Welcome to MSC, this site is screen reader friendly.

800-645-7270
MSC Industrial Reports Fiscal 2021 Third Quarter Results

MELVILLE, N.Y. and DAVIDSON, N.C., July 7, 2021 /PRNewswire/ --

FISCAL 2021 Q3 HIGHLIGHTS

  • Net sales of $866.3 million, a 3.8% increase from the prior year quarter (2.2% on an average daily sales basis)
  • $20.8 million loss recovery related to the nitrile glove impairment originally recorded in the fiscal first quarter
  • Operating income of $128.6 million, or $109.5 million excluding loss recovery, restructuring and other costs1
  • Operating margin of 14.8%, or 12.6% excluding the adjustments described above1
  • Diluted EPS of $1.68 vs. $1.40 in the prior year quarter; Adjusted diluted EPS of $1.42, same as prior year1
  • Repurchased 507,000 shares during the quarter

MSC INDUSTRIAL DIRECT CO., INC. (NYSE: MSM), "MSC Industrial" or the "Company", a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services, today reported financial results for its fiscal 2021 third quarter ended May 29, 2021.














Financial Highlights2


FY21 Q3


FY20 Q3


Change


FY21 YTD


FY20 YTD


Change

Net Sales


$866.3


$835.0


3.8%


$2,412.2


$2,444.7


-1.3%

Income from Operations


$128.6


$109.9


17.1%


$210.6


$277.8


-24.2%

Operating Margin


14.8%


13.2%




8.7%


11.4%



Net Income attributable to MSC
Industrial


$94.4


$77.7


21.5%


$151.0


$198.6


-24.0%

Diluted EPS


$1.68

3

1.40

4

20.0%


$2.69

3

$3.57

4

-24.6%














Adjusted Financial Highlights1,2


FY21 Q3


FY20 Q3


Change


FY21 YTD


FY20 YTD


Change

Unadjusted Net Sales


$866.3


$835.0


3.8%


$2,412.2


$2,444.7


-1.3%

Adjusted Income from Operations


$109.5


$111.2


-1.5%


$274.9


$283.7


-3.1%

Adjusted Operating Margin


12.6%


13.3%




11.4%


11.6%



Adjusted Net Income attributable to
MSC Industrial


$80.2


$78.7


1.8%


$199.5


$203.0


-1.7%

Adjusted Diluted EPS


$1.42

3

$1.42

4

0.0%


$3.55

3

$3.65

 4

-2.7%


1 Represents a non-GAAP financial measure. An explanation and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure are presented in schedules accompanying this press release.

2 In millions except percentages and per share data or as otherwise noted.

3 Based on 56.4 million and 56.1 million diluted shares outstanding for FY21 Q3 and FY21 YTD respectively.

4 Based on 55.6 million diluted shares outstanding for both FY20 Q3 and FY20 YTD.

Erik Gershwind, President and Chief Executive Officer, said, "The economic environment improved significantly and most of our manufacturing end markets turned positive during our fiscal third quarter. Total company sales returned to growth and, while muted by PPE-related comparisons, our non-safety and non-janitorial product lines grew 21 percent. Execution on our Mission Critical initiatives continued at a high level and we have lifted our expectations both in terms of gross and net savings for fiscal 2021."

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "Average daily sales growth turned positive during our fiscal third quarter and was 2.2 percent. Solid execution of our March price increase contributed to a lift in our gross margin sequentially to 42.3 percent. On our Mission Critical programs, we delivered another $12 million of gross savings, bringing our cumulative savings for fiscal 2021 to $29 million, against our original goal of $25 million. We also reinvested approximately $7 million into growth programs, bringing our cumulative investment for fiscal 2021 to roughly $15 million. In total, we now expect to drive gross savings of $40 million and to invest roughly $25 million in fiscal 2021, such that we will achieve net savings above our original goal of $10 million for the year. Finally, we continued to use our strong balance sheet to support our customers with higher inventory levels and our shareholders through our share buyback program."

Gershwind concluded, "We are gaining steam internally and our end markets are strengthening. Strong execution on our Mission Critical initiatives will further support our share capture programs and deliver additional savings over the next two years and beyond. We remain on-track to achieve our goals of growing sales 400 basis points above the Industrial Production Index and returning ROIC to the high teens by the end of fiscal 2023."

Conference Call Information 

MSC Industrial will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2021 third quarter 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 under the events section at http://investor.mscdirect.com for one year.

The Company's reporting date for fiscal 2021 fourth quarter and full year results is scheduled for October 20, 2021.

About MSC Industrial Direct Co., Inc.

MSC Industrial Direct Co., Inc. (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 approximately 1.9 million products, inventory management and other supply chain solutions, and deep expertise from 80 years of working with customers across industries. Our experienced team of more than 6,200 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 Industrial, please visit mscdirect.com.

Cautionary 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 the future impact of COVID-19 on our business operations, results of operations and financial condition, expected future results, expected benefits from our investment and strategic plans and other initiatives, and expected future growth, profitability and return on invested capital, are forward-looking statements. The words "will,", "may," "believes," "anticipates," "thinks," "expects," "estimates," "plans," "intends," and similar expressions are intended to identify 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 press release does not constitute an admission by MSC Industrial 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 the following, many of which are and will be amplified by the COVID-19 pandemic: the impact of the COVID-19 pandemic on our sales, operations and supply chain; general economic conditions in the markets in which we operate, including conditions resulting from the COVID-19 pandemic; changing customer and product mixes; competition, including the adoption by competitors of aggressive pricing strategies and sales methods; industry consolidation and other changes in the industrial distribution sector; our ability to realize the expected benefits from our investment and strategic plans, including our transition from being a spot-buy supplier to a mission-critical partner to our customers; our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; the retention of key personnel; volatility in commodity and energy prices; the credit risk of our customers, including changes in credit risk as a result of the COVID-19 pandemic; the risk of customer cancellation or rescheduling of orders; difficulties in calibrating customer demand for our products, in particular personal protective equipment or "PPE" products, which could cause an inability to sell excess products ordered from manufacturers resulting in inventory write-downs or could conversely cause inventory shortages of such products; work stoppages, labor shortages or other business interruptions (including those due to extreme weather conditions or as a result of the COVID-19 pandemic) at transportation centers, shipping ports, our headquarters or our customer fulfillment centers; disruptions or breaches of our information systems, or violations of data privacy laws; the retention of qualified sales and customer service personnel and metalworking specialists; the risk of loss of key suppliers or key brands or supply chain disruptions, including due to import restrictions resulting from the COVID-19 pandemic; changes to governmental trade policies, including the impact from significant import restrictions or tariffs; risks related to opening or expanding our customer fulfillment centers; our ability to estimate the cost of healthcare claims incurred under our self-insurance plan; litigation risk due to the nature of our business; risks associated with the integration of acquired businesses or other strategic transactions; financial restrictions on outstanding borrowings; our ability to maintain our credit facilities; the interest rate uncertainty due to the London Interbank Offered Rate ("LIBOR") reform; the failure to comply with applicable environmental, health and safety laws and regulations, including government action in response to the COVID-19 pandemic, and other laws applicable to our business; the outcome of government or regulatory proceedings or future litigation; goodwill and intangible assets recorded resulting from our acquisitions could be impaired; our common stock price may be volatile due to factors outside of our control; and our principal shareholders exercise significant control over us, which may result in our taking actions or failing to take actions that are in the best interests of other shareholders. 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 our Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively, and in the other reports and documents that we file with the U.S. Securities and Exchange Commission. We expressly disclaim any obligation to update any of these forward-looking statements, except to the extent required by applicable law.

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Balance Sheets
(In thousands)




May 29,


August 29,


2021


2020

ASSETS


(Unaudited)




Current Assets:






Cash and cash equivalents

$

27,429


$

125,211

Accounts receivable, net of allowance for credit losses


564,963



491,743

Inventories


598,328



543,106

Prepaid expenses and other current assets


116,947



77,710

Total current assets


1,307,667



1,237,770

Property, plant and equipment, net


296,200



301,979

Goodwill


679,920



677,579

Identifiable intangibles, net


97,610



104,873

Operating lease assets


39,401



56,173

Other assets


3,520



4,056

Total assets

$

2,424,318


$

2,382,430







LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities:






Current portion of debt including obligations under finance leases

$

412,547


$

122,248

Current portion of operating lease liabilities


14,570



21,815

Accounts payable


195,858



125,775

Accrued expenses and other current liabilities


145,841



138,895

Total current liabilities


768,816



408,733

Long-term debt including obligations under finance leases


346,458



497,018

Noncurrent operating lease liabilities


26,008



34,379

Deferred income taxes and tax uncertainties


121,715



121,727

Other noncurrent liabilities


9,443



Total liabilities


1,272,440



1,061,857

Commitments and Contingencies






Shareholders' Equity:






Preferred Stock




Class A Common Stock


48



47

Class B Common Stock


9



10

Additional paid-in capital


735,562



690,739

Retained earnings


528,766



749,515

Accumulated other comprehensive loss


(14,780)



(21,418)

Class A treasury stock, at cost


(104,951)



(103,948)

Total MSC Industrial shareholders' equity


1,144,654



1,314,945

Noncontrolling interest

$

7,224


$

5,628

Total shareholders' equity


1,151,878



1,320,573

Total liabilities and shareholders' equity

$

2,424,318


$

2,382,430

 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)















Thirteen Weeks Ended


Thirty-Nine Weeks Ended


May 29,


May 30,


May 29,


May 30,


2021


2020


2021


2020

Net sales

$

866,294


$

834,972


$

2,412,193


$

2,444,667

Cost of goods sold


499,823



481,010



1,427,653



1,412,457

Gross profit


366,471



353,962



984,540



1,032,210

Operating expenses


257,336



242,751



741,156



748,519

Impairment loss (loss recovery)


(20,840)



-



5,886



-

Restructuring costs


1,349



1,359



26,943



5,871

Income from operations


128,626



109,852



210,555



277,820

Other income (expense):












Interest expense


(3,696)



(5,451)



(10,632)



(12,117)

Interest income


15



173



52



251

Other income (expense), net


1,131



(560)



1,724



(509)

Total other expense


(2,550)



(5,838)



(8,856)



(12,375)

Income before provision for income taxes


126,076



104,014



201,699



265,445

Provision for income taxes


31,141



25,900



49,639



66,323

Net income


94,935



78,114



152,060



199,122

Less: Net income attributable to noncontrolling interest


501



411



1,087



501

Net income attributable to MSC Industrial

$

94,434


$

77,703


$

150,973


$

198,621

Per share data attributable to MSC Industrial:












Net income per common share:












Basic

$

1.69


$

1.40


$

2.70


$

3.58

Diluted

$

1.68


$

1.40


$

2.69


$

3.57

Weighted-average shares used in computing

   net income per common share:












Basic


55,944



55,563



55,814



55,435

Diluted


56,352



55,599



56,139



55,581

 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)















Thirteen Weeks Ended


Thirty-Nine Weeks Ended


May 29,


May 30,


May 29,


May 30,


2021


2020


2021


2020

Net income, as reported

$

94,935


$

78,114


$

152,060


$

199,122

Other comprehensive income, net of tax:












Foreign currency translation adjustments


4,325



(4,065)



7,147



(3,247)

Comprehensive income


99,260



74,049



159,207



195,875

Comprehensive income attributable to noncontrolling interest:












Net income


(501)



(411)



(1,087)



(501)

Foreign currency translation adjustments


(299)



536



(509)



441

Comprehensive income attributable to MSC Industrial

$

98,460


$

74,174


$

157,611


$

195,815

 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)









Thirty-Nine Weeks Ended


May 29,


May 30,


2021


2020

Cash Flows from Operating Activities:






Net income

$

152,060


$

199,122

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization    


51,575



51,354

Non-cash operating lease cost


11,650



16,852

Stock-based compensation


13,407



12,463

Loss on disposal of property, plant and equipment


460



278

Inventory write-down


30,091



Operating lease and fixed asset impairment due to restructuring


15,819



Provision for credit losses


5,303



8,008

Changes in operating assets and liabilities:






Accounts receivable


(77,130)



(13,788)

Inventories


(82,864)



(17,049)

Prepaid expenses and other current assets


(38,658)



(17,082)

Operating lease liabilities


(25,576)



(16,634)

Other assets


585



2,008

Accounts payable and accrued liabilities


82,638



(10,591)

Total adjustments


(12,700)



15,819

Net cash provided by operating activities


139,360



214,941

Cash Flows from Investing Activities:






    Expenditures for property, plant and equipment


(37,598)



(35,920)

    Cash used in business acquisitions, net of cash acquired




(2,286)

Net cash used in investing activities


(37,598)



(38,206)

Cash Flows from Financing Activities:






Repurchases of common stock


(50,700)



(3,236)

Payments of regular cash dividends


(125,707)



(124,851)

Payments of special cash dividends


(195,351)



(277,634)

Proceeds from sale of Class A Common Stock in connection with associate stock purchase plan


3,112



3,287

Proceeds from exercise of Class A Common Stock options


28,969



13,530

Borrowings under credit facilities


505,000



1,012,200

Payments under credit facilities


(365,000)



(578,000)

Proceeds from long-term debt




100,000

Payments on finance lease and financing obligations


(1,896)



(1,629)

Other, net


1,286



1,162

Net cash provided by (used in) financing activities


(200,287)



144,829

Effect of foreign exchange rate changes on cash and cash equivalents


743



(457)

Net increase (decrease) in cash and cash equivalents


(97,782)



321,107

Cash and cash equivalents – beginning of period


125,211



32,286

Cash and cash equivalents – end of period

$

27,429


$

353,393

Supplemental Disclosure of Cash Flow Information:






      Cash paid for income taxes

$

60,903


$

39,672

      Cash paid for interest

$

8,776


$

8,501

Non-GAAP Financial Measures

  • Results Excluding Impairment Loss (Loss Recovery), Restructuring Costs, Inventory Write-downs, and Other Charges

To supplement MSC Industrial's unaudited selected financial data presented consistent with accounting principles generally accepted in the United States ("GAAP"), the Company discloses certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude impairment losses (loss recovery), restructuring costs, inventory write-downs related to certain PPE inventory, and other related costs and tax effects.

These non-GAAP financial measures are not presented in accordance with GAAP or an alternative for GAAP financial measures and may be different from similar non-GAAP financial measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures and should only be used to evaluate MSC Industrial's results of operations in conjunction with the corresponding GAAP financial measures.

In calculating non-GAAP financial measures, we exclude impairment losses (loss recovery), restructuring costs, inventory write-downs related to certain PPE inventory, and other related costs and tax effects.  Management makes these adjustments to facilitate a review of the Company's operating performance on a comparable basis between periods, for comparison with forecasts and strategic plans, for identifying and analyzing trends in the Company's underlying business and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results from the perspective of management in addition to seeing results presented in accordance with GAAP for the same reasons and purposes for which management uses such non-GAAP financial measures.
















MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen Weeks Ended May 29, 2021

(dollars in thousands, except percentages and per share data)

















GAAP Financial
Measure



Items Affecting Comparability


Non-GAAP
Financial Measure


Total MSC
Industrial


Impairment
Loss (Loss
Recovery)


Restructuring
Costs


Legal Costs-
impairment of
prepaid for PPE


Adjusted Total
MSC Industrial

Net Sales

$

866,294


$

-


$

-


$

-


$

866,294
















Cost of Goods Sold


499,823



-



-



-



499,823
















Gross Profit


366,471



-



-



-



366,471

Gross Margin


42.3%



-



-



-



42.3%
















Operating Expenses


257,336



-



-



401



256,935

Operating Exp as % of Sales


29.7%



-



-



0.0%



29.7%
















Impairment Loss (Loss Recovery)


(20,840)



(20,840)



-



-



-
















Restructuring Costs


1,349



-



1,349



-



-
















Income from Operations


128,626



20,840



(1,349)



(401)



109,536

Operating Margin


14.8%



2.4%



-0.2%



0.0%



12.6%
















Total Other Expense


(2,550)



-



-



-



(2,550)
















Income before provision for income taxes


126,076



20,840



(1,349)



(401)



106,986
















Provision for income taxes


31,141



5,263



(341)



(100)



26,319

     Net income


94,935



15,577



(1,008)



(301)



80,667

     Net income attributable to noncontrolling interest


501



-



-



-



501

     Net income attributable to MSC Industrial

$

94,434


$

15,577


$

(1,008)


$

(301)


$

80,166
















Net income per common share:















     Diluted

$

1.68


$

0.28


$

(0.02)


$

(0.01)


$

1.42

 



















MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirty-Nine Weeks Ended May 29, 2021

(dollars in thousands, except percentages and per share data)




















GAAP
Financial
Measure


Items Affecting Comparability


Non-GAAP
Financial
Measure


Total MSC
Industrial


Inventory
Write-down


Restructuring
Costs


Impairment
Loss


 Legal Costs -
impairment of
prepaid for PPE


Adjusted Total
MSC Industrial

Net Sales

$

2,412,193


$

-


$

-


$

-


$

-


$

2,412,193



















Cost of Goods Sold


1,427,653



30,091



-



-



-



1,397,562



















Gross Profit


984,540



(30,091)



-



-



-



1,014,631

Gross Margin


40.8%



-1.2%



-



-



-



42.1%



















Operating Expenses


741,156



-



-



-



1,421



739,735

Operating Exp as % of Sales


30.7%



-



-



-



0.1%



30.7%



















Impairment Loss


5,886



-



-



5,886



-



-



















Restructuring Costs


26,943



-



26,943



-



-



-



















Income from Operations


210,555



(30,091)



(26,943)



(5,886)



(1,421)



274,896

Operating Margin


8.7%



-1.2%



-1.1%



-0.2%



-0.1%



11.4%



















Total Other Expense


(8,856)



-



-



-



-



(8,856)



















Income before provision for income taxes


201,699



(30,091)



(26,943)



(5,886)



(1,421)



266,040



















Provision for income taxes


49,639



(7,392)



(6,620)



(1,446)



(349)



65,446

     Net income


152,060



(22,699)



(20,323)



(4,440)



(1,072)



200,594

     Net income attributable to noncontrolling interest


1,087



-



-



-



-



1,087

     Net income attributable to MSC Industrial

$

150,973


$

(22,699)


$

(20,323)


$

(4,440)


$

(1,072)


$

199,507



















Net income per common share:


















     Diluted

$

2.69


$

(0.40)


$

(0.36)


$

(0.08)


$

(0.02)


$

3.55

 



















MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen and Thirty-Nine Weeks Ended May 30, 2020

(dollars in thousands, except percentages and per share data)




















GAAP Financial Measure


Items Affecting Comparability 1


Non-GAAP Financial Measure


Total MSC Industrial


Restructuring Costs


MSC Industrial excluding
Restructuring Costs


Thirteen

Weeks Ended


Thirty-Nine

Weeks Ended


Thirteen

Weeks Ended


Thirty-Nine

Weeks Ended

Thirteen

Weeks Ended


Thirty-Nine

Weeks Ended


May 30, 2020

May 30, 2020

May 30, 2020

Net Sales

$

834,972


$

2,444,667


$

-


$

-


$

834,972


$

2,444,667



















Cost of Goods Sold


481,010



1,412,457



-



-



481,010



1,412,457



















Gross Profit


353,962



1,032,210



-



-



353,962



1,032,210

Gross Margin


42.4%



42.2%



-



-



42.4%



42.2%



















Operating Expenses


242,751



748,519









242,751



748,519

Operating Exp as % of Sales


29.1%



30.6%



-



-



29.1%



30.6%



















Restructuring Costs


1,359



5,871



1,359



5,871



-



-



















Income from Operations


109,852



277,820



(1,359)



(5,871)



111,211



283,691

Operating Margin


13.2%



11.4%



-0.2%



-0.2%



13.3%



11.6%



















Total Other Expense


(5,838)



(12,375)



-



-



(5,838)



(12,375)



















Income before provision for income taxes


104,014



265,445



(1,359)



(5,871)



105,373



271,316



















Provision for income taxes


25,900



66,323



(338)



(1,468)



26,238



67,791

     Net income


78,114



199,122



(1,021)



(4,403)



79,135



203,525

     Net income attributable to noncontrolling interest


411



501



-



-



411



501

     Net income attributable to MSC Industrial

$

77,703


$

198,621


$

(1,021)


$

(4,403)


$

78,724


$

203,024



















Net income per common share:


















     Diluted

$

1.40


$

3.57


$

(0.02)


$

(0.08)


$

1.42


$

3.65


1The thirteen and thirty-nine weeks ended May 30, 2020 include only restructuring costs. Items of note excluded from the current period results, including inventory write-downs, an impairment loss (loss recovery) and associated legal costs, did not occur in the prior year periods.

 

SOURCE MSC Industrial Supply Co.

For further information: Contact Information: Investors: John G. Chironna, Vice President, Investor Relations and Treasurer, (704) 987-5231; Media: Paul Mason, Director, Corporate Communications, (704) 987-5313