MELVILLE, N.Y. and DAVIDSON, N.C., Oct. 30, 2018 /PRNewswire/ --

FISCAL Q4 2018 HIGHLIGHTS

• Net sales of $838.0 million, an increase of 11.2% YoY (9.5% increase on an ADS basis)
• Operating income of $107.8 million, an increase of 7.8% YoY
• Operating margin of 12.9% (13.8% excluding acquisitions*)
• Diluted EPS of $1.29, versus EPS of $1.07 in the prior year quarter

FISCAL 2018 HIGHLIGHTS

• Net sales of $3.2 billion, an increase of 10.9% YoY (10.5% increase on an ADS basis)
• Operating income of $420.6 million, an increase of 11.0% YoY
• Operating margin of 13.1% (13.7% excluding acquisitions*)
• Diluted EPS of $5.80, versus $4.05 in the prior year
• Completed acquisition of AIS, a value-added production fastener distributor, on April 30, 2018

MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the "Company," a premier distributor of Metalworking and Maintenance, Repair and Operations ("MRO") products and services to industrial customers throughout North America, today reported financial results for its fiscal 2018 fourth quarter and full year ended September 1, 2018. Both periods included one additional day of operations as compared to the prior periods.

Erik Gershwind, president and chief executive officer, said, "The manufacturing environment maintained its positive momentum in the fiscal fourth quarter, while pricing remained relatively stable. Our sales performance continued to be impacted by our sales force effectiveness initiatives, but we are beginning to see positive results from our actions and expect stronger growth levels over the next couple of quarters. Growth in the quarter was slightly above our expectations, with Core customers seeing notable improvement, well ahead of company average, and our two acquisitions, DECO and AIS, continuing to perform well. Overall, there is a building excitement and confidence in our plan."

Rustom Jilla, executive vice president and chief financial officer, added, "Excluding the acquisitions, our base business operating margins for the quarter and year were up 30 and 50 basis points, respectively, as we achieved both gross margin stability and operating expense leverage. Our fourth quarter reported operating margin of 12.9% was down 40 basis points versus last year, entirely due to the acquisitions. Cash generation remained strong with full year Free Cash Flow* up $94 million, or up 47% over last year. This allowed us to increase ordinary dividends by 23%, acquire AIS for $88 million, buy back 2% of our outstanding shares, and reduce our leverage ratio slightly to 1.0 times."

Gershwind concluded, "In recent years, we have repositioned MSC from a spot buy supplier to a mission critical partner on manufacturing plant floors across North America. By focusing on products and services that are technical and high touch, we have cemented our leadership in metalworking and gained solid traction in the Class C VMI space. We also established a new platform in OEM Fasteners. Most recently, we redesigned our sales force to deliver upon the new, more complex and high-touch role that we are playing in enabling our customers to achieve higher levels of growth, productivity, and profitability. As we begin fiscal 2019, we are well positioned to capitalize on the opportunities ahead of us."

^* An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures is presented in schedules following this press release

Outlook

The Company expects total net sales for the first quarter of fiscal 2019 to be between $821 million and $837 million. At the midpoint, average daily sales are expected to increase roughly 7.8% compared to last year's first quarter. The Company expects diluted earnings per share for the first quarter of fiscal 2019 to be between $1.28 and $1.34.

Excluding AIS, the Company expects net sales for the first quarter of fiscal 2019 to be between $803 million and $819 million, with average daily sales at the midpoint expected to increase roughly 5.5% compared to last year's first quarter. Excluding AIS, the Company expects diluted earnings per share for the first quarter of fiscal 2019 to be between $1.29 and $1.35.

Conference Call Information

MSC will host a conference call today at 8:30 a.m. EST to review the Company's fiscal 2018 fourth quarter and full year results. The call, accompanying slides, and other operational statistics may be accessed at: http://investor.mscdirect.com. The conference call may also be accessed at 1-877-443-5575 (U.S.), 1-855-669-9657 (Canada) or 1-412-902-6618 (international).

An online archive of the broadcast will be available until November 6, 2018.

The Company's reporting date for fiscal first quarter 2019 is scheduled for January 9, 2019.

About MSC Industrial Supply Co. MSC Industrial Supply Co. (NYSE:MSM) is a leading North American distributor of metalworking and maintenance, repair, and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with more than 1 million products, inventory management and other supply chain solutions, and deep expertise from over 75 years of working with customers across industries.

Our experienced team of more than 6,500 associates is dedicated to working side by side with our customers to help drive results for their businesses - from keeping operations running efficiently today to continuously rethinking, retooling, and optimizing for a more productive tomorrow.

For more information on MSC, please visit 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, expected benefits from our investment and strategic plans, including from our recent acquisitions, and expected future margins, 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: general economic conditions in the markets in which we operate, changing customer and product mixes, competition, including the adoption by competitors of aggressive pricing strategies and sales methods, industry consolidation, volatility in commodity and energy prices, the outcome of government or regulatory proceedings or future litigation, 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, shipping ports, our headquarters or our customer fulfillment centers, dependence on our information systems and the risk of business disruptions arising from changes to our information systems, disruptions due to computer system or network failures, computer viruses, physical or electronics break-ins and cyber-attacks, retention of key personnel, the loss of key suppliers or supply chain disruptions, risks associated with changes to trade policies, failure to comply with applicable environmental, health and safety laws and regulations, goodwill and intangible assets recorded as a result of our acquisitions could be impaired, risks associated with the integration of acquired businesses or other strategic transactions, and financial restrictions on outstanding borrowings. 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.

Non-GAAP Financial Measures

• Free Cash Flow

Our measure of "FCF" meets the definition of a non-GAAP financial measure. FCF is used in addition to and in conjunction with results presented in accordance with GAAP and FCF should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure. FCF, which we reconcile to "Net cash provided by operating activities," is cash flow from operations reduced by "Expenditures for property, plant and equipment". We believe that FCF, although similar to cash flow from operations, is a useful additional measure since capital expenditures are a necessary component of ongoing operations. Management also views FCF, as a measure of the Company's ability to reduce debt, add to cash balances, pay dividends, and repurchase stock. FCF has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, FCF does not incorporate payments made on capital lease obligations or required debt service payments. In addition, different companies define FCF differently. Therefore, we believe it is important to view FCF as a complement to our entire consolidated statements of cash flows. A reconciliation of cash provided by operating activities to FCF for the thirteen week periods and fiscal years ended September 1, 2018 and September 2, 2017, respectively is shown below.

• Results excluding DECO Tool Supply Co (DECO) and All Integrated Solutions (AIS), collectively "Acquisitions"

To supplement MSC's unaudited selected financial data presented consistent with Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures, including Non-GAAP net sales, non-GAAP gross profit, non-GAAP income from operations, non-GAAP (benefit) provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude the results of our acquisitions of DECO Tool Supply Co. ("DECO") on July 31, 2017 and All Integrated Solutions ("AIS") on April 30, 2018, collectively, "Acquisitions". Beginning with the thirteen-week period ending December 1, 2018, the results of DECO are included.

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 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 the Company's performance.

In calculating non-GAAP financial measures, we exclude the results of our Acquisitions to facilitate a review of the Company's operating performance on a period-to-period basis, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. 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 operating results;
• the ability to better identify trends in the Company's underlying business and perform related trend analyses;
• a better understanding of how management plans and measures the Company's underlying business; and
• an easier way to compare the Company's operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures

SOURCE MSC Industrial Supply Co.