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November 7, 2006

Industrial Distribution Group, Inc., Atlanta, GA, reported a 2.8% sales increase in the third quarter 2006 to $139 million. On a per day basis, revenue increased 4.4% over the prior-year quarter.

Profit was up to $1.8 million from $1.2 million in the prior-year period.

The 2005 quarter results include the company's former Cardinal Machinery business unit, which was sold in September 2005.

Revenues for the nine months ended Sept. 30, 2006, increased 1.8% to $416.3 million. The company's profit for the 2006 nine-month period was $4.9 million compared $3.9 million for the comparable period of 2005.

"The third quarter operating results are further evidence that IDG is achieving steady progress on our strategic initiatives and business objectives," said President and CEO Charles Lingenfelter. "We are beginning to see the results of our initiatives to improve our gross margin through improved and consistent pricing of contracts, along with positive results from other initiatives. More importantly, we have been able to leverage these improvements to bring the results to the bottom line."

Revenues from Flexible Procurement Solutions, IDG's services-based supply offerings including storeroom management, comprised 60.3% of IDG's total sales for the third quarter of 2006 compared to 56.5% of IDG's total sales for the comparable period in 2005. The growth in FPS sales as a percentage of sales was due to a 9.8% increase in sales over the prior-year quarter, primarily reflecting new customer growth.

Year-to-date, FPS revenues were $244.8 million, an increase of 7.9%. At Sept. 30, 2006, the company had 339 FPS sites, including 102 storeroom management arrangements, a net increase of six storeroom management sites since Sept. 30, 2005.

Revenues from IDG's General MROP business decreased 6.3% to $55.2 million for the third quarter. As noted above, $1.7 million of the decline is attributable to the sale of Cardinal, and the remainder is primarily the result of lower production levels in industries including automotive, manufactured housing, and recreational vehicles.

Gross margins for the third quarter of 2006 were 22.6% compared to 22.0% for the third quarter of 2005. The increase reflects IDG's improved pricing models, particularly for FPS contracts, and an increase in personnel and administrative revenues related to the implementation of new FPS sites. Year- to-date, gross margin increased to 21.8% from 21.6% in the prior year.

"This quarter's improved financial results are only a portion of the progress we are making across IDG," Lingenfelter said. "We completed the last significant portion of our IT systems conversion project. We are moving forward in our initiatives to realign our core processes and have bolstered our sales and marketing efforts company-wide including adding several key product line managers. We have also critically evaluated our sales force and made appropriate changes, including implementing new leadership at one of our regions. We will continue to improve our sales and marketing structure as we progress under the 'One Company' initiative."

Related Links:
Industrial Distribution Group Reports 2.8% Sales Jump in 2Q
IDG Reports Small Jump in 1Q Revenues
Strategic Pricing, Technology on Distributors' Minds

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