Investor Relations MSC Industrial Direct

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 -

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,

2012


September 1,

2012


(unaudited)



ASSETS




Current Assets:




     Cash and cash equivalents

$ 233,506


$ 168,453

     Accounts receivable, net of allowance for doubtful accounts

288,288


297,215

     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 financing obligations

$ 1,082


$ 1,007

     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,
2012


November 26,
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 income taxes

102,327


96,824

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,

2012

November 26,
2011

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, and equipment

60


1

     Provision for doubtful accounts

1,116


1,541

     Deferred income taxes


4,195

       Excess tax benefits from stock-based compensation

(3,451)


(2,784)

     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 current assets

(4,161)


(3,775)

          Other assets

1,073


1,942

          Accounts payable and accrued liabilities

3,425


(4,843)





     Total adjustments

26,182


(13,645)





                    Net cash provided by operating activities

89,369


46,192





Cash Flows from Investing Activities:




     Expenditures for property, plant and equipment

(16,993)


(8,271)

     Cash used in business acquisition, net of cash received


(1,246)





                    Net cash used in investing activities

(16,993)


(9,517)





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 financing obligations

(279)

(136)

     Excess tax benefits from stock-based compensation

3,451


2,784

     Proceeds from sale of Class A common stock in connection with

       associate stock purchase plan

863


739

     Proceeds from exercise of Class A common stock options

11,024


10,567

     Borrowings under financing obligations


814

                    Net cash used in financing activities

(7,354)


(4,309)





Effect of foreign exchange rate changes on cash and cash equivalents

31


(91)

Net increase in cash and cash equivalents

65,053


32,275

Cash and cash equivalents – beginning of period

168,453


95,959

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:

  • 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:


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 Ended

Three Months Ended



December 1, 2012

November 26, 2011






(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 co-location costs

1,327

                            _


Adjusted Operating income

$ 103,679

$ 96,824

21.6%

 



Three Months Ended

December 1, 2012

(in thousands, except per share amounts)

$(after tax)

Diluted

EPS

GAAP net income

$                      63,187

$                     1.00

Headquarters non-recurring co-location costs*

820

0.01

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.

For further information: 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

https://investor.mscdirect.com/2013-01-10-MSC-Industrial-Direct-Co.-Inc.-Reports-Results-for-Its-Fiscal-2013-First-Quarter