**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 SEPTEMBER 30, 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 Form10-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 November 10, 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****                                                                                                                           |   |
| **** ****                              | ****Unaudited Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004****                                                 |   |
| **** ****                              | ****Unaudited Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2005 and September 24, 2004**** |   |
| **** ****                              | ****Unaudited Condensed Consolidated Statement of Stockholder’s Equity (Deficiency) for the Nine Months Ended September 30, 2005****              |   |
| **** ****                              | ****Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and September 24, 2004****                  |   |
| **** ****                              | ****Notes to Unaudited Condensed Consolidated Financial Statements****                                                                                 |   |
| ****Item 2.****                             | ****Management’s Discussions and Analysis of Financial Condition and Results of Operations****                                                    |   |
| ****Item 3.****                             | ****Quantitative and Qualitative Disclosures about Market Risk****                                                                                     |   |
| ****Item 4.****                             | ****Controls and Procedures****                                                                                                                        |   |
|                                        |                                                                                                                                                   |   |
| ****PART II — OTHER INFORMATION****    |                                                                                                                                                   |
|                                        |                                                                                                                                                   |   |
| ****Item 1.****                             | ****Legal Proceedings****                                                                                                                              |   |
| ****Item 5.****                             | ****Other Information****                                                                                                                              |   |
| ****Item 6.****                             | ****Exhibits****                                                                                                                                       |   |
|                                        |                                                                                                                                                   |   |
| ****SIGNATURES****                          |                                                                                                                                                   |

 

----

 

**PART I. FINANCIAL INFORMATION**

 

ITEM 1. FINANCIAL STATEMENTS.

 

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

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

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

**AS OFSEPTEMBER 30, 2005 AND DECEMBER 31, 2004**

**(inthousands, except share data)**

 
| ** **                                                                                                                                          | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                                                                                                                                          | ** ** | **2005**          | ** ** | **2004**         | ** ** |
| ** **                                                                                                                                          | ** ** | ** **        | ** ** | ** **       | ** ** |
| **ASSETS**                                                                                                                                          |       |              |       |             |       |
| CURRENT ASSETS:                                                                                                                                     |       |              |       |             |       |
| Cash and cash equivalents                                                                                                                           |       | $                 | 1,610      |             | $          | 69,178 |   |
| Accounts receivable - trade (net of  allowance for doubtful accounts of $7,789 and $6,929)                                                          |       | 126,059           |       | 98,511           |       |
| Accounts receivable - other                                                                                                                         |       | 10,761            |       | 17,828           |       |
| Inventory                                                                                                                                           |       | 158,899           |       | 145,532          |       |
| Prepaid expenses and other current assets                                                                                                           |       | 4,057             |       | 3,204            |       |
| Deferred income taxes                                                                                                                               |       | 13,194            |       | 12,084           |       |
| Total current assets                                                                                                                                |       | 314,580           |       | 346,337          |       |
|                                                                                                                                                |       |              |       |             |       |
| PROPERTY AND EQUIPMENT, net                                                                                                                         |       | 30,262            |       | 28,767           |       |
|                                                                                                                                                |       |              |       |             |       |
| GOODWILL                                                                                                                                            |       | 249,638           |       | 203,848          |       |
|                                                                                                                                                |       |              |       |             |       |
| OTHER INTANGIBLE ASSETS, net                                                                                                                        |       | 105,961           |       | 85,361           |       |
|                                                                                                                                                |       |              |       |             |       |
| OTHER ASSETS                                                                                                                                        |       | 9,422             |       | 9,067            |       |
| TOTAL ASSETS                                                                                                                                        |       | $                 | 709,863    |             | $          | 673,380 |   |
|                                                                                                                                                |       |              |       |             |       |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                       |       |              |       |             |       |
| CURRENT LIABILITIES:                                                                                                                                |       |              |       |             |       |
| Current portion of long-term debt                                                                                                                   |       | $                 | 1,400      |             | $          | 1,000 |   |
| Revolver                                                                                                                                            |       | 5,000             |       | —           |       |
| Accounts payable                                                                                                                                    |       | 69,498            |       | 53,260           |       |
| Accrued expenses and other current liabilities                                                                                                      |       | 25,955            |       | 22,180           |       |
| Accrued interest payable                                                                                                                            |       | 5,927             |       | 3,042            |       |
| Accrued merger expenses                                                                                                                             |       | 6,300             |       | 6,131            |       |
| Accrued income taxes payable                                                                                                                        |       | 4,797             |       | 7,372            |       |
| Total current liabilities                                                                                                                           |       | 118,877           |       | 92,985           |       |
|                                                                                                                                                |       |              |       |             |       |
| LONG-TERM LIABILITIES:                                                                                                                              |       |              |       |             |       |
| Deferred income taxes                                                                                                                               |       | 33,660            |       | 25,221           |       |
| Long-term debt, net of current portion                                                                                                              |       | 281,025           |       | 302,275          |       |
| Capital leases                                                                                                                                      |       | 1,167             |       |             |       |
| TOTAL LIABILITIES                                                                                                                                   |       | 434,729           |       | 420,481          |       |
|                                                                                                                                                |       |              |       |             |       |
| COMMITMENTS AND CONTINGENCIES                                                                                                                       |       |              |       |             |       |
| SENIOR PREFERRED STOCK, $0.01 par value, 1  share authorized and outstanding as of   September 30, 2005 and December 31, 2004; at liquidation value |       | 422,667           |       | 381,327          |       |
|                                                                                                                                                |       |              |       |             |       |
| STOCKHOLDERS’ EQUITY:                                                                                                                          |       |              |       |             |       |
| Common stock; no par value, 100 authorized,  issued and outstanding as of September 30, 2005 and December 31, 2004                                  |       | 177,388           |       | 174,879          |       |
| Accumulated deficit                                                                                                                                 |       | (325,921          | )          | (304,162         | )          |
| Accumulated other comprehensive income                                                                                                              |       | 1,000             |       | 855              |       |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                                     |       | (147,533          | )          | (128,428         | )          |
| TOTAL LIABILITIES & STOCKHOLDERS’  EQUITY                                                                                                  |       | $                 | 709,863    |             | $          | 673,380 |   |

 

*See accompanyingnotes to unaudited condensed consolidated financial statements.*

 

1

----

 

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

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

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

**THREE MONTHSAND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 24, 2004**

**(inthousands)**

 
| ** **                                           | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **September 30,**      | ** ** | **September 24,**     | ** ** | **September 30,** | ** ** | **September 24,** | ** ** |
| ** **                                           | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| NET SALES                                            |       | $                      | 225,811    |                  | $          | 190,400 |   | $ | 625,968 |   | $ | 548,383 |   |
| COST OF SALES                                        |       | 139,701                |       | 117,214               |       | 387,117 |   | 338,529 |   |
| Gross Profit                                         |       | 86,110                 |       | 73,186                |       | 238,851 |   | 209,854 |   |
| OPERATING EXPENSES :                                 |       |                   |       |                  |       |   |   |   |   |
| Selling, general and administrative  expenses        |       | 58,885                 |       | 49,724                |       | 167,141 |   | 148,062 |   |
| Depreciation and amortization                        |       | 3,361                  |       | 2,988                 |       | 9,699 |   | 9,414 |   |
| Total Operating Expense                              |       | 62,246                 |       | 52,712                |       | 62,011 |   | 157,476 |   |
| OPERATING INCOME                                     |       | 23,864                 |       | 20,474                |       | 176,840 |   | 52,378 |   |
| CHANGE IN FAIR VALUE OF INTEREST RATE SWAPS          |       | —                 |       | 1,503                 |       | — |   | 6,201 |   |
| LOSS ON EXTINGUISHMENT OF DEBT                       |       | —                 |       | —                |       | (10,340 | ) | — |   |
| INTEREST EXPENSE                                     |       | (6,694                 | )          | (10,269               | )          | (18,709 | ) | (30,563 | ) |
| INTEREST INCOME                                      |       | 45                     |       | 32                    |       | 171 |   | 65 |   |
| OTHER INCOME                                         |       | 188                    |       | 119                   |       | 474 |   | 300 |   |
| Income before income taxes                           |       | 17,403                 |       | 11,859                |       | 33,607 |   | 28,381 |   |
| PROVISION FOR INCOME TAXES                           |       | 6,857                  |       | 4,932                 |       | 13,103 |   | 11,246 |   |
| NET INCOME                                           |       | 10,546                 |       | 6,927                 |       | 20,504 |   | 17,135 |   |
| PREFERRED STOCK DIVIDENDS                            |       | (14,255                | )          | (14,170               | )          | (41,340 | ) | (41,155 | ) |
| NET INCOME (LOSS) APPLICABLE TO COMMON  STOCKHOLDERS |       | $                      | (3,709     | )                     | $          | (7,243 | ) | $ | (20,836 | ) | $ | (24,020 | ) |

 

*Seeaccompanying notes to unaudited condensed consolidated financial statements.*

 

2

----

 

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

**NINE MONTHS ENDED SEPTEMBER 30, 2005**

**(in thousands except share data)**

 
| ** **                        | ** ** | ** **       | ** ** | ** **       | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** **              | ** ** |
|-----------------------------------|------------|------------------|------------|------------------|------------|-------------------|------------|------------------------|------------|-------------------------|------------|
| ** **                        | ** ** | ** **       | ** ** | ** **       | ** ** | ** **        | ** ** | **Other**              | ** ** | **Total**               | ** ** |
| ** **                        | ** ** | **Common Stock** | ** ** | **(Accumulated** | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                        | ** ** | **Shares**       | ** ** | **Amount**       | ** ** | **Deficit)**      | ** ** | **Income**             | ** ** | **Equity (Deficiency)** | ** ** |
| ** **                        | ** ** | ** **       | ** ** | ** **       | ** ** | ** **        | ** ** | ** **             | ** ** | ** **              | ** ** |
| BALANCE, DECEMBER 31, 2004   |       | 100              |       | $                | 174,879    |              | $          | (304,162               | )          | $                       | 855        |   | $ | (128,428 | ) |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Preferred stock dividends         |       |             |       |             |       | (41,340           | )          |                   |       | (41,340                 | )          |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Capital contribution from Parent  |       |             |       | 2,509            |       |              |       |                   |       | 2,509                   |       |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Dividend to Parent                |       |             |       |             |       | (923              | )          |                   |       | (923                    | )          |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Comprehensive income:             |       |             |       |             |       |              |       |                   |       |                    |       |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Net income                        |       |             |       |             |       | 20,504            |       |                   |       |                    |       |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Foreign currency translation      |       |             |       |             |       |              |       | 145                    |       |                    |       |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| Total comprehensive income        |       |             |       |             |       |              |       |                   |       | 19,821                  |       |
|                              |       |             |       |             |       |              |       |                   |       |                    |       |
| BALANCE,  SEPTEMBER 30, 2005 |       | 100              |       | $                | 177,388    |              | $          | (325,921               | )          | $                       | 1,000      |   | $ | (147,533 | ) |

 

*See accompanying notes to unaudited condensed consolidated financialstatements.*

 

3

----

 

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

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

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

**NINE MONTHSENDED SEPTEMBER 30, 2005 AND SEPTEMBER 24, 2004**

**(inthousands)**

 
| ** **                                                                         | ** ** | **September 30, 2005** | ** ** | **September 24, 2004** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| OPERATING  ACTIVITIES :                                                            |       |                   |       |                   |       |
| Net Income                                                                         |       | $                      | 20,504     |                   | $          | 17,135 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                   |       |                   |       |
| Depreciation and amortization                                                      |       | 9,699                  |       | 9,414                  |       |
| Amortization and write-off of debt issuance  costs                                 |       | 3,482                  |       | 1,428                  |       |
| Redemption premium on 11.5% senior  subordinated notes                             |       | 8,050                  |       | —                 |       |
| Stock based compensation                                                           |       | 718                    |       | —                 |       |
| Loss on disposal of property and equipment                                         |       | 53                     |       | —                 |       |
| Change in fair value of interest rate swaps                                        |       | —                 |       | (6,201                 | )          |
| Interest income on shareholder notes                                               |       | —                 |       | (30                    | )          |
| Deferred income taxes                                                              |       | (2,160                 | )          | 3,754                  |       |
| Income tax effect from exercise of stock  options                                  |       | 215                    |       | —                 |       |
|                                                                               |       |                   |       |                   |       |
| Changes in assets and liabilities, net of  business acquired:                      |       |                   |       |                   |       |
| Accounts receivable - trade                                                        |       | (23,882                | )          | (24,108                | )          |
| Accounts receivable - other                                                        |       | 4,974                  |       | 1,435                  |       |
| Inventory                                                                          |       | (3,782                 | )          | (18,625                | )          |
| Prepaid expenses and other current assets                                          |       | (428                   | )          | 350                    |       |
| Other assets                                                                       |       | (354                   | )          | (210                   | )          |
| Accrued interest payable                                                           |       | 2,885                  |       | 5,254                  |       |
| Accounts payable                                                                   |       | 11,598                 |       | 11,778                 |       |
| Accrued expenses and other current  liabilities                                    |       | 3,066                  |       | 477                    |       |
| Accrued merger expenses                                                            |       | (307                   | )          | (416                   | )          |
| Income taxes payable                                                               |       | (2,575                 | )          | 6,064                  |       |
| Net cash provided by operating activities                                          |       | 31,756                 |       | 7,499                  |       |
|                                                                               |       |                   |       |                   |       |
| INVESTING  ACTIVITIES :                                                            |       |                   |       |                   |       |
| Purchase of property and equipment, net                                            |       | (5,899                 | )          | (5,359                 | )          |
| Cash - restricted                                                                  |       | —                 |       | (1                     | )          |
| Purchase of business, net of cash acquired                                         |       | (71,195                | )          | (509                   | )          |
| Net cash used in investing activities                                              |       | (77,094                | )          | (5,869                 | )          |
|                                                                               |       |                   |       |                   |       |
| FINANCING  ACTIVITIES :                                                            |       |                   |       |                   |       |
| Increase in revolver and swingline, net                                            |       | 5,000                  |       | 7,000                  |       |
| Repayment of long-term debt                                                        |       | (70,850                | )          | (5,250                 | )          |
| Proceeds from financing transaction                                                |       | 50,000                 |       | —                 |       |
| Payment of redemption on 11.5% senior  subordinated notes                          |       | (8,050                 | )          | —                 |       |
| Payment of debt issuance costs                                                     |       | (836                   | )          | (587                   | )          |
| Contribution from Parent, net                                                      |       | 3,410                  |       | —                 |       |
| Dividend to Parent                                                                 |       | (923                   | )          |                   |       |
| Payments on capital lease obligations                                              |       | (126                   | )          | —                 |       |
| Net cash (used in) provided by financing  activities                               |       | (22,375                | )          | 1,163                  |       |
|                                                                               |       |                   |       |                   |       |
| EFFECT OF  EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                      |       | 145                    |       | 89                     |       |
| NET  (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                              |       | (67,568                | )          | 2,882                  |       |
| CASH AND  CASH EQUIVALENTS, BEGINNING OF PERIOD                                    |       | 69,178                 |       | 1,612                  |       |
| CASH AND  CASH EQUIVALENTS, END OF PERIOD                                          |       | $                      | 1,610      |                   | $          | 4,494 |   |
| ** **                                                                         | ** ** | ** **             | ** ** | ** **             | ** ** |
| SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION                                  |       |                   |       |                   |       |
| Cash paid during the period for :                                                  |       |                   |       |                   |       |
| Interest                                                                           |       | $                      | 13,124     |                   | $          | 23,853 |   |
| Income taxes (net of refunds)                                                      |       | $                      | 17,633     |                   | $          | 457 |   |
|                                                                               |       |                   |       |                   |       |
| SCHEDULE OF  NON-CASH INVESTING AND FINANCING ACTIVITIES                           |       |                   |       |                   |       |
|                                                                               |       |                   |       |                   |       |
| Dividends on preferred stock                                                       |       | $                      | 41,340     |                   | $          | 41,155 |   |
| Adjustment to goodwill on business acquired                                        |       | $                      | 9,473      |                   | $          | — |   |

 

*Seeaccompanying notes to unaudited condensed consolidated financial statements.*

 

4

----

 

**INTERLINE BRANDS, INC. (A NEW JERSEYCORPORATION) 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.  These unaudited condensed consolidatedfinancial statements do not include all disclosures provided in the annualfinancial statements and should be read in conjunction with the financialstatements and notes thereto contained in the Annual Report on Form 10-K forInterline Brands, Inc. for the year ended December 31, 2004 as filed with theSecurities and Exchange Commission on March 31, 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 for the interimperiods presented are not necessarily indicative of the results to be expectedfor the full year.

 

DuringDecember 2004, a reincorporation merger occurred and Interline Brands, a Delawarecorporation, (“Interline Delaware” or the “Parent”) became the parent companyof the Company, which in turn became the Parent’s principal operatingsubsidiary.  Immediately following thereincorporation merger, the Parent completed its initial public offering (the “IPO”).

 

*SegmentInformation*—TheCompany is in one industry, the distribution of maintenance, repair andoperations, 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 operatingsegment.  Our net sales for the three andnine-month periods ended September 30, 2005 and September 24, 2004 by productcategory were approximately (in millions): 

 
| ** **                                 | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                 | ** ** | **September 30,**      | ** ** | **September 24,**     | ** ** | **September 30,** | ** ** | **September 24,** | ** ** |
| **Product Category**                       | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
| Plumbing                                   |       | $                      | 91.0       |                  | $          | 82.6 |   | $ | 269.0 |   | $ | 242.2 |   |
| Electrical                                 |       | 31.2                   |       | 28.4                  |       | 90.4 |   | 83.4 |   |
| Heating,  Ventilation and Air Conditioning |       | 29.9                   |       | 12.9                  |       | 64.5 |   | 40.2 |   |
| Security  Hardware                         |       | 14.0                   |       | 13.3                  |       | 41.2 |   | 38.2 |   |
| Appliances                                 |       | 14.2                   |       | 12.6                  |       | 38.5 |   | 33.7 |   |
| Hardware                                   |       | 12.9                   |       | 12.6                  |       | 37.9 |   | 35.2 |   |
| Other                                      |       | 32.6                   |       | 28.0                  |       | 84.5 |   | 75.4 |   |
| Total                                      |       | $                      | 225.8      |                  | $          | 190.4 |   | $ | 626.0 |   | $ | 548.3 |   |

 

*Stock-basedCompensation*—TheCompany and its Parent accounted for option plans in accordance with APBOpinion No. 25, under which no compensation cost has been recognized for stockoption awards.  While the Company doesnot recognize compensation costs for stock options, the Company does determinewhat these costs would have been using the method prescribed by SFAS No, 123for disclosure purposes.

 

The fair value of eachoption was estimated on the date of grant using the Black-Scholes optionpricing model with the following assumptions used for options granted in 2005under the 2004 Equity Incentive Plan: dividend yield of 0%, volatility of 33%,risk-free interest rate of 4.01% and expected life of 5 years.  The following assumptions were used foroptions granted in 2004 under the 2000 Stock Award Plan:

 

5

----

 

dividend yield of 0%,expected volatility of 0%, risk-free interest rate of 3.485%, and expected lifeof 5 years.   The fair value of theseawards approximated zero.

 

The following tableillustrates the effect on net earnings (loss) and earnings (loss) per share forthe three and nine months ended September 30, 2005 and September 24, 2004 as ifthe Company had applied the fair value recognition provisions of SFAS No. 123, “Accountingfor Stock-Based Compensation,” to stock-based employee compensation (inthousands):

 
| ** **                                                                                                                   | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                                                   | ** ** | **September 30, 2005** | ** ** | **September 24, 2004** | ** ** | **September 30, 2005** | ** ** | **September 24, 2004** | ** ** |
|                                                                                                                         |       |                   |       |                   |       |   |   |   |   |
| Net income as reported                                                                                                       |       | $                      | 10,546     |                   | $          | 6,927 |   | $ | 20,504 |   | $ | 17,135 |   |
|                                                                                                                         |       |                   |       |                   |       |   |   |   |   |
| Add: Stock-based employee compensation  expense included in reported net income, net of related tax effects                  |       | 146                    |       | —                 |       | 438 |   | — |   |
|                                                                                                                         |       |                   |       |                   |       |   |   |   |   |
| Deduct: Total stock-based employee compensation  expense determined under fair value based method for all awards, net of tax |       | (313                   | )          | —                 |       | (704 | ) | — |   |
|                                                                                                                         |       |                   |       |                   |       |   |   |   |   |
| Pro forma net income                                                                                                         |       | 10,380                 |       | 6,927                  |       | 20,238 |   | 17,135 |   |
|                                                                                                                         |       |                   |       |                   |       |   |   |   |   |
| Preferred stock dividends                                                                                                    |       | (14,255                | )          | (14,170                | )          | (41,340 | ) | (41,155 | ) |
|                                                                                                                         |       |                   |       |                   |       |   |   |   |   |
| Net loss applicable to common stockholders                                                                                   |       | $                      | (3,875     | )                      | $          | (7,243 | ) | $ | (21,102 | ) | $ | (24,020 | ) |

 

*NewAccounting Pronouncements*—On December 16, 2004, the FASB issued SFAS No. 123 (revised2004), “Share-Based Payment,” which is a revision of FASB No. 123, “Accountingfor Stock-Based Compensation.” SFAS No. 123R supersedes APB OpinionNo. 25, “Accounting for Stock Issued to Employees” and amends SFAS No. 95,“Statement of Cash Flows.”  Generally,the approach in SFAS No. 123R is similar to the approach described in SFASNo. 123; however, this Statement requires all share-based payments toemployees, including grants of employee stock options, be recognized in theincome statement based on their fair values. Pro forma disclosure will no longerbe an alternative to financial statement recognition.

 

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

 

In March 2004, theFASB issued Interpretation No. 46(R)-5 (“FIN 46(R)-5”), “Implicit VariableInterests under FASB Interpretation No. 46 (revised December 2003),Consolidation of Variable Interest Entities.” FIN 46 (R)-5 is effective for thefirst reporting period beginning after March 3, 2005; however, earlierapplication is permitted for periods for which financial statements have notyet been issued. The Company has evaluated the impact of FIN 46(R)-5 anddetermined that the impact is immaterial to the consolidated statements.

 

InNovember 2004, the FASB issued SFAS No. 151, *Amendment of ARB No. 43, Chapter 4*(“SFAS 151”). Thisstatement amends the guidance in Accounting Research Bulletin No. 43,Chapter 4, *Inventory Pricing*, toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted

 

6

----

 

material(spoilage).  This statement requires thatthose items be recognized as current-period charges regardless of whether theymeet the criterion of “so abnormal.”  Inaddition, this statement requires that allocation of fixed production overheadto the costs of conversion be based on the normal capacity of the productionfacilities.  SFAS 151 is effective forinventory costs incurred during fiscal years beginning after June 15,2005.  The Company is currentlyevaluating the requirements of SFAS 151.

 

InMarch 2005, the FASB issued Interpretation No. 47 (FIN 47), *Accounting for Conditional Asset RetirementObligations*.  Thisinterpretation states that the term “conditional asset retirement obligation”as used in paragraph A23 of SFAS No. 143 refers to a legal obligation toperform an asset retirement in which the timing and (or) method of settlementare conditional on a future event that may or may not be within the control ofthe entity.  The obligation to performthe asset retirement obligation is unconditional even though uncertainty existsabout the timing and (or) method of settlement. The effective date for adopting this interpretation is no later than theend of fiscal years ending after December 15, 2005.  The Company’s financial condition, results ofoperations and cash flows were not impacted by the adoption of FIN 47 in thethird quarter of 2005.

 

In May 2005, theFASB issued Statement No. 154*, “*AccountingChanges and Error Corrections—a replacement of APB Opinion No. 20 and FASBStatement No. 3” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes,”and FASB Statement No. 3, “Reporting Accounting Changes in InterimFinancial Statements,” and changes the requirements for the accounting for andreporting of a change in accounting principle. SFAS 154 requires retrospective application to prior periods’financial statements of changes in accounting principle, unless it isimpracticable to do so, in which case other alternatives are required.  SFAS 154 is effective for accountingchanges and corrections of errors made in fiscal years beginning afterDecember 15, 2005, or for the Company’s fiscal 2006 year end.  The Company has evaluated the requirements ofSFAS 154 and have determined that there is no impact on the consolidatedfinancial statements.

 

**2.**              DEBT

 

Long-term debt at September 30, 2005 and December 31, 2004 consists ofthe following:

 
| ** **                       | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|----------------------------------|------------|-------------------------|------------|------------------------|------------|
|                             |       |                    |       |                   |       |
| Term loans                       |       | $                       | 149,150    |                   | $          | 100,000 |   |
| Note payable                     |       | 3,275                   |       | 3,275                  |       |
| 11.5% senior  subordinated notes |       | 130,000                 |       | 200,000                |       |
|                             |       |                    |       |                   |       |
|                             |       | 282,425                 |       | 303,275                |       |
| Less current  portion            |       | (1,400                  | )          | (1,000                 | )          |
|                             |       |                    |       |                   |       |
|                             |       | $                       | 281,025    |                   | $          | 302,275 |   |

 

In May 2003, the Companycompleted an offering of $200 million of 11.5% senior subordinated notes due2011 and entered into a $205.0 million senior secured credit facility whichconsisted of a $140.0 million term loan facility and a $65.0 million revolvingloan facility, a portion of which is available in the form of letters ofcredit.  The net proceeds from theoffering of senior subordinated notes and the refinancing of the former creditfacility with the new credit facility were used to: (1) repay all outstandingindebtedness under the Company’s former credit facility, (2) redeem all of the16% senior subordinated notes, (3) pay accrued interest and related redemption premiumson the Company’s former debt, and (4) pay transaction fees and expenses relatedto the foregoing transactions, which we refer to as the “RefinancingTransactions”.  Debt

 

7

----

 

issuance costs capitalizedin connection with the Refinancing Transactions were approximately $13.1million. An expense of approximately $14.9 million in May 2003 for the earlyextinguishment of debt resulted from the write-off of the unamortized loan feesand loan discount relating to the Company’s former credit facility and theredemption premium incurred upon redemption of the 16% senior subordinated notes.

 

The senior subordinatednotes pay interest each May 15 and November 15, with the first payment made onNovember 15, 2003.  Prior to May 15,2006, the Company had the option to redeem up to 35% of the notes usingproceeds of certain equity offerings and the Company may redeem all of thenotes after May 15, 2007, subject to redemption premiums unless redeemed afterMay 15, 2009.   The Company elected toredeem $70.0 million of the 11.5% senior subordinated notes using proceeds fromInterline Delewares IPO and gave the 30-day notice, required by the indenture,on December 20, 2004.  In January 2005,the Company recorded a loss on extinguishment of debt of $10.3 million,consisting of the write-off of deferred financing costs of $2.3 million and thepremium of $8.1 million on the $70.0 million redemption of 11.5% seniorsubordinated notes.

 

In December 2004, theCompany amended its term loan facility and revolving loan facility.  The term loan was reduced to $100.0 millionfrom $140.0 million and the revolving loan facility was increased to $100.0million from $65.0 million.  As part ofthe amendment in December 2004, the Company paid down $31.3 million of the termloan using proceeds from Interline Delaware’s IPO.  The Company also amended its credit facilityon July 7, 2005, to permit the incurrence of an additional $50.0 million termloan, having substantially the same terms as the existing term loan inconnection with the Copperfield acquisition, discussed below.  On August 8, 2005, the Company again amendedits credit facility to lower the interest rate spreads applicable to theadditional $50.0 million term loan.  Theamended credit facility provides for aggregate commitments of $250.0 million,consisting of (1) a revolving loan facility of $100.0 million, of which aportion not exceeding $20.0 million will be available in the form of letters ofcredit, and (2) a term loan facility of $150.0 million.

 

Borrowings under theamended term loan facility and revolving loan facility bear interest, at theCompany’s option, at either LIBOR plus a spread or at the alternate base rateplus a spread.  The indebtedness underthe amended credit facility is guaranteed by the Company and by our domesticsubsidiaries.  Interest rates in effecton borrowings under the term loan facilities at September 30, 2005 ranged from 6.27%for LIBOR based borrowings and 8.0% for prime based borrowings under the $100.0million tranche B-1 term loan and 5.45% for LIBOR based borrowings and 7.75%for prime based borrowings under the $50.0 million tranche B-2 term loan.  Outstanding letters of credit under therevolving loan facility are subject to a per annum fee equal to the applicablespread over the adjusted LIBOR for revolving loans.  The term loan 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 $0.8 million.

 

As of September 30, 2005,the Company had $85.9 million available under its revolving loan facility.  Total letters of credit issued under thisfacility as of September 30, 2005 were $9.1 million.  There were $5.0 million of borrowings underthe revolving loan facility at September 30, 2005. The credit facility issecured by substantially all of the assets of the Company.

 

In conjunction with the Company’sIPO and the amended credit facility, the Company recorded an expense ofapproximately $0.7 million for early extinguishments of debt resulting from thewrite-off of the unamortized loan fees relating to the Company’s former creditfacility in December 2004.  In January2005, the Company recognized a charge of $2.3 million related to the earlyextinguishment of $70.0 million of the 11.5% senior subordinated notes inJanuary 2005.

 

Periodically, the Companyhas entered into derivative financial instruments, including interest rateexchange agreements, to manage its exposure to fluctuations in interest rateson its debt.  All interest rate swapagreements were terminated as of December 2004.

 

The credit facilitycontains customary affirmative and negative covenants that limit the Company’sability to incur additional indebtedness, pay dividends on its common stock orredeem, repurchase or retire its

 

8

----

 

common stock orsubordinated indebtedness, make certain investments, sell assets, andconsolidate, merge or transfer assets, and that require the Company to maintaina maximum debt to cash flow ratio and a minimum interest expense coverageratio. The Company was in compliance with all covenants at September 30, 2005.

 

InApril 2003, the Interline New Jersey issued a non-recourse note payable in theprincipal amount of $3.3 million for the purchase of an investment. This note,which is secured only by the investment, bears interest at a rate of 4% perannum, with principal due in full in April 2010.

 

The maturities of long-term debt subsequentto September 30, 2005 are as follows:

 
| 2005       |   | $       | 350     |   |
|------------|--------|---------|---------|--------|
| 2006       |   | 1,400   |    |
| 2007       |   | 1,400   |    |
| 2008       |   | 1,400   |    |
| 2009       |   | 1,400   |    |
| Thereafter |   | 276,475 |    |
|       |   | $       | 282,425 |   |

 

**3.**              STOCK OPTION PLANS

 

During 2000, the Company establisheda Stock Award Plan, (the “2000 Plan”), under which the Copmany may award atotal of 6,395 shares of common stock in the form of incentive stock options(which may be awarded to key employees only), nonqualified stock options, stockappreciation rights, or SARs, and restricted stock awards, all of which may beawarded to directors, officers, key employees and consultants.  The exercise price per share for an incentivestock option may not be less than 100% of the fair market value of a share ofcommon stock on the grant date.  The exerciseprice per share for an incentive stock option granted to a person owning stockpossessing more than 10% of the total combined voting power of all classes ofstock may not be less than 110% of the fair market value of a share of commonstock on the grant date, and may not be exercisable after the expiration of tenyears from the date of grant.  The Parent’scompensation committee will determine in its sole discretion whether a SAR issettled in cash, shares or a combination of cash and shares.

 

During 2004, the Parentadopted the 2004 Equity Incentive Plan, (the “2004 Plan”), under which the Parentmay award 3,175,000 shares in the form of incentive stock options, nonqualifiedstock options, stock appreciation rights, or SARs, restricted share units, restrictedstock and stock bonus awards, all of which may be awarded to any employee,director, officer or consultant of the Company or the Parent.  Under the terms of the 2004 plan and unlessthe compensation committee of the Parent determines otherwise, the exerciseprice of the options will not be less than the fair market value of the commonstock at the time of grant.

 

Upon completion of the Parent’sIPO in December 2004, 175,820 shares of Parent restricted stock were issued tosenior management.  The restricted stockawards will vest contingent upon the executive’s continued employment inone-third installments over three years provided that certain pre-establishedannual percentage increases in our earnings per share are attained.  The restricted stock may also vest on theseventh anniversary of the date of grant if the executive remains in our employfor seven years.  In addition, anaggregate of 10,000 shares of the Parent’s restricted stock were issued tonon-employee directors who are not affiliated with any of our principalstockholders.  Such awards will vest overtwo years.  As a result of theserestricted stock awards, the Company will incur non-cash charges between $0.4million and $0.9 million in each of the next three to seven years depending uponthe 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, the Parentissued to management 1,835,218 non-qualified stock options to purchase theParent’s common stock with an exercise price equal to the IPO price of $15.00per share and 590,465 non-qualified stock options to purchase the Parent’s

 

9

----

 

common stock with aweighted 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                            |       | 68,500        |       | $19.05 - $20.21    |       | $                    | 19.61      |   |
| Exercised                          |       | (112,849      | )          | $15.00             |       | $                    | 15.00      |   |
| Cancelled                          |       | (153,243      | )          | $15.00 - $1,669.13 |       | $                    | 30.59      |   |
|                               |       |          |       |               |       |                 |       |
| Outstanding  at September 30, 2005 |       | 2,270,417     |       | $15.00 - $41.05    |       | $                    | 16.93      |   |

 

**4.**              ACQUISITION

 

*CCSEnterprises, Inc.*

 

On July 7, 2005, theCompany acquired all of the common stock of CCS Enterprises, Inc., alsoknown as Copperfield, under a stock purchase agreement.  Copperfield is a national distributor anddirect marketer of specialty ventilation and chimney maintenance products andis headquartered in Fairfield, Iowa. This acquisition represents an expansion of the Company’s professionalcontractors and specialty distributor business.  Copperfield had net sales of $41.0 million forthe year ended November 30, 2004.

 

The aggregatepurchase price was $70.0 million, including costs of acquisition of $0.7million, and was funded by borrowings under the Company’s credit facility.  Included in the purchase price was $4.0million deposited in an escrow account to cover the representations, warrantiesand contingencies of the parties to the purchase agreement.  The amounts are included in the preliminarypurchase price allocation as they are not considered contingent but representthe final payment of the purchase price after finalization of assets purchasedand liabilities assumed.  The amount inescrow related to contingencies is included because the amount will be eitherpaid to the seller or to a third-party claimant not yet determined.  The Company has included the results ofoperations for Copperfield from the date of acquisition and applied preliminarypurchase accounting in accordance with SFAS No. 141, Business Combinations as ofthe date of acquisition, which resulted in recorded estimated goodwill of $35.8million.  The allocation of thepurchase price is as follows:

 

10

----

 
| Net assets              |   | $      | 7.7    |   |
|-------------------------|--------|--------|--------|--------|
| Customer  relationships |   | 21.0   |   |
| Trademarks              |   | 5.5    |   |
| Goodwill                |   | 35.8   |   |
|                    |   |   |   |
|                    |   | $      | 70.0   |   |

 

Goodwill recorded in connectionwith the acquisition is not expected to be deductible for tax purposes.  The intangible assets are subject toamortization and will be amortized on a straight-line basis over aweighted-average useful life of approximately 22.3 years.  We recorded an addition to goodwill of $9.5million in connection with the acquisition of CCS Enterprises, Inc. to recognizethe book to tax basis difference on non-goodwill intangibles.  The purchase price allocations for thisacquisition have not been finalized because information related to finalizingthe valuations of inventory and property, plant and equipment are still in theprocess of being gathered and analyzed. Supplemental proforma information has not been provided below because itis immaterial.

 

**5.**              SUBSIDIARY GUARANTORS

 

The Company completed an offering of $200 million principal amount of 11.5%senior subordinated notes in connection with its Refinancing Transactions in2003, 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., GlenwoodAcquisition LLC, and CCS Enterprises, Inc. (100%-owned subsidiaries of theCompany), together with Copperfield Chimney Supply, Inc. and Riverton MachineFoundry, Inc. (100%-owned subsidiaries of CCS Enterprises, Inc.).    Theguarantees by these subsidiary guarantors (the “Subsidiary Guarantors”) are seniorto any of their existing and future subordinated obligations, equal in right ofpayment with any of their existing and future senior subordinated indebtednessand subordinated to any of their existing and future senior indebtedness.  Accordingly, condensed consolidatingfinancial statements for Interline Brands, Inc. and the Subsidiary Guarantorsare presented below.

 

11

----

 

**CONDENSEDCONSOLIDATING BALANCE SHEET (UNAUDITED)**

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

**As of September 30,2005**

 
| ** **                                                    | ** ** | **Company**                           | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Excluding**                         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Subsidiary**                        | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Guarantors**                        | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                    | ** ** | **(In thousands, except share data)** | ** ** |
| ASSETS                                                        |       |                                  |       |           |       |             |       |             |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| CURRENT  ASSETS:                                              |       |                                  |       |           |       |             |       |             |       |
| Cash and cash equivalents                                     |       | $                                     | 781        |           | $          | 829              |       | $                | —     |   | $ | 1,610 |   |
| Accounts receivable - trade, net                              |       | 120,127                               |       | 5,932          |       | —           |       | 126,059          |       |
| Accounts receivable - other                                   |       | 10,465                                |       | 296            |       | —           |       | 10,761           |       |
| Inventory                                                     |       | 149,164                               |       | 9,735          |       | —           |       | 158,899          |       |
| Prepaid expenses and other current assets                     |       | 3,592                                 |       | 465            |       | —           |       | 4,057            |       |
| Deferred income taxes                                         |       | 12,659                                |       | 535            |       | —           |       | 13,194           |       |
| Due from Parent                                               |       | —                                |       | 9,671          |       | (9,671           | )          | —           |       |
| Investment in subsidiaries                                    |       | 113,711                               |       | —         |       | (113,711         | )          | —           |       |
| Total current assets                                          |       | 410,499                               |       | 27,463         |       | (123,382         | )          | 314,580          |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| PROPERTY AND EQUIPMENT, net                                   |       | 28,220                                |       | 2,042          |       | —           |       | 30,262           |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| GOODWILL                                                      |       | 214,369                               |       | 35,269         |       | —           |       | 249,638          |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| OTHER INTANGIBLE ASSETS, net                                  |       | 79,709                                |       | 26,252         |       | —           |       | 105,961          |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| OTHER ASSETS                                                  |       | 6,147                                 |       | 7,544          |       | (4,269           | )          | 9,422            |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| TOTAL ASSETS                                                  |       | $                                     | 738,944    |           | $          | 98,570           |       | $                | (127,651   | ) | $ | 709,863 |   |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY  (DEFICIENCY)       |       |                                  |       |           |       |             |       |             |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| CURRENT LIABILITIES:                                          |       |                                  |       |           |       |             |       |             |       |
| Current portion of long-term debt                             |       | $                                     | 1,400      |           | $          | —           |       | $                | —     |   | $ | 1,400 |   |
| Revolver                                                      |       | 5,000                                 |       | —         |       | —           |       | 5,000            |       |
| Accounts payable                                              |       | 64,625                                |       | 4,873          |       | —           |       | 69,498           |       |
| Accrued expenses and other current  liabilities               |       | 23,965                                |       | 1,990          |       | —           |       | 25,955           |       |
| Accrued interest payable                                      |       | 5,927                                 |       | —         |       | —           |       | 5,927            |       |
| Accrued merger expenses                                       |       | 6,300                                 |       | —         |       | —           |       | 6,300            |       |
| Income taxes payable                                          |       | 2,188                                 |       | 2,609          |       | —           |       | 4,797            |       |
| Due to subsidiaries                                           |       | 42,654                                |       | —         |       | (42,654          | )          | —           |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| Total current liabilities                                     |       | 152,059                               |       | 9,472          |       | (42,654          | )          | 118,877          |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| LONG-TERM  LIABILITIES:                                       |       |                                  |       |           |       |             |       |             |       |
| Deferred income taxes                                         |       | 34,001                                |       | (341           | )          | —           |       | 33,660           |       |
| Long-term debt, net of current portion                        |       | 277,750                               |       | 3,275          |       | —           |       | 281,025          |       |
| Capital leases                                                |       | —                                |       | 1,167          |       | —           |       | 1,167            |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| TOTAL  LIABILITIES                                            |       | 463,810                               |       | 13,573         |       | (42,654          | )          | 434,729          |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| SENIOR  PREFERRED STOCK                                       |       | 422,667                               |       | —         |       | —           |       | 422,667          |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| STOCKHOLDERS’  EQUITY (DEFICIENCY):                      |       |                                  |       |           |       |             |       |             |       |
| Common stock                                                  |       | 177,388                               |       | —         |       | —           |       | 177,388          |       |
| Additional paid-in-capital                                    |       | —                                |       | 43,285         |       | (43,285          | )          |             |       |
| Accumulated deficit                                           |       | (325,921                              | )          | 41,705         |       | (41,705          | )          | (325,921         | )          |
| Accumulated other comprehensive loss                          |       | 1,000                                 |       | 7              |       | (7               | )          | 1,000            |       |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| TOTAL  STOCKHOLDERS’ EQUITY (DEFICIENCY)                 |       | (147,533                              | )          | 84,997         |       | (84,997          | )          | (147,533         | )          |
|                                                          |       |                                  |       |           |       |             |       |             |       |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  (DEFICIENCY) |       | $                                     | 738,944    |           | $          | 98,570           |       | $                | (127,651   | ) | $ | 709,863 |   |

 

12

----

 

**CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)**

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

**As of December 31, 2004**

 
| ** **                                                    | ** ** | **Company**                           | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Excluding**                         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Subsidiary**                        | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Guarantors**                        | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                    | ** ** | **(In thousands, except 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 |   |

 

13

----

 

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

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

**Three Months Ended September 30, 2005**

 
| ** **                                           | ** ** | **Company**        | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------|------------|--------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **Excluding**      | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                           | ** ** | **Subsidiary**     | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                           | ** ** | **Guarantors**     | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                           | ** ** | **(In thousands)** | ** ** |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET SALES                                            |       | $                  | 214,105    |           | $          | 11,706           |       | $                | —     |   | $ | 225,811 |   |
| COST OF  SALES                                       |       | 133,347            |       | 6,354          |       | —           |       | 139,701          |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Gross profit                                         |       | 80,758             |       | 5,352          |       | —           |       | 86,110           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| OPERATING  EXPENSES:                                 |       |               |       |           |       |             |       |             |       |
| Selling, general and administrative  expenses        |       | 55,869             |       | 3,016          |       | —           |       | 58,885           |       |
| Depreciation and amortization                        |       | 3,199              |       | 162            |       |             |       | 3,361            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Total operating expenses                             |       | 59,068             |       | 3,178          |       | —           |       | 62,245           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| OPERATING  INCOME                                    |       | 21,690             |       | 2,174          |       | —           |       | 23,864           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| INTEREST  EXPENSE                                    |       | (10,833            | )          | (55            | )          | 4,194            |       | (6,694           | )          |
| INTEREST  INCOME                                     |       | 45                 |       | 4,194          |       | (4,194           | )          | 45               |       |
| OTHER INCOME                                         |       | 188                |       | 188            |       | (188             | )          | 188              |       |
| EQUITY IN  EARNINGS OF SUBSIDIARIES                  |       | 3,704              |       | —         |       | (3,704           | )          | —           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Income before income taxes                           |       | 14,794             |       | 6,501          |       | (3,892           | )          | 17,403           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| PROVISION  FOR INCOME TAXES                          |       | 4,248              |       | 2,609          |       | —           |       | 6,857            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET INCOME                                           |       | 10,546             |       | 3,892          |       | (3,892           | )          | 10,546           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| PREFERRED  STOCK DIVIDENDS                           |       | (14,255            | )          | —         |       | —           |       | (14,255          | )          |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET (LOSS) INCOME APPLICABLE TO COMMON  STOCKHOLDERS |       | $                  | (3,709     | )              | $          | 3,892            |       | $                | (3,892     | ) | $ | (3,709 | ) |

 

14

----

 

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

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

**Three Months Ended September 24, 2004**

 
| ** **                                          | ** ** | **Company  Excluding  Subsidiary** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------------|------------|------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                          | ** ** | **Guarantors**                     | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                          | ** ** | **(In thousands)**                 | ** ** |
| ** **                                          | ** ** | ** **                         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| NET SALES                                           |       | $                                  | 190,400    |           | $          | —           |       | $                | —     |   | $ | 190,400 |   |
| COST OF  SALES                                      |       | 117,214                            |       | —         |       | —           |       | 117,214          |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| Gross profit                                        |       | 73,186                             |       | —         |       | —           |       | 73,186           |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| OPERATING  EXPENSES:                                |       |                               |       |           |       |             |       |             |       |
| Selling, general and administrative  expenses       |       | 49,720                             |       | 4              |       | —           |       | 49,724           |       |
| Depreciation and amortization                       |       | 2,988                              |       | —         |       | —           |       | 2,988            |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| Total operating expenses                            |       | 52,708                             |       | 4              |       | —           |       | 52,712           |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| OPERATING  INCOME (LOSS)                            |       | 20,478                             |       | (4             | )          | —           |       | 20,474           |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| CHANGE IN FAIR VALUE OF INTEREST RATE SWAPS         |       | 1,503                              |       | —         |       | —           |       | 1,503            |       |
| INTEREST  EXPENSE                                   |       | (13,449                            | )          | —         |       | 3,180            |       | (10,269          | )          |
| INTEREST  INCOME                                    |       | 32                                 |       | 3,180          |       | (3,180           | )          | 32               |       |
| OTHER INCOME                                        |       | 119                                |       | 119            |       | (119             | )          | 119              |       |
| EQUITY IN  EARNINGS OF SUSIDIARIES                  |       | 2,076                              |       | —         |       | (2,076           | )          | —           |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| Income before income taxes                          |       | 10,759                             |       | 3,295          |       | (2,195           | )          | 11,859           |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| PROVISION  FOR INCOME TAXES                         |       | 3,832                              |       | 1,100          |       | —           |       | 4,932            |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| NET INCOME                                          |       | 6,927                              |       | 2,195          |       | (2,195           | )          | 6,927            |       |
|                                                |       |                               |       |           |       |             |       |             |       |
| PREFERRED  STOCK DIVIDENDS                          |       | (14,170                            | )          | —         |       | —           |       | (14,170          | )          |
|                                                |       |                               |       |           |       |             |       |             |       |
| NET (LOSS) INCOME APPLICABLE TOCOMMON  STOCKHOLDERS |       | $                                  | (7,243     | )              | $          | 2,195            |       | $                | (2,195     | ) | $ | (7,243 | ) |

 

15

----

 

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

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

**Nine Months Ended September 30, 2005**

 
| ** **                                           | ** ** | **Company**        | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------|------------|--------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **Excluding**      | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                           | ** ** | **Subsidiary**     | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                           | ** ** | **Guarantors**     | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                           | ** ** | **(In thousands)** | ** ** |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET SALES                                            |       | $                  | 614,261    |           | $          | 11,707           |       | $                | —     |   | $ | 625,968 |   |
| COST OF  SALES                                       |       | 380,763            |       | 6,354          |       | —           |       | 387,117          |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Gross profit                                         |       | 233,498            |       | 5,353          |       | —           |       | 238,851          |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| OPERATING  EXPENSES:                                 |       |               |       |           |       |             |       |             |       |
| Selling, general and administrative  expenses        |       | 164,113            |       | 3,028          |       | —           |       | 167,141          |       |
| Depreciation and amortization                        |       | 9,537              |       | 162            |       | —           |       | 9,699            |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Total operating expenses                             |       | 173,650            |       | 3,190          |       | —           |       | 176,840          |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| OPERATING  INCOME (LOSS)                             |       | 59,848             |       | 2,163          |       | —           |       | 62,011           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| LOSS ON  EXTINGUISHMENT OF DEBT                      |       | (10,340            | )          | —         |       | —           |       | (10,340          | )          |
| INTEREST  EXPENSE                                    |       | (30,010            | )          | (55            | )          | 11,356           |       | (18,709          | )          |
| INTEREST  INCOME                                     |       | 171                |       | 11,356         |       | (11,356          | )          | 171              |       |
| OTHER INCOME                                         |       | 474                |       | 474            |       | (474             | )          | 474              |       |
| EQUITY IN  EARNINGS OF SUBSIDIARIES                  |       | 8,355              |       | —         |       | (8,355           | )          | —           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| Income before income taxes                           |       | 28,498             |       | 13,938         |       | (8,829           | )          | 33,607           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| PROVISION  FOR INCOME TAXES                          |       | 7,994              |       | 5,109          |       | —           |       | 13,103           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET INCOME                                           |       | 20,504             |       | 8,829          |       | (8,829           | )          | 20,504           |       |
|                                                 |       |               |       |           |       |             |       |             |       |
| PREFERRED  STOCK DIVIDENDS                           |       | (41,340            | )          | —         |       | —           |       | (41,340          | )          |
|                                                 |       |               |       |           |       |             |       |             |       |
| NET (LOSS) INCOME APPLICABLE TO COMMON  STOCKHOLDERS |       | $                  | (20,836    | )              | $          | 8,829            |       | $                | (8,829     | ) | $ | (20,836 | ) |

 

 

16

----

 

**CONDENSEDCONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)**

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

**Nine MonthsEnded September 24, 2004**

 
| ** **                                           | ** ** | **Company  Excluding  Subsidiary** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                           | ** ** | **Guarantors**                     | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                           | ** ** | **(In thousands)**                 | ** ** |
| ** **                                           | ** ** | ** **                         | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| NET SALES                                            |       | $                                  | 548,383    |           | $          | —           |       | $                | —     |   | $ | 548,383 |   |
| COST OF  SALES                                       |       | 338,529                            |       | —         |       | —           |       | 338,529          |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| Gross profit                                         |       | 209,854                            |       | —         |       | —           |       | 209,854          |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| OPERATING  EXPENSES:                                 |       |                               |       |           |       |             |       |             |       |
| Selling, general and administrative  expenses        |       | 148,050                            |       | 12             |       | —           |       | 148,062          |       |
| Depreciation and amortization                        |       | 9,414                              |       | —         |       | —           |       | 9,414            |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| Total operating expenses                             |       | 157,464                            |       | 12             |       | —           |       | 157,476          |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| OPERATING  INCOME (LOSS)                             |       | 52,390                             |       | (12            | )          | —           |       | 52,378           |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| CHANGE IN FAIR VALUE OF INTEREST RATE SWAPS          |       | 6,201                              |       | —         |       | —           |       | 6,201            |       |
| INTEREST  EXPENSE                                    |       | (39,719                            | )          | —         |       | 9,156            |       | (30,563          | )          |
| INTEREST  INCOME                                     |       | 65                                 |       | 9,156          |       | (9,156           | )          | 65               |       |
| OTHER INCOME                                         |       | 300                                |       | 300            |       | (300             | )          | 300              |       |
| EQUITY IN  EARNINGS OF SUSIDIARIES                   |       | 6,044                              |       | —         |       | (6,044           | )          | —           |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| Income before income taxes                           |       | 25,281                             |       | 9,444          |       | (6,344           | )          | 28,381           |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| PROVISION  FOR INCOME TAXES                          |       | 8,146                              |       | 3,100          |       | —           |       | 11,246           |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| NET INCOME                                           |       | 17,135                             |       | 6,344          |       | (6,344           | )          | 17,135           |       |
|                                                 |       |                               |       |           |       |             |       |             |       |
| PREFERRED  STOCK DIVIDENDS                           |       | (41,155                            | )          | —         |       | —           |       | (41,155          | )          |
|                                                 |       |                               |       |           |       |             |       |             |       |
| NET (LOSS) INCOME APPLICABLE TO COMMON  STOCKHOLDERS |       | $                                  | (24,020    | )              | $          | 6,344            |       | $                | (6,344     | ) | $ | (24,020 | ) |

 

17

----

 

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

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

**Nine Months Ended September 30, 2005**

 
| ** **                                                                                   | ** ** | **Company**        | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                   | ** ** | **Excluding**      | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Subsidiary**     | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Guarantors**     | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                                                   | ** ** | **(In thousands)** | ** ** |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| OPERATING ACTIVITIES:                                                                        |       |               |       |           |       |             |       |             |       |
| Net income                                                                                   |       | $                  | 20,504     |           | $          | 8,829            |       | $                | (8,829     | ) | $ | 20,504 |   |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities: |       |               |       |           |       |             |       |             |       |
| Depreciation and amortization                                                                |       | 9,537              |       | 162            |       | —           |       | 9,699            |       |
| Amortization and write-off of debt issuance  costs                                           |       | 3,482              |       | —         |       | —           |       | 3,482            |       |
| Redemption premium on 11.5% senior  subordinated notes                                       |       | 8,050              |       | —         |       | —           |       | 8,050            |       |
| Stock based compensation                                                                     |       | 718                |       | —         |       | —           |       | 718              |       |
| Loss on disposal of property and equipment                                                   |       | 53                 |       | —         |       | —           |       | 53               |       |
| Deferred income taxes                                                                        |       | (3,037             | )          | 877            |       | —           |       | (2,160           | )          |
| Income tax effect from exercise of stock  options                                            |       | 215                |       | —         |       | —           |       | 215              |       |
| Equity in earnings of subsidiaries                                                           |       | (8,829             | )          | —         |       | 8,829            |       | —           |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| Changes in assets and liabilities, net of  business acquired:                                |       |               |       |           |       |             |       |             |       |
| Accounts receivable - trade                                                                  |       | (21,617            | )          | (2,265         | )          | —           |       | (23,882          | )          |
| Accounts receivable - other                                                                  |       | 5,031              |       | (57            | )          | —           |       | 4,974            |       |
| Inventory                                                                                    |       | (3,632             | )          | (150           | )          | —           |       | (3,782           | )          |
| Prepaid expenses and other current assets                                                    |       | (395               | )          | (33            | )          | —           |       | (428             | )          |
| Due from parent                                                                              |       | —             |       | (4,484         | )          | 4,484            |       | —           |       |
| Other assets                                                                                 |       | 120                |       | (474           | )          | —           |       | (354             | )          |
| Accrued interest payable                                                                     |       | 2,885              |       | —         |       | —           |       | 2,885            |       |
| Accounts payable                                                                             |       | 11,364             |       | 234            |       | —           |       | 11,598           |       |
| Accrued expenses and other current  liabilities                                              |       | 3,781              |       | (715           | )          | —           |       | 3,066            |       |
| Accrued merger expenses                                                                      |       | (307               | )          | —         |       | —           |       | (307             | )          |
| Income taxes payable                                                                         |       | (1,584             | )          | (991           | )          | —           |       | (2,575           | )          |
| Due to subsidiaries                                                                          |       | 4,484              |       | —         |       | (4,484           | )          | —           |       |
| Net cash provided by (used in) operating  activities                                         |       | 30,823             |       | 933            |       | —           |       | 31,756           |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| INVESTING ACTIVITIES:                                                                        |       |               |       |           |       |             |       |             |       |
| Purchase of property and equipment                                                           |       | (5,792             | )          | (107           | )          | —           |       | (5,899           | )          |
| Purchase of business, net of cash acquired                                                   |       | (71,195            | )          | —         |       | —           |       | (71,195          | )          |
| Net cash used in investing activities                                                        |       | (76,987            | )          | (107           | )          | —           |       | (77,094          | )          |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| FINANCING ACTIVITIES:                                                                        |       |               |       |           |       |             |       |             |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| Increase in revolver and swingline, net                                                      |       | 5,000              |       | —         |       | —           |       | 5,000            |       |
| Repayment of long-term debt                                                                  |       | (70,850            | )          | —         |       | —           |       | (70,850          | )          |
| Proceeds from financing transaction                                                          |       | 50,000             |       | —         |       | —           |       | 50,000           |       |
| Payment of redemption premium on 11.5%  senior subordinated notes                            |       | (8,050             | )          | —         |       | —           |       | (8,050           | )          |
| Payment of debt issuance costs                                                               |       | (836               | )          | —         |       | —           |       | (836             | )          |
| Payments on capital lease obligations                                                        |       | —             |       | (126           | )          | —           |       | (126             | )          |
| Dividend to Parent                                                                           |       | (923               | )          |           |       |             |       | (923             | )          |
| Contribution from Parent, net                                                                |       | 3,410              |       | —         |       | —           |       | 3,410            |       |
| Net cash used in financing activities                                                        |       | (22,249            | )          | (126           | )          | —           |       | (22,375          | )          |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND  CASH EQUIVALENTS                                |       | 152                |       | (7             | )          | —           |       | 145              |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| NET DECREASE IN CASH AND CASH EQUIVALENTS                                                    |       | (68,261            | )          | 693            |       | —           |       | (67,568          | )          |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| CASH AND CASH EQUIVALENTS, BEGINNING OF  PERIOD                                              |       | 69,110             |       | 68             |       | —           |       | 69,178           |       |
|                                                                                         |       |               |       |           |       |             |       |             |       |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                                     |       | $                  | 849        |           | $          | 761              |       | $                | —     |   | $ | 1,610 |   |

 

18

----

 

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

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

**Nine Months Ended September 24, 2004**

 
| ** **                                                                         | ** ** | **Company  Excluding  Subsidiary** | ** ** | **Subsidiary** | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                                         | ** ** | **Guarantors**                     | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                                         | ** ** | **(In thousands)**                 | ** ** |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| OPERATING ACTIVITIES:                                                              |       |                               |       |           |       |             |       |             |       |
| Net income                                                                         |       | $                                  | 17,135     |           | $          | 6,344            |       | $                | (6,344     | ) | $ | 17,135 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                               |       |           |       |             |       |             |       |
| Depreciation and amortization                                                      |       | 9,414                              |       | —         |       | —           |       | 9,414            |       |
| Amortization of debt issuance costs                                                |       | 1,428                              |       | —         |       | —           |       | 1,428            |       |
| Change in fair value of interest rate swaps                                        |       | (6,201                             | )          | —         |       | —           |       | (6,201           | )          |
| Interest on shareholder loans                                                      |       | (30                                | )          | —         |       | —           |       | (30              | )          |
| Deferred income taxes                                                              |       | 3,754                              |       | —         |       | —           |       | 3,754            |       |
| Equity in earnings of subsidiaries                                                 |       | (6,344                             | )          | —         |       | 6,344            |       | —           |       |
| Changes in assets and liabilities, net of  effects of acquisition:                 |       |                               |       |           |       |             |       |             |       |
| Accounts receivable - trade                                                        |       | (24,108                            | )          | —         |       | —           |       | (24,108          | )          |
| Accounts receivable - other                                                        |       | 1,435                              |       | —         |       | —           |       | 1,435            |       |
| Inventory                                                                          |       | (18,625                            | )          | —         |       | —           |       | (18,625          | )          |
| Prepaid expenses and other current assets                                          |       | 347                                |       | 3              |       | —           |       | 350              |       |
| Due from parent                                                                    |       | —                             |       | (9,156         | )          | 9,156            |       | —           |       |
| Other assets                                                                       |       | 90                                 |       | (300           | )          | —           |       | (210             | )          |
| Accrued interest payable                                                           |       | 5,254                              |       | —         |       | —           |       | 5,254            |       |
| Accounts payable                                                                   |       | 11,786                             |       | (8             | )          | —           |       | 11,778           |       |
| Accrued expenses and other current  liabilities                                    |       | 477                                |       | —         |       | —           |       | 477              |       |
| Accrued merger expenses                                                            |       | (416                               | )          | —         |       | —           |       | (416             | )          |
| Income taxes payable                                                               |       | 2,964                              |       | 3,100          |       | —           |       | 6,064            |       |
| Due to subsidiaries                                                                |       | 9,156                              |       | —         |       | (9,156           | )          | —           |       |
| Net cash provided by (used in) operating  activities                               |       | 7,516                              |       | (17            | )          | —           |       | 7,499            |       |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| INVESTING ACTIVITIES:                                                              |       |                               |       |           |       |             |       |             |       |
| Purchase of property and equipment                                                 |       | (5,359                             | )          | —         |       | —           |       | (5,359           | )          |
| Cash - restricted                                                                  |       | (1                                 | )          | —         |       | —           |       | (1               | )          |
| Purchase of business, net of assets  acquired                                      |       | (509                               | )          | —         |       | —           |       | (509             | )          |
| Net cash used in investing activities                                              |       | (5,869                             | )          | —         |       | —           |       | (5,869           | )          |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| FINANCING ACTIVITIES:                                                              |       |                               |       |           |       |             |       |             |       |
| Increase in revolver and swingline, net                                            |       | 7,000                              |       | —         |       | —           |       | 7,000            |       |
| Repayment of debt                                                                  |       | (5,250                             | )          | —         |       | —           |       | (5,250           | )          |
| Payment of debt issuance and offering costs                                        |       | (587                               | )          | —         |       | —           |       | (587             | )          |
| Net cash provided by financing activities                                          |       | 1,163                              |       | —         |       | —           |       | 1,163            |       |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND  CASH EQUIVALENTS                      |       | 89                                 |       | —         |       | —           |       | 89               |       |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                              |       | 2,899                              |       | (17            | )          | —           |       | 2,882            |       |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| CASH AND CASH EQUIVALENTS, BEGINNING OF  PERIOD                                    |       | 1,527                              |       | 85             |       | —           |       | 1,612            |       |
|                                                                               |       |                               |       |           |       |             |       |             |       |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                           |       | $                                  | 4,426      |           | $          | 68               |       | $                | —     |   | $ | 4,494 |   |

 

19

----

 

ITEM 2. MANAGEMENT’SDISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

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

 

**Cautionary Statement for Purposes of the “Safe Harbor”Provisions of the Private Securities Litigation Reform Act of 1995**

 

This quarterly reportcontains forward-looking statements that are subject to risks anduncertainties. You should not place undue reliance on those statements becausethey are subject to numerous uncertainties and factors relating to ouroperations and business environment, all of which are difficult to predict andmany of which are beyond our control. Forward-looking statements includeinformation concerning our possible or assumed future results of operations,including descriptions of our business strategy. These statements often includewords such 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:

 

•                  materialfacilities and systems disruptions and shutdowns,

•                  ourability to purchase products from suppliers on favorable terms,

•                  ourability to accurately predict market trends,

•                  productcost and price fluctuations due to market conditions or foreign currencyfluctuations,

•                  failureto locate and acquire acquisition candidates,

•                  failureto successfully integrate acquired businesses,

•                  dependenceon key employees,

•                  ourlevel of debt,

•                  interestrate fluctuations,

•                  futurecash flows,

•                  the highly competitive nature of the maintenance, repairand operations distribution industry,

•                  generalmarket conditions,

•                  changesin consumer preferences,

•                  adversepublicity and litigation,

•                  laborand benefit costs, and

•                  theother factors listed under “Risk Factors” in our Annual Report on Form 10-Kfiled 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 approximately 150,000 active customer accounts. Our highly diverse customerbase includes facilities maintenance customers, professional contractors andspecialty distributors. Our customers range in size from individual contractorsand independent specialty distributors or hardware stores to apartmentmanagement companies and national purchasing groups.

 

20

----

 

We market and sell ourproducts primarily through nine 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 our marketsusing a variety of sales channels, including a direct sales force of fieldsales representatives, telesales representatives, a direct marketing program,brand-specific e-commerce websites and a national accounts sales program.

 

CriticalAccounting Policies

 

In preparing theconsolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America, management is required tomake certain estimates, judgments and assumptions. These estimates, judgmentsand assumptions affect the reported amounts of assets and liabilities,including the disclosure of contingent assets and liabilities, at the date ofthe financial statements and the reported amounts of revenues and expensesduring the 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.

 

*Revenue Recognition*

 

While ourrecognition of revenue is predominantly derived from routine transactions anddoes not involve significant judgment, revenue recognition represents animportant accounting policy for us.  Werecognize a sale when the product has been shipped and risk of loss has passedto the customer, collection of the resulting receivable is probable, persuasiveevidence of an arrangement exists, and the price is fixed or determinable.  Sales are recorded net of estimateddiscounts, rebates and returns.  Aportion of our sales is delivered direct from the manufacturer.  These direct-shipment sales are recorded on agross basis, with the corresponding cost of goods sold, in accordance with theguidance in EITF 99-19, *Reporting Revenues Grossas a Principal verses Net as an Agent*.  We provide limited product return andprotection rights to certain customers. We accrue product return reserves and warranty obligations.  A provision is made for estimated productreturns based on sales volumes and our experience.  Actual returns have not varied materiallyfrom amounts provided historically.

 

*EstimatingAllowances for Doubtful Accounts*

 

We maintain allowances fordoubtful accounts for estimated losses resulting from the 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 September 30, 2005 the allowance for doubtful accounts totaled $7.8million.

 

*EstimatingWrite-Offs for Excess and Obsolete Inventory*

 

Inventories are valuedat the lower of cost or market. We determine inventory cost using the averagecost method. We adjust inventory for excess and obsolete inventory and for thedifference by which the cost of the inventory exceeds the estimated marketvalue. In order to determine the adjustments, management reviews inventoryquantities on hand, slow movement reports and sales history reports. Managementestimates the required adjustment based on estimated demand for products andmarket conditions. To the extent historical results are not indicative offuture results and if events occur that affect our relationships with suppliersor the salability of our products, additional write-offs may be needed thatwill increase our cost of sales and decrease inventory.

 

21

----

 

*Impairmentof 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 selling, general and administrativeexpenses in our statements of operations, and would result in reduced carryingamounts of the related assets in our balance sheets.

 

*LegalContingencies*

 

From time to time, in thecourse of our business, we become involved in legal proceedings. In accordancewith SFAS No. 5 “Accounting for Contingencies,” if it is probable that, asa result of a pending legal claim, an asset had been impaired or a liabilityhad been incurred at the date of the financial statements and the amount of theloss is estimable, an accrual for the costs to resolve the claim is recorded inaccrued expenses in our balance sheets. Professional fees related to legalclaims are included in general and administrative expenses in our statements ofoperations. Management, with the assistance of outside counsel, determineswhether it is probable that a liability from a legal claim has been incurredand estimates the amount of loss. The analysis is based upon potential results,assuming a combination of litigation and settlement strategies. Management doesnot believe that currently pending proceedings will have a material adverseeffect on our consolidated financial position. It is possible, however, thatfuture results of operations for any particular period could be materiallyaffected by changes in our assumptions related to these proceedings.

 

*DerivativeFinancial 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 was determinedby quotes obtained from the related counter parties.

 

Resultsof Operations

 

Thefollowing discussion includes references to the term average daily sales.  Average daily sales are defined as sales fora period of time divided by the number of shipping days in that period of time.

 

*Overview.*  During the thirdquarter of 2005 we achieved record revenue.  Sales increased 18.6% to $225.8 million in the third quarter compared to $190.4million in the prior year period, with the same number of shipping days in eachperiod.  Our revenue growth is a result ofseveral factors, including our ability to execute on our strategy to grow salesorganically and through strategic acquisition.  The company achievedcontinued growth in our three core markets: facilities maintenance,professional contractors and specialty distributors.  Our sales growth, excluding salesassociated with our July 2005 acquisition of Copperfield, was 12.4% compared to the prior yearperiod.  Our sales growth came from the success of the numerousgrowth investments we have put into place during 2004 and 2005, as well asimproved market conditions in the professional contractor and multi-familyhousing sectors.  An increasing component ofour sales growth in the third quarter came from newproduct initiatives, such as the expansion of our capabilities to sell anddistribute HVAC equipment.  Sales of thisequipment, and other larger items such as appliances and water heaters, takenas a whole, have increased over the prior year period by 65%.  These three product groups have a higher averagesales price than our average stock-keeping units and generally carry lowergross margins.

 

22

----

 

Primarily as aresult of sales mix, our consolidated gross margin percentage declined in theperiod by 30 basis points.    We continuedto benefit from operating expense leverage in the areas of freight,distribution center labor and occupancy costs.  Operatingincome increased by 12.1% over the comparable prioryear period.

 

*Three Months Ended September 30, 2005 Compared to ThreeMonths Ended September 24, 2004*

 

**NetSales.**Our netsales increased by $35.4 million, or 18.6%, to $225.8 million in thethree months ended September 30, 2005 from $190.4 million in the threemonths ended September 24, 2004, with the same number of shipping days in bothperiods.  The sales increase wasattributable to $11.7 million from our Copperfield acquisition and theremaining increase resulted from continued strong demand for our products, newsales and growth initiatives, and the success of new productintroductions.  Our strongest salesgrowth this quarter, excluding the impact of our Copperfield acquisition, was19.2% in the professional contractor market, followed by 9.7% sales growth inthe facilities maintenance market and 10.3% sales growth in the specialtydistributor market.

 

*GrossProfit.*Grossprofit increased by $12.9 million, or 17.7%, to $86.1 million in thethree months ended September 30, 2005 from $73.2 million in the threemonths ended September 24, 2004.  Grossprofit margins decreased to 38.1% for the three months ended September 30, 2005compared to 38.4% for the three months ended September 24, 2004.  This decline in our gross profit margins isprimarily a result of a change in sales mix related to a 65% increase in thesale of large equipment items, specifically appliances, water heaters and HVACequipment, which generally carry lower gross profit margins.

 

*Selling, General and Administrative Expenses.*SG&A expenses increased by$9.2 million, or 18.4%, to $58.9 million in the three months endedSeptember 30, 2005 from $49.7 million in the three months ended September24, 2004.  Increased SG&A expensesrelated to our Copperfield acquisition accounted for $3.0 million of the $9.2million increase.  Excluding theseexpenses, SG&A expenses increased 14.2% in the three months ended September30, 2005.  Certain expenses withinSG&A, such as the costs of running regional distribution centers, deliveryexpenses and selling expenses fluctuate with sales volume.  The increase in SG&A expenses includedthese increases as well as increased investment in new sales and marketinginitiatives, higher health care costs, and Sarbanes-Oxley compliance costs.  SG&A expenses as a percentage of salesremained the same at 26.1% in the three months ended September 30, 2005 and inthe three months ended September 24, 2004. Excluding Sarbanes-Oxley compliance costs of $0.4 million incurredduring the three months ended September 30, 2005, SG&A expenses as apercentage of sales decreased 20 basis points to 25.9%.  There were no Sarbanes-Oxley compliance costsin the comparable prior year period.

 

*Depreciationand Amortization.*Depreciationand amortization expense increased by $0.4 million, or 12.5%, to $3.4million in the three months ended September 30, 2005 from $3.0 million inthe three months ended September 24, 2004. This increase was due to our Copperfield acquisition.  Copperfield depreciation and amortization was$0.4 million for the three months ended September 30, 2005.  This represents the depreciation andamortization on property, plant and equipment as well as amortization of theintangibles valued in the purchase.

 

*OperatingIncome.*Asa result of the foregoing, operating income increased by $3.4 million, or 16.6%,to $23.9 million in the three months ended September 30, 2005 from $20.5million in the three months ended September 24, 2004.  As a percent of sales, operating incomedecreased to 10.6% in the current quarter from 10.8% in the comparable prioryear period.  

 

23

----

 

*Changein Fair Value of Interest Rate Swaps.*Our interest rate swaps were terminated at the time of our Parent'sinitial public offering, or IPO, in December 2004.  As such, changes in fair value of interestrate swaps were zero in the three months ended September 30, 2005 compared to again of $1.5 million in the three months ended September 24, 2004. Theses gainsare related to changes in the market value of our interest rate swapinstruments. The non-cash gains were attributable to changes in marketconditions, including but not limited to fluctuations in interest rates,general market volatility, and the remaining tenor of those instruments.

 

*InterestExpense.*Interestexpense decreased by $3.6 million in the three months ended September 30, 2005to $6.7 million from $10.3 million in the three months endedSeptember 24, 2004.  The net decrease wasattributed to lower debt balances associated with the early extinguishment of$70.0 million of our 11.5% senior subordinated notes in January 2005 and thepay down of $31.3 million of our term loan, as well as lower interest expenseassociated with the termination of our interest rate swaps and the write-off ofdeferred financing costs – all associated with our IPO.  This was partially offset by the incurrenceof an additional $50.0 million term loan during the three months endedSeptember 30, 2005 as well as increased average borrowings under our revolvingcredit facility to fund the $70.0 million acquisition of Copperfield.

 

*Provision for Income Taxes.*The effective tax rate for the three monthsended September 30, 2005 was 39.4% compared to 41.6% in the three months endedSeptember 24, 2004.  The decrease in theeffective tax rate was due primarily to lower state income taxes and lowerpermanent differences.

 

*Nine Months Ended September 30, 2005 Compared to Nine MonthsEnded September 24, 2004*

 

**NetSales.**Our net sales increased by$77.6 million, or 14.1%, to $626.0 million in the nine months endedSeptember 30, 2005 from $548.4 million in the nine months ended September24, 2004.  During 2005 we had one moreshipping day than during the prior year period. Average daily sales increased 13.6% to $3.3 million in the ninemonths ended September 30, 2005 compared to $2.9 million in the ninemonths ended September 24, 2004.  The sales increase wasattributable to $11.7 million from our Copperfield acquisition and theremaining increase resulted from improved demand forour products, new sales and growth initiatives, and to new productintroductions.  Average daily salesgrowth for the nine months ended September 30, 2005, excluding the impact ofour Copperfield acquisition, was 17.0% in the professional contractor market,followed by 10.5% sales growth in the facilities maintenance market and 6.4%sales growth in the specialty distributor market.

 

*GrossProfit.*Grossprofit increased by $29.0 million, or 13.8%, to $238.9 million in thenine months ended September 30, 2005 from $209.9 million in the ninemonths ended September 24, 2004.  Grossprofit margins declined 10 basis points to 38.2% for the nine months ended September30, 2005 from 38.3% for the nine months ended September 24, 2004.  This decline in our gross profit margins isprimarily a result of  30% increases insales over the comparable prior year period of lower margin products such asappliances, water heaters and HVAC equipment. This was partially offset by improvement in gross profit margins incertain product categories due to the success of our private label program,improved pricing from suppliers, and increased efficiencies at our nationaldistribution center.

 

*Selling, General and Administrative Expenses.*SG&A expenses increased by$19.1 million, or 12.9%, to $167.1 million in the nine months endedSeptember 30, 2005 from $148.1 million in the nine months ended September 24,2004.  Increased SG&A expensesrelated to our Copperfield acquisition accounted for $3.0 million of the $19.1million increase.  Excluding theseexpenses, SG&A expenses increased 10.9% in the nine months ended September30, 2005.  Certain expenses withinSG&A, such as the costs of running distribution centers, delivery expensesand selling expenses fluctuate with sales volume.  The increase in SG&A expenses includedthese increases as well as continuing investments in new sales and marketinginitiatives, higher health care costs, and Sarbanes-Oxley compliance costs.  SG&A expenses as a percentage of salesimproved 30 basis points to 26.7% in the nine months ended September 30, 2005from 27.0% in the nine months ended September 24, 2004.  This improvement in operating leverage is aresult of improved operating efficiencies at our regional distribution centers –specifically distribution center labor and freight costs – as well as thebenefit of increased sales on our fixed cost infrastructure, partially offsetby our continued investment in our growth initiatives.  Excluding Sarbanes-Oxley compliance costs at$0.7 million incurred during the nine months ended September 30, 2005, SG&Aexpenses as a percentage of sales decreased 40 basis points to 26.6%.  There were no Sarbanes-Oxley compliance costsin the comparable prior year period.

 

*Depreciationand Amortization.*Depreciationand amortization expense increased by $0.3 million, or 3.0%, to $9.7million in the nine months ended September 30, 2005 from $9.4 million inthe nine months ended

 

24

----

 

September 24, 2004.  This increase was due to our Copperfieldacquisition.  The Copperfielddepreciation and amortization was $0.4 million for the three months endedSeptember 30, 2005.  This represents thedepreciation and amortization on property, plant and equipment as well asamortization of the intangibles valued in the purchase.

 

* Operating Income.*As a result of the foregoing,operating income increased by $9.6 million, or 18.4%, to $62.0 million inthe nine months ended September 30, 2005 from $52.4 million in the ninemonths ended September 24, 2004.  As apercent of sales, operating income increased to 9.9% in the first nine monthsfrom 9.6% in the comparable prior year period.

 

*Changein Fair Value of Interest Rate Swaps.*Our interest rate swaps were terminated at the time of our Parent'sIPO in December 2004.  As such, changesin fair value of interest rate swaps were zero in the nine months endedSeptember 30, 2005 compared to a gain of $6.2 million in the nine months endedSeptember 24, 2004. Theses gains are related to changes in the market value ofour interest rate swap instruments.  Thenon-cash gains were attributable to changes in market conditions, including butnot limited to fluctuations in interest rates, general market volatility, andthe remaining tenor of our instruments.

 

*InterestExpense.*Interestexpense decreased by $11.9 million in the nine months ended September 30,2005 to $18.7 million from $30.6 million in the nine months endedSeptember 24, 2004.  The net decrease wasattributed to lower debt balances associated with the early extinguishment of$70.0 million of our 11.5% senior subordinated notes in January 2005 and thepay down of $31.5 million of our term loan, as well as lower interest expenseassociated with the termination of our interest rate swaps and the write-off ofdeferred financing costs – all associated with our IPO.  This was partially offset by the incurrenceof an additional $50.0 million term loan during the three months endedSeptember 30, 2005 as well as increased borrowings under our revolving creditfacility to fund the $70.0 million acquisition of Copperfield.

 

*Loss on Extinguishment of Debt*. As part of our IPO, we redeemed $70.0million of the 11.5% senior subordinated notes in January 2005. This redemptionwas made 30 days after the closing of our IPO, in accordance with theredemption provision of the indenture governing the notes. In connection withthe redemption, we recorded a $10.3 million loss on the early extinguishment ofdebt in the first quarter of 2005,consisting of an $8.1 million redemption premium and $2.3 million write-off ofdeferred financing costs.

 

*Provision for Income Taxes.*The effective tax rate for the nine monthsended September 30, 2005 was 38.9% compared to 39.6% in the nine months endedSeptember 24, 2004.  The decrease in theeffective tax rate was due primarily to lower state income taxes and lowerpermanent differences.

 

**Liquidityand Capital Resources**

 

As of September 30,2005, we had approximately $85.9 million of availability under our$100.0 million revolving credit facility. Historically, our capital requirements have been for debt serviceobligations, working capital requirements, acquisitions, the expansion and maintenanceof our distribution network, and upgrades of our proprietary informationsystems.  We expect this to continue inthe foreseeable future.  Historically, wehave funded these requirements through internally generated cash flow and fundsborrowed under our credit facility.  Weexpect our cash flow from operations and the loan availability under our

 

25

----

 

credit facility to be ourprimary 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 ofSeptember 30, 2005, we had $9.1 million of letters of credit issued underthe credit facility.  Interest on our11.5% senior subordinated notes due 2011 is payable each May 15 and November15.  With respect to borrowings under ourcredit facility, we have the option to borrow at an adjusted LIBOR or analternative base rate.  Interest on thecredit facility is generally payable quarterly, and with respect to any LIBORborrowings, on the last day of the interest period applicable to the term ofthe borrowing.

 

Net cash provided byoperating activities was $31.8 million for the nine months ended September30, 2005 compared to net cash provided by operating activities of$7.5 million in the nine months ended September 24, 2004.  Net cash provided by operating activities forthe nine months ended September 30, 2005 was higher than the prior year periodprimarily as a result of our increase in operating income of $8.7 million andchanges in our core working capital, defined as the sum of accounts receivabletrade plus inventory less accounts payable, of $14.9 million.  This was partially offset by the changes inall other assets and liabilities.  Inaddition, we had lower cash interest expense of $10.7 million, resulting fromour lower average debt balances, which were reduced using proceeds from our IPO,and higher cash taxes of $17.2 million, due to higher pretax earnings and thetiming of income tax payments.

 

Netcash used in investing activities was $77.1 million in the nine monthsended September 30, 2005 compared to $5.9 million in the nine months endedSeptember 24, 2004.  Net cash used ininvesting activities in the nine months ended September 30, 2005 and the ninemonths ended September 24, 2004 were primarily attributable to capitalexpenditures made in the ordinary course of business and costs related topurchases of businesses including the $70.0 million purchase of Copperfield.

 

Net cash used in financingactivities totaled $22.4 million for the nine months ended September 30,2005 compared to net cash provided by financing activities of $1.2 millionin the nine months ended September 24, 2004. Net cash used in financing activities for the nine months endedSeptember 30, 2005 was primarily attributable to our repayment of $70.0 millionof our senior subordinated notes and $8.1 million in related redemptionpremiums partially offset by the incurrence of an additional $50.0 million termloan, which was used in our Copperfield acquisition, $2.3 million received inJanuary 2005 for the over-allotment shares sold to underwriters, net ofexpenses, in conjunction with our IPO and $1.7 million of proceeds receivedfrom the exercise of stock options.

 

As of September 30, 2005, otherthan the redemption of $70.0 million of our 11.5% senior subordinated notes andthe incurrence of an additional $50.0 million term loan and incrementalrevolver borrowings, as described above, our contractual obligations and othercontractual commitments have not changed materially outside the ordinary courseof business since December 31, 2004.

 

*TheReincorporation Merger and Related Transactions*

 

InDecember 2004, we completed a reincorporation merger and became the 100%-ownedsubsidiary of Interline Brands, Inc., a Delaware corporation (NYSE: IBI), whichwe also refer to as our Parent or Interline Delaware.  In this reincorporation merger, in theaggregate, holders of our preferred stock received $55.0 million in cash and19,183,321 shares of Parent common stock and holders of our common stockreceived 66,667 shares of Parent common stock. In return, Parent received 100 shares of our common stock and one shareof our preferred stock, representing all of our authorized and outstandingshares.  Also, options to purchase sharesof our common stock were converted into options to purchase shares of Parentcommon stock.  In conjunction with thisreincorporation merger, Parent successfully completed its IPO and we amendedour senior credit facility.  A total of14,375,000 shares of Parent common stock were sold, of which 12,667,000 weresold by Parent and 1,708,000 were sold by its shareholders. Parent sold12,500,000 shares of its common stock in December 2004 and 167,000 shares inJanuary 2005 following the exercise of the underwriters’ over-allotmentoption.  Parent received $171.8 millionin net proceeds including the exercise of the underwriters’ over-allotmentoption, representing $176.9 million of proceeds from the sale of stock net ofunderwriting discounts and commissions, less $4.1 million of initial publicoffering costs and $1.1 million of debt issuance costs.  After the IPO-related expenses and preferredstock consideration in the reincorporation merger were paid, all of theproceeds from the IPO were contributed to the Company.

 

26

----

 

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 we alsoused $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 the 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.

 

*CapitalExpenditures*

 

Capital expenditures were$5.9 million in the nine months ended September 30, 2005 compared to $5.4million in the nine months ended September 24, 2004.  Capital expenditures as a percentage of saleswere 0.9% in the nine months ended September 30, 2005 and 1.0% in the ninemonths ended September 24, 2004.

 

*Liquidity*

 

Our principal workingcapital need is for inventory and trade accounts receivable, which havegenerally increased with the growth in our business.  Our principal sources of cash to fund ourworking capital needs are cash generated from operating activities andborrowings under our revolving credit facility.

 

*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 IPO.  We also amended our credit facility on July 7,2005, to permit the incurrence of an additional $50.0 million term loan, havingsubstantially the same terms as the existing term loan in connection with theCopperfield acquisition.  On August 8,2005, we again amended our credit facility to lower the interest rate spreadsapplicable to the additional $50.0 million term loan.  The amended credit facility provides foraggregate commitments of $250.0 million, consisting of (1) a revolvingloan facility of $100.0 million, of which a portion not exceeding $20.0million will be available in the form of letters of credit, and (2) a term loanfacility of $150.0 million.  Borrowings under the amended term loanfacility and revolving loan facility bear interest, at our option, at eitheradjusted LIBOR or at the alternate base rate plus a spread. Outstanding lettersof credit under the revolving loan facility are subject to a per annum feeequal to the applicable spread over adjusted LIBOR for revolving loans. Theindebtedness under the amended credit facility is guaranteed by our Parent and ourdomestic subsidiaries.  The amended termloan facility has a maturity of December 31, 2010, and the revolving loanfacility has a maturity of May 31, 2008.

 

On July 7, 2005, we used theproceeds from the additional $50.0 million term loan and $20.0 million ofborrowings under the revolving loan facility to fund the Copperfield acquisition.  As of the end of the third quarter theCompany had paid down $15.0 million of the incremental $20.0 million borrowedfor the acquisition.

 

During the nine months endedSeptember 30, 2005 we borrowed periodically on our revolving credit facility toaccommodate our daily working capital needs. The weighted average daily outstanding balance during the nine-monthperiod was $11.3 million, with ordinary course borrowings ranging from$0.0 million to $22.5 million. As of September 30, 2005, we had $9.1 million of letters of creditissued under the revolving loan facility and $149.2 million aggregateprincipal outstanding under the term loan facility.

 

We believe that cash flowfrom operations and available borrowing capacity under our new credit facilitywill be adequate to finance our ongoing operational cash flow needs and debtservice obligations for the next twelve months.

 

27

----

 

ITEM 3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We areaware of the potentially unfavorable effects inflationary pressures may createthrough higher asset replacement costs and related depreciation, higherinterest rates and higher product and material costs.  We seek to minimize the effects of inflationand changing prices through economies of purchasing and inventory managementresulting in cost reductions and productivity improvements as well as priceincreases to maintain reasonable profit margins.  Management believes that while inflation has historicallybeen moderate the company and its markets have been impacted over the past yearby rising raw material prices and resulting supplier cost increases.  These increases have generally served toincrease sales results.

 

The majorityof our purchases from foreign-based suppliers is from China and other countriesin Asia and is transacted in U.S. dollars. On July 21, 2005, the People’s Bank of China announced that the yuanwill no longer be pegged to the U.S. dollar, but will be allowed to float in aband (and to a limited extent, increase in value) against a basket of foreigncurrencies, and on September 23, 2005 slightly increased the permitted movementagainst non-U.S. dollar currencies in a basket. China’s decision to remove the U.S. dollar peg for the yuan increasesthe risk that Chinese-sourced products could become more expensive for us.

 

*DerivativeFinancial Instruments*

 

Periodically,we enter into derivative financial instruments, including interest rateexchange agreements, or swaps, to manage our exposure to fluctuations ininterest rates on our debt.  As of September30, 2005, we did not have any interest rate swap exchange agreements, orswaps.  Under our former swap agreements,we pay a fixed rate on the notional amount to our banks and the banks pay us avariable rate on the notional amount equal to a base LIBOR rate.  Our derivative activities, all of which arefor purposes other than trading, are initiated within the guidelines ofcorporate risk-management policies.

 

Weperiodically evaluate the costs and benefits of any changes in our interestrate risk.  Based on such evaluation, wemay enter into new interest rate swaps to manage our interest rate exposure.

 

ITEM 4. CONTROLS ANDPROCEDURES.

 

Our management, with theparticipation of our Chief Executive Officer and Chief Financial Officer (ourprincipal executive officer and principal financial officer), evaluated theeffectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2005. Basedon this evaluation, our Chief Executive Officer and Chief Financial Officerconcluded that, as of September 30, 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 our internalcontrol over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)under the Exchange Act) occurred during the quarter ended September 30, 2005that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

**PART II. OTHERINFORMATION**

 

ITEM 1. LEGAL PROCEEDINGS.

 

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

 

ITEM 5. OTHER INFORMATION.

 

None

 

28

----

 

ITEM 6. EXHIBITS.

 

The following exhibitsare being filed as part of this Quarterly Report on Form 10-Q:

 
| 1.1   |   | Underwriting  Agreement dated as of August 3, 2005 among the Company, the several  selling stockholders named on Schedule A thereto and the several  underwriters named on Schedule B thereto, for whom Credit Suisse First  Boston LLC and Lehman Brothers, Inc. acted as representatives (incorporated  by reference to exhibit 1.1 to the Company's Registration Statement on  Form S-1/A filed on July 22, 2005). |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1  |   | Amendment  No. 1, dated as of August 8, 2005, to the Amended and Restated  Credit Agreement dated as of December 21, 2004, among the Company,  Interline New Jersey, the lenders party thereto and Credit Suisse, Cayman  Islands Branch, as Administrative Agent (incorporated by reference to  exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed  on August 11, 2005).                         |
| 10.53 |   | Incremental  Facility Amendment, dated as of July 7, 2005, among the Company,  Interline New Jersey, the lenders named thereto and Credit Suisse, Cayman  islands Branch, as Administrative Agent (incorporated by reference to exhibit  10.53 to the Company's Registration Statement on Form S-1/A filed on  July 22, 2005.                                                                                                        |
| 10.55 |   | Employment  Agreement, dated as of July 22, 2005, between Interline New Jersey and  Thomas J. Tossavainen (incorporated by reference to exhibit 10.55 to the  Company's Registration Statement on Form S-1/A filed on August 1,  2005).                                                                                                                                                                                         |
| 10.56 |   | Amendment,  dated September 9, 2005, to Employment Agreement, dated as of  December 15, 2004, between Interline New Jersey and William R. Pray  (incorporated by reference to exhibit 10.56 to the Quarterly Report on  Form 10-Q of Interline Brands, Inc., a Delaware corporation, filed on  November 10, 2005).                                                                                                              |
| 31.1  |   | Certification  of Michael J. Grebe as President and Chief Executive Officer of Interline  Brands, Inc., a New Jersey Corporation, 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., a New Jersey Corporation, 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).                                                                                                                                                                                                                          |

 

29

----

 

**Signatures**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto dulyauthorized. 

 
|   | INTERLINE  BRANDS, INC. |
|--------|-------------------------|
|   |                    |   |
|   |                    |   |
|   | BY:                     |   /s/ Michael J. Grebe  |   |
|   |                    | Michael  J. Grebe |
|   |                    | President and Chief Executive  Officer |
|   |                    |   |
|   |                    | (Duly  Authorized Signatory and Principal Executive Officer) |

 

 

Date: November 10,2005

 

30

----

 

**Signatures**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto dulyauthorized.

 

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

 

 

Date: November 10,2005

 

31

----