for measuring fair value with accounting principles generally accepted in the United States of America and expands disclosures about fair
value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements. Accordingly, FAS 157 does not require any new fair value
measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007 with early adoption permitted. The Company is currently evaluating the impact that adoption of
FAS 157 will have on its financial position, results of operations and cash flows.

In
February 2007, the FASB issued FASB Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities,
("FAS 159"). FAS 159 permits an entity to irrevocably elect fair value on a contract-by-contract basis as the initial and subsequent measurement attribute for
many financial assets and liabilities and certain other items including property and casualty insurance contracts. Entities electing the fair value option would be required to recognize changes in
fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. Entities electing the fair value option are required to distinguish on
the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another
measurement attribute. An entity can accomplish this by either reporting the fair value and non-fair-value carrying amounts as separate line items or aggregate those amounts
and disclose parenthetically the amount of fair value included in the aggregate amount. FAS 159 is effective for fiscal years beginning after November 15, 2007. Upon adoption, an entity
is permitted to elect the fair value option irrevocably for any existing asset or liability within the scope of the standard. The adjustment to reflect the difference between the fair value and the
carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. Retrospective application would not be permitted. The Company is
currently evaluating the impact that adoption of FAS 159 will have on its financial position, results of operations and cash flows. Currently, the Company does not intend to apply the
provisions of FAS 159 to any of its existing financial assets or liabilities.

In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007),Business Combinations, ("FAS 141R"), which replaces
FASB Statement No. 141,Business Combinations, ("FAS 141"). FAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. FAS 141R
also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of the business combination. FAS 141R is effective for fiscal years beginning after
December 15, 2008 with early adoption prohibited. The Company is currently evaluating the impact that adoption of FAS 141R will have on its financial position, results of operations and
cash flows.

In
December 2007, the FASB issued FASB Statement No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51, ("FAS 160"). FAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the

F-17

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

parent,
the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest, and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. FAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. FAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will
affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. FAS 160 is effective for fiscal years beginning after
December 15, 2008 with early adoption prohibited. The Company is currently evaluating the impact that adoption of FAS 160 will have on its financial position, results of operations and
cash flows.

3. ACQUISITION

AmSan LLC

On July 3, 2006, Interline New Jersey acquired all of the outstanding equity interests of AmSan LLC ("AmSan") from American Sanitary Incorporated
for $133.8 million in cash, including cash acquired of $2.2 million and transaction fees of $3.0 million. AmSan is a leading national distributor of janitorial and sanitary
supplies. The acquisition was funded with the $130.0 million delayed draw facility under Interline New Jersey's new bank credit facility (see Note 10. Debt) and accounted for in
accordance with FASB Statement No. 141,Business Combinations("FAS 141").

AmSan,
one of the largest national distributors in the U.S. janitorial and sanitary maintenance supply industry, offers over 40,000 products from 43 locations to approximately 40,000
customers in 39 states. AmSan's primary end markets are institutional facilities, such as schools and universities, health care sites, lodging and government properties and building service
contractors. This acquisition represents an expansion of the Company's MRO product offering and institutional facilities maintenance business.

The
following table summarizes the allocation of the purchase price to the AmSan assets acquired and liabilities assumed at estimated fair values (in thousands):

Current assets

$
54,181Property and equipment


2,983Goodwill


66,264Intangible assets


43,600Other assets


631Total assets acquired


167,659Current liabilities


32,603Other liabilities


1,255Total liabilities assumed


33,858Net assets acquired

$
133,801


F-18

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

3. ACQUISITION (Continued)

As
a result of its integration plan, the Company accrued, as part of the purchase price, $2.0 million in employee severance and relocation costs and $3.9 million in
facility closing and other costs associated with the AmSan acquisition.

This
acquisition was treated as a purchase and sale of assets for federal income tax purposes. Accordingly, of the $66.3 million of goodwill, $62.7 million is expected to
be deductible for tax purposes.

Of
the $43.6 million of acquired intangible assets, $19.4 million was assigned to registered trademarks that are not subject to amortization as the Company believes these
intangible assets have indefinite lives. The remaining $24.2 million of acquired intangible assets consists of customer relationships and have a weighted-average useful life of approximately
16 years.

The
results of AmSan have been included in the condensed consolidated financial statements since July 3, 2006. The following unaudited pro forma financial information reflects the
AmSan acquisition as if it had occurred on December 31, 2005 and January 1, 2005, respectively, after giving effect to certain adjustments including amortization of other intangible
assets and interest expense (in thousands, except per share data):

Year EndedDecember 29,
2006

December 30,
2005Revenues

$
1,201,262

$
1,111,961Net income

$
33,634

$
31,940Earnings Per Share:Basic

$
1.05

$
1.00Diluted

$
1.03

$
0.98


The
pro forma financial information does not purport to represent what the Company's actual results of operations would have been had the acquisition occurred as of December 31,
2005 and January 1, 2005, respectively, and may not be indicative of operating results for any future periods.

F-19

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

3. ACQUISITION (Continued)

Acquisition Reserves

The following table summarizes the changes to reserves assumed in connection with the Company's business combinations (in thousands):

Employee
Severance and
Relocation

Facility
Closing and
Other Costs

TotalBalance at December 30, 2005

$
630

$
4,778

$
5,408Payments


(1,221
)

(337
)

(1,558
)Write-offs


(76
)

(1,811
)

(1,887
)Additions to reserve


1,760


2,691


4,451Balance at December 29, 2006


1,093


5,321


6,414Payments


(1,073
)

(471
)

(1,544
)Write-offs





(1,925
)

(1,925
)Additions to reserve


248


1,252


1,500Balance at December 28, 2007

$
268

$
4,177

$
4,445


F-20

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

4. ACCOUNTS RECEIVABLE

The Company's trade receivables are exposed to credit risk. The majority of the market served by the Company is comprised of numerous individual accounts, none of
which is individually significant. The Company monitors the creditworthiness of its customers on an ongoing basis and provides a reserve for estimated bad debt losses. The activity in the allowance
for doubtful accounts consisted of the following (in thousands):

|Year Ended           |  | Balance at
Beginning
of Year |        | Charged to
Expense |   | Deductions(1) |  | Balance at
End of
Year
|-------------------- |  | ---------------------------- | ------ | ------------------ | - | ------------- |  | ----------------------
|December 30, 2005    |  | $                            | 6,929  |                    | $ | 2,828         |  | $                     
|December 29, 2006    |  | $                            | 8,150  |                    | $ | 3,443         |  | $                     
|December 28, 2007(2) |  | $                            | 10,224 |                    | $ | 4,277         |  | $                     

---

5. SHORT-TERM INVESTMENTS

Short-term investments consisted of the following as of December 28, 2007 (in thousands):

December 28,
2007Auction rate securities

$
32,575Variable rate demand notes


15,965$
48,540


The
Company's short-term investments primarily include investments in high-grade tax exempt auction rate securities and variable rate demand notes, which are debt
instruments, such as municipal bonds, with long-term scheduled maturities and periodic interest rate reset dates. The Company's intent and ability is not to hold these investments to their
underlying maturities, but to sell these investments

F-21

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

5. SHORT-TERM INVESTMENTS (Continued)

to
provide liquidity as needed. The following summarizes the contractual underlying maturities of the Company's short-term investments (in thousands):

December 28,
2007Due in less than fifteen years

$
2,000Due between fifteen and twenty years


17,015Due between twenty and twenty-five years


3,900Due between twenty-five and thirty years


20,525Due after thirty years


5,100$
48,540


6. PREPAID EXPENSES

Prepaid expenses and other current assets consisted of the following as of December 28, 2007 and December 29, 2006 (in thousands):

December 28,
2007

December 29,
2006Vendor rebates receivable

$
16,556

$
14,703Prepaid insurance


1,997


2,761Other


5,111


5,451$
23,664

$
22,915


7. PROPERTY AND EQUIPMENT

Major classifications of property and equipment as of December 28, 2007 and December 29, 2006 are as follows (in thousands):

December 28,
2007

December 29,
2006Land

$
400

$
400Building


9,258


9,258Machinery and equipment


68,972


59,762Office furniture and equipment


7,105


6,772Vehicles


1,509


1,150Leasehold improvements


10,170


8,096Construction in progress


1,982


5699,396


85,494Less: Accumulated depreciation and amortization


(62,265
)

(53,740
)$
37,131

$
31,754


F-22

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

7. PROPERTY AND EQUIPMENT (Continued)

Depreciation
and amortization expense, including for assets under capital leases, was $9.5 million, $8.7 million, and $8.5 million for 2007, 2006 and 2005,
respectively.

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes to goodwill during 2007 and 2006 were as follows (in thousands):

Balance at December 30, 2005

$
249,574Acquired goodwill


65,003Purchase price adjustments


(1,500
)Balance at December 29, 2006


313,077Acquired goodwill


690Purchase price adjustments


(305
)Balance at December 28, 2007

$
313,462


The
acquired goodwill during 2006 and 2007 relate to the Company's July 2006 acquisition of AmSan. This is discussed in further detail in Note 3. Acquisition.

Purchase
price adjustments during 2006 relate primarily to the write-off of unused acquisition accruals created for the estimated loss on property and equipment associated
with the Barnett, Inc., Florida Lighting, Inc. and CCS Enterprises, Inc. ("Copperfield") acquisitions as well as the adjustment to deferred taxes associated with the final
valuation of Copperfield.

Purchase
price adjustments during 2007 relate primarily to the write-off of unused acquisition accruals created for the estimated losses on lease abandonments and facility
consolidations associated with the Barnett, Inc., Florida Lighting, Inc., Copperfield and AmSan acquisitions offset by the related adjustments to deferred taxes for these
write-offs.

F-23

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

8. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

The
gross carrying amount and accumulated amortization of the Company's intangible assets other than goodwill as of December 28, 2007 and December 29, 2006 were as follows
(in thousands):

December 28, 2007

Gross
Carrying
Amount

Accumulated
Amortization

Net Book
ValueCustomer lists

$
49,362

$
16,733

$
32,629Customer relationships


45,200


4,850


40,350Trademarks


61,121


5,568


55,553Non-compete agreements


2,616


2,384


232Deferred debt issuance costs


9,615


1,645


7,970Total

$
167,914

$
31,180

$
136,734


December 29, 2006Customer lists

$
49,362

$
13,898

$
35,464Customer relationships


45,200


2,288


42,912Trademarks


61,121


5,568


55,553Non-compete agreements


2,616


2,135


481Deferred debt issuance costs


9,581


551


9,030Total

$
167,880

$
24,440

$
143,440


The
amortization of deferred debt issuance costs, recorded as a component of interest expense, was $1.1 million, $1.4 million, and $1.6 million in 2007, 2006 and
2005, respectively. The write-off of deferred debt issuance costs were $7.2 million and $2.3 million in 2006 and 2005, respectively. The Company did not write-off
any deferred debt issuance costs during 2007.

F-24

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

8. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)

Amortization expense on other intangible assets was $5.6 million, $5.7 million, and $4.5 million for 2007, 2006 and 2005, respectively.
Expected amortization expense on other intangible assets (excluding deferred debt issuance costs which will vary depending upon debt payments) for each of the five succeeding fiscal years is expected
to be as follows (in thousands):

Fiscal Year

Future
Estimated
Amortization2008

$
5,6302009

$
5,3972010

$
5,3972011

$
5,3972012

$
5,397


Change in Estimate

During the quarter ended December 29, 2006, in accordance with FAS 142, the Company evaluated the remaining useful lives of its intangible assets
that are being amortized to determine whether a revision to the remaining period of amortization was appropriate. As a result of its evaluation, effective September 30, 2006, the Company
changed the estimated useful life of the trademarks acquired in the
acquisitions of Sexauer, Inc., Barnett. Inc., Florida Lighting, Inc. and Copperfield from 40 years to indefinite. Accordingly, the Company will no longer amortize its
trademarks. Instead, in accordance with FAS 142, the Company will test its trademarks for impairment annually, or more frequently if events or changes in circumstances indicate that the
trademarks might be impaired. The effect of this change in the estimated remaining useful life was a decrease in amortization expense of $0.3 million during the year ended December 29,
2006 with no material impact on net income or earnings per share.

9. ACCRUED LIABILITIES

Accrued expenses and other current liabilities consisted of the following as of December 28, 2007 and December 29, 2006 (in thousands):

December 28,
2007

December 29,
2006Accrued compensation and benefits

$
13,703

$
15,879Purchase card payable(1)


7,223


Acquisition reserves


4,445


6,414Accrued sales tax


3,841


3,488Accrued freight


2,813


3,020Other


10,150


9,921$
42,175

$
38,722




F-25

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

9. ACCRUED LIABILITIES (Continued)



10. DEBT

Long-term debt consisted of the following as of December 28, 2007 and December 29, 2006 (in thousands):

December 28,
2007

December 29,
2006Term loans

$
216,550

$
218,850Notes payable


3,275


3,58781/8% senior subordinated notes, net of unamortized discount of $1,235


198,765


198,629418,590


421,066Less: Current portion


(2,300
)

(2,416
)$
416,290

$
418,650


In
April 2003, Interline New Jersey issued a non-recourse note payable in the principal amount of $3.3 million for the purchase of an investment. This note, which is
secured only by the investment, bears interest at a rate of 4.0% per annum, with principal due in full in April 2010.

In
May 2003, Interline New Jersey completed an offering of $200.0 million of 111/2% senior subordinated notes due 2011 and entered into a $205.0 million
senior secured credit facility.

On
December 20, 2004, Interline New Jersey elected to redeem $70.0 million of the 111/2% senior subordinated notes using proceeds from the Company's IPO and
gave the 30-day notice required by the indenture. In January 2005, the Company recorded a loss on extinguishment of debt of $10.3 million, consisting of the write-off of
deferred financing costs of $2.3 million and the redemption premium of $8.1 million on the $70.0 million redemption of 111/2% senior subordinated notes. On
June 23, 2006, Interline New Jersey repurchased the remaining $130.0 million of 111/2% senior subordinated notes as part of the refinancing transactions described below.

In
December 2004, Interline New Jersey amended its term loan facility and revolving loan facility. The term loan was reduced to $100.0 million from $140.0 million and the
revolving loan facility was increased to $100.0 million from $65.0 million. As part of the amendment in December 2004, Interline New Jersey paid down $31.3 million of the term
loan using proceeds from the Company's IPO. Interline New Jersey also amended its credit facility on July 7, 2005, in connection with the acquisition of Copperfield, to permit the incurrence of
an additional $50.0 million term loan, having substantially the same terms as the existing term loan. On August 8, 2005, Interline New Jersey again amended its credit facility to lower
the interest rate spreads applicable to the additional $50.0 million term loan. The amended credit facility provided for aggregate commitments of $250.0 million, consisting of
(1) a

F-26

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

10. DEBT (Continued)

revolving
loan facility of $100.0 million, of which a portion not exceeding $20.0 million was available in the form of letters of credit, and (2) a term loan facility of
$150.0 million.

Borrowings
under the amended term loan facility and revolving loan facility bore interest, at Interline New Jersey's option, at either LIBOR or at the alternate base rate plus a spread.
The indebtedness under the amended credit facility was guaranteed by the Company and by the domestic subsidiaries of Interline New Jersey. Interest rates in effect on borrowings under the term loan
facilities at June 23, 2006, the date such borrowings were paid off, ranged from 7.72% for LIBOR based borrowings and 9.25% for prime based borrowings under the $100.0 million
tranche B-1 term loan and 7.22% for LIBOR based borrowings and 9.00% for prime based borrowings under the $50.0 million tranche B-2 term loan. Outstanding
letters of credit under the revolving loan facility were subject to a per annum fee equal to the applicable spread over the adjusted LIBOR for revolving loans. The term loan facility was due to mature
on December 31, 2010 and the revolving loan facility was due to mature on May 31, 2008. Debt issuance costs capitalized in connection with the amended credit facility were
$1.1 million. On June 23, 2006, Interline New Jersey paid off the term loan facility as part of the refinancing transactions described below.

In
June 2006, Interline New Jersey completed a series of refinancing transactions consisting of (1) an offering of $200.0 million of 81/8% senior
subordinated notes due 2014 and (2) entering into a $330.0 million bank credit facility. The new bank credit facility consists of a $100.0 million 7-year term loan, a
$130.0 million 7-year delayed draw term loan and a $100.0 million 6-year revolving credit facility of which a portion not exceeding $40.0 million is
available in the form of letters of credit. The delayed draw term loan was available solely to fund the acquisition of substantially all of the assets of American Sanitary Incorporated and the
acquisition-related fees and expenses (see Note 3. Acquisition). The proceeds from the 81/8% senior subordinated notes and the new bank credit facility were used to repurchase
the 111/2% senior subordinated notes and to repay the indebtedness under the prior credit facility. The 111/2% senior subordinated notes were repurchased at a price equal
to 110.51% of their principal amount.

In
connection with the repurchase of the 111/2% senior subordinated notes and the repayment of the prior credit facility, Interline New Jersey recorded a loss on early
extinguishment of debt of $20.7 million. The loss was comprised of $13.7 million in tender premiums associated with the repurchase of the 111/2% senior subordinated notes
and a non-cash charge of $7.0 million in deferred financing costs associated with the repurchase of the 111/2% senior subordinated notes and the repayment of the
prior credit facility.

The
81/8% senior subordinated notes were priced at 99.3%, or $198.6 million, of their principal amount, representing a yield to maturity of 81/4%.
The discount of $1.4 million is being amortized over the term of the 81/8% senior subordinated notes. The amortization of the discount, recorded as a component of interest
expense, was $0.1 million and $0.1 million in 2007 and 2006, respectively. The 81/8% senior subordinated notes mature on June 15, 2014 and interest is payable on
June 15 and December 15 of each year beginning on December 15, 2006. Debt issuance costs capitalized in connection with the 81/8% senior subordinated notes were
$5.8 million. As of December 28, 2007 and December 29, 2006, the 81/8% senior subordinated notes had a fair market value of $198.0 million, or 99% of par,
and $205.5 million, or 102.75% of par, respectively.

F-27

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

10. DEBT (Continued)

Borrowings
under the new term loan, the delayed draw facility and the new revolving credit facility bear interest, at Interline New Jersey's option, at either LIBOR plus 1.75% or at the
alternate base rate, which is the greater of the Prime Rate or the Federal Funds Effective Rate plus 0.50%, plus 0.75%. As of December 28, 2007, the interest rate in effect with respect to the
new term loan and the delayed draw facility was 6.60% for the LIBOR option and 8.00% for the alternate base rate option. Outstanding letters of credit under the new revolving credit facility are
subject to a per annum fee equal to the applicable margin under the new revolving credit facility. The interest rate margin is subject to pricing adjustments at the end of each fiscal quarter based on
net total indebtedness to consolidated EBITDA. The new term loan and the delayed draw facility mature on June 23, 2013 and the revolving loan facility matures on June 23, 2012. Amounts
under the new term loan and the delayed draw facility are due and payable in quarterly installments equal to 1.0% of the original principal amount on an annual basis through June 23, 2013, with
the balance payable in one final installment at the maturity date. Debt issuance costs capitalized in connection with the new term loan, the delayed draw facility and the new revolving credit facility
were $3.9 million.

The
debt instruments of Interline New Jersey, primarily the credit facility and the indenture governing the terms of the 81/8% senior subordinated notes, contain
significant restrictions on the payment of dividends and distributions to the Company by Interline New Jersey. Interline New Jersey's credit facility allows it to pay dividends, make distributions to
the Company or make investments in the Company in an aggregate amount not to exceed $2.0 million during any fiscal year, so long as Interline New Jersey is not in default or would be in default
as a result of such payments. In addition, ordinary course distributions for overhead (up to $3.0 million annually) and taxes are permitted, as are annual payments of up to $7.5 million
in respect of the Company's stock option or other benefit plans for management or employees and (provided Interline New Jersey is not in default) aggregate payments of up to $40.0 million
depending on the pro forma net leverage ratio as of the last day of the previous quarter. In addition, the indenture for the 81/8% senior subordinated notes generally restricts the
ability of Interline New Jersey to pay distributions to the Company and to make advances to, or investments in, the Company to an amount generally equal to 50% of the net income of Interline New
Jersey, plus an amount equal to the net proceeds from certain equity issuances, subject to compliance with a leverage ratio and no default having occurred and continuing. The indenture also contains
certain permitted exceptions including (1) allowing the Company to pay its franchise taxes and other fees required to maintain its corporate existence, to pay for general corporate and overhead
expenses and to
pay expenses incurred in connection with certain financing, acquisition or disposition transactions, in an aggregate amount not to exceed $10.0 million per year; (2) allowing certain tax
payments; and (3) allowing certain permitted distributions up to $75 million.

In
connection with the new bank credit facility, Interline New Jersey is required to pay administrative fees, commitment fees, letter of credit issuance and administration fees and
certain expenses and to provide certain indemnities, all of which are customary for financings of this type. The new bank credit facility also allows for certain incremental term loans and incremental
commitments under the revolving credit facility which are available to Interline New Jersey to repay indebtedness and make acquisitions if certain conditions, including various financial ratios are
met.

The
new bank credit facility, which is secured by substantially all of the assets of Interline New Jersey and is guaranteed by the Company and by the domestic subsidiaries of Interline
New Jersey, contains affirmative, negative and financial covenants that limit Interline New Jersey's ability to incur

F-28

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

10. DEBT (Continued)

additional
indebtedness, pay dividends on its common stock or redeem, repurchase or retire its common stock or subordinated indebtedness, make certain investments, sell assets, and consolidate, merge
or transfer assets, and that require Interline New Jersey to maintain certain financial ratios as of the last day of each fiscal quarter, including a minimum ratio of consolidated earnings before
interest, taxes, depreciation and amortization ("EBITDA") to consolidated cash interest expense and a maximum ratio of net total indebtedness to consolidated EBITDA. Interline New Jersey and the
Company were in compliance with all covenants as of December 28, 2007 and December 29, 2006.

As
of December 28, 2007 and December 29, 2006, Interline New Jersey had $87.9 million and $86.1 million, respectively, available under its revolving credit
facility. Total letters of credit issued under this facility as of December 28, 2007 and December 29, 2006 were $12.1 million and $13.9 million, respectively. There were no
borrowings under the revolving credit facility as of December 28, 2007 and December 29, 2006.

The
maturities of long-term debt subsequent to December 28, 2007 are as follows (in thousands):

Fiscal Year2008

$
2,3002009


2,3002010


5,5752011


2,3002012


2,300Thereafter


405,050$
419,825


11. PREFERRED STOCK

The Company has the authority to issue 20,000,000 shares of preferred stock, par value $.01 per share. As of December 28, 2007 and December 29, 2006
there were no preferred shares issued or outstanding. In connection with the reincorporation merger and IPO transaction, the preferred stock of Interline New Jersey was converted to common stock of
the Company.

12. STOCKHOLDERS' EQUITY



During 2004, the Company completed its IPO as described in Note 1. Description of Business and Background above. In addition to the shares issued to the
public at the IPO in December 2004, the Company issued 19,250,000 shares of its common stock to existing stockholders and senior management of Interline New Jersey in connection with the
reincorporation merger and the IPO. Existing holders of Interline New Jersey common stock received .01218 shares of the Company's common stock per share held or an aggregate of 66,667 shares of common
stock. As a result of the conversion, the accompanying consolidated financial statements retroactively reflect a decrease in the numbers of outstanding shares of common stock. The foregoing amount of
outstanding shares of common stock excludes 167,000 shares issued by the Company in January 2005 in connection with the IPO underwriters' exercise of their over-allotment option.

F-29

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

12. STOCKHOLDERS' EQUITY (Continued)

In
August 2005, certain of the Company's stockholders sold 7,750,000 shares of the Company's common stock in an underwritten offering pursuant to a registration statement on
Form S-1 filed with the SEC (Commission File No. 333-126515). The underwriters of this offering elected to exercise their over-allotment option with
respect to additional shares held by the selling stockholders. As a result, certain of the selling stockholders sold an additional 1,162,500 shares of the Company's common stock in a second closing
pursuant to the same underwritten offering. In connection with this offering, the Company did not receive any proceeds and incurred $0.9 million of expenses during 2005, which was recorded by
the Company as an expense.

13. SHARE-BASED COMPENSATION

Stock Incentive Plans

During 2000, Interline New Jersey established a Stock Award Plan (the "2000 Plan"), under which Interline New Jersey may award a total of 6,395 shares of common
stock in the form of incentive stock options (which may be awarded to key employees only), nonqualified stock options, stock appreciation rights ("SARs") and restricted stock awards, all of which may
be awarded to directors, officers, key employees and consultants. The Company's compensation committee will determine in its sole discretion whether a SAR is settled in cash, shares or a combination
of cash and shares. In connection with the Company's IPO in December 2004, options to purchase shares of the common stock of Interline New Jersey were converted into options to purchase shares of the
Company's common stock.

During
2004, the Company adopted the 2004 Equity Incentive Plan, (the "2004 Plan"), under which the Company may award 3,175,000 shares in the form of incentive stock options,
nonqualified stock options, stock appreciation rights, or SARs, restricted stock, restricted share units ("RSUs"), deferred stock units ("DSUs") and stock bonus awards, all of which may be awarded to
any employee, director, officer or consultant of the Company. In May 2006, the stockholders of the Company approved an amendment to the 2004 Plan whereby the number of shares of the Company's common
stock reserved for issuance under the 2004 Plan was increased by 2,000,000 shares and to further restrict the repricing of awards granted under the 2004 Plan without first obtaining approval by the
Company's stockholders.

These
plans allow the Company to fulfill its incentive stock option, nonqualified stock option, SAR, restricted stock, RSU, DSU and stock bonus award obligations using unissued or
treasury shares.

Stock Options

Under the terms of the 2000 Plan, the exercise price per share for an incentive stock option may not be less than 100% of the fair market value of a share of
common stock on the grant date. The exercise price per share for an incentive stock option granted to a person owning stock possessing more than 10% of the total combined voting power of all classes
of stock may not be less than 110% of the fair market value of a share of common stock on the grant date. These incentive stock options vest in 25% increments over four years and may not be
exercisable after the expiration of ten years from the date of grant.

Under
the terms of the 2004 Plan, the exercise price of the options will not be less than the fair market value of the common stock at the date of grant, generally vest in 25% increments
over four years and may not be exercisable after the expiration of seven or ten years from the date of grant.

F-30

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

13. SHARE-BASED COMPENSATION (Continued)

As
permitted by FAS 123R, the fair values of stock options were estimated using the Black-Scholes option-pricing model. Expected volatility is based on historical performance of
the Company's stock. The Company also uses historical data to estimate the timing and amount of stock option exercises and forfeitures. The expected life represents the period of time that stock
options are expected to remain outstanding and is based on the contractual term of the stock options and expected exercise behavior. The risk-free interest rate is based on U.S. Treasury
zero-coupon issues with a remaining term equal to the expected option life assumed at the date of grant. The Black-Scholes weighted-average assumptions were as follows:

Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005Expected volatility

27.0
%
27.7
%
28.7
%Expected dividends

0.0
%
0.0
%
0.0
%Risk-free interest rate

4.5
%
4.9
%
4.0
%Expected life (in years)

5.0

5.0

5.0


The
weighted average fair value per option of stock options granted during 2007, 2006 and 2005 was $6.88, $7.96 and $6.39, respectively.

A
summary of stock option activity as of December 28, 2007 and changes during the year then ended is presented below:

|Options                                         |                      | Shares    |         | Weighted-
Average
Exercise
Price |       | Weighted-
Average
Remaining
Contractual
Term |     | Aggregate
Intrinsic
Value(1)
|----------------------------------------------- | -------------------- | --------- | ------- | -------------------------------- | ----- | -------------------------------------------- | --- | ----------------------------
|
|
|Outstanding at December 29, 2006                |                      | 2,569,982 |         | $                                | 18.62 |                                              |     |                             
|                                                | Granted              |           | 485,346 |                                  |       | 21.11                                        |     |                             
|                                                | Exercised            |           | (37,367 | )                                |       | 15.13                                        |     |                             
|                                                | Forfeited or expired |           | (28,532 | )                                |       | 21.04                                        |     |                             
|                                                |                      |           |         |                                  |       |                                              |     |                             
|Outstanding at December 28, 2007                |                      | 2,989,429 |         | $                                | 19.05 |                                              | 6.8 |                             
|                                                |                      |           |         |                                  |       |                                              |     |                             
|Vested or expected to vest at December 28, 2007 |                      | 2,976,960 |         | $                                | 19.04 |                                              | 6.8 |                             
|                                                |                      |           |         |                                  |       |                                              |     |                             
|Exercisable at December 28, 2007                |                      | 2,222,099 |         | $                                | 18.06 |                                              | 7.0 |                             
|                                                |                      |           |         |                                  |       |                                              |     |                             

---

The
total intrinsic value, the difference between the exercise price and the market price on the date of exercise, of all stock options exercised during 2007, 2006 and
2005 was $0.3 million, $0.7 million and $0.6 million, respectively. Proceeds from stock options exercised during 2007, 2006 and 2005 was $0.6 million, $1.0 million
and $1.7 million, respectively. As of December 28, 2007, there was $4.1 million of total unrecognized compensation cost related to unvested stock options. The cost is expected to
be recognized over a weighted-average period of 2.8 years.

F-31

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

13. SHARE-BASED COMPENSATION (Continued)

Restricted Stock, Restricted Stock Units and Deferred Stock Units

Shares of restricted stock granted under the 2004 Plan to executives, employees and non-employee directors do not have an exercise price. The
share-based compensation expense associated with the restricted stock is based on the quoted market price of the Company's shares of common stock on the date of grant. The restricted stock awards for
executives vest either on an accelerated basis in one-third installments over three years provided that certain pre-established annual percentage increases in the Company's
earnings per share are attained or on the seventh anniversary of the date of grant. One half of the restricted stock awards granted to employees vest evenly over three years and one half vest evenly
over five years. The restricted stock awards for non-employee directors vest evenly over two years or at the end of three years, depending on the grant.

RSUs
granted under the 2004 Plan to management do not have an exercise price. The share-based compensation expense associated with the RSUs is based on the quoted market price of the
Company's shares of common stock on the date of grant. Depending on the grant, (1) one half of the RSUs vest on an accelerated basis in two installments over two years provided that certain
pre-established annual percentage increases in the Company's earnings per share are attained and one half vest evenly over three years; or (2) one half of the RSUs vest on the
second grant date anniversary if certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets are met and one half vest on the third grant date anniversary if certain
EBITDA targets are met; or (3) one half of the RSUs vest evenly over three years and one half vest evenly over five years.

DSUs
granted under the 2004 Plan to non-employee directors do not have an exercise price. The share-based compensation expense associated with the DSUs is based on the quoted
market price of the Company's shares of common stock on the date of grant. DSUs vest on the grant date or evenly over the non-employee directors' current service term; depending on the
grant. All DSUs are to be settled in shares of the Company's common stock upon termination of the non-employee directors' service or one year after termination of the
non-employee directors' service; depending on the grant.

Prior
to the adoption of FAS 123R on December 31,2005, unearned stock compensation was recorded as deferred compensation within stockholders' equity at the date of the
award based on the quoted market price of the Company's common stock on the date of grant and amortized to expense using the straight-line method from the grant date through the vesting
date. Upon adoption of FAS 123R, the $1.9 million of deferred compensation as of December 30, 2005 was required to be charged against additional paid-in capital.

A
summary status of restricted stock, RSUs and DSUs as of December 28, 2007, and changes during the year then ended is presented below:

|                                 |           | Restricted Stock |         | Restricted Share Units |       | Deferred Stock Units
|-------------------------------- | --------- | ---------------- | ------- | ---------------------- | ----- | --------------------
|
|Outstanding at December 29, 2006 |           | 132,335          |         | $                      | 16.39 |                     
|                                 | Granted   |                  | 4,600   |                        |       | 22.27               
|                                 | Vested    |                  | (54,770 | )                      |       | 15.00               
|                                 | Forfeited |                  | (2,683  | )                      |       | 15.00               
|                                 |           |                  |         |                        |       |                     
|Outstanding at December 28, 2007 |           | 79,482           |         | $                      | 17.73 |                     
|                                 |           |                  |         |                        |       |                     

F-32

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

13. SHARE-BASED COMPENSATION (Continued)

The
total fair value of restricted stock vested during 2007 and 2006 was $1.1 million and $1.6 million, respectively. No restricted stock vested during
2005. As of December 28, 2007, there was $2.4 million of total unrecognized compensation cost related to unvested restricted stock, RSUs and DSUs. The cost is expected to be recognized
over a weighted-average period of 1.5 years.

14. EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company has qualified profit sharing plans under Section 401(k) of the Internal Revenue Code. Pursuant to the 401(k) plan, the Company matches employee
contributions at a rate of 50% of the first 5% up to the statutory maximum of $5,500 per employee. Company contributions to the 401(k) plan were $2.1 million, $1.6 million and
$1.2 million for 2007, 2006 and 2005, respectively.

Supplemental Executive Retirement Plan

As a result of the AmSan acquisition, the Company has a supplemental executive retirement plan ("AmSan SERP"). The AmSan SERP is a nonqualified plan that covers
three AmSan employees. Upon adoption of FAS 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB
Statements No. 87, 88, 106, and 132(R), ("FAS 158") the Company decreased the liability associated with the AmSan SERP as of December 29, 2006 by
$0.1 million and recorded the unrecognized gain in accumulated other comprehensive income. The projected benefit obligation for the AmSan SERP as of December 28, 2007 and
December 29, 2006 was $0.6 million and $0.4 million, respectively, and is included in other liabilities on the Company's consolidated balance sheet. The Company does not fund this
liability and no assets are held by the AmSan SERP. The accumulated benefit obligation for the AmSan SERP as of December 28, 2007 and December 29, 2006 was $0.6 million and
$0.4 million, respectively.

The
reconciliation of the projected benefit obligation for the AmSan SERP is as follows (in thousands):

Year Ended
December 28,
2007

Period from
July 3,
2006 to
December 29,
2006Beginning projected benefit obligation

$
435

$
402Service cost


28


22Interest cost


28


11Prior service cost


126


Cash benefits paid


(47
)

Ending projected benefit obligation

$
570

$
435


F-33

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

14. EMPLOYEE BENEFIT PLANS (Continued)

The
components of net periodic benefit cost are as follows (in thousands):

Year Ended
December 28,
2007

Period from
July 3,
2006 to
December 29,
2006Service cost

$
28

$
22Interest cost


28


11Gain recognized


(31
)

(15
)Prior service cost


33


4Net periodic benefit cost

$
58

$
22


The
weighted-average assumptions used to determine the projected benefit obligation and the net periodic benefit cost are as follows:

December 28,
2007

December 29,
2006Discount rate

5.5
%
5.5
%Rate of compensation increase

0.0
%
0.0
%


The
following benefit payments are expected to be paid under the AmSan SERP (in thousands):

Fiscal Year2008

$
802009


802010


802011


802012


80Thereafter


351$
751


The
Company has one whole-life insurance policy for each AmSan employee covered by the AmSan SERP. The cash surrender value of these policies as of
December 28, 2007 and December 29, 2006 was $0.6 million and $0.5 million, respectively, and is included in other assets on the Company's consolidated balance sheet.

Deferred Compensation Plan

As a result of the AmSan acquisition, the Company has a nonqualified deferred compensation plan ("AmSan DCP"). Contributions and interest expense for the AmSan
DCP for 2007 and for the period from July 3, 2006 to December 29, 2006 were immaterial. Payments under the AmSan DCP were $0.2 million during 2007. There were no payments during
the period from July 3, 2006 to December 29, 2006. The liability for the AmSan DCP as of December 28, 2007 and December 29, 2006 was $0.2 million and
$0.4 million, respectively, and is included in other liabilities on the Company's consolidated balance sheet. The Company does not fund this liability and no assets are held by the AmSan DCP.

F-34

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

14. EMPLOYEE BENEFIT PLANS (Continued)

The following benefit payments, including interest and estimated future contributions, are expected to be paid under the AmSan DCP (in thousands):

Fiscal Year2008

$
272009


272010


272011


272012


27Thereafter


132$
267


15. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases its facilities under operating and capital leases expiring at various dates through 2016. Minimum future rental payments under these operating
and capital leases as of December 28, 2007 are as follows (in thousands):

Fiscal Year

Operating

Capital2008

$
18,520

$
2852009


12,454


2792010


8,387


2332011


5,263


42012


3,277


Thereafter


3,606


Total payments

$
51,507


801Less: Amount representing interest





(119
)Present value of minimum lease payments





682Less: Current portion





(218
)$
464


In
connection with the Copperfield acquisition, the Company leases an office building from an entity in which an employee and his family hold an ownership interest in the
property. This lease was amended in November 2005 and will expire on November 30, 2010, with an option to extend for one additional five year term. Minimum annual rent payable under this lease
is $0.2 million, plus all real estate taxes and assessments, and all operating costs related to the building. The total rent expense for this lease was $0.2 million and
$0.2 million for 2007 and 2006, respectively, and $0.1 million from the period from July 7, 2005 to December 30, 2005. The Company believes that the terms of the lease are
no less favorable to it than could be obtained from an unaffiliated party.

In
connection with the AmSan acquisition, the Company leases six properties from entities in which employees and their families hold an ownership interest. One of these leases expires on
October 31, 2008, two of these leases expire on December 31, 2008 and the remaining three leases

F-35

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

15. COMMITMENTS AND CONTINGENCIES (Continued)

expire
on January 31, 2009, March 25, 2009 and December 31, 2009, respectively. Minimum annual rent payable under these leases is $1.3 million, including all real estate
taxes and assessments, plus all operating costs related to the properties. The total rent expense for these leases was $1.3 million for 2007 and $0.6 million for the period from
July 3, 2006 to December 29, 2006. The Company believes that the terms of these leases are no less favorable to it than could be obtained from unaffiliated parties.

Rent
expense under all operating leases was $32.4 million, $25.1 million, and $19.1 million for 2007, 2006 and 2005, respectively. Certain of the leases provide that
the Company pays taxes, insurance and other operating expenses applicable to the leased premises.

Employment Agreement

The Company has employment agreements with certain officers of various dates through 2009, unless terminated earlier by the Company, at combined salaries of
$5.7 million, plus bonuses and subject to adjustments.

Contingent Liabilities

As of December 28, 2007 and December 29, 2006, the Company was contingently liable for unused letters of credit aggregating $12.1 million and
$13.9 million, respectively.

Legal Proceedings

The Company is involved in various legal proceedings in the ordinary course of its business that are not anticipated to have a material adverse effect on the
Company's results of operations or financial position.

16. INTEREST AND OTHER INCOME

Interest and other income consisted of the following during 2007, 2006 and 2005 (in thousands):

Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005Interest income

$
2,007

$
591

$
236Other income


1,244


606


639$
3,251

$
1,197

$
875


F-36

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

17. INCOME TAXES

The provision for income taxes for 2007, 2006 and 2005, was as follows (in thousands):

Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005Current:Federal

$
26,654

$
18,726

$
17,686State


4,946


2,778


2,662Foreign


344


190


35131,944


21,694


20,699Deferred:Federal


504


(2,028
)

(2,371
)State


15


(234
)

4Foreign


(3
)

63


3516


(2,199
)

(2,364
)$
32,460

$
19,495

$
18,335


The
components of income before income taxes were as follows (in thousands):

Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005United States

$
82,490

$
49,908

$
45,984Foreign


932


772


1,150Total

$
83,422

$
50,680

$
47,134


The
reconciliation of the provision for income taxes at the federal statutory tax rate to the provision for income taxes is as follows:

Year EndedDecember 28,
2007

December 29,
2006

December 30,
2005Federal statutory tax rate

35.00
%
35.00
%
35.00
%State income taxes, net of federal benefit

4.00

3.10

3.68Non-deductible expenses

0.36

0.56

1.02Tax exempt interest

(0.28
)


Foreign income taxes

0.02

(0.03
)
Other

(0.19
)
(0.16
)
(0.81
)38.91
%
38.47
%
38.89
%


Deferred
income taxes result primarily from temporary differences in the recognition of certain expenses for financial and income tax reporting purposes. The components of the Company's
deferred

F-37

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

17. INCOME TAXES (Continued)

tax
assets and liabilities as of December 28, 2007 and December 29, 2006 consist of the following (in thousands):

December 28,
2007

December 29,
2006Deferred tax assets:Inventory

$
5,110

$
5,333Bad debt reserves


2,894


3,976Closing costs accrual


1,685


2,137Vacation accrual


984


539Vendor discounts


2,062


1,628Other


7,561


6,362Total deferred tax assets


20,296


19,975Deferred tax liabilities:Identifiable intangibles


(35,727
)

(34,352
)Depreciation


(1,591
)

(1,722
)Other


(970
)

(879
)Total deferred tax liabilities


(38,288
)

(36,953
)Net deferred tax liabilities

$
(17,992
)
$
(16,978
)


The
Company files numerous consolidated and separate income tax returns in the United States Federal jurisdiction and in many state and foreign jurisdictions. With few exceptions, the
Company is
no longer subject to U.S. Federal income tax examinations for years before 2004 and is no longer subject to state and local, or foreign income tax examinations by tax authorities for years before
2003.

Effective
December 30, 2006, the Company adopted the provisions of FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance
with FASB Statement No. 109,Accounting for Income Taxes, ("FAS 109"). FIN 48 clarifies the application of FAS 109 by
defining criteria that an individual tax position must meet for any part of the benefit of that position to be recognized in the financial statements. Additionally, FIN 48 provides guidance on
the measurement, derecognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties.

As
a result of the adoption of FIN 48, the Company recognized an increase of $0.8 million, in the liability for unrecognized tax benefits, including penalties and interest,
net of tax, which was accounted for as an increase to the December 30, 2006 balance of accumulated deficit. As of the date of adoption and after the impact of recognizing the increase in
liability noted above, the Company's liability for unrecognized tax benefits totaled $1.4 million, including penalties and interest, net of tax. Of this $1.4 million,
$1.0 million, net of tax, represented the amount of unrecognized tax benefits that, if

F-38

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

17. INCOME TAXES (Continued)

recognized,
would favorably affect the effective income tax rate. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

Balance at December 30, 2006

$
1,478Additions for tax positions taken during prior years


307Balance at December 28, 2007

$
1,785


The
Company does not anticipate that total unrecognized tax benefits will significantly change prior to December 26, 2008.

The
Company recognizes potential accrued penalties and accrued interest related to unrecognized tax benefits within its statements of earnings as selling, general and administrative
expenses and interest
expense, respectively. In conjunction with the adoption of FIN 48, the Company accrued $0.4 million of penalties and interest at December 30, 2006 which is included as a component
of the $1.4 million liability for unrecognized tax benefits noted above. During 2007, the Company recognized $0.1 million in potential penalties and interest associated with uncertain
tax positions. As of December 28, 2007, the Company had $0.5 million accrued for the potential payment of penalties and interest associated with uncertain tax positions, net of tax. To
the extent penalties and interest are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of selling, general and administrative expenses
and interest expense, respectively.

18. GUARANTOR SUBSIDIARIES

In June 2006, Interline New Jersey (the "Subsidiary Issuer") issued $200.0 million of 81/8% senior subordinated notes due 2014 and entered
into a $330.0 million bank credit facility (see Note 10. Debt). The 81/8% senior subordinated notes and the bank credit facility are fully and unconditionally guaranteed,
jointly and severally, on a subordinated basis by the Company (the "Parent Company") and all of Interline New Jersey's 100% owned domestic subsidiaries: Wilmar Holdings, Inc., Wilmar
Financial, Inc., Glenwood Acquisition LLC and AmSan LLC (the "Guarantor Subsidiaries"). The guarantees by the subsidiary guarantors are senior to any of their existing and future
subordinated obligations, equal in right of payment with any of their existing and future senior subordinated indebtedness and subordinated to any of their existing and future senior indebtedness.

The
Company is a holding company whose only asset is the stock of its subsidiaries. The Company conducts virtually all of its business operations through Interline New Jersey.
Accordingly, the Company's only material sources of cash are dividends and distributions with respect to its ownership interests in Interline New Jersey that are derived from the earnings and cash
flow generated by Interline New Jersey.

The
following tables set forth, on a condensed consolidating basis, the balance sheets, statements of operations and statements of cash flows for the Parent Company, Subsidiary Issuer
and Guarantor Subsidiaries for all financial statement periods presented in the Company's consolidated financial statements. The Subsidiary Issuer does not allocate integration expenses, corporate
overhead or other expenses for shared services to the Guarantor Subsidiaries; therefore, the following tables do not reflect any such allocation.

F-39

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET    AS OF DECEMBER 28, 2007    (in thousands)

|                                     |                                                | Parent
Company                             |         | Subsidiary
Issuer |         | Guarantor
Subsidiaries |         | Consolidating
Adjustments |         | Consolidated
|------------------------------------ | ---------------------------------------------- | ------------------------------------------ | ------- | ----------------- | ------- | ---------------------- | ------- | ------------------------- | ------- | ------------
|ASSETS                               |                                                |                                            |         |                   |         |                        |         |                           |         |             
|Current Assets:                      |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     | Cash and cash equivalents                      |                                            | $       |                  |         | $                      | 7,564   |                           | $       | 18          
|                                     | Short-term investments                         |                                            |         |                  |         |                        | 48,540  |                           |         |            
|                                     | Accounts receivabletrade                      |                                            |         |                  |         |                        | 127,482 |                           |         | 27,089      
|                                     | Inventory                                      |                                            |         |                  |         |                        | 172,431 |                           |         | 18,543      
|                                     | Intercompany receivable                        |                                            |         |                  |         |                        |        |                           |         | 113,867     
|                                     | Other current assets                           |                                            |         |                  |         |                        | 34,612  |                           |         | 4,411       
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total current assets                       |         |                   |        |                        |         | 390,629                   |         |             
|Property and equipment, net          |                                                |                                            |        |                   |         | 34,188                 |         |                           | 2,943   |             
|Goodwill                             |                                                |                                            |        |                   |         | 247,198                |         |                           | 66,264  |             
|Other intangible assets, net         |                                                |                                            |        |                   |         | 95,403                 |         |                           | 41,331  |             
|Investment in subsidiaries           |                                                |                                            | 377,414 |                   |         | 260,200                |         |                           |        |             
|Other assets                         |                                                |                                            |        |                   |         | 1,710                  |         |                           | 9,714   |             
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total assets                               |         | $                 | 377,414 |                        | $       | 1,029,328                 |         | $           
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                |                                            |         |                   |         |                        |         |                           |         |             
|Current Liabilities:                 |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     | Accounts payable                               |                                            | $       |                  |         | $                      | 49,770  |                           | $       | 12,996      
|                                     | Accrued expenses and other current liabilities |                                            |         |                  |         |                        | 37,281  |                           |         | 6,905       
|                                     | Intercompany payable                           |                                            |         |                  |         |                        | 113,867 |                           |         |            
|                                     | Debt and capital leaseshort-term              |                                            |         |                  |         |                        | 2,508   |                           |         | 10          
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total current liabilities                  |         |                   |        |                        |         | 203,426                   |         |             
|Long-Term Liabilities:               |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     | Term debt and capital leaselong-term          |                                            |         |                  |         |                        | 413,465 |                           |         | 3,289       
|                                     | Other liabilities                              |                                            |         |                  |         |                        | 35,023  |                           |         | 780         
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total liabilities                          |         |                   |        |                        |         | 651,914                   |         |             
|Senior preferred stock               |                                                |                                            |        |                   |         | 575,571                |         |                           |        |             
|Stockholders' equity (deficit)       |                                                |                                            | 377,414 |                   |         | (198,157               | )       |                           | 260,200 |             
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total liabilities and stockholders' equity |         | $                 | 377,414 |                        | $       | 1,029,328                 |         | $           
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             

F-40

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET    AS OF DECEMBER 29, 2006    (in thousands)

|                                     |                                                | Parent
Company                             |         | Subsidiary
Issuer |         | Guarantor
Subsidiaries |         | Consolidating
Adjustments |         | Consolidated
|------------------------------------ | ---------------------------------------------- | ------------------------------------------ | ------- | ----------------- | ------- | ---------------------- | ------- | ------------------------- | ------- | ------------
|ASSETS                               |                                                |                                            |         |                   |         |                        |         |                           |         |             
|Current Assets:                      |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     | Cash and cash equivalents                      |                                            | $       |                  |         | $                      | 8,783   |                           | $       | 15          
|                                     | Accounts receivabletrade                      |                                            |         |                  |         |                        | 119,118 |                           |         | 23,783      
|                                     | Inventory                                      |                                            |         |                  |         |                        | 183,023 |                           |         | 18,639      
|                                     | Intercompany receivable                        |                                            |         |                  |         |                        |        |                           |         | 103,564     
|                                     | Other current assets                           |                                            |         |                  |         |                        | 35,385  |                           |         | 5,351       
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total current assets                       |         |                   |        |                        |         | 346,309                   |         |             
|Property and equipment, net          |                                                |                                            |        |                   |         | 29,164                 |         |                           | 2,590   |             
|Goodwill                             |                                                |                                            |        |                   |         | 248,074                |         |                           | 65,003  |             
|Other intangible assets, net         |                                                |                                            |        |                   |         | 100,596                |         |                           | 42,844  |             
|Investment in subsidiaries           |                                                |                                            | 320,679 |                   |         | 176,523                |         |                           |        |             
|Other assets                         |                                                |                                            |        |                   |         | 6,186                  |         |                           | 8,570   |             
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total assets                               |         | $                 | 320,679 |                        | $       | 906,852                   |         | $           
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                |                                            |         |                   |         |                        |         |                           |         |             
|Current Liabilities:                 |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     | Accounts payable                               |                                            | $       |                  |         | $                      | 53,976  |                           | $       | 15,463      
|                                     | Accrued expenses and other current liabilities |                                            |         |                  |         |                        | 31,181  |                           |         | 13,543      
|                                     | Intercompany payable                           |                                            |         |                  |         |                        | 52,060  |                           |         |            
|                                     | Debt and capital leaseshort-term              |                                            |         |                  |         |                        | 2,594   |                           |         | 129         
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total current liabilities                  |         |                   |        |                        |         | 139,811                   |         |             
|Long-Term Liabilities:               |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     | Term debt and capital leaselong-term          |                                            |         |                  |         |                        | 415,838 |                           |         | 3,495       
|                                     | Other liabilities                              |                                            |         |                  |         |                        | 34,799  |                           |         | 818         
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total liabilities                          |         |                   |        |                        |         | 590,448                   |         |             
|Senior preferred stock               |                                                |                                            |        |                   |         | 501,763                |         |                           |        |             
|Stockholders' equity (deficit)       |                                                |                                            | 320,679 |                   |         | (185,359               | )       |                           | 236,911 |             
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             
|                                     |                                                | Total liabilities and stockholders' equity |         | $                 | 320,679 |                        | $       | 906,852                   |         | $           
|                                     |                                                |                                            |         |                   |         |                        |         |                           |         |             

F-41

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS    FOR THE YEAR ENDED DECEMBER 28, 2007    (in thousands)

|                                                      |                                              | Parent
Company          |        | Subsidiary
Issuer |         | Guarantor
Subsidiaries(1) |         | Consolidating
Adjustments |         | Consolidated |       
|----------------------------------------------------- | -------------------------------------------- | ----------------------- | ------ | ----------------- | ------- | ------------------------- | ------- | ------------------------- | ------- | ------------ | ------
|Net sales                                             |                                              | $                       |       |                   | $       | 974,430                   |         | $                         | 264,597 |              | $     
|Cost of sales                                         |                                              |                         |       |                   |         | 602,115                   |         |                           | 163,022 |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      | Gross profit                                 |                         |        |                  |         |                           | 372,315 |                           |         | 101,575      |       
|Operating Expenses:                                   |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      | Selling, general and administrative expenses |                         |        |                  |         |                           | 286,833 |                           |         | 58,464       |       
|                                                      | Depreciation and amortization                |                         |        |                  |         |                           | 11,857  |                           |         | 2,642        |       
|                                                      | Equity earnings of subsidiaries              |                         |        | (83,422           | )       |                           | (21,632 | )                         |         |             |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      |                                              | Total operating expense |        |                   | (83,422 | )                         |         | 277,058                   |         |              | 61,106
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|Operating income                                      |                                              |                         | 83,422 |                   |         | 95,257                    |         |                           | 40,469  |              |       
|Interest and other (expense) income, net              |                                              |                         |       |                   |         | (24,423                   | )       |                           | (5,013  | )            |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      | Income before income taxes                   |                         |        | 83,422            |         |                           | 70,834  |                           |         | 35,456       |       
|Income tax provision                                  |                                              |                         | 32,460 |                   |         | 19,872                    |         |                           | 12,588  |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|Net income                                            |                                              |                         | 50,962 |                   |         | 50,962                    |         |                           | 22,868  |              |       
|Preferred stock dividends                             |                                              |                         |       |                   |         | (73,808                   | )       |                           |        |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|Net income (loss) attributable to common stockholders |                                              | $                       | 50,962 |                   | $       | (22,846                   | )       | $                         | 22,868  |              | $     
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       

---

F-42

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS    FOR THE YEAR ENDED DECEMBER 29, 2006    (in thousands)

|                                                      |                                              | Parent
Company          |        | Subsidiary
Issuer |         | Guarantor
Subsidiaries(1) |         | Consolidating
Adjustments |         | Consolidated |       
|----------------------------------------------------- | -------------------------------------------- | ----------------------- | ------ | ----------------- | ------- | ------------------------- | ------- | ------------------------- | ------- | ------------ | ------
|Net sales                                             |                                              | $                       |       |                   | $       | 937,818                   |         | $                         | 129,752 |              | $     
|Cost of sales                                         |                                              |                         |       |                   |         | 579,020                   |         |                           | 79,678  |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      | Gross profit                                 |                         |        |                  |         |                           | 358,798 |                           |         | 50,074       |       
|Operating Expenses:                                   |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      | Selling, general and administrative expenses |                         |        |                  |         |                           | 255,448 |                           |         | 37,304       |       
|                                                      | Depreciation and amortization                |                         |        |                  |         |                           | 13,075  |                           |         | 1,352        |       
|                                                      | Equity earnings of subsidiaries              |                         |        | (50,680           | )       |                           | (16,790 | )                         |         |             |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      |                                              | Total operating expense |        |                   | (50,680 | )                         |         | 251,733                   |         |              | 38,656
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|Operating income                                      |                                              |                         | 50,680 |                   |         | 107,065                   |         |                           | 11,418  |              |       
|Loss on extinguishment of debt                        |                                              |                         |       |                   |         | (20,843                   | )       |                           |        |              |       
|Interest and other (expense) income, net              |                                              |                         |       |                   |         | (44,945                   | )       |                           | 15,381  |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|                                                      | Income before income taxes                   |                         |        | 50,680            |         |                           | 41,277  |                           |         | 26,799       |       
|Income tax provision                                  |                                              |                         | 19,495 |                   |         | 10,092                    |         |                           | 9,403   |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|Net income                                            |                                              |                         | 31,185 |                   |         | 31,185                    |         |                           | 17,396  |              |       
|Preferred stock dividends                             |                                              |                         |       |                   |         | (64,343                   | )       |                           |        |              |       
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       
|Net income (loss) attributable to common stockholders |                                              | $                       | 31,185 |                   | $       | (33,158                   | )       | $                         | 17,396  |              | $     
|                                                      |                                              |                         |        |                   |         |                           |         |                           |         |              |       

---

F-43

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS    FOR THE YEAR ENDED DECEMBER 30, 2005    (in thousands)

|                                                      |                                              | Parent
Company          |        | Subsidiary
Issuer |         | Guarantor
Subsidiaries(1) |         | Consolidating
Adjustments |        | Consolidated |      
|----------------------------------------------------- | -------------------------------------------- | ----------------------- | ------ | ----------------- | ------- | ------------------------- | ------- | ------------------------- | ------ | ------------ | -----
|Net sales                                             |                                              | $                       |       |                   | $       | 817,678                   |         | $                         | 34,250 |              | $    
|Cost of sales                                         |                                              |                         |       |                   |         | 507,785                   |         |                           | 18,549 |              |      
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|                                                      | Gross profit                                 |                         |        |                  |         |                           | 309,893 |                           |        | 15,701       |      
|Operating Expenses:                                   |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|                                                      | Selling, general and administrative expenses |                         |        | 932               |         |                           | 221,620 |                           |        | 7,975        |      
|                                                      | Depreciation and amortization                |                         |        |                  |         |                           | 12,830  |                           |        | 219          |      
|                                                      | Equity earnings of subsidiaries              |                         |        | (48,066           | )       |                           | (14,492 | )                         |        |             |      
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|                                                      |                                              | Total operating expense |        |                   | (47,134 | )                         |         | 219,958                   |        |              | 8,194
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|Operating income                                      |                                              |                         | 47,134 |                   |         | 89,935                    |         |                           | 7,507  |              |      
|Loss on extinguishment of debt                        |                                              |                         |       |                   |         | (10,340                   | )       |                           |       |              |      
|Interest and other (expense) income, net              |                                              |                         |       |                   |         | (39,934                   | )       |                           | 16,029 |              |      
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|                                                      | Income before income taxes                   |                         |        | 47,134            |         |                           | 39,661  |                           |        | 23,536       |      
|Income tax provision                                  |                                              |                         | 18,335 |                   |         | 9,930                     |         |                           | 8,405  |              |      
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|Net income                                            |                                              |                         | 28,799 |                   |         | 29,731                    |         |                           | 15,131 |              |      
|Preferred stock dividends                             |                                              |                         |       |                   |         | (56,092                   | )       |                           |       |              |      
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      
|Net income (loss) attributable to common stockholders |                                              | $                       | 28,799 |                   | $       | (26,361                   | )       | $                         | 15,131 |              | $    
|                                                      |                                              |                         |        |                   |         |                           |         |                           |        |              |      

---

F-44

---





INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS    FOR THE YEAR ENDED DECEMBER 28, 2007    (in thousands)

|                                                             |                                                              | Parent
Company                                      |   | Subsidiary
Issuer |   | Guarantor
Subsidiaries |          | Consolidating
Adjustments |      | Consolidated |       
|------------------------------------------------------------ | ------------------------------------------------------------ | --------------------------------------------------- | - | ----------------- | - | ---------------------- | -------- | ------------------------- | ---- | ------------ | ------
|Net cash provided by operating activities                    |                                                              | $                                                   |  |                   | $ | 59,384                 |          | $                         | (993 | )            | $     
|Cash Flows from Investing Activities:                        |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       
|                                                             | Purchase of property and equipment, net                      |                                                     |   |                  |   |                        | (13,475  | )                         |      | (1,431       | )     
|                                                             | Purchase of short-term investments                           |                                                     |   |                  |   |                        | (168,962 | )                         |      |             |       
|                                                             | Proceeds from sales and maturities of short-term investments |                                                     |   |                  |   |                        | 120,422  |                           |      |             |       
|                                                             | Purchase of businesses, net of cash acquired                 |                                                     |   |                  |   |                        | (3,517   | )                         |      | 209          |       
|                                                             |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       
|                                                             |                                                              | Net cash (used in) provided by investing activities |   |                   |  |                        |          | (65,532                   | )    |              | (1,222
|Cash Flows from Financing Activities:                        |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       
|                                                             | Repayment of debt and capital lease obligations              |                                                     |   |                  |   |                        | (2,595   | )                         |      | (325         | )     
|                                                             | Payment of debt issuance costs                               |                                                     |   |                  |   |                        | (34      | )                         |      |             |       
|                                                             | Other                                                        |                                                     |   |                  |   |                        | 7,395    |                           |      | 2,543        |       
|                                                             |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       
|                                                             |                                                              | Net cash provided by (used in) financing activities |   |                   |  |                        |          | 4,766                     |      |              | 2,218 
|Effect of exchange rate changes on cash and cash equivalents |                                                              |                                                     |  |                   |   | 163                    |          |                           |     |              |       
|                                                             |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       
|Net increase (decrease) in cash and cash equivalents         |                                                              |                                                     |  |                   |   | (1,219                 | )        |                           | 3    |              |       
|Cash and cash equivalents at beginning of period             |                                                              |                                                     |  |                   |   | 8,783                  |          |                           | 15   |              |       
|                                                             |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       
|Cash and cash equivalents at end of period                   |                                                              | $                                                   |  |                   | $ | 7,564                  |          | $                         | 18   |              | $     
|                                                             |                                                              |                                                     |   |                   |   |                        |          |                           |      |              |       

F-45

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS    FOR THE YEAR ENDED DECEMBER 29, 2006    (in thousands)

|                                                             |                                                                            | Parent
Company                                      |   | Subsidiary
Issuer |   | Guarantor
Subsidiaries |          | Consolidating
Adjustments |       | Consolidated |       
|------------------------------------------------------------ | -------------------------------------------------------------------------- | --------------------------------------------------- | - | ----------------- | - | ---------------------- | -------- | ------------------------- | ----- | ------------ | ------
|Net cash provided by operating activities                    |                                                                            | $                                                   |  |                   | $ | 25,512                 |          | $                         | 4,434 |              | $     
|Cash Flows from Investing Activities:                        |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       
|                                                             | Purchase of property and equipment, net                                    |                                                     |   |                  |   |                        | (7,610   | )                         |       | (203         | )     
|                                                             | Purchase of businesses, net of cash acquired                               |                                                     |   |                  |   |                        | (133,727 | )                         |       | 2,242        |       
|                                                             |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       
|                                                             |                                                                            | Net cash (used in) provided by investing activities |   |                   |  |                        |          | (141,337                  | )     |              | 2,039 
|Cash Flows from Financing Activities:                        |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       
|                                                             | Repayment of debt and capital lease obligations                            |                                                     |   |                  |   |                        | (163,407 | )                         |       | (40          | )     
|                                                             | Repayment of 111/2% senior subordinated notes                              |                                                     |   |                  |   |                        | (130,000 | )                         |       |             |       
|                                                             | Payment of tender and redemption premiums                                  |                                                     |   |                  |   |                        | (13,663  | )                         |       |             |       
|                                                             | Proceeds from issuance of 81/8% senior subordinated notes, net of discount |                                                     |   |                  |   |                        | 198,566  |                           |       |             |       
|                                                             | Proceeds from issuance of term debt                                        |                                                     |   |                  |   |                        | 230,000  |                           |       |             |       
|                                                             | Payment of debt issuance costs                                             |                                                     |   |                  |   |                        | (9,724   | )                         |       |             |       
|                                                             | Other                                                                      |                                                     |   |                  |   |                        | 8,260    |                           |       | (6,766       | )     
|                                                             |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       
|                                                             |                                                                            | Net cash provided by (used in) financing activities |   |                   |  |                        |          | 120,032                   |       |              | (6,806
|Effect of exchange rate changes on cash and cash equivalents |                                                                            |                                                     |  |                   |   | 20                     |          |                           |      |              |       
|                                                             |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       
|Net increase (decrease) in cash and cash equivalents         |                                                                            |                                                     |  |                   |   | 4,227                  |          |                           | (333  | )            |       
|Cash and cash equivalents at beginning of period             |                                                                            |                                                     |  |                   |   | 2,610                  |          |                           | 348   |              |       
|                                                             |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       
|Cash and cash equivalents at end of period                   |                                                                            | $                                                   |  |                   | $ | 6,837                  |          | $                         | 15    |              | $     
|                                                             |                                                                            |                                                     |   |                   |   |                        |          |                           |       |              |       

F-46

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

18. GUARANTOR SUBSIDIARIES (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS    FOR THE YEAR ENDED DECEMBER 30, 2005    (in thousands)

|                                                             |                                                 | Parent
Company                                      |      | Subsidiary
Issuer |     | Guarantor
Subsidiaries |         | Consolidating
Adjustments |     | Consolidated |     
|------------------------------------------------------------ | ----------------------------------------------- | --------------------------------------------------- | ---- | ----------------- | --- | ---------------------- | ------- | ------------------------- | --- | ------------ | ----
|Net cash (used in) provided by operating activities          |                                                 | $                                                   | (932 | )                 | $   | 39,053                 |         | $                         | 717 |              | $   
|Cash Flows from Investing Activities:                        |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     
|                                                             | Purchase of property and equipment, net         |                                                     |      |                  |     |                        | (7,818  | )                         |     | (102         | )   
|                                                             | Purchase of businesses, net of cash acquired    |                                                     |      |                  |     |                        | (73,213 | )                         |     |             |     
|                                                             |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     
|                                                             |                                                 | Net cash used in investing activities               |      |                   |    |                        |         | (81,031                   | )   |              | (102
|Cash Flows from Financing Activities:                        |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     
|                                                             | Repayment of debt and capital lease obligations |                                                     |      |                  |     |                        | (68,200 | )                         |     | (335         | )   
|                                                             | Payment of tender and redemption premiums       |                                                     |      |                  |     |                        | (8,050  | )                         |     |             |     
|                                                             | Proceeds from issuance of term debt             |                                                     |      |                  |     |                        | 50,000  |                           |     |             |     
|                                                             | Payment of debt issuance costs                  |                                                     |      |                  |     |                        | (838    | )                         |     |             |     
|                                                             | Other                                           |                                                     |      | 932               |     |                        | 2,429   |                           |     |             |     
|                                                             |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     
|                                                             |                                                 | Net cash provided by (used in) financing activities |      |                   | 932 |                        |         | (24,659                   | )   |              | (335
|Effect of exchange rate changes on cash and cash equivalents |                                                 |                                                     |     |                   |     | 137                    |         |                           |    |              |     
|                                                             |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     
|Net (decrease) increase in cash and cash equivalents         |                                                 |                                                     |     |                   |     | (66,500                | )       |                           | 280 |              |     
|Cash and cash equivalents at beginning of period             |                                                 |                                                     |     |                   |     | 69,110                 |         |                           | 68  |              |     
|                                                             |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     
|Cash and cash equivalents at end of period                   |                                                 | $                                                   |     |                   | $   | 2,610                  |         | $                         | 348 |              | $   
|                                                             |                                                 |                                                     |      |                   |     |                        |         |                           |     |              |     

F-47

---



INTERLINE BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

YEARS ENDED DECEMBER 28, 2007, DECEMBER 29, 2006 AND DECEMBER 30, 2005

19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of our quarterly results of operations for 2007 and 2006 (in thousands, except per share amounts):

|                           |          | Quarter
|-------------------------- | -------- | -------
|
|2007                       |          |        
|Net sales                  |          | $      
|Gross profit               |          |        
|Net income                 |          |        
|Earnings Per Share:        |          |        
|                           | Basic    |        
|                           | Diluted  |        
|2006                       |          |        
|Net sales                  |          | $      
|Gross profit               |          |        
|Net income (loss)(2)       |          |        
|Earnings (Loss) Per Share: |          |        
|                           | Basic(1) |        
|                           | Diluted  |        

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20. SUBSEQUENT EVENT

All of the auction rate securities and variable rate demand notes the Company held as of December 28, 2007 were sold subsequent to December 28,
2007. However, recent uncertainties in the credit markets have prevented the Company, and other investors, from liquidating some of its holdings in auction rate
securities. In February 2008, auctions failed for $6.0 million of the Company's auction rate securities that were acquired subsequent to December 28, 2007. As of February 22,
2008, the Company had liquidated all of its auction rate securities and variable rate demand notes except $10.0 million in auction rate securities, including $4.0 million of the failed
auctions. There is no assurance that currently successful auctions on the other auction rate securities in its investment portfolio will continue to succeed and as a result its ability to liquidate
its investment and fully recover the carrying value of its investment in the near term may be limited or not exist. An auction failure means that the parties wishing to sell securities could not. All
of the Company's auction rate securities and variable rate demand notes, including those subject to the failure, are currently rated AAA, the highest rating, by a rating agency. If the issuers are
unable to successfully close future auctions and their credit ratings deteriorate, the Company may in the future be required to record an impairment charge on these investments. The Company believes
it will be able to liquidate its investments without significant loss within the next year, and the Company currently believes these securities are not significantly impaired as they are
collateralized by the bonds and credit rating of the underlying issuer and insured against loss of principal and interest by bond insurers with AAA ratings. However, it could take until the final
maturity of the underlying notes (over 30 years) to realize the Company's investments' recorded value. Based on the Company's expected operating cash flows, and its other sources of cash, it
does not anticipate the potential lack of liquidity on these investments will affect its ability to execute its current business plan.

F-48

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