MELVILLE, N.Y. and DAVIDSON, N.C., July 6,
2016 /PRNewswire/ --
FISCAL 2016 Q3 HIGHLIGHTS
- Net sales of $727.5 million
declined 2.4% year-over-year (3.9% decline on an ADS basis)
- Gross margin of 45.0% remained stable in a challenging economic
environment
- Operating margin of 14.5% driven by tight operating cost
control and ongoing productivity improvements
- GAAP diluted EPS of $1.05
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 third quarter ended
May 28, 2016.
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|
|
|
|
|
|
Financial
Highlights1
|
|
FY16
Q3
|
|
FY15
Q3
|
|
Change
|
Net Sales
|
|
$727.5
|
|
$745.5
|
|
(2.4%)
|
GAAP Operating
Income
|
|
105.8
|
|
104.2
|
|
1.5%
|
% of Net
Sales
|
|
14.5%
|
|
14.0%
|
|
|
Adjusted Operating
Income
|
|
105.8
|
|
104.5 2
|
|
1.2%
|
% of Net
Sales
|
|
14.5%
|
|
14.0%
|
|
|
GAAP Net
Income
|
|
64.8
|
|
63.3
|
|
2.3%
|
Adjusted Net
Income
|
|
64.8
|
|
63.5 3
|
|
2.1%
|
GAAP Diluted
EPS
|
|
$1.05 4
|
|
$1.03 4
|
|
1.9%
|
Adjusted Diluted
EPS
|
|
$1.05 4
|
|
$1.03 4
|
|
1.9%
|
|
1In
millions unless otherwise noted. 2Excludes non-recurring
costs. 3Excludes the after-tax effects of non-recurring
costs. 4Based on 61.4 million diluted shares outstanding
in both FY16 Q3 and FY15 Q3.
|
Erik Gershwind, president and
chief executive officer, said, "The challenging economic
environment grew even more difficult through our third quarter and,
as a result, sales were at the lower end of our guidance. We did,
however, continue to gain share, which, when coupled with strong
execution on gross margin countermeasures and cost reduction
initiatives, helped to offset economic headwinds."
Rustom Jilla, executive vice
president and chief financial officer, added, "Our diluted EPS for
the quarter was $1.05 versus
$1.03 in the prior year's third
quarter. This was the result of strong execution on the gross
margin and expense lines. Gross margins held at 45 percent, the
fourth consecutive quarter at this level, despite the challenging
price environment and headwinds from customer mix. Operating
expenses declined significantly year-over-year due in large part to
our productivity efforts and the reversal of incentive accruals.
Finally, our year to date operating cash flow less capital
expenditure (free cash flow) was $251
million, double last year's $125
million. As we move forward, our strong focus on
productivity will intensify given the economic backdrop."
Gershwind concluded, "Despite the challenging environment, I
remain confident in our future. Should things deteriorate further,
this creates opportunities for MSC such as new customer
relationships, the hiring of experienced industry salespeople, and
stronger supplier relationships. All of these would serve to
increase our share gain potential. At the same time, with the work
we have done on managing costs, along with our completed
infrastructure investments, we are poised for earnings leverage
when growth returns. Finally, we are using our strong balance sheet
to enhance shareholder returns, while preserving flexibility to
capitalize on any further market dislocations that may be ahead of
us."
Outlook
Based on current market conditions, the Company expects net
sales for the fiscal 2016 fourth quarter to be between $730 million and $742 million. At the midpoint,
average daily sales are expected to decline approximately 5%. The
Company expects diluted earnings per share for the fiscal 2016
fourth quarter to be between $0.96 and
$1.00. Fiscal 2016 is a 53-week year for MSC and the
Company's fiscal fourth quarter has an additional week. This
guidance reflects the additional week in the fourth quarter, and
typical seasonal patterns in sales and margins.
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. EDT to review the Company's fiscal 2016
third 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).
An online archive of the broadcast will be available until
August 5, 2016.
The Company's reporting date for fiscal 2016 fourth quarter and
full year results will be November 1,
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)
|
|
|
|
|
|
|
May 28,
|
|
August 29,
|
|
2016
|
|
2015
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
32,328
|
|
$
|
38,267
|
Accounts receivable,
net of allowance for doubtful accounts
|
|
395,464
|
|
|
403,468
|
Inventories
|
|
462,141
|
|
|
506,631
|
Prepaid expenses and
other current assets
|
|
39,387
|
|
|
39,067
|
Deferred income
taxes
|
|
44,643
|
|
|
44,643
|
Total current
assets
|
|
973,963
|
|
|
1,032,076
|
Property, plant and
equipment, net
|
|
286,251
|
|
|
291,156
|
Goodwill
|
|
624,001
|
|
|
623,626
|
Identifiable
intangibles, net
|
|
107,424
|
|
|
119,805
|
Other
assets
|
|
31,500
|
|
|
34,543
|
Total
assets
|
$
|
2,023,139
|
|
$
|
2,101,206
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Revolving credit
note
|
$
|
40,000
|
|
$
|
188,000
|
Current maturities of
long-term debt
|
|
44,635
|
|
|
25,515
|
Accounts
payable
|
|
113,109
|
|
|
114,328
|
Accrued
liabilities
|
|
95,773
|
|
|
94,494
|
Total current
liabilities
|
|
293,517
|
|
|
422,337
|
Long-term debt, net
of current maturities
|
|
177,875
|
|
|
214,789
|
Deferred income taxes
and tax uncertainties
|
|
131,132
|
|
|
131,210
|
Total
liabilities
|
|
602,524
|
|
|
768,336
|
Commitments and
Contingencies
|
|
|
|
|
|
Shareholders'
Equity:
|
|
|
|
|
|
Preferred
Stock
|
|
-
|
|
|
-
|
Class A common
stock
|
|
57
|
|
|
56
|
Class B common
stock
|
|
13
|
|
|
13
|
Additional paid-in
capital
|
|
621,377
|
|
|
604,905
|
Retained
earnings
|
|
1,322,057
|
|
|
1,232,381
|
Accumulated other
comprehensive loss
|
|
(18,090)
|
|
|
(17,252)
|
Class A treasury
stock, at cost
|
|
(504,799)
|
|
|
(487,233)
|
Total shareholders'
equity
|
|
1,420,615
|
|
|
1,332,870
|
Total liabilities and
shareholders' equity
|
$
|
2,023,139
|
|
$
|
2,101,206
|
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 28,
|
|
May 30,
|
|
May 28,
|
|
May 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net sales
|
$
|
727,495
|
|
$
|
745,483
|
|
$
|
2,118,431
|
|
$
|
2,182,974
|
Cost of goods
sold
|
|
400,467
|
|
|
407,066
|
|
|
1,163,640
|
|
|
1,193,534
|
Gross
profit
|
|
327,028
|
|
|
338,417
|
|
|
954,791
|
|
|
989,440
|
Operating
expenses
|
|
221,244
|
|
|
234,173
|
|
|
678,077
|
|
|
705,351
|
Income from
operations
|
|
105,784
|
|
|
104,244
|
|
|
276,714
|
|
|
284,089
|
Other (expense)
income:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(1,204)
|
|
|
(1,807)
|
|
|
(4,055)
|
|
|
(4,786)
|
Interest
income
|
|
164
|
|
|
166
|
|
|
491
|
|
|
606
|
Other income
(expense), net
|
|
110
|
|
|
10
|
|
|
912
|
|
|
(370)
|
Total other
expense
|
|
(930)
|
|
|
(1,631)
|
|
|
(2,652)
|
|
|
(4,550)
|
Income before
provision for income taxes
|
|
104,854
|
|
|
102,613
|
|
|
274,062
|
|
|
279,539
|
Provision for income
taxes
|
|
40,038
|
|
|
39,271
|
|
|
104,692
|
|
|
107,253
|
Net income
|
$
|
64,816
|
|
$
|
63,342
|
|
$
|
169,370
|
|
$
|
172,286
|
Per Share
Information:
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.06
|
|
$
|
1.03
|
|
$
|
2.76
|
|
$
|
2.79
|
Diluted
|
$
|
1.05
|
|
$
|
1.03
|
|
$
|
2.75
|
|
$
|
2.78
|
Weighted average
shares used in computing net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
61,133
|
|
|
61,287
|
|
|
61,206
|
|
|
61,294
|
Diluted
|
|
61,369
|
|
|
61,424
|
|
|
61,364
|
|
|
61,510
|
Cash dividends
declared per common share
|
$
|
0.43
|
|
$
|
0.40
|
|
$
|
1.29
|
|
$
|
4.20
|
MSC INDUSTRIAL
DIRECT CO., INC.
Condensed
Consolidated Statements of Comprehensive Income
(In
thousands)
(Unaudited)
|
|
|
|
Thirteen Weeks
Ended
|
|
Thirty-Nine Weeks
Ended
|
|
May 28,
|
|
May 30,
|
|
May 28,
|
|
May 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income, as
reported
|
$
|
64,816
|
|
$
|
63,342
|
|
$
|
169,370
|
|
$
|
172,286
|
Foreign currency
translation adjustments
|
|
2,556
|
|
|
59
|
|
|
(838)
|
|
|
(9,338)
|
Comprehensive
income
|
$
|
67,372
|
|
$
|
63,401
|
|
$
|
168,532
|
|
$
|
162,948
|
MSC INDUSTRIAL
DIRECT CO., INC.
Condensed
Consolidated Statements of Cash Flows
(In
thousands)
(Unaudited)
|
|
|
|
Thirty-Nine Weeks
Ended
|
|
May 28,
|
|
May 30,
|
|
2016
|
|
2015
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net income
|
$
|
169,370
|
|
$
|
172,286
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
53,343
|
|
|
52,095
|
Stock-based
compensation
|
|
10,302
|
|
|
11,299
|
Loss on disposal of
property, plant, and equipment
|
|
539
|
|
|
665
|
Provision for doubtful
accounts
|
|
5,496
|
|
|
4,305
|
Deferred income taxes
and tax uncertainties
|
|
(78)
|
|
|
(88)
|
Excess tax benefits
from stock-based compensation
|
|
(630)
|
|
|
(3,770)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
1,990
|
|
|
(29,547)
|
Inventories
|
|
44,032
|
|
|
(62,832)
|
Prepaid expenses and
other current assets
|
|
(348)
|
|
|
967
|
Other
assets
|
|
2,892
|
|
|
3,356
|
Accounts payable and
accrued liabilities
|
|
(1,086)
|
|
|
14,237
|
Total
adjustments
|
|
116,452
|
|
|
(9,313)
|
Net cash provided by
operating activities
|
|
285,822
|
|
|
162,973
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(34,714)
|
|
|
(38,176)
|
Net cash used in
investing activities
|
|
(34,714)
|
|
|
(38,176)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
Purchases of treasury
stock
|
|
(19,372)
|
|
|
(26,411)
|
Payments of regular
cash dividends
|
|
(79,351)
|
|
|
(74,143)
|
Payment of special
cash dividend
|
|
—
|
|
|
(185,403)
|
Payments on capital
lease and financing obligations
|
|
(600)
|
|
|
(1,574)
|
Excess tax benefits
from stock-based compensation
|
|
630
|
|
|
3,770
|
Proceeds from sale of
Class A common stock in connection with associate stock purchase
plan
|
|
2,896
|
|
|
3,271
|
Proceeds from exercise
of Class A common stock options
|
|
5,081
|
|
|
8,848
|
Borrowings under
financing obligations
|
|
453
|
|
|
530
|
Borrowings under
Credit Facility
|
|
88,000
|
|
|
306,000
|
Payments of borrowings
under Credit Facility
|
|
(254,750)
|
|
|
(181,750)
|
Net cash used in
financing activities
|
|
(257,013)
|
|
|
(146,862)
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
|
(34)
|
|
|
(226)
|
Net decrease in cash
and cash equivalents
|
|
(5,939)
|
|
|
(22,291)
|
Cash and cash
equivalents – beginning of period
|
|
38,267
|
|
|
47,154
|
Cash and cash
equivalents – end of period
|
$
|
32,328
|
|
$
|
24,863
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
Cash paid for income
taxes
|
$
|
101,178
|
|
$
|
88,553
|
Cash paid for
interest
|
$
|
3,878
|
|
$
|
4,190
|
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 May 30, 2015 associated
with the 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 May 28, 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
|
|
May 30,
2015
|
|
(in
thousands)
|
|
% of Net
Sales
|
GAAP Operating
income
|
$
|
104,244
|
|
14.0
|
%
|
Non-recurring
costs
|
|
237
|
|
|
|
Adjusted Operating
income
|
$
|
104,481
|
|
14.0
|
%
|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
|
May 30,
2015
|
|
|
(in
thousands)
|
Net sales
|
|
$
|
745,483
|
Cost of goods
sold
|
|
|
407,066
|
Gross
profit
|
|
|
338,417
|
Operating
Expenses
|
|
|
234,173
|
Income from
Operations
|
|
|
104,244
|
Non-recurring
costs
|
|
|
237
|
Adjusted Operating
income
|
|
$
|
104,481
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
|
May 30,
2015
|
(in thousands,
except per share amounts)
|
|
$(after-tax)
|
|
Diluted
EPS
|
GAAP net
income
|
|
$
|
63,342
|
|
$
|
1.03
|
Non-recurring
costs*
|
|
|
146
|
|
|
-
|
Adjusted net
income
|
|
$
|
63,488
|
|
$
|
1.03
|
|
|
|
|
|
|
|
* On a pre-tax basis
includes approximately $237 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 38.3%.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/msc-reports-fiscal-2016-third-quarter-results-300294419.html
SOURCE MSC Industrial Supply Co.