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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
[ ] 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)
Delaware 58-2299339
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 East Paces Ferry Road, Suite 1575 Atlanta, Georgia 30326
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Address of principal executive offices and zip code)
(404) 949-2100
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(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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at April 30, 2001
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Common Stock, $.01 par value 8,616,815
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INDUSTRIAL DISTRIBUTION GROUP, INC.
INDEX
PART I. Financial Information
ITEM 1. Financial Statements
Consolidated Balance Sheets at March 31, 2001 (Unaudited) and December 31, 2000
Consolidated Statements of Operations for the three months ended March 31, 2001 and
2000 (Unaudited)
Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000
(Unaudited)
Notes to the Consolidated Financial Statements - March 31, 2001 (Unaudited)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. Other Information
ITEM 1. Legal Proceedings
ITEM 6. Exhibits and Reports on Form 8-K
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
MARCH 31, DECEMBER 31,
2001 2000
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents .............................................. $ 599 $ 3,690
Accounts Receivable, net ............................................... 69,484 64,705
Inventory, net ......................................................... 68,282 68,518
Deferred Tax Assets .................................................... 7,344 7,586
Prepaid and Other Current Assets ....................................... 10,811 9,923
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TOTAL CURRENT ASSETS .................................................. 156,520 154,422
Property and Equipment, net ............................................ 14,941 15,446
Intangible Assets, net ................................................. 51,843 52,204
Other Assets ........................................................... 2,220 1,886
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TOTAL ASSETS .......................................................... $ 225,524 $ 223,958
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Long-term Debt ................................... $ 751 $ 789
Book Overdraft ......................................................... 6,607 8,230
Accounts Payable ....................................................... 45,172 38,536
Accrued Compensation ................................................... 1,914 2,419
Current Portion of Management Liability Insurance ...................... 3,718 3,718
Other Accrued Liabilities .............................................. 6,916 6,465
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TOTAL CURRENT LIABILITIES ............................................. 65,078 60,157
Long-Term Debt ......................................................... 51,128 52,516
Other Long-Term Liabilities ............................................ 7,691 9,170
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TOTAL LIABILITIES .................................................... 123,897 121,843
STOCKHOLDERS' EQUITY:
Common Stock, par value $.01 per share, 50,000,000 shares authorized;
8,565,805 shares issued and 8,559,032 shares outstanding in 2001;
8,493,360 shares issued and 8,486,587 shares outstanding in 2000....... 86 85
Additional Paid-In Capital.............................................. 97,400 97,293
Retained Earnings....................................................... 4,231 4,827
Treasury Stock.......................................................... (90) (90)
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Total Stockholders' Equity ............................................. 101,627 102,115
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ............................. $ 225,524 $ 223,958
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The accompanying notes are an integral part of these consolidated financial
statements.
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INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2001 2000
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NET SALES .............................................................. $ 136,169 $ 140,849
COST OF SALES .......................................................... 105,728 109,268
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Gross profit ......................................................... 30,441 31,581
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ........................... 29,788 29,796
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Income from operations ............................................... 653 1,785
INTEREST EXPENSE ....................................................... 1,358 1,229
OTHER EXPENSE (INCOME) ................................................. 5 (48)
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(LOSS) INCOME BEFORE INCOME TAXES ...................................... (710) 604
(BENEFIT) PROVISION FOR INCOME TAXES ................................... (114) 355
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NET (LOSS) INCOME ...................................................... $ (596) $ 249
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BASIC AND DILUTED (LOSS) EARNINGS PER SHARE ............................ $ (.07) $ .03
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WEIGHTED AVERAGE SHARES OUTSTANDING (Basic and Diluted) ................ 8,559,032 8,747,608
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The accompanying notes are an integral part of these consolidated financial
statements.
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INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ...................................................... $ (596) $ 249
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Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Depreciation and amortization ...................................... 1,231 1,252
Deferred taxes ..................................................... 249 0
Gain on disposal of equipment ...................................... (4) (36)
Changes in operating assets and liabilities:
Accounts receivable, net ....................................... (4,779) (5,520)
Inventories, net ............................................... 236 (1,399)
Prepaid assets and other assets ................................ (926) (369)
Accounts payable ............................................... 6,636 (151)
Accrued compensation ........................................... (505) (83)
Other accrued liabilities ...................................... (103) 4,431
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Total adjustments ........................................... 2,035 (1,875)
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Net cash provided by (used in) operating activities.......... 1,439 (1,626)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net ............................. (302) (2,154)
Proceeds from the sale of property and equipment ..................... 12 1,783
Deposits ............................................................. (213) (155)
Cash surrender value of life insurance ............................... 0 18
Proceeds from sale of investments .................................... 0 88
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Net cash used in investing activities ......................... (503) (420)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................. 108 128
Net (repayments) borrowings on credit facilities
and other lines....................................................... (1,229) 4,000
Long-term debt repayments .............................................. (288) (106)
Change in book overdraft ............................................... (1,623) (897)
Premium payments on management liability insurance ..................... (930) 0
Deferred loan costs and other .......................................... (65) (19)
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Net cash (used in) provided by financing activities.......... (4,027) 3,106
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NET CHANGE IN CASH AND CASH EQUIVALENTS ................................ (3,091) 1,060
CASH AND CASH EQUIVALENTS, beginning of period ......................... 3,690 851
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CASH AND CASH EQUIVALENTS, end of period ............................... $ 599 $ 1,911
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Supplemental Cash Flow Information:
Cash Paid for Interest ............................................... $ 1,038 $ 1,235
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Cash Paid for Income Taxes ........................................... $ 442 $ 655
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The accompanying notes are an integral part of these consolidated financial
statements.
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INDUSTRIAL DISTRIBUTION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 2001 (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 for manufacturers and other users
of maintenance, repair, operating, and production ("MROP") products. The Company
conducts business in 35 states and two foreign countries, providing product
expertise in the procurement 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 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.
The quarterly results for the period ended March 31, 2000 were restated as
discussed in note 13 of the Company's financial statements and notes thereto,
included in its Annual Report on Form 10-K, for the fiscal year ended December
31, 2000, Commission File Number 001-13195.
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, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS Nos. 137 and 138, which
addresses the accounting for derivative instruments. SFAS No. 133 is effective
for financial statements for the Company's fiscal quarters beginning on January
1, 2001. The Company's adoption of SFAS No. 133 has not had a significant effect
on the Company's financial position or results of operations.
3. CREDIT FACILITY
In December 2000, the Company entered into a $100,000,000 revolving credit
facility with a five financial institution syndicate. The facility expires on
March 31, 2004 and has a first security interest in the assets of the business
units. The agreement provides that the facility may be used for operations and
acquisitions, and provides $5,000,000 for swinglines and $10,000,000 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. This rate was 7.8% at March 31, 2001.
The amounts outstanding under the current facility at March 31, 2001 and under
the previous facility at December 31, 2000 were $48,200,000 and $49,429,000,
respectively, which have been classified as long-term liabilities. Additionally,
the Company had outstanding letters of credit for $2,604,000 at March 31, 2001.
The revolving credit facility contains various covenants pertaining to the
maintenance of certain financial ratios. These covenants include requirements
for interest 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 March 31, 2001 and December
31, 2000.
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4. CAPITAL STOCK
Effective January 1, 2001, the Company issued 72,445 shares of its common stock
through its employee stock purchase plan.
Options are to be 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. There was no dilutive effect of the
options outstanding during the three months ended March 31, 2001 and 2000 to the
weighted average common shares outstanding for purposes of calculating diluted
EPS. During the three months ended March 31, 2001 and 2000, options where the
exercise price exceeded the average market price of the common shares totaled
1,102,219 and 1,306,627, respectively.
5. 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 the historical financial results of the
Company. Results of operations from acquisitions made using the purchase method
of accounting have also been included from their date of acquisition.
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 the
Company's operations, performance, and financial condition, including, in
particular, the likelihood of the Company's success in developing and expanding
its 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 the control of the Company. 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, the availability of attractive acquisition
opportunities, the successful integration and profitable management of acquired
businesses, improvement of operating efficiencies, the availability of working
capital and financing for future acquisitions, the Company's ability to grow
internally through expansion of services and customer bases, its ability to
reduce overhead, seasonality, the continuation of key supplier relationships,
the ability of the Company to compete successfully in the highly competitive and
diverse MROP market, the Company's ability to maintain key personnel, the
availability of key personnel for employment by the Company, and other factors
discussed in more detail under "Item 1-Business" of the Company's Annual Report
on Form 10-K for fiscal 2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
The following table sets forth certain historical financial data for IDG and
shows such data as a percentage of net sales for the periods indicated (dollars
in thousands):
THREE MONTHS ENDED MARCH 31
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2001 2000
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Net Sales $136,169 100.0% $140,849 100.0%
Cost of Sales 105,728 77.6 109,268 77.6
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Gross Profit 30,441 22.4 31,581 22.4
Selling, General and
Administrative 29,788 21.9 29,796 21.1
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Operating Income $ 653 0.5% $ 1,785 1.3%
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Net sales decreased $4.7 million or 3.3 % from $140.8 million for the three
months ended March 31, 2000 to $136.2 million for the three months ended March
31, 2001. The sales decrease is attributable to higher interest rates and energy
costs as well as the generally slower economy, with our manufacturing customers
in the automobile, trucking, manufactured housing, and aluminum industries hit
especially hard.
Cost of sales decreased $3.5 million or 3.2 % from $109.3 million for the three
months ended March 31, 2000 to $105.7 million for the three months ended March
31, 2001. As a percentage of net sales, cost of sales remained the same at 77.6%
in 2000 and 2001.
Selling, general, and administrative expenses were $29.8 million for each of the
three months ended March 31, 2000 and 2001, or 21.1% and 21.9% of revenues for
the periods, respectively. This percentage increase resulted from the same
dollar base of selling, general, and administrative expenses for both quarters
being spread over lower sales volume in 2001.
Operating income decreased $1.1 million from $1.8 million for the three months
ended March 31, 2000 to $.7 million for the three months ended March 31, 2001.
As a percentage of net sales, operating income decreased from 1.3% in 2000 to
0.5% in 2001 due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company had $.6 million in cash, an additional $90.8
million of working capital, and $49.2 million of borrowing capacity under its
$100 million revolving credit facility. The Company's liquidity position
continues to be sufficient to enable the Company to fund its current operations
and to fund anticipated internal expansion and acquisitions for the next year.
Net cash provided by (used in) operating activities for the three months ended
March 31, 2001 and 2000 was $1.4 million and ($1.6 million), respectively. The
change was principally due to improved management of accounts payable.
Net cash used in investing activities for the three months ended March 31, 2001
and 2000 was $.5 and $.4 million, respectively. The difference is mainly due to
the proceeds on the sale of investments, which the company benefited from in
2000. In 2001, the cash was used for property and equipment additions and
deposits, whereas in 2000, the cash was used primarily for property and
equipment additions (net of proceeds from the sale of property and equipment).
Net cash (used in) provided by financing activities for the three months ended
March 31, 2001 and 2000 was ($4.0 million) and $3.1 million, respectively. In
2000, borrowings on the credit facility were used to fund working capital needs,
whereas, in 2001 improved working capital management has enabled the Company to
pay down its credit facility. Additionally in 2001, the Company made premiums
payments on the management liability insurance policy, which was entered into in
the second quarter of 2000.
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,
2000.
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, 2000.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits filed as part of this Form 10-Q:
None
b) Reports on Form 8-K filed during the quarter to which this Form 10-Q
relates:
None
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SIGNATURES
Pursuant to the requirements 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.
INDUSTRIAL DISTRIBUTION GROUP, INC.
(Registrant)
Date: May 14, 2001 By: /s/ Jack Healey
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Jack P. Healey
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Accounting and Financial Officer)
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