Industrial Distribution Group Reports Second Quarter 2005 Results
Increases Gross and Operating Margins ATLANTA, Aug. 2
/PRNewswire-FirstCall/ -- Industrial Distribution Group, Inc.
(NASDAQ:IDGR) today reported financial results for the second
quarter ended June 30, 2005. Second quarter 2005 revenue was $135.6
million, up $1.7 million or 1.3% compared to $133.9 million for the
comparable period of 2004. The Company's net earnings for the
second quarter of 2005 increased 12.2% to $1.6 million or $0.16 per
diluted share compared to net earnings of $1.4 million or $0.14 per
diluted share as corrected for the comparable period of the prior
year. For the six months ended June 30, 2005, revenue was $273.6
million compared to $260.1 million for the first six months of the
prior year. The Company's 2005 year-to-date net earnings were $2.8
million or $0.29 per diluted share compared to net earnings of $2.4
million or $0.25 per diluted share for the six months ended June
30, 2004. For the second quarter, revenues from Flexible
Procurement Solutions(TM) (FPS), IDG's services-based supply
offerings including storeroom management, were $75.8 million, an
increase of $1.8 million or 2.5% as compared to the comparable
period in 2004. Revenues from FPS comprised 55.9% of IDG's total
sales for the second quarter of 2005 compared to 55.3% for the
comparable period in 2004. For the quarter ended June 30, 2005, the
Company was affected by the turnover of four storeroom management
customers in late 2004. This turnover was primarily driven by
non-renewal of contracts that no longer fit the Company's
profitability parameters and impacted year-to-date revenue by $11.4
million. Year-to-date, FPS revenues increased $9.0 million or 6.4%
compared to the prior year. At June 30, 2005 the Company had 339
total FPS sites, including 94 storeroom management arrangements, a
net increase of 11 FPS sites since June 30, 2004. During the second
quarter, General MROP sales decreased $0.1 million or 0.2% to $59.8
million from $59.9 million in the prior year quarter, primarily as
a result of stagnant economic conditions in the automotive
industry. Year- to-date, General MROP sales were $122.9 million
representing an increase of $4.5 million from $118.4 million, or
3.8%, of such sales for the comparable period of the prior year.
This improvement in General MROP was primarily due to increased
volume and market share at existing accounts. The Company was
affected more significantly in its Northeast Region, where sales
declined $2.4 million or 5.7% for the second quarter, due to the
reasons noted above. The remainder of the Company's Regions
experienced sales growth of 4.5% as compared to the second quarter
of 2004. "During the second quarter, IDG achieved important
objectives related to increasing gross and operating margins, both
sequentially and on a year over year basis," said Andrew B.
Shearer, IDG's president and chief executive officer. "This success
was a direct result of both the pricing practices we put in place
last quarter and the variable cost benefits inherent in our
services model. We are pleased with the progress we made in these
areas, as well as IDG's success in posting double-digit earnings
growth and further strengthening our balance sheet. While we are
not satisfied with our sales growth, we are confident that our
decision to focus on contracts that meet strict profitability
standards will serve the Company and shareholders well in the
future. Our recent success signing such contracts with leading
manufacturers in diverse industries, combined with the demand we
anticipate for both our storeroom management and mid-market
solutions, gives us confidence in our ability to both accelerate
sales growth and enhance our profit potential." Gross margin for
the second quarter of 2005 was 22.0% compared to 21.7% for the
comparable period of 2004, an improvement of 30 basis points, and a
100 basis point improvement over the first quarter. Gross margin
improvements during the second quarter reflect the Company's
continued focus on gross margin and company-wide efforts to improve
pricing, in response to price increases from the Company's vendors.
These improvements in the second quarter partially offset margin
decreases that occurred in the first quarter. Year-to-date, gross
margin decreased 40 basis points as compared to the first six
months of the prior year, from 21.9% to 21.5%. Selling, general and
administrative expenses increased to $26.8 million in the second
quarter compared to $26.3 million in the prior year period, an
increase of 1.8%. The increase was due to an increase in salaries
and benefits of $0.4 million as a result of improved profitability,
as well as the higher cost of healthcare. Professional fees
increased $0.3 million related to management of the Company's
compliance efforts for Section 404 of the Sarbanes-Oxley Act.
Partially offsetting these increases was an improvement in bad debt
expense of $0.4 million during the quarter due to improved
collections. Year-to-date, SG&A increased $1.1 million or 2.2%
to $53.3 million as compared to $52.2 million for the six months
ended June 30, 2004. Operating income was 2.2% of revenues for the
second quarter of 2005, an increase of 20 basis points over the
same period in the prior year and an increase of 50 basis points
over the first quarter. Year-to-date, operating income increased 20
basis points from 1.8% of revenues for the six months ended June
30, 2004 to 2.0% of revenues for the current year. IDG continued to
manage its working capital during the second quarter. As of June
30, 2005, the Company's long-term debt declined to $19.2 million
compared to $30.1 million one year ago. "IDG is committed to
building upon the progress we made improving both gross and
operating margins and will maintain a steadfast focus on achieving
these important objectives for the Company and its shareholders,"
stated Shearer. "Concurrently, we will continue to roll-out our
value added services to both new and existing customers, with
growth and profitability at the forefront of our decision making.
IDG will also continue to concentrate on maintaining a strong
balance sheet, which has served the Company well in the past and
remains a priority for the future. With significant financial
flexibility, a favorable forward-looking revenue growth and
improved margin outlook, IDG is in a strong position to continue to
create value for our shareholders." Conference Call Information
IDG's management will host a conference call on August 2, 2005 at
9:00 a.m. eastern time to discuss the Company's second quarter
results. To access this call, please dial (800) 497-8785. The
conference ID number is 7989226. A replay of the call may be
accessed by dialing (800) 642-1687 and providing the conference ID
number 7989226. The replay will be available from 12:00 p.m.
eastern time on August 2, 2005, to 11:59 p.m. eastern time on
August 9, 2005. The conference call will also be webcast live on
the Company's website, http://www.idglink.com/, and will be
available through August 9, 2005. About IDG Industrial Distribution
Group, Inc. (NASDAQ:IDGR) is a nationwide products and services
company that creates a competitive advantage for customers. The
Company provides outsourced maintenance, repair, operating and
production (MROP) procurement, management and application expertise
through an array of value-added services and other arrangements
that include its Flexible Procurement Solutions(TM) (FPS) service
offerings as well as direct general MROP sales through traditional
distribution channels. The Company's FPS service offerings
emphasize and utilize IDG's specialized knowledge in product
applications and process improvements to deliver out-sourced
solutions and documented cost savings for customers. Through these
arrangements, IDG distributes a full line of MROP products,
specializing in cutting tools, abrasives, hand and power tools,
coolants, lubricants, adhesives and machine tools, and IDG can
supply at a competitive price virtually any other MROP product that
its customers may require. IDG has four operating divisions
organized into regional responsibility areas. IDG serves over
20,000 active customers representing a diverse group of large and
mid-sized national and international corporations including
Honeywell International, Inc., The Boeing Company, Arvin Meritor,
Borg-Warner Inc., Pentair, Inc., as well as many local and regional
businesses. The company currently has a presence in 43 of the top
75 manufacturing markets in the United States. Flexible Procurement
Solutions(TM) IDG's Flexible Procurement Solutions(TM) (FPS) offer
customers an answer for the entire supply chain management process
for MROP materials. IDG recognizes that managing MROP materials is
a costly, time-consuming function for the industrial marketplace.
FPS services merge state-of-the-art technology with the expertise
of IDG personnel to deliver supply chain management services. In a
fully integrated supply relationship, IDG associates work directly
on-site at a customer's location to provide documented cost savings
from product application innovations, continuous process
improvements, more effective management of inventory, and many
other areas, all focused on reducing customer costs. Best of all,
these cost savings are quantified and documented and most go
directly to the customer's bottom line. Safe Harbor In addition to
the historical information contained herein, certain matters set
forth in this news release are forward-looking statements,
including but not limited to statements relating to expected
operating results. Industrial Distribution Group, Inc. warns that
caution should be taken in relying upon any forward-looking
statements in this release, as they involve a number of known and
unknown risks, uncertainties, and other factors including
heightened national security risks including acts of terrorism and
potential for war, that may cause actual results, performance, or
achievements of Industrial Distribution Group, Inc. to differ
materially from any such statements, including the risks and
uncertainties discussed in the Company's Forms 10-K, Forms 10-Q,
filed by the Company under the caption "Certain Factors Affecting
Forward Looking Statements," or any 8-K filed or furnished by the
Company each of which is incorporated herein by reference. For
Additional Information, Contact: Jack P. Healey Senior Vice
President and Chief Financial Officer Industrial Distribution
Group, Inc. (404)949-2010 http://www.idglink.com/ INDUSTRIAL
DISTRIBUTION GROUP, INC. Statements of Income (in thousands, except
share data) (unaudited) Three Months Ended Six Months Ended June
30, June 30, 2005 2004 2005 2004 (as (as corrected corrected - Note
1) - Note 1) Net Sales $135,618 $133,926 $273,566 $260,067 Cost of
Sales 105,823 104,908 214,820 203,147 Gross Profit 29,795 29,018
58,746 56,920 Selling, General & Administrative Expenses 26,791
26,315 53,344 52,208 Income from Operations 3,004 2,703 5,402 4,712
Interest Expense 483 418 966 822 Interest Income (58) (3) (116)
(18) Other Expense (Income), net 0 23 1 (1) Income Before Income
Taxes 2,579 2,265 4,551 3,909 Provision for Income Taxes 1,013 869
1,760 1,500 Net Earnings $1,566 $1,396 $2,791 $2,409 Basic earnings
per common share $0.17 $0.15 $0.30 $0.26 Diluted earnings per
common share $0.16 $0.14 $0.29 $0.25 Basic weighted average shares
outstanding 9,408,720 9,309,919 9,419,810 9,285,016 Diluted
weighted average shares outstanding 9,772,034 9,685,463 9,782,912
9,631,110 Note 1: In connection with preparing its financial
statements for fiscal year 2004, the Company restated certain of
its previous financial results to correct an error related to the
recording of certain accounts payable in prior periods. The
correction increased the Company's accounts payable and cost of
sales previously reported by $0.2 million and $0.5 million for the
three and six months ended June 30, 2004, respectively. The Company
also made correcting adjustments to its depreciation expense in
order for prior periods to be consistent with the Company's
property and equipment accounting policies, which resulted in a
reduction of depreciation expense and an increase of net property
and equipment previously reported by less than $0.1 million for
both the three and six months ended June 30, 2004, respectively.
These corrections in the aggregate reduced the Company's previously
reported net income by $0.1 million, or $0.01 per diluted share for
the three months ended June 30, 2004 and by $0.3 million, or $0.02
per diluted share for the six months ended June 30, 2004.
INDUSTRIAL DISTRIBUTION GROUP, INC. Condensed Balance Sheets (in
thousands) ASSETS June 30, December 31, 2005 2004 (unaudited) Total
Current Assets $136,329 $135,088 Property and Equipment, net 4,876
7,277 Intangible and Other Assets, net 3,523 3,697 TOTAL ASSETS
$144,728 $146,062 LIABILITIES AND SHAREHOLDERS' EQUITY Total
Current Liabilities $56,452 $57,866 Long-Term Debt 19,196 22,085
Other Long-Term Liabilities 1,278 1,328 Total Liabilities 76,926
81,279 Total Shareholders' Equity 67,802 64,783 TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $144,728 $146,062 DATASOURCE: Industrial
Distribution Group, Inc. CONTACT: Jack P. Healey, Senior Vice
President and Chief Financial Officer of Industrial Distribution
Group, Inc., +1-404-949-2010 Web site: http://www.idglink.com/
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