MSC Industrial Direct Co., Inc. Reports Results for Its Fiscal 2013 First Quarter - Net Sales of $577.5 Million in Fiscal 2013 First Quarter - - Adjusted Diluted Earnings per Share Increase 6.3% to $1.01, GAAP Diluted Earnings per Share Increase 5.3% to $1.00 in Fiscal 2013 First Quarter - PR Newswire MELVILLE, N.Y., Jan. 10, 2013 MELVILLE, N.Y., Jan. 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 first quarter ended December 1, 2012. Net sales for the first quarter of fiscal 2013 were $577.5 million, an increase of 5.8% over net sales of $545.7 million in the first quarter of fiscal 2012. Excluding non-recurring costs of $1.3 million associated with the previously announced co-location of the Company's headquarters in Davidson, North Carolina, adjusted operating income for the fiscal 2013 first quarter was $103.7 million, or 18.0% of net sales, compared to $96.8 million, or 17.7% of net sales in the same quarter a year ago. GAAP operating income for the fiscal 2013 first quarter was $102.4 million. Excluding the after tax effects of these non-recurring costs, adjusted net income for the first quarter of fiscal 2013 rose 7.0% to $64.0 million, or $1.01 per diluted share (based on 62.7 million diluted shares outstanding), compared to $59.8 million, or $0.95 per diluted share, a year ago (based on 62.6 million diluted shares outstanding). GAAP net income for the first quarter of fiscal 2013 was $63.2 million, or $1.00 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, "I am pleased with our performance this quarter and our continued success in executing our strategy. We produced revenue growth of nearly 6% in an eroding demand environment impacted by uncertainty and caution over the fiscal cliff. Our team demonstrated exceptional cost control, as reflected in adjusted incremental margin of over 20%, and strong execution of our share gain initiatives, such as vending and e-commerce." Jeff Kaczka, Executive Vice President and Chief Financial Officer, commented, "We aggressively and carefully managed our expenses in our fiscal first quarter to produce strong incremental margin, while our focus on working capital management reduced inventories and receivables and nearly doubled our cash flow from operations from the year ago quarter. Our financial position remains strong and affords us the ability to continue investing in the future of our business and to pursue an opportunistic growth strategy throughout market cycles." Mr. Gershwind concluded, "As I assume the role of CEO, I remain excited about the future of our company and our long-term strategic vision. In the near-term, both the demand and pricing environments have softened since we last reported and fiscal cliff issues have yet to be fully resolved and digested by our customers. We have very limited visibility heading into the second quarter and as such are planning for a continuation of the current environment. We do see some signs for cautious optimism on the horizon, such as an uptick in December's ISM report, that would bode well should the trend continue. Regardless of environment, we expect to take share, to continue investing in key programs and to balance that with strong expense control like we demonstrated in the first quarter. We remain committed to executing on our time-tested strategy and expect to drive strong growth as the market improves." Outlook Based on a continuation of current market conditions, for the fiscal 2013 second quarter the Company expects net sales to be between $563 million and $575 million reflecting projected average daily sales growth of 1.0% at the midpoint. Excluding non-recurring costs related to the co-location of the Company's headquarters in Davidson, North Carolina, the Company expects adjusted diluted earnings per share for the second quarter of fiscal 2013 to be between $0.86 and $0.90. Guidance reflects the soft demand environment and the lack of a mid-year price adjustment. The Company expects these non-recurring costs to have a minimal impact on its GAAP diluted earnings per share in the fiscal second quarter. The Company expects to spend a total of approximately $7 million in non-recurring relocation costs in the remainder of fiscal year 2013 and fiscal 2014. 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 first 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 Thursday, February 7, 2013. Alternatively, the conference call can be accessed by dialing 1-800-860-2442 (U.S.) or 1-412-858-4600 (international). A replay will be available within one hour of the conclusion of the call and will remain available until Thursday, February 7, 2013. The replay is accessible by dialing 1-877-344-7529 (U.S.) or 1-412-317-0088 (international) and entering passcode 10022853. The Company's next reporting date for its fiscal 2013 second quarter will be Wednesday, April 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) December 1, September 1, 2012 2012 (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 233,506 $ 168,453 Accounts receivable, net of allowance for 288,288 297,215 doubtful accounts Inventories 387,615 393,412 Prepaid expenses and other current assets 33,480 29,313 Deferred income taxes 31,718 31,718 Total current assets 974,607 920,111 Property, plant and equipment, net 187,615 174,597 Goodwill 289,124 289,124 Identifiable intangibles, net 48,546 51,212 Other assets 8,061 9,832 Total assets $ 1,507,953 $ 1,444,876 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of capital lease and $ 1,082 $ 1,007 financing obligations Accounts payable 84,119 96,640 Accrued liabilities 87,834 72,868 Total current liabilities 173,035 170,515 Capital lease obligations, net of current maturities 2,243 2,189 Deferred income taxes and tax uncertainties 85,061 85,061 Total liabilities 260,339 257,765 Commitments and Contingencies Shareholders' Equity: Preferred Stock -- -- Class A common stock 53 53 Class B common stock 15 16 Additional paid-in capital 502,713 483,682 Retained earnings 1,015,187 970,965 Accumulated other comprehensive loss (2,174) (2,443) Class A treasury stock, at cost (268,180) (265,162) Total shareholders' equity 1,247,614 1,187,111 Total liabilities and shareholders' equity $ 1,507,953 $ 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 December 1, November 26, 2012 2011 Net sales $ 577,491 $ 545,703 Cost of goods sold 312,402 293,570 Gross profit 265,089 252,133 Operating expenses 162,737 155,309 Income from operations 102,352 96,824 Other (Expense) Income: Interest expense (52) (46) Interest income 43 50 Other expense, net (16) (4) Total other expense (25) — Income before provision for 102,327 96,824 income taxes Provision for income taxes 39,140 36,987 Net income $ 63,187 $ 59,837 Per Share Information: Net income per common share: Basic $ 1.01 $ 0.95 Diluted $ 1.00 $ 0.95 Weighted average shares used in computing net income per common share: Basic 62,378 62,285 Diluted 62,701 62,627 Cash dividend declared per common share $ 0.30 $ 0.25 MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (In thousands) (unaudited) Thirteen Weeks Ended December 1, November 26, 2011 2012 Net income, as reported $63,187 $59,837 Cumulative foreign currency translation adjustment 269 (692) Comprehensive income 63,456 59,145 MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Thirteen Weeks Ended December 1, 2012 November 26, 2011 Cash Flows from Operating Activities: Net income $ 63,187 $ 59,837 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,021 7,823 Stock-based compensation 4,253 3,828 Loss on disposal of property, plant, 60 1 and equipment Provision for doubtful accounts 1,116 1,541 Deferred income taxes — 4,195 Excess tax benefits from (3,451) (2,784) stock-based compensation Changes in operating assets and liabilities, net of amounts associated with business acquired: Accounts receivable 7,931 (5,442) Inventories 5,915 (16,131) Prepaid expenses and other (4,161) (3,775) current assets Other assets 1,073 1,942 Accounts payable and accrued 3,425 (4,843) liabilities Total adjustments 26,182 (13,645) Net cash provided by 89,369 46,192 operating activities Cash Flows from Investing Activities: Expenditures for property, plant and (16,993) (8,271) equipment Cash used in business acquisition, — (1,246) net of cash received Net cash used in (16,993) (9,517) investing activities Cash Flows from Financing Activities: Purchases of treasury stock (3,506) (3,331) Payment of cash dividend (18,907) (15,746) Payments on capital lease and (279) (136) financing obligations Excess tax benefits from stock-based 3,451 2,784 compensation Proceeds from sale of Class A common stock in connection with 863 739 associate stock purchase plan Proceeds from exercise of Class A 11,024 10,567 common stock options Borrowings under financing — 814 obligations Net cash used in (7,354) (4,309) financing activities Effect of foreign exchange rate changes on 31 (91) cash and cash equivalents Net increase in cash and cash equivalents 65,053 32,275 Cash and cash equivalents – beginning of 168,453 95,959 period Cash and cash equivalents – end of period $ 233,506 $ 128,234 Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 5,999 $ 6,602 Cash paid for interest $ 5 $ -- 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 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: othe ability to make more meaningful period-to-period comparisons of the Company's on-going operating results; othe ability to better identify trends in the Company's underlying business and perform related trend analyses; and oa 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: Three Months Ended December 1, 2012 (in thousands) $ Margin GAAP Operating income $ 102,352 17.7% Headquarters non-recurring co-location costs 1,327 Adjusted Operating income $ 103,679 18.0% Three Months Three Months Ended Ended December 1, November 26, 2011 2012 (in thousands) $ $ Incremental Margin Net sales $ 577,491 $ 545,703 Cost of goods sold 312,402 293,570 Gross profit 265,089 252,133 Operating expenses 162,737 155,309 Income from operations 102,352 96,824 17.4% Headquarters non-recurring 1,327 _ co-location costs Adjusted Operating $ 103,679 $ 96,824 21.6% income Three Months Ended December 1, 2012 (in thousands, except per share Diluted amounts) $(after tax) EPS GAAP net income $ $ 63,187 1.00 Headquarters non-recurring 820 0.01 co-location costs* Adjusted net income $ $ 64,007 1.01 * On a pre-tax basis includes charges of $1,327,000 reported within Operating Expenses for the three months ended December 1, 2012 associated with the Co-Location of the Company's headquarters in Davidson, North Carolina. SOURCE MSC Industrial Direct Co., Inc. Website: http://www.mscdirect.com Contact: John G. Chironna, VP Investor Relations & Treasurer, MSC Industrial Direct Co., Inc., +1-516-812-1216; Media: Rachel Rosenblatt, FTI Consulting - Strategic Communications, +1-212-850-5600
MSC Industrial Direct Co., Inc. Reports Results for Its Fiscal 2013 First Quarter
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