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Industrial Distribution Group, Inc.,Atlanta, GA, reported revenues for the year ended Dec. 31, 2004, increased 9.5% to $529.2 million, compared to $483.4 million for the 2003 fiscal year. Net income for 2004 was $7.3 million compared to $2.4 million for 2003 as restated. Net income originally reported for fiscal year 2003 was $2.6 million.
Net income in 2004 includes $0.20 per diluted share attributable to the previously reported deferred tax benefit adjustment recorded in the third quarter of 2004. The company is providing with this press release a schedule of pro forma results for fiscal year 2004 that excludes the impacts of that adjustment, and provides a reconciliation to generally accepted accounting principles (GAAP) results, in order to permit investors and other interested parties to better assess the tax expense, net income and earnings per share implications of that tax matter.
Revenues for the fourth quarter 2004 increased 12.1% to $134.6 million compared to $120.1 million reported for the comparable period of 2003. The company's net income for the fourth quarter of 2004 was $1.4 million, compared to $1.1 million for the comparable period of 2003 as restated. The adjustments to restate fiscal year 2003 results decreased net income in the fourth quarter of 2003 by $49,000.
For the fourth quarter, total FPS revenues, including storeroom management, were 55.4% of total revenues compared to 53.7% of total revenues for the comparable period of 2003.
For the full year 2004, total FPS revenues, including storeroom management, increased 15.4% from the prior year and grew to 54.7% of total 2004 revenues compared to 51.8% for 2003. At the end of 2004, the company had 341 FPS sites under management, as compared to 315 at the end of 2003.
"We were successful during 2004 with our strategy that focused on achieving strong top-line revenue growth from our service offerings and stabilizing our products business, while we maintained an internal focus on operating efficiencies. Together, these led to our earnings growth and enhanced shareholder value," said Andrew B. Shearer, IDG's president and CEO. "We believe that IDG will continue to benefit from the increasing number of manufacturers that seek to achieve product and process improvements through business process outsourcing of supply chain functions, where they achieve greater efficiencies and cost savings. IDG's Flexible Procurement Solutions service offerings, most notably storeroom management, are increasingly recognized as an outsourced supply chain opportunity that helps manufacturers realize documented cost savings that improve their competitive position."
Gross margins for the fourth quarter 2004 were 22.3% compared to 22.8% for the comparable period of 2003. For the year ended Dec. 31, 2004, gross margins were 21.9% compared to the 22.3% for 2003. Gross margins reflect competitive pricing pressures, as well as the ongoing growth of the company's service offerings that reflect lower product pricing but higher operating margins.
The corrections made to properly record accounts payable caused operating expenses to be higher in both 2004 and 2003. Such increases contributed to the decline in gross margin for 2004 as compared to 2003. Partially offsetting these effects, were adjustments to decrease the company's depreciation expense for 2004 by approximately $0.3 million, and decreased depreciation expense for 2003 by approximately $0.2 million, because of correcting adjustments made to previously recorded amounts to provide for consistency with the company's current fixed asset accounting policies. In addition, the company realized additional volume rebates of $0.5 million and a reduction in inventory reserves of $0.3 million in the fourth quarter of 2004 compared to the fourth quarter of 2003.
The company continued to realize progress in its ongoing efforts to reduce the