MSC Industrial Direct Co., Inc. Reports Fiscal 2013 Fourth Quarter Results

  MSC Industrial Direct Co., Inc. Reports Fiscal 2013 Fourth Quarter Results

- Net Sales of $673.8 Million in Fiscal 2013 Fourth Quarter -

- Adjusted Diluted Earnings per Share of $0.95, GAAP Diluted Earnings per
Share of $0.89 in Fiscal 2013 Fourth Quarter -

PR Newswire

MELVILLE, N.Y., Oct. 30, 2013

MELVILLE, N.Y., Oct. 30, 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 North America, today reported financial results for its fiscal 2013
fourth quarter ended August 31, 2013.

Net sales for the fourth quarter of fiscal 2013 were $673.8 million, an
increase of 6.1% (12.7% on an average daily sales basis) over net sales of
$635.3 million in the fourth quarter of fiscal 2012. The recently acquired
Barnes Distribution North America ("BDNA") business contributed approximately
$73.6 million to net sales in the fiscal 2013 fourth quarter. The fiscal 2012
fourth quarter contained fourteen weeks.

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 fourth quarter was $98.7 million, or
14.7% of net sales, compared to $109.2 million, or 17.2% of net sales in the
same quarter a year ago. GAAP operating income for the fiscal 2013 fourth
quarter was $92.4 million.

Excluding the after tax effects of non-recurring costs, adjusted net income
for the fourth quarter of fiscal 2013 was $60.3 million, or $0.95 per diluted
share (based on 63.2 million diluted shares outstanding), compared to $69.7
million, or $1.11 per diluted share, a year ago (based on 62.5 million diluted
shares outstanding). The BDNA operations contributed approximately $0.04 to
the fiscal fourth quarter EPS and GAAP net income for the fourth quarter of
fiscal 2013 was $56.4 million, or $0.89 per diluted share.

Erik Gershwind, President and Chief Executive Officer, stated, "Consistent
with our outlook, a soft market environment persisted in the fiscal fourth
quarter, particularly in metalworking where spending remained at depressed
levels. However, the success of our share gain programs and customer
penetration initiatives such as E-commerce and vending continued despite this
weakness. Since the fiscal fourth quarter ended, sequential improvement in
average daily sales growth rates in September and October are encouraging.
Looking ahead, I would characterize the indicators as mixed, with some signs
of possible improvement on the horizon."

Jeff Kaczka, Executive Vice President and Chief Financial Officer, commented,
"Overall, despite the soft environment, we were able to exceed our EPS
guidance through a lift in our gross margin and effective management of our
expenses. The BDNA integration is progressing well and the contribution of
BDNA to our results was better than expected. For the fiscal first quarter of
2014, our guidance reflects a slight acceleration in revenue growth rates,
combined with increased spending on infrastructure and growth initiatives to
support our strategic plan. Finally, we were pleased to announce a 10 percent
increase to our quarterly dividend last week."

Mr. Gershwind concluded, "We are in the midst of building a foundation that
will support the next leg of our growth story. Our actions will ensure that we
not only continue to outgrow the market as we have in the current low growth
environment, but accelerate our growth through share gains no matter the
market conditions. As we implement our infrastructure and growth initiatives,
we see fiscal 2014 as the low point for the operating margins for the base
business, inclusive of MSC and BDNA, and anticipate improvement beginning in
fiscal 2015. As we execute on our growth roadmap, we see the base business
operating comfortably at operating margins in the high-teens."

Outlook

The Company expects net sales for the fiscal first quarter 2014 to be between
$662 million and $674 million. At the midpoint, average daily sales growth,
exclusive of BDNA, is expected to be approximately 3 percent. Excluding
non-recurring costs related to the co-location of the Company's headquarters
and non-recurring integration costs associated with BDNA, the Company expects
adjusted diluted earnings per share for the fiscal first quarter 2014 to be
between $0.92 and $0.96.

The Company expects the non-recurring costs related to the co-location of the
Company's headquarters to have a $0.02 impact and the integration costs
related to the BDNA acquisition to have approximately a $0.04 impact on its
GAAP diluted earnings per share in the fiscal first quarter 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 fiscal 2013 fourth 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, November 29, 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,
November 29, 2013. The replay is accessible by dialing 1-877-344-7529 (U.S.)
or 1-412-317-0088 (international) and entering passcode 10034454.

The Company's reporting date for fiscal 2014 first quarter results will be
January 8, 2014.

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 North America.
MSC employs one of the industry's largest sales forces and distributes
approximately 700,000 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.

MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
                                            August 31,       September 1,

                                            2013            2012
ASSETS
Current Assets:
Cash and cash equivalents                  $    55,876   $    168,453
Accounts receivable, net of allowance for  345,366          297,215
doubtful accounts
 Inventories                          419,012          393,412
 Prepaid expenses and other current   35,464           29,313
assets
 Deferred income taxes                37,771           31,718
Total current assets                        893,489          920,111
Property, plant and equipment, net          251,536          174,597
Goodwill                                    630,318          289,124
Identifiable intangibles, net               155,324          51,212
Other assets                                12,336           9,832
Total assets                                $   1,943,003  $    1,444,876
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
                                                            
Current maturities of long-term debt
                                            14,184           1,007
Accounts payable                  113,636          96,640
Accrued liabilities                         85,759           72,868
Total current liabilities                   213,579          170,515
Long-term debt, net of current maturities   241,566          2,189
Deferred income taxes and tax uncertainties 97,475           85,061
Total liabilities                           552,620          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                  528,770          483,682
Retained earnings                           1,132,868        970,965
Accumulated other comprehensive loss        (4,427)          (2,443)
Class A treasury stock, at cost             (266,897)        (265,162)
Total shareholders' equity                  1,390,383        1,187,111
Total liabilities and shareholders' equity  $   1,943,003  $   1,444,876





MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(In thousands, except net income per share data)
                        (Unaudited)
                        Quarters Ended             Fiscal Years Ended
                        August 31,  September 1,   August 31,    September 1,

                        2013        2012           2013          2012
                        (13 weeks)  (14 weeks)     (52 weeks)    (53 weeks)
Net sales               $       $          $           $   
                        673,773     635,271        2,457,649    2,355,918
Cost of goods sold      366,228     348,244        1,339,133     1,277,715
Gross profit            307,545     287,027        1,118,516     1,078,203
Operating expenses      215,193     179,021        732,990       665,987
Income from operations  92,352      108,006        385,526       412,216
Other income (expense):
Interest expense        (898)       (62)           (2,164)       (241)
Interest income         4           36             117           196
Other expense, net      (116)       (24)           (50)          (29)
Total other expense     (1,010)     (50)           (2,097)       (74)
 Income before
provision for income    91,342      107,956        383,429       412,142
taxes
Provision for income    34,967      39,041         145,434       153,111
taxes
Net income              $      $         $         $    
                        56,375      68,915         237,995       259,031
Per Share Information:
Net income per common
share:
Basic                   $      $        $       $      
                          0.89     1.10          3.77         4.12
Diluted                 $      $        $       $      
                          0.89     1.09          3.75         4.09
Weighted average shares
used in computing net
income per common
share:
Basic                   62,896      62,203         62,695        62,434
Diluted                 63,203      62,539         63,011        62,803
Cash dividend declared  $      $        $       $      
per common share          0.30     0.25          1.20         1.00

MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
                                    For The Fiscal Years Ended
                                    August 31,   September 1,    August 27,
                                    2013         2012            2011
                                    (52 weeks)
                                                 (53 weeks)      (52 weeks)
Net income, as reported        $             $   259,031   $  218,786
                               237,995
Foreign currency translation   (1,984)           (358)           575
adjustments
Comprehensive income           $             $    258,673 $  219,361
                               236,011



MSC INDUSTRIAL DIRECT CO., INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
                                         For the Fiscal Years Ended
                                          August 31,     September 1,
                                         2013                2012

                                         (52 weeks)          (53 weeks)
Cash Flows from Operating Activities:
Net income                               $     237,995  $     
                                                             259,031
Adjustments to reconcile net income to
net cash

 provided by operating activities:
Depreciation and amortization        49,479              34,723
Stock-based compensation                 15,824              15,262
Loss on disposal of property, plant, and 941                 1,129
equipment
Provision for doubtful accounts          3,499               3,560
Deferred income taxes and tax            6,360               2,765
uncertainties
 Excess tax benefits from         (6,040)             (4,888)
stock-based compensation
Write-off of deferred financing costs on 594                 —
previous credit facility
Changes in operating assets and
liabilities, net of amounts
associated with business
acquired:
Accounts receivable                      (15,630)            (30,213)
Inventories                              23,409              (45,306)
Prepaid expenses and other current       (1,619)             (6,598)
assets
Other assets                             (1,784)             1,268
Accounts payable and accrued liabilities 12,409              3,551
Total adjustments                        87,442              (24,747)
 Net cash provided 325,437             234,284
by operating activities
Cash Flows from Investing Activities:
 Expenditures for property, plant and (89,252)            (47,691)
equipment
 Cash used in business acquisitions,  (548,769)           (33,451)
net of cash received
Net cash used in investing activities    (638,021)           (81,142)
Cash Flows from Financing Activities:
Purchases of treasury stock              (3,773)             (48,098)
Payment of cash dividends                (75,860)            (63,024)
Payments on capital lease and       (1,300)             (1,385)
financing obligations
Excess tax benefits from stock-based     6,040               4,888
compensation
Proceeds from sale of Class A common                        
stock in connection
with associate stock purchase plan  3,785               3,387
Proceeds from exercise of Class A common 21,664              22,422
stock options
Borrowings under financing obligation    1,417               1,192
Borrowings under Credit Facility         370,000             —
Credit facility financing costs          (1,912)             —
Payments of notes payable and revolving  (120,000)           —
loans under the credit facility
Net cash provided by (used in) financing 200,061             (80,618)
activities
Effect of foreign exchange rate changes  (54)                (30)
on cash and cash equivalents
Net (decrease) increase in cash and cash (112,577)           72,494
equivalents
Cash and cash equivalents – beginning of 168,453             95,959
period
Cash and cash equivalents – end of       $    55,876      $    168,453
period
Supplemental Disclosures of Cash Flow
Information:
Cash paid for income taxes               $    130,342     $    145,651
Cash paid for interest                   $      1,281   $        
                                                             55



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") acquisition 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
                             August 31, 2013
                             (dollars in thousands)    Margin
GAAP Operating income        $ 92,352                  13.7%
Non-recurring costs          6,392
Adjusted Operating income    $ 98,744                  14.7%
                             Thirteen Weeks Ended      Fourteen Weeks Ended
                             August 31, 2013           September 1, 2012
                             (dollars in thousands)
Sales                        $673,773                  $ 635,271
Cost of Sales                366,228                   348,244
Gross Margin                 307,545                   287,027
Operating Expenses           215,193                   179,021
Income from Operations       92,352                    108,006
Non-recurring costs          6,392                     1,232
Adjusted Operating income    $98,744                   $109,238
                             Thirteen Weeks Ended
                             August 31, 2013
                                                       Diluted
(in thousands, except per    $(after tax)              EPS
share amounts)
GAAP net income              $ 56,375                  $ 0.89
Non-recurring costs*         3,945                     0.06
Adjusted net income          $ 60,320                  $ 0.95
* On a pre-tax basis includes approximately $1,900 of non-recurring relocation
costs associated with the Co-Location of the Company's headquarters in
Davidson, North Carolina and approximately $4,492 of non-recurring transaction
and integration costs associated with the BDNA acquisition for the thirteen
weeks ended August 31, 2013. The non-recurring costs were calculated using an
effective tax rate of 38.3%.
                             Fourteen Weeks Ended
                             September 1, 2012
                                                       Diluted
(in thousands, except per    $(after tax)              EPS**
share amounts)
GAAP net income              $68,915                   $ 1.09
Non-recurring costs*         774                       0.01
Adjusted net income          $ 69,689                  $ 1.11
* On a pre-tax basis includes approximately $1,232 of non-recurring relocation
costs associated with the Co-Location of the Company's headquarters in
Davidson, North Carolina for the fourteen weeks ended September 1, 2012. The
non-recurring costs were calculated using an effective tax rate of 37.2%.



** Individual amounts of earnings per share may not agree to the total due to
rounding.



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., (704) 987-5231; or Media Contact:
Rachel Rosenblatt, FTI Consulting - Strategic Communications, (212) 850-5600