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Industrial Distribution Group revenues for the third quarter ending Sept. 30, were up $.7 million from the same period last year. Third quarter revenues were $135.2 million, compared with $134.5 million in 2004.
The company's net income for the third quarter was $1.2 million compared with $3.5 million during the same period last year.
Revenues for the nine months ending Sept. 30, 2005, increased $14.2 million or 3.6 percent to $408.8 million, compared with $396.6 million in the same period last year. IDG's 2005 nine-month net income was $3.9 million compared to net income of $5.9 million in the same period in 2004.
According to a company statement, the change in net income between the third quarters of 2004 and 2005 reflects a $0.21 per diluted share income tax adjustment based on the company's recording during the third quarter of 2004 a $2 million reduction in its valuation allowance for deferred tax assets associated with future deductible goodwill amortization.
As previously announced, during the third quarter, the company sold its Cardinal Machinery business unit and recorded a $.1 million gain.
Revenues from Flexible Procurement Solutions, IDG's services-based supply offerings including storeroom management, comprised 56.5 percent of IDG's total sales for the third quarter of 2005 compared to 54.3 percent of IDG's total sales for the comparable period in 2004. Year-to-date, FPS revenues were $227 million, an increase of $12.3 million or 5.7 percent compared with the prior year. As of Sept. 30, 2005, the Company had 335 FPS sites, including 96 storeroom management arrangements, a net increase of three FPS sites since Sept. 30, 2004. The increase in net FPS sites was partially offset by the reduction in the number of sites primarily due to competitive pricing pressures and customer plant consolidations.
Revenues from IDG's general MROP business, including revenues from the Cardinal Machinery business unit, decreased $2.6 million or 4.2 percent to $58.9 million for the third quarter. The decline in revenues was primarily the result of lower production levels at automotive industry customers and a decline from IDG customers who also serve and support this industry. IDG was similarly impacted during the month of September by the union strike at a large aerospace customer, which resulted in a direct revenue impact of approximately $0.5 million.
"While IDG has experienced some recent challenges, I am optimistic about the company's future," said Charles A. Lingenfelter, IDG's president and CEO. IDG's talented associates, leading position in the industry, strong balance sheet and our FPS offerings provide the company with a strong foundation to build upon for the future. These strengths, combined with the company's long-standing position in the general MROP market, give me great confidence in IDG's ability to provide improved top line growth and operating margins. This, in turn, should provide the overall improvement in financial performance we all seek."
Gross margins for the third quarter of 2005 were 22 percent, a margin consistent with the second quarter of 2005 and an improvement compared with the 21.4 percent reported for the third quarter of 2004. Gross margin improvements during the third quarter resulted from IDG's company-wide efforts to improve margins through enhanced pricing practices, more rapid transfer of price increases to customers, and more rigid profitability standards on FPS contract renewals.
During the third quarter, the company continued its focus on the management and optimization of its expense and cost structure. Selling, general and administrative expenses increased by only 4.5 percent over the prior year third quarter. SG&A as a percent of total revenues increased from 19.4 percent in the third quarter of 2004 to 20.2 percent for the third quarter of 2005. These increases were driven by increased