MSC INDUSTRIAL SUPPLY CO. REPORTS FISCAL 2022 SECOND QUARTER RESULTS

FISCAL 2022 Q2 HIGHLIGHTS

  • Net sales of $862.5 million, an increase of 11.4% (7.9% on an average daily sales basis) compared to the prior fiscal year quarter
  • Gross margin of 42.5% vs. 38.1%, or 42.0% on an adjusted basis in the prior fiscal year quarter1
  • Operating margin of 11.3%, or 11.6% excluding restructuring and other costs1,2
  • Diluted EPS of $1.25 vs. $0.32 in the prior fiscal year quarter
  • Adjusted diluted EPS of $1.29 vs. $1.03 in the prior fiscal year quarter, a 25.2% increase1

MELVILLE, N.Y. and DAVIDSON, N.C., March 30, 2022 /PRNewswire/ -- MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the "Company," a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services, today reported financial results for its fiscal 2022 second quarter ended February 26, 2022.














Financial Highlights3


FY22 Q2


FY21 Q2


Change


FY22 YTD


FY21 YTD


Change

Net Sales


$862.5


$774.0


11.4%


$1,711.1


$1,545.9


10.7%

Income from Operations


$97.2


$28.0


246.8%


$187.9


$81.9


129.3%

Operating Margin


11.3%


3.6%




11.0%


5.3%



Net Income attributable to MSC


$69.9


$18.1


286.7%


$136.0


$56.5


140.5%

Diluted EPS


$1.25

4

0.32

5

290.6%


$2.43

4

$1.01

5

140.6%














Adjusted Financial Highlights1,3


FY22 Q2


FY21 Q2


Change


FY22 YTD


FY21 YTD


Change

Net Sales


$862.5


$774.0


11.4%


$1,711.1


$1,545.9


10.7%

Income from Operations


$100.3


$80.5


24.7%


$196.3


$165.4


18.7%

Operating Margin


11.6%


10.4%




11.5%


10.7%



Net Income attributable to MSC


$72.3


$57.6


25.6%


$142.2


$119.4


19.2%

Diluted EPS


$1.29

4

$1.03

5

25.2%


$2.54

4

$2.13

5

19.2%


1 Represents a non-GAAP financial measure and reconciliations to the most directly comparable GAAP financial measure is presented in the schedules accompanying this press release.

2 Reflects severance and separation costs, consulting costs and exit-related costs to better align our strategy.

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

4 Based on 56.0 million and 55.9 million weighted average diluted shares outstanding for FY22 Q2 and FY22 YTD respectively.

5 Based on 56.1 million and 56.0 million weighted average diluted shares outstanding for FY21 Q2 and FY21 YTD respectively.

Erik Gershwind, President and Chief Executive Officer, said, "I am excited by the growing momentum inside the Company to accelerate market share capture and improve profitability. We achieved double-digit top-line growth despite Covid-related disruptions during the first two weeks of January. Our growth initiatives are in high gear and the productivity improvements we deliver to our customers are resonating. Gross margin countermeasures, including a late January price increase, are working well and give us confidence that we can keep gross margins flat or better for full year fiscal 2022 versus fiscal 2021."

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "Strong top line growth combined with gross margin execution and Mission Critical cost savings resulted in 11.6% adjusted operating margin and 22.4% adjusted incremental margin over the prior year fiscal second quarter. With the building momentum, we are adding a low double-digit growth tier to our fiscal 2022 annual adjusted operating margin framework with a corresponding annual adjusted operating margin between 12.5% and 13.1%. Should recent trends continue, we expect to be in that range."

Gershwind concluded, "I am pleased with the progress I see throughout the Company. We are already at or above our long-range target of growing sales by at least 400 basis points above the Industrial Production Index and are well on our way to achieving ROIC in the high-teens by the end of fiscal 2023."

Conference Call Information
MSC will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2022 second 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 until April 6, 2022.

The Company's reporting date for fiscal 2022 third quarter results is scheduled for June 29, 2022. 

About MSC Industrial Supply Co. 
MSC Industrial Supply Co. (NYSE: MSM) is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with approximately 2.0 million products, inventory management and other supply chain solutions, and deep expertise from over 80 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 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. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances, statements involving a discussion of strategy, plans or intentions, statements about management's assumptions, projections or predictions of future events or market outlook and any other statement other than a statement of present or historical fact are forward looking statements. The inclusion of any statement in this press release does not constitute an admission by MSC or any other person that the events or circumstances described in such statement are material. In addition, new risks may emerge from time to time and it is not possible for management to predict such risks or to assess the impact of such risks on our business or financial results. Accordingly, future results may differ materially from historical results or from those discussed or implied by these forward looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward looking statements. These risks and uncertainties include, but are not limited to, the following:  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 impact of prolonged periods of low, high and rapid inflation, and fluctuations in interest rates; the credit risk of our customers, including changes in credit risk as a result of the COVID-19 pandemic, higher inflation and fluctuations in interest rates; 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 technology 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 contractors or key brands or supply chain disruptions, including due to import restrictions resulting from the COVID-19 pandemic or global geopolitical conditions; changes to governmental trade or sanctions policies, including the impact from significant import restrictions or tariffs or moratoriums on economic activity with certain countries or regions; 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 which our other shareholders do not prefer. 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)








February 26,


August 28,


2022


2021

ASSETS


(unaudited)




Current Assets:






Cash and cash equivalents

$

41,754


$

40,536

Accounts receivable, net of allowance for credit losses


619,913



560,373

Inventories


657,710



624,169

Prepaid expenses and other current assets


97,435



89,167

          Total current assets


1,416,812



1,314,245

Property, plant and equipment, net


300,232



298,416

Goodwill


692,482



692,704

Identifiable intangibles, net


96,061



101,854

Operating lease assets


51,602



49,011

Other assets


7,726



5,885

          Total assets

$

2,564,915


$

2,462,115







LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities:






Current portion of debt including obligations under finance leases

$

251,269


$

202,433

Current portion of operating lease liabilities


13,417



13,927

Accounts payable


191,436



186,330

Accrued expenses and other current liabilities


141,049



159,238

          Total current liabilities


597,171



561,928

Long-term debt including obligations under finance leases


584,182



583,616

Noncurrent operating lease liabilities


39,410



36,429

Deferred income taxes and tax uncertainties


108,851



108,827

Other noncurrent liabilities




9,443

          Total liabilities


1,329,614



1,300,243

Commitments and Contingencies






Shareholders' Equity:






Preferred Stock




Class A Common Stock


48



48

Class B Common Stock


9



9

Additional paid-in capital


766,156



740,867

Retained earnings


584,283



532,315

Accumulated other comprehensive loss


(19,121)



(17,984)

Class A treasury stock, at cost


(107,401)



(104,384)

          Total MSC shareholders' equity


1,223,974



1,150,871

     Noncontrolling interest

$

11,327


$

11,001

          Total shareholders' equity


1,235,301



1,161,872

          Total liabilities and shareholders' equity

$

2,564,915


$

2,462,115

 

MSC INDUSTRIAL DIRECT CO., INC.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)














Thirteen Weeks Ended


Twenty-Six Weeks Ended


February 26,


February 27,


February 26,


February 27,


2022


2021


2022


2021

Net sales

$

862,522


$

773,995


$

1,711,069


$

1,545,899

Cost of goods sold


496,247



479,244



992,198



927,830

     Gross profit


366,275



294,751



718,871



618,069

Operating expenses


265,973



245,115



522,554



483,820

Impairment loss








26,726

Restructuring and other costs


3,134



21,615



8,417



25,594

     Income from operations


97,168



28,021



187,900



81,929

Other income (expense):












     Interest expense


(3,617)



(3,580)



(7,345)



(6,936)

     Interest income


21



16



40



37

     Other income (expense), net


91



(58)



(322)



593

Total other expense


(3,505)



(3,622)



(7,627)



(6,306)

     Income before provision for income taxes


93,663



24,399



180,273



75,623

Provision for income taxes


23,509



6,051



43,862



18,498

     Net income


70,154



18,348



136,411



57,125

Less: Net income attributable to noncontrolling interest


223



263



413



586

     Net income attributable to MSC Industrial

$

69,931


$

18,085


$

135,998


$

56,539

Per share data attributable to MSC Industrial:












Net income per common share:












     Basic

$

1.25


$

0.32


$

2.44


$

1.01

     Diluted

$

1.25


$

0.32


$

2.43


$

1.01

Weighted average shares used in computing
   net income per common share:












     Basic


55,799



55,838



55,664



55,749

     Diluted


55,971



56,133



55,945



56,019

   

MSC INDUSTRIAL DIRECT CO., INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)














Thirteen Weeks Ended


Twenty-Six Weeks Ended


February 26,


February 27,


February 26,


February 27,


2022


2021


2022


2021

Net income, as reported

$

70,154


$

18,348


$

136,411


$

57,125

Other comprehensive income, net of tax:












   Foreign currency translation adjustments


3,768



626



(1,224)



2,822

Comprehensive income


73,922



18,974



135,187



59,947

Comprehensive income attributable to noncontrolling interest:












   Net income


(223)



(263)



(413)



(586)

   Foreign currency translation adjustments


(824)



251



87



(210)

Comprehensive income attributable to MSC Industrial

$

72,875


$

18,962


$

134,861


$

59,151

 

MSC INDUSTRIAL DIRECT CO., INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)








Twenty-Six Weeks Ended


February 26,


February 27,


2022


2021

Cash Flows from Operating Activities:






Net income

$

136,411


$

57,125

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






Depreciation and amortization    


34,985



34,571

Non-cash operating lease cost


8,012



7,537

Stock-based compensation


10,189



8,994

Loss on disposal of property, plant and equipment


230



345

Inventory write-down




30,091

Operating lease and fixed asset impairment due to restructuring




18,097

Provision for credit losses


4,245



4,280

Deferred income taxes


(341)



Changes in operating assets and liabilities:






Accounts receivable


(64,293)



(39,421)

Inventories


(34,024)



(18,647)

Prepaid expenses and other current assets


(8,358)



(27,214)

Operating lease liabilities


(8,136)



(9,074)

Other assets


(1,492)



494

Accounts payable and accrued liabilities


(20,007)



51,756

Total adjustments


(78,990)



61,809

               Net cash provided by operating activities


57,421



118,934

Cash Flows from Investing Activities:






Expenditures for property, plant and equipment


(31,179)



(19,954)

               Net cash used in investing activities


(31,179)



(19,954)

Cash Flows from Financing Activities:






Repurchases of common stock


(4,813)



(3,519)

Payments of regular cash dividends


(83,586)



(83,685)

Payments of special cash dividends




(195,351)

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


2,259



2,040

Proceeds from exercise of Class A Common Stock options


12,053



10,834

Borrowings under credit facilities


184,000



415,000

Payments under credit facilities


(134,500)



(350,000)

Borrowings under financing obligations


1,058



1,269

Other, net


(1,387)



(1,392)

               Net cash used in financing activities


(24,916)



(204,804)

Effect of foreign exchange rate changes on cash and cash equivalents


(108)



855

Net increase (decrease) in cash and cash equivalents


1,218



(104,969)

Cash and cash equivalents – beginning of period


40,536



125,211

Cash and cash equivalents – end of period

$

41,754


$

20,242







Supplemental Disclosure of Cash Flow Information:






Cash paid for income taxes

$

63,909


$

41,265

Cash paid for interest

$

7,068


$

6,606

Non-GAAP Financial Measures

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

To supplement MSC'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 incremental margin, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude impairment loss (prior year), inventory write-downs (prior year), legal costs for impairment of prepaid PPE (prior year), restructuring and other costs, 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's results of operations in conjunction with the corresponding GAAP financial measures.

In calculating non-GAAP financial measures, we exclude impairment loss (prior year), inventory write-downs (prior year), legal costs for impairment of prepaid PPE (prior year), restructuring and other costs, 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 and Twenty-Six Weeks Ended February 26, 2022

(In thousands, except percentages and per share data)




















GAAP Financial Measure


Items Affecting Comparability


Non-GAAP Financial Measure


Total MSC Industrial


Restructuring and Other Costs


Adjusted Total MSC Industrial


Thirteen Weeks Ended


Twenty-Six
Weeks Ended


Thirteen Weeks Ended


Twenty-Six
Weeks Ended


Thirteen Weeks Ended


Twenty-Six
Weeks Ended

Net Sales

$

862,522


$

1,711,069


$

-


$

-


$

862,522


$

1,711,069



















Cost of Goods Sold


496,247



992,198



-



-



496,247



992,198



















Gross Profit


366,275



718,871



-



-



366,275



718,871

Gross Margin


42.5%



42.0%









42.5%



42.0%



















Operating Expenses


265,973



522,554



-



-



265,973



522,554

Operating Exp as % of Sales


30.8%



30.5%









30.8%



30.5%



















Restructuring and Other Costs


3,134



8,417



3,134



8,417



-



-



















Income from Operations


97,168



187,900



(3,134)



(8,417)



100,302



196,317

Operating Margin


11.3%



11.0%



-0.4%



-0.5%



11.6%



11.5%

Incremental Margin


78.1%



64.2%









22.4%



18.7%



















Total Other Expense


(3,505)



(7,627)



-



-



(3,505)



(7,627)



















Income before provision for income taxes


93,663



180,273



(3,134)



(8,417)



96,797



188,690



















Provision for income taxes


23,509



43,862



(787)



(2,178)



24,296



46,040

Net income


70,154



136,411



(2,347)



(6,239)



72,501



142,650

Net income attributable to noncontrolling interest


223



413



-



-



223



413

Net income attributable to MSC Industrial

$

69,931


$

135,998


$

(2,347)


$

(6,239)


$

72,278


$

142,237



















Net income per common share:


















Diluted

$

1.25


$

2.43


$

(0.04)


$

(0.11)


$

1.29


$

2.54



















*Individual amounts may not agree to the total due to rounding.


















 

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen Weeks Ended February 27, 2021

(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 and Other Costs


Legal Costs-impairment of prepaid for PPE


Adjusted Total MSC Industrial

Net Sales

$

773,995


$

-


$

-


$

-


$

773,995
















Cost of Goods Sold


479,244



30,091



-



-



449,153
















Gross Profit


294,751



(30,091)



-



-



324,842

Gross Margin


38.1%



-3.9%



-



-



42.0%
















Operating Expenses


245,115



-



-



727



244,388

Operating Exp as % of Sales


31.7%









0.1%



31.6%
















Restructuring and Other Costs


21,615



-



21,615



-



-
















Income from Operations


28,021



(30,091)



(21,615)



(727)



80,454

Operating Margin


3.6%



-3.9%



-2.8%



-0.1%



10.4%
















Total Other Expense


(3,622)



-



-



-



(3,622)
















Income before provision for income taxes


24,399



(30,091)



(21,615)



(727)



76,832
















Provision for income taxes


6,051



(7,432)



(5,339)



(180)



19,002

Net income


18,348



(22,659)



(16,276)



(547)



57,830

Net income attributable to noncontrolling interest


263



-



-



-



263

Net income attributable to MSC Industrial

$

18,085


$

(22,659)


$

(16,276)


$

(547)


$

57,567
















Net income per common share:















Diluted

$

0.32


$

(0.40)


$

(0.29)


$

(0.01)


$

1.03
















*Individual amounts may not agree to the total due to rounding.















 

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Twenty-Six Weeks Ended February 27, 2021

(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 and Other Costs


Impairment Loss


 Legal Costs - impairment of prepaid for PPE


Adjusted Total MSC Industrial

Net Sales

$

1,545,899


$

-


$

-


$

-


$

-


$

1,545,899



















Cost of Goods Sold


927,830



30,091



-



-



-



897,739



















Gross Profit


618,069



(30,091)



-



-



-



648,160

Gross Margin


40.0%



-1.9%



-



-



-



41.9%



















Operating Expenses


483,820



-



-



-



1,020



482,800

Operating Exp as % of Sales


31.3%



-



-



-



0.1%



31.2%



















Impairment Loss


26,726



-



-



26,726



-



-



















Restructuring and Other Costs


25,594



-



25,594



-



-



-



















Income from Operations


81,929



(30,091)



(25,594)



(26,726)



(1,020)



165,360

Operating Margin


5.3%



-1.9%



-1.7%



-1.7%



-0.1%



10.7%



















Total Other Expense


(6,306)



-



-



-



-



(6,306)



















Income before provision for income taxes


75,623



(30,091)



(25,594)



(26,726)



(1,020)



159,054



















Provision for income taxes


18,498



(7,432)



(6,322)



(6,601)



(252)



39,105

Net income


57,125



(22,659)



(19,272)



(20,125)



(768)



119,949

Net income attributable to noncontrolling interest


586



-



-



-



-



586

Net income attributable to MSC Industrial

$

56,539


$

(22,659)


$

(19,272)


$

(20,125)


$

(768)


$

119,363



















Net income per common share:


















Diluted

$

1.01


$

(0.40)


$

(0.34)


$

(0.36)


$

(0.01)


$

2.13



















*Individual amounts may not agree to the total due to rounding.


















 

SOURCE MSC Industrial Supply Co.

For further information: Investors: John G. Chironna, Vice President, Investor Relations and Treasurer, (704) 987-5231; Media: Paul Mason, Director, Corporate Communications, (336) 817-2131
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Chat is available Monday through Friday from 8:00AM - 8:00 PM EST. U.S. Customers: For prompt service please call our MSC eCommerce Customer Care Team at 800-753-7970. International Customers: For prompt service please call our International Customer Care Team at 1-888-080-2048 (within the U.S.) or 001-248-200-4420 (outside the U.S.). Thank you.
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