INDUSTRIAL DISTRIBUTION GROUP, INC.
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
OR
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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 001-13195
INDUSTRIAL DISTRIBUTION GROUP, INC.
(Exact name of registrant as specified in its charter)
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| Delaware
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58-2299339 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
950 East Paces Ferry Road, Suite 1575 Atlanta, Georgia 30326
(Address of principal executive offices and zip code)
(404) 949-2100
(Registrant’s telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes þ No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date:
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| Class
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Outstanding at July 15, 2005 |
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| Common Stock, $.01 par value
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9,524,423 |
INDUSTRIAL DISTRIBUTION GROUP, INC.
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
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JUNE 30, |
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DECEMBER 31, |
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2005 |
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2004 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
1,058 |
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$ |
3,164 |
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Accounts receivable, net |
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67,188 |
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64,582 |
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Inventory, net |
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56,797 |
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56,835 |
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Deferred tax assets |
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4,508 |
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4,363 |
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Prepaid and other current assets |
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6,778 |
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6,144 |
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Total current assets |
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136,329 |
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135,088 |
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PROPERTY AND EQUIPMENT, NET |
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4,876 |
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7,277 |
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INTANGIBLE ASSETS, NET |
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222 |
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243 |
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DEFERRED TAX ASSETS |
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2,297 |
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2,463 |
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OTHER ASSETS |
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1,004 |
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991 |
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Total assets |
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$ |
144,728 |
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$ |
146,062 |
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LIABILITIES & STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Current portion of long-term debt |
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$ |
200 |
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$ |
196 |
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Accounts payable |
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46,448 |
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47,960 |
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Accrued compensation |
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2,169 |
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4,095 |
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Other accrued liabilities |
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7,635 |
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5,615 |
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Total current liabilities |
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56,452 |
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57,866 |
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LONG-TERM DEBT, NET OF CURRENT PORTION |
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19,196 |
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22,085 |
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OTHER LONG-TERM LIABILITIES |
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1,278 |
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1,328 |
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Total liabilities |
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76,926 |
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81,279 |
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COMMITMENTS AND CONTINGENCIES (NOTE 8) |
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STOCKHOLDERS’ EQUITY: |
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Preferred stock, $0.10 par value per share;
10,000,000 shares authorized, no shares
issued or outstanding in 2005 and 2004 |
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0 |
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0 |
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Common stock, par value $0.01 per share,
50,000,000 shares authorized; 9,418,504
shares issued and outstanding in 2005;
9,343,850 shares issued and outstanding in
2004 |
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94 |
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93 |
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Additional paid-in capital |
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101,113 |
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100,700 |
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Unearned compensation |
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(591 |
) |
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(405 |
) |
Accumulated deficit |
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(32,814 |
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(35,605 |
) |
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Total stockholders’ equity |
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67,802 |
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64,783 |
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Total liabilities and stockholders’ equity |
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$ |
144,728 |
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$ |
146,062 |
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The accompanying notes are an integral part of these consolidated financial statements.
3
INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
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THREE MONTHS ENDED |
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JUNE 30, |
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2005 |
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2004 |
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(As restated – |
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see Note 1) |
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NET SALES |
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$ |
135,618 |
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$ |
133,926 |
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COST OF SALES |
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105,823 |
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104,908 |
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Gross profit |
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29,795 |
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29,018 |
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SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES |
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26,791 |
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26,315 |
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Operating income |
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3,004 |
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2,703 |
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INTEREST EXPENSE |
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483 |
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418 |
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INTEREST INCOME |
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(58 |
) |
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(3 |
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OTHER EXPENSE (INCOME), net |
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0 |
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23 |
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EARNINGS BEFORE INCOME TAXES |
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2,579 |
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2,265 |
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PROVISION FOR INCOME TAXES |
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1,013 |
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869 |
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NET EARNINGS |
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$ |
1,566 |
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$ |
1,396 |
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BASIC EARNINGS PER COMMON SHARE |
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$ |
0.17 |
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$ |
0.15 |
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DILUTED EARNINGS PER COMMON SHARE |
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$ |
0.16 |
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$ |
0.14 |
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WEIGHTED AVERAGE SHARES: |
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Basic |
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9,408,720 |
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9,309,919 |
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Diluted |
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9,772,034 |
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9,685,463 |
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The accompanying notes are an integral part of these consolidated financial statements.
4
INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
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SIX MONTHS ENDED |
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JUNE 30, |
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2005 |
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2004 |
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(As restated – |
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see Note 1) |
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NET SALES |
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$ |
273,566 |
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$ |
260,067 |
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COST OF SALES |
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214,820 |
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203,147 |
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Gross profit |
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58,746 |
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56,920 |
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SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES |
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53,344 |
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52,208 |
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Operating income |
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5,402 |
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|
4,712 |
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INTEREST EXPENSE |
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966 |
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|
822 |
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INTEREST INCOME |
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(116 |
) |
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(18 |
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OTHER EXPENSE (INCOME), net |
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1 |
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(1 |
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EARNINGS BEFORE INCOME TAXES |
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4,551 |
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3,909 |
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PROVISION FOR INCOME TAXES |
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1,760 |
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1,500 |
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NET EARNINGS |
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$ |
2,791 |
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$ |
2,409 |
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BASIC EARNINGS PER COMMON SHARE |
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$ |
0.30 |
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$ |
0.26 |
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DILUTED EARNINGS PER COMMON SHARE |
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$ |
0.29 |
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$ |
0.25 |
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WEIGHTED AVERAGE SHARES: |
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Basic |
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9,419,810 |
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9,285,016 |
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Diluted |
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9,782,912 |
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9,631,110 |
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The accompanying notes are an integral part of these consolidated financial statements.
5
INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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SIX MONTHS ENDED |
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JUNE 30, |
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2005 |
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2004 |
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(As restated – |
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see Note 1) |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net earnings |
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$ |
2,791 |
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$ |
2,409 |
|
Adjustments to reconcile net earnings to net cash used in by operating activities: |
|
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Depreciation and amortization |
|
|
639 |
|
|
|
514 |
|
Gain on sale of assets |
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(408 |
) |
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(39 |
) |
Amortization of unearned compensation |
|
|
149 |
|
|
|
36 |
|
Deferred taxes |
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21 |
|
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(106 |
) |
Income tax benefit of stock options exercised |
|
|
100 |
|
|
|
134 |
|
Changes in operating assets and liabilities: |
|
|
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|
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Accounts receivable, net |
|
|
(2,606 |
) |
|
|
(13,770 |
) |
Inventories, net |
|
|
38 |
|
|
|
295 |
|
Prepaid and other assets |
|
|
(522 |
) |
|
|
(764 |
) |
Accounts payable |
|
|
(1,512 |
) |
|
|
7,773 |
|
Accrued compensation |
|
|
(1,926 |
) |
|
|
253 |
|
Other accrued liabilities |
|
|
1,970 |
|
|
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(600 |
) |
|
|
|
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Total adjustments |
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|
(4,057 |
) |
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|
(6,274 |
) |
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Net cash used in operating activities |
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(1,266 |
) |
|
|
(3,865 |
) |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property and equipment, net |
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(55 |
) |
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|
(299 |
) |
Proceeds from the sale of property and equipment |
|
|
2,246 |
|
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|
101 |
|
|
|
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Net cash provided by (used in) investing activities |
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|
2,191 |
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(198 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from issuance of common stock, net of issuance costs |
|
|
97 |
|
|
|
427 |
|
Repurchase of common stock |
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(118 |
) |
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|
0 |
|
Repayments on revolving credit facility |
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(63,825 |
) |
|
|
(56,285 |
) |
Borrowings on revolving credit facility |
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|
61,000 |
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|
|
60,060 |
|
Payments for deferred loan costs |
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|
(125 |
) |
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|
0 |
|
Short-term debt borrowings |
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|
4 |
|
|
|
5 |
|
Long-term debt repayments |
|
|
(64 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(3,031 |
) |
|
|
4,154 |
|
|
|
|
|
|
|
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
(2,106 |
) |
|
|
91 |
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
3,164 |
|
|
|
337 |
|
|
|
|
|
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CASH AND CASH EQUIVALENTS, end of period |
|
$ |
1,058 |
|
|
$ |
428 |
|
|
|
|
|
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Supplemental Disclosures: |
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Interest paid |
|
$ |
536 |
|
|
$ |
594 |
|
|
|
|
|
|
|
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Income taxes paid |
|
$ |
1,069 |
|
|
$ |
3,159 |
|
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|
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The accompanying notes are an integral part of these consolidated financial statements.
6
INDUSTRIAL DISTRIBUTION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — JUNE 30, 2005 (Unaudited)
Industrial Distribution Group, Inc. (“IDG” or the “Company”), a Delaware corporation, was formed on
February 12, 1997 to create a nationwide supplier of cost-effective, Flexible Procurement Solutions
™ (“FPS”) for manufacturers and other users of maintenance, repair, operating, and production
(“MROP”) products. The Company conducts business in all 50 states and two foreign countries,
providing expertise in the procurement, management, and application of MROP products to a wide
range of industries.
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements are prepared pursuant to the
Securities and Exchange Commission’s rules and regulations for reporting on Form 10-Q. Accordingly,
certain information and footnotes required by U. S. generally accepted accounting principles for
complete financial statements are not included herein. The Company believes all adjustments
necessary for a fair presentation of these interim statements have been included and are of a
normal and recurring nature.
These interim statements should be read in conjunction with the Company’s financial statements and
notes thereto, included in its Annual Report on Form 10-K, for the fiscal year ended December 31,
2004.
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.
2. FUTURE ADOPTION OF NEW ACCOUNTING STANDARDS
In June 2005, the Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) issued
EITF 05-06, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease
Inception or Acquired in a Business Combination,” which addresses the amortization period for
leasehold improvements in operating leases that are either (a) purchased subsequent to the
inception of the lease or (b) acquired in a business combination. This Issue has been considered
by the Company and will have no material impact on the financial statements.
The Company adopted the fair-value-based method of accounting for share-based payments effective
January 1, 2003 using the prospective method described in Statement of Financial Accounting
Standards (“SFAS”) No. 148 , “Accounting for Stock-Based Compensation-Transition and Disclosure.”
Currently, the Company uses the Black-Scholes-Merton formula to estimate the value of stock options
granted to employees and expects to continue to use this acceptable option valuation model upon the
required adoption of the revision of SFAS No. 123 “Accounting for Stock-Based Compensation.” The
effective date of SFAS No. 123R is January 1, 2006, for calendar year companies. Because SFAS No.
123R must be applied not only to new awards but to previously granted awards that are not fully
vested on the effective date, and because the Company adopted SFAS No. 123 “Accounting for
Stock-Based Compensation” using the prospective transition method (which applied only to awards
granted, modified or settled after the adoption date), compensation cost for some previously
granted awards that were not recognized under SFAS No. 123 may be recognized under SFAS No. 123R.
However, had the Company adopted SFAS No. 123R in prior periods, the impact of that standard would
have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net
earnings per common share in Note 6 to the Company’s consolidated financial statements. SFAS No.
123R also requires the benefits of tax deductions in excess of recognized compensation cost to be
reported as a financing cash flow, rather than as an operating cash flow as required under
7
current literature. This requirement will reduce net operating cash flows and increase net
financing cash flows in periods after adoption. While the Company cannot estimate what those
amounts will be in the future (because they depend on, among other things, when employees exercise
stock options), the amount of operating cash flows recognized for such excess tax deductions were
$0.1 million for the six months ended 2005 and 2004.
3. SALE OF PROPERTY
During the first quarter, the Company sold a property, located in Greensboro, NC, in a continued
effort to consolidate warehouse facilities, improve logistic efficiencies and reduce assets. The
Greensboro property sold for $2.2 million, net of closing costs. The gain associated with this sale
was $0.4 million and is classified as a component of selling, general, and administrative expenses.
There are no relocation or severance costs associated with this sale of property. This sale is part
of the Company’s facility rationalization plan announced in 2002.
4. CREDIT FACILITY
In December 2000, the Company entered into a $100.0 million revolving credit facility with a five
financial institution syndicate. On May 28, 2003, the Company amended this agreement to extend it
to May 28, 2006. The agreement contains a first security interest in the assets of the Company. The
agreement provides that the facility may be used for operations and acquisitions, and provides $5.0
million for swinglines and $10.0 million for letters of credit. Amounts outstanding under the
credit facility bear interest at either the lead bank’s corporate rate or LIBOR, as selected by the
Company from time to time, plus applicable margins. At June 30, 2005 and December 31, 2004, the
daily interest rates were 5.4% and 4.7%, respectively. There is an annual commitment fee on the
unused portion of the facility equal to between 25 and 37.5 basis points of the average daily
unused portion of the aggregate commitment depending on the indebtedness to adjusted EBITDA ratio,
as defined.
On May 4, 2005, the Company signed a letter of intent with its existing syndicate to amend its
Credit Facility; the agreement was signed on July 18, 2005 and will provide funding through July
18, 2010. Accordingly, obligations on this facility are classified as long-term on the
accompanying consolidated balance sheet as of June 30, 2005. The amended agreement provides a
$75.0 million credit facility with an accordion option enabling the Company to expand the facility
to $110.0 million. The annual commitment fee on the unused portion of the amended facility is 25
basis points of the average daily unused portion of the greater of $75.0 million or the total
commitment. Amounts outstanding under the amended credit facility bear interest at either the lead
bank’s corporate rate or LIBOR, as selected by the Company from time to time, plus applicable
margins. The balance of deferred loan costs associated with the existing credit facility at July
18, 2005 was $0.2 million and will be capitalized and amortized over the term of the agreement in
addition to other incremental direct costs associated with obtaining the amended credit facility.
The amounts outstanding under the facility at June 30, 2005 and December 31, 2004 were $18.9
million and $21.7 million, respectively, which have been classified as long-term liabilities in the
consolidated balance sheets. Additionally, the Company had outstanding letters of credit of $2.1
million under the facility at June 30, 2005 and December 31, 2004. The current revolving credit
facility contains various covenants pertaining to the maintenance of certain financial ratios.
These covenants include requirements for fixed charge coverage, net worth, and capital
expenditures, among other restrictions. The covenants also prohibit the payment of cash dividends.
The Company was in compliance with these covenants as of June 30, 2005 and December 31, 2004. The
amended credit facility does not require financial covenants to be met unless monthly average
excess availability under the facility falls below $15.0 million. In such case, the amended credit
facility contains a requirement for fixed charge coverage.
5. CAPITAL STOCK
During the respective three month periods ended June 30, 2005 and 2004, the Company issued 16,434
and 17,834 shares of its common stock through its employee stock purchase plan and issued 36,486
and 61,823 shares of its common stock pursuant to the exercise of options. For the six month
periods ended June 30, 2004 and 2005, the Company issued 27,151 and 39,731 shares of its common
stock through its employee stock purchase plan and issued 41,803 and 68,769 shares of its common
stock pursuant to the exercise of options.
8
Options are included in the computation of diluted earnings per share (“EPS”) where the options’
exercise price is less than the average market price of the common shares during the period. The
number of options outstanding during the three months ended June 30, 2005 and 2004 had a dilutive
effect of 363,314 and 375,544 shares, respectively, to the weighted average common shares
outstanding. The number of options outstanding during the six months ended June 30, 2005 and 2004
had a dilutive effect of 363,102 and 346,094 shares, respectively, to the weighted average common
shares outstanding. During the three months ended June 30, 2005 and 2004, options where the
exercise price exceeded the average market price of the common shares totaled 57,095 and 58,275,
respectively. During the six months ended June 30, 2005 and 2004, options where the exercise price
exceeded the average market price of the common shares totaled 57,095 and 69,425, respectively.
The Company’s board of directors approved, on February 23, 2005, a program for the Company to
repurchase up to $5.0 million of its outstanding common shares over the next 24 months. During the
three months ended June 30, 2005, the Company repurchased 41,000 shares for an average price per
share of $8.28. During the six months ended June 30, 2005 the Company repurchased 54,300 shares for
an average price per share of $8.43.
6. STOCK BASED COMPENSATION
The Company has several stock-based compensation plans, which are described in Note 8 — Capital
Stock in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K
for the fiscal year 2004. Effective January 1, 2003, the Company adopted the fair value recognition
provisions of SFAS No. 123 using the prospective method of adoption under SFAS No. 148, which
recognition provisions have been applied to all employee awards granted, modified, or settled after
January 1, 2003.
The expense related to stock-based compensation included in the determination of net earnings for
2005 and 2004 are less than would have been recognized if the fair value method had been
applied to all awards granted after the original effective date of SFAS No. 123. If the Company had
elected to adopt the fair value recognition provisions of SFAS No. 123 as of its original effective
date, pro forma net earnings and diluted net earnings per share would be as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
| |
|
|
|
|
|
(As restated – |
|
|
|
|
|
|
(As restated – |
|
| |
|
|
|
|
|
see Note 1) |
|
|
|
|
|
|
see Note 1) |
|
Net earnings as reported |
|
$ |
1,566 |
|
|
$ |
1,396 |
|
|
$ |
2,791 |
|
|
$ |
2,409 |
|
Add: Total stock-based
compensation expense included in
the determination of net earnings
as reported, net of tax |
|
|
105 |
|
|
|
42 |
|
|
|
192 |
|
|
|
89 |
|
Deduct: Total stock-based
compensation expense determined
under fair-value based method for
all awards, net of tax |
|
|
129 |
|
|
|
101 |
|
|
|
262 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings |
|
$ |
1,542 |
|
|
$ |
1,337 |
|
|
$ |
2,721 |
|
|
$ |
2,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.17 |
|
|
$ |
0.15 |
|
|
$ |
0.30 |
|
|
$ |
0.26 |
|
Pro forma |
|
$ |
0.16 |
|
|
$ |
0.14 |
|
|
$ |
0.29 |
|
|
$ |
0.25 |
|
Diluted earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.16 |
|
|
$ |
0.14 |
|
|
$ |
0.29 |
|
|
$ |
0.25 |
|
Pro forma |
|
$ |
0.16 |
|
|
$ |
0.14 |
|
|
$ |
0.28 |
|
|
$ |
0.24 |
|
7. DEFERRED TAXES
The Company’s net deferred tax assets totaled approximately $6.8 million at June 30, 2005 and
December 31, 2004, and are subject to periodic recoverability assessments. The realization of the
Company’s deferred tax assets is principally dependent upon the Company being able to generate
sufficient future taxable income in certain tax jurisdictions. Factors used to assess the
likelihood of realization are the Company’s forecast of future taxable income (which is based upon
estimates and assumptions) and available tax planning strategies that could be implemented to
realize the net deferred tax assets. On the basis of the Company’s operating results and
projections for future taxable income, management believes it is more likely than not that future
operations will generate sufficient taxable income
9
to realize the deferred tax assets. The valuation allowance for net deferred tax assets was $0.6
million as of June 30, 2005 and December 31, 2004. The valuation allowance for deferred tax assets
at June 30, 2005 is primarily for state net operating loss carryforwards for which the Company
believes sufficient taxable income will not be realized prior to expiration.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and legal actions, which arise in the ordinary course of
business. The Company believes that the ultimate resolution of such matters will not have a
material adverse effect on the Company’s financial position or results of operations.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is based upon our historical financial results. In this discussion, most
percentages and dollar amounts have been rounded to aid presentation; as a result, all such figures
are approximations. References to such approximations have generally been omitted.
This discussion may contain certain forward-looking statements concerning our operations,
performance, and financial condition, including, in particular, the likelihood of our success in
developing and expanding our business. These statements are based upon a number of assumptions and
estimates that are inherently subject to significant uncertainties and contingencies, many of which
are beyond our control. Actual results may differ materially from those expressed or implied by
such forward-looking statements. Factors that could cause actual results to differ, include but are
not limited to our ability to compete successfully in the highly competitive and diverse MROP
markets, the impact of dedicating significant resources to our Flexible Procurement Solutions™
(“FPS”) program, the availability of key personnel for employment by us, our reliance on the
expertise of our senior management, our reliance on regional information systems, the operations
levels of our customers, our ability to source products and to pass vendor price increases to our
customers, our exposure to foreign currency fluctuations, different business cultures and
international laws and regulations, our compliance with requirements of Sarbanes-Oxley Act of 2002
relating to internal controls over financial reporting, and other factors discussed in more detail
under Item 1—Business of our Annual Report on Form 10-K for fiscal year 2004.
In connection with the preparation of 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. 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.
Our discussions below in this Item 2 are based upon the more detailed discussions about our
business, operations and financial condition included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2004, under Item 7. Our discussions here focus on our results during
or as of the three-month and six-month periods ended June 30, 2005, and the comparable period of
2004 for comparison purposes, and, to the extent applicable, any material changes from the
information discussed in that Form 10-K or other important intervening developments or information
since that time. These discussions should be read in conjunction with that Form 10-K for more
detailed and background information.
10
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2005 AND 2004
The following table sets forth a summary of our operating data and shows such data as a
percentage of net sales for the periods indicated (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED JUNE 30, |
|
| |
|
2005 |
|
|
2004 |
|
| |
|
|
|
|
|
|
|
|
|
(As restated - see Note 1) |
|
Net Sales |
|
$ |
135,618 |
|
|
|
100.0 |
% |
|
$ |
133,926 |
|
|
|
100.0 |
% |
Cost of Sales |
|
|
105,823 |
|
|
|
78.0 |
|
|
|
104,908 |
|
|
|
78.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
29,795 |
|
|
|
22.0 |
|
|
|
29,018 |
|
|
|
21.7 |
|
Selling, General, and Administrative Expenses |
|
|
26,791 |
|
|
|
19.8 |
|
|
|
26,315 |
|
|
|
19.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
3,004 |
|
|
|
2.2 |
|
|
|
2,703 |
|
|
|
2.0 |
|
Interest Expense |
|
|
483 |
|
|
|
0.3 |
|
|
|
418 |
|
|
|
0.3 |
|
Interest Income |
|
|
(58 |
) |
|
|
0.0 |
|
|
|
(3 |
) |
|
|
0.0 |
|
Other Expense (Income), net |
|
|
0 |
|
|
|
0.0 |
|
|
|
23 |
|
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Taxes |
|
|
2,579 |
|
|
|
1.9 |
|
|
|
2,265 |
|
|
|
1.7 |
|
Provision for Income Taxes |
|
|
1,013 |
|
|
|
0.8 |
|
|
|
869 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings |
|
$ |
1,566 |
|
|
|
1.1 |
% |
|
$ |
1,396 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
Net sales increased $1.7 million or 1.3% to $135.6 million for the three months ended June 30, 2005
from $133.9 million for the three months ended June 30, 2004. For the three months ended June 30,
2005, total FPS revenue grew $1.8 million or 2.5% to $75.8 million as compared to $74.0 million in
the prior period. This increase was generated through the addition of new customers and expansion
of market share at existing customers. We had 339 total FPS sites which represent a net increase
of 11 sites since June 30, 2004. Despite a net increase, there was a loss of 17 storeroom
management sites related to four customers, which was partially offset by seven new sites. The
decrease in sites was primarily due to four customers, three of which were located in the Northeast
which has experienced a $2.4 million decline in revenue over the previous year. General MROP sales
decreased $0.1 million or 0.2% to $59.8 million for the three months ended June 30, 2005, from
$59.9 million in 2004 primarily as a result of two drivers, (i) our automobile customers showed
slower production in the quarter and (ii) company-wide efforts to implement more efficient and
effective pricing practices resulted in a loss of sales volume.
Cost of Sales
Cost of sales increased $0.9 million or 0.9% to $105.8 million for the three months ended June 30,
2005, from $104.9 million for the three months ended June 30, 2004. However, as a percentage of
sales, cost of sales decreased to 78.0% for the three months ended June 30, 2005, from 78.3% in
2004. The gross margin improvement of 0.3% was due to our company-wide efforts to improve margins
through better pricing practices, in response to price increases from our vendors. In addition,
rebate income increased $0.2 million for the three months ended June 30, 2005 due to continued
efforts to consolidate purchases with our strategic growth suppliers. Partially offsetting the
improvement was an increase in inventory reserve expense of $0.2 million for the three months ended
June 30, 2005 as compared to the prior year quarter.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased $0.5 million or 1.8% to $26.8 million for
the three months ended June 30, 2005, from $26.3 million for the three months ended June 30, 2004.
As a percentage of sales, total selling, general, and administrative expenses increased to 19.8% in
2005 from 19.7% in 2004. The slight increase was primarily the result of increased salaries and
benefits expense of $0.4 million as a result of higher healthcare costs in addition to increased
travel expense of $0.1 million, and professional fees increased by $0.3 million related
11
to management of our 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.
Operating Income
Operating income increased $0.3 million or 11.1% to $3.0 million for the three months ended June
30, 2005, from $2.7 million for the three months ended June 30, 2004, primarily as a result of
improved gross margin as mentioned above, which was only partially offset by an increase in
selling, general and administrative expenses.
Interest Expense
As compared to a year ago, we reduced our average debt outstanding under our Credit Facility by
$9.9 million or 28.5% to $24.8 million for the three months ended June 30, 2005. Interest expense
increased $0.1 million or 15.6% to $0.5 million for the three months ended June 30, 2005 from $0.4
million in 2004. The increase in interest expense was due to the increase in the average quarterly
interest rate to 5.5% as of June 30, 2005, which was an increase of two percentage points over the
prior year quarter.
Provision for Income Taxes
The provision for income taxes increased by $0.1 million, resulting in a provision of $1.0 million
for the three months ended June 30, 2005, compared to $0.9 million for the three months ended June
30, 2004. Our effective tax rate increased to 39.3% in the second quarter of 2005 from 38.4% in
second quarter of 2004 primarily due to an increase in non-deductible items as a percentage of
pre-tax income.
SIX MONTHS ENDED JUNE 30, 2005 AND 2004
The following table sets forth a summary of our operating data and shows such data as a percentage
of net sales for the periods indicated (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
SIX MONTHS ENDED JUNE 30, |
|
| |
|
2005 |
|
|
2004 |
|
| |
|
|
|
|
|
|
|
|
|
(As restated - see Note 1) |
|
Net Sales |
|
$ |
273,566 |
|
|
|
100.0 |
% |
|
$ |
260,067 |
|
|
|
100.0 |
% |
Cost of Sales |
|
|
214,820 |
|
|
|
78.5 |
|
|
|
203,147 |
|
|
|
78.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
58,746 |
|
|
|
21.5 |
|
|
|
56,920 |
|
|
|
21.9 |
|
Selling, General, and Administrative Expenses |
|
|
53,344 |
|
|
|
19.5 |
|
|
|
52,208 |
|
|
|
20.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
5,402 |
|
|
|
2.0 |
|
|
|
4,712 |
|
|
|
1.8 |
|
Interest Expense |
|
|
966 |
|
|
|
0.4 |
|
|
|
822 |
|
|
|
0.3 |
|
Interest Income |
|
|
(116 |
) |
|
|
0.0 |
|
|
|
(18 |
) |
|
|
0.0 |
|
Other Expense (Income), net |
|
|
1 |
|
|
|
0.0 |
|
|
|
(1 |
) |
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Taxes |
|
|
4,551 |
|
|
|
1.6 |
|
|
|
3,909 |
|
|
|
1.5 |
|
Provision for Income Taxes |
|
|
1,760 |
|
|
|
0.6 |
|
|
|
1,500 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings |
|
$ |
2,791 |
|
|
|
1.0 |
% |
|
$ |
2,409 |
|
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
For the six months ended June 30, 2005, net sales increased by $13.5 million or 5.2% from $260.1
million for the six months ended June 30, 2004 to $273.6 million. Total FPS revenues grew $9.0
million or 6.4% from $141.7 million for the six months ended June 30, 2004 to $150.7 million in the
current year. The increase in FPS revenues was due to the net increase of 11 new FPS sites since
June 30, 2004, in addition to increased production and increased market share at existing sites. At
June 30, 2005, we had 339 total FPS sites as compared to 328 total FPS sites at June 30, 2004.
There was also an increase in revenue at our General MROP customers of $4.5 million or 3.8% to
$122.9 million from $118.4 million in the prior period. The improvement in General MROP was
primarily a result of increased volume and market share at existing accounts which was partially
offset by declines in the automotive industry during the second quarter.
Cost of Sales
12
Cost of sales for the six months ended June 30, 2005 increased $11.7 million or 5.7% to $214.8
million from $203.1 million for the six months ended June 30, 2004. Cost of sales, as a percentage
of net sales, reflected an increase from 78.1% for the six months ended June 30, 2004 to 78.5% for
2005. The increase was primarily a result of a contraction in our gross margin on General MROP
sales due to supplier price increases, competition and product mix earlier in the year. However,
this impact was partially offset in the second quarter as better pricing practices became
effective. Adding to the decline in gross margin was a $0.5 million increase in the inventory
reserve expense for the six months ended June 30, 2005 as compared to the previous year. This
increase was largely attributable to there being no additional expense required in 2004.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the six months ended June 30, 2005 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. As a percentage of net sales, selling, general, and administrative expenses improved to 19.5%
for the six months ended June 30, 2005 from 20.1% for the same period in the prior year. The
dollar increase in expense was primarily due to the higher sales volume and variable costs relating
to these sales, such as salary, benefits, incentives and commissions of $1.1 million and increased
travel expense of $0.4 million, and as a result of Section 404 of the Sarbanes Oxley Act
compliance efforts, our professional fees increased $0.4 million. These increases were partially
offset by the realization of a gain on the sale of property of $0.4 million and an improvement of
$0.5 million in bad debt expense for the six months ended June 30, 2005 as a result of improved
collections.
Operating Income
Operating income increased $0.7 million or 14.6% to $5.4 million of income for the six months ended
June 30, 2005 from $4.7 million for the six months ended June 30, 2004. Operating margin increased
by 0.2% due to the savings in selling, general and administrative expenses for the year.
Interest Expense
As compared to a year ago we reduced our average debt outstanding under our credit facility by $6.6
million or 19.9% to $26.7 million for the six months ended June 30, 2005. Interest expense
increased $0.1 million or 17.5% to $0.9 million for the six months ended June 30, 2005 from $0.8
million in 2004 due to the increase in the year to date average interest rate to 5.2% as of June
30, 2005, which was an increase of 1.6% over the prior year six month average.
Provision for Income Taxes
As a result of more profitable operations, the provision for income taxes increased by $0.3 million
to $1.8 million for the six months ended June 30, 2005 from $1.5 million for the six months ended
June 30, 2004. Our effective tax rate increased to 38.7% in 2005 from 38.4% in 2004 due to an
increase in non-deductible items as a percentage of pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Capital Availability and Requirements
At June 30, 2005, our total working capital was $79.9 million, which included $1.1 million in cash
and cash equivalents. We had an aggregate of $73.6 million of borrowing capacity under our Credit
Facility. Based upon our current asset base (which is used as our collateral) and outstanding
borrowings under the Credit Facility, we had borrowing availability under the Credit Facility of
$52.6 million.
On May 4, 2005, we signed a letter of intent with our existing financial syndicate to amend our
Credit Facility; the agreement was signed on July 18, 2005 and will provide funding through July
18, 2010. Accordingly, obligations on this facility are classified as long-term on the
accompanying balance sheet as of June 30, 2005. The amended agreement provides a $75.0 million
credit facility with an accordion option enabling us to expand the facility to
13
$110.0 million. The annual commitment fee on the unused portion of the amended facility is 25
basis points of the average daily unused portion of the greater of $75.0 million or the total
commitment. Amounts outstanding under the amended credit facility bear interest at either the lead
bank’s corporate rate or LIBOR, as selected by the Company from time to time, plus applicable
margins. The balance of deferred loan costs associated with the existing credit facility
at July 18, 2005 was $0.2 million and will be capitalized and amortized over the term of the
agreement in addition to other incremental and direct costs associated with obtaining the amended
credit facility.
The amounts outstanding under the facility at June 30, 2005 and December 31, 2004 were $18.9
million and $21.7 million, respectively, which have been classified as long-term liabilities in the
consolidated balance sheets. Additionally, we had outstanding letters of credit of $2.1 million
under the facility at June 30, 2005 and December 31, 2004.
The principal financial covenants under our current Credit Facility require a fixed charge coverage
ratio of 1.1:1.0 and capital expenditures of no more than $6.5 million in any twelve-month period.
Our fixed charge coverage ratio was 2.4:1.0 at June 30, 2005, and our capital expenditures were
$0.8 million for the twelve-month period ended June 30, 2005. Our covenants require a minimum
tangible net worth of $49.4 million; at June 30, 2005, our tangible net worth was $67.5 million.
We were in compliance with these covenants as of June 30, 2005 and December 31, 2004. The amended
credit facility does not require financial covenants to be met unless monthly average excess
availability under the line falls below $15.0 million. In such case, the amended credit facility
contains a requirement for fixed charge coverage of 1.0:1.1.
Analysis of Cash Flows
Net cash used in operating activities was $1.3 million and $3.9 million for the six months ended
June 30, 2005 and 2004, respectively. When compared to 2004, the improvement is primarily due to
accounts receivable which has declined as a result of improved collections, partially offset by
accounts payable activity.
Net cash provided by (used in) investing activities for the six months ended June 30, 2005 and 2004
was $2.2 million and ($0.2 million), respectively. The increase in cash provided by investing
activities is attributable to the sale of property which resulted in proceeds from property, plant
and equipment of $2.2 million. Cash used for capital expenditures was ($0.1 million) for the six
months ended June 30, 2005 and ($0.3 million) for the six months ended June 30, 2004.
Net cash (used in) provided by financing activities was ($3.0 million) and $4.2 million for the six
months ended June 30, 2005 and 2004, respectively. For the six months ended June 30, 2005, cash
was used primarily by net repayments on our Credit Facility of $2.8 million and cash provided for
the six months ended June 30, 2004 was primarily due to net borrowings on our Credit Facility of
$3.8 million.
CERTAIN ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial statements requires our management to
make estimates and assumptions that affect: the reported amounts of assets and liabilities at the
date of the financial statements; the disclosure of contingent assets and liabilities at the date
of the financial statements; and the reported amounts of revenues and expenses during the reporting
period. Our management regularly evaluates its estimates and assumptions. These estimates and
assumptions are based on historical experience and on various other factors that are believed to be
reasonable under the circumstances and form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in Note 2 — Summary of Significant
Accounting Policies in the Notes to Consolidated Financial Statements of our Annual Report on Form
10-K for fiscal 2004, we believe that the following accounting policies and estimates involve a
higher degree of complexity and warrant specific description.
Allowance for Doubtful Accounts — Methodology
14
We have established an allowance for doubtful accounts based on our collection experience and an
assessment of the collectability of specific accounts. We evaluate the collectability of accounts
receivable based on a combination of factors. Initially, we estimate an allowance for doubtful
accounts as a percentage of accounts receivable based on historical collections experience. This
initial estimate is periodically adjusted when we become aware of a specific customer’s inability
to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the
overall aging of accounts receivable. We do not believe our estimate of the allowance for doubtful
accounts is likely to be adversely affected by any individual customer or group of customers, since
our customers are geographically and functionally dispersed, and none are individually significant.
The table below depicts our allowance for doubtful accounts, bad debt expense incurred or
recovered and write offs or recoveries during the first and second quarters of 2005 and 2004. The
decline in the allowance as a percentage of gross accounts receivable is due to the fact that we
wrote off $2.5 million of fully reserved accounts in the fourth quarter of 2004.
| |
|
|
|
|
|
|
|
|
| Allowance for Doubtful Accounts |
|
2005 |
|
|
2004 |
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
Balance at January 1 |
|
$ |
2,055 |
|
|
$ |
3,719 |
|
Add: Charges to costs and expenses, net. |
|
|
(109 |
) |
|
|
52 |
|
Deduct: Write offs, net of recoveries |
|
|
15 |
|
|
|
226 |
|
|
|
|
|
|
|
|
Balance at March 31 |
|
$ |
1,931 |
|
|
$ |
3,545 |
|
Add: Charges to costs and expenses, net. |
|
|
(177 |
) |
|
|
221 |
|
Deduct: Write offs, net of recoveries |
|
|
(12 |
) |
|
|
198 |
|
|
|
|
|
|
|
|
Balance at June 30 |
|
$ |
1,766 |
|
|
$ |
3,568 |
|
Percentage of Gross Receivables |
|
|
2.6 |
% |
|
|
4.8 |
% |
Inventories — Slow Moving and Obsolescence
In connection with certain contracts, we maintain certain special inventories for specific
customers’ needs. In certain contracts, the customers are required to purchase the special
inventory at the point in time in which the inventory reaches a certain age. However, for other
customer relationships and inventories, we are not protected by our customer from the risk of
inventory obsolescence. In such cases, we rely on available return privileges with vendors, if any.
Therefore, in determining the net realizable value of inventories, we identify slow moving or
obsolete inventories that (1) are not protected by our customer agreements from risk of loss, and
(2) are not eligible for return under various vendor return programs. Based upon these factors, we
estimate the net realizable value of inventories and record any necessary adjustments as a charge
to cost of sales. If our inventory return privileges were discontinued in the future, or if
customers were unable to honor the provisions of certain contracts that protect us from inventory
losses, our risk of loss associated with obsolete or slow moving inventories would increase. The
table below depicts our reserve for slow moving and obsolete inventory, incurred or recovered, and
write offs or recoveries during the first and second quarters of 2005 and 2004.
| |
|
|
|
|
|
|
|
|
| Inventory Reserve |
|
2005 |
|
|
2004 |
|
| (dollars in thousands) |
|
|
|
|
|
|
|
|
Balance at January 1 |
|
$ |
5,168 |
|
|
$ |
5,597 |
|
Add: Charges to costs and expenses, net. |
|
|
300 |
|
|
|
(6 |
) |
Deduct: Write offs, net of recoveries |
|
|
1 |
|
|
|
55 |
|
|
|
|
|
|
|
|
Balance at March 31 |
|
$ |
5,467 |
|
|
$ |
5,536 |
|
Add: Charges to costs and expenses, net. |
|
|
90 |
|
|
|
(109 |
) |
Deduct: Write offs, net of recoveries |
|
|
454 |
|
|
|
95 |
|
|
|
|
|
|
|
|
Balance at June 30 |
|
$ |
5,103 |
|
|
$ |
5,332 |
|
Percentage of Gross Inventory |
|
|
8.2 |
% |
|
|
8.7 |
% |
Impairment of Long-Lived Assets
15
We periodically evaluate property and equipment for potential impairment indicators. Our judgments
regarding the existence of impairment indicators are based on legal factors, market conditions, and
operational performance. Future events could cause us to conclude that impairment indicators exist
and that assets associated with a particular operation are impaired. Evaluating the impairment also
requires us to estimate future operating results and cash flows, which also requires judgment by
management. Any resulting impairment loss could have a material adverse impact on our financial
condition and results of operations.
Deferred Income Tax Assets
We have net deferred tax assets, which are subject to periodic recoverability assessments. The
factors used to assess the likelihood of realization of these net deferred tax assets are the
reversal of taxable temporary differences, our forecast of future taxable income, which is based
upon estimates and assumptions, and available tax planning strategies that could be implemented to
realize the net deferred tax assets. On the basis of our operating results and projections for
future taxable income, we believe it is more likely than not that our future operations will
generate sufficient taxable income to realize our net deferred tax assets. If these estimates and
related assumptions change in the future, we may be required to record an additional valuation
allowance against our deferred tax assets resulting in additional income tax expense in our
consolidated statements of income. We evaluate the realizability and appropriateness of our
deferred tax assets and liabilities quarterly and assess the need for any valuation allowance
against deferred tax assets. In the future, if it becomes more likely than not that we will be able
to utilize certain deferred tax benefits that are presently reserved with a valuation allowance, we
may adjust the valuation allowance resulting in a reduction in income tax expense. In addition, if
we experience a decline in earnings in the future, we may have to increase the valuation allowance.
Self Insurance and Related Reserves
We are self-insured for certain losses relating to group health, worker’s compensation, and
casualty losses, subject to an aggregate stop loss limit of $1.3 million. We utilize third party
administrators to process and administer all related claims. We accrue an estimate for incurred but
not reported claims and related expenses based upon historical experience. The accrual for incurred
but not reported claims relating to group health, worker’s compensation, and casualty losses
totaled approximately $1.5 million at both June 30, 2005 and December 31, 2004. The accuracy of our
accrual for incurred but not reported claims is entirely dependent on future events that are
subject to change. Because we are self-insured, an increase in the volume (frequency) or amount
(severity) of claims in the future may cause us to record additional expense that was not estimable
at June 30, 2005. We are not aware of any increasing frequency or severity of individual claims.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no significant change in the disclosure concerning this item made in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of our management,
including our President and Chief Executive Officer and our Senior Vice President and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report. Based on that evaluation, our
President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer,
concluded that our disclosure controls and procedures were effective as of the end of the period
covered by this report in accumulating and communicating information to our management, including
our President and Chief Executive Officer and our Senior Vice President and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures of that
information under the Securities and Exchange Commission’s rules and forms and that our disclosure
controls and procedures are designed to ensure that the information we are required to disclose in
reports that we file or submit under the Act is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission’s rules and forms.
16
No change occurred in the Company’s internal controls concerning financial reporting during the
second fiscal quarter ended June 30, 2005 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to various claims and legal actions, which arise in the ordinary course of
business. The Company believes that the ultimate resolution of such matters will not have a
material adverse effect on the Company’s financial position or results of operations. There has
been no significant change in the disclosure concerning this item made in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2004.
ITEM 6. EXHIBITS
Exhibits filed as part of this Form 10-Q:
| |
|
|
31.1
|
|
Certification pursuant to Rule 13a-14(a) (Chief Executive Officer) |
31.2
|
|
Certification pursuant to Rule 13a-14(a) (Chief Financial Officer) |
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350 (Chief Executive Officer) |
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350 (Chief Financial Officer) |
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(a) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Atlanta, State of Georgia, on the 5th day of August 2005.
| |
|
|
|
|
| |
INDUSTRIAL DISTRIBUTION GROUP, INC.
(Registrant)
|
|
| Date: August 5, 2005 |
By: |
/s/ Jack P. Healey
|
|
| |
|
Jack P. Healey Senior Vice President and Chief |
|
| |
|
Financial Officer (Duly Authorized
Officer and Principal Accounting and Financial
Officer) |
|
18