** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**FORM 10-Q**
| ****(Mark One)****                                          |
|-------------------------------------------------------------|
| **** ****                                              |
| ****x****                                                   | ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**** |
| **** ****                                              | **** **** |
| ****FOR  THE QUARTERLY PERIOD ENDED MARCH 31, 2006**** |
| ** **                                                  | **** **** |
| ****OR****                                                  |
| ** **                                                  | **** **** |
| ****o****                                                   | ****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**** |

 

****FORTHE TRANSITION PERIOD FROM               TO               ****

****COMMISSIONFILE NUMBER 333-106801****

**INTERLINE BRANDS, INC.**

(Exact name of registrant as specified in its charter)

 

| ****NEW JERSEY****                                                      | **** **** | ****22-2232386****                            |
|-------------------------------------------------------------------------|----------------|-----------------------------------------------|
| ****(State or other jurisdiction of  incorporation or organization)**** | **** **** | ****(I.R.S. Employer  Identification No.)**** |
| **** ****                                                          | **** **** | **** ****                                |
| ****801  WEST BAY STREET****                                            |           | ****32204****                                 |
| ****JACKSONVILLE,  FLORIDA****                                          | **** **** | ****(Zip code)****                            |
| ****(Address of principal executive offices)****                        | **** **** |                                          |

** **

**(904) 421-1400**

(Registrant’s telephone number, including area code)

 

**NOT APPLICABLE**

(Former name, former address and former fiscal year,if changed since last report)

 

**The registrant meets the conditions set forth in General Instruction H(1)(a) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.**

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 o      No x*

*      Theregistrant is not required to file this Quarterly Report on Form 10-Qpursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.The filing is required, however, pursuant to the terms of the indenturegoverning the registrant’s 11.5% senior subordinated notes due 2011.

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer o | Accelerated  Filer o | Non-accelerated  Filer x |
|---------------------------|----------------------|--------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

Yes o      No x

Indicate the number of shares of the registrant’scommon stock outstanding, as of the latest practicable date:  As of April 28, 2006, there were noshares of the registrant’s common stock outstanding.

Because theregistrant is an indirect wholly owned subsidiary of Interline Brands, Inc.,a Delaware corporation, none of the registrant’s outstanding voting stock isheld by non-affiliates of the registrant. As of the date hereof, 100 shares ofthe registrant’s common stock were issued and outstanding and held by InterlineBrands, Inc., a Delaware corporation.

 

 

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**TABLE OF CONTENTS**
| ****ITEM****       | **** **** | ** **     | ** **     | ** **                                                                                                                                            |           |
|--------------------|----------------|----------------|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|               | ** **     | **** **** | **** **** | **** ****                                                                                                                                        |           |   |
|               | ** **     | **** **** | **** **** | ****PART I. FINANCIAL INFORMATION****                                                                                                            |           |   |
|               | ** **     | **** **** | **** **** | **** ****                                                                                                                                        |           |   |
| **** ****     | ****1.****     | **** **** | **** **** | ****Financial Statements****                                                                                                                          |           |   |
|               | ** **     | **** **** | **** **** | ****Condensed Consolidated Balance Sheets (Unaudited) as  of March 31, 2006 and December 30, 2005****                                       | **** **** | ** ** |
|               | ** **     | **** **** | **** **** | ****Condensed Consolidated Statements of Operations  (Unaudited) for the Three Months Ended March 31, 2006 and April 1,  2005****           | **** **** | ** ** |
|               | ** **     | **** **** | **** **** | ****Condensed Consolidated Statements of Comprehensive  Income (Unaudited) for the Three Months Ended March 31, 2006 and  April 1, 2005**** | **** **** | ** ** |
|               | ** **     | **** **** | **** **** | ****Condensed Consolidated Statements of Cash Flows  (Unaudited) for the Three Months Ended March 31, 2006 and April 1,  2005****           | **** **** | ** ** |
| **** ****     | **** **** | **** **** | **** **** | ****Notes to Unaudited Condensed Consolidated Financial  Statements****                                                                               | **** **** | ** ** |
| **** ****     | ****2.****     | **** **** | **** **** | ****Management’s  Discussions and Analysis of Financial Condition and Results of Operations****                                                  | **** **** | ** ** |
| **** ****     | ****4.****     | **** **** | **** **** | ****Controls and  Procedures****                                                                                                                      | **** **** | ** ** |
| **** ****     | **** **** | **** **** | **** **** | **** ****                                                                                                                                        | **** **** | **** **** |
|               | ** **     | **** **** | **** **** | ****PART II. OTHER INFORMATION****                                                                                                               |           |   |
|               | ** **     | **** **** | **** **** | **** ****                                                                                                                                        |           |   |
| **** ****     | ****1.****     | **** **** | **** **** | ****Legal Proceedings****                                                                                                                             | **** **** | ** ** |
| **** ****     | ****1A.****    | **** **** | **** **** | ****Risk Factors****                                                                                                                                  | **** **** | ** ** |
|               | 5.             |           |           | Other  Information                                                                                                                                    |           |   |
| **** ****     | ****6.****     | **** **** | **** **** | ****Exhibits****                                                                                                                                      | **** **** | ** ** |
| **** ****     | **** **** | **** **** | **** **** | **** ****                                                                                                                                        | **** **** | **** **** |
| ****SIGNATURES**** | **** **** | ** **     |           |
|                    |                |                |                |                                                                                                                                                       |                |  |  |  |  |  |

** **

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**PART I. FINANCIALINFORMATION**

**ITEM1. Financial Statements**

**INTERLINEBRANDS, INC. (A NEW JERSEY CORPORATION) AND SUBSIDIARIES(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)AS OF MARCH 31, 2006 AND DECEMBER 30, 2005(in thousands, except share and per share data)**
| ** **                                                                                                                                               | ** ** | **March 31,** | ** ** | **December 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                               | ** ** | **2006**           | ** ** | **2005**              | ** ** |
|                                                                                                                                                     |       |               |       |                  |       |
| **ASSETS**                                                                                                                                               | ** ** | ** **         | ** ** | ** **            | ** ** |
| Current Assets:                                                                                                                                          |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                               |       | $                  | 16,712     |                  | $          | 2,958 |   |
| Accounts receivable -  trade (net of allowance for doubtful accounts of $8,475 and $8,150)                                                               |       | 116,704            |       | 113,271               |       |
| Accounts receivable -  other                                                                                                                             |       | 9,068              |       | 12,163                |       |
| Inventory                                                                                                                                                |       | 164,621            |       | 165,282               |       |
| Prepaid expenses and  other current assets                                                                                                               |       | 6,905              |       | 5,498                 |       |
| Deferred income taxes                                                                                                                                    |       | 14,537             |       | 13,945                |       |
| Total current assets                                                                                                                                     |       | 328,547            |       | 313,117               |       |
| Property and equipment,  net                                                                                                                             |       | 29,159             |       | 29,865                |       |
| Goodwill                                                                                                                                                 |       | 249,554            |       | 249,574               |       |
| Other intangible  assets, net                                                                                                                            |       | 102,527            |       | 104,244               |       |
| Other assets                                                                                                                                             |       | 9,175              |       | 8,969                 |       |
| Total assets                                                                                                                                             |       | $                  | 718,962    |                  | $          | 705,769 |   |
| ** **                                                                                                                                               | ** ** | ** **         | ** ** | ** **            | ** ** |
| **LIABILITIES AND STOCKHOLDER’S  DEFICIT**                                                                                                          | ** ** | ** **         | ** ** | ** **            | ** ** |
| Current Liabilities:                                                                                                                                     |       |               |       |                  |       |
| Accounts payable                                                                                                                                         |       | $                  | 68,902     |                  | $          | 69,182 |   |
| Accrued expenses and  other current liabilities                                                                                                          |       | 22,484             |       | 21,574                |       |
| Accrued merger expenses                                                                                                                                  |       | 5,989              |       | 5,408                 |       |
| Accrued interest                                                                                                                                         |       | 5,064              |       | 2,152                 |       |
| Income taxes payable                                                                                                                                     |       | 5,916              |       | 1,780                 |       |
| Revolver                                                                                                                                                 |       | —             |       | 3,000                 |       |
| Current portion of  long-term debt                                                                                                                       |       | 1,400              |       | 1,400                 |       |
| Capital lease - current                                                                                                                                  |       | 452                |       | 452                   |       |
| Total current  liabilities                                                                                                                               |       | 110,207            |       | 104,948               |       |
|                                                                                                                                                     |       |               |       |                  |       |
| Long-Term Liabilities:                                                                                                                                   |       |               |       |                  |       |
| Deferred income taxes                                                                                                                                    |       | 34,101             |       | 34,646                |       |
| Long-term debt, net of  current portion                                                                                                                  |       | 280,325            |       | 280,675               |       |
| Capital lease - long  term                                                                                                                               |       | 875                |       | 958                   |       |
| Total liabilities                                                                                                                                        |       | 425,508            |       | 421,227               |       |
| Commitments and  contingencies                                                                                                                           |       |               |       |                  |       |
| Senior preferred stock,  $0.01 par value, 1 share authorized and outstanding as of March 31, 2006  and December 30, 2005; at liquidation value |       | 452,688            |       | 437,420               |       |
|                                                                                                                                                     |       |               |       |                  |       |
| Stockholder’s deficit:                                                                                                                              |       |               |       |                  |       |
| Common stock; no par  value, 100 authorized, issued and outstanding as of March 31, 2006 and  December 30, 2005                                |       | 178,074            |       | 177,586               |       |
| Accumulated deficit                                                                                                                                      |       | (338,283           | )          | (331,456              | )          |
| Accumulated other  comprehensive income                                                                                                                  |       | 975                |       | 992                   |       |
| Total stockholder’s  deficit                                                                                                                        |       | (159,234           | )          | (152,878              | )          |
| Total liabilities and stockholder’s deficit                                                                                                         |       | $                  | 718,962    |                  | $          | 705,769 |   |

 

*See accompanying notes to unaudited condensedconsolidated financial statements.*

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**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) ANDSUBSIDIARIES(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)THREE MONTHS ENDED MARCH 31, 2006 AND APRIL 1, 2005(in thousands, except share and per share data)**
| ** **                                    | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|
| ** **                                    | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| ** **                                    | ** ** | **2006**                         | ** ** | **2005** | ** ** |
|                                          | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Net sales                                     |       | $                                | 224,674    |   | $ | 196,491 |   |
| Cost of sales                                 |       | 138,966                          |       | 121,005 |   |
| Gross profit                                  |       | 85,708                           |       | 75,486 |   |
|                                          |       |                             |       |   |   |
| Operating Expenses:                           |       |                             |       |   |   |
| Selling, general  and administrative expenses |       | 61,678                           |       | 53,740 |   |
| Depreciation and  amortization                |       | 3,445                            |       | 3,117 |   |
| Total operating  expense                      |       | 65,123                           |       | 56,857 |   |
| Operating income                              |       | 20,585                           |       | 18,629 |   |
|                                          |       |                             |       |   |   |
| Loss on extinguishment  of debt               |       | —                           |       | (10,340 | ) |
| Interest expense                              |       | (6,952                           | )          | (6,270 | ) |
| Interest income                               |       | 60                               |       | 120 |   |
| Other income                                  |       | 126                              |       | 168 |   |
| Income before  income taxes                   |       | 13,819                           |       | 2,307 |   |
| Provision for income  taxes                   |       | 5,378                            |       | 914 |   |
| Net income                                    |       | 8,441                            |       | 1,393 |   |
| Preferred stock  dividends                    |       | (15,268                          | )          | (13,310 | ) |
| Net loss applicable to common stockholder     |       | $                                | (6,827     | ) | $ | (11,917 | ) |

 

*Seeaccompanying notes to unaudited condensed consolidated financial statements.*

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**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) ANDSUBSIDIARIES(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)THREE MONTHS ENDED MARCH 31, 2006 AND APRIL 1, 2005(in thousands, except share and per share data)**
| ** **                          | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|
| ** **                          | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| ** **                          | ** ** | **2006**                         | ** ** | **2005** | ** ** |
|                                | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Net income                          |       | $                                | 8,441      |   | $ | 1,393 |   |
|                                |       |                             |       |   |   |
| Other comprehensive  income (loss): |       |                             |       |   |   |
| Foreign currency  translation       |       | (17                              | )          | (38 | ) |
|                                |       |                             |       |   |   |
| Total comprehensive income          |       | $                                | 8,424      |   | $ | 1,355 |   |

 

*Seeaccompanying notes to unaudited condensed consolidated financial statements.*

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**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) ANDSUBSIDIARIES(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)THREE MONTHS ENDED MARCH 31, 2006 AND APRIL 1, 2005(in thousands)**
| ** **                                                                                   | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                   | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| ** **                                                                                   | ** ** | **2006**                         | ** ** | **2005** | ** ** |
|                                                                                         | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Cash Flows from  Operating Activities:                                                       |       |                             |       |   |   |
| Net income                                                                                   |       | $                                | 8,441      |   | $ | 1,393 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: |       |                             |       |   |   |
| Depreciation and  amortization                                                               |       | 3,445                            |       | 3,117 |   |
| Amortization and  write-off of debt issuance costs                                           |       | 418                              |       | 2,685 |   |
| Redemption  premium on 11.5% senior subordinated notes                                       |       | —                           |       | 8,050 |   |
| Stock based  compensation                                                                    |       | 716                              |       | 238 |   |
| Deferred income  taxes                                                                       |       | (1,117                           | )          | 356 |   |
| Provision for  doubtful accounts                                                             |       | 836                              |       | 354 |   |
|                                                                                         |       |                             |       |   |   |
| Changes in  assets and liabilities, net of business acquired:                                |       |                             |       |   |   |
| Accounts  receivable - trade                                                                 |       | (4,269                           | )          | (7,528 | ) |
| Accounts  receivable - other                                                                 |       | 3,095                            |       | 1,536 |   |
| Inventory                                                                                    |       | 661                              |       | (468 | ) |
| Prepaid expenses  and other current assets                                                   |       | (1,407                           | )          | (1,888 | ) |
| Other assets                                                                                 |       | (206                             | )          | (543 | ) |
| Accounts payable                                                                             |       | (280                             | )          | 665 |   |
| Accrued expenses  and other current liabilities                                              |       | 527                              |       | (1,478 | ) |
| Accrued merger  expenses                                                                     |       | (64                              | )          | 2,810 |   |
| Accrued interest                                                                             |       | 3,837                            |       | (111 | ) |
| Accrued Income  taxes payable                                                                |       | 4,136                            |       | (6,033 | ) |
| Net cash provided  by operating activities                                                   |       | 18,769                           |       | 3,155 |   |
| Cash Flows from  Investing Activities:                                                       |       |                             |       |   |   |
| Purchase of  property and equipment, net                                                     |       | (1,527                           | )          | (1,543 | ) |
| Purchase of  businesses, net of cash acquired                                                |       | (193                             | )          | (1,009 | ) |
| Net cash used in  investing activities                                                       |       | (1,720                           | )          | (2,552 | ) |
| Cash Flows from  Financing Activities:                                                       |       |                             |       |   |   |
| Decrease (increase)  in revolver, net                                                        |       | (3,000                           | )          | 17,000 |   |
| Repayment of  long-term debt                                                                 |       | (350                             | )          | (70,250 | ) |
| Payment of  redemption premium on 11.5% senior subordinated notes                            |       | —                           |       | (8,050 | ) |
| Contribution from  Parent, net proceeds from exercise of underwriters over-allotment options |       | —                           |       | 1,755 |   |
| Excess tax  benefits from stock-based compensation                                           |       | 155                              |       | — |   |
| Payments on  capital lease obligations                                                       |       | (83                              | )          | — |   |
| Net cash used in  financing activities                                                       |       | (3,278                           | )          | (59,545 | ) |
| Effect of exchange rate  changes on cash and cash equivalents                                |       | (17                              | )          | (38 | ) |
| Net increase (decrease)  in cash and cash equivalents                                        |       | 13,754                           |       | (58,980 | ) |
| Cash and cash  equivalents at beginning of period                                            |       | 2,958                            |       | 69,178 |   |
| Cash and cash  equivalents at end of period                                                  |       | $                                | 16,712     |   | $ | 10,198 |   |
|                                                                                         | ** ** | ** **                       |       | ** ** | ** ** |
| Supplemental Disclosure  of Cash Flow Information:                                           |       |                             |       |   |   |
| Cash paid during  the period for:                                                            |       |                             |       |   |   |
| Interest                                                                                     |       | $                                | 2,697      |   | $ | 1,611 |   |
| Income taxes  (net of refunds)                                                               |       | $                                | 2,246      |   | $ | 6,595 |   |
|                                                                                         |       |                             |       |   |   |
| Schedule of Non-Cash  Investing and Financing Activities:                                    |       |                             |       |   |   |
| Dividends on  preferred stock                                                                |       | $                                | 15,268     |   | $ | 13,310 |   |
| Adjustment to  liabilities assumed and goodwill on businesses acquired                       |       | $                                | 20         |   | $ | — |   |

 

*Seeaccompanying notes to unaudited condensed consolidated financial statements.*

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**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) ANDSUBSIDIARIES(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.**              DESCRIPTIONOF BUSINESS AND BASIS OF PRESENTATION

*Business*

Interline Brands, Inc., a New Jersey corporation,and its subsidiaries (“Interline” or the “Company”) (a wholly owned subsidiaryof Interline Brands, Inc., a Delaware corporation) is a direct marketerand specialty distributor of maintenance, repair and operations (“MRO”)products. The Company sells plumbing, electrical, hardware, security, heating,ventilation and air conditioning (“HVAC”) and other MRO products. Interline’shighly diverse customer base consists of multi-family housing, educational,lodging and health care facilities, professional contractors and specialtydistributors.

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

During December 2004, a reincorporation mergeroccurred and Interline Brands, Inc., a Delaware corporation, (“InterlineDelaware” or the “Parent”) became the parent company of the Company, itsprincipal operating subsidiary. In the reincorporation merger, the holders ofthe preferred stock of Interline received an aggregate of $55 million incash and 19,183,321 shares of Interline Delaware’s common stock and the holdersof the common stock of Interline received 0.01218 shares of InterlineDelaware’s common stock per share of Interline common stock, or 66,667 sharesof Interline Delaware’s common stock in total. In addition, options to purchaseshares of the common stock of Interline were converted into options to purchaseshares of Interline Delaware’s common stock.

*Basis ofPresentation*

The accompanying unaudited interim condensedconsolidated financial statements of Interline have been prepared in accordancewith accounting principles generally accepted in the United States of Americaand instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, certain information and footnote disclosures normally included infinancial statements included in our Annual Report on Form 10-K havebeen condensed or omitted. The accompanying unaudited interim condensedconsolidated financial statements should be read in conjunction with Management’sDiscussion and Analysis of Financial Condition and Results of Operationscontained in this report and the audited consolidated financial statements andrelated notes included in our Annual Report on Form 10-K for thefiscal year ended December 30, 2005 filed with the Securities and ExchangeCommission (“SEC”).

All adjustments which are in the opinion of management,necessary for a fair statement of the results for the interim periods presentedhave been recorded. The results of operations for the interim periods presentedare not necessarily indicative of the results to be expected for the full year.

The preparation of condensed consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the condensed consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period. Significant estimates include valuation reserves foraccounts receivable, inventory and income taxes, reserves for self-insuranceprograms, valuation of goodwill and valuation of assets and liabilities assumedin the acquisition of Copperfield. Actual results could differ from thoseestimates.

*Reclassifications*

Certain prior year amounts in the unaudited condensedconsolidated financial statements and the notes thereto have been reclassifiedto conform to the current year presentation. These reclassifications had noeffect on total stockholder’s equity or net income.

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*SegmentInformation*

The Company is in one industry, the distribution ofmaintenance, repair and operations, or MRO, products. In accordance withStatement of Financial Accounting Standards (“SFAS”) No. 131, *Disclosure about Segments of an Enterprise and Related Information*,the Company has one operating segment. Our net sales for the three-monthperiods ended March 31, 2006 and April 1, 2005 by product categorywere (in thousands): 

|                                            | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|
| ** **                                 | ** ** | **March 31,**               | ** ** | **April 1,** | ** ** |
| **Product Category**                  | ** ** | ** **                       | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                 | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Plumbing                                   |       | $                                | 95,486     |   | $ | 90,386 |   |
| Electrical                                 |       | 30,106                           |       | 29,474 |   |
| Heating, Ventilation  and Air Conditioning |       | 26,363                           |       | 13,625 |   |
| Security                                   |       | 13,705                           |       | 13,754 |   |
| Appliances                                 |       | 12,582                           |       | 11,789 |   |
| Hardware                                   |       | 12,357                           |       | 11,789 |   |
| Other                                      |       | 34,075                           |       | 25,674 |   |
|                                       |       |                             |       |   |   |
| Total                                      |       | $                                | 224,674    |   | $ | 196,491 |   |
|                                            |            |                                  |            |  |  |  |  |  |  |

 

**2.     STOCK-BASED COMPENSATION**

Effective December 31, 2005, the Company adoptedthe provisions of SFAS No. 123R, *Share-Based Payment*,using the modified prospective application transition method. Under this method,the share-based compensation cost recognized beginning December 31, 2005includes compensation cost for (i) all share-based payments granted priorto, but not vested as of December 31, 2005, based on the grant date fairvalue originally estimated in accordance with the provisions of SFAS No. 123,*Accounting for Stock-Based Compensation*, and (ii) allshare-based payments granted subsequent to December 30, 2005, based on thegrant date fair value estimated in accordance with the provisions of SFAS No. 123R.Compensation cost under SFAS No. 123R is recognized ratably using thestraight-line attribution method over the expected vesting period or to theretirement eligibility date, if less than the vesting period when vesting isnot contingent upon any future performance. In addition, pursuant to SFAS No. 123,the Company is required to estimate the amount of expected forfeitures whencalculating the compensation costs, instead of accounting for forfeitures asincurred, which was the method previously used by the Company. As of December 31,2005, the cumulative effect of adopting the estimated forfeiture method was notsignificant. Prior periods are not restated under this transition method.

SFAS No. 123R also requires the Company toreflect the tax benefit from the exercise of stock options in the statement ofcash flows as a cash inflow from financing activities. Prior to the adoption ofSFAS No. 123R, these tax benefits have been reflected as a cash inflowfrom operating activities. The prior year statement of cash flows has not beenrestated. There were no stock options exercised during the three months ended March 31,2006 and April 1, 2005.

The effect of adopting SFAS No. 123R was notmaterial to the Company’s results of operations for the three months ended March 31,2006.

6

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Prior to December 31, 2005, the Company accountedfor stock-based compensation plans in accordance with the provisions ofAccounting Principles Board (“APB”) Opinion No. 25, *Accountingfor Stock Issued to Employees*, as permitted by SFAS No. 123.The Company elected to use the intrinsic value method of accounting foremployee and director stock-based compensation expense for its nonqualifiedemployee and director stock option awards and did not recognize compensationexpense for the issuance of options with an exercise price equal to or greaterthan the market price of the underlying common stock at the date of grant. Hadthe Company elected to adopt the fair value approach as prescribed by SFAS No. 123,which charges earnings for the estimated fair value of stock options, the proforma net income and pro forma earnings per share for the three months ended April 1,2005 would have been as follows (in thousands, except per share amounts):

| Net income as reported                                                                                                                   |   | $       | 1,393   |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|---------|--------|
|                                                                                                                                     |   |    |    |
| Add: Stock-based  compensation expense included in reported net income, net of related tax  effects                                      |   | 144     |    |
|                                                                                                                                     |   |    |    |
| Deduct: Total  stock-based compensation expense determined under the fair value-based method  for all awards, net of related tax effects |   | (144    | )       |
|                                                                                                                                     |   |    |    |
| Pro forma net income                                                                                                                     |   | 1,393   |    |
|                                                                                                                                     |   |    |    |
| Preferred stock  dividends                                                                                                               |   | (13,310 | )       |
|                                                                                                                                     |   |    |    |
| Net loss applicable to  common stockholders                                                                                              |   | $       | (11,917 | )      |

* *

*Stock IncentivePlans*

During 2000, the Company established a Stock AwardPlan, (the “2000 Plan”), under which the Company may award a total of 6,395shares of common stock in the form of incentive stock options (which may beawarded to key employees only), nonqualified stock options, stock appreciationrights, or SARs, and restricted stock awards, all of which may be awarded todirectors, officers, key employees and consultants. The Company’s compensationcommittee will determine in its sole discretion whether a SAR is settled incash, shares or a combination of cash and shares. In connection with the IPO ofInterline Delaware in December 2004, options to purchase shares of theCompany’s common stock were converted into options to purchase shares ofInterline Delaware’s common stock.

During 2004, Interline Delaware adopted the 2004Equity Incentive Plan, (the “2004 Plan”), under which Interline Delaware mayaward 3,175,000 shares in the form of incentive stock options, nonqualifiedstock options, stock appreciation rights, or SARs, restricted stock units (“RSUs”),restricted stock and stock bonus awards, all of which may be awarded to anyemployee, director, officer or consultant of the Company or Interline Delaware.

These plans allow Interline Delaware to fulfill itsincentive stock options, nonqualified stock options, SARs, RSUs, and restrictedstock and stock bonus awards obligations using unissued or treasury shares. Thetotal stock-based compensation expense, which is included in the unauditedcondensed consolidated statement of operations, was $0.7 million for the threemonths ended March 31, 2006.

*Stock Options*

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

Under the terms of the 2004 plan and unless thecompensation committee of Interline Delaware determines otherwise, the exerciseprice of the options will not be less than the fair market value of the commonstock at the time of grant, vest in 25% increments over four years and may notbe exercisable after the expiration of ten years from the date of grant.

7

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As permitted by SFAS No. 123R, the fair values ofstock options were estimated using the Black-Scholes option-pricing model.Expected volatility is based on historical performance of Interline Delaware’sstock. The Company also uses historical data to estimate the timing and amountof stock option exercises and forfeitures. The expected life represents theperiod of time that stock options are expected to remain unvested and is basedon 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 aremaining term equal to the expected option life assumed at the date of grant.The Black-Scholes weighted-average assumptions for the three months ended March 31,2006 were as follows:
| Expected volatility       |   | 26.0   | %      |
|---------------------------|--------|--------|--------|
|                      |   |   |   |
| Expected dividends        |   | 0.0    | %      |
|                      |   |   |   |
| Expected life (in  years) |   | 5.0    |   |
|                      |   |   |   |
| Risk-free interest rate   |   | 4.8    | %      |

 

The weighted average fair value of stock optionsgranted during the three months ended March 31, 2006 was $7.56 per option.There were no stock options granted during the three months ended April 1,2005.

A summary of stock option activity as of March 31,2006, and changes during the three-months then ended is presented below:

|                                        | ** ** | ** ** | ** ** | ** **    | ** ** | **Weighted-**       | ** ** | ** **              | ** ** |
|----------------------------------------|------------|------------|------------|---------------|------------|---------------------|------------|-------------------------|------------|
| ** **                             | ** ** | ** ** | ** ** | **Weighted-** | ** ** | **Average**         | ** ** | ** **              | ** ** |
| ** **                             | ** ** | ** ** | ** ** | **Average**   | ** ** | **Remaining**       | ** ** | **Aggregate**           | ** ** |
| ** **                             | ** ** | ** ** | ** ** | **Exercise**  | ** ** | **Contractual**     | ** ** | **Intrinsic**           | ** ** |
| **Options**                            | ** ** | ** ** | ** ** | **Shares**    | ** ** | **Price**           | ** ** | **Term**                | ** ** | **Value (a)** | ** ** |
| ** **                             | ** ** | ** ** | ** ** | ** **    | ** ** | **(in years)** | ** ** | **(in thousands)** | ** ** |
|                                   |       |       |       |          |       |                |       |                    |       |
| Outstanding at  December 30, 2005 |       | 2,274,027  |       | $             | 17.42      |                |       |                    |       |   |
|                                   |       |       |       |          |       |                |       |                    |       |
| Granted                                |       | 345,202    |       | 23.31         |       |                |       |                    |       |
|                                   |       |       |       |          |       |                |       |                    |       |
| Forfeited or expired                   |       | (51        | )          | 41.05         |       |                |       |                    |       |
|                                   |       |       |       |          |       |                |       |                    |       |
| Outstanding at  March 31, 2006    |       | 2,619,178  |       | $             | 18.20      |                | 8.5        |                    | $          | 19,751 |   |
|                                   |       |       |       |          |       |                |       |                    |       |
| Exercisable at  March 31, 2006    |       | 2,238,945  |       | $             | 17.25      |                | 8.8        |                    | $          | 18,913 |   |
|                                        |            |            |            |               |            |                     |            |                         |            |  |  |  |  |

 

(a)             Theaggregate intrinsic value represents the amount by which fair value of theunderlying stock at period end exceeds the stock option exercise price.

As of March 31, 2006, there was $2.8 million oftotal unrecognized compensation cost related to unvested stock options. Thecost is expected to be recognized over a weighted-average period of 3.9 years.

*Restricted Stock and Restricted Stock Units*

Shares of restricted stock granted under the 2004 Planto senior management do not have an exercise price. The stock-basedcompensation expense associated with the restricted stock is based on thequoted market price of Interline Delaware’s shares of common stock on the dateof grant. The restricted stock awards will vest (depending on the grant) either(i) on an accelerated basis contingent upon the executive’s continuedemployment in one-third installments over three years provided that certainpre-established annual percentage increases in our earnings per share areattained or on the seventh anniversary of the date of grant if the executiveremains in our employ for seven years; (ii) evenly over two years; or (iii) atthe end of three years.

RSUs granted under the 2004 Plan do not have anexercise price. The stock-based compensation expense associated with the RSUsis based on the quoted market price of Interline Delaware’s shares of commonstock on the date of grant. One half of the RSUs will vest on an acceleratedbasis contingent upon the executive’s continued employment in two installmentsover two years provided that certain pre-established annual percentageincreases in our earnings per share are attained and one half will vest evenlyover three years.

8

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In prior periods, unearned stock compensation wasrecorded as deferred compensation within stockholder’s equity at the date ofaward based on the quoted market price of Interline Delaware’s common stock onthe date of grant and amortized to expense using the straight-line method fromthe grant date through the vesting date. Upon adoption of SFAS No. 123R,the $1.9 million of deferred compensation as of December 30, 2005 wasrequired to be charged against additional paid-in capital.

A summary status of restricted stock and RSUs as of March 31,2006, and changes during the three-months then ended is presented below:

|                                     | ** ** | **Restricted Stock** | ** ** | **Restricted Stock Units** | ** ** |
|-------------------------------------|------------|---------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | ** **                | ** ** | **Weighted-**                        | ** ** | ** ** | ** ** | **Weighted-** | ** ** |
| ** **                          | ** ** | ** **                | ** ** | **Average**                          | ** ** | ** ** | ** ** | **Average** | ** ** |
| ** **                          | ** ** | ** **                | ** ** | **Grant Date**                  | ** ** | ** ** | ** ** | **Grant Date** | ** ** |
| ** **                          | ** ** | **Shares**                | ** ** | **Fair Value**                  | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
|                                |       |                      |       |                                 |       |   |   |   |   |
| Unvested at December 30,  2005 |       | 190,820                   |       | $                                    | 15.11      |   | — |   | $ | — |   |
|                                |       |                      |       |                                 |       |   |   |   |   |
| Granted                             |       | —                    |       | —                               |       | 173,361 |   | 23.32 |   |
|                                |       |                      |       |                                 |       |   |   |   |   |
| Vested                              |       | (63,607                   | )          | 15.00                                |       | — |   | — |   |
|                                |       |                      |       |                                 |       |   |   |   |   |
| Unvested at  March 31, 2006    |       | 127,213                   |       | $                                    | 15.17      |   | 173,361 |   | $ | 23.32 |   |

 

As of March 31, 2006, there was $5.3 million of totalunrecognized compensation cost related to nonvested restricted stock and RSUs.The cost is expected to be recognized over a weighted-average period of 1.5years. The total fair value of restricted stock vested during the three monthsended March 31, 2006 was $1.5 million. No restricted stock vested duringthe three months ended April 1, 2005.

**3.**              DEBT

Long-term debt at March 31, 2006 and December 30,2005 consists of the following (in thousands):

|                                 | ** ** | **March 31,** | ** ** | **December 30,** | ** ** |
|---------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                      | ** ** | **2006**           | ** ** | **2005**              | ** ** |
|                            |       |               |       |                  |       |
| Term loans                      |       | $                  | 148,450    |                  | $          | 148,800 |   |
| Note payable                    |       | 3,275              |       | 3,275                 |       |
| Senior Subordinated  Noes-11.5% |       | 130,000            |       | 130,000               |       |
|                            |       |               |       |                  |       |
|                            |       | 281,725            |       | 282,075               |       |
| Less current portion            |       | (1,400             | )          | (1,400                | )          |
|                            |       |               |       |                  |       |
|                            |       | $                  | 280,325    |                  | $          | 280,675 |   |

 

In May 2003, the Company completed an offering of$200 million of 11.5% senior subordinated notes due 2011 and entered into a$205.0 million senior secured credit facility.

The Company elected to redeem $70.0 million of the11.5% senior subordinated notes using proceeds from Interline Delaware’s IPOand gave the 30-day notice, required by the indenture, on December 20,2004. In January 2005, the Company recorded a loss on extinguishment ofdebt of $10.3 million, consisting of the write-off of deferred financing costsof $2.3 million and the premium of $8.1 million on the $70.0 million redemptionof 11.5% senior subordinated notes.

In December 2004, the Company amended its termloan facility and revolving loan facility. The term loan was reduced to $100.0million 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,the Company paid down $31.3 million of the term loan using proceeds fromInterline Delaware’s IPO. The Company also amended its credit facility on July 7,2005, to permit the incurrence of an additional $50.0 million term loan, havingsubstantially the same terms as the existing term loan in connection with theacquisition of Copperfield. On August 8, 2005, the Company again amendedits credit facility to lower the interest rate spreads applicable

9

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to the additional$50.0 million term loan. The amended credit facility provides for aggregatecommitments of $250.0 million, consisting of (1) a revolving loan facilityof $100.0 million, of which a portion not exceeding $20.0 million will beavailable in the form of letters of credit, and (2) a term loan facilityof $150.0 million.

Borrowings under the amended term loan facility andrevolving loan facility bear interest, at the Company’s option, at either LIBORor at the alternate base rate plus a spread. The indebtedness under the amendedcredit facility is guaranteed by Interline Delaware and by our domestic subsidiaries.Interest rates in effect on borrowings under the term loan facilities at March 31,2006 ranged from 7.25% for LIBOR based borrowings and 9.00% for prime basedborrowings under the $100.0 million tranche B-1 term loan and 6.75% forLIBOR based borrowings and 8.75% for prime based borrowings under the $50.0million tranche B-2 term loan. Outstanding letters of credit under therevolving loan facility are subject to a per annum fee equal to the applicablespread over the adjusted LIBOR for revolving loans. The term loan facilitymatures on December 31, 2010 and the revolving loan facility matures on May 31,2008. Debt issuance costs capitalized in connection with the amended creditfacility were approximately $1.1 million.

As of March 31, 2006, the Company had $89.7million available under its revolving loan facility. Total letters of creditissued under this facility as of March 31, 2006 were $10.3 million. Therewere no borrowings under the revolving loan facility at March 31, 2006.The credit facility is secured by substantially all of the assets of theCompany.

The credit facility contains customary affirmative andnegative covenants that limit the Company’s ability to incur additionalindebtedness, pay dividends on its common stock or redeem, repurchase or retireits common stock or subordinated indebtedness, make certain investments, sellassets, and consolidate, merge or transfer assets, and that require the Companyto maintain a maximum debt to cash flow ratio and a minimum interest expensecoverage ratio. The Company was in compliance with all covenants at March 31,2006.

In April 2003, the Company issued a non-recoursenote payable in the principal amount of $3.3 million for the purchase of aninvestment. This note, which is secured only by the investment, bears interestat a rate of 4.0% per annum, with principal due in full in April 2010.

**4.**              SUBSIDIARY GUARATORS

The Company completed an offering of $200 millionprincipal amount of 11.5% senior subordinated notes in connection with itsRefinancing Transactions in 2003, of which $130 million principal amountremains outstanding. The Company filed a registration statement with theSecurities and Exchange Commission with respect to an exchange offer for the11.5% senior subordinated notes and with respect to resales of the seniorsubordinated notes by an affiliate of the Company for market-making purposes. Theregistration statement was declared effective by the SEC and the exchange offerwas consummated. The Company’s 11.5% senior subordinated notes are fully andunconditionally guaranteed, jointly and severally, on a subordinated basis byWilmar Holdings, Inc., Wilmar Financial, Inc. and GlenwoodAcquisition LLC (100%-owned subsidiaries of the Company). The guarantees bythese subsidiary guarantors (the “Subsidiary Guarantors”) are senior to any oftheir existing and future subordinated obligations, equal in right of paymentwith any of their existing and future senior subordinated indebtedness andsubordinated to any of their existing and future senior indebtedness. Accordingly,condensed consolidating financial statements for Interline Brands, Inc.and the Subsidiary Guarantors are presented below.

10

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**CONSOLIDATINGBALANCE SHEETINTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORSAs of March 31, 2006**
| ** **                                                | ** ** | **Company**                                         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                | ** ** | **Excluding**                                       | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                | ** ** | **Subsidiary**                                      | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                | ** ** | **Guarantors**                                      | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                | ** ** | **(In thousands, except share and per share data)** | ** ** |
| ASSETS                                                    |       |                                                |       |           |       |             |       |             |       |
| CURRENT ASSETS:                                           |       |                                                |       |           |       |             |       |             |       |
| Cash and cash  equivalents                                |       | $                                                   | 16,692     |           | $          | 20               |       | $                | —     |   | $ | 16,712 |   |
| Accounts  receivable—trade, net                      |       | 116,704                                             |       | —         |       | —           |       | 116,704          |       |
| Accounts  receivable—other                           |       | 9,068                                               |       | —         |       | —           |       | 9,068            |       |
| Inventory                                                 |       | 164,621                                             |       | —         |       | —           |       | 164,621          |       |
| Prepaid expenses  and other current assets                |       | 6,902                                               |       | 3              |       | —           |       | 6,905            |       |
| Deferred income  taxes                                    |       | 14,537                                              |       | —         |       | —           |       | 14,537           |       |
| Due from Parent                                           |       | —                                              |       | 86,476         |       | (86,476          | )          | —           |       |
| Investment in  subsidiaries                               |       | 42,697                                              |       | —         |       | (42,697          | )          | —           |       |
| Total current  assets                                     |       | 371,221                                             |       | 86,499         |       | (129,173         | )          | 328,547          |       |
| PROPERTY AND EQUIPMENT,  net                              |       | 29,159                                              |       | —         |       | —           |       | 29,159           |       |
| GOODWILL                                                  |       | 249,554                                             |       | —         |       | —           |       | 249,554          |       |
| OTHER INTANGIBLE  ASSETS, net                             |       | 102,527                                             |       | —         |       | —           |       | 102,527          |       |
| OTHER ASSETS                                              |       | 5,900                                               |       | 7,833          |       | (4,558           | )          | 9,175            |       |
| TOTAL ASSETS                                              |       | $                                                   | 758,361    |           | $          | 94,332           |       | $                | (133,731   | ) | $ | 718,962 |   |
| LIABILITIES AND  STOCKHOLDER’S EQUITY (DEFICIT)      |       |                                                |       |           |       |             |       |             |       |
| CURRENT  LIABILITIES:                                     |       |                                                |       |           |       |             |       |             |       |
| Accounts payable                                          |       | 68,901                                              |       | $              | 1          |             | $          | —           |       | $ | 68,902 |   |
| Accrued expenses  and other current liabilities           |       | 22,484                                              |       | —         |       | —           |       | 22,484           |       |
| Accrued interest  payable                                 |       | 5,064                                               |       | —         |       | —           |       | 5,064            |       |
| Accrued merger  expenses                                  |       | 5,989                                               |       | —         |       | —           |       | 5,989            |       |
| Income taxes  payable                                     |       | 4,416                                               |       | 1,500          |       | —           |       | 5,916            |       |
| Current portion  of long-term debt                        |       | 1,400                                               |       | —         |       | —           |       | 1,400            |       |
| Capital lease -  current                                  |       | 452                                                 |       | —         |       | —           |       | 452              |       |
| Due to  subsidiaries                                      |       | 44,175                                              |       | —         |       | (44,175          | )          | —           |       |
| Total current  liabilities                                |       | 152,881                                             |       | 1,501          |       | (44,175          | )          | 110,207          |       |
| LONG-TERM  LIABILITIES:                                   |       |                                                |       |           |       |             |       |             |       |
| Deferred income  taxes                                    |       | 34,101                                              |       | —         |       | —           |       | 34,101           |       |
| Long-term debt,  net of current portion                   |       | 277,050                                             |       | 3,275          |       | 280,325          |       |             |       |
| Long-term debt,  net of current portion                   |       | 875                                                 |       | —         |       | —           |       | 875              |       |
| TOTAL  LIABILITIES                                        |       | 464,907                                             |       | 4,776          |       | (44,175          | )          | 425,508          |       |
| SENIOR PREFERRED  STOCK                                   |       | 452,688                                             |       | —         |       | —           |       | 452,688          |       |
| STOCKHOLDER’S  EQUITY (DEFICIT):                     |       |                                                |       |           |       |             |       |             |       |
| Common stock                                              |       | 178,074                                             |       | —         |       | —           |       | 178,074          |       |
| Additional  paid-in-capital                               |       | —                                              |       | 43,285         |       | (43,285          | )          | —           |       |
| Accumulated  deficit                                      |       | (338,283                                            | )          | 46,271         |       | (46,271          | )          | (338,283         | )          |
| Accumulated  other comprehensive loss                     |       | 975                                                 |       | —         |       | —           |       | 975              |       |
| TOTAL  STOCKHOLDER’S EQUITY (DEFICIT)                |       | (159,234                                            | )          | 89,556         |       | (89,556          | )          | (159,234         | )          |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) |       | $                                                   | 758,361    |           | $          | 94,332           |       | $                | (133,731   | ) | $ | 718,962 |   |

 

11

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**CONSOLIDATINGBALANCE SHEETINTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORSAs of December 30, 2005**
| ** **                                                | ** ** | **Company**                                                                            | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                | ** ** | **Excluding**                                                                          | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                | ** ** | **Subsidiary**                                                                         | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                | ** ** | **Guarantors**                                                                         | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                | ** ** | **(In thousands, except share and per share data)** | ** ** |
| ASSETS                                                    |       |                                                                                   |       |           |       |             |       |             |       |
| CURRENT ASSETS:                                           |       |                                                                                   |       |           |       |             |       |             |       |
| Cash and cash  equivalents                                |       | $                                                                                      | 2,610      |           | $          | 348              |       | $                | —     |   | $ | 2,958 |   |
| Accounts  receivable - trade, net                         |       | 108,926                                                                                |       | 4,345          |       | —           |       | 113,271          |       |
| Accounts  receivable - other                              |       | 11,739                                                                                 |       | 424            |       | —           |       | 12,163           |       |
| Inventory                                                 |       | 156,696                                                                                |       | 8,586          |       | —           |       | 165,282          |       |
| Prepaid expenses  and other current assets                |       | 5,183                                                                                  |       | 315            |       | —           |       | 5,498            |       |
| Deferred income  taxes                                    |       | 13,139                                                                                 |       | 806            |       | —           |       | 13,945           |       |
| Due from Parent                                           |       | —                                                                                 |       | 17,518         |       | (17,518          | )          | —           |       |
| Investment in  subsidiaries                               |       | 117,159                                                                                |       | —         |       | (117,159         | )          | —           |       |
| Total current  assets                                     |       | 415,452                                                                                |       | 32,342         |       | (134,677         | )          | 313,117          |       |
| PROPERTY AND  EQUIPMENT, net                              |       | 28,255                                                                                 |       | 1,610          |       | —           |       | 29,865           |       |
| GOODWILL                                                  |       | 212,682                                                                                |       | 36,892         |       | —           |       | 249,574          |       |
| OTHER INTANGIBLE  ASSETS, net                             |       | 78,288                                                                                 |       | 25,956         |       | —           |       | 104,244          |       |
| OTHER ASSETS                                              |       | 5,694                                                                                  |       | 7,708          |       | (4,433           | )          | 8,969            |       |
| TOTAL ASSETS                                              |       | $                                                                                      | 740,371    |           | $          | 104,508          |       | $                | (139,110   | ) | $ | 705,769 |   |
| LIABILITIES AND  STOCKHOLDER’S EQUITY (DEFICIT)      |       |                                                                                   |       |           |       |             |       |             |       |
| CURRENT  LIABILITIES:                                     |       |                                                                                   |       |           |       |             |       |             |       |
| Revolver                                                  |       | $                                                                                      | 3,000      |           | $          | —           |       | $                | —     |   | $ | 3,000 |   |
| Current portion  of long-term debt                        |       | 1,400                                                                                  |       | —         |       | —           |       | 1,400            |       |
| Accounts payable                                          |       | 63,765                                                                                 |       | 5,417          |       | —           |       | 69,182           |       |
| Accrued expenses  and other current liabilities           |       | 20,211                                                                                 |       | 1,815          |       | —           |       | 22,026           |       |
| Accrued interest  payable                                 |       | 2,152                                                                                  |       | —         |       | —           |       | 2,152            |       |
| Accrued merger  expenses                                  |       | 5,408                                                                                  |       | —         |       | —           |       | 5,408            |       |
| Income taxes  payable                                     |       | 29                                                                                     |       | 1,751          |       | —           |       | 1,780            |       |
| Due to  subsidiaries                                      |       | 47,818                                                                                 |       | —         |       | (47,818          | )          | —           |       |
| Total current  liabilities                                |       | 143,783                                                                                |       | 8,983          |       | (47,818          | )          | 104,948          |       |
| LONG-TERM  LIABILITIES:                                   |       |                                                                                   |       |           |       |             |       |             |       |
| Deferred income  taxes                                    |       | 34,646                                                                                 |       | —         |       | —           |       | 34,646           |       |
| Long-term debt,  net of current portion                   |       | 277,400                                                                                |       | 3,275          |       | —           |       | 280,675          |       |
| Capital leases                                            |       | —                                                                                 |       | 958            |       | —           |       | 958              |       |
| TOTAL  LIABILITIES                                        |       | 455,829                                                                                |       | 13,216         |       | (47,818          | )          | 421,227          |       |
| SENIOR PREFERRED  STOCK                                   |       | 437,420                                                                                |       | —         |       | —           |       | 437,420          |       |
| STOCKHOLDER’S  EQUITY (DEFICIT):                     |       |                                                                                   |       |           |       |             |       |             |       |
| Common stock                                              |       | 177,586                                                                                |       | —         |       | —           |       | 177,586          |       |
| Additional  paid-in-capital                               |       | —                                                                                 |       | 43,285         |       | (43,285          | )          | —           |       |
| Accumulated  deficit                                      |       | (331,456                                                                               | )          | 48,007         |       | (48,007          | )          | (331,456         | )          |
| Accumulated  other comprehensive loss                     |       | 992                                                                                    |       | —         |       | —           |       | 992              |       |
| TOTAL  STOCKHOLDER’S EQUITY (DEFICIT)                |       | (152,878                                                                               | )          | 91,292         |       | (91,292          | )          | (152,878         | )          |
| TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) |       | $                                                                                      | 740,371    |           | $          | 104,508          |       | $                | (139,110   | ) | $ | 705,769 |   |

 

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**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORSThree Months Ended March 31, 2006**
| ** **                                         | ** ** | **Company**             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------|------------|-------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                         | ** ** | **Excluding**           | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                         | ** ** | **Subsidiary**          | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                         | ** ** | **Guarantors**          | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                         | ** ** | **(In thousands)** | ** ** |
|                                               |       |                    |       |           |       |             |       |             |       |
| NET SALES                                          |       | $                       | 224,674    |           | $          | —           |       | $                | —     |   | $ | 224,674 |   |
| COST OF SALES                                      |       | 138,966                 |       | —         |       | —           |       | 138,966          |       |
| Gross profit                                       |       | 85,708                  |       | —         |       | —           |       | 85,708           |       |
| OPERATING  EXPENSES:                               |       |                    |       |           |       |             |       |             |       |
| Selling, general  and administrative expenses      |       | 61,672                  |       | 6              |       | —           |       | 61,678           |       |
| Depreciation and  amortization                     |       | 3,445                   |       | —         |       | —           |       | 3,445            |       |
| Total operating  expenses                          |       | 65,117                  |       | 6              |       | —           |       | 65,123           |       |
| OPERATING INCOME                                   |       | 20,591                  |       | (6             | )          | —           |       | 20,585           |       |
|                                               |       |                    |       |           |       |             |       |             |       |
| INTEREST EXPENSE                                   |       | (11,121                 | )          | —         |       | 4,169            |       | (6,952           | )          |
| INTEREST INCOME                                    |       | 60                      |       | 4,169          |       | (4,169           | )          | 60               |       |
| OTHER INCOME                                       |       | 126                     |       | 126            |       | (126             | )          | 126              |       |
| EQUITY IN EARNINGS OF  SUBSIDIARIES                |       | 2,663                   |       | —         |       | (2,663           | )          | —           |       |
| Income  (loss) before income taxes                 |       | 12,319                  |       | 4,289          |       | (2,789           | )          | 13,819           |       |
| PROVISION FOR  INCOME TAXES                        |       | 3,878                   |       | 1,500          |       | —           |       | 5,378            |       |
| NET INCOME  (LOSS)                                 |       | 8,441                   |       | 2,789          |       | (2,789           | )          | 8,441            |       |
| PREFERRED STOCK  DIVIDENDS                         |       | (15,268                 | )          | —         |       | —           |       | (15,268          | )          |
| NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDER |       | $                       | (6,827     | )              | $          | 2,789            |       | $                | (2,789     | ) | $ | (6,827 | ) |

 

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**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORSThree Months Ended April 1, 2005**
| ** **                                         | ** ** | **Company**                                                                            | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                         | ** ** | **Excluding**                                                                          | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                         | ** ** | **Subsidiary**                                                                         | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                         | ** ** | **Guarantors**                                                                         | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                         | ** ** | **(In thousands, except share and per share data)** | ** ** |
|                                               |       |                                                                                   |       |           |       |             |       |             |       |
| NET SALES                                          |       | $                                                                                      | 196,491    |           | $          | —           |       | $                | —     |   | $ | 196,491 |   |
| COST OF SALES                                      |       | 121,005                                                                                |       | —         |       | —           |       | 121,005          |       |
| Gross profit                                       |       | 75,486                                                                                 |       | —         |       | —           |       | 75,486           |       |
| OPERATING  EXPENSES:                               |       |                                                                                   |       |           |       |             |       |             |       |
| Selling, general  and administrative expenses      |       | 53,735                                                                                 |       | 5              |       | —           |       | 53,740           |       |
| Depreciation and  amortization                     |       | 3,117                                                                                  |       | —         |       | —           |       | 3,117            |       |
| Total operating  expenses                          |       | 56,852                                                                                 |       | 5              |       | —           |       | 56,857           |       |
| OPERATING INCOME  (LOSS)                           |       | 18,634                                                                                 |       | (5             | )          | —           |       | 18,629           |       |
| LOSS ON  EXTINGUISHMENT OF DEBT                    |       | (10,340                                                                                | )          | —         |       | —           |       | (10,340          | )          |
| INTEREST EXPENSE                                   |       | (9,818                                                                                 | )          | —         |       | 3,548            |       | (6,270           | )          |
| INTEREST INCOME                                    |       | 120                                                                                    |       | 3,548          |       | (3,548           | )          | 120              |       |
| OTHER INCOME                                       |       | 168                                                                                    |       | 168            |       | (168             | )          | 168              |       |
| EQUITY IN EARNINGS OF  SUBSIDIARIES                |       | 2,343                                                                                  |       | —         |       | (2,343           | )          | —           |       |
| Income before  income taxes                        |       | 1,107                                                                                  |       | 3,711          |       | (2,511           | )          | 2,307            |       |
| PROVISION FOR  INCOME TAXES                        |       | (286                                                                                   | )          | 1,200          |       | —           |       | 914              |       |
| NET INCOME                                         |       | 1,393                                                                                  |       | 2,511          |       | (2,511           | )          | 1,393            |       |
| PREFERRED STOCK  DIVIDENDS                         |       | (13,310                                                                                | )          | —         |       | —           |       | (13,310          | )          |
| NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDER |       | $                                                                                      | (11,917    | )              | $          | 2,511            |       | $                | (2,511     | ) | $ | (11,917 | ) |

 

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**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORSThree Months Ended March 31, 2006**
| ** **                                                                                   | ** ** | **Company**             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                   | ** ** | **Excluding**           | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Subsidiary**          | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Guarantors**          | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                                                   | ** ** | **(In thousands)** | ** ** |
| OPERATING  ACTIVITIES:                                                                       |       |                    |       |           |       |             |       |             |       |
| Net income                                                                                   |       | $                       | 8,441      |           | $          | 2,788            |       | $                | (2,788     | ) | $ | 8,441 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: |       |                    |       |           |       |             |       |             |       |
| Depreciation and  amortization                                                               |       | 3,445                   |       | —         |       | —           |       | 3,445            |       |
| Amortization and  write-off of debt issuance costs                                           |       | 418                     |       | —         |       | —           |       | 418              |       |
| Stock based  compensation                                                                    |       | 716                     |       | —         |       | —           |       | 716              |       |
| Deferred income  taxes                                                                       |       | (1,117                  | )          | —         |       | —           |       | (1,117           | )          |
| Provision for  doubtful accounts                                                             |       | 836                     |       | —         |       | —           |       | 836              |       |
| Equity in  earnings of subsidiaries                                                          |       | (2,788                  | )          | —         |       | 2,788            |       | —           |       |
| Changes in  assets and liabilities, net of effects of acquisition:                           |       |                    |       |           |       |             |       |             |       |
| Accounts  receivable—trade                                                              |       | (4,269                  | )          | —         |       | —           |       | (4,269           | )          |
| Accounts  receivable—other                                                              |       | 3,095                   |       | —         |       | —           |       | 3,095            |       |
| Inventory                                                                                    |       | 661                     |       | —         |       | —           |       | 661              |       |
| Prepaid expenses  and other current assets                                                   |       | (1,404                  | )          | (3             | )          | —           |       | (1,407           | )          |
| Due from parent                                                                              |       | —                  |       | (2,788         | )          | 2,788            |       | —           |       |
| Other assets                                                                                 |       | (206                    | )          | —         |       | —           |       | (206             | )          |
| Accounts payable                                                                             |       | (280                    | )          | —         |       | —           |       | (280             | )          |
| Accrued expenses  and other current liabilities                                              |       | 527                     |       | —         |       | —           |       | 527              |       |
| Accrued merger  expenses                                                                     |       | (64                     | )          | —         |       | —           |       | (64              | )          |
| Accrued interest  payable                                                                    |       | 3,837                   |       | —         |       | —           |       | 3,837            |       |
| Income taxes  payable                                                                        |       | 4,136                   |       | —         |       | —           |       | 4,136            |       |
| Due to  subsidiaries                                                                         |       | 2,788                   |       | —         |       | (2,788           | )          | —           |       |
| Net cash  provided by (used in) operating activities                                         |       | 18,772                  |       | (3             | )          | —           |       | 18,769           |       |
| INVESTING  ACTIVITIES:                                                                       |       |                    |       |           |       |             |       |             |       |
| Purchase of  property and equipment                                                          |       | (1,527                  | )          | —         |       | —           |       | (1,527           | )          |
| Purchase of  business, net of assets acquired                                                |       | (193                    | )          | —         |       | —           |       | (193             | )          |
| Net cash used in  investing activities                                                       |       | (1,720                  | )          | —         |       | —           |       | (1,720           | )          |
|                                                                                         |       |                    |       |           |       |             |       |             |       |
| FINANCING ACTIVITIES:                                                                        |       |                    |       |           |       |             |       |             |       |
| Increase in  revolver and swingline, net                                                     |       | (3,000                  | )          | —         |       | —           |       | (3,000           | )          |
| Repayment of  long-term debt                                                                 |       | (350                    | )          | —         |       | —           |       | (350             | )          |
| Excess tax  benefits from stock-based compensation                                           |       | 155                     |       | —         |       | —           |       | 155              |       |
| Payments on  capital lease obligations                                                       |       | (83                     | )          | —         |       | —           |       | (83              | )          |
| Net cash used in  financing activities                                                       |       | (3,278                  | )          | —         |       | —           |       | (3,278           | )          |
| EFFECT OF  EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                |       | (17                     | )          | —         |       | —           |       | (17              | )          |
| NET DECREASE IN  CASH AND CASH EQUIVALENTS                                                   |       | 58,951                  |       | (3             | )          | —           |       | 13,754           |       |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF PERIOD                                              |       | 2,935                   |       | 23             |       | —           |       | 2,958            |       |
| CASH AND CASH  EQUIVALENTS, END OF PERIOD                                                    |       | $                       | 10,160     |           | $          | 20               |       | $                | —     |   | $ | 16,712 |   |

 

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**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORSThree Months Ended April 1, 2005**
| ** **                                                                                       | ** ** | **Company**             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|--------------------------------------------------------------------------------------------------|------------|-------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                       | ** ** | **Excluding**           | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                       | ** ** | **Subsidiary**          | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                       | ** ** | **Guarantors**          | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                                                       | ** ** | **(In thousands)** | ** ** |
|                                                                                             |       |                    |       |           |       |             |       |             |       |
| OPERATING ACTIVITIES:                                                                            |       |                    |       |           |       |             |       |             |       |
| Net income                                                                                       |       | $                       | 1,393      |           | $          | 2,511            |       | $                | (2,511     | ) | $ | 1,393 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities:     |       |                    |       |           |       |             |       |             |       |
| Depreciation and  amortization                                                                   |       | 3,117                   |       | —         |       | —           |       | 3,117            |       |
| Amortization and  write-off of debt issuance costs                                               |       | 2,685                   |       | —         |       | —           |       | 2,685            |       |
| Redemption  premium on 11.5% senior subordinated notes                                           |       | 8,050                   |       | —         |       | —           |       | 8,050            |       |
| Loss on disposal  of property and equipment                                                      |       | 238                     |       | —         |       | —           |       | 238              |       |
| Deferred income  taxes                                                                           |       | 356                     |       | —         |       | —           |       | 356              |       |
| Equity in  earnings of subsidiaries                                                              |       | (2,511                  | )          | —         |       | 2,511            |       | —           |       |
| Changes in  assets and liabilities, net of effects of acquisition:                               |       |                    |       |           |       |             |       |             |       |
| Accounts receivable—trade                                                                   |       | (7,174                  | )          | —         |       | —           |       | (7,174           | )          |
| Accounts  receivable—other                                                                  |       | 1,536                   |       | —         |       | —           |       | 1,536            |       |
| Inventory                                                                                        |       | (468                    | )          | —         |       | —           |       | (468             | )          |
| Prepaid expenses  and other current assets                                                       |       | (1,885                  | )          | (3             | )          | —           |       | (1,888           | )          |
| Due from parent                                                                                  |       | —                  |       | (294           | )          | 294              |       | —           |       |
| Other assets                                                                                     |       | (375                    | )          | (168           | )          | —           |       | (543             | )          |
| Accrued interest  payable                                                                        |       | 2,810                   |       | —         |       | —           |       | 2,810            |       |
| Accounts payable                                                                                 |       | 665                     |       | —         |       | —           |       | 665              |       |
| Accrued expenses  and other current liabilities                                                  |       | (1,478                  | )          | —         |       | —           |       | (1,478           | )          |
| Accrued merger  expenses                                                                         |       | (111                    | )          | —         |       | —           |       | (111             | )          |
| Income taxes  payable                                                                            |       | (3,958                  | )          | (2,075         | )          | —           |       | (6,033           | )          |
| Due to  subsidiaries                                                                             |       | 294                     |       | —         |       | (294             | )          | —           |       |
| Net cash  provided by (used in) operating activities                                             |       | 3,184                   |       | (29            | )          | —           |       | 3,155            |       |
| INVESTING  ACTIVITIES:                                                                           |       |                    |       |           |       |             |       |             |       |
| Purchase of  property and equipment                                                              |       | (1,543                  | )          | —         |       | —           |       | (1,543           | )          |
| Purchase of  business, net of assets acquired                                                    |       | (1,009                  | )          | —         |       | —           |       | (1,009           | )          |
| Net cash used in  investing activities                                                           |       | (2,552                  | )          | —         |       | —           |       | (2,552           | )          |
| FINANCING  ACTIVITIES:                                                                           |       |                    |       |           |       |             |       |             |       |
| Increase in  revolver and swingline, net                                                         |       | 17,000                  |       | —         |       | —           |       | 17,000           |       |
| Repayment of  long-term debt                                                                     |       | (70,250                 | )          | —         |       | —           |       | (70,250          | )          |
| Payment of  redemption premium on 11.5% senior subordinated notes                                |       | (8,050                  | )          | —         |       | —           |       | (8,050           | )          |
| Contribution  from Parent, net of proceeds from exercise of underwriters over-allotment  options |       | 1,755                   |       | —         |       | —           |       | 1,755            |       |
| Net cash used in  financing activities                                                           |       | (59,545                 | )          | —         |       | —           |       | (59,545          | )          |
| EFFECT OF  EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                    |       | (38                     | )          | —         |       | —           |       | (38              | )          |
| NET DECREASE IN  CASH AND CASH EQUIVALENTS                                                       |       | 58,951                  |       | (29            | )          | —           |       | (58,980          | )          |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF PERIOD                                                  |       | 69,111                  |       | 67             |       | —           |       | 69,178           |       |
| CASH AND CASH  EQUIVALENTS, END OF PERIOD                                                        |       | $                       | 10,160     |           | $          | 38               |       | $                | —     |   | $ | 10,198 |   |

 

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**ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

*References to “us” and “we” are to theCompany. You should read the following discussion in conjunction with ourunaudited condensed consolidated financial statements and related notesincluded in this quarterly report, and our audited consolidated financialstatements and related notes included  in**our Annual Report on Form 10-Kfiled with the SEC.*

**Forward-Looking Statements**

This report contains forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934 (the “Exchange Act”) that are subject torisks and uncertainties. You should not place undue reliance on thosestatements because they are subject to numerous uncertainties and factorsrelating to our operations and business environment, all of which are difficultto predict and many of which are beyond our control. Forward-looking statementsinclude information concerning our possible or assumed future results ofoperations, including descriptions of our business strategy. These statementsoften include words such as “may,” “believe,” “expect,” “anticipate,” “intend,”“plan,” “estimate” or similar expressions. These statements are based onassumptions that we have made in light of our experience in the industry aswell as our perceptions of historical trends, current conditions, expectedfuture developments and other factors we believe are appropriate under thecircumstances. As you read and consider this report, you should understand thatthese statements are not guarantees of performance or results. They involverisks, uncertainties and assumptions. Although we believe that theseforward-looking statements are based on reasonable assumptions, you should beaware that many factors could affect our actual financial results or results ofoperations and could cause actual results to differ materially from those inthe forward-looking statements. These factors include:

·                  material facilitiesand systems disruptions and shutdowns,

·                  the highlycompetitive nature of the maintenance, repair and operations distributionindustry,

·                  economicslowdowns,

·                  general marketconditions,

·                  our ability topurchase products from suppliers on favorable terms,

·                  the length ofour supply chains,

·                  fluctuations inthe cost of raw materials and fuel prices,

·                  currencyexchange rates,

·                  the loss ofsignificant customers,

·                  our ability toaccurately predict market trends,

·                  product cost andprice fluctuations due to market conditions,

·                  failure tolocate, acquire and successfully integrate acquisition candidates,

·                  dependence onkey employees,

·                  our inability toprotect trademarks,

·                  adversepublicity and litigation,

·                  our level ofdebt,

·                  interest ratefluctuations,

·                  future cashflows,

·                  changes inconsumer preferences,

·                  labor andbenefit costs, and

·                  the otherfactors described under “Part I. Item 1A—Risk Factors” in our AnnualReport on Form 10-K filed with the SEC.

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

**Overview**

Weare a leading national distributor and direct marketer of specialty MROproducts. We stock over 50,000 plumbing, electrical, hardware, securityhardware, heating, ventilation and air conditioning and other MRO products andsell to approximately 160,000 active customer accounts. Our products areprimarily used for the repair, maintenance, remodeling and refurbishment ofproperties and non-industrial facilities. We are able to realize higheroperating margins by focusing on repair, maintenance, remodeling andrefurbishment customers, who generally make smaller, more frequent purchasesand require high levels of service. Our diverse customer base includesfacilities maintenance customers, which consist of multi-family housing,educational, lodging and health care facilities; professional

17

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contractors who primarily repairand maintain properties and non-industrial facilities; and specialtydistributors, including plumbing and hardware retailers. Our customers range insize from individual contractors and independent hardware stores to apartmentmanagement companies and national purchasing groups.

Wemarket and sell our products primarily through nine distinct and targetedbrands, each of which is nationally recognized in the markets we serve for providingpremium products at competitive prices with reliable same-day or next-daydelivery. Wilmar, Sexauer and Maintenance USA brands generally serve ourfacilities maintenance customers; Barnett, U.S. Lock, Sun Star and Copperfieldbrands generally serve our professional contractor customers; Hardware Expressand 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 tomeet the individual needs of each respective customer group served. We reachour markets using a variety of sales channels, including a sales force ofapproximately 400 field sales representatives, over 370 telesales and customerservice representatives, a direct marketing program of approximately fivemillion pieces annually, brand-specific websites and a national accountssales program. We deliver our products through our network of 53 regionaldistribution centers, 22 professional contractor showrooms located throughoutthe United States and Canada, a national distribution center, or NDC, inNashville, Tennessee, 15 vendor managed inventory locations at largeprofessional contractor customer locations and a dedicated fleet of trucks. Ourbroad distribution network allows us the ability to provide reliable, same-dayor next-day delivery service to 98% of the U.S. population.

Our common information technologyand logistics platform supports our major business functions, allowing us tomarket and sell our products at varying price points depending on the customer’sservice requirements. While we market our products under a variety of brandedcatalogs, generally our brands draw from the same inventory within commondistribution centers and share associated employee and transportation costs. Inaddition, we have centralized marketing, purchasing and catalog productionoperations to support our brands. We believe that our common informationtechnology and logistics platform also benefits our customers by allowing us tooffer a broad product selection at highly competitive prices while maintainingthe unique customer appeal of each of our targeted brands. Overall, our commonoperating platform has enabled us to improve customer service, maintain loweroperating costs, efficiently manage working capital and support our growthinitiatives.

**Critical Accounting Policies**

In preparing the unauditedcondensed consolidated financial statements in conformity with accountingprinciples generally accepted in the United States of America, management isrequired to make certain estimates, judgments and assumptions. These estimates,judgments and assumptions affect the reported amounts of assets andliabilities, including the disclosure of contingent assets and liabilities, atthe date of the financial statements and the reported amounts of revenues andexpenses during the periods presented. On an ongoing basis, managementevaluates these estimates and assumptions. Management bases its estimates andassumptions on historical experience and on various other factors that arebelieved to be reasonable at the time the estimates and assumptions are made.Actual results may differ from these estimates and assumptions under differentcircumstances or conditions. The significant accounting policies thatmanagement believes are the most critical in order to fully understand andevaluate our financial position and results of operations include the followingpolicies.

*Revenue Recognition*

While our recognition of revenue is predominantlyderived from routine transactions and does not involve significant judgment,revenue recognition represents an important accounting policy for us. Werecognize a sale when the product has been shipped and risk of loss has passedto the customer, collection of the resulting receivable is probable, persuasiveevidence of an arrangement exists, and the price is fixed or determinable.Sales are recorded net of estimated discounts, rebates and returns. A portionof our sales is delivered directly from the supplier to our customers. Thesedirect-shipment sales are recorded on a gross basis, with the correspondingcost of goods sold, in accordance with the guidance in Emerging Issues TaskForce (“EITF”) No. 99-19, *Reporting Revenues Grossas a Principal versus Net as an Agent*. We provide limited productreturn and protection rights to certain customers. We accrue product returnreserves and warranty obligations. A provision is made for estimated productreturns based on sales volumes and our experience. Actual returns have notvaried materially from amounts provided historically.

*Allowancesfor Doubtful Accounts*

Wemaintain allowances for doubtful accounts for estimated losses resulting fromthe inability to collect outstanding amounts from customers. The allowancesinclude specific amounts for those accounts that are likely to beuncollectible, such as accounts of customers in bankruptcy and generalallowances for those accounts that management currently believes to becollectible but may later become uncollectible. Estimates are used to determinethe allowances for bad debts and are based on historical collection experience,current economic trends, credit worthiness of customers and changes in customerpayment terms. Adjustments to credit limits are made

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based upon payment history andour customers’ current credit worthiness. If the financial condition of ourcustomers were to deteriorate, allowances may be needed that will increaseselling, general and administrative expenses and decrease accounts receivable.

*Excess andObsolete Inventory*

Inventories are valued at the lower ofcost or market. We determine inventory cost using the average cost method. Weadjust inventory for excess and obsolete inventory and for the difference bywhich the cost of the inventory exceeds the estimated market value. In order todetermine the adjustments, management reviews inventory quantities on hand,slow movement reports and sales history reports. Management estimates therequired adjustment based on estimated demand for products and marketconditions. To the extent historicalresults are not indicative of future results and if events occur that affectour relationships with suppliers or the salability of our products, additionalwrite-offs may be needed that will increase our cost of sales and decreaseinventory.

*Goodwill, Intangibles andOther Long-Lived Assets*

Management assesses therecoverability of our goodwill, identifiable intangibles and other long-livedassets on an annual basis or whenever events or changes in circumstancesindicate that the carrying value may not be recoverable. The following factors,if present, may trigger an impairment review: (1) significantunderperformance relative to expected historical or projected future operatingresults; (2) significant negative industry or economic trends; (3) asignificant increase in competition; and (4) a significant increase ininterest rates on debt. If the recoverability of these assets is unlikelybecause of the existence of one or more of the above-mentioned factors,an impairment analysis is performed using a projected discounted cash flowmethod. Management must make assumptions regarding estimated future cash flowsand other factors to determine the fair value of these respective assets. Ifthese estimates or related assumptions change in the future, we may be requiredto record an impairment charge. Impairment charges would be included in ourstatements of operations, and would result in reduced carrying amounts of therelated assets in our balance sheets.

*LegalContingencies*

Fromtime to time, in the course of our business, we become involved in legalproceedings. In accordance with SFAS No. 5, *Accountingfor Contingencies*, if it is probable that, as a result of a pendinglegal claim, an asset had been impaired or a liability had been incurred at thedate of the financial statements and the amount of the loss is estimable, anaccrual for the costs to resolve the claim is recorded in accrued expenses inour balance sheets. Professional fees related to legal claims are included ingeneral and administrative expenses in our statements of operations.Management, with the assistance of outside counsel, determines whether it isprobable that a liability from a legal claim has been incurred and estimatesthe amount of loss. The analysis is based upon potential results, assuming acombination of litigation and settlement strategies. Management does notbelieve that currently pending proceedings will have a material adverse effecton our consolidated financial position. It is possible, however, that futureresults of operations for any particular period could be materially affected bychanges in our assumptions related to these proceedings.

**Accounting and DisclosureChanges**

Effective December 31,2005, we adopted the provisions of SFAS No. 123R, *Share-BasedPayment*, using the modified prospective application transitionmethod. Under this method, the share-based compensation cost recognizedbeginning December 31, 2005 includes compensation cost for (i) all share-basedpayments granted prior to, but not vested as of December 31, 2005, basedon the grant date fair value originally estimated in accordance with theprovisions of SFAS No. 123, *Accounting for Stock-BasedCompensation*, and (ii) all share-based payments grantedsubsequent to December 30, 2005, based on the grant date fair valueestimated in accordance with the provisions of SFAS No. 123R. Compensationcost under SFAS No. 123R is recognized ratably using the straight-lineattribution method over the expected vesting period or to the retirementeligibility date, if less than the vesting period when vesting is notcontingent upon any future performance. In addition, pursuant to SFAS No. 123,we are required to estimate the amount of expected forfeitures when calculatingthe compensation costs, instead of accounting for forfeitures as incurred,which was the method previously used by us. As of December 31, 2005, thecumulative effect of adopting the estimated forfeiture method was notsignificant. Prior periods are not restated under this transition method

SFAS No. 123Ralso requires us to reflect the tax benefit from the exercise of stock optionsin the statement of cash flows as a cash inflow from financing activities.Prior to the adoption of SFAS No. 123R, these tax benefits have beenreflected as a cash inflow from operating activities. The prior year statementof cash flows has not been restated. There were no stock options exercisedduring the three months ended March 31, 2006 and April 1, 2005.

As of March 31,2006, there was $8.1 million of total unrecognized compensation cost related tounvested stock awards. The cost is expected to be recognized over aweighted-average period of 3.5 years.

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Prior to December 31,2005, we accounted for stock-based compensation plans in accordance with theprovisions of Accounting Principles Board (“APB”) Opinion No. 25, *Accounting for Stock Issued to Employees*, as permitted bySFAS No. 123. We elected to use the intrinsic value method of accountingfor employee and director stock-based compensation expense for itsnon-compensatory employee and director stock option awards and did notrecognize compensation expense for the issuance of options with an exerciseprice equal to or greater than the market price of the underlying common stockat the date of grant. Had we elected to adopt the fair value approach asprescribed by SFAS No. 123, which charges earnings for the estimated fairvalue of stock options, our net income and earnings per share for the threemonths ended April 1, 2005 would not have been materially affected.

**Results of Operations**

The following discussion includes references to the term average dailysales and average organic daily sales. Average daily sales are defined as salesfor a period of time divided by the number of shipping days in that period oftime. Average organic daily sales are defined as sales from a period oftime divided by the number of shipping days in that period of time excludingany sales from acquisitions made subsequent to the beginning of the prior yearperiod.

*Overview.*We ended thefirst quarter on strong top line growth in each of our three customer endmarkets: facilities maintenance, professional contractors and specialtydistributors. Average daily sales grew 16.1% in the first quarter including$11.0 million in sales from our July 2005 acquisition of Copperfield.Excluding Copperfield, sales grew 10.5% on an average organic daily salesbasis. We continue to invest in organic growth initiatives at a rate ofapproximately $1.5 million per quarter including the expansion of our nationalaccounts program, the addition of field sales and telesales professionals, theaddition of new products and geographic expansions such as the addition ofprofession contractor showrooms and vendor managed inventory sites. Asignificant component of our sales growth in the first quarterincluded an increase of over 35% in the sale of “big ticket” or larger thanaverage sales price products such as HVAC equipment, appliances and waterheaters. These products typically carry lower gross margin percentages butenable better sales penetration with existing and new customers alike. Theeffect of this continued change in sales mix on consolidated gross margins wasa decline in the quarter of 40 basis points. This decline was offset by highergross margins on Copperfield sales of approximately 10 basis points resultingin a net decline in gross margin percentages of 30 basis points in the threemonths ended March 31, 2006 compared to the three months ended April 1,2005. We continue to see operating expense leverage, specifically in the areaof freight and distribution center labor.

*Three Months Ended March 31,2006 Compared to Three Months Ended April 1, 2005*

*NetSales.*Our net sales increased by $28.2 million, or14.3%, to $224.7 million in the three months ended March 31, 2006from $196.5 million in the three months ended April 1, 2005, with oneless shipping day than the comparable prior year period. The sales increase wasattributable to $11.0 million from our Copperfield acquisition with theremaining increase driven by continued strong demand for our products, newsales and growth initiatives and approximately 4% from price increases.

*GrossProfit.*Gross profit increased by $10.2 million, or13.5%, to $85.7 million in the three months ended March 31, 2006 from$75.5 million in the three months ended April 1, 2005. Gross profitmargins decreased 30 basis points to 38.1% for the three months ended March 31,2006 compared to 38.4% for the three months ended April 1, 2005. Thisdecline in our gross profit margins is primarily a result of a change in salesmix related to our increase of over 35% in the sale of big ticket items such asHVAC equipment, appliances and water heaters offset in part by higher grossmargins on Copperfield sales.

*Selling,General and Administrative Expenses.*SG&A expensesincreased by $7.9 million, or 14.8%, to $61.7 million in the threemonths ended March 31, 2006 from $53.7 million in the three monthsended April 1, 2005. Increased SG&A expenses related to ourCopperfield acquisition accounted for $1.2 million of the $7.9 millionincrease. Excluding these expenses, SG&A expenses increased 12.5% in thethree months ended March 31, 2006. Certain expenses within SG&A, suchas the costs of running regional distribution centers, delivery expenses andselling expenses fluctuate with sales volume. The increase in SG&A expensesincluded these increases as well as increased investment in new sales andmarketing initiatives and additional stock-based compensation associated withgrants of restricted stock units and stock options during the three monthsended March 31, 2006. SG&A expenses as a percentage of sales was 27.5%in the three months ended March 31, 2006 and 27.3% in the three monthsended April 1, 2005. This increase was due to the additional stock-basedcompensation associated with grants of restricted stock units and stock optionsduring the three months ended March 31, 2006.

*Depreciation and Amortization.*Depreciation and amortization expense increased by$0.3 million, or 10.5%, to $3.4 million in the three months ended March 31,2006 from $3.1 million in the three months ended April 1, 2005. Thisincrease was due to our Copperfield acquisition.

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*Operating Income.*Asa result of the foregoing, operating income increased by $2.0 million, or10.5%, to $20.6 million in the three months ended March 31, 2006 from$18.6 million in the three months ended April 1, 2005. As a percent ofsales, operating income decreased to 9.2% in the current quarter from 9.5% inthe comparable prior year period. This decrease was primarily due to $0.5million in additional stock-based compensation associated with grants ofrestricted stock units and stock options during the three months ended March 31,2006.

*Interest Expense.*Interestexpense increased by $0.7 million in the three months ended March 31, 2006to $7.0 million from $6.3 million in the three months ended April 1,2005. The net increase was attributed to the overall higher debt balancesresulting from the additional $50.0 million term loan incurred during the threemonths ended September 30, 2005 offset by the early extinguishment of$70.0 million of our 11.5% senior subordinated notes during the three monthsended April 1, 2005.

*Provisionfor Income Taxes.*The effective tax rate for the three monthsended March 31, 2006 was 38.9% compared to 39.6% in the three months endedApril 1, 2005. The decrease in the effective tax rate was due primarily tolower state income taxes and lower non-deductible expenses partially offset bythe phase-out of the extraterritorial income exclusions used in 2005.

**Liquidity and Capital Resources**

As of March 31, 2006, we had approximately$89.7 million of availability under our $100.0 million revolvingcredit facility. Historically, our capital requirements have been for debtservice obligations, working capital requirements, acquisitions, the expansionand maintenance of our distribution network, and upgrades of our proprietaryinformation systems. We expect this to continue in the foreseeable future.Historically, we have funded these requirements through internally generatedcash flow and funds borrowed under our credit facility. We expect our cash flowfrom operations and the loan availability under our credit facility to be our primarysource of funds in the future. Letters of credit, which are issued under therevolving loan facility under our credit facility, are used to support paymentobligations incurred for our general corporate purposes. As of March 31,2006, we had $10.3 million of letters of credit issued under the creditfacility. Interest on our 11.5% senior subordinated notes due 2011 is payableeach May 15 and November 15. With respect to borrowings under ourcredit facility, we have the option to borrow at an adjusted LIBOR or analternative base rate. Interest on the credit facility is generally payablequarterly, and with respect to any LIBOR borrowings, on the last day of theinterest period applicable to the term of the borrowing.

Net cash provided by operatingactivities was $18.8 million for the three months ended March 31,2006 compared to net cash provided by operating activities of $3.2 millionin the three months ended April 1, 2005. Net cash provided by operating activities for the three months ended March 31,2006 was higher than the prior year period primarily as a result of ourincrease in net income of $7.0 million, changes in our accounts receivable-trade,inventory and accounts payable of $3.4 million, and changes in all other assetsand liabilities of $15.6 million, mostly related to the change in accruedincome taxes of $10.2 million. These increases were partially offset bythe payment of the early redemption premium of $8.1 million in the three monthsended April 1, 2005 related to the pay-down of a portion of our seniorsubordinated notes in January 2005, which payment was not repeated in thethree months ended March 31, 2006. In addition, we had higher cashinterest expense of $1.1 million, resulting from incurrence of an additional$50.0 million term loan, which we used for our Copperfield acquisition in July 2005,and lower cash taxes of $4.3 million, due to the timing of income tax payments.

Net cash used ininvesting activities was $1.7 million in the three months ended March 31,2005 compared to $2.6 million in the three months ended April 1, 2005. Netcash used in investing activities in the three months ended March 31, 2006and the three months ended April 1, 2005 were primarily attributable tocapital expenditures made in the ordinary course of business and costs relatedto purchases of businesses in prior periods.

Net cash used in financingactivities totaled $3.3 million for the three months ended March 31,2006 compared to net cash provided byfinancing activities of $59.5 million in the three monthsended  April 1, 2005. Net cash used in financing activities for thethree months ended March 31, 2006 was primarily attributable to ourrepayment of $3.0 million of borrowings on our revolving credit facility. Netcash used in financing activities for the three months ending April 1,2005 was primarily due to the early redemption of $70.0 million of our seniorsubordinated notes and $8.1 million in related redemption premiums, partiallyoffset by revolving credit facility borrowings of $17.0 million.

As of March 31, 2006, ourcontractual obligations and other contractual commitments have not changedmaterially outside the ordinary course of business since December 30,2005.

*The Reincorporation Merger andRelated Transactions*

In December 2004, wecompleted a reincorporation merger and became the 100%-owned subsidiary ofInterline Brands, Inc., a Delaware corporation (NYSE: IBI), which we alsorefer to as our Parent or Interline Delaware. In this reincorporation merger,in the

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aggregate, holders of our preferred stock received$55.0 million in cash and 19,183,321 shares of Parent common stock and holdersof our common stock received 66,667 shares of Parent common stock. In return,Parent received 100 shares of our common stock and one share of our preferredstock, representing all of our authorized and outstanding shares. Also, optionsto purchase shares of our common stock were converted into options to purchaseshares of Parent common stock. In conjunction with this reincorporation merger,Parent successfully completed its IPO and we amended our senior creditfacility. A total of 14,375,000 shares of Parent common stock were sold, ofwhich 12,667,000 were sold by Parent and 1,708,000 were sold by itsshareholders. Parent sold 12,500,000 shares of its common stock in December 2004and 167,000 shares in January 2005 following the exercise of theunderwriters’ over-allotment option. Parent received $171.8 million in netproceeds including the exercise of the underwriters’ over-allotment option,representing $176.9 million of proceeds from the sale of stock net ofunderwriting discounts and commissions, less $4.1 million of initial publicoffering costs and $1.1 million of debt issuance costs. After the IPO-relatedexpenses and preferred stock consideration in the reincorporation merger werepaid, all of the proceeds from the IPO were contributed to the Company.

We used $31.3 million of theproceeds to partially repay the term loan under our credit facility. We amendedour senior credit facility to allow for the IPO and reduce our applicable ratein respect to any term loans from LIBOR plus 3.50% to LIBOR plus 2.25%. Inconjunction with this amendment, we incurred $1.1 million of debt issuancecosts. In December 2004 we also used $4.6 million of the proceeds toterminate the interest rate swap agreements. In January 2005 we used $70.0million of the proceeds from the IPO to partially redeem the 11.5% seniorsubordinated notes. In connection with the redemption, in January 2005 wepaid $8.1 million of premiums for early redemption of the 11.5% seniorsubordinated notes and recorded a $10.3 million loss on the earlyextinguishment of debt, which included a charge for write-off of unamortizeddebt issuance costs in the amount of $2.3 million.

*Capital Expenditures*

Capital expenditures were $1.5million in the three months ended March 31, 2006 and April 1,2005. Capital expenditures as a percentageof sales were 0.7% in the three months ended March 31, 2006 and 0.8% inthe three months ended April 1, 2005.

*Liquidity*

Our principal working capitalneed is for inventory and trade accounts receivable, which have generallyincreased with the growth in our business. Our principal sources of cash tofund our working capital needs are cash generated from operating activities andborrowings under our revolving credit facility.

*CreditFacility*

The Company entered into a creditfacility on May 29, 2003, which was amended as of December 19, 2003,and amended again on December 21, 2004 in connection with the IPO. TheCompany also amended its credit facility on July 7, 2005, to permit theincurrence of an additional $50.0 million term loan, having substantially thesame terms as the existing term loan in connection with the Copperfieldacquisition. On August 8, 2005, the Company again amended its creditfacility to lower the interest rate spreads applicable to the additional $50.0million term loan. The amended credit facility provides for aggregatecommitments of $250.0 million, consisting of (1) a revolving loanfacility of $100.0 million, of which a portion not exceeding $20.0 millionwill be available in the form of letters of credit, and (2) a term loanfacility of $150.0 million. Borrowings under the amended term loanfacility and revolving loan facility bear interest, at the Company’s option, ateither adjusted LIBOR or at the alternate base rate plus a spread. Outstandingletters of credit under the revolving loan facility are subject to a per annumfee equal to the applicable spread over adjusted LIBOR for revolving loans. Theindebtedness under the amended credit facility is guaranteed by us and by thedomestic subsidiaries of the Company. The amended term loan facility has amaturity of December 31, 2010, and the revolving loan facility has amaturity of May 31, 2008.

On July 7, 2005, we used theproceeds from the additional $50.0 million term loan and $20.0 million ofborrowings under the revolving loan facility to fund the Copperfieldacquisition. As of March 31, 2006, we had paid down the incremental $20.0million borrowed for the acquisition.

              During the three months ended March 31,2006, we borrowed periodically on our revolving credit facility to accommodateour daily working capital needs. The weighted average daily outstanding balanceduring the three-month period was $0.7 million, with ordinary courseborrowings ranging from $0.0 million to $3.5 million. As of March 31,2006, we had $10.3 million of letters of credit issued under the revolvingloan facility and $148.5 million aggregate principal outstanding under theterm loan facility.

We believe that cash flow fromoperations and available borrowing capacity under our new credit facility willbe adequate to finance our ongoing operational cash flow needs and debt serviceobligations for the next twelve months.

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**ITEM 4. Controls and Procedures**

*Evaluation of Disclosure Controlsand Procedures*

Our management, with the participation of our ChiefExecutive Officer and Chief Financial Officer (our principal executive officerand principal financial officer), evaluated the effectiveness of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act) as of March 31, 2006. Based on this evaluation, ourChief Executive Officer and Chief Financial Officer concluded that, as of March 31,2006, our disclosure controls and procedures were (1) designed to ensurethat material information relating to us, including our consolidatedsubsidiaries, is made known to our Chief Executive Officer and Chief FinancialOfficer by others within those entities, particularly during the period inwhich this report was being prepared and (2) effective, in that theyprovide reasonable assurance that information required to be disclosed by us inthe 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 andforms.

*Changes in Internal Control overFinancial Reporting*

No change in our internal control over financialreporting (as defined in Rules 13a-15(f) and 15d-15(f) underthe Exchange Act) occurred during the quarter ended March 31, 2006 thathas materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART II.OTHER INFORMATION**

**ITEM 1. Legal Proceedings**

We are involvedin various legal proceedings that have arisen in the ordinary course of ourbusiness and have not been fully adjudicated. These actions, when ultimatelyconcluded and determined, will not, in the opinion of management, have amaterial effect upon our consolidated financial position, results of operationsor liquidity.

**ITEM 1A. RiskFactors**

For information regarding factors that could affectour results of operations, financial position and liquidity, see the riskfactors discussion provided in Item 1A of our Annual Report on Form 10-Kfor the fiscal year ended December 30, 2005. See also “Part I. Item2—Forward Looking Statements” above.

**ITEM 5. Other Information**

None

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**ITEM 6. Exhibits**

Thefollowing exhibits are being filed as part of this Quarterly Report on Form 10-Q:

 

| 31.1 |   | Certification of the Chief Executive Officer of  Interline Brands, Inc., 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 of  Interline Brands, Inc., pursuant to Rule 13a-14 of the  Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002 (furnished herewith). |

 

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned hereunto duly authorized.

 
|                         |   |   |   | INTERLINE  BRANDS, INC.                                                  |
|-------------------------|--------|--------|--------|--------------------------------------------------------------------------|
|                    |   |   |   | Registrant                                                               |
|                    |   |   |   |                                                                     |
|                    |   |   |   |                                                                     |
| Date: May 9,  2006 |   | By:    |   | /S/ THOMAS J. TOSSAVAINEN                                                |
|                    |   |   |   | Thomas J. Tossavainen                                                    |
|                    |   |   |   | Chief Financial Officer                                                  |
|                    |   |   |   | (Duly Authorized Signatory, Principal Financial and  Accounting Officer) |

 

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