2014

MSC Industrial Direct Co., Inc. Reports Results For Its Fiscal 2013 Second Quarter - Net Sales of $569.5 Million in Fiscal 2013 Second Quarter -

- Adjusted Diluted Earnings per Share of $0.90, GAAP Diluted Earnings per Share of $0.88 in Fiscal 2013 Second Quarter -

MELVILLE, N.Y., April 10, 2013 /PRNewswire/ -- MSC INDUSTRIAL DIRECT CO., INC. (NYSE: MSM), "MSC" or the "Company," the premier distributor of Metalworking and Maintenance, Repair and Operations ("MRO") supplies to industrial customers throughout the United States, today reported financial results for its fiscal second quarter ended March 2, 2013.

Net sales for the second quarter of fiscal 2013 were $569.5 million, an increase of 1.2% over net sales of $563.0 million in the second quarter of fiscal 2012. Excluding non-recurring costs of $1.8 million associated with the previously announced Barnes Distribution North America ("BDNA") acquisition and co-location of the Company's headquarters in Davidson, North Carolina, adjusted operating income for the fiscal 2013 second quarter was $92.3 million, or 16.2% of net sales, compared to $96.5 million, or 17.1% of net sales in the same quarter a year ago. GAAP operating income for the fiscal 2013 second quarter was $90.6 million.

Excluding the after tax effects of these non-recurring costs, adjusted net income for the second quarter of fiscal 2013 declined 4.8% to $57.2 million, or $0.90 per diluted share (based on 63.0 million diluted shares outstanding), compared to $60.1 million, or $0.95 per diluted share, a year ago (based on 63.0 million diluted shares outstanding). GAAP net income for the second quarter of fiscal 2013 was $56.1 million, or $0.88 per diluted share. 

Net sales for the first half of fiscal 2013 were $1,147.0 million, compared with net sales of $1,108.7 million in the first half of fiscal 2012. Excluding non-recurring costs of $3.1 million associated with the BDNA acquisition and co-location of the Company's headquarters in Davidson, North Carolina, adjusted operating income for the first half of fiscal 2013 was $196.0 million, or 17.1% of net sales, compared to $193.4 million, or 17.4% of net sales in in the first half of fiscal 2012. GAAP operating income for the first half of fiscal 2013 was $192.9 million.

Excluding the after tax effects of these non-recurring costs, adjusted net income for the first half of fiscal 2013 rose 1.1% to $121.2 million, or $1.91 per diluted share (based on 62.9 million diluted shares outstanding), compared to $119.9 million, or $1.89 per diluted share, a year ago (based on 62.8 million diluted shares outstanding). GAAP net income for the first half of fiscal 2013 was $119.3 million, or $1.88 per diluted share. 

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.

Erik Gershwind, President and Chief Executive Officer, stated, "While demand from heavy industrial end markets and specifically the metalworking-related sectors has yet to rebound and continued at low levels, we remain pleased with the execution of our plan. Our focus on strategic growth initiatives like vending and e-commerce, including our newly launched mscdirect.com, continues to fuel share gain in our core market."

Jeff Kaczka, Executive Vice President and Chief Financial Officer, commented, "In view of the challenging demand environment during the second quarter, our team worked hard to control costs and manage our working capital. As a result, not only did we achieve the top end of our EPS guidance, but excluding non-recurring costs related to the BDNA acquisition and our co-located headquarters in Davidson, NC, we reduced our operating expenses as a percent of net sales in the first half. We also reduced our inventories by $29 million in the first half. These steps will position us well and allow us to significantly leverage the eventual recovery in demand."

Mr. Gershwind concluded, "We continue to pursue our strategic vision. First, we are penetrating our core metal-working business through investment in value-added programs and we will benefit disproportionately when the metalworking-related sectors of the economy strengthen. Second, we are expanding into product adjacencies with the purchase of BDNA. The more we see of the BDNA business and its team, the more excited we are about the growth prospects, the talent pool and the inventory management solutions they bring to us. We remain on track to achieve our long-term growth goals."

Outlook
Based on a continuation of current market conditions, for the fiscal 2013 third quarter the Company expects net sales to be between $597 million and $609 million reflecting flat average daily sales growth at the midpoint. Excluding non-recurring costs related to the co-location of the Company's headquarters in Davidson, North Carolina and the effects of the pending acquisition of BDNA, including non-recurring transaction and integration costs, the Company expects adjusted diluted earnings per share for the third quarter of fiscal 2013 to be between $0.95 and $0.99. Guidance reflects the existing soft demand environment and the lack of a mid-year price adjustment.

The Company expects the non-recurring costs related to the co-location of the Company's headquarters to have a $0.01 impact on its GAAP diluted earnings per share in the fiscal third 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 second quarter, and to comment on current operations.  The call may be accessed via the Internet on the home page of MSC's website located at: www.mscdirect.com. A replay of the conference call will be available on the Company's website until Wednesday, May 8, 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 Wednesday, May 8, 2013. The replay is accessible by dialing 1-877-344-7529 (U.S.) or 1-412-317-0088 (international) and entering passcode 10026758.

The Company's next reporting date for its fiscal 2013 third quarter will be July 10, 2013.

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. 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)



March 2,

 2013


September 1,
2012


(Unaudited)



ASSETS




Current Assets:




Cash and cash equivalents

$       243,949


$        168,453

Accounts receivable, net of allowance for doubtful accounts

304,712


297,215

       Inventories

364,726


393,412

       Prepaid expenses and other current assets

38,791


29,313

       Deferred income taxes

31,718


31,718

Total current assets

983,896


920,111





Property, plant and equipment, net

201,628


174,597

Goodwill

289,124


289,124

Identifiable intangibles, net

45,876


51,212

Other assets

6,131


9,832

Total assets

$     1,526,655


$     1,444,876





LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities:




Current maturities of capital lease and financing obligations

$            1,265


$             1,007

Accounts payable

86,599


96,640

Accrued liabilities

57,179


72,868

Total current liabilities

145,043


170,515

Capital lease obligations, net of current maturities

1,986


2,189

Deferred income taxes and tax uncertainties

85,061


85,061

Total liabilities

232,090


257,765

Commitments and Contingencies




Shareholders' Equity:




Preferred Stock

--


--

Class A common stock

54


53

Class B common stock

15


16

Additional paid-in capital

513,101


483,682

Retained earnings

1,052,261


970,965

Accumulated other comprehensive loss

(3,220)


(2,443)

Class A treasury stock, at cost

(267,646)


(265,162)

Total shareholders' equity

1,294,565


1,187,111

Total liabilities and shareholders' equity

$     1,526,655


$      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


Twenty-Six Weeks Ended


March 2,

2013


February 25,

2012


March 2,

2013


February 25,

2012

Net sales

$      569,462


$      562,974


$    1,146,953


$      1,108,677

Cost of goods sold

313,093


303,514


625,495


597,084

Gross profit

256,369


259,460


521,458


511,593

Operating expenses

165,793


162,933


328,530


318,242

Income from operations

90,576


96,527


192,928


193,351

Other income (expense):








Interest expense

(73)


(70)


(125)


(116)

Interest income

39


68


82


118

Other income (expense), net

87


(16)


71


(20)

Total other income (expense)

53


(18)


28


(18)

          Income before provision for income taxes

90,629


96,509


192,956


193,333

Provision for income taxes

34,550


36,441


73,690


73,428

Net income

$          56,079


$          60,068


$        119,266


$        119,905

Per Share Information:








Net income per common share:








Basic

$               0.89


$               0.95


$               1.89


$               1.90

Diluted

$               0.88


$               0.95


$               1.88


$               1.89

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








Basic

62,699


62,616


62,538


62,451

Diluted

63,008


63,008


62,854


62,818

Cash dividend declared per common share

$               0.30


$               0.25


$               0.60


$               0.50

 

 

 


MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income


(In thousands)


(Unaudited)



Thirteen Weeks Ended


Twenty-Six Weeks Ended


March 2,
2013


February 25,
2012


March 2,
2013


February 25,
2012

Net income, as reported

$56,079


$60,068


$119,266


$119,905

Cumulative foreign currency translation adjustment

(1,046)


319


(777)


(373)

Comprehensive income

$55,033


$60,387


$118,489


$119,532









 

 

 


MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows


(In thousands)


(Unaudited)



Twenty-Six Weeks Ended


  March 2,

2013


February 25,
2012

Cash Flows from Operating Activities:




Net income

$          119,266


$           119,905

Adjustments to reconcile net income to net cash

    provided by operating activities:








Depreciation and amortization    

21,069


16,369

Stock-based compensation

8,104


7,571

Loss on disposal of property, plant, and equipment

645


2

Provision for doubtful accounts

1,591


2,370

Deferred income taxes


(1,984)

        Excess tax benefits from stock-based compensation

(4,735)


(4,203)

Changes in operating assets and liabilities, net of amounts associated with
        business acquired:




Accounts receivable

(9,573)


(23,783)

Inventories

28,246


(29,814)

Prepaid expenses and other current assets

(9,494)


(9,196)

Other assets

2,390


3,434

Accounts payable and accrued liabilities

(22,482)


(6,608)





Total adjustments

15,761


(45,842)





                       Net cash provided by operating activities

135,027


74,063





Cash Flows from Investing Activities:




    Expenditures for property, plant and equipment

(40,306)


(17,322)

    Cash used in business acquisition, net of cash received


(32,396)





Net cash used in investing activities

(40,306)


(49,718)





Cash Flows from Financing Activities:




Purchases of treasury stock

(3,629)


(3,439)

Payment of cash dividends    

(37,855)


(31,522)

Payments on capital lease and financing obligations

(610)


(275)

Excess tax benefits from stock-based compensation

4,735


4,203

Proceeds from sale of Class A common stock in connection with associate stock
     purchase plan

 

2,094


 

1,781

Proceeds from exercise of Class A common stock options

15,901


16,811

Borrowings under financing obligations

257


1,050

Net cash used in financing activities

(19,107)


(11,391)





Effect of foreign exchange rate changes on cash and cash equivalents

(118)


(32)

Net increase in cash and cash equivalents

75,496


12,922

Cash and cash equivalents – beginning of period

168,453


95,959

Cash and cash equivalents – end of period

$       243,949


$        108,881

Supplemental Disclosure of Cash Flow Information:




Cash paid for income taxes

$         77,552


$          78,839

Cash paid for interest

$               31


$                  --

 

 

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.  These supplemental measures exclude non-recurring costs associated with the previously announced Barnes Distribution North America ("BDNA") acquisition (which is expected to close in the Company's fiscal third quarter) 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


March 2, 2013

(in thousands)

$

          Margin

GAAP Operating income

$ 90,576

15.9%

Non-recurring costs*

1,773


Adjusted Operating income

$ 92,349

16.2%








Thirteen Weeks Ended


      March 2, 2013

       February 25, 2012

(in thousands)



Sales

$  569,462

$  562,974

Cost of Sales

313,093

303,514

Gross Margin

256,369

259,460

Operating Expenses

165,793

162,933

Income from Operations

90,576

96,527

Non-recurring costs*

1,773

-

Adjusted Operating income

$   92,349

$   96,527








Thirteen Weeks Ended


March 2, 2013

(in thousands, except per
share amounts
)

$(after tax)

Diluted

EPS

GAAP net income

$    56,079

$                          0.88

Non-recurring costs*

1,098

0.02

Adjusted net income

$       57,177

$                          0.90







*  On a pre-tax basis includes approximately $133 of non-recurring relocation costs associated with the Co-Location of the Company's headquarters in Davidson, North Carolina and approximately $1,640 of non-recurring transaction costs associated with the BDNA acquisition reported within Operating Expenses for the thirteen weeks ended March 2, 2013.






Twenty-Six Weeks Ended


March 2, 2013

(in thousands)

$

               Margin

GAAP operating income

$   192,928

16.8%

Non-recurring costs*

3,105


Adjusted operating income

$   196,033

17.1%








Twenty-Six Weeks Ended


      March 2, 2013

       February 25, 2012

(in thousands)



Sales

$  1,146,953

$  1,108,677

Cost of Sales

625,495

597,084

Gross Margin

521,458

511,593

Operating Expenses

328,530

318,242

Income from Operations

192,928

193,351

Non-recurring costs*

3,105

-

Adjusted Operating income

$         196,033

$ 193,351








Twenty-Six Weeks Ended


March 2, 2013

(in thousands, except per
share amounts
)

$(after tax)

Diluted

EPS



GAAP net income

$  119,266

$              1.88

Non-recurring costs*

1,919

0.03

Adjusted net income

$   121,185

$              1.91







*  On a pre-tax basis includes approximately $1,461 of non-recurring relocation costs associated with the Co-Location of the Company's headquarters in Davidson, North Carolina and approximately $1,644 of non-recurring transaction costs associated with the BDNA acquisition reported within Operating Expenses for the twenty-six weeks ended March 2, 2013.

SOURCE MSC Industrial Direct Co., Inc.



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