Forward-Looking Statements

Transcription

1 William Blair & Company 27 th Annual Growth Stock Conference June 20,

2 Forward-Looking Statements This presentation contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are outside our control. These forward-looking statements include statements about our business strategy, objectives, and expectations, our future operating results and anticipated sources of funds. All statements, other than statements of historical facts, regarding our strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words will, may, believe, anticipate, intend, estimate, expect, project and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements speak only as of the date of this presentation. You should not place undue reliance on these forward-looking statements. Although we believe our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this presentation are reasonable, we may be unable to achieve these plans, intentions or expectations. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Risks and uncertainties that could cause actual results to differ from those in the forwardlooking statements are described in Risk Factors and Forward Looking Statements in our prospectus supplement and the accompanying prospectus relating to our recent note offering. Information regarding market and industry statistics contained in this presentation is based on information available to us that we believe is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forwardlooking statements, even if new information becomes available in the future. 1

3 Agenda Investment Highlights Business Strategy AmSan Overview Financial Performance 2

4 Investment Highlights Industry Leader in MRO Distribution Leading market positions in Facilities Maintenance and Pro Contractor markets National footprint, scale and operating model drive market leading positions Stable, Highly Attractive End Markets Limited exposure to industrial production and new construction Focus on less cyclical maintenance, repair and remodeling end markets Highly Diversified Revenue Base Unique Business Model and Scalable Platform Strong, Consistent Cash Flow Generation Highly Experienced Management Team Over 200,000 customer accounts; top 10 less than 7% of sales Over 80,000 products with next-day delivery to 98% of the U.S. population Customer segmentation through multiple brands drives best in class profitability Highly integrated, industry leading IT and logistics platform creates significant efficiencies Strong, consistent EBITDA; efficient working capital management; and low capex drive significant cash flow generation Stable gross profit and operating margin track record Senior management averages 20+ years in distribution Core team of multi-functional senior managers together since

5 Market Leading MRO Distributor Professional Contractors 23% Specialty Distributors 14% Q Revenue by: Customer Type Facilities Maintenance 63% Diverse Product Offering Market leading, value-added distributor of maintenance, repair and operations ( MRO ) products National scope with local market presence and superior customer service Approximately 200,000 active customer accounts; long standing relationships Deep product offering of approximately 80,000 SKU s Highly integrated industry leading IT and logistics platform Industry leading profitability Focused on multi-family housing, commercial facility and residential end markets Plumbing 33% Janitorial & Sanitary 23% Q LTM revenue and adjusted EBITDA of $1.1 billion and $120.0 million, respectively (1) HVAC, Appliances & Parts 13% Security 5% Other Products 11% Electrical 11% Hardw are 4% Have generated EBITDA margins over 10% for over a decade 20% per year Adjusted Pro Forma EPS growth since IPO Strong free cash flow generation of $28.5 million in Q Varied end markets and product offering drive numerous growth opportunities and operating performance predictability (1) Reconciliation to the comparable measures under GAAP is presented in the reconciliation section of this presentation. 4

6 Strong National Market Position Broad Geographic Diversity 77 Distribution Centers 38 Professional Contractor Showrooms 15 Vendor Managed Inventory Locations 1 National Distribution Center Next-day delivery service to over 98% of U.S. population Same-day service offered as a premium service Leased truck fleet serving same-day/next-day delivery in densely populated areas National coverage is achieved through thirdparty, next-day delivery Distributions Distribution Center Headquarters National Distribution Center Professional Contractor Showroom Our nationwide distribution network helps attract National Accounts and serves as the logistics backbone for our growth initiatives 5

7 Industry Leader in Attractive End Markets $300 Billion MRO Market (1) Historical Addressable Market: Facilities Maintenance and Repair & Remodeling $247 BN $30 BN $23 BN New Addressable Market: Janitorial / Sanitation New Commercial and Residential Construction and Heavy Industrial Manufacturing Facilities maintenance and repair & remodeling sectors $53 billion addressable market opportunity Driven by less cyclical maintenance, repair and remodeling Negligible exposure to manufacturing; Competition based on product line breadth, product availability, service and price Highly fragmented Largely composed of small, local and regional companies Largest MRO distribution competitor less than 5% of the MRO market Targeted markets driven by less cyclical MRO expenditures (1) According to a U.S. Bancorp Piper Jaffray Research Report and encompasses the supply of a wide range of products, including plumbing and electrical supplies, hand-tools, janitorial supplies, safety equipment and many other categories. 6

8 Consistent Growth in Professional Contractor Market Home Improvement & Repair Expenditures ($ in billions) ($ in millions) $199 $215 $ % $94 $98 $107 $108 $115 $ % 6.8% $116 $122 $ % 7.2% $125 $131 $134 $134 $ % $173 $ % 12.2% 6.1% 4.3% 5.5% 5.1% ` 1.7% 0.1% 7.1% 3.1% 2.1% 8.3% 1.1% (4.3%) (6.7%) Total Expenditure % Change (YoY) Source: U.S. Census Bureau. Home improvement & repair expenditures include expenses for maintenance, repairs, additions, alterations and major replacements to residential properties. Home improvement and repair expenditures have increased in each of the last ten years and have only declined in two of the past 20 years more recent trends indicate a slower growth rate in 2006 and

9 Attractive Facilities Maintenance Market Trends Apartment Vacancy Rate vs. 10 yr Treasury Yield Steady Growth in Jan San Distribution 11% 10% Purchasing Managers Index 65 $23.1 US Jan San Industry ($ in BN) $25 9% 8% 60 $15.2 $16.7 $19.6 $21.1 $20 7% 55 $15 6% 50 5% $ % 3% 40 $5 2% 12/31/01 12/31/02 12/31/03 12/30/04 12/31/05 12/31/ $0 Rental Vacancy Rates 10-Year Treasury Yield US Jan San Industry PMI Source: FactSet Research Systems; U.S. Department of Commerce. Source: Institute for Supply Management; International Sanitary Supply Association. Declining vacancy rates leading to increased maintenance expenditures Jan San industry has demonstrated steady growth through economic cycles 8

10 Unique Business Model Focused on Customer Segmentation SEGMENT BRAND PRODUCTS / TARGETED END MARKETS PRIMARY SALES CHANNEL MRO products for multi-family housing Field sales reps Facilities Maintenance 63% of Sales Specialty plumbing and maintenance for institutional markets Field sales reps MRO products for multi-family, hospitality and institutional markets Telesales and direct marketing MRO products for professional contractors Telesales and direct marketing Professional Contractors 23% of Sales Security hardware products for professional locksmiths Electrical products for electrical contractors Telesales and direct marketing Telesales, direct marketing and manufacturers reps Specialty Distributors 14% of Sales MRO products for independent and cooperative retail hardware stores Electrical products for electrical distributors Telesales and direct marketing Telesales, direct marketing and manufacturers reps Interline s targeted brand approach results in deep penetration of markets served and allows the Company to offer varying levels of service and price 9

11 Targeted Market Segmentation Customer: Apartment Manager Service Model: Field Sales Reps and Same Day Delivery Customer: Service Model: Retail Hardware Store Telesales, Direct Marketing and Display Packaging (1) Customer: Service Model: Professional Contractor Telesales and Direct Marketing Interline packages products and services to meet the specific needs of its diverse customer groups resulting in best-in class profitability (1) Premier is one of Interline s private label product brands. 10

12 Scalable Operating Platform Features Common Logistics NDC facilitates private label strategy Regional distribution centers ship product for all brands Centralized inventory management system Transportation management Leveraged truck routing Common Marketing & Sales Resources Centralized management of all customer relationships Direct marketing production with offshore capabilities Proprietary IT provides deep customer analysis Common Operating Platform Facilities Maintenance Professional Contractors Specialty Distributors Scalable operating platform enables customer segmentation strategy and drives industry leading service levels and profitability 11

13 Agenda Investment Highlights Business Strategy AmSan Overview Financial Performance 12

14 Business Strategy Market penetration / sales force expansion Growth Initiatives National Account initiatives New product additions Expand private label program Disciplined acquisition strategy Operations Strong information technology and logistics platform drives operational improvements Continue to leverage scalable operating platform Consistent focus on working capital management Interline s organic growth plan and operating initiatives should drive significant earnings growth, ROIC improvement and cash flow generation 13

15 Key Growth Drivers Facilities Maintenance National Accounts Increase penetration beyond current ~20% of sales Transition key relationships toward supply chain services Supply Chain Management Aggressively market services to National Accounts Introduce service to institutional facilities markets Product Expansion Expand product offering into institutional markets AmSan will accelerate progress Professional Contractor Accelerate Barnett Brand Expansion Multi-channel approach in major metro areas Approach can be implemented in additional markets over next 2 years Yields significant incremental customer penetration New Product Introductions Electrical; leverage SunStar HVAC; continue growing private label HVAC product line Vendor Managed Inventory Increases customer penetration from 10% to 90% Specialty Distributor New Leadership Team in 2005 Integrated sales & marketing functions Multi-channel approach to target small MRO distributors New Product Strategies HVAC / water heaters Export Strategy Northern Mexico Management driving targeted growth initiatives 14

16 Multi-Family Market # Interline Units By Spend Per Unit in M 2.2M 0.7M $150 $130 $110 $90 $70 $50 $30 $10 Average Spend Per Unit 19% CAGR 21% CAGR $1 -$24 $25 - $99 $100+ IBI Units Avg. Spend/Unit - $100+ Avg. Spend/Unit - $25-$99 Interline will continue to take market share and grow organically by capitalizing on its national account and supply chain management capabilities 15

17 Institutional Market Addressable Institutional MRO Spend, By Category Total Estimated Market = $28B Plumbing 12% HVAC 6% Jan/San 34% Product Category Jan/San Total Est. MRO Purchases ($B) $ 9.5 ` Electrical $ 13.6 Plumbing $ 3.4 Electrical 48% HVAC $ 1.6 The institutional MRO market represents a large opportunity for Interline, which has less than a 1% share of this market today * Pembroke Consulting Estimate 16

18 Pro-Contractor Market Typical Annual Spend by Customer Type $ 500K Key Growth Strategies $ 5K $ 20K $ 50K Pro Center Geographic Expansion National Accounts Catalog Customers National Accounts Truck Management VMI Supply Chain Programs Truck Management Vendor-managed Inventory Interline s National Accounts and Supply Chain Programs are generating incremental sales 17

19 Proven Acquisition Strategy Strategic acquisition program focused on attractive businesses that can be leveraged on Interline s operating platform Preserve and maintain liquidity and capital structure Financial criteria: Strong sales growth opportunities, supported by solid market growth Clear path to operating synergies of 1x (purchase price multiple) in year 1 and an additional 1x upon full integration in year 2 Integration strategy: Obtain strategic operating synergies in year 1; integrated in year 2 Centralized finance, marketing, logistics and management functions Interline will continue to supplement organic growth with strategic acquisitions 18

20 Agenda Investment Highlights Business Strategy AmSan Overview Financial Performance 19

21 AmSan Overview Business Overview Products/Services: National distributor of janitorial-sanitary products and services in highly stable $23 billion industry End Market: Professional or contract cleaning, education, health care, government, retail, property management, industrial and others Employees: Over 900 Customers: 44,000; highly sticky customer base # Products: 40,000; strong exclusive brand capability Distribution: 41 locations; 25 stocking facilities End Market CAGR ( 97-04) Favorable End Market Growth Characteristics (2) 11.3% 8.3% 7.4% 9.6% 19% 19% 14% 14% 14% 12% 9% 7% Equipment and Parts 8% Janitorial 7% Specialty and Other 10% Sales By Product Type Food Service 3% Safety 2% Packaging 1% Paper 32% Liners 10% Re-dis 5% Government 9% Manufacturing 10% Chemicals 27% Sales By End Market Retail 4% Property Management 3% Education 19% Contract Cleaners 19% Contract Cleaners Educational Healthcare Government AmSan Sales Split (1) Adjusted for assets not being acquired. (2) ISSA Report on Sanitary Supply Distributor Sales (2004). End Market Sales Split Healthcare 14% Other 17% 20

22 Jan-San Expansion Opportunities IBI facility where AmSan has no presence Current AmSan location Interline has DCs in 23 cities where AmSan has no presence; consolidation offers a significant footprint expansion opportunity 21

23 AmSan Investment Thesis Leading National Distributor Largest independent distributor dedicated exclusively to the JanSan market #1 market share in many of its end markets and geographic regions Strong brand recognition and customer relationships; growing private label program Compelling Valuation 7.5x LTM EBITDA purchase multiple excluding synergies and tax benefits Efficient tax structuring results in tax benefit of approximately $15 million $4 million to $6 million of potential synergies Revenue Growth Opportunities Geographic expansion opportunity National and regional account opportunity Capitalize on cross-selling opportunity as AmSan and Interline target common end-markets Margin Expansion Opportunities Optimize AmSan s exclusive brand program Purchasing leverage via vendor consolidation, product standardization and terms alignment Centralize and transition AmSan s marketing and logistics operations 22

24 Agenda Investment Highlights Business Strategy AmSan Overview Financial Performance 23

25 Strong Historical Track Record Revenue Gross Margin ($ in millions) ($ in millions) $ % $ % $1, % $ % $ % $408.9 $325.6 $285.4 $112.3 $ % 38.2% 38.3% 38.1% 13.8% 38.0% 14.3% Note: Percentage reflects YOY revenue growth. Q Q Note: Percentage reflects gross margin. Q Q Adjusted EBITDA (1)(2) Adjusted Operating Income (1)(2) ($ in millions) $83.8 $96.6 $116.7 $24.2 $27.4 ($ in millions) $70.7 $83.0 $ % 11.3% 10.9% 10.8% 9.3% $20.6 $ % 9.7% 9.5% 9.2% 13.8% 7.9% 14.3% Note: Percentage reflects adjusted EBITDA margin. Q Q Note: Percentage reflects adjusted operating margin. Q Q Track record of consistent revenue, profitability and earnings growth (1) Adjusted EBITDA represents net income plus interest expense, change in fair value of interest rate swaps, loss on extinguishment of debt, additional compensation expense for forgiveness of shareholder loans and one-time bonuses that relate to financing transactions, provision for income taxes and depreciation and amortization. (2) Reconciliation to the comparable measures under GAAP is presented in the reconciliation section of this presentation. 24

26 Continued Strength in Recent Operating Results ($ in millions) Three Months Ended Y-o-Y Metric 3/31/06 3/30/07 Growth Revenue $ $ % Gross Profit $ 85.7 $ % GM% 38.1% 38.0% Adj. EBITDA (1) $ 24.2 $ % % Margin 10.8% 10.4% Adj. Op Inc $ 20.6 $ % % Margin 9.2% 7.9% EPS $ 0.26 $ % Achieved YOY Organic Daily Sales growth of 3.2% (1) Facilities Maintenance growth of 14.1% at the highest level in years Continuing to invest in our business Operating margins impacted by AmSan mix, continued investment spend, and incremental share based compensation Adjusted Pro Forma EPS Growth of 12% (1) Strong revenue and earnings growth combined with solid cash flow and sound business investment (1) Reconciliation to the comparable measures under GAAP is presented in the reconciliation section of this presentation. 25

27 Solid Free Cash Flow Generation Cash Flow From Operations Before Changes in Net Working Capital (1) Cash Flow Before Changes in Working Capital YOY Sales Growth 25.3% 31.5% 16.2% 14.5% $34.7 $29.6 $48.8 $68.6 $ % Q (-) Increase in NWC (1) Cash Provided By Operating Activites (1.6) 33.1 (31.0) (1.4) (10.0) 38.8 (38.7) (-) CAPEX Free Cash Flow (4.6) 28.5 (6.8) (8.2) (7.9) 30.9 (7.8) 22.1 (3.5) 28.5 Capex as a % of Sales 0.7% 0.9% 0.9% 0.7% 1.2% Strong cash flow generation over the cycle and minimal capex requirements (1) Net Working Capital includes trade receivables, inventory and accounts payable and excludes the impact of acquisitions. 26

28 Efficient Working Capital Management and Industry Leading Returns on Invested Capital Net Working Capital Days (1) ROIC % 20.0% % 18.0% 36.0% 16.0% 32.0% 14.0% Q % 12.0% Q1 07 LTM Period Ending ROIC Excluding (2) ROIC Including (3) Goodwill & Intangibles Goodwill & Intangibles Note: Graph above reflects average working capital metrics. (1) Net working capital days defined as average LTM trade receivables plus inventory less payables, all divided by LTM sales, then multiplied by 365. (2) Tangible ROIC defined as adjusted EBITDA divided by (average LTM NWC + average LTM fixed assets). (3) ROIC defined as adjusted EBITDA divided by (average LTM NWC + average LTM fixed assets + average LTM goodwill + average LTM intangibles). 27

29 Well Positioned Capital Structure ($ in millions) 3/30/07 Cash $ 34.9 Debt: Revolver $ - Term Loan(s) Notes Payable 3.3 Total Senior Debt $ Sr. Sub. Notes Total Debt $ Shareholders' Equity Total Capitalization $ LTM Adj. EBITDA (1) LTM Interest Expense 33.0 LTM CAPEX 9.8 Including our July 2006 acquisition of AmSan, our Pro Forma LTM EBITDA is approx. $126 million. (2) The priority order for our use of excess cash flow is as follows: 1. Organic growth initiatives and supportive working capital 2. Strategic acquisitions 3. Debt repayment Credit Ratios: Total Debt / Total Capitalization 55.7% Senior Debt / LTM Adj. EBITDA (1) 1.8x Total Debt / LTM Adj. EBITDA 3.5x Net Debt / LTM Adj. EBITDA (1) 3.2x Our comprehensive refinancing adds flexibility, extends maturities, reduces our cost of capital and positions us for future growth (1) Adjusted EBITDA represents net income plus interest expense, change in fair value of interest rate swaps, loss on extinguishment of debt, additional compensation expense for forgiveness of shareholder loans and one-time bonuses that relate to financing transactions, provision for income taxes and depreciation and amortization. (2) As AmSan was acquired in Q3 of 2006, Proforma LTM EBITDA includes unaudited AmSan EBITDA from the one quarter prior to the acquisition. 28

30 Investment Highlights Industry Leader in MRO Distribution Leading market positions in Facilities Maintenance and Pro Contractor markets National footprint, scale and operating model drive market leading positions Large and Attractive End Market Growth Management Driving Significant Growth Initiatives Unique Business Model and Scalable Platform Large and attractive end markets for MRO spend Facilities Maintenance outlook remains strong Depth of organic initiatives driving predictable growth performance Increasing opportunities in national accounts, market penetration, private label and strategic acquisitions Customer segmentation through multiple brands drives best in class profitability Highly integrated, leading IT and logistics platform creates significant efficiencies Growing Earnings and Cash Flow Generation Strong growth in EBITDA, efficient working capital management and low capex Proven track record of earnings growth and significant cash flow generation Highly Experienced Management Team Senior management averages 20+ years in distribution Core team of multi-functional senior managers together since

31 Reconciliations 30

32 Reconciliation: Adjusted EBITDA ($ in millions) For the 12 Months Ended Three Months Ended 12/31/04 12/30/05 12/29/06 3/31/06 3/30/07 Net Income (Loss) $ 18.1 $ 28.8 $ 31.2 $ 8.4 $ 9.4 % of Sales 2.4% 3.4% 2.9% 3.8% 3.2% Plus (Less): Interest expense, net $ 39.8 $ 25.2 $ 30.8 $ 6.9 $ 8.2 Provision for income taxes Depreciation and amortization Loss on extinguishment of debt Change in fair value of interest rate swaps (8.2) IPO/Secondary expenses Adjusted EBITDA(1) $ 83.8 $ 96.6 $ $ 24.2 $ 27.4 % of Sales 11.3% 11.3% 10.9% 10.8% 9.3% (1) Adjusted EBITDA is presented herein because we believe it to be relevant and useful information to our investors because it is used by our management to evaluate the operating performance of our business and compare our operating performance with that of our competitors. Management also uses Adjusted EBITDA for planning purposes, including the preparation of annual operating budgets, to determine appropriate levels of operating and capital investments. Adjusted EBITDA excludes certain items, including change in fair value of interest rate swaps and loss on extinguishment of debt, which we believe are not indicative of our core operating results. We therefore utilize Adjusted EBITDA as a useful alternative to net income as an indicator of our operating performance. However, Adjusted EBITDA is not a measure of financial performance under GAAP and Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as net income. While we believe that some of the items excluded from Adjusted EBITDA are not indicative of our core operating results, these items do impact our income statement, and management therefore utilizes Adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income and gross profit. 31

33 Reconciliation: Adjusted Operating Income ($ in millions) For the 12 Months Ended Three Months Ended 12/31/04 12/30/05 12/29/06 3/31/06 3/30/07 Revenue $ $ $ 1,067.6 $ $ Operating Income (GAAP) $ 61.5 $ 82.0 $ $ 20.6 $ 23.4 % Margin 8.3% 9.6% 9.5% 9.2% 7.9% IPO/Secondary Related Expenses (1) Adjusted Operating Income (2) $ 70.7 $ 83.0 $ $ 20.6 $ 23.4 % Margin 9.5% 9.7% 9.5% 9.2% 7.9% (1) Stock-based compensation expense is now being recognized on the P&L. IPO related expenses include additional compensation expense for forgiveness of shareholder loans and one-time bonuses. (2) Adjusted Operating Income is presented herein because we believe it to be relevant and useful information to our investors because it is used by our management to evaluate the operating performance of our business and compare our operating performance with that of our competitors. Adjusted Operating Income excludes certain items that relate to financing transactions and which we believe are not indicative of our core operating results. We therefore utilize Adjusted Operating Income as a useful alternative to net income as an indicator of our operating performance. However, Adjusted Operating Income is not a measure of financial performance under GAAP and Adjusted Operating Income should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as operating income. While we believe that the item excluded from Adjusted Operating Income is not indicative of our core operating results, this item does impact our income statement, and management therefore utilizes Adjusted Operating Income as an operating performance measure in conjunction with GAAP measures such as net income and gross profit. 32

34 Reconciliation: Return on Invested Capital ($ in millions) For the 12 Months Ended LTM 12/26/03 12/31/04 12/30/05 12/29/06 3/30/07 LTM Adjusted EBITDA $72.6 $83.8 $96.6 $116.7 $120.0 Invested Capital (LTM 5 QTR Averages) (+) Accounts receivable, trade (+) Inventory ( ) Accounts payable Avg. Net Working Capital $155.1 $175.7 $203.4 $241.5 $253.2 (+) Property and equipment Avg. Tangible Capital $186.9 $205.5 $232.5 $271.8 $284.1 (+) Goodwill (+) Other intangible assets, net Avg. Invested Capital $465.0 $496.2 $546.2 $665.7 $698.2 ROIC (1) 15.6% 16.9% 17.7% 17.5% 17.2% ROTC (1) 38.8% 40.8% 41.6% 42.9% 42.2% (1) Return on Invested Capital ( ROIC ) is presented herein because we believe it to be relevant and useful information to our investors because it is a measure utilized by our management to evaluate our operating performance given the capital we employ in our business. Management believes ROIC is a key operating metric because it is a measure of how the Company manages certain assets and liabilities in which management has direct control over. Management also uses ROIC for planning purposes, including the preparation of annual operating budgets, and to determine appropriate levels of operating and capital investments. ROIC is not a measure of financial performance under GAAP and ROIC should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP. Calculating ROIC with net income would not provide any meaningful results. Certain credit statistics that include Adjusted EBITDA were not calculated using net income because they would not provide any meaningful results. 33

35 Reconciliation: Adjusted Pro Forma EPS ($ in millions) For the 12 Months Ended Three Months Ended 12/31/04 12/30/05 12/29/06 3/31/06 3/30/07 Income before income taxes (GAAP) $ 29.7 $ 47.1 $ 50.7 $ 13.8 $ 15.5 ( ) Change in fair value of interest rate swaps (8.2) (+) Loss on early extinguishment of debt (+) Pro forma interest expense adjustment (1) (+) Additional expense for secondary offering (2) (+) Additional compensation expense (2) Adjusted pro forma income before income taxes $ 48.1 $ 58.9 $ 71.5 $ 13.8 $ 15.5 ( ) Provision for income taxes Adjusted pro forma net income $ 29.3 $ 36.3 $ 44.0 $ 8.4 $ 9.4 Fully-diluted shares outstanding Adjusted pro forma net income per share $ 0.91 $ 1.12 $ 1.34 $ 0.26 $ 0.29 % YOY Growth 25% 23% 20% 8% 12% (1) Pro forma interest expense adjustment reflects the estimated annual reduction in interest expense assuming the reduction of debt from IPO proceeds and subsequent elimination of associated amortization of deferred financing fees occurred at the beginning of each respective fiscal year. (2) Adjusted pro forma net income is presented herein because we believe it to be relevant and useful information to our investors because it is used by our management to evaluate the operating performance of our business and compare our operating performance with that of our competitors. Adjusted pro forma net income excludes certain items, including change in fair value of interest rate swaps, loss on extinguishment of debt and additional compensation expense for forgiveness of shareholder loans and one-time bonuses that relate to financing transactions, and which we believe are not indicative of our core operating results. However, adjusted pro forma net income is not a measure of financial performance under GAAP and adjusted pro forma net income should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as gross profit and operating income. While we believe that the items excluded from adjusted pro forma net income are not indicative of our core operating results, these items do impact our income statement, and management therefore utilizes adjusted pro forma net income as an operating performance measure in conjunction with GAAP measures such as gross profit and operating income. 34

36 Reconciliation: Daily Sales Growth ($ in millions) Q1 Q2 Q3 Q4 FY 05 Q1 Q2 Q3 Q4 FY 06 Net Sales $ $ $ $ $ $ $ $ $ $ 1,067.6 Less: Acquisition (1) (2) Organic Sales $ $ $ $ $ $ $ $ $ $ Daily Sales: Ship Days Average Daily Sales $ 3.0 $ 3.2 $ 3.6 $ 3.7 $ 3.4 $ 3.5 $ 3.7 $ 5.0 $ 4.8 $ 4.2 Average Organic Daily Sales $ 3.0 $ 3.2 $ 3.6 $ 3.7 $ 3.4 $ 3.3 $ 3.6 $ 3.9 $ 3.8 $ 3.6 Daily Sales Growth Rates: Average Daily Sales Growth 12.0% 9.9% 18.6% 23.1% 15.9% 16.1% 15.6% 39.1% 29.8% 25.8% Average Organic Daily Sales Growth 12.0% 9.9% 12.4% 10.9% 11.2% 10.5% 11.8% 8.9% 2.6% 8.3% ($ in millions) Q1 Q2 Q3 Q4 FY 06 Q1 Q2 Q3 Q4 FY 07 Net Sales $ $ $ $ $ 1,067.6 $ $ - $ - $ - $ - Less: Acquisition (2) Organic Sales $ $ $ $ $ 1,067.6 $ $ - $ - $ - $ - Daily Sales: Ship Days Average Daily Sales $ 3.5 $ 3.7 $ 5.0 $ 4.8 $ 4.2 $ 4.6 $ - $ - $ - $ - Average Organic Daily Sales $ 3.5 $ 3.7 $ 5.0 $ 4.8 $ 4.2 $ 3.6 $ - $ - $ - $ - Daily Sales Growth Rates: Average Daily Sales Growth 16.1% 15.6% 39.1% 29.8% 25.8% 31.5% Average Organic Daily Sales Growth 10.5% 11.8% 8.9% 2.6% 8.3% 3.2% (1) Copperfield was acquired in July (2) AmSan was acquired in July

37 36