MSC INDUSTRIAL DIRECT CO., INC. 
By 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, September 1,
2012 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, November 26,
2012 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, November 26,
2012 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 863 739
associate stock purchase plan
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.
