**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 
| ****(Mark One)**** | ** **     | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                            | ** ** | ** ** |
|--------------------|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ****ý****     | **** **** | ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****** ****SECURITIES EXCHANGE ACT OF 1934******                                                                                                                                                                                                                                                                                                                                      |
| ** **         | ** **     | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **** ****     | **** **** | ****FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2005****                                                                                                                                                                                                                                                                                                                                                                                                  |
| ** **         | ** **     | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **** ****     | **** **** | ****OR****                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **         | ** **     | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ****o****          | **** **** | ****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)****** ****OF THE SECURITIES EXCHANGE ACT OF 1934******                                                                                                                                                                                                                                                                                                                                     |
| ** **         | ** **     | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **** ****     | **** **** | ****FOR THE TRANSITION PERIOD FROM                                  TO                                 **** |
| ** **         | ** **     | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **** ****     | **** **** | ****COMMISSION FILE NUMBER 333-106801****                                                                                                                                                                                                                                                                                                                                                                                                             |

 

**INTERLINE BRANDS, INC.**

(Exact name of registrant as specified in its charter)

 

| ****NEW JERSEY****                      | **** **** | ****22-2232386****          |
|-----------------------------------------|----------------|-----------------------------|
| ****(State or other jurisdiction of**** | **** **** | ****(I.R.S. Employer****    |
| ****incorporation or organization)****  | **** **** | ****Identification No.)**** |

 

| ****801 WEST BAY STREET, JACKSONVILLE, FLORIDA**** | **** **** | ****32204****      |
|----------------------------------------------------|----------------|--------------------|
| ****(Address of principal executive offices)****   | **** **** | ****(Zip Code)**** |

 

**(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 ý*

 

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

 

                    Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No ý

 

Number of shares of Common Stock outstanding as of May 16, 2005: **None**

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

 

 

**TABLE OF CONTENTS**

 

 

 

 

 
| ****PART I — FINANCIAL INFORMATION**** |                                                                                                                               |
|---------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|
|                                        |                                                                                                                               |
| ****Item 1.****                             | ****Financial Statements****                                                                                                       | 1 |
| **** ****                              | ****Unaudited Condensed Consolidated Balance Sheets as of  April 1, 2005 and December 31, 2004****                            | 1 |
| **** ****                              | ****Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended April 1, 2005 and March 26, 2004**** | 2 |
| **** ****                              | ****Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended April 1, 2005****      | 3 |
| **** ****                              | ****Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2005 and March 26, 2004**** | 4 |
| **** ****                              | ****Notes to Unaudited Condensed Consolidated Financial Statements****                                                        | 5 |
| ****Item 2.****                             | ****Management’s Discussions and Analysis of Financial Condition and Results of Operations****                           | 16 |
| ****Item 3.****                             | ****Quantitative and Qualitative Disclosures about Market Risk****                                                                 | 21 |
| ****Item 4.****                             | ****Controls and Procedures****                                                                                                    | 22 |
|                                        |                                                                                                                               |   |
| ****PART II — OTHER INFORMATION****    | 22                                                                                                                                 |
|                                        |                                                                                                                               |   |
| ****Item 1.****                             | ****Legal Proceedings****                                                                                                          | 22 |
| ****Item 5.****                             | ****Other Information****                                                                                                          | 22 |
| ****Item 6.****                             | ****Exhibits****                                                                                                                   | 22 |
|                                        |                                                                                                                               |   |
| ****SIGNATURES****                          | 23                                                                                                                                 |
|                                        |
|                                             |                                                                                                                                    |  |  |

** **

 

**PART I.****FINANCIAL INFORMATION**

 

ITEM 1.  FINANCIAL STATEMENTS.

 

**INTERLINE BRANDS, 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 APRIL 1, 2005 AND DECEMBER 31, 2004**

**(in thousands, except share and per share data)**
| ** **                                                                                                                                    | ** ** | **April 1,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------|------------|------------------|------------|
| ** **                                                                                                                                    | ** ** | **2005**     | ** ** | **2004**         | ** ** |
| ** **                                                                                                                                    | ** ** | ** **   | ** ** | ** **       | ** ** |
| **ASSETS**                                                                                                                                    |       |         |       |             |       |
| CURRENT ASSETS:                                                                                                                               |       |         |       |             |       |
| Cash and cash equivalents                                                                                                                     |       | $            | 10,198     |             | $          | 69,178 |   |
| Accounts  receivable - trade (net of allowance for doubtful accounts of $7,014 and  $6,929)                                                   |       | 105,685      |       | 98,511           |       |
| Accounts  receivable - other                                                                                                                  |       | 13,961       |       | 17,828           |       |
| Inventory                                                                                                                                     |       | 146,000      |       | 145,532          |       |
| Prepaid expenses  and other current assets                                                                                                    |       | 5,092        |       | 3,204            |       |
| Deferred income  taxes                                                                                                                        |       | 11,405       |       | 12,084           |       |
| Total current  assets                                                                                                                         |       | 292,341      |       | 346,337          |       |
|                                                                                                                                          |       |         |       |             |       |
| PROPERTY AND  EQUIPMENT, net                                                                                                                  |       | 28,195       |       | 28,767           |       |
|                                                                                                                                          |       |         |       |             |       |
| GOODWILL                                                                                                                                      |       | 203,848      |       | 203,848          |       |
|                                                                                                                                          |       |         |       |             |       |
| OTHER INTANGIBLE  ASSETS, net                                                                                                                 |       | 81,673       |       | 85,361           |       |
|                                                                                                                                          |       |         |       |             |       |
| OTHER ASSETS                                                                                                                                  |       | 9,610        |       | 9,067            |       |
| TOTAL ASSETS                                                                                                                                  |       | $            | 615,667    |             | $          | 673,380 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                |       |         |       |             |       |
|                                                                                                                                          |       |         |       |             |       |
| CURRENT  LIABILITIES:                                                                                                                         |       |         |       |             |       |
| Revolver                                                                                                                                      |       | $            | 17,000     |             | $          | — |   |
| Current portion  of long-term debt                                                                                                            |       | 1,000        |       | 1,000            |       |
| Accounts payable                                                                                                                              |       | 53,925       |       | 53,260           |       |
| Accrued expenses  and other current liabilities                                                                                               |       | 19,218       |       | 22,180           |       |
| Accrued interest  payable                                                                                                                     |       | 5,852        |       | 3,042            |       |
| Accrued merger  expenses                                                                                                                      |       | 5,994        |       | 6,131            |       |
| Accrued income  taxes payable                                                                                                                 |       | 1,339        |       | 7,372            |       |
| Total current liabilities                                                                                                                     |       | 104,328      |       | 92,985           |       |
|                                                                                                                                          |       |         |       |             |       |
| LONG-TERM LIABILITIES:                                                                                                                        |       |         |       |             |       |
| Deferred income  taxes                                                                                                                        |       | 24,899       |       | 25,221           |       |
| Long-term debt,  net of current portion                                                                                                       |       | 232,025      |       | 302,275          |       |
|                                                                                                                                          |       |         |       |             |       |
| TOTAL  LIABILITIES                                                                                                                            |       | 361,252      |       | 420,481          |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                |       |         |       |             |       |
|                                                                                                                                          |       |         |       |             |       |
| SENIOR PREFERRED  STOCK, $0.01 par value, 1 share authorized and outstanding as of April 1,  2005 and December 31, 2004; at liquidation value |       | 394,637      |       | 381,327          |       |
|                                                                                                                                          |       |         |       |             |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                   |       |         |       |             |       |
| Common stock; no  par value, 100 authorized, issued and outstanding as of April 1, 2005 and  December 31, 2004                                |       | 175,039      |       | 174,879          |       |
| Accumulated  deficit                                                                                                                          |       | (316,078     | )          | (304,162         | )          |
| Accumulated  other comprehensive income                                                                                                       |       | 817          |       | 855              |       |
| TOTAL  STOCKHOLDERS’ EQUITY                                                                                                              |       | (140,222     | )          | (128,428         | )          |
| TOTAL  LIABILITIES & STOCKHOLDERS’ EQUITY                                                                                            |       | $            | 615,667    |             | $          | 673,380 |   |

* *

*See accompanying notes to unaudited condensed consolidated financial statements.*

 

 

1

 

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND SUBSIDIARIES**

**(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

**THREE MONTHS ENDED APRIL 1, 2005 AND MARCH 26, 2004**

**(in thousands, except share and per share data)**
| ** **                                           | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|
| ** **                                           | ** ** | **April 1, 2005**      | ** ** | **March 26, 2004** | ** ** |
| NET SALES                                            |       | $                      | 196,491    |   | $ | 172,604 |   |
| COST OF SALES                                        |       | 121,005                |       | 106,881 |   |
| Gross Profit                                         |       | 75,486                 |       | 65,723 |   |
| OPERATING  EXPENSES :                                |       |                   |       |   |   |
| Selling, general  and administrative expenses        |       | 53,740                 |       | 48,257 |   |
| Depreciation and  amortization                       |       | 3,117                  |       | 2,983 |   |
| Total Operating  Expense                             |       | 56,857                 |       | 51,240 |   |
| OPERATING INCOME                                     |       | 18,629                 |       | 14,483 |   |
| CHANGE IN FAIR  VALUE OF INTEREST RATE SWAPS         |       | —                 |       | 1,104 |   |
| LOSS ON  EXTINGUISHMENT OF DEBT                      |       | (10,340                | )          | — |   |
| INTEREST EXPENSE                                     |       | (6,270                 | )          | (10,194 | ) |
| INTEREST INCOME                                      |       | 120                    |       | 8 |   |
| OTHER INCOME                                         |       | 168                    |       | 136 |   |
| Income before income  taxes                          |       | 2,307                  |       | 5,537 |   |
| PROVISION FOR  INCOME TAXES                          |       | 914                    |       | 2,286 |   |
| NET INCOME                                           |       | 1,393                  |       | 3,251 |   |
| PREFERRED STOCK  DIVIDENDS                           |       | (13,310                | )          | (13,261 | ) |
| NET INCOME  (LOSS) APPLICABLE TO COMMON STOCKHOLDERS |       | $                      | (11,917    | ) | $ | (10,010 | ) |

 

*See accompanying notes to unaudited condensed consolidated financial statements.*

**** ****

****2****

**** ****

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND SUBSIDIARIES**

**(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)**

**CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY) (UNAUDITED)**

**THREE MONTHS ENDED APRIL 1, 2005**

**(in thousands except share data)**
| ** **                        | ** ** | ** **        | ** ** | ** **       | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** **               | ** ** |
|-----------------------------------|------------|-------------------|------------|------------------|------------|-------------------|------------|------------------------|------------|--------------------------|------------|
| ** **                        | ** ** | ** **        | ** ** | ** **       | ** ** | ** **        | ** ** | **Other**              | ** ** | **Total**                | ** ** |
| ** **                        | ** ** | **Common  Stock** | ** ** | **(Accumulated** | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                        | ** ** | **Shares**        | ** ** | **Amount**       | ** ** | **Deficit)**      | ** ** | **Income  (Loss)**     | ** ** | **Equity  (Deficiency)** | ** ** |
| ** **                        | ** ** | ** **        | ** ** | ** **       | ** ** | ** **        | ** ** | ** **             | ** ** | ** **               | ** ** |
| BALANCE, DECEMBER  31, 2004       |       | 100               |       | 174,879          |       | (304,161          | )          | 855                    |       | (128,427                 | )          |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| Preferred stock  dividends        |       |              |       |             |       | (13,310           | )          |                   |       | (13,310                  | )          |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| Capital contribution  from Parent |       |              |       | 160              |       |              |       |                   |       | 160                      |       |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| Comprehensive  income:            |       |              |       |             |       |              |       |                   |       |                     |       |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| Net income                        |       |              |       |             |       | 1,393             |       |                   |       |                     |       |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| Foreign currency  translation     |       |              |       |             |       |              |       | (38                    | )          |                     |       |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| Total  comprehensive income       |       |              |       |             |       |              |       |                   |       | 1,355                    |       |
|                              |       |              |       |             |       |              |       |                   |       |                     |       |
| BALANCE, APRIL 1,  2005           |       | 100               |       | $                | 175,039    |              | $          | (316,078               | )          | $                        | 817        |   | $ | (140,222 | ) |
|                                   |            |                   |            |                  |            |                   |            |                        |            |                          |            |  |  |  |  |

 

*See accompanying notes to unaudited condensed consolidated financial statements.*

 

3

 

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND SUBSIDIARIES**

**(A WHOLLY OWNED SUBSIDIARY OF INTERLINE BRANDS, INC., A DELAWARE CORPORATION)**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**THREE MONTHS ENDED APRIL 1, 2005 AND MARCH 26, 2004**

**(in thousands)**
| ** **                                                                                    | ** ** | **April 1, 2005** | ** ** | **March 26, 2004** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------|------------|--------------------|------------|
| OPERATING  ACTIVITIES :                                                                       |       |              |       |               |       |
| Net Income                                                                                    |       | $                 | 1,393      |               | $          | 3,251 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities:            |       |              |       |               |       |
| Depreciation and  amortization                                                                |       | 3,117             |       | 2,983              |       |
| Amortization and  write-off of debt issuance costs                                            |       | 2,685             |       | 487                |       |
| Redemption  premium on 11.5% senior subordinated notes                                        |       | 8,050             |       | —             |       |
| Stock based  compensation                                                                     |       | 238               |       | —             |       |
| Change in fair  value of interest rate swaps                                                  |       | —            |       | (1,104             | )          |
| Interest income  on shareholder notes                                                         |       | —            |       | 12                 |       |
| Deferred income  taxes                                                                        |       | 356               |       | 140                |       |
|                                                                                          |       |              |       |               |       |
| Changes in  assets and liabilities, net of effects of acquisition:                            |       |              |       |               |       |
| Accounts  receivable - trade                                                                  |       | (7,174            | )          | (8,408             | )          |
| Accounts  receivable - other                                                                  |       | 1,536             |       | 4,411              |       |
| Inventory                                                                                     |       | (468              | )          | 817                |       |
| Prepaid expenses  and other current assets                                                    |       | (1,888            | )          | 602                |       |
| Other assets                                                                                  |       | (543              | )          | (150               | )          |
| Accrued interest  payable                                                                     |       | 2,810             |       | 5,477              |       |
| Accounts payable                                                                              |       | 665               |       | 6,493              |       |
| Accrued expenses  and other current liabilities                                               |       | (1,478            | )          | 179                |       |
| Accrued merger  expenses                                                                      |       | (111              | )          | (88                | )          |
| Income taxes  payable                                                                         |       | (6,033            | )          | 1,138              |       |
|                                                                                          |       |              |       |               |       |
| Net cash  provided by operating activities                                                    |       | 3,155             |       | 16,240             |       |
|                                                                                          |       |              |       |               |       |
| INVESTING  ACTIVITIES :                                                                       |       |              |       |               |       |
| Purchase of  property and equipment, net                                                      |       | (1,543            | )          | (1,429             | )          |
| Purchase of  business, net of cash acquired                                                   |       | (1,009            | )          | (289               | )          |
|                                                                                          |       |              |       |               |       |
| Net cash used in  investing activities                                                        |       | (2,552            | )          | (1,718             | )          |
|                                                                                          |       |              |       |               |       |
| FINANCING  ACTIVITIES :                                                                       |       |              |       |               |       |
| Increase in  revolver and swingline, net                                                      |       | 17,000            |       | —             |       |
| Repayment of  long-term debt                                                                  |       | (70,250           | )          | (1,750             | )          |
| Payment of redemption  on 11.5% senior subordinated notes                                     |       | (8,050            | )          |               |       |
| Payment of debt  issuance costs                                                               |       | —            |       | (218               | )          |
| Contribution  from Parent, net proceeds from exercise of underwriters over-allotment  options |       | 1,755             |       | —             |       |
|                                                                                          |       |              |       |               |       |
| Net cash used in  financing activities                                                        |       | (59,545           | )          | (1,968             | )          |
|                                                                                          |       |              |       |               |       |
| EFFECT OF  EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                 |       | (38               | )          | (23                | )          |
| NET (DECREASE)  INCREASE IN CASH AND CASH EQUIVALENTS                                         |       | (58,980           | )          | 12,531             |       |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF PERIOD                                               |       | 69,178            |       | 1,612              |       |
| CASH AND CASH  EQUIVALENTS, END OF PERIOD                                                     |       | $                 | 10,198     |               | $          | 14,143 |   |
|                                                                                          |       |              |       |               |       |
| SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION                                             |       |              |       |               |       |
| Cash paid during  the period for :                                                            |       |              |       |               |       |
| Interest                                                                                      |       | $                 | 1,611      |               | $          | 4,209 |   |
| Income taxes  (net of refunds)                                                                |       | $                 | 6,595      |               | $          | 270 |   |
|                                                                                          |       |              |       |               |       |
| SCHEDULE OF  NON-CASH INVESTING AND FINANCING ACTIVITIES                                      |       |              |       |               |       |
|                                                                                          |       |              |       |               |       |
| Dividends on  preferred stock                                                                 |       | $                 | 13,310     |               | $          | 13,261 |   |

 

*See accompanying notes to unaudited condensed consolidated financial statements.*

 

4

**InterlineBrands, Inc. (A NEW JERSEY CORPORATION) AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS** (UNAUDITED)

** (in thousands, except share data)**

 

**1.           BASIS OF PRESENTATION**

 

The accompanyingunaudited interim financial statements of Interline Brands, Inc., a New Jerseycorporation, and its subsidiaries (“Interline” or the “Company”) (a whollyowned subsidiary of Interline Brands, Inc., a Delaware corporation) have beenprepared in accordance with accounting principles generally accepted in theUnited States of America and the rules and regulations of the Securities andExchange Commission, which apply to interim financial statements. Theseunaudited condensed consolidated financial statements do not include alldisclosures provided in the annual financial statements and should be read inconjunction with the financial statements and notes thereto contained in theAnnual Report on Form 10-K for Interline Brands, Inc. for the year endedDecember 31, 2004 as filed with the Securities and Exchange Commission on March31, 2005.

 

All adjustments which arein the opinion of management, necessary for a fair statement of the results forthe interim periods presented have been recorded. The results of operations forthe interim periods presented are not necessarily indicative of the results tobe expected for the full year.

 

During December 2004, areincorporation merger occurred and Interline Brands, a Delaware corporation,(“Interline Delaware” or “the Parent”) became the parent company of the Company,which in turn became the Parent’s principal operating subsidiary. Immediatelyfollowing the reincorporation merger, the Parent completed its initial publicoffering (the “IPO”).

 

*SegmentInformation*—The Company is in one industry, the distributionof maintenance, repair and operations, or MRO, products.  In accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 131, “Disclosure about Segments of anEnterprise and Related Information”, the Company has one operating segment. Ournet sales for the three month periods ended April 1, 2005 and March 26, 2004 byproduct category were approximately (in millions):

 
| ** **                                 | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------|------------|------------------------|------------|
| **Product Category**                       | ** ** | **April 1, 2005**      | ** ** | **March 26, 2004** | ** ** |
| Plumbing                                   |       | $                      | 90.4       |   | $ | 79.4 | ** ** |
| Electrical                                 |       | 29.5                   |       | 27.6 | ** ** |
| Security Hardware                          |       | 13.7                   |       | 12.1 | ** ** |
| Heating,  Ventilation and Air Conditioning |       | 13.6                   |       | 10.2 | ** ** |
| Hardware                                   |       | 11.8                   |       | 10.4 | ** ** |
| Appliances                                 |       | 11.8                   |       | 10.4 | ** ** |
| Other                                      |       | 25.7                   |       | 22.5 | ** ** |
| Total                                      |       | $                      | 196.5      |   | $ | 172.6 | ** ** |

 

*Stock-basedCompensation*—The Company and its Parent accounted for theoption plans in accordance with APB Opinion No. 25, under which no compensationcost has been recognized for stock option awards. While the Company does notrecognize compensation costs for stock options, the 

 

5

----

 

Companydoes determine what these costs would have been using the method prescribed bySFAS No. 123 for disclosure purposes.

 

Thefair value of each option was estimated on the date of grant using theBlack-Scholes option pricing model. There were no options granted in the three months ended April 1,2005 and options granted under the 2004 Equity Incentive Plan were fully vestedas of the grant date.  The followingassumptions were used for options granted in 2004 under the 2000 Stock AwardPlan: dividend yield of 0%, expected volatility of 0%, risk-free interest rateof 3.48%, and expected life of 5 years. The fair value of these awards approximated zero.

 

Thefollowing table illustrates the effect on net earnings (loss) for the threemonths ended April 1, 2005 and March 26, 2004 as if the Company hadapplied the fair value recognition provisions of SFAS No.123, “Accounting forStock-Based Compensation,” to stock-based employee compensation (in thousands):

 
| ** **                                                                                                                   | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                                                   | ** ** | **April 1, 2005** | ** ** | **March 26, 2004** | ** ** |
| Net Income as reported                                                                                                       |       | $                      | 1,393      |   | $ | 3,251 |   |
|                                                                                                                         |       |                   |       |   |   |   |   |
| Add: Stock-based employee compensation expense  included in reported net income, net of related tax effects                  |       | 144                    |       | — |   |
|                                                                                                                         |       |                   |       |   |   |
| Deduct: Total stock-based employee compensation  expense determined under fair value based method for all awards, net of tax |       | (144                   | )          | — |   |
|                                                                                                                         |       |                   |       |   |   |
| Pro forma net income                                                                                                         |       | 1,393                  |       | 3,251 |   |
|                                                                                                                         |       |                   |       |   |   |
| Preferred stock dividends                                                                                                    |       | (13,310                | )          | (13,261 | ) |
|                                                                                                                         |       |                   |       |   |   |
| Net (loss) applicable to common shareholders                                                                                 |       | $                      | (11,917    | ) | $ | (10,010 | ) |

 

*NewAccounting Pronouncements*—On December 16, 2004, the FASBissued SFAS No. 123 (revised 2004), “Share-Based Payment,” which is a revisionof FASB No. 123, “Accounting for Stock-Based Compensation.”  SFAS No. 123R supersedes APB Opinion No. 25,“Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statementof Cash Flows.”  Generally, the approachin SFAS No. 123R is similar to the approach described in SFAS No. 123; however,this Statement requires all share-based payments to employees, including grantsof employee stock options, be recognized in the income statement based on theirfair values.  Pro forma disclosure willno longer be an alternative to financial statement recognition.

 

On April 14,2005, the Securities and Exchange Commission (“SEC”) announced that it wouldprovide for a phased-in implementation process for SFAS No. 123R. The SEC nowrequires that registrants that are not small business issuers adopt SFAS No.123R’s fair value method of accounting for share-based payments to employees notlater than the beginning of the first fiscal quarter in the year beginningafter June 15, 2005.  As a result,the Company and its Parent will not be required to adopt SFAS No. 123R until December 31,2005, the first day of the company’s 2006 fiscal year.  The Company and its Parent are continuing toevaluate the provisions of this Statement, the impact on its consolidatedfinancial statements and the timing and approach to adoption of this Statement.

 

**2.**              DEBT

 

Long-term debt at April 1, 2005 and December 31, 2004 consists of thefollowing:

 

6

----

 
| ** **                       | ** ** | **April 1,** | ** ** | **December 31,** | ** ** |
|----------------------------------|------------|--------------|------------|------------------|------------|
| ** **                       | ** ** | **2005**     | ** ** | **2004**         | ** ** |
|                             |       |         |       |             |       |
| Term loan                        |       | $            | 99,750     |             | $          | 100,000 |   |
| Note payable                     |       | 3,275        |       | 3,275            |       |
| 11.5% senior subordinated  notes |       | 130,000      |       | 200,000          |       |
|                             |       |         |       |             |       |
|                             |       | 233,025      |       | 303,275          |       |
| Less current  portion            |       | (1,000       | )          | (1,000           | )          |
|                             |       |         |       |             |       |
|                             |       | $            | 232,025    |             | $          | 302,275 |   |
|                             |       |         |       |             |       |

 

In May 2003, the Company completed an offering of $200million of 11.5% senior subordinated notes due 2011 and entered into a new$205.0 million senior secured credit facility which consists of a $140.0million term loan facility and a $65.0 million revolving loan facility, aportion of which is available in the form of letters of credit.  The net proceeds from the offering of seniorsubordinated notes and the refinancing of the former credit facility with thenew credit facility were used to: (1) repay all outstanding indebtedness underthe Company’s former credit facility, (2) redeem all of the 16% seniorsubordinated notes, (3) pay accrued interest and related redemption premiums onthe Company’s former debt, and (4) pay transaction fees and expenses related tothe foregoing transactions, which we refer to as the “Refinancing Transactions”.  Debt issuance costs capitalized in connectionwith the Refinancing Transactions were approximately $13.1 million. An expenseof approximately $14.9 million in May 2003 for the early extinguishment of debtresulted from the write-off of the unamortized loan fees and loan discountrelating to the Company’s former credit facility and the redemption premiumincurred upon redemption of the 16% senior subordinated notes.

 

The $200 million principal amount 11.5% seniorsubordinated notes due 2011 pay interest each May 15 and November 15, with thefirst payment made on November 15, 2003. Prior to May 15, 2006, the Company may redeem up to 35% of the notesusing proceeds of certain equity offerings and the Company may redeem all ofthe notes after May 15, 2007, subject to redemption premiums unless redeemedafter May 15, 2009.   The Company electedto redeem $70.0 million of the 11.5% senior subordinated notes using proceedsfrom the IPO transaction and gave the 30-day notice, required by the indentureagreement, on December 20, 2004.  InJanuary 2005, the Company recorded a loss on extinguishment of debt of $10.3million, consisting of the write-off of deferred financing costs of $2.3million and the premium of $8.1 million on the $70.0 million redemption of11.5% senior subordinated notes.

 

In December 2004 the Company amended its term loanfacility and revolving loan facility. The term loan was reduced to $100.0 million from $140.0 million and therevolving 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 transaction. Borrowings under the amended term loan facility and revolving loanfacility bear interest, at the Company’s option, at either LIBOR plus a spreador at the alternate base rate plus a spread. Interest rates in effect onborrowings under the term loan facility at April 1, 2005 ranged from 5.37% forLIBOR based borrowings and 7.0% for prime based borrowings.  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 facility matures on December31, 2010 and the revolving loan facility matures on May 31, 2008.  Debt issuance costs capitalized in connectionwith the amended credit facility were approximately $1.1 million.

 

As of April 1, 2005, theCompany had $73.0 million available under its revolving loan facility.  Total letters of credit issued under thisfacility as of April 1, 2005 were $10.0 million.  There were $17.0 million in borrowings underthe revolving loan facility at April 1, 2005. The credit facility is secured bysubstantially all of the assets of the Company.

 

7

----

 

In conjunction with the company’s IPO transaction andthe amended credit facility an expense of approximately $0.7 million for earlyextinguishments of debt resulted from the write-off of the unamortized loanfees relating to the Company’s former credit facility in December 2004. InJanuary 2005 the Company recognized a charge of $2.3 million related to the earlyextinguishment of $70.0 million of the 11.5% senior subordinated notes.

 

Periodically, the Company enters into derivativefinancial instruments, including interest rate exchange agreements, to manageits exposure to fluctuations in interest rates on its debt.  All interest rate swap agreements wereterminated in conjunction with the IPO in December 2004.

 

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 April 1,2005.

 

In April 2003, the Company issued a non-recourse notepayable 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% per annum, with principal due in full in April 2010.

 

The maturities of long-term debt subsequentto April 1, 2005 are as follows:

 

| 2005       |   | $       | 750     |   |
|------------|--------|---------|---------|--------|
| 2006       |   | 1,000   |    |
| 2007       |   | 1,000   |    |
| 2008       |   | 1,000   |    |
| 2009       |   | 1,000   |    |
| Thereafter |   | 228,275 |    |
|       |   | $       | 233,025 |   |
|       |   |    |    |

 

 

**3.**              STOCKOPTION PLANS

 

During 2000, the Companyestablished a Stock Award Plan, (the “2000 Plan”), under which Interline NewJersey may award a total of 6,395 shares of common stock in the form ofincentive stock options (which may be awarded to key employees only),nonqualified stock options, stock appreciation rights, or SARs, and restrictedstock awards, all of which may be awarded to directors, officers, key employeesand consultants.  The exercise price pershare 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 price per share for an incentivestock option granted to a person owning stock possessing more than 10% of thetotal combined voting power of all classes of stock may not be less than 110%of the fair market value of a share of common stock on the grant date, and maynot be exercisable after the expiration of ten years from the date ofgrant.  The Parent’s compensationcommittee will determine in its sole discretion whether a SAR is settled incash, shares or a combination of cash and shares.

 

During 2004, the Parentadopted the 2004 Equity Incentive Plan, (the “2004 Plan”), under which theParent may award 3,175,000 shares in the form of incentive stock options,nonqualified stock options, stock appreciation rights, or SARs, restrictedshare units, restricted stock and stock bonus awards, all of which may beawarded to any employee, director, officer or consultant of the Company or theParent.  Under the terms of the 2004 planand unless the compensation committee of the Parent determines otherwise, theexercise price of the options will not be less than the fair market value ofthe common stock at the time of grant.

 

8

----

 

Upon completion of theParent’s IPO in December 2004, 175,820 shares of Parent restricted stock wereissued to senior management.  Therestricted stock awards will vest 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.  The restricted stock will alsovest if the executive remains in our employ for seven years on the seventhanniversary of the date of grant.  Inaddition, an aggregate of 10,000 shares of the Parent’s restricted stock wereissued to non-employee directors who are not affiliated with any of ourprincipal stockholders.  Such awards willvest over two years.  As a result of theserestricted stock awards, the Company expects to incur non-cash charges between$0.4 million and $0.9 million in each of the next three to seven yearsdepending upon the acceleration of vesting of restricted stock.  These two directors also each received 20,000non-qualified stock options with an exercise price equal to the IPO price of$15.00 per share.  In addition, theParent issued to management 1,835,218 non-qualified stock options to purchasethe Parent’s common stock with an exercise price equal to the IPO price of$15.00 per share and 590,465 non-qualified stock options to purchase the Parent’scommon stock with a weighted average exercise price of $24.00 per share.  All of these options were fully vested andexercisable when granted.  However,management will only be permitted to sell shares acquired upon the exercise ofthe options in 25% increments over four years.

 

A summary of the statusof stock option plans to purchase the Parent’s common stock is as follows:

 
| ** **                        | ** ** | ** **    | ** ** | ** **         | ** ** | **Weighted**         | ** ** |
|-----------------------------------|------------|---------------|------------|--------------------|------------|----------------------|------------|
| ** **                        | ** ** | **Number**    | ** ** | **Exercise Price** | ** ** | **Average Exercise** | ** ** |
| ** **                        | ** ** | **of Shares** | ** ** | **Per Share**      | ** ** | **Price Per Share**  | ** ** |
|                              |       |          |       |               |       |                 |       |
| Outstanding at  December 31, 2004 |       | 2,468,009     |       | $15.00 - $1,669.13 |       | $                    | 17.61      |   |
|                              |       |          |       |               |       |                 |       |
| 2005:                             |       |          |       |               |       |                 |       |
| Granted                           |       | —        |       | —             |       | —               |       |
| Cancelled                         |       | —        |       | —             |       | —               |       |
|                              |       |          |       |               |       |                 |       |
| Outstanding at  April 1, 2005     |       | 2,468,009     |       | $15.00 - $1,669.13 |       | $                    | 17.61      |   |
|                              |       |          |       |               |       |                 |       |

 

**4.**              SUBSIDIARY GUARANTORS

 

The Company completed an offering of $200 million principal amount of11.5% senior subordinated notes in connection with its Refinancing Transactionsin 2003, of which $130 million principal amount remains outstanding.  The Company filed a registration statementwith the Securities and Exchange Commission with respect to an exchange offerfor the 11.5% senior subordinated notes and with respect to resales of thesenior subordinated notes by an affiliate of the Company for market-makingpurposes.  The registration statement wasdeclared effective by the SEC and the exchange offer was consummated.  The Company’s 11.5% senior subordinated notesare fully and unconditionally guaranteed, jointly and severally, on asubordinated basis by Wilmar Holdings, Inc., Wilmar Financial, Inc., andGlenwood Acquisition LLC (100%-owned subsidiaries of Interline).  The guarantees by these subsidiary guarantors(the “Subsidiary Guarantors”) are senior to any of their existing and futuresubordinated obligations, equal in right of payment with any of their existingand future senior subordinated indebtedness and subordinated to any of theirexisting and future senior indebtedness. Accordingly, condensed consolidating financial statements for InterlineBrands, Inc. and the Subsidiary Guarantors are presented below.

 

9

----

 

**CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)**

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION)AND THE SUBSIDIARY GUARANTORS**

**As of April 1, 2005**

 

 
| ** **                                                    | ** ** | **Company**                                          | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Excluding**                                        | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Subsidiary**                                       | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Guarantors**                                       | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                    | ** ** | **(In  thousands, except share and per share data)** | ** ** |
| ASSETS                                                        |       |                                                 |       |           |       |             |       |             |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| CURRENT ASSETS:                                               |       |                                                 |       |           |       |             |       |             |       |
| Cash and cash  equivalents                                    |       | $                                                    | 10,159     |           | $          | 39               |       | $                | —     |   | $ | 10,198 |   |
| Accounts  receivable - trade, net                             |       | 105,685                                              |       | —         |       | —           |       | 105,685          |       |
| Accounts  receivable - other                                  |       | 13,961                                               |       | —         |       | —           |       | 13,961           |       |
| Inventory                                                     |       | 146,000                                              |       | —         |       | —           |       | 146,000          |       |
| Prepaid expenses  and other current assets                    |       | 5,081                                                |       | 11             |       | —           |       | 5,092            |       |
| Deferred income  taxes                                        |       | 11,405                                               |       | —         |       | —           |       | 11,405           |       |
| Due from Parent                                               |       | —                                               |       | 76,186         |       | (76,186          | )          | —           |       |
| Investment in  subsidiaries                                   |       | 42,078                                               |       | —         |       | (42,078          | )          | —           |       |
| Total current  assets                                         |       | 334,369                                              |       | 76,236         |       | (118,264         | )          | 292,341          |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| PROPERTY AND  EQUIPMENT, net                                  |       | 28,195                                               |       | —         |       | —           |       | 28,195           |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| GOODWILL                                                      |       | 203,848                                              |       | —         |       | —           |       | 203,848          |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| OTHER INTANGIBLE  ASSETS, net                                 |       | 81,673                                               |       | —         |       | —           |       | 81,673           |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| OTHER ASSETS                                                  |       | 6,336                                                |       | 7,236          |       | (3,962           | )          | 9,610            |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| TOTAL ASSETS                                                  |       | $                                                    | 654,421    |           | $          | 83,472           |       | $                | (122,226   | ) | $ | 615,667 |   |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY (DEFICIENCY)       |       |                                                 |       |           |       |             |       |             |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| CURRENT  LIABILITIES:                                         |       |                                                 |       |           |       |             |       |             |       |
| Revolver                                                      |       | $                                                    | 17,000     |           | $          | —           |       | $                | —     |   | $ | 17,000 |   |
| Current portion  of long-term debt                            |       | 1,000                                                |       | —         |       | —           |       | 1,000            |       |
| Accounts payable                                              |       | 53,925                                               |       | —         |       | —           |       | 53,925           |       |
| Accrued expenses  and other current liabilities               |       | 19,218                                               |       | —         |       | —           |       | 19,218           |       |
| Accrued interest  payable                                     |       | 5,852                                                |       | —         |       | —           |       | 5,852            |       |
| Accrued merger  expenses                                      |       | 5,994                                                |       | —         |       | —           |       | 5,994            |       |
| Income taxes  payable                                         |       | (186                                                 | )          | 1,525          |       | —           |       | 1,339            |       |
| Due to  subsidiaries                                          |       | 43,554                                               |       | —         |       | (43,554          | )          | —           |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| Total current  liabilities                                    |       | 146,357                                              |       | 1,525          |       | (43,554          | )          | 104,328          |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| LONG-TERM  LIABILITIES:                                       |       |                                                 |       |           |       |             |       |             |       |
| Deferred income  taxes                                        |       | 24,899                                               |       | —         |       | —           |       | 24,899           |       |
| Long-term debt,  net of current portion                       |       | 228,750                                              |       | 3,275          |       | —           |       | 232,025          |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| TOTAL  LIABILITIES                                            |       | 400,006                                              |       | 4,800          |       | (43,554          | )          | 361,252          |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| SENIOR PREFERRED  STOCK                                       |       | 394,637                                              |       | —         |       | —           |       | 394,637          |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| STOCKHOLDERS’  EQUITY (DEFICIENCY):                      |       |                                                 |       |           |       |             |       |             |       |
| Common stock                                                  |       | 175,039                                              |       | —         |       | —           |       | 175,039          |       |
| Additional  paid-in-capital                                   |       | —                                               |       | 43,285         |       | (43,285          | )          | —           |       |
| Accumulated  deficit                                          |       | (316,078                                             | )          | 35,387         |       | (35,387          | )          | (316,078         | )          |
| Accumulated  other comprehensive loss                         |       | 817                                                  |       | —         |       | —           |       | 817              |       |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| TOTAL  STOCKHOLDERS’ EQUITY (DEFICIENCY)                 |       | (140,222                                             | )          | 78,672         |       | (78,672          | )          | (140,222         | )          |
|                                                          |       |                                                 |       |           |       |             |       |             |       |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) |       | $                                                    | 654,421    |           | $          | 83,472           |       | $                | (122,226   | ) | $ | 615,667 |   |

 

10

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**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

**INTERLINEBRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORS**

**As ofDecember 31, 2004**

 
| ** **                                                    | ** ** | **Company**                                         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Excluding**                                       | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Subsidiary**                                      | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Guarantors**                                      | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                    | ** ** | **(In thousands, except share and per share data)** | ** ** |
| ASSETS                                                        |       |                                                |       |           |       |             |       |             |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| CURRENT ASSETS:                                               |       |                                                |       |           |       |             |       |             |       |
| Cash and cash  equivalents                                    |       | $                                                   | 69,110     |           | $          | 68               |       | $                | —     |   | $ | 69,178 |   |
| Accounts  receivable - trade, net                             |       | 98,511                                              |       | —         |       | —           |       | 98,511           |       |
| Accounts  receivable - other                                  |       | 17,828                                              |       | —         |       | —           |       | 17,828           |       |
| Inventory                                                     |       | 145,532                                             |       | —         |       | —           |       | 145,532          |       |
| Prepaid expenses  and other current assets                    |       | 3,196                                               |       | 8              |       | —           |       | 3,204            |       |
| Deferred income  taxes                                        |       | 12,084                                              |       | —         |       | —           |       | 12,084           |       |
| Due from Parent                                               |       | —                                              |       | 75,892         |       | (75,892          | )          | —           |       |
| Investment in  subsidiaries                                   |       | 39,745                                              |       | —         |       | (39,745          | )          | —           |       |
| Total current  assets                                         |       | 386,006                                             |       | 75,968         |       | (115,637         | )          | 346,337          |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| PROPERTY AND  EQUIPMENT, net                                  |       | 28,767                                              |       | —         |       | —           |       | 28,767           |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| GOODWILL                                                      |       | 203,848                                             |       | —         |       | —           |       | 203,848          |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| OTHER INTANGIBLE  ASSETS, net                                 |       | 85,361                                              |       | —         |       | —           |       | 85,361           |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| OTHER ASSETS                                                  |       | 5,793                                               |       | 7,068          |       | (3,794           | )          | 9,067            |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| TOTAL ASSETS                                                  |       | $                                                   | 709,775    |           | $          | 83,036           |       | $                | (119,431   | ) | $ | 673,380 |   |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY (DEFICIENCY)       |       |                                                |       |           |       |             |       |             |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| CURRENT  LIABILITIES:                                         |       |                                                |       |           |       |             |       |             |       |
| Current portion  of long-term debt                            |       | $                                                   | 1,000      |           | $          | —           |       | $                | —     |   | $ | 1,000 |   |
| Accounts payable                                              |       | 53,260                                              |       | —         |       | —           |       | 53,260           |       |
| Accrued expenses  and other current liabilities               |       | 22,180                                              |       | —         |       | —           |       | 22,180           |       |
| Accrued interest  payable                                     |       | 3,042                                               |       | —         |       | —           |       | 3,042            |       |
| Accrued merger  expenses                                      |       | 6,131                                               |       | —         |       | —           |       | 6,131            |       |
| Income taxes  payable                                         |       | 3,772                                               |       | 3,600          |       | —           |       | 7,372            |       |
| Due to  subsidiaries                                          |       | 43,270                                              |       | —         |       | (43,270          | )          | —           |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| Total current  liabilities                                    |       | 132,655                                             |       | 3,600          |       | (43,270          | )          | 92,985           |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| LONG-TERM  LIABILITIES:                                       |       |                                                |       |           |       |             |       |             |       |
| Deferred income  taxes                                        |       | 25,221                                              |       | —         |       | —           |       | 25,221           |       |
| Long-term debt,  net of current portion                       |       | 299,000                                             |       | 3,275          |       | —           |       | 302,275          |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| TOTAL  LIABILITIES                                            |       | 456,876                                             |       | 6,875          |       | (43,270          | )          | 420,481          |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| SENIOR PREFERRED  STOCK                                       |       | 381,327                                             |       | —         |       | —           |       | 381,327          |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| STOCKHOLDERS’  EQUITY (DEFICIENCY):                      |       |                                                |       |           |       |             |       |             |       |
| Common stock                                                  |       | 174,879                                             |       | —         |       | —           |       | 174,879          |       |
| Additional  paid-in-capital                                   |       | —                                              |       | 43,285         |       | (43,285          | )          | —           |       |
| Accumulated  deficit                                          |       | (304,162                                            | )          | 32,876         |       | (32,876          | )          | (304,162         | )          |
| Accumulated  other comprehensive loss                         |       | 855                                                 |       | —         |       | —           |       | 855              |       |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| TOTAL  STOCKHOLDERS’ EQUITY (DEFICIENCY)                 |       | (128,428                                            | )          | 76,161         |       | (76,161          | )          | (128,428         | )          |
|                                                          |       |                                                |       |           |       |             |       |             |       |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) |       | $                                                   | 709,775    |           | $          | 83,036           |       | $                | (119,431   | ) | $ | 673,380 |   |

 

11

----

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**INTERLINEBRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORS**

**Three MonthsEnded 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 STOCKHOLDERS |       | $                                                   | (11,917    | )              | $          | 2,511            |       | $                | (2,511     | ) | $ | (11,917 | ) |

 

12

 

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORS**

**Three Months Ended  March 26, 2004**

 
| ** **                                           | ** ** | **Parent**         | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------|------------|--------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **Company**        | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                           | ** ** | **(In thousands)** | ** ** |
| ** **                                           | ** ** | ** **         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| NET SALES                                            |       | $                  | 172,604    |           | $          | —           |       | $                | —     |   | $ | 172,604 |   |
| COST OF SALES                                        |       | 106,881            |       | —         |       | —           |       | 106,881          |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Gross profit                                         |       | 65,723             |       | —         |       | —           |       | 65,723           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| OPERATING  EXPENSES:                                 |       |               |       |           |       |             |       |             |       |
| Selling, general  and administrative expenses        |       | 48,252             |       | 5              |       | —           |       | 48,257           |       |
| Depreciation and  amortization                       |       | 2,983              |       | —         |       | —           |       | 2,983            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Total operating  expenses                            |       | 51,235             |       | 5              |       | —           |       | 51,240           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| OPERATING INCOME                                     |       | 14,488             |       | (5             | )          | —           |       | 14,483           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| CHANGE IN FAIR  VALUE OF INTEREST RATE SWAPS         |       | 1,104              |       | —         |       | —           |       | 1,104            |       |
| INTEREST EXPENSE                                     |       | (13,021            | )          | —         |       | 2,827            |       | (10,194          | )          |
| INTEREST INCOME                                      |       | 8                  |       | 2,827          |       | (2,827           | )          | 8                |       |
| OTHER INCOME  (EXPENSE)                              |       | 136                |       | 136            |       | (136             | )          | 136              |       |
| EQUITY IN  EARNINGS OF SUBSIDIARIES                  |       | 1,822              |       | —         |       | (1,822           | )          | —           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Income (loss)  before income taxes                   |       | 4,537              |       | 2,958          |       | (1,958           | )          | 5,537            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| PROVISION FOR  INCOME TAXES                          |       | 1,286              |       | 1,000          |       | —           |       | 2,286            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET INCOME  (LOSS)                                   |       | 3,251              |       | 1,958          |       | (1,958           | )          | 3,251            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| PREFERRED STOCK  DIVIDENDS                           |       | (13,261            | )          | —         |       | —           |       | (13,261          | )          |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET (LOSS)  INCOME APPLICABLE TO COMMON STOCKHOLDERS |       | $                  | (10,010    | )              | $          | 1,958            |       | $                | (1,958     | ) | $ | (10,010 | ) |

 

13

 

**CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)**

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THE SUBSIDIARY GUARANTORS**

**Three 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 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 |   |

 

14

----

 

**CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)**

**INTERLINE BRANDS, INC. (A NEW JERSEY CORPORATION) AND THESUBSIDIARY GUARANTORS**

**Three Months Ended March 26, 2004**

 
| ** **                                                                                   | ** ** | **Parent**         | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                   | ** ** | **Company**        | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                                                   | ** ** | **(In thousands)** | ** ** |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| OPERATING  ACTIVITIES:                                                                       |       |               |       |           |       |             |       |             |       |
| Net income                                                                                   |       | $                  | 3,251      |           | $          | 1,958            |       | $                | (1,958     | ) | $ | 3,251 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: |       |               |       |           |       |             |       |             |       |
| Depreciation and  amortization                                                               |       | 2,983              |       | —         |       | —           |       | 2,983            |       |
| Amortization of  debt issuance costs                                                         |       | 487                |       | —         |       | —           |       | 487              |       |
| Change in fair  value of interest rate swaps                                                 |       | (1,104             | )          | —         |       | —           |       | (1,104           | )          |
| Interest on  shareholder loans                                                               |       | 12                 |       | —         |       | —           |       | 12               |       |
| Deferred income  taxes                                                                       |       | 140                |       | —         |       | —           |       | 140              |       |
| Equity in  earnings of subsidiaries                                                          |       | (1,958             | )          | —         |       | 1,958            |       | —           |       |
| Changes in  assets and liabilities, net of effects of acquisition:                           |       |               |       |           |       |             |       |             |       |
| Accounts  receivable - trade                                                                 |       | (8,408             | )          | —         |       | —           |       | (8,408           | )          |
| Accounts  receivable - other                                                                 |       | 4,411              |       | —         |       | —           |       | 4,411            |       |
| Inventory                                                                                    |       | 817                |       | —         |       | —           |       | 817              |       |
| Prepaid expenses  and other current assets                                                   |       | 604                |       | (2             | )          | —           |       | 602              |       |
| Due from parent                                                                              |       | —             |       | (2,826         | )          | 2,826            |       | —           |       |
| Other assets                                                                                 |       | (14                | )          | (136           | )          | —           |       | (150             | )          |
| Accrued interest  payable                                                                    |       | 5,477              |       | —         |       | —           |       | 5,477            |       |
| Accounts payable                                                                             |       | 6,501              |       | (8             | )          | —           |       | 6,493            |       |
| Accrued expenses  and other current liabilities                                              |       | 179                |       | —         |       | —           |       | 179              |       |
| Accrued merger  expenses                                                                     |       | (88                | )          | —         |       | —           |       | (88              | )          |
| Income taxes  payable                                                                        |       | 138                |       | 1,000          |       | —           |       | 1,138            |       |
| Due to  subsidiaries                                                                         |       | 2,826              |       | —         |       | (2,826           | )          | —           |       |
| Net cash  provided by (used in) operating activities                                         |       | 16,254             |       | (14            | )          | —           |       | 16,240           |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| INVESTING  ACTIVITIES:                                                                       |       |               |       |           |       |             |       |             |       |
| Purchase of  property and equipment                                                          |       | (1,429             | )          | —         |       | —           |       | (1,429           | )          |
| Purchase of  business, net of assets acquired                                                |       | (289               | )          | —         |       | —           |       | (289             | )          |
| Net cash used in  investing activities                                                       |       | (1,718             | )          | —         |       | —           |       | (1,718           | )          |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| FINANCING  ACTIVITIES:                                                                       |       |               |       |           |       |             |       |             |       |
| Repayment of  debt                                                                           |       | (1,750             | )          | —         |       | —           |       | (1,750           | )          |
| Payment of debt  issuance costs                                                              |       | (218               | )          | —         |       | —           |       | (218             | )          |
| Net cash used in  financing activities                                                       |       | (1,968             | )          | —         |       | —           |       | (1,968           | )          |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| EFFECT OF  EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                |       | (23                | )          | —         |       | —           |       | (23              | )          |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                                        |       | 12,545             |       | (14            | )          | —           |       | 12,531           |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF PERIOD                                              |       | 1,527              |       | 85             |       | —           |       | 1,612            |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| CASH AND CASH  EQUIVALENTS, END OF PERIOD                                                    |       | $                  | 14,072     |           | $          | 71               |       | $                | —     |   | $ | 14,143 |   |

 

15

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ITEM 2. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS.

 

*References to “us”and “we” are to the Company.  You shouldread the following discussion in conjunction with our unaudited consolidatedfinancial statements and related notes included in this quarterly report, andour audited consolidated financial statements and related notes included  in**our Annual Report on Form 10-K filed with the SEC.*

 

**CautionaryStatement for Purposes of the “Safe Harbor” Provisions of the PrivateSecurities Litigation Reform Act of 1995**

 

                This quarterly report containsforward-looking statements that are subject to risks and uncertainties.You should not place undue reliance on those statements because they aresubject to numerous uncertainties and factors relating to our operations andbusiness environment, all of which are difficult to predict and many of whichare beyond our control. Forward-looking statements include informationconcerning our possible or assumed future results of operations, includingdescriptions of our business strategy. These statements often include wordssuch as “may,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate”or similar expressions. These statements are based on assumptions that we havemade in light of our experience in the industry as well as our perceptions ofhistorical trends, current conditions, expected future developments and otherfactors we believe are appropriate under the circumstances. As you read andconsider this quarterly report, you should understand that these statements arenot guarantees of performance or results. They involve risks, uncertainties andassumptions. Although we believe that these forward-looking statementsare based on reasonable assumptions, you should be aware that many factorscould affect our actual financial results or results of operations and couldcause actual results to differ materially from those in the forward-lookingstatements. These factors include:

 

•                    material facilities and systems disruptions andshutdowns,

•                    our ability to purchase products from suppliers onfavorable terms,

•                    our ability to accurately predict market trends,

•                    product cost and price fluctuations due to marketconditions,

•                    failure to locate and acquire acquisitioncandidates,

•                    dependence on key employees,

•                    our level of debt,

•                    interest rate fluctuations,

•                    future cash flows,

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

•                    general market conditions,

•                    changes in consumer preferences,

•                    adverse publicity and litigation,

•                    labor and benefit costs, and

•                    the other factors listed under “Risk Factors” inour Annual Report on Form 10-K filed with the SEC.

 

                All information contained inthis quarterly report is materially accurate as of the date of thisreport.   New risks and uncertaintiesarise from time to time, and it is impossible for us to predict these events orhow they may affect us. In light of these risks and uncertainties, you shouldkeep in mind that any forward-looking statement made in this quarterlyreport might not occur.  We assume noobligation to update any forward-looking statements after the date of thisquarterly report as a result of new information, future events or developments,except as required by federal securities law.

 

Overview

 

                As a leading nationaldistributor and direct marketer of over 45,000 specialty MRO products, we sellto over 150,000 active customer accounts. Ourhighly diverse customer base includes facilities maintenance customers,professional contractors and specialty distributors. Our customers range insize from individual contractors and independent hardware stores to apartmentmanagement companies and national purchasing groups.

 

                We market and sell our productsprimarily through eight distinct and targeted brands. Our multi-brandoperating model, which we believe is unique in the industry, allows us to use asingle platform to deliver tailored products and services to meet theindividual needs of each respective customer group served. We reach 

 

16

----

 

our markets using avariety of sales channels, including a direct sales force of field salesrepresentatives, telesales representatives, a direct mail program,brand-specific e-commerce websites and a national accounts sales program.

 

Critical AccountingPolicies

 

                In preparing the consolidatedfinancial statements in conformity with accounting principles generallyaccepted in the United States of America, management is required to makecertain estimates, judgments and assumptions. These estimates, judgments andassumptions affect the reported amounts of assets and liabilities, includingthe disclosure of contingent assets and liabilities, at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe periods presented. On an ongoing basis, management evaluates theseestimates and assumptions. Management bases its estimates and assumptions onhistorical experience and on various other factors that are believed to bereasonable at the time the estimates and assumptions are made. Actual resultsmay differ from these estimates and assumptions under different circumstancesor conditions. The significant accounting policies that management believes arethe most critical in order to fully understand and evaluate our financialposition and results of operations include the following policies.

 

*RevenueRecognition*

 

While our recognition of revenue is predominantly derived from routinetransactions and does not involve significant judgment, revenue recognitionrepresents an important accounting policy for us. We recognize a sale when theproduct has been delivered and risk of loss has passed to the customer,collection of the resulting receivable is probable, persuasive evidence of anarrangement exists, and the fee is fixed or determinable. Sales are recordednet of estimated discounts, rebates and returns. A portion of our sales aredelivered direct from the manufacturer. These direct-shipment sales arerecorded on a gross basis, with the corresponding cost of goods sold, inaccordance with the guidance in EITF 99-19, *Reporting Revenues Gross as a Principal verses Net as an Agent.*Weprovide limited product return and protection rights to certain customers. Weaccrue product return reserves and warranty obligations. A provision is madefor estimated product returns based on sales volumes and our experience. Actualreturns have not varied materially from amounts provided historically.

 

*Estimating Allowances for Doubtful Accounts*

 

                We maintain allowances fordoubtful accounts for estimated losses resulting from our inability to collectoutstanding amounts from customers. The allowances include specific amounts forthose accounts that are likely to be uncollectible, such as accounts ofcustomers in bankruptcy and general allowances for those accounts thatmanagement currently believes to be collectible but later become uncollectible.Estimates are used to determine the allowances for bad debts and are based onhistorical collection experience, current economic trends, credit worthiness ofcustomers and changes in customer payment terms. Adjustments to credit limitsare made based upon payment history and our customers’ current creditworthiness. If the financial condition of our customers were to deteriorate,allowances may be needed that will increase selling, general and administrativeexpenses and decrease accounts receivable. At April 1, 2005 the allowance for doubtful accounts totaled $7.0million.

 

*Estimating Write-Offs for Excess and Obsolete Inventory*

 

                Inventoriesare valued at the lower of cost or market. We determined inventory cost usingthe average cost method. We adjust inventory for excess and obsolete inventoryand for the difference by which the cost of the inventory exceeds the estimatedmarket value. In order to determine the adjustments, management reviewsinventory quantities on hand, slow movement reports and sales history reports.Management estimates the required adjustment based on estimated demand forproducts and market conditions. Tothe extent historical results are not indicative of future results and ifevents occur that affect our relationships with vendors or the salability ofour products, additional write-offs may be needed that will increase our costof sales and decrease inventory.

 

*Impairment of Goodwill, Intangibles and Other Long-Lived Assets*

 

                Management assesses therecoverability of our goodwill, identifiable intangibles and other long-livedassets whenever events or changes in circumstances indicate that the carryingvalue may not be recoverable. The following factors, if present, may trigger animpairment review: (1) significant underperformance relative to expectedhistorical or projected future operating results, (2) significant negativeindustry or economic trends, (3) a significant increase in competition,and (4) a significant increase in interest rates on debt. If therecoverability of these assets is unlikely because of the existence of one ormore of the above-mentioned factors, an impairment analysis is performedusing a projected discounted cash flow method. Management must make assumptionsregarding estimated future cash flows and other factors to determine the fairvalue of these respective assets. If these estimates or related assumptionschange in the future, we may be required to record an impairment charge.Impairment charges would be included in corporate general and administrativeexpenses in our statements of operations, and would result in reduced carryingamounts of the related assets in our balance sheets.

 

*Legal Contingencies*

 

                From time to time, in the courseof our business, we become involved in legal proceedings. In accordance withSFAS No. 5 “Accounting for Contingencies,” if it is probable that, asa result of a pending legal claim, an asset 

 

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hadbeen impaired or a liability had been incurred at the date of the financialstatements and the amount of the loss is estimable, an accrual for the costs toresolve the claim is recorded in accrued expenses in our balance sheets.Professional fees related to legal claims are included in general andadministrative expenses in our statements of operations. Management, with theassistance of outside counsel, determines whether it is probable that aliability from a legal claim has been incurred and estimates the amount ofloss. The analysis is based upon potential results, assuming a combination oflitigation and settlement strategies. Management does not believe thatcurrently pending proceedings will have a material adverse effect on ourconsolidated financial position. It is possible, however, that future resultsof operations for any particular period could be materially affected by changesin our assumptions related to these proceedings.

 

*Derivative Financial Instruments*

 

                We periodically enter intoderivative financial instruments, including interest rate exchange agreements,or swaps, to manage exposure to fluctuations in interest rates on our debt. InDecember 2004, in conjunction with our Parent’s initial public offering, weterminated all interest rate exchange agreements, or swaps.  Under our former swap agreements we paid afixed rate on the notional amount to a bank and the bank paid us a variablerate on the notional amount equal to a base LIBOR rate. These interest rateswaps did not qualify for hedge accounting under SFAS No. 133 “Accountingfor Derivative Statements and Hedging Activities,” and were recorded at fairvalue in our balance sheet with changes in the fair value reflected innon-operating expense. The fair market value of these instruments wasdetermined by quotes obtained from the related counter parties.

 

Results ofOperations

 

The following discussion includes references to the termaverage daily sales.  Average daily salesare defined as sales for a period of time divided by the number of shippingdays in that period of time.

 

*ThreeMonths Ended April 1, 2005 Compared to Three Months Ended March 26, 2004*

 

*                Overview.*  Thefirst quarter of 2005 showed continued improvement in most of our key operatingmetrics.  Sales grew 13.8% in the firstquarter compared to the prior year period and 12.1% on an organic average dailysales basis.  We were able to achievethis sales performance due to the continued success of our organic growthinitiatives, which include expanding our field sales force, continued successof our national accounts and supply chain initiatives, and increasing customerdemand for new product introductions in HVAC equipment and private labelfaucets.  Our professional contractormarket remains strong posting a daily sales growth rate of 18.8%.  Our facilities maintenance markets alsocontinue to improve, due primarily to improving occupancy in the multi-familyhousing sector.  We also showed continuedimprovement in gross profit margins, which increased 34 basis points to 38.4% ofsales for the quarter.  This gross marginimprovement combined with effective cost controls in logistics and operationsled to an improvement in operating expense leverage of 75 basis points,resulting in improved operating income.  As a result of the significant debt reduction associated with ourInitial Public Offering last quarter, interest expense was $3.9 million lowerthan the prior year period.  While weadded inventory during the quarter to support increased growth and high servicelevels, we were able to show continued improvement in our return on investedcapital.

 

**                NetSales.**  Our net sales increased by $23.9 million, or13.8%, to $196.5 million in the three months ended April 1, 2005 from$172.6 million in the three months ended March 26, 2004.  During 2005 we had one more shipping day thanduring the prior year period.  Averagedaily sales were $3.0 million in the three months ended April 1, 2005 and$2.7 million in the three months ended March 26, 2004, a 12.1%increase. The sales increase was attributable to improved demand for ourproducts, new sales and growth initiatives and to price increases.  Our strongest sales growth this quarter wasin the professional contractor market, which grew 18.9%, followed by 11.4%growth in the facilities maintenance market and 4.9% sales growth in ourspecialty distributor market.

 

*                GrossProfit.*  Gross profitincreased by $9.8 million, or 14.9%, to $75.5 million in the threemonths ended April 1, 2005 from $65.7 million in the three months endedMarch 26, 2004.  Gross profit marginsincreased to 38.4% for the three months ended April 1, 2005 compared to 38.1%for the three months ended March 26, 2004. This improvement in our gross profit margins is a result of overallhigher selling margins related to our successful private label program and favorablemerchandising programs, as well as increased efficiencies at our nationaldistribution center over the comparable prior year period.

 

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*                Selling,General and Administrative Expenses.*  SG&Aexpenses increased by $5.5 million, or 11.4%, to $53.7 million in thethree months ended April 1, 2005 from $48.3 million in the three monthsended March 26, 2004.  Certain expenseswithin SG&A, such as the costs of running distribution centers, deliveryexpenses and selling expenses fluctuate with sales volume.  The increase in SG&A expenses were madeup of these increases as well as increased investment in new sales andmarketing initiatives.  SG&A expensesas a percentage of sales improved 70 basis points to 27.3% in the three monthsended April 1, 2005 from 28.0% in the three months ended March 26, 2004.  This operating leverage is a result ofoperating efficiencies at our regional distribution centers — specificallydistribution center labor and freight costs — as well as the overall leveragingof our labor and benefit plan costs, partially offset by our continuedinvestment in our growth initiatives.

 

*                Depreciationand Amortization.*  Depreciationand amortization expense increased by $0.1 million, or 5.0%, to $3.1million in the three months ended April 1, 2005 from $3.0 million in thethree months ended March 26, 2004.

 

*                OperatingIncome.*  As a resultof the foregoing, operating income increased by $4.1 million, or 28.6%, to$18.6 million in the three months ended April 1, 2005 from$14.5 million in the three months ended March 26, 2004.

 

*                Changein Fair Value of Interest Rate Swaps.*  Ourinterest rate swaps were terminated at the time of our initial public offering,described below, in December 2004.  Assuch, changes in fair value of interest rate swaps were zero in the threemonths ended April 1, 2005 compared to a gain of $1.1 million in the threemonths ended March 26, 2004.  Thesesgains are related to changes in the market value of our interest rate swap instruments.The non-cash gains were attributable to changes in market conditions, includingbut not limited to fluctuations in interest rates, general market volatility,and the remaining tenor of our instruments. Our interest rate swaps were terminated at the time of our IPO inDecember 2004.

 

*                InterestExpense.*  Interest expensedecreased by $3.9 million in the three months ended April 1, 2005 to$6.3 million from $10.2 million in the three months ended March 26,2004.  The net decrease was attributed tolower debt balances associated with the early extinguishment of $70.0 millionof our 11.5% senior subordinated notes in January 2005 and the pay down of$31.3 million of our term loan, as well as lower interest expense associatedwith the termination of our interest rate swaps and the write-off of deferredfinancing costs — all associated with our Initial Public Offering.

 

*                Loss on Extinguishment of Debt*.  As partof our Parent’s initial public offering, we redeemed $70.0 million of the 11.5%senior subordinated notes in January 2005. This redemption was made 30 days after the closing of our initial publicoffering, in accordance with the redemption provision of the indenturegoverning the notes.  In connection withthe redemption, we recorded a $10.3 million loss on the early extinguishment ofdebt in the first quarter of 2005.

 

*                Provision for Income Taxes.*  Theprovision for income taxes was $0.9 million in the fiscal three monthsended April 1, 2005 compared to a provision of $2.3 million in the threemonths ended March 26, 2004. The effective tax rate for the three months endedApril 1, 2005 was 39.6% compared to 41.3% in the three months ended March 26,2004. The decrease in the effective tax rate was due primarily to a decrease inour state income taxes and foreign income taxes partially offset by an increasein non-deductible expenses.

 

**Liquidity and Capital Resources**

 

                Asof April 1, 2005, we had approximately $73.0 million of availability underour $100.0 million revolving credit facility.  Historically, our capital requirements havebeen for debt service obligations, acquisitions, the expansion and maintenanceof our distribution network, upgrades of our proprietary information systemsand working capital requirements.  Weexpect this to continue in the foreseeable future.  Historically, we have funded theserequirements through internally generated cash flow and funds borrowed underour credit facility.  We expect our cashflow from operations and the loan availability under our credit facility to beour primary source of funds in the future. Letters of credit, which are issued under the revolving loan facilityunder our credit facility, are used to support payment obligations incurred forour general corporate purposes.  As ofApril 1, 2005, we had $10.0 million of letters of credit issued under thecredit facility.  Interest on our 11.5%senior subordinated notes due 2011 is payable semiannually.  With respect to borrowings under our creditfacility, we have the option to borrow at an adjusted LIBOR or an alternativebase rate.  Interest 

 

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on the credit facility is generally payable quarterly,and with respect to any LIBOR borrowings, on the last day of the interestperiod applicable to the term of the borrowing.

 

                Net cash provided by operatingactivities was $3.2 million for the three months ended April 1, 2005compared to net cash provided by operating activities of $16.2 million inthe three months ended March 26, 2004.  Net cash provided by operating activities forthe three months ended April 1, 2005 was lower than the prior yearperiod primarily as a result of our investment in working capital, specificallyinventory and higher trade account receivable balances, in support of our 13.8%sales growth as well as an increase of $6.3 million in cash tax requirements. Thiswas offset in part by $3.9 million of lower interest expense associated withour lower average debt balances, which were reduced using proceeds from our IPOtransaction.

 

Netcash used in investing activities was $2.6 million in the three monthsended April 1, 2005 compared to $1.7 million in the three months ended March26, 2004.  Net cash used in investingactivities in the three months ended April 1, 2005 and the three months ended March26, 2004 were primarily attributable to capital expenditures made in theordinary course of business and costs related to purchases of businessesaccrued in prior periods.

 

                Net cash used in financingactivities totaled $59.5 million for the three months ended April1, 2005 compared to net cash used infinancing activities of $2.0 million in the three months endedMarch 26, 2004.  Net cash used in financing activities for thethree months ended April 1, 2005 was primarily attributable to our repayment of$70.0 million of our senior subordinated notes and $8.1 million in relatedredemption premiums partially offset by $17.0 million net borrowings on ourrevolving credit facility and $2.3 million received January 2005 for theover-allotment shares sold to underwriters, net of expenses, in conjunctionwith our Parent’s December 2004 initial public offering.

 

Other than theredemption of $70.0 million of our 11.5% senior subordinated notes as describedabove, our contractual obligations and other contractual commitments have notchanged materially outside the ordinary course of business since December 31,2004.

 

*The Reincorporation Merger and Related Transactions*

 

                In December 2004, we completed areincorporation merger and became the 100%-owned subsidiary of Interline BrandsInc., a Delaware corporation (NYSE: IBI), which we also refer to as our Parentor Interline Delaware.  In thisreincorporation merger, in the aggregate, holders of our preferred stockreceived $55.0 million in cash and 19,183,321 shares of Parent common stock andholders of our common stock received 66,667 shares of Parent common stock.  In return, Parent received 100 shares of ourcommon stock and one share of our preferred stock, representing all of ourauthorized and outstanding shares.  Also,options to purchase shares of our common stock were converted into options topurchase shares of Parent common stock. In conjunction with this reincorporation merger, Parent successfullycompleted its Initial Public Offering, (“IPO”) and we amended our senior creditfacility.  A total of 14,375,000 sharesof Parent common stock were sold, of which 12,667,000 were sold by Parent and1,708,000 were sold by its shareholders. Parent sold 12,500,000 shares of its commonstock in December 2004 and 167,000 shares in January 2005 following theexercise of the underwriters’ 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 IPO costs and $1.1million of debt issuance costs.  Afterthe IPO-related expenses and preferred stock consideration in the reincorporationmerger were paid, all of the proceeds from the IPO were contributed to theCompany.

 

                We used $31.3 million of theproceeds to partially repay the term loan under our credit facility.  We amended our senior credit facility toallow for the IPO and reduce our applicable rate in respect to any term loansfrom LIBOR plus 3.50% to LIBOR plus 2.25%. In conjunction with this amendment, we incurred $1.1 million of debtissuance costs.  In December 2004, wealso used $4.6 million of the proceeds to terminate the interest rate swapagreements.  In January 2005, we used$70.0 million of the proceeds from the IPO to partially redeem our 11.5% seniorsubordinated notes.  In connection withthe redemption, in January 2005 we paid $8.1 million of premiums for earlyredemption of the 11.5% senior subordinated notes and recorded a $10.3 millionloss on the early extinguishment of debt, which included a charge for write-offof unamortized debt issuance costs in the amount of $2.3 million.

 

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*Capital Expenditures*

 

                Capital expenditures were $1.5million in the three months ended April 1, 2005 compared to $1.4 million in thethree months ended March 26, 2004. Capital expenditures as a percentage of sales were 0.8% in both periods.

 

*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 to fund our working capital needs are cashgenerated from operating activities and borrowings under our revolving creditfacility.

 

*Credit Facility*

 

                We 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 our Parent’s IPOTransactions. The amended credit facility provides for aggregate commitments of$200.0 million, consisting of (1) a revolving loan facility of$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 facility of$100.0 million.  Borrowings underthe amended term loan facility and revolving loan facility bear interest, atour option, at either adjusted LIBOR or at the alternate base rate plus aspread. Outstanding letters of credit under the revolving loan facility aresubject to a per annum fee equal to the applicable spread over adjusted LIBORfor revolving loans. The indebtedness under the amended credit facility isguaranteed by our Parent and our domestic subsidiaries.  The amended term loan facility has a maturityof December 31, 2010, and the revolving loan facility has a maturity ofMay 31, 2008.

 

                During the three months endedApril 1, 2005 we borrowed periodically on our revolving credit facility toaccommodate our daily working capital needs. The weighted average dailyoutstanding balance during the three-month period was $10.0 million,with ordinary course borrowings ranging from $0.0 million to$18.0 million. As of April 1, 2005, we had $10.0 million of lettersof credit issued under the revolving loan facility and $99.8 millionaggregate principal outstanding under the term 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.

 

ITEM 3.  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

                We are aware of the potentiallyunfavorable effects inflationary pressures may create through higher assetreplacement costs and related depreciation, higher interest rates and higherproduct and material costs.  We seek tominimize the effects of inflation and changing prices through economies ofpurchasing and inventory management resulting in cost reductions and productivityimprovements as well as price increases to maintain reasonable profitmargins.  Management believes thatinflation (which has been moderate over the past few years) did notsignificantly affect our operating results or markets.

 

                The majority of our purchasesfrom foreign-based suppliers is from China and other countries in Asia and istransacted in U.S. dollars.  Accordingly,we have minimal foreign currency risk related to suppliers.

 

*DerivativeFinancial Instruments*

 

                Periodically, we enter into derivativefinancial instruments, including interest rate exchange agreements, or swaps,to manage our exposure to fluctuations in interest rates on our debt.  As of April 1, 2005, we did not have anyinterest rate swap exchange agreements, or swaps.  Under our former swap agreements, we pay afixed rate on the notional amount to our banks and the banks pay us a variablerate on the notional amount equal to a base LIBOR rate.  Our derivative activities, all of which are forpurposes other than trading, are initiated within the guidelines of corporaterisk-management policies.

 

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                We periodically evaluate thecosts and benefits of any changes in our interest rate risk.  Based on such evaluation, we may enter intonew interest rate swaps to manage our interest rate exposure.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

                Our management,with the participation of our Chief Executive Officer and Chief FinancialOfficer (our principal executive officer and principal financial officer),evaluated the effectiveness of our disclosure controls and procedures (asdefined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 1,2005. Based on this evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that, as of April 1, 2005, our disclosure controls andprocedures were: (1) designed to ensure that material information relating tous, including our consolidated subsidiaries, is made known to our ChiefExecutive Officer and Chief Financial Officer by others within those entities,particularly during the period in which this report was being prepared and, (2)effective, in that they provide reasonable assurance that information requiredto be disclosed by us in the reports that we file or submit under the ExchangeAct is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms.

 

                No change in ourinternal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) occurred during the quarter ended April 1,2005 that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II****. OTHER INFORMATION**

 

ITEM 1. LEGAL PROCEEDINGS.

 

                We areinvolved in various legal proceedings that have arisen in the ordinary courseof our business and have not been fully adjudicated. These actions, whenultimately concluded and determined, will not, in the opinion of management,have a material effect upon our consolidated financial position, results ofoperations or liquidity.

 

ITEM 5. OTHER INFORMATION.

 

(a)*Managementappointments*

 

On May 10, 2005, theCompany appointed Thomas J. Tossavainen as its Chief Financial Officer. Mr.Tossavainen has been the acting Chief Financial Officer since March 17, 2005and has served in a senior financial capacity with Interline since 2001, mostrecently as its Vice President of Finance and Treasurer.  Prior to joining Interline, Mr. Tossavainenheld various positions at Airgas, Inc., beginning in 1996.  Prior to this time, Mr. Tossavainen alsoserved in the financial services group at KPMG Peat Marwick LLP. Mr.Tossavainen is a Certified Public Accountant.

 

ITEM 6. EXHIBITS.

 

                Thefollowing exhibits are being filed as part of this Quarterly Report on Form10-Q:

 
| 10.20 |   | Separation Agreement  and Release of All Claims, dated March 17, 2005, by and between  Interline Brands, Inc. and Charles Blackmon (incorporated by reference to  Exhibit 10.20 to Interline Brands Inc.’s Form 10-K filed on March 31, 2005). |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.34 |   | Employment Agreement,  dated May 12, 2004 between Interline Brands, Inc. and Thomas J.  Tossavainen (incorporated by reference to Exhibit 10.34 to Interline Brands  Inc.’s Form 10-K filed on March 31, 2005).                           |
| 31.1  |   | Certification of  Michael J. Grebe as President and Chief Executive Officer of Interline  Brands, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  (furnished herewith).                                                            |
| 31.2  |   | Certification of Thomas  J. Tossavainen as Vice President and Chief Financial Officer of Interline  Brands, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  (furnished herewith).                                                  |
| 32.1  |   | Certification of the  Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (furnished herewith).                                    |
| 32.2  |   | Certification of the  Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (furnished herewith).                                    |

 

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**Signatures**

 

                Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned hereuntoduly authorized. 
|   |                   |                                                         |
|--------|------------------------|--------------------------------------------------------------|
|   | INTERLINE BRANDS, INC. |
|   |                   |                                                         |
|   | BY:               | /s/ Michael  J. Grebe                                        |   |
|   |                   | Michael J. Grebe                                             |
|   |                   | President  and Chief Executive Officer                       |
|   |                   |                                                         |
|   |                   | (Duly Authorized Signatory and Principal Executive  Officer) |
|        |                        |                                                              |  |  |

 

Date: May 16, 2005

 

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**Signatures**

 

                Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned hereuntoduly authorized.

 
|   |                   |                                                         |
|--------|------------------------|--------------------------------------------------------------|
|   | INTERLINE BRANDS, INC. |
|   |                   |                                                         |
|   | BY:               | /s/ Thomas  J. Tossavainen                                   |   |
|   |                   | Thomas J. Tossavainen                                        |
|   |                   | Vice  President and Chief Financial Officer                  |
|   |                   |                                                         |
|   |                   | (Duly Authorized Signatory and Principal Financial  Officer) |
|        |                        |                                                              |  |  |

 

Date: May 16, 2005

 

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