<PAGE> 1
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 SEPTEMBER 30, 1999
[ ] 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
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 [X] No [ ]
Shares outstanding of the issuer's Common Stock at September 30, 1999: 8,590,450
shares of Common Stock, $0.01 par value share.
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INDEX
INDUSTRIAL DISTRIBUTION GROUP, INC.
<TABLE>
<S> <C>
PART I. Financial Information
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 1999 and December 31, 1998
Consolidated Statements of Operations for the three months ended September 30, 1999 and 1998
Consolidated Statements of Operations for the nine months ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998
Notes to the Consolidated Financial Statements
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
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDUSTRIAL DISTRIBUTION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents ............................... $ 1,028 $ 1,285
Accounts Receivable, net ................................ 66,715 57,459
Inventory, net .......................................... 64,758 60,949
Deferred Tax Assets ..................................... 5,516 5,516
Prepaid and Other Current Assets ........................ 6,105 7,919
-------- --------
TOTAL CURRENT ASSETS ................................... 144,122 133,128
Property and Equipment, net ............................. 29,850 24,619
Intangible Assets, net .................................. 53,050 51,880
Other Assets ............................................ 1,252 1,838
-------- --------
TOTAL ASSETS ........................................... $228,274 $211,465
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short Term Debt ......................................... $ 561 $ 4,039
Accounts Payable ........................................ 50,143 40,342
Accrued Compensation .................................... 3,070 3,772
Other Accrued Liabilities ............................... 3,321 3,986
-------- --------
TOTAL CURRENT LIABILITIES .............................. 57,095 52,139
Long-Term Debt .......................................... 45,587 35,660
Deferred Income Tax Liabilities ......................... 883 884
Other Long-Term Liabilities ............................. 9,023 9,187
-------- --------
TOTAL LIABILITIES ..................................... 112,588 97,870
STOCKHOLDERS' EQUITY:
Common Stock, par value $.01 per share, 50,000,000
shares authorized; 8,616,583 shares issued and 8,590,450
shares outstanding in 1999; 8,484,953 shares issued and
8,478,180 shares Outstanding in 1998 ................... 86 85
Additional Paid-In Capital .............................. 97,605 97,182
Retained Earnings ....................................... 17,995 16,328
-------- --------
Total Stockholders' Equity .............................. 115,686 113,595
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .............. $228,274 $211,465
======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1999 1998
---------- -------------
<S> <C> <C>
NET SALES ................................... $ 135,300 $ 119,888
COST OF SALES ............................... 105,414 92,268
---------- -----------
Gross profit .............................. 29,886 27,620
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 27,861 24,559
---------- -----------
Income from operations .................... 2,025 3,061
INTEREST EXPENSE ............................ 919 359
OTHER (INCOME) EXPENSE ...................... 13 (130)
---------- -----------
INCOME BEFORE INCOME TAXES .................. 1,093 2,832
PROVISION FOR INCOME TAXES .................. 599 1,120
---------- -----------
NET INCOME .................................. $ 494 $ 1,712
========== ===========
BASIC EARNINGS PER SHARE .................... $ .06 $ .20
========== ===========
DILUTED EARNINGS PER SHARE .................. $ .06 $ .20
========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic) . 8,592,287 8,463,802
========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (Diluted) 8,592,287 8,490,652
========== ===========
</TABLE>
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)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
---------- ----------
<S> <C> <C>
NET SALES ............................................... $ 408,445 $ 316,289
COST OF SALES ........................................... 318,476 243,828
---------- ----------
Gross profit .......................................... 89,969 72,461
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ............ 84,448 64,635
---------- ----------
Income from operations ................................ 5,521 7,826
INTEREST EXPENSE ........................................ 2,440 846
OTHER INCOME ............................................ 168 832
---------- ----------
INCOME BEFORE INCOME TAXES .............................. 3,249 7,812
PROVISION FOR INCOME TAXES .............................. 1,582 3,024
---------- ----------
NET INCOME .............................................. $ 1,667 $ 4,788
========== ==========
BASIC EARNINGS PER SHARE ................................ $ .20 $ .58
========== ==========
DILUTED EARNINGS PER SHARE .............................. $ .20 $ .58
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING (Basic) ............. 8,543,419 8,190,780
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING (Diluted) ........... 8,543,419 8,226,364
========== ==========
</TABLE>
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)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................... $ 1,667 $ 4,788
-------- --------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ............................................. 3,498 2,377
Benefit for deferred taxes ................................................ -- (564)
Loss (gain) on disposal of equipment ...................................... (13) 31
Loss (gain) on sale of investments ........................................ 10 (6)
Changes in operating assets and liabilities:
Accounts receivable, net .............................................. (9,367) (2,693)
Inventories, net ...................................................... (3,219) (864)
Prepaid assets and other assets ....................................... 1,088 (3,168)
Accounts payable ...................................................... 9,202 (5,470)
Accrued compensation .................................................. (543) 895
Deferred loan costs ................................................... 190 (15)
Other accrued liabilities ............................................. (296) (1,157)
-------- --------
Total adjustments .................................................. 550 (10,634)
-------- --------
Net cash provided by (used in) operating activities ................ 2,217 (5,846)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net .................................... (14,886) (5,513)
Proceeds from the sale of property and equipment ............................ 6,212 175
Cash paid in acquisitions ................................................... (2,135) (19,886)
Proceed from sale of investments, net ....................................... 43 6
Deposits .................................................................... 180 112
Cash surrender value of life insurance ...................................... 70 1,074
Cash from acquired companies ................................................ 382 855
Payments received on notes receivable ....................................... -- 68
-------- --------
Net cash used in investing activities ................................ (10,134) (23,109)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ........................................ 382 269
Proceeds from (payments on) long term debt, net ............................... 8,950 (6,509)
Purchases of treasury stock ................................................... -- (91)
Proceeds from (payments on) short term debt, net .............................. (1,666) 6,348
Other ......................................................................... (6) (132)
-------- --------
Net cash provided by (used in) financing activities ................ 7,660 (115)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS ....................................... (257) (29,070)
CASH AND CASH EQUIVALENTS, beginning of period ................................ $ 1,285 $ 31,534
======== ========
CASH AND CASH EQUIVALENTS, end of period ...................................... $ 1,028 $ 2,464
======== ========
Supplemental Cash Flow Information:
Cash Paid for Interest ...................................................... $ 2,677 $ 369
======== ========
Cash Paid for Income Taxes .................................................. $ 975 $ 3,409
======== ========
</TABLE>
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 SEPTEMBER 30, 1999
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 28 states and provides product expertise in the procurement
and application of MROP products to a wide range of industries.
1. BASIS OF PRESENTATION
IDG merged with three companies in 1998 which were accounted for as
poolings-of-interests (Pooled Companies). Accordingly, their results of
operations are included for all periods presented. Acquisitions made in 1998 and
1999 using the purchase method of accounting are included from their respective
dates of acquisition.
The accompanying unaudited interim financial statements are prepared pursuant to
the 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 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, 1998, Commission File Number
001-13195.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There were no significant changes in the accounting policies of the Company
during the periods presented.
3. ACQUISITIONS
During the second quarter of 1999, the Company acquired Mel's Industrial
Supplies, Inc. This acquisition was accounted for using the purchase method of
accounting.
4. CREDIT FACILITY
In December 1998, the Company entered into a $125,000,000 revolving credit
facility with a six-bank syndicate. The facility has a three-year term, bears
interest at either the bank's corporate base rate or a Eurodollar rate plus
applicable margins, and has a first security interest in the capital stock of
the Company's business units. The agreement provides that the facility be used
for operations and acquisitions and provides $5,000,000 for swinglines and
$10,000,000 for letters of credit. There is an annual commitment fee on the
unused portion of the facility equal to between 20 and 30 basis points of the
average daily unused portion of the aggregate commitment, depending on the
indebtedness to adjusted EBITDA ratio. This fee amounted to $46,979 and $33,665
for the three months ending September 30, 1999 and 1998 respectively. This
agreement amended the December 1997 agreement for $75,000,000. The amounts
outstanding under this facility at September 30, 1999 and 1998 were $43,000,000
and $17,000,000 respectively. Additionally, the Company has outstanding a letter
of credit issued under this facility for $2,081,000 as of September 30, 1999.
The revolving credit facility contains various covenants pertaining to
maintenance of certain financial relationships. These covenants include
requirements for interest coverage, cash flow, and net worth, among other
restrictions. The covenants also prohibit the payment of dividends. In October
1999, the Company amended the current agreement to allow for changes in its
financial covenants. The Company is currently in compliance with these amended
financial covenants.
5. CAPITAL STOCK
During the third quarter of 1999, the Company issued 32,964 shares of its common
stock through its employee stock purchase plan. The Company also exercised its
right of offset and cancelled 2,142 shares of common stock which had been held
in escrow in accordance with the acquisition agreements of the affected
companies.
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6. COMMITMENTS AND CONTINGENCIES
As previously reported, the Company's wholly owned subsidiary The Distribution
Group, Inc. ("TDG") brought an action on December 22, 1997, in DeKalb County
Superior Court, Georgia, File No. 97-14388-4, against a former stockholder,
Alvis J. Waite, under the Georgia dissenters' rights provisions of the Georgia
Business Corporation Code (the "GBCC"). (The case was subsequently transferred
to the Superior Court of Fulton County, Georgia.) Mr. Waite, as a stockholder of
TDG, had exercised his rights pursuant to the GBCC to dissent from the merger of
TDG with the Company in 1997. TDG offered to pay Mr. Waite $4.2 million for his
interest in TDG; Mr. Waite rejected that offer and demanded payment of $9
million. TDG brought this action to seek a judicial determination of the value
of Mr. Waite's interest in TDG as of the time of the merger. The court appointed
an appraiser to supervise the completion of discovery, to conduct factual
hearings and to render a report on the central valuation issues. The appraiser
rendered his report to the court on November 12, 1999, containing a recommended
value for Mr. Waite's interest of $8.475 million. TDG will file objections to
the report and its recommendations, challenging its conclusions and analyses on
several bases, and will obtain a hearing with the court before a judgement is
entered. The court may accept, modify, or reject (in whole or in part) the
conclusions and recommendations in the appraiser's report. If the court were to
enter judgment based on the appraiser's recommendations, without modification in
light of objections TDG will make, the overall costs to TDG, including accrued
interest and legal costs, would be approximately $11,500,000, and the Company
could incur a charge up to $4.5 million related to this matter. However, until
the court has considered the appraiser's report and TDG's objections to it, the
Company is unable to predict the ultimate outcome of this proceeding.
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, including that identified above, will not have a material
adverse effect on the Company's financial position or results of operations.
7. NEW PRONOUNCEMENTS
In September 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which addresses
the accounting for derivative instruments. SFAS No. 133 was recently amended to
be effective for financial statements for the Company's fiscal quarters
beginning after January 1, 2001. The Company does not expect SFAS No. 133 will
have a significant effect on its current financial reporting.
8. PRO FORMA COMBINED FINANCIAL INFORMATION
The following pro forma combined financial information for the nine months ended
September 30, 1999 and 1998, includes the results of all the companies acquired
in 1998 and 1999 as if the acquisitions had occurred on January 1, 1998. This
pro forma combined financial information includes the effects of (a) the
acquisitions, (b) amortization of goodwill resulting from the acquisitions, (c)
adjustment of interest expense for the debt incurred related to the
acquisitions, and (d) provision for income taxes at 45%.
The earnings per share amounts are based on 8,543,419 and 8,513,480 common
shares deemed to be outstanding for the periods ended September 30, 1999 and
1998, respectively. The net income amounts include estimates of the federal and
state taxes that would have been applicable to the Company had the acquisitions
occurred at the beginning of the period. The underlying tax rates differ from
statutory federal and state rates primarily because a portion of the
amortization of goodwill related to the acquisitions is not deductible for tax
purposes.
The pro forma combined financial information does not purport to represent what
the Company's financial position or results of operations would actually have
been if such transactions and events in fact had occurred on those dates or to
project the Company's results of operations for any future period. (Amounts are
in thousands, except for per share amounts.)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
Net Sales $ 410,417 $ 438,675
--------- ---------
Net Income $ 1,706 $ 4,839
========= =========
Earnings per Share $ .20 $ .57
========= =========
</TABLE>
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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, and companies accounted for under the pooling-of-interests method
of accounting for the periods presented. 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, the effects of the
Year 2000 issue, and other factors discussed in more detail under "Item
1-Business" of the Company's Annual Report on Form 10-K for fiscal 1998.
The timing and magnitude of acquisitions and assimilation costs may also
materially affect quarterly results. Accordingly, the operating results for any
interim period are not necessarily indicative of the results that may be
achieved for any subsequent interim period or for a full year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
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):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
-------------------------------------------------
1999 1998
--------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 135,300 100.0% $ 119,888 100.0%
Cost of Sales 105,414 77.9 92,268 76.9
--------- ------ --------- -----
Gross Profit 29,886 22.1 27,620 23.1
Selling, General and 27,861 20.6 24,559 20.5
--------- ------ --------- -----
Administrative
Operating Income $ 2,025 1.5% $ 3,061 2.6%
========= ====== ========= =====
</TABLE>
Net sales increased $15.4 million or 12.8 % from $119.9 million for the three
months ended September 30, 1998 to $135.3 million for the three months ended
September 30, 1999. This was primarily due to the revenue contributed from
acquisitions, which is somewhat offset by a 4.6% decline in same store revenue
due to an industry slowdown in the manufacturing sector nationwide and
specifically the aerospace, machine tool and heavy equipment sectors.
Cost of sales increased $13.1 million from $92.3 million for the three months
ended September 30, 1998 to $105.4 million for the three months ended September
30, 1999. As a percentage of net sales, cost of sales increased from 76.9% in
1998 to 77.9% in 1999. The increase in cost of sales as a percentage of net
sales is primarily due to a change in total company product mix as a result of
acquisitions and increased competition in the marketplace.
Selling, general, and administrative expenses increased $3.3 million from $24.6
million for the three months ended September 30, 1998 to $27.9 million for the
three months ended September 30, 1999. The increase is primarily attributable to
the effect of acquisitions. As a percentage of net sales, selling, general, and
administrative expenses increased from 20.5% in 1998 to 20.6% in 1999. Expenses
related to establishing a Corporate headquarters increased over the prior year
primarily due to increased staffing levels to fill key strategic positions,
including procurement, information systems, and flexible procurement solutions
in order to build the infrastructure to support the Company's larger number of
operating companies. Excluding corporate expenses for both years and
non-recurring acquisition costs for 1998, SG&A was 19.6% of net sales for 1999
as compared to 19.3% in 1998. The increase in SG&A as
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<PAGE> 10
a percent of sales is the result of fixed costs as a percentage of net sales
increasing due to the decline in revenues from the industry slowdown, and the
costs associated with the integration and physical combination of several
operating facilities.
Operating income decreased $1.1 million from $3.1 million for the three months
ended September 30, 1998 to $2.0 million for the three months ended September
30, 1999. As a percentage of net sales, operating income decreased from 2.6% in
1998 to 1.5% in 1999.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
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):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
------------------------------------------------------
1999 1998
---- ----
<S> <C> <C> <C> <C>
Net Sales $408,445 100.0% $316,289 100.0%
Cost of Sales 318,476 77.9 243,828 77.1
-------- ----- -------- -----
Gross Profit 72,461
89,969 22.1 22.9
Selling, General and
Administrative 84,448 20.7 64,635 20.4
-------- ----- -------- -----
Operating Income $ 5,521 1.4% $ 7,826 2.5%
======== ===== ======== =====
</TABLE>
Net sales increased $92.1 million or 29.1% from $316.3 million for the nine
months ended September 30, 1998 to $408.4 million for the nine months ended
September 30, 1999. This was primarily due to the revenue contributed from
acquisitions, but was somewhat offset by a 6.4% decline in same store revenues
due to an industry slowdown in the manufacturing sectors nationwide specifically
the aerospace, machine tool and heavy equipment sectors.
Cost of sales increased $74.6 million from $243.8 million for the nine months
ended September 30, 1998 to $318.4 million for the nine months ended September
30, 1999. As a percentage of net sales, cost of sales increased from 77.1% in
1998 to 77.9% in 1999. The increase in cost of sales as a percentage of net
sales is primarily due to a change in total company product mix as a result of
acquisitions and increased competition in the marketplace.
Selling, general, and administrative expenses increased $19.8 million for the
nine months ended September 30, 1998 from $64.6 million in 1998 to $84.4 million
in 1999. The increase is primarily attributable to the effect of acquisitions.
As a percentage of net sales, selling, general, and administrative expenses
increased from 20.4% in 1998 to 20.7% in 1999. Expenses for the corporate office
increased $1.9 million over the prior year primarily due to a new facility lease
and increased staffing levels as discussed above for the three month period.
Included in selling, general and administrative expenses for the nine months
ended September 30, 1999 is a charge of $693,000 for expenses associated with
the departure of the former CEO, and the closure of the Chevy Chase, Maryland
office during the first quarter of 1999. For 1998, SG&A expenses included
$317,000 of non-recurring expenses related to acquisitions made during the first
three quarters of 1998. Excluding corporate expenses for both years,
non-recurring acquisition costs for 1998 and the one time charge for the
departure of the former CEO for 1999, SG&A was 19.3% of net sales for the nine
months in 1999 as compared to 19.3% for the nine months in 1998.
Operating income decreased $2.3 million from $7.8 million for the nine months
ended September 30, 1998 to $5.5 million for the nine months ended September 30,
1999. As a percentage of net sales, operating income decreased from 2.5% in 1998
to 1.4% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had $1 million in cash, an additional $86
million of working capital, and $80 million available under its $125 million
revolving credit facility with a six-bank syndicate.
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 at least the current year, as well as to fund
its obligation to the former shareholder of The Distribution Group, Inc. who
dissented from its acquisition by the Company in 1997, when the amount of that
obligation is ultimately decided by the Court.
Net cash provided by (used in) operating activities for the nine months
ended September 30, 1999 and 1998 was $2.2 million and ($5.8 million),
respectively. The change was principally due to changes in working capital
needs.
Net cash used in investing activities for the nine months ended September
30, 1999 and 1998 was $10.1 million and $23.1 million, respectively. In 1999,
the cash used was primarily for property additions, in particular a new office
and warehouse facility for a subsidiary and the funding of the Company's Wide
Area Network (WAN) and Enterprise Resource Planning (ERP) System. In 1998,
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<PAGE> 11
the cash used was primarily for acquisitions. During the quarter the Company
sold $5.6 million of computer hardware, software and related capitalized
expenses in a sale/leaseback transaction.
Net cash provided by (used in) financing activities for the three months
ended September 30, 1999 and 1998 was $7.6 million and ($115,000), respectively.
The change was principally due to borrowing of funds for operations,
acquisitions and property additions.
YEAR 2000
Impact of the Year 2000 Issue
Generally, the year 2000 issue involves computer software and hardware
that are not able to perform without interruption into the year 2000. The
arrival of the year 2000 poses a unique worldwide challenge to the ability of
all systems to correctly recognize the date change from December 31, 1999 to
January 1, 2000. If the Company's systems did not correctly recognize such a
date change, computer applications that rely on the date field could fail or
create erroneous results. Such failures or erroneous results could result in the
temporary inability to process transactions, send invoices or engage in similar
normal business activities. If not adequately addressed by the Company or its
suppliers, customers or other companies with which it does business, the year
2000 issue could result in a material adverse impact on the Company's financial
condition and results of operations.
The Company's State of Readiness
The Company's 13 hub business unit presidents and their IT staff are
responsible for the respective business units' identification and remediation of
date recognition problems in both information technology (IT) and non-systems IT
functions and processes that include microcontrollers and other embedded
computer technology. The Company hired a chief information officer in August
1998 whose responsibilities include coordinating the consolidation of the
business units' IT systems. He has assumed oversight responsibility for the
business units' year 2000 initiatives.
The Company's business units have developed plans to address issues
related to the year 2000 risk. Their plans consist of four phases: (1) assessing
both IT systems and non-systems IT functions and processes; (2) remediating year
2000 problems; (3) testing the remediated systems; and (4) implementing the
remediated systems. The chart below shows that the Company's 13 business units
are year 2000 ready:
<TABLE>
<CAPTION>
STAGES OF THE COMPANY'S
YEAR 2000 PLAN
---------------------------------------------------------------------------------------------------
PHASE IT SYSTEMS NON-SYSTEMS IT FUNCTIONS
--------------------------------- -------------------------------- ----------------------------
<S> <C> <C>
(1) Assessment 13 13
(2) Remediation 13 13
(3) Testing 13 13
(4) Implementation 13 13
</TABLE>
For operational reasons, the Company is purchasing and implementing an
Enterprise Resource Planing (ERP) IT system. The system will be implemented in
stages beginning the third quarter of 2000, with a targeted completion date of
early 2002. The ERP system, which the Company believes will be year 2000
compliant when installed, will replace the current systems being remediated at
the business units. The Company's purchase of the enterprise-wide IT system is a
part of its continuing effort to implement system-wide efficiencies.
Costs to Address Year 2000 Issues
The Company does not anticipate that the year 2000 related costs
(excluding the $25 million expenditure for the ERP and WAN system mentioned
above that is being installed for operational reasons unrelated to year 2000
issues) will be material to its financial condition or results of operations.
Excluding the expenditures for ERP and WAN, the Company estimates that its total
costs for the evaluation, remediation, testing and implementation of its IT and
non-IT systems in connection with the year 2000 issue was $500,000. The Company
funded such expenditures from available sources of capital. The Company spent
approximately 35% of the year 2000 costs for the remediation of software. The
remainder of the expenditures relate to the replacement of systems and
equipment. In accordance with generally accepted accounting principles, certain
year 2000 expenditures will be charged to income for the year when the expense
is incurred.
A-11
<PAGE> 12
Risks of Third-Party Year 2000 Issues
The impact of year 2000 non-compliance by outside parties with whom the
Company transacts business cannot be accurately gauged. The Company has
contacted (1) key customers that aggregate approximately 80% of each business
unit's sales during 1998; (2) key trade vendors that supply approximately 80% of
products sold by the each business unit in 1998; and (3) key utility vendors.
The Company received 1,715 responses to its inquiries with a 99.1% Y2K
compliance rating. The customers and vendors that made up the .9% refused to
confirm that they would be Y2K ready. However they did confirm that they were
working on such compliance.
The Company's Contingency Plans
The Company has developed contingency plans to address reasonably
likely worst case year 2000 scenarios. They were reviewed by the Audit Committee
of the Company's Board of Directors. These scenarios include: (1) an
interruption in the supply of goods and services from the Company's vendors; (2)
the inability of a business unit's IT system to interface with the IT systems of
other business units or the Company's corporate office; and (3) the inability of
the Company's e-commerce systems to integrate with its customers' systems. The
Company has completed its contingency plans with respect to these and other
scenarios.
The Company believes that should the worst case scenarios described in
subparagraphs (2) or (3) above occur, the Company could utilize telephone or
facsimile communications for a short period of time.
See "Item 1. Business--Certain Factors Affecting Forward Looking
Statements--Year 2000 Compliance" in the Company's 1998 Annual Report on Form
10K for a discussion of risks.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No significant changes have occurred since the filing of the Company's Annual
Report on Form 10K.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, the Company's wholly owned subsidiary The
Distribution Group, Inc. ("TDG") brought an action on December 22, 1997, in
DeKalb County Superior Court, Georgia, File No. 97-14388-4, against a former
stockholder, Alvis J. Waite, under the Georgia dissenters' rights provisions of
the Georgia Business Corporation Code (the "GBCC"). (The case was subsequently
transferred to the Superior Court of Fulton County, Georgia.) Mr. Waite, as a
stockholder of TDG, had exercised his rights pursuant to the GBCC to dissent
from the merger of TDG with the Company in 1997. TDG offered to pay Mr. Waite
$4.2 million for his interest in TDG; Mr. Waite rejected that offer and demanded
payment of $9 million. TDG brought this action to seek a judicial determination
of the value of Mr. Waite's interest in TDG as of the time of the merger. The
court appointed an appraiser to supervise the completion of discovery, to
conduct factual hearings and to render a report on the central valuation
issues. The appraiser rendered his report to the court on November 12, 1999,
containing a recommended value for Mr. Waite's interest of $8.475 million. TDG
will file objections to the report and its recommendations, challenging its
conclusions and analyses on several bases, and will obtain a hearing with the
court before a judgment is entered. The court may accept, modify, or reject (in
whole or in part) the conclusions and recommendations in the appraiser's
report. If the court were to enter judgment based on the appraiser's
recommendations, without modification in light of objections TDG will make, the
overall costs to TDG, including accrued interest and legal costs, would be
approximately $11,500,000, and the Company could incur a charge up to $4.5
million related to this matter. However, until the court has considered the
appraiser's report and TDG's objections to it, the Company is unable to predict
the ultimate outcome of this proceeding.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits
Exhibit 10--Amendment to Credit Facility
Exhibit 11 -- Computation of Earnings Per Share
Exhibit 27A -- Financial Data Schedule (for SEC use only)
A-12
<PAGE> 13
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: November 15, 1999 By: /s/ Jack P. Healey
------------------------------------------
Jack P. Healey
Senior Vice President and Chief Financial
Officer (Duly Authorized Officer and
Principal Accounting and Financial Officer)
A-13
<PAGE> 1
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment") is made
and entered into as of ___________1999, among INDUSTRIAL DISTRIBUTION GROUP,
INC., a Delaware corporation (the "Borrower"), the lending institutions listed
on the signature pages of this Amendment (collectively, the "Lenders"), BANK
ONE, N.A. (formerly The First National Bank of Chicago), in its capacities as
agent for the Lenders (in such capacity, the "Agent") and as issuing bank for
the "Facility LCs" as provided in the Credit Agreement referred to below (in
such capacity, the "LC Issuer"), BANK OF AMERICA, N.A. (formerly Bank of
America National Trust and Savings Association), in its capacity as Co-Agent
for the Lenders, and FIRST UNION NATIONAL BANK, in its capacity as Co-Agent for
the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, and the Agent and LC Issuer are
parties to a certain Credit Agreement dated as of December 11, 1997, as amended
and restated by a certain First Amendment and Restatement of Credit Agreement
dated as of December 11, 1998 (as so amended and restated, the "Credit
Agreement");
WHEREAS, the Borrower has requested that the Lenders amend the Credit
Agreement so as to revise one of the financial covenants set forth therein and
in certain other respects;
WHEREAS, the Lenders have agreed to make such amendments, subject to
the terms, conditions and requirements set forth in this Amendment;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINED TERMS. Except as otherwise expressly defined herein,
capitalized terms used in this Amendment that are defined in the Credit
Agreement are used in this Amendment with the respective meanings assigned to
such capitalized terms in the Credit Agreement.
2. AMENDMENT OF SECTION 6.19 ("FINANCIAL COVENANTS"). Section 6.19 of the
Credit Agreement is hereby amended by deleting subsection 6.19.1 thereof
("Coverage Ratio") and substituting in lieu thereof the following subsection
6.19.1:
6.19.1. COVERAGE RATIO. The Borrower will not permit the
ratio, determined as of the end of each of its fiscal quarters for the
then most-recently ended four fiscal quarters, of (i) Consolidated
EBITDA plus Consolidated Rentals, to (ii) Consolidated Interest
Expense plus Consolidated Rentals, to be less than (x) 2.40 to 1.00
for the fiscal quarter of the Borrower ending September 30, 1999, or
(y) 2.50 to 1.00 for any other fiscal quarter of the Borrower.
<PAGE> 2
3. AMENDMENT OF SCHEDULE 5.8 ("SUBSIDIARIES"). Schedule 5.8 attached to
the Credit Agreement is hereby amended by deleting said Schedule 5.8 in its
entirety and substituting in lieu thereof Schedule 5.8 as attached to this
Amendment.
4. AMENDMENT OF PRICING SCHEDULE. The Pricing Schedule attached to the
Credit Agreement is hereby amended by deleting such Pricing Schedule in its
entirety and substituting in lieu thereof the Pricing Schedule attached to this
Amendment. On and after the Amendment Effective Date (as defined below),
interest on all Loans and Commitment Fees on the daily unused portion of each
Lender's Revolving Commitment shall be calculated on the basis of the
applicable interest rate margins and fee rates as set forth in the Pricing
Schedule attached to this Amendment.
5. PROPERTY INFORMATION. The Borrower agrees to furnish to the Agent (a)
not later than November 15, 1999 (i) descriptions in reasonable detail of all
inventory, accounts receivable and fixed assets of the Borrower and its
Subsidiaries, including without limitation (x) as to inventory and equipment,
the locations where such property is maintained and the existence of lien
waivers from landlords or other third parties having control over such
locations, (y) as to accounts receivable, a current listing and aging report,
and (z) as to real property, the report with respect to such properties
prepared for the Borrower by Trammell Crow and, if requested by the Agent,
existing title insurance policies, surveys, and environmental audit reports in
respect of such properties, (ii) the book and estimated fair market values of
the respective properties described in the preceding clause (i) and the basis
for such estimates, and (iii) copies of all agreements that purport to limit or
restrict in any manner the Borrower's or any such Subsidiary's right or ability
to grant in favor of the Agent for the benefit of the Lenders a first priority
security interest in and lien on such properties (other than leases,
conditional sale agreements, and similar secured financing agreements in
respect of specific equipment or leased property, and license agreements in
respect of specific software and similar intellectual property rights, in each
case containing customary restrictions on the right or ability of the lessee,
owner or licensee thereunder to grant such security interests or liens), and
(b) not later than November 30, 1999, current Uniform Commercial Code and, if
requested by the Agent, real property records examination reports with respect
to the Borrower and such Subsidiaries and their respective properties
indicating the status of title to, and the existence of security interests and
liens on, such properties, together with copies of all documents or instruments
creating any such security interests or liens. The Borrower acknowledges and
agrees that failure to comply with the requirements in the preceding sentence
shall constitute a Default for all purposes of the Credit Agreement and all
other Credit Documents.
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders and the
Agent and LC Issuer to enter into this Amendment, the Borrower represents and
warrants to the Lenders and the Agent and LC Issuer as follows:
(a) All representations and warranties set forth in the Credit
Agreement, as amended by this Amendment, are true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of this Amendment, except to the extent that
such representations and warranties are expressly made with respect to a
specific date, in which case such representations and warranties are true and
correct in all material respects as of such specific date.
2
<PAGE> 3
(b) No Default or Unmatured Default has occurred and is continuing
on the date hereof. Since June 30, 1999, there has been no change in the
business, property, prospects, condition (financial or otherwise) or results of
operations of the Borrower and its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
(c) Each of the Borrower and the other Loan Parties has the
organizational power and authority to make, deliver and perform their
respective obligations under this Amendment and has taken all necessary
organizational action to authorize the execution, delivery and performance of
this Amendment. No consent or authorization of, or filing with, any Person
(including, without limitation, any governmental authority), is required in
connection with the execution, delivery or performance by the Borrower or any
such other Loan Party, or the validity or enforceability against the Borrower
or any such other Loan Party, of this Amendment, other than such consents,
authorizations or filings which have been made or obtained.
(d) This Amendment has been duly executed and delivered by the
Borrower and the other Loan Parties, as applicable, and this Amendment
constitutes the legal, valid and binding obligation of the Borrower and such
other Loan Parties, respectively, enforceable against the Borrower and such
other Loan Parties in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity. The execution, delivery and performance by the Borrower
and such other Loan Parties of this Amendment will not violate any applicable
legal requirements or cause a breach or default under any of their respective
contractual obligations.
(e) The Borrower acknowledges and agrees that there are no defenses,
claims, counterclaims, or rights of setoff in its favor against any Lender or
the Agent or LC Issuer with regard to any of the obligations and liabilities of
the Borrower or any of its Subsidiaries under the terms of the Credit
Agreement, the other Credit Documents, or this Amendment.
7. REFERENCES TO AGREEMENT. On and after the Amendment Effective Date,
each and every reference in the Credit Documents to the Credit Agreement shall
be deemed to refer to and mean the Credit Agreement as amended by this
Amendment. The parties further confirm and agree that (i) except as expressly
amended herein, the Credit Agreement remains in full force and effect in
accordance with its terms, and (ii) except as expressly amended or supplemented
by this Amendment, all other Credit Documents remain in full force and effect
in accordance with their respective terms.
8. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Agent in connection with the preparation,
execution and delivery of this Amendment and the other Credit Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities hereunder and thereunder. In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Amendment and the other Credit Documents, and agrees to save the Agent and each
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying such taxes.
9. GOVERNING LAW. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Georgia.
3
<PAGE> 4
10. ENTIRE UNDERSTANDING. This Amendment sets forth the entire
understanding of the parties with respect to the matters set forth herein, and
shall supersede any prior negotiations, commitment letters, or agreements,
whether written or oral, with respect to such matters.
11. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts and may
be delivered by telecopier. Each counterpart so executed and delivered shall be
deemed an original and all of which taken together shall constitute but one and
the same instrument.
12. NO WAIVER. The Borrower agrees that nothing herein shall constitute a
waiver by the Lenders of any Default or Unmatured Default, whether known or
unknown, which may exist under the Credit Agreement, except as expressly
provided herein with respect to compliance by the Borrower with the minimum
Coverage Ratio of 2.50 to 1.00 for the four fiscal quarter period ending
September 30, 1999, as required by Section 6.19.1 of the Credit Agreement.
13. AMENDMENT EFFECTIVE DATE. This Amendment shall become effective as of
the date first above written (the "Amendment Effective Date") when this
Amendment shall have been executed and delivered by the Borrower, Lenders
constituting the Required Lenders as provided in the Credit Agreement, and the
Agent.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
through their authorized officers as of the date first above written.
INDUSTRIAL DISTRIBUTION GROUP, INC.
By:
------------------------------------
Title:
---------------------------------
5
<PAGE> 6
BANK ONE, N.A.
(Formerly The First National Bank of Chicago)
Individually and as Agent
By:
------------------------------------------
Title:
---------------------------------------
6
<PAGE> 7
BANK OF AMERICA, N.A.
(Formerly Bank of America National Trust and
Savings Association),
Individually and as Co-Agent
By:
----------------------------------------
Title:
-------------------------------------
7
<PAGE> 8
FIRST UNION NATIONAL BANK,
Individually and as Co-Agent
By:
----------------------------------
Title:
------------------------------
8
<PAGE> 9
FLEET NATIONAL BANK
By:
---------------------------------
Title:
------------------------------
9
<PAGE> 10
WACHOVIA BANK, N.A.
By:
---------------------------------
Title:
------------------------------
10
<PAGE> 11
COMPASS BANK
By:
----------------------------------
Title:
------------------------------
11
<PAGE> 12
PRICING SCHEDULE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
MARGIN STATUS STATUS STATUS STATUS STATUS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Eurodollar Rate 1.50% 1.75% 2.00% 2.25% 2.50%
- ---------------------------------------------------------------------------------------------------------------
Floating Rate 0.50% 0.75% 1.00% 1.25% 1.50%
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
FEE RATE STATUS STATUS STATUS STATUS STATUS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitment 0.325% 0.35% 0.50% 0.50% 0.50%
Fee
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"FINANCIALS" means the annual or quarterly consolidated financial
statements of the Borrower and its Subsidiaries delivered pursuant to Section
6.1(i) or (ii).
"LEVEL I STATUS" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, the
Leverage Ratio is less than or equal to 2.00 to 1.00.
"LEVEL II STATUS" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower does not qualify for Level I Status and (ii) the Leverage Ratio is
less than or equal to 2.50 to 1.00.
"LEVEL III STATUS" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower does not qualify for Level I Status or Level II Status, and (ii)
the Leverage Ratio is less than or equal to 3.00 to 1.00.
"LEVEL IV STATUS" exists at any date if, as of the last day of the
fiscal quarter of the Borrower referred to in the most recent Financials, (i)
the Borrower does not qualify for Level I Status, Level II Status, or Level III
Status and (ii) the Leverage Ratio is less than or equal to 3.50 to 1.00.
"LEVEL V STATUS" exists at any date if the Borrower does not qualify
for Level I, Level II, Level III or Level IV Status.
"STATUS" means either Level I Status, Level II Status, Level III
Status, or Level IV Status, as the case may be.
12
<PAGE> 13
The Applicable Margin and Applicable Fee Rate shall be determined in
accordance with the foregoing table based on the Borrower's Status as reflected
in the then most recent Financials. Adjustments, if any, to the Applicable
Margin or Applicable Fee Rate shall be effective five Business Days after the
Agent has received the applicable Financials. If the Borrower fails to deliver
the Financials to the Agent at the time required pursuant to Section 6.1, then
the Applicable Margin and Applicable Fee Rate shall be the highest Applicable
Margin and Applicable Fee Rate set forth in the foregoing table until five
Business Days after such Financials are so delivered.
13
<PAGE> 14
ACKNOWLEDGMENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing
Amendment No. 1 to Credit Agreement dated as of __________, 1999 (the
"Amendment"), (ii) consents to the execution and delivery of the Amendment by
the parties thereto, and (iii) reaffirms all of its obligations and covenants
under the Subsidiary Guaranty and Subsidiary Pledge Agreement (all as defined
in the Credit Agreement and in effect as of the date hereof), and agrees that
none of such obligations and covenants shall be affected by the execution and
delivery of the Amendment, and that all of such obligations and covenants
remain in full force and effect on and after the date hereof. This
Acknowledgment and Reaffirmation may be executed in any number of counterparts
and by the different parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
instrument.
Associated Suppliers, Inc.
Atlantic Industrial Supply Co., Inc.
Austin Ford Logan, Inc.
B&J Industrial Supply Company
B&J Industrial Supply Company of Spokane
B&J Industrial Supply Company of Tacoma
Buford Bros., Inc.
Cardinal Machinery, Inc.
Cramer Industrial Supplies, Inc.
The Distribution Group, Inc.
Dynamic Tool & Abrasives, Inc.
E. C. Blackstone Company
Hawley Industrial Supplies, Inc.
IDG Real Properties, Inc.
Industrial & Tool Suppliers Limited Liability
Company
Industrial Distribution Group - California, Inc.
The Innovative Distributor Group, Inc.
J.J. Stangel Co.
Knox Industrial, Inc.
L.D. Supply, Inc.
Mel's Industrial Supplies, Inc.
The New England Group Industrial Distributors, Inc.
Northern Tool & Supply, Inc.
Petry & Morrow, Inc.
Refco, Inc.
Shearer Industrial Supply Co.
Tri-Star Industrial Supply, Inc.
Turner Industries, Inc.
Wm. H. Taylor & Company, Inc.
By:
--------------------------------------------------
Name:
Title:
14
<PAGE> 15
SCHEDULE 5.8
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NAME STATE OF CAPITAL STOCK PERCENTAGE
INCORPORATION HELD BY HELD
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Associated Suppliers, Inc. Oregon IDG 100
- -----------------------------------------------------------------------------------------------
Atlantic Industrial Supply Co., Inc. Massachusetts IDG 100
- -----------------------------------------------------------------------------------------------
Austin Ford Logan, Inc. New York IDG 100
- -----------------------------------------------------------------------------------------------
B&J Industrial Supply Company Washington IDG 100
- -----------------------------------------------------------------------------------------------
B&J Industrial Supply Company of Washington B&J 100
Spokane
- -----------------------------------------------------------------------------------------------
B&J Industrial Supply Company of Washington B&J 100
Tacoma
- -----------------------------------------------------------------------------------------------
Buford Bros., Inc. Tennessee IDG 100
- -----------------------------------------------------------------------------------------------
Cardinal Machinery, Inc. Tennessee IDG 100
- -----------------------------------------------------------------------------------------------
Cramer Industrial Supplies, Inc. New York IDG 100
- -----------------------------------------------------------------------------------------------
The Distribution Group, Inc. Georgia IDG 100
- -----------------------------------------------------------------------------------------------
Dynamic Tool & Abrasives, Inc. Michigan IDG 100
- -----------------------------------------------------------------------------------------------
E.C. Blackstone Company Georgia IDG 100
- -----------------------------------------------------------------------------------------------
Hawley Industrial Supplies, Inc. Connecticut IDG 100
- -----------------------------------------------------------------------------------------------
IDG Real Properties, Inc. Georgia IDG 100
- -----------------------------------------------------------------------------------------------
Industrial & Tool Suppliers Maine IDG 50
Limited Liability Company Refco 50
- -----------------------------------------------------------------------------------------------
Industrial Distribution Group - California IDG 100
California, Inc.
- -----------------------------------------------------------------------------------------------
The Innovative Distributor Group, Inc. Ohio IDG 100
- -----------------------------------------------------------------------------------------------
J.J. Stangel Co. Wisconsin IDG 100
- -----------------------------------------------------------------------------------------------
Knox Industrial, Inc. California IDG-CA 100
- -----------------------------------------------------------------------------------------------
L.D. Supply, Inc. Georgia IDG 100
- -----------------------------------------------------------------------------------------------
Mel's Industrial Supplies, Inc. California IDG 100
- -----------------------------------------------------------------------------------------------
The New England Group New Hampshire IDG 100
Industrial Distributors, Inc.
- -----------------------------------------------------------------------------------------------
Northern Tool & Supply, Inc. Michigan IDG 100
- -----------------------------------------------------------------------------------------------
Petry & Morrow, Inc. Pennsylvania IDG 100
- -----------------------------------------------------------------------------------------------
Refco, Inc. Georgia IDG 100
- -----------------------------------------------------------------------------------------------
Shearer Industrial Supply Co. Pennsylvania IDG 100
- -----------------------------------------------------------------------------------------------
Tri-Star Industrial Supply, Inc. Missouri IDG 100
- -----------------------------------------------------------------------------------------------
Turner Industries, Inc. Pennsylvania Shearer 100
- -----------------------------------------------------------------------------------------------
Wm. H. Taylor & Company, Inc. Delaware Shearer 100
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 11
INDUSTRIAL DISTRIBUTION GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND NINE MONTHS PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Net income $ 494 $1,712 $ 1,667 $4,788
======== ====== ======== ======
Weighted average common
shares outstanding 8,592 8,464 8,543 8,191
Add - Dilutive effect of outstanding
options (as determined by the
application of the treasury stock method) -- 27 -- 35
-------- ------ -------- ------
Weighted average common and
common equivalent
shares outstanding 8,592 8,491 8,543 8,226
======== ====== ======== ======
Primary earnings per share: $ .06 $ .20 $ .20 $ .58
======== ====== ======== ======
Diluted earnings per share: $ .06 $ .20 $ .20 $ .58
======== ====== ======== ======
</TABLE>
A-14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INDUSTRIAL DISTRIBUTION GROUP, INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,028
<SECURITIES> 0
<RECEIVABLES> 68,530
<ALLOWANCES> (1,815)
<INVENTORY> 64,758
<CURRENT-ASSETS> 144,122
<PP&E> 37,564
<DEPRECIATION> (7,714)
<TOTAL-ASSETS> 228,274
<CURRENT-LIABILITIES> 57,095
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 115,686
<TOTAL-LIABILITY-AND-EQUITY> 228,274
<SALES> 408,445
<TOTAL-REVENUES> 408,445
<CGS> 318,476
<TOTAL-COSTS> 471,454
<OTHER-EXPENSES> (168)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,440
<INCOME-PRETAX> 3,249
<INCOME-TAX> 1,582
<INCOME-CONTINUING> 1,667
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,667
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
