Mail Stop 0510
April 4, 2005
By U.S. Mail and facsimile to (404)949-2040
Mr. Jack P. Healey
Industrial Distribution Group, Inc.
Senior Vice President and Chief Financial Officer
950 East Paces Ferry Road, Suite 1575
Atlanta, Georgia 30326
Re: Industrial Distribution Group, Inc.
Form 10-K for the year ended December 31, 2004
File No. 001-13195
Dear Mr. Healey:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 2004
1. Where a comment below requests additional disclosures or other
revisions to be made, please show us in your supplemental response
what the revisions will look like. These revisions should be
included in your future filings beginning with your next Form 10-
Q.
Liquidity and Capital Resources, page 19
2. Please include in future filings a discussion of the cash
requirements for interest. See footnote 46 to Release No. 33-
8350.
Statement of Cash Flows, page F-6
3. Please expand for us supplementally about the nature of your
premium payments on management liability insurance. In addition,
tell us how you determined that it was appropriate to classify
these
payments as a financing activity.
Note 1. Basis of Presentation, page F-7
Restatement of Fiscal Year 2003
4. Please supplementally provide for us a more comprehensive
discussion of the nature of the error that was identified as well
as
the corrective action you have taken. Tell us when the error was
identified, by whom it was identified, and when it first began.
In
addition, tell us what specific steps you have taken to remediate
the
error.
Note 2. Summary of Significant Accounting Policies, page F-7
General
5. We note that you have developed software programs that are
utilized in your service offerings. Please tell us how you are
accounting for the costs of these programs.
Inventories, page F-8
6. In future filings, please disclose the amount of inventory
representing inventory held by customers on consignment.
7. We note that inventory reserves include the effect of
recoveries
in fiscal 2004 and 2003. Please tell us about the facts and
circumstances surrounding these amounts and why a reversal of
existing reserves was necessary.
Revenue Recognition, page F-10
8. Tell us supplementally and revise future filings to provide a
more
comprehensive discussion of how you determine when you "earn"
revenue. Include specific information related to your service
revenue. Also address for us how you have applied the guidance
set
forth in EITF 00-21: Revenue Arrangements with Multiple
Deliverables.
9. We note that many of your Flexible Procurement Solutions (FPS)
arrangement include a guarantee of the customers cost reduction.
Please tell us how you are accounting for these guarantees. In
addition, tell us how you account for situations in which
customers
share their cost savings with you.
10. We note that much of your inventory consists of products
purchased for resale. Please tell us if any of your vendors
directly
ship items to your customers. If this arrangement exits, please
tell
us what consideration you have given to recognizing revenue on a
gross or net basis. Reference EITF 99-19.
Insurance Reserves, page F-10
11. In future filings, please disclose the amount of your stop
loss
limits.
Note 9. Income Taxes, page F-16
12. We note that you have a $2.6M reversal in your valuation
allowance. Please tell us supplementally the facts and
circumstances
surrounding these reserves and how you determined that such
reserves
were no longer necessary.
Note 10. Commitments and Contingencies, page F-17
13. We note that you have a significant amount of operating
leases.
Please confirm to us that you are correctly accounting for all of
the
provisions of the lease arrangements in accordance with SFAS 13
and
FTB 85-3. Reference the SEC Staff`s letter to the Center for
Public
Company Audit Firms regarding certain leasing issues.
Please respond to these comments within 10 business days, or
tell us when you will provide us with a response. Please provide
us
with a supplemental response letter that keys your responses to
our
comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Patricia Armelin, Staff Accountant, at (202) 824-
5563,
Nathan Cheney at (202) 942-1804 or, in their absence, to the
undersigned at (202) 824-5373.
Sincerely,
John Cash
Accounting Branch Chief
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Mr. Jack P. Healey
April 4, 2005
Page 1 of 4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE