MELVILLE, N.Y.and DAVIDSON, N.C., April 6, 2016/PRNewswire / --

FISCAL 2016 Q2 HIGHLIGHTS

  • Net sales of $684.1 million, a decline of 3.2% year-over-year
  • Gross margin of 45.1% reflecting continued execution of gross margin countermeasures
  • Operating margin of 11.8% driven by tight operating cost control and ongoing productivity improvements
  • GAAP diluted EPS of $0.80

MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), 'MSC' or the 'Company,' a premier distributor of Metalworking and Maintenance, Repair and Operations supplies to industrial customers throughout North America, today reported financial results for its fiscal 2016 second quarter ended February 27, 2016.

Financial Highlights

FY16 Q2

FY15 Q2

Change

Net Sales

$684.1

$706.4

(3.2%)

GAAP Operating Income

80.5

85.9

(6.2%)

% of Net Sales

11.8%

12.2%

Adjusted Operating Income

80.5

86.3

(6.7%)

% of Net Sales

11.8%

12.2%

GAAP Net Income

49.5

51.5

(3.9%)

Adjusted Net Income

49.5

51.8

(4.4%)

GAAP Diluted EPS

$0.80

$0.83

(3.6%)

Adjusted Diluted EPS

$0.80

$0.84

(4.8%)

In millions unless otherwise noted. Excludes non-recurring costs. Excludes the after-tax effects of non-recurring costs. Based on 61.3 million diluted shares outstanding for FY16 Q2. Based on 61.6 million diluted shares outstanding for FY15 Q2.

Erik Gershwind, president and chief executive officer, said, 'The market environment during our fiscal second quarter remained challenging, consistent with continued low levels of demand in the industrial economy and particularly in metalworking and heavy manufacturing. Continued share gains, as well as strong execution on our gross margin countermeasures and cost reduction initiatives, helped offset this ongoing weakness.'

Rustom Jilla, executive vice president and chief financial officer, added, 'Our second quarter gross margin and EPS were both at the top of our guidance range, while average daily sales and operating expenses were in-line with our guidance. Our strong cash flows for the quarter reflect our working capital management, including a reduction in inventory, which we achieved while maintaining the very high service levels that define our competitive advantage.'

Gershwind concluded, 'In such a difficult environment, I am very pleased with how we have managed the business in the first half of fiscal 2016, and we remain in line with our annual operating margin framework. Should conditions improve, the combination of share gains, gross margin stabilization and improvements to our cost structure will result in strong earnings growth.'

Outlook

Based on current market conditions, the Company expects net sales for the fiscal 2016 third quarter to be between $729 million and $741 million. At the midpoint, average daily sales are expected to decline roughly 3 percent compared to the prior year period. The Company expects diluted earnings per share for the fiscal 2016 third quarter to be between $0.98 and $1.02.

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.

Conference Call Information

MSC will host a conference call today at 8:30 a.m. ESTto review the Company's fiscal 2016 second quarter results. The call, accompanying slides, and other operational statistics may be accessed at: http://investor.mscdirect.com. The conference call may be accessed by dialing 1-877-443-5575 (US), 1-855-669-9657 (Canada), or 1-412-902-6618 (international).

A webcast replay of the conference call will be available until May 6, 2016.

The Company's reporting date for fiscal 2016 third quarter results will be July 6, 2016.

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 75 years of working with customers across industries.

Our experienced team of over 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 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, expected benefits from our investment and strategic plans, 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, current economic, political, and social conditions, changing customer and product mixes, competition, industry consolidation and other changes in the industry distribution sector, volatility in commodity and energy prices, the outcome of potential government or regulatory proceedings or future litigation relating to pending or future claims, inquiries or audits, credit risk of our customers, the risk of cancellation or rescheduling of customer orders, work stoppages or other business interruptions (including those due to extreme weather conditions) at transportation centers or shipping ports, the risk of loss of key suppliers, key brands or supply chain disruptions, our dependence on our information systems and the risk of business disruptions arising from changes to our information systems, and disruptions due to catastrophic events, power outages, natural disasters, computer system or network failures, computer viruses, physical or electronics break-ins and cyber-attacks, our dependence on key personnel, 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, problems with successfully integrating acquired operations, and disclosing our use of 'conflict minerals' in certain of the products we distribute could raise reputational and other risks. 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.

MSC INDUSTRIAL DIRECT CO., INC.

Condensed Consolidated Balance Sheets

(In thousands)

February 27,

August 29,

2016

2015

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

23,960

$

38,267

Accounts receivable, net of allowance for doubtful accounts

389,359

403,468

Inventories

464,225

506,631

Prepaid expenses and other current assets

49,372

39,067

Deferred income taxes

44,643

44,643

Total current assets

971,559

1,032,076

Property, plant and equipment, net

287,557

291,156

Goodwill

623,042

623,626

Identifiable intangibles, net

111,189

119,805

Other assets

32,105

34,543

Total assets

$

2,025,452

$

2,101,206

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Revolving credit note

$

99,000

$

188,000

Current maturities of long-term debt

38,465

25,515

Accounts payable

110,946

114,328

Accrued liabilities

84,167

94,494

Total current liabilities

332,578

422,337

Long-term debt, net of current maturities

190,534

214,789

Deferred income taxes and tax uncertainties

131,132

131,210

Total liabilities

654,244

768,336

Commitments and Contingencies

Shareholders' Equity:

Preferred Stock

-

-

Class A common stock

56

56

Class B common stock

13

13

Additional paid-in capital

613,160

604,905

Retained earnings

1,283,762

1,232,381

Accumulated other comprehensive loss

(20,646)

(17,252)

Class A treasury stock, at cost

(505,137)

(487,233)

Total shareholders' equity

1,371,208

1,332,870

Total liabilities and shareholders' equity

$

2,025,452

$

2,101,206

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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 27,

February 28,

February 27,

February 28,

2016

2015

2016

2015

Net sales

$

684,117

$

706,400

$

1,390,936

$

1,437,491

Cost of goods sold

375,326

385,526

763,173

786,468

Gross profit

308,791

320,874

627,763

651,023

Operating expenses

228,249

235,000

456,833

471,178

Income from operations

80,542

85,874

170,930

179,845

Other (expense) income:

Interest expense

(1,295)

(2,035)

(2,851)

(2,979)

Interest income

164

435

327

440

Other income (expense), net

739

(557)

802

(380)

Total other expense

(392)

(2,157)

(1,722)

(2,919)

Income before provision for income taxes

80,150

83,717

169,208

176,926

Provision for income taxes

30,625

32,190

64,654

67,982

Net income

$

49,525

$

51,527

$

104,554

$

108,944

Per Share Information:

Net income per common share:

Basic

$

0.81

$

0.84

$

1.70

$

1.76

Diluted

$

0.80

$

0.83

$

1.70

$

1.75

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

Basic

61,187

61,351

61,242

61,298

Diluted

61,313

61,566

61,361

61,554

Cash dividends declared per common share

$

0.43

$

0.40

$

0.86

$

3.80

MSC INDUSTRIAL DIRECT CO., INC.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Thirteen Weeks Ended

Twenty-Six Weeks Ended

February 27,

February 28,

February 27,

February 28,

2016

2015

2016

2015

Net income, as reported

$

49,525

$

51,527

$

104,554

$

108,944

Foreign currency translation adjustments

(2,279)

(5,449)

(3,394)

(9,397)

Comprehensive income

$

47,246

$

46,078

$

101,160

$

99,547

MSC INDUSTRIAL DIRECT CO., INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Twenty-Six Weeks Ended

February 27,

February 28,

2016

2015

Cash Flows from Operating Activities:

Net income

$

104,554

$

108,944

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

Depreciation and amortization

35,381

34,445

Stock-based compensation

6,999

8,202

Loss on disposal of property, plant, and equipment

390

371

Provision for doubtful accounts

5,241

2,719

Deferred income taxes and tax uncertainties

(78)

(60)

Excess tax benefits from stock-based compensation

(267)

(3,686)

Changes in operating assets and liabilities:

Accounts receivable

7,581

(28,222)

Inventories

41,153

(58,055)

Prepaid expenses and other current assets

(10,362)

(11,424)

Other assets

653

2,140

Accounts payable and accrued liabilities

(8,265)

(7,767)

Total adjustments

78,426

(61,337)

Net cash provided by operating activities

182,980

47,607

Cash Flows from Investing Activities:

Expenditures for property, plant and equipment

(26,781)

(25,145)

Net cash used in investing activities

(26,781)

(25,145)

Cash Flows from Financing Activities:

Purchases of treasury stock

(19,212)

(26,298)

Payments of regular cash dividends

(52,948)

(49,468)

Payment of special cash dividend

-

(185,403)

Payments on capital lease and financing obligations

(367)

(1,322)

Excess tax benefits from stock-based compensation

267

3,686

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

1,982

2,326

Proceeds from exercise of Class A common stock options

890

8,440

Borrowings under financing obligations

453

530

Borrowings under Credit Facility

66,000

298,000

Payments of borrowings under Credit Facility

(167,500)

(92,500)

Net cash used in financing activities

(170,435)

(42,009)

Effect of foreign exchange rate changes on cash and cash equivalents

(71)

(182)

Net decrease in cash and cash equivalents

(14,307)

(19,729)

Cash and cash equivalents - beginning of period

38,267

47,154

Cash and cash equivalents - end of period

$

23,960

$

27,425

Supplemental Disclosure of Cash Flow Information:

Cash paid for income taxes

$

70,511

$

68,036

Cash paid for interest

$

2,747

$

2,336

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. The adjusted supplemental measures exclude non-recurring costs for the thirteen weeks ended February 28, 2015associated with the Class C Solutions Group ('CCSG') acquisition and executive transition costs related to the retirement of our former Chief Financial Officer and related tax effects. There were no adjustments for non-recurring costs for the thirteen weeks ended February 27, 2016. 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 certain 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:

Thirteen Weeks Ended

February 28, 2015

(in thousands)

% of Net Sales

GAAP Operating income

$

85,874

12.2

%

Non-recurring costs

467

Adjusted Operating income

$

86,341

12.2

%

Thirteen Weeks Ended

February 28, 2015

(in thousands)

Net sales

$

706,400

Cost of goods sold

385,526

Gross profit

320,874

Operating Expenses

235,000

Income from Operations

85,874

Non-recurring costs

467

Adjusted Operating income

$

86,341

Thirteen Weeks Ended

February 28, 2015

(in thousands, except per share amounts)

$(after-tax)

Diluted EPS **

GAAP net income

$

51,527

$

0.83

Non-recurring costs*

286

-

Adjusted net income

$

51,813

$

0.84

* On a pre-tax basis includes approximately $220 of non-recurring integration costs associated with the CCSG acquisition and approximately $247 of non-recurring executive transition costs related to the retirement of our former Chief Financial Officer. The non-recurring costs were calculated using an effective tax rate of 38.5%.

** Individual amounts of earnings per share 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, (704) 987-5313

MSC Industrial Direct Co. Inc. issued this content on 06 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 06 April 2016 10:49:14 UTC

Original Document: http://investor.mscdirect.com/2016-04-06-MSC-Reports-Fiscal-2016-Second-Quarter-Results