SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
----------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 5, 1998
-----------------------
INDUSTRIAL DISTRIBUTION GROUP, INC.
------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
Delaware 001-13195 58-2299339
- ------------------------------------------------------------------------
(State or other Jurisdiction of (Commission File (IRS Employer
Incorporation or Organization) Number) Identification No.)
2500 Royal Place
Tucker, Georgia 30084
---------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (770) 243-9000
Not applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 5, 1998, Industrial Distribution Group, Inc. (the
"Company") completed the acquisition of L D Supply, Inc. ("L D
Supply") through the merger of L D Supply with a wholly-owned
subsidiary of the Company, pursuant to an Agreement and Plan of
Merger and Reorganization dated June 5, 1998 between the Company,
its merger subsidiary, L D Supply and all of the shareholders of
L D Supply. The consideration paid by the Company consisted of
270,583 shares of its Common Stock, $5,000,032 in cash and the
assumption of certain liabilities. L D Supply is a distributor of
cutting tools based in Wichita, Kansas and the Company presently
intends to operate L D Supply substantially as it had been operated
prior to its acquisition. The number of shares issued in this
transaction was determined by a formula price based on the various
closing prices of the Company's Common Stock on the New York
Stock Exchange during the period from April 21, 1998 (the date the Company
and L D Supply entered into a letter of intent) to June 2, 1998 (three
business days prior to the closing of the transaction). The Company
accounted for the acquisition of L D Supply as a purchase.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The following financial statements of L D Supply are filed with this
Form 8-K/A:
<TABLE>
<CAPTION>
Description Page
----------- ----
<S> <C>
1. Report of Independent Public Accountants F-1
2. Balance sheet as of April 30, 1998 F-2
3. Statement of operations for the year ended April 30, 1998 F-3
4. Statement of shareholders' equity for the year ended April 30,
1998 F-4
5. Statement of cash flows for the year ended April 30, 1998 F-5
6. Notes to financial statements F-6
(b) Pro Forma Financial Information
The following pro forma financial statements of the Company
are filed with this Form 8-K/A.
Description Page
----------- ----
1. Introduction to unaudited proforma condensed combined financial
information F-11
2. Pro forma condensed combined balance sheet as of March 31, 1998 F-12
(unaudited)
3. Pro forma condensed combined statement of operations for the
three months ended March 31, 1998 (unaudited) F-14
4. Pro forma condensed combined statement of operations for the
year ended December 31, 1997 (unaudited) F-15
5. Notes to unaudited pro forma condensed combined financial statements F-16
</TABLE>
Exhibits
(c) The following exhibits are filed with this report:
2.1 Agreement and Plan of Merger and Reorganization
23.1 Consent of Arthur Andersen LLP
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
LD Supply, Inc.:
We have audited the accompanying balance sheet of LD SUPPLY, INC.
(a Kansas corporation) as of April 30, 1998 and the related
statements of operations, stockholders' equity, and cash flows
for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of LD Supply, Inc. as of April 30, 1998 and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 24, 1998
F-1
<PAGE>
LD SUPPLY, INC.
BALANCE SHEET
APRIL 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 544,348
Accounts receivable, net 1,428,585
Inventories 1,508,336
Prepaid and other current assets 456,579
-----------
Total current assets 3,937,848
PROPERTY AND EQUIPMENT, net 78,956
-----------
Total assets $ 4,016,804
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 200,000
Accounts payable 496,320
Accrued expenses 137,004
Accrued taxes payable 577,651
-----------
Total current liabilities 1,410,975
-----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, $100 par value per share; 5,000 shares authorized,
32 shares issued and outstanding 3,200
Additional paid-in capital 138,968
Retained earnings 2,463,661
-----------
Total stockholders' equity 2,605,829
-----------
Total liabilities and stockholders' equity $ 4,016,804
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-2<PAGE>
LD SUPPLY, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
<S> <C>
NET SALES $16,960,660
COST OF SALES 13,216,619
-----------
Gross profit 3,744,041
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 2,506,670
-----------
Income from operations 1,237,371
INTEREST EXPENSE 17,502
INTEREST INCOME 9,731
OTHER INCOME, net 10,304
-----------
NET INCOME $ 1,239,904
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3<PAGE>
LD SUPPLY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------ ---------- --------- -------------
<S> <C> <C> <C> <C>
BALANCE, April 30, 1997 $3,200 $138,968 $1,817,625 $1,959,793
Distributions to stockholders 0 0 (593,868) (593,868)
Net income 0 0 1,239,904 1,239,904
------ -------- ---------- ----------
BALANCE, April 30, 1998 $3,200 $138,968 $2,463,661 $2,605,829
====== ======== ========== ==========
</TABLE>
The accompanying notes are an integral of this statement.
F-4<PAGE>
LD SUPPLY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,239,904
----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 60,775
Gain on sale of property and equipment (9,000)
Changes in operating assets and liabilities:
Accounts receivable, net (248,827)
Inventories, net (225,913)
Prepaid and other current assets (2,000)
Accounts payable (83,132)
Accrued expenses (115,875)
Accrued taxes payable 3,306
----------
Total adjustments (620,666)
----------
Net cash provided by operating activities 619,238
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (30,773)
Proceeds from sale of property and equipment 9,000
Sale of short-term investments 32,949
Changes in short-term investments 11,985
Cash surrender value of life insurance policies (41,341)
----------
Net cash used in investing activities (18,180)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders (593,868)
----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 7,190
CASH AND CASH EQUIVALENTS, beginning of year 537,158
----------
CASH AND CASH EQUIVALENTS, end of year $ 544,348
==========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 16,665
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5<PAGE>
LD SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
1. BASIS OF PRESENTATION
Organization and Business
LD Supply, Inc. (the "Company"), a Kansas corporation, was formed
on April 11, 1956 and is a distributor that provides procurement
solutions, products, and services to industrial users which have
maintenance, repair, operating, and production supply
requirements. The Company conducts business primarily in Kansas,
with customers ranging from small machine shops to major aircraft
companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and 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. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all short-term investments with original
maturities of three months or less to be cash equivalents.
Accounts Receivable
An allowance for uncollectible accounts has been established
based on the Company's collection experience and an assessment of
the collectibility of specific accounts. The allowance amounted
to $11,147 as of April 30, 1998, and the provision for bad debts
was $7,000 for the year then ended.
Inventories
Inventories consist primarily of merchandise purchased for resale
and are stated at the lower of cost or market value. Cost is
determined using the first-in-first-out method, and market is
considered to be net realizable value.
F-6<PAGE>
Property and Equipment
Property and equipment are recorded at cost, less accumulated
depreciation. Expenditures for repairs and maintenance are
charged to expense as incurred. Upon retirement or disposal of
assets, the cost and related accumulated depreciation are removed
from the accounts, and any resulting gain or loss is recognized
as other income or expense in the statement of operations.
Depreciation is computed using the straight-line method over the
following estimated useful lives:
Office equipment Three to five years
Automobiles Three years
Income Taxes
Effective May 1, 1997, the Company elected and was approved by
the Internal Revenue Service to change its tax status from a
C corporation to an S corporation. As an S corporation, the
Company is not a taxable entity, and separately stated items of
income, loss, deduction, and credit are passed through to and
taken into account by the individual stockholder in computing
federal and state individual income tax liabilities. The Company
makes cash distributions to its owners for estimated tax
payments.
Revenue Recognition
Revenue is recognized on sales of products at the time of
shipment, offset by discounts given to customers.
Cost of Sales
Cost of sales consists of the cost of materials purchased, offset
by discounts received from suppliers.
Financial Instruments and Concentration of Credit Risk
The Company's carrying value of financial instruments (cash,
trade receivables, accounts payable, accrued liabilities, and
debt) approximates fair value due to the short maturity of those
instruments. For the year ended April 30, 1998, the Company had
one customer which represented approximately 29% of the Company's
operating revenues and approximately 18% of the Company's
accounts receivable. The Company renewed an existing contract
with this customer on May 28, 1998, expiring May 31, 2001, in
which the customer guarantees to purchase certain inventory items
as stated in the contract. As part of this agreement, the
Company is obligated to maintain certain levels of inventory for
purchase by the customer.
F-7<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at April 30,
1998:
Office equipment $219,470
Automobiles 78,189
--------
297,659
Less accumulated depreciation (218,703)
--------
Property and equipment, net $ 78,956
========
Depreciation expense totaled $60,775 for the year ended April 30,
1998.
4. DEBT
The Company has a $500,000 revolving line of credit with a bank
maturing March 11, 1999 and bearing interest at prime plus .25%.
The interest rate was 8.5% at April 30, 1998 and averaged 8.5%
during the year then ended. The borrowings under the line of
credit were $200,000 at April 30, 1998.
Among other restrictive covenants, the revolving line of credit
requires the Company to maintain a minimum current ratio and a
minimum tangible net worth. Additionally, the Company cannot
exceed certain capital expenditure limitations. At April 30,
1998, the Company was in compliance with these covenants.
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases the main warehouse and office facility in
which it conducts business as well as certain office equipment
under operating leases.
The minimum future rental payments under all leases as of
April 30, 1998 are as follows:
1999 $ 35,212
2000 34,482
2001 33,960
2002 33,960
2003 33,960
Thereafter 166,970
---------
$ 338,544
=========
During the year ended April 30, 1998, rental expense under
operating leases totaled $31,362.
F-8<PAGE>
6. LITIGATION
In August 1997, the Internal Revenue Service concluded its
examination of the Company's income tax returns for the fiscal
years ended April 30, 1994, 1995, and 1996 by issuing an
examination report proposing additional income taxes and the
imposition of accumulated earnings taxes plus interest totaling
$60,692, $70,717, and $74,447, respectively. The Company intends
to vigorously defend against the proposed additions to income tax
and the imposition of accumulated earnings tax by administrative
appeal and/or litigation in the United States Tax Court or the
United States District Court, with such actions to be commenced
soon hereafter.
In June 1995, a former employee of the Company filed a claim
against the Company for discrimination under the Kansas Act
Against Discrimination and/or the Americans With Disabilities
Act. The employee claims that the Company wrongfully terminated
him because he was disabled and could not perform job duties
under his job description. The Company has denied any liability
and plans to vigorously defend itself in this matter.
Management believes that the ultimate resolution of these matters
will not materially affect the Company's results of operations or
financial position.
7. BENEFIT PLAN
Beginning January 1, 1998, the Company established a 401(k) plan
(the "Plan") for the Company's employees under which participants
may contribute up to 10% of their compensation. Employees over
age 21 with more than one year of service are eligible for
participation in the Plan. During 1998, the Company matched 50%
of the first 6% of participants' contributions. The Company's
contributions totaled $5,442 during 1998.
8. POSTEMPLOYMENT HEALTH BENEFITS
In March 1998, the board of directors approved a plan which
guarantees health insurance to certain officers until age 65,
regardless of employment status. As all covered officers are
currently employed by the Company, no provision has been made for
such postemployment benefits at April 30, 1998. Should the
employment of the covered officers be terminated, the liability
for such benefits at April 30, 1998 is estimated to be $632,000.
9. EMPLOYEE STOCK OWNERSHIP PLAN
The board of directors approved the termination of the Employee
Stock Ownership Plan in November 1996. Final distributions and
transfers to employees of approximately $1,587,000 were completed
as of May 12, 1998.
F-9<PAGE>
10. RELATED-PARTY TRANSACTIONS
The Company leases its warehouse and office facility under an
operating lease from Begonia, Inc., in which two stockholders of
the Company own a majority interest. The operating lease was
renewed March 31, 1998 and expires March 31, 2008. Minimum lease
payments were $2,480 through March 31, 1998, and the renewed
lease increased the minimum lease payment to $2,830 per month.
Rental expense recognized under this lease was $30,110 for the
year ended April 30, 1998.
The Company entered into an agreement with two stockholders dated
February 10, 1987 and May 2, 1988 in which the stockholders
agreed not to associate directly or indirectly with any business
under any name similar to the Company's name, without Company
consent, for a period of one year after termination. Further,
stockholders agreed not to compete with any competitor of the
Company within a 100-mile radius of Wichita, Kansas, for a period
of one year after termination.
11. SUBSEQUENT EVENTS (UNAUDITED)
At April 30, 1998, the Company was the assigned owner and
beneficiary of key man life insurance policies held for certain
stockholders. The Company recognized cash surrender value on
these policies for the year ended April 30, 1998. In May 1998,
the policies were canceled, with cash surrender values paid
directly to the insured stockholders and treated as a dividend by
the Company.
On June 5, 1998, the Company entered into an agreement with LDS
Acquisition Company, a wholly owned subsidiary of Industrial
Distribution Group ("IDG"), to effect a merger and
reorganization. As a result of the business consolidation, the
Company will become a wholly owned subsidiary of IDG.
Consideration paid by IDG consisted of approximately 270,583
shares of IDG common stock, approximately $5,000,000 cash, and
the assumption of certain liabilities.
F-10<PAGE>
INDUSTRIAL DISTRIBUTION GROUP, INC.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information
as of and for the three months ended March 31, 1998 and for the
year ended December 31, 1997 are set forth on the following
pages. The unaudited pro forma financial information has been
prepared utilizing the historical financial statements of
Industrial Distribution Group, Inc. ("IDG") and LD Supply, Inc.
("LDS"). The pro forma financial information also has been
prepared to reflect the historical financial data for certain
acquisitions made by IDG since the beginning of 1997. In
September 1997, IDG completed an initial public offering of its
common stock (NYSE: IDG) and, concurrent with the offering,
acquired the following nine industrial distribution companies:
Associated Suppliers, Inc., B&J Industrial Supply Company, Cramer
Industrial Supplies, Grinding Supplies Company, J.J. Stangel
Company, Shearer Industrial Supply Company, Slater Industrial
Supply Company, The Distribution Group (formerly known as
Industrial Distribution Group, Inc.), and Tri-Star Industrial
Supply, Inc. (collectively referred to as the "Founding
Companies"). Accordingly, the pro forma financial information
gives pro forma effect to the above acquisitions as if they had
occurred as of March 31, 1998 for the purposes of the balance
sheet and as of January 1, 1997 for the purposes of the
statements of operations. Additionally, IDG completed the mergers
with Northern Tool & Supply and Continental Air Tools, Inc.,
d.b.a. Continental-McLaughlin, during the first quarter of 1998
and with Hawley Industrial Supplies, Inc. (collectively referred
to as the "Pooled Companies") during the second quarter of 1998.
These mergers have been accounted for under the pooling of
interests method of accounting and all historical financial
information has been restated to give effect to these mergers.
The LDS historical financial statements are for the year ended
April 30, 1998. They have been recast to a calendar year pro
forma presentation as of December 31, 1997.
The acquisition of LDS has been accounted for under the purchase
method of accounting. The pro forma financial information has
been prepared on such basis of accounting utilizing estimates and
assumptions as set forth below and in the notes thereto. The pro
forma financial information is presented for informational
purposes and is not necessarily indicative of the future
financial position or results of operations of the combined
companies or of the financial position or the results of
operations of the combined companies that would have actually
occurred had the acquisition been consummated on such date or as
of the periods described above. The purchase price allocations
reflected in the pro forma financial information have been based
on preliminary estimates of the respective fair values of assets
and liabilities which may differ from the actual allocations and
are subject to revision based on further studies and valuations.
Certain amounts in the historical financial statements of LDS
have been reclassified to conform to the financial presentation
of IDG.
F-11<PAGE>
<TABLE>
<CAPTION>
INDUSTRIAL DISTRIBUTION GROUP, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
(In Thousands)
ASSETS
Historical IDG,
as Restated for Subtotal
the Pooled Historical Pro Forma Pro Forma Pro Forma
Companies LDS Combined Adjustments Combined
--------------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 27,098 $ 436 $ 27,534 $(5,000)(e) $ 22,534
Accounts receivable, net 41,471 1,592 43,063 0 43,063
Inventories, net 43,492 1,450 44,942 0 44,942
Prepaid and other current assets 4,505 454 4,959 (451)(g) 4,508
--------- ------- --------- ------- --------
Total current assets 116,566 3,932 120,498 (5,451) 115,047
PROPERTY AND EQUIPMENT, net 12,158 100 12,258 0 12,258
INTANGIBLE ASSETS, net 21,433 0 21,433 0 21,433
OTHER ASSETS 3,106 0 3,106 6,594 9,700
--------- ------- --------- ------- --------
Total assets $ 153,263 $ 4,032 $ 157,295 $ 1,143 $158,438
========= ======= ========= ======= ========
</TABLE
F-12
<PAGE>
Page 2 of 2
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Historical IDG,
as Restated for Subtotal
the Pooled Historical Pro Forma Pro Forma Pro Forma
Companies LDS Combined Adjustments Combined
--------------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,703 $ 0 $ 4,703 $ 0 $ 4,703
Line of credit 0 200 200 0 200
Accounts payable 27,756 404 28,160 0 28,160
Accrued expenses 2,351 133 2,484 0 2,484
Accrued taxes payable 0 583 583 0 583
Other accrued liabilities 3,360 0 3,360 0 3,360
--------- ------- --------- ------- --------
Total current liabilities 38,170 1,320 39,490 0 39,490
--------- ------- --------- ------- --------
LONG-TERM DEBT 5,156 0 5,156 0 5,156
--------- ------- --------- ------- --------
OTHER LONG-TERM LIABILITIES 7,493 0 7,493 0 7,493
--------- ------- --------- ------- --------
DEFERRED TAX LIABILITIES 217 0 217 0 217
--------- ------- --------- ------- --------
STOCKHOLDERS' EQUITY:
Common stock 78 3 81 3 (e) 81
(3)(e)
Additional paid-in capital 90,713 139 90,852 4,303 (e) 94,565
(139)(e)
(451)(g)
Retained earnings 11,436 2,570 14,006 (2,570)(e) 11,436
--------- ------- --------- ------- --------
Total stockholders' equity 102,227 2,712 104,939 1,143 106,082
--------- ------- --------- ------- --------
Total liabilities and stockholders'
equity $ 153,263 $ 4,032 $ 157,295 $ 1,143 $158,438
========= ======= ========= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
financial information.
F-13<PAGE>
INDUSTRIAL DISTRIBUTION GROUP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Historical IDG,
as Restated for Subtotal
the Pooled Historical Pro Forma Pro Forma Pro Forma
Companies LDS Combined Adjustments Combined
--------------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET SALES $ 89,763 $4,465 $ 94,228 $ 0 $94,228
COST OF SALES 68,838 3,472 72,310 0 72,310
-------- ------ -------- ------- -------
Gross profit 20,925 993 21,918 0 21,918
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES 18,815 594 19,409 (54)(g) 19,396
41 (f)
-------- ------ -------- ------- -------
OPERATING INCOME 2,110 399 2,509 13 2,522
INTEREST EXPENSE 293 4 297 0 297
INTEREST INCOME 0 6 6 0 6
OTHER INCOME, net 486 0 486 0 486
-------- ------ -------- ------- -------
INCOME BEFORE INCOME TAXES 2,303 401 2,704 13 2,717
PROVISION FOR INCOME TAXES 927 0 927 160 (h) 1,087
-------- ------ -------- ------- -------
NET INCOME $ 1,376 $ 401 $ 1,777 $ (147) $ 1,630
======== ====== ======== ======= =======
EARNINGS PER SHARE:
Basic $.17 $.20
======== =======
Diluted $.17 $.20
======== =======
WEIGHTED AVERAGE SHARES:
Basic 7,894,585 270,583 (e) 8,165,168
========= ======= =========
Diluted 7,954,541 270,583 (e) 8,225,124
========= ======= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
financial information.
F-14<PAGE>
INDUSTRIAL DISTRIBUTION GROUP, INC.
<TABLE>
<CAPTION>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
(In Thousands, Except Per Share Data)
Founding
Historical IDG Companies
as Restated for Through Subtotal
the Pooled September 23, Historical Pro Forma Pro Forma Pro Forma
Companies 1997 LDS Combined Adjustments Combined
--------------- ------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $153,218 $178,951 $16,037 $348,206 $ 0 $348,206
COST OF SALES 117,726 138,051 12,378 268,155 0 268,155
-------- -------- ------- -------- -------- --------
Gross profit 35,492 40,900 3,659 80,051 0 80,051
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 31,595 36,902 2,950 71,447 28 (g) 70,879
(1,150) (d)
389 (a)
165 (f)
-------- -------- ------- -------- -------- --------
OPERATING INCOME 3,897 3,998 709 8,604 568 9,172
INTEREST EXPENSE 966 2,020 12 2,998 (1,775) (b) 1,223
INTEREST INCOME 461 0 51 512 0 512
OTHER INCOME, net 178 177 0 355 0 355
-------- -------- ------- -------- -------- --------
INCOME FROM OPERATIONS, before income taxes 3,570 2,155 748 6,473 2,343 8,816
PROVISION FOR INCOME TAXES 1,254 854 0 2,108 331 (h) 3,637
1,198 (c)
-------- -------- ------- -------- -------- --------
NET INCOME BEFORE EXTRAORDINARY ITEM 2,316 1,301 748 4,365 814 5,179
-------- -------- ------- -------- -------- --------
EXTRAORDINARY ITEM DUE TO CHANGE FROM LIFO, net of tax 0 0 79 79 (79) (i) 0
-------- -------- ------- -------- -------- --------
NET INCOME $ 2,316 $ 1,301 $ 827 $ 4,444 $ 735 $ 5,179
======== ======== ======= ======== ======== ========
EARNINGS PER SHARE:
Basic $.71 $1.47
======== ========
Diluted $.71 $1.46
======== ========
WEIGHTED AVERAGE SHARES:
Basic 3,258,555 270,583 (e) 3,529,138
========= =========== =========
Diluted 3,282,927 270,583 (e) 3,553,510
========= =========== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
financial information.
F-15<PAGE>
INDUSTRIAL DISTRIBUTION GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
On June 5, 1998, IDG completed the acquisition of all of the
outstanding capital stock of LDS. LDS is a distributor that
provides procurement solutions, products, and services to
industrial users that have maintenance, repair, operating, and
production supply requirements. Consideration paid by IDG
consisted of 270,583 shares of IDG common stock, $5,000,032
in cash, and the assumption of certain liabilities.
The acquisition of LDS was accounted for under the purchase
method of accounting, applying the provisions of Accounting
Principles Board ("APB") Opinion No. 16, and as a result, IDG
recorded the assets and liabilities of LDS at their estimated
fair values, with the excess of the purchase price over this
amount being recorded as goodwill. The total amount of goodwill
was approximately $6,594,000, which includes acquisition costs of
$73,000.
Pro Forma Adjustments
(a) Records the amortization of goodwill over a 40-year period and
other intangible assets over a 13-year period for the Founding
Companies on a straight-line basis.
(b) Eliminates interest expense from line of credit of the Founding
Companies, which was paid from the proceeds of the acquisition.
(c) Records the tax provision for the Founding Companies using
IDG's effective rate.
(d) Eliminates the one-time compensation expense related to
purchases of common stock in relation to the acquisition.
(e) Records the preliminary estimate of goodwill, common stock
issued, and cash paid in relation to the acquisition, and
eliminates the stockholders' equity of LDS.
(f) Records the amortization of goodwill related to LDS over a
40-year period on a straight-line basis.
(g) Eliminates the assets and income and expense related to assets
not acquired in the purchase.
(h) Records the tax provision based on the taxable income of LDS
using IDG's effective rate.
(i) Eliminates the extraordinary item related to change from
last-in, first-out inventory method.
F-16<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned hereunto duly authorized.
INDUSTRIAL DISTRIBUTION GROUP, INC.
By: /s/ Jack P. Healey
Jack P. Healey
Senior Vice President and Chief
Financial Officer
8/18/98
------------------
Date
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated July 24, 1998 included in this Form 8-K/A into the
Company's previously filed Registration Statements on Form S-8 (File No.
333-41921 and File No. 333-45323).
/s/ Arthur Andersen LLP
Atlanta, Georgia
August 14, 1998
