2014

MSC Industrial Direct Co., Inc. Reports Fiscal 2013 Third Quarter Results - Net Sales of $636.9 Million in Fiscal 2013 Third Quarter -

- Adjusted Diluted Earnings per Share of $1.05, GAAP Diluted Earnings per Share of $0.98 in Fiscal 2013 Third Quarter -

MELVILLE, N.Y., July 10, 2013 /PRNewswire/ -- MSC INDUSTRIAL DIRECT CO., INC. (NYSE: MSM), "MSC" or the "Company," a premier distributor of Metalworking and Maintenance, Repair and Operations ("MRO") supplies to industrial customers throughout the United States and Canada, today reported financial results for its fiscal third quarter ended June 1, 2013.

Net sales for the third quarter of fiscal 2013 were $636.9 million, an increase of 4.1% (5.7% on an average daily sales basis) over net sales of $612.0 million in the third quarter of fiscal 2012.  The recently acquired Barnes Distribution North America ("BDNA") business contributed approximately $34.7 million to net sales, reflecting its contribution to net sales from the acquisition date of April 22, 2013, to the end of the fiscal third quarter. Excluding non-recurring costs of $6.4 million associated with the BDNA acquisition and the co-location of the Company's headquarters, adjusted operating income for the fiscal 2013 third quarter was $106.6 million, or 16.7% of net sales, compared to GAAP operating income of $110.9 million, or 18.1% of net sales in the same quarter a year ago. GAAP operating income for the fiscal 2013 third quarter was $100.2 million.

Excluding the after tax effects of non-recurring costs, adjusted net income for the third quarter of fiscal 2013 was $66.7 million, or $1.05 per diluted share (based on 63.1 million diluted shares outstanding), compared to GAAP net income of $70.2 million, or $1.10 per diluted share, a year ago (based on 63.1 million diluted shares outstanding). The BDNA operations contributed approximately $0.02 to the fiscal third quarter EPS and GAAP net income for the third quarter of fiscal 2013 was $62.4 million, or $0.98 per diluted share. 

Erik Gershwind, President and Chief Executive Officer, stated, "We continue to fuel share gains in our targeted markets despite a sluggish manufacturing sector, particularly in metalworking-related end markets.  The organic growth investments we have made in E-commerce, vending and other areas are offsetting a weak demand environment."

Jeff Kaczka, Executive Vice President and Chief Financial Officer, commented, "Our cost reduction and tight working capital management enabled us to exceed our third quarter EPS guidance against the backdrop of a soft demand environment.  For the fourth quarter, our adjusted EPS at the midpoint of guidance is 89 cents, which is down from $1.09 last year, reflecting primarily the extra week in FY12 and the lack of the mid-year price increase.  After those adjustments, the fourth quarter will be very similar to the past couple of quarters."

Mr. Gershwind concluded, "I remain confident about our future prospects for revenue and earnings growth, as we execute on our strategic investments and gain traction with the new, high margin growth platform in BDNA.  We are excited about our early returns on BDNA and are beginning to execute our integration plans including distribution network and headquarter consolidations with MSC.  We are on track to achieving our long-term growth goal of $4 billion in revenue by FY2016."

Outlook

Based on a continuation of current market conditions, for the fiscal 2013 fourth quarter the Company expects net sales including BDNA to be between $661 million and $673 million. At the midpoint, average daily sales exclusive of BDNA are expected to be flat. Excluding non-recurring costs related to the co-location of the Company's headquarters and non-recurring transaction and integration costs associated with BDNA, the Company expects adjusted diluted earnings per share for the fourth quarter of fiscal 2013 to be between $0.87 and $0.91.

The Company expects the non-recurring costs related to the co-location of the Company's headquarters to have a $0.03 impact and the integration costs related to the BDNA acquisition to have approximately a $0.03 impact on its GAAP diluted earnings per share in the fiscal fourth quarter. 

The management of MSC will host a conference call today, at 11:00 a.m. Eastern Time, to review the Company's results for the fiscal 2013 third quarter.  The call and accompanying slides may be accessed via the Internet on MSC's website located at: http://investor.mscdirect.com.  A replay of the conference call will be available on the Company's website until Friday, August 9, 2013.

Alternatively, the conference call can be accessed by dialing 1-877-270-2148 (U.S.) or 1-412-902-6510 (international). A replay will be available within one hour of the conclusion of the call and will remain available until Friday, August 9, 2013. The replay is accessible by dialing 1-877-344-7529 (U.S.) or 1-412-317-0088 (international) and entering passcode 10030820.

The Company's next reporting date for its fiscal 2013 fourth quarter will be October 30, 2013.

An explanation and reconciliation of the non-GAAP financial measures contained in this press release to the most directly comparable GAAP financial measures are included in the attached tables.

About MSC Industrial Direct Co., Inc.

MSC Industrial Direct Co., Inc. is one of the largest distributors of Metalworking and Maintenance, Repair and Operations ("MRO") supplies to industrial customers throughout the United States and Canada. MSC employs one of the industry's largest sales forces and distributes approximately 600,000 industrial products from approximately 3,000 suppliers. In-stock availability is approximately 99%, with next day standard delivery to the contiguous United States on qualifying orders up until 8 p.m. Eastern Time.  For more information, visit MSC's website at http://www.mscdirect.com.

Note Regarding Forward-Looking Statements: Statements in this Press Release may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about expected future results, are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this release does not constitute an admission by MSC or any other person that the events or circumstances described in such statement are material.   Factors that could cause actual results to differ materially from those in forward-looking statements include: problems with successfully integrating acquired operations, unanticipated delays or costs associated with opening or expanding our customer fulfillment centers or customer service centers, current economic, political and social conditions, changing customer and product mixes, financial restrictions on outstanding borrowings, industry consolidation, the loss of key suppliers or supply chain disruptions, competition, general economic conditions in the markets in which we operate, volatility in commodity and energy prices, credit risk of our customers, risk of cancellation or rescheduling of orders, work stoppages or other business interruptions (including those due to extreme weather conditions) at transportation centers or shipping ports, the risk of war, terrorism and similar hostilities, dependence on our information systems and on key personnel, and the outcome of potential government or regulatory proceedings or future litigation relating to pending or future claims, inquiries or audits.  Additional information concerning these and other risks is described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the reports on Forms 10-K and 10-Q that we file with the U.S. Securities and Exchange Commission.  We assume no obligation to update any of these forward-looking statements.

(Tables Follow)

 

 

MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

 


June 1,

2013


September 1,
2012


(Unaudited)



ASSETS




Current Assets:




    Cash and cash equivalents

$           58,017


$        168,453

    Accounts receivable, net of allowance for doubtful accounts

337,779


297,215

    Inventories

414,268


393,412

    Prepaid expenses and other current assets

43,584


29,313

    Deferred income taxes

31,718


31,718

        Total current assets

885,366


920,111





Property, plant and equipment, net

234,643


174,597

Goodwill

632,801


289,124

Identifiable intangibles, net

159,807


51,212

Other assets

6,875


9,832

Total assets

$      1,919,492


$      1,444,876





LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities:




    Revolving credit note

$           40,000


$                   --

    Current maturities of long-term debt

10,527


1,007

    Accounts payable

106,082


96,640

    Accrued liabilities

88,240


72,868

        Total current liabilities

244,849


170,515

Long-term debt, net of current maturities

242,353

2,189

Deferred income taxes and tax uncertainties

85,180


85,061





        Total liabilities

572,382


257,765

Commitments and Contingencies




Shareholders' Equity:




    Preferred Stock

--


--

    Class A common stock

55


53

    Class B common stock

14


16

    Additional paid-in capital

522,327


483,682

    Retained earnings

1,095,568


970,965

    Accumulated other comprehensive loss

(3,608)


(2,443)

    Class A treasury stock, at cost

(267,246)


(265,162)

        Total shareholders' equity

1,347,110


1,187,111

Total liabilities and shareholders' equity

$      1,919,492


$      1,444,876

 

 

MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(In thousands, except net income per share data)

(Unaudited)

 


Thirteen Weeks Ended


Thirty-Nine Weeks Ended


June 1,

2013

May 26,

2012


June 1,

2013

May 26,

2012

Net sales

$         636,923

$         611,970


$      1,783,876

$        1,720,647

Cost of goods sold

347,410

332,387


972,905

929,471

Gross profit

289,513

279,583


810,971

791,176

Operating expenses

189,267

168,724


517,797

486,966

Income from operations

100,246

110,859


293,174

304,210

Other income (expense):






Interest expense

(1,141)

(63)


(1,266)

(179)

Interest income

31

42


113

160

Other income (expense), net

(5)

15


66

(5)

Total other income (expense)

(1,115)

(6)


(1,087)

(24)

        Income before provision for

         income taxes

99,131

110,853


292,087

304,186

Provision for income taxes

36,777

40,642


110,467

114,070

Net income

$           62,354

$           70,211


$         181,620

$           190,116

Per Share Information:






Net income per common share:






  Basic

$               0.99

$               1.11


$               2.88

$                 3.02

  Diluted

$               0.98

$               1.10


$               2.86

$                 3.00

Weighted average shares used in computing net income per common share:






  Basic

62,808

62,651


62,628

62,517

  Diluted

63,134

63,055


62,947

62,896

Cash dividend declared per common share

$               0.30

$               0.25


$               0.90

$                 0.75

 

 

 

MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 


Thirteen Weeks Ended


Thirty-Nine Weeks Ended


June 1,
2013

May 26,
2012


June 1,
2013

May 26,
2012

Net income, as reported

$            62,354

$         70,211


$    181,620

$    190,116

Cumulative foreign currency translation adjustment

(388)

(132)


(1,165)

(505)

Comprehensive income

$            61,966

$        70,079


$    180,455

$    189,611


 

MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 


Thirty-Nine Weeks Ended


June 1,

2013


May 26,
2012

Cash Flows from Operating Activities:




Net income

$     181,620


$     190,116

Adjustments to reconcile net income to net cash

  provided by operating activities:








      Depreciation and amortization

33,994


25,279

      Stock-based compensation

11,989


11,410

      Loss on disposal of property, plant, and equipment

791


876

      Provision for doubtful accounts

2,111


2,520

      Deferred income taxes


3,025

      Excess tax benefits from stock-based compensation

(5,563)


(4,844)

      Write-off of deferred financing costs on previous credit facility

594


      Changes in operating assets and liabilities, net of amounts

        associated with business acquired:




            Accounts receivable

(6,791)


(30,150)

            Inventories

28,084


(44,499)

            Prepaid expenses and other current assets

(11,136)


(11,837)

            Other assets

2,162


4,388

            Accounts payable and accrued liabilities

7,574


(1,076)





      Total adjustments

63,809


(44,908)





                  Net cash provided by operating activities

245,429


145,208





Cash Flows from Investing Activities:




      Expenditures for property, plant and equipment

(62,305)


(28,753)

      Cash used in business acquisition, net of cash received

(548,769)


(33,451)





                  Net cash used in investing activities

(611,074)


(62,204)





Cash Flows from Financing Activities:




      Purchases of treasury stock

(3,656)


(47,986)

      Payment of cash dividends

(56,843)


(47,341)

      Payments on capital lease and financing obligations

(981)


(721)

      Excess tax benefits from stock-based compensation

5,563


4,844

      Proceeds from sale of Class A common stock in connection with

       associate stock purchase plan

2,891


2,630

      Proceeds from exercise of Class A common stock options

19,986


19,566

      Borrowings under financing obligation

257


1,050

      Borrowings under Credit Facility

370,000


      Credit facility financing costs

(1,904)


      Pay down revolving loans from credit facility

(80,000)


                  Net cash provided (used) in financing activities

255,313


(67,958)

Effect of foreign exchange rate changes on cash and cash equivalents

(104)


(56)

Net (decrease) increase in cash and cash equivalents

(110,436)


14,990

Cash and cash equivalents – beginning of period

168,453


95,959

Cash and cash equivalents – end of period

$        58,017


$      110,949

Supplemental Disclosure of Cash Flow Information:




Cash paid for income taxes

$      102,107


$      113,299

Cash paid for interest

$             367


$               34

Non-GAAP Financial Measures
To supplement MSC's unaudited selected financial data presented on a basis consistent with Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures, including adjusted operating income, adjusted net income, and adjusted net income per diluted share.  The adjusted supplemental measures exclude non-recurring costs associated with the Barnes Distribution North America ("BDNA") and co-location of our corporate headquarters in Davidson, North Carolina and the related tax effects.  These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies.  We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with MSC's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate MSC's results of operations in conjunction with the corresponding GAAP measures.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures.  We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of Company performance.

In calculating non-GAAP financial measures, we exclude these non-recurring costs to facilitate a review of the comparability of the Company's operating performance on a period-to-period basis because such costs are not, in our view, related to the Company's ongoing operational performance.  We use non-GAAP measures to evaluate the operating performance of our business, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors.  In addition, we use non-GAAP financial measures as performance metrics for management incentive programs.  Since we find these measures to be useful, we believe that investors benefit from seeing results "through the eyes" of management in addition to seeing GAAP results.  We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
  • the ability to better identify trends in the Company's underlying business and perform related trend analyses; and
  • a better understanding of how management plans and measures the Company's underlying business.

The following tables reconcile GAAP operating income, GAAP net income and GAAP net income per diluted share ("EPS") to non-GAAP adjusted operating income, adjusted net income, and adjusted net income per diluted share:


Thirteen Weeks Ended


June 1, 2013

(in thousands)

$

Margin

GAAP Operating income

$           100,246

15.7%

Non-recurring costs

6,385


Adjusted Operating income

$           106,631

16.7%


Thirteen Weeks Ended




June 1, 2013

May 26, 2012



(in thousands)

$

$



Sales

$           636,923

$           611,970



Cost of Sales

347,410

332,387



Gross Margin

289,513

279,583



Operating Expenses

189,267

168,724



Income from Operations

100,246

110,859



Non-recurring costs

6,385

-



Adjusted Operating income

$           106,631

$           110,859











Thirteen Weeks Ended



June 1, 2013


(in thousands, except per share amounts)

$(after tax)

Diluted


EPS


GAAP net income

$           62,354

$           0.98


Non-recurring costs*

4,390

0.07


Adjusted net income

$           66,744

$          1.05


 

* On a pre-tax basis includes approximately $930 of non-recurring relocation costs associated with the Co-Location of the Company's headquarters in Davidson, North Carolina and approximately $6,049 of non-recurring transaction costs associated with the BDNA acquisition for the thirteen weeks ended June 1, 2013. The non-recurring costs were calculated using an effective tax rate of 37.1%.

 

SOURCE MSC Industrial Direct Co., Inc.



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