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MSC Industrial Direct Co., Inc. Reports Results For Its Fiscal 2013 Second Quarter



  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 -

PR Newswire

MELVILLE, N.Y., April 10, 2013

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,            September 1,
                                                           2012
                                        2013
                                       (Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents              $       243,949     $        168,453
Accounts receivable, net of allowance  304,712             297,215
for doubtful accounts
       Inventories                     364,726             393,412
       Prepaid expenses and other      38,791              29,313
current assets
       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    $            1,265  $             1,007
and financing obligations
Accounts payable                       86,599              96,640
Accrued liabilities                    57,179              72,868
Total current liabilities              145,043             170,515
Capital lease obligations, net of      1,986               2,189
current maturities
Deferred income taxes and tax          85,061              85,061
uncertainties
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'    $     1,526,655     $      1,444,876
equity

 

 

 

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,     February 25,  March 2,        February 25,

                      2013         2012          2013            2012
Net sales             $            $             $    1,146,953  $    
                       569,462      562,974                       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           90,576       96,527        192,928         193,351
operations
Other income
(expense):
Interest expense      (73)         (70)          (125)           (116)
Interest income       39           68            82              118
Other income          87           (16)          71              (20)
(expense), net
Total other income    53           (18)          28              (18)
(expense)
          Income
before provision for  90,629       96,509        192,956         193,333
income taxes
Provision for income  34,550       36,441        73,690          73,428
taxes
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       0.30         0.25        0.60            0.50
share

 

 

 

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,  February 25,  March 2,  February 25,
                                2013      2012          2013      2012
Net income, as reported         $56,079   $60,068       $119,266  $119,905
Cumulative foreign currency     (1,046)   319           (777)     (373)
translation adjustment
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,        February 25,
                                                              2012
                                            2013
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    645               2
equipment
Provision for doubtful accounts             1,591             2,370
Deferred income taxes                       —                 (1,984)
        Excess tax benefits from            (4,735)           (4,203)
stock-based compensation
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 135,027           74,063
operating activities
Cash Flows from Investing Activities:
    Expenditures for property, plant and    (40,306)          (17,322)
equipment
    Cash used in business acquisition, net  —                 (32,396)
of cash received
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     (610)             (275)
obligations
Excess tax benefits from stock-based        4,735             4,203
compensation
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    15,901            16,811
stock options
Borrowings under financing obligations      257               1,050
Net cash used in financing activities       (19,107)          (11,391)
Effect of foreign exchange rate changes on  (118)             (32)
cash and cash equivalents
Net increase in cash and cash equivalents   75,496            12,922
Cash and cash equivalents – beginning of    168,453           95,959
period
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:

  o the ability to make more meaningful period-to-period comparisons of the
    Company's on-going operating results;
  o the ability to better identify trends in the Company's underlying business
    and perform related trend analyses; and
  o 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      $ 92,349             16.2%
income
                        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      $   92,349           $   96,527
income
                        Thirteen Weeks Ended
                        March 2, 2013
(in thousands, except                        Diluted
per                     $(after tax)
share amounts)                               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      $   196,033          17.1%
income
                        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      $         196,033    $ 193,351
income
                        Twenty-Six Weeks Ended
                        March 2, 2013
(in thousands, except                        Diluted
per                     $(after tax)
share amounts)                               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.

Website: http://www.mscdirect.com
Contact: Investor Contact: John G. Chironna, VP Investor Relations &
Treasurer, MSC Industrial Direct Co., Inc., (516) 812-1216; Media Contact:
Rachel Rosenblatt, FTI Consulting - Strategic Communications, (212) 850-5600
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