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