MELVILLE, N.Y. and DAVIDSON, N.C., Nov. 1,
2016 /PRNewswire/ --
FISCAL Q4 2016 HIGHLIGHTS
- Net sales of $745.1 million,
increased 2.4% year-over-year (3.6% decline on an Average Daily
Sales basis)
- Gross margin of 44.8% reflecting continued stabilization in an
ongoing difficult environment
- Operating margin of 13.3% resulting from cost containment and
ongoing monitoring of discretionary spend
- GAAP diluted EPS of $1.02
FISCAL 2016 HIGHLIGHTS
- Net sales of $2.9 billion
decreased 1.6% over the prior year (3.5% decline on an ADS
basis)
- GAAP diluted EPS of $3.77
MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the
"Company," a premier distributor of Metalworking and Maintenance,
Repair and Operations ("MRO") supplies to industrial customers
throughout North America, today
reported financial results for its fiscal 2016 fourth quarter and
full year ended September 3, 2016.
Both periods included an additional week of operational results as
compared to the prior periods.
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Financial
Highlights1
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FY16
Q4
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FY15
Q4
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Change
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FY16
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FY15
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Change
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Net Sales
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$745.1
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$727.4
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2.4%
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$2,863.5
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$2,910.4
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(1.6%)
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GAAP Operating
Income
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99.2
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95.4
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4.0%
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376.0
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379.5
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(0.9%)
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% of Net
Sales
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13.3%
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13.1%
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13.1%
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13.0%
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Adjusted Operating
Income
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99.2
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95.7
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2
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3.7%
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376.0
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384.0
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2
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(2.1%)
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% of Net
Sales
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13.3%
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13.2%
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13.1%
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13.2%
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GAAP Net
Income
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61.8
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59.0
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4.8%
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231.2
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231.3
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0.0%
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Adjusted Net
Income
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61.8
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59.2
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3
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4.5%
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231.2
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234.1
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3
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(1.2%)
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GAAP Diluted
EPS
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$1.02
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4
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$0.96
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5
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6.3%
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$3.77
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4
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$3.74
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5
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0.8%
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Adjusted Diluted
EPS
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$1.02
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4
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$0.96
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5
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6.3%
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$3.77
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4
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$3.79
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5
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(0.5%)
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1In
millions unless noted. 2Excludes non-recurring
costs.3Excludes the after tax effects of non-recurring
costs.4Based on 60.3 million and 61.1 million diluted
shares outstanding for FY16 Q4 and FY16, respectively.
5Based on 61.4 million and 61.5 million diluted shares
outstanding for FY15 Q4 and FY15, respectively.
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Erik Gershwind, president and
chief executive officer, said, "Conditions remained very difficult
throughout the fourth quarter, much as they have for the past few
quarters. Low oil prices and the strong US dollar continued to
depress demand, particularly in metalworking and heavy
manufacturing. Despite these headwinds, our execution remains
strong, including continued share gains, sustained gross margin
stabilization and strong expense controls."
Rustom Jilla, executive vice
president and chief financial officer, added, "Our diluted EPS for
the quarter was $1.02, 4 cents above the mid-point of our guidance
range. We continued executing on our gross margin and cost
reduction initiatives, but the fourth fiscal quarter's higher EPS
was mostly attributable to sales being above guidance. For the full
year, we succeeded in delivering an operating margin roughly in
line with prior year levels despite lower sales. Finally, our cash
flow generation was particularly strong in fiscal 2016, and we
returned $500 million to our
shareholders through dividends and share buybacks."
Gershwind concluded, "As we look to fiscal 2017, MSC is well
positioned regardless of what happens in the industrial economy.
Should conditions improve or even just stabilize, the Company is
poised for a tremendous growth and leverage story. On the other
hand, if difficult conditions persist, we will continue to
capitalize on the opportunities a challenging environment creates
for MSC, making the future growth and leverage story even more
compelling."
Outlook
Based on current market conditions, the Company expects net
sales for the first quarter of fiscal 2017 to be between
$676 million and $688 million. At the
midpoint, average daily sales are expected to decline roughly 3.5%,
as compared to last year's first quarter. The Company expects
diluted earnings per share for the fiscal first quarter 2017 to be
between $0.90 and $0.94.
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. EST to review the Company's fiscal 2016
fourth quarter and full year 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
November 8, 2016.
The Company's reporting date for fiscal first quarter 2017
results will be January 11, 2017.
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 over 75 years of working with customers
across industries.
Our experienced team of more than 6,000 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 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, 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, financial restrictions
on outstanding borrowings, dependence on our information systems
and the risk of business disruptions arising from changes to our
information systems, disruptions due to computer system or network
failures, computer viruses, physical or electronics break-ins and
cyber-attacks, the inability to successfully manage the upgrade of
our core financial systems, the loss of key suppliers or supply
chain disruptions, problems with successfully integrating acquired
operations, opening or expanding our customer fulfillment centers
exposes us to risks of delays, the risk of war, terrorism and
similar hostilities, dependence on key personnel, goodwill and
intangible assets recorded as a result of our acquisitions could be
impaired, 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.
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
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Condensed
Consolidated Balance Sheets
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(In
thousands)
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September
3,
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August 29,
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2016
|
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2015
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ASSETS
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Current
Assets:
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Cash and cash
equivalents
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$
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52,890
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$
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38,267
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Accounts receivable,
net of allowance for doubtful accounts
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392,463
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403,468
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Inventories
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444,221
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506,631
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Prepaid expenses and
other current assets
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45,290
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39,067
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Deferred income
taxes
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|
46,627
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|
44,643
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Total current
assets
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981,491
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1,032,076
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Property, plant and
equipment, net
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320,544
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291,156
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Goodwill
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624,081
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623,626
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Identifiable
intangibles, net
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105,307
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119,805
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Other
assets
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33,528
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33,523
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Total
assets
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$
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2,064,951
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$
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2,100,186
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LIABILITIES AND
SHAREHOLDERS' EQUITY
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Current
Liabilities:
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Revolving credit
note
|
$
|
217,000
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$
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188,000
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Current maturities of
long-term debt
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50,050
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25,165
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Accounts
payable
|
|
110,601
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114,328
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Accrued
liabilities
|
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100,951
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|
94,494
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Total current
liabilities
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|
478,602
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421,987
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Long-term debt, net
of current maturities
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339,772
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214,119
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Deferred income taxes
and tax uncertainties
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|
148,201
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|
|
131,210
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Total
liabilities
|
|
966,575
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|
767,316
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Commitments and
Contingencies
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Shareholders'
Equity:
|
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Preferred
Stock
|
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—
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|
|
—
|
Class A common
stock
|
|
53
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|
56
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Class B common
stock
|
|
12
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13
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Additional paid-in
capital
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584,017
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604,905
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Retained
earnings
|
|
1,040,148
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1,232,381
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Accumulated other
comprehensive loss
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(19,098)
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(17,252)
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Class A treasury
stock, at cost
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(506,756)
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(487,233)
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Total shareholders'
equity
|
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1,098,376
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1,332,870
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Total liabilities and
shareholders' equity
|
$
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2,064,951
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$
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2,100,186
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MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Income
|
(In thousands,
except per share data)
|
|
|
(Unaudited)
|
|
|
|
|
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|
Quarters
Ended
|
|
Fiscal Years
Ended
|
|
September
3,
|
|
August 29,
|
|
September
3,
|
|
August 29,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(14 weeks)
|
|
(13 weeks)
|
|
(53 weeks)
|
|
(52 weeks)
|
Net sales
|
$
|
745,074
|
|
$
|
727,405
|
|
$
|
2,863,505
|
|
$
|
2,910,379
|
Cost of goods
sold
|
|
411,007
|
|
|
400,270
|
|
|
1,574,647
|
|
|
1,593,804
|
Gross
profit
|
|
334,067
|
|
|
327,135
|
|
|
1,288,858
|
|
|
1,316,575
|
Operating
expenses
|
|
234,821
|
|
|
231,695
|
|
|
912,898
|
|
|
937,046
|
Income from
operations
|
|
99,246
|
|
|
95,440
|
|
|
375,960
|
|
|
379,529
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(1,752)
|
|
|
(1,554)
|
|
|
(5,807)
|
|
|
(6,340)
|
Interest
income
|
|
163
|
|
|
165
|
|
|
654
|
|
|
771
|
Other income
(expense), net
|
|
12
|
|
|
(449)
|
|
|
924
|
|
|
(819)
|
Total other
expense
|
|
(1,577)
|
|
|
(1,838)
|
|
|
(4,229)
|
|
|
(6,388)
|
Income before
provision for income taxes
|
|
97,669
|
|
|
93,602
|
|
|
371,731
|
|
|
373,141
|
Provision for income
taxes
|
|
35,823
|
|
|
34,580
|
|
|
140,515
|
|
|
141,833
|
Net income
|
$
|
61,846
|
|
$
|
59,022
|
|
$
|
231,216
|
|
$
|
231,308
|
Per Share
Information:
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.03
|
|
$
|
0.96
|
|
$
|
3.78
|
|
$
|
3.75
|
Diluted
|
$
|
1.02
|
|
$
|
0.96
|
|
$
|
3.77
|
|
$
|
3.74
|
Weighted average
shares used in computing net income per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
60,079
|
|
|
61,283
|
|
|
60,908
|
|
|
61,292
|
Diluted
|
|
60,278
|
|
|
61,413
|
|
|
61,076
|
|
|
61,487
|
Cash dividends
declared per common share
|
$
|
0.43
|
|
$
|
0.40
|
|
$
|
1.72
|
|
$
|
4.60
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Comprehensive Income
|
(In
thousands)
|
|
|
Fiscal Years
Ended
|
|
September
3,
|
|
August 29,
|
|
August 30,
|
|
2016
|
|
2015
|
|
2014
|
|
(53 weeks)
|
|
(52 weeks)
|
|
(52 weeks)
|
Net income, as
reported
|
$
|
231,216
|
|
$
|
231,308
|
|
$
|
236,067
|
Foreign currency
translation adjustments
|
|
(1,846)
|
|
|
(12,198)
|
|
|
(627)
|
Comprehensive
income
|
$
|
229,370
|
|
$
|
219,110
|
|
$
|
235,440
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
|
|
Fiscal Years
Ended
|
|
September
3,
|
|
August 29,
|
|
2016
|
|
2015
|
|
(53 weeks)
|
|
(52 weeks)
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net income
|
$
|
231,216
|
|
$
|
231,308
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
71,930
|
|
|
69,729
|
Stock-based
compensation
|
|
13,985
|
|
|
14,195
|
Loss on disposal of
property, plant, and equipment
|
|
752
|
|
|
1,453
|
Provision for doubtful
accounts
|
|
6,997
|
|
|
6,665
|
Deferred income taxes
and tax uncertainties
|
|
15,007
|
|
|
15,035
|
Excess tax benefits
from stock-based compensation
|
|
(1,536)
|
|
|
(3,956)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
2,595
|
|
|
(29,347)
|
Inventories
|
|
61,047
|
|
|
(59,008)
|
Prepaid expenses and
other current assets
|
|
(6,303)
|
|
|
1,268
|
Other
assets
|
|
142
|
|
|
(1,354)
|
Accounts payable and
accrued liabilities
|
|
5,271
|
|
|
3,803
|
Total
adjustments
|
|
169,887
|
|
|
18,483
|
Net cash provided by
operating activities
|
|
401,103
|
|
|
249,791
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(87,930)
|
|
|
(51,405)
|
Net cash used in
investing activities
|
|
(87,930)
|
|
|
(51,405)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
Repurchases of common
stock
|
|
(383,798)
|
|
|
(33,414)
|
Payments of regular
cash dividends
|
|
(105,778)
|
|
|
(98,828)
|
Payments of special
cash dividend
|
|
—
|
|
|
(185,403)
|
Payments on capital
lease and financing obligations
|
|
(1,090)
|
|
|
(2,290)
|
Excess tax benefits
from stock-based compensation
|
|
1,536
|
|
|
3,956
|
Proceeds from sale of
Class A common stock in connection with associate stock purchase
plan
|
|
4,084
|
|
|
4,285
|
Proceeds from exercise
of Class A common stock options
|
|
7,410
|
|
|
11,119
|
Borrowings under
financing obligations
|
|
453
|
|
|
530
|
Borrowings under
Credit Facility
|
|
305,000
|
|
|
336,000
|
Proceeds from Private
Placement Loan
|
|
175,000
|
|
|
—
|
Private Placement Loan
financing costs
|
|
(185)
|
|
|
—
|
Payments of notes
payable and revolving credit note under the Credit
Facility
|
|
(301,000)
|
|
|
(243,000)
|
Net cash used in
financing activities
|
|
(298,368)
|
|
|
(207,045)
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
|
(182)
|
|
|
(228)
|
Net increase
(decrease) in cash and cash equivalents
|
|
14,623
|
|
|
(8,887)
|
Cash and cash
equivalents – beginning of year
|
|
38,267
|
|
|
47,154
|
Cash and cash
equivalents – end of year
|
$
|
52,890
|
|
$
|
38,267
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
Cash paid for income
taxes
|
$
|
127,965
|
|
$
|
122,988
|
Cash paid for
interest
|
$
|
4,986
|
|
$
|
5,843
|
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 for the thirteen weeks and fiscal year ended
August 29, 2015 exclude non-recurring
costs associated with the Class C Solutions Group ("CCSG")
acquisition and executive transition and separation costs, and
related tax effects. There were no adjustments for non-recurring
costs for the fourteen weeks and fiscal year ended September 3, 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
|
|
August 29,
2015
|
|
(in
thousands)
|
|
Margin
|
GAAP Operating
income
|
$
|
95,440
|
|
13.1
|
%
|
Non-recurring
costs
|
|
236
|
|
|
|
Adjusted Operating
income
|
$
|
95,676
|
|
13.2
|
%
|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
|
August 29,
2015
|
|
|
(in
thousands)
|
Net sales
|
|
$
|
727,405
|
Cost of goods
sold
|
|
|
400,270
|
Gross
profit
|
|
|
327,135
|
Operating
Expenses
|
|
|
231,695
|
Income from
Operations
|
|
|
95,440
|
Non-recurring
costs
|
|
|
236
|
Adjusted Operating
income
|
|
$
|
95,676
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
|
August 29,
2015
|
(in thousands,
except per share amounts)
|
|
$(after
tax)
|
|
Diluted
EPS
|
GAAP net
income
|
|
$
|
59,022
|
|
$
|
0.96
|
Non-recurring
costs*
|
|
|
149
|
|
|
-
|
Adjusted net
income
|
|
$
|
59,171
|
|
$
|
0.96
|
|
|
|
|
|
|
|
* On a pre-tax basis
includes approximately $236 of non-recurring executive transition
costs related to the planned retirement of the Company's Chief
Financial Officer for the thirteen weeks ended August 29, 2015. The
non-recurring costs were calculated using an effective tax rate of
36.9%.
|
|
|
|
|
|
|
|
Fiscal Year
Ended
|
|
August 29,
2015
|
|
(in
thousands)
|
|
Margin
|
GAAP Operating
income
|
$
|
379,529
|
|
13.0
|
%
|
Non-recurring
costs
|
|
4,507
|
|
|
|
Adjusted Operating
income
|
$
|
384,036
|
|
13.2
|
%
|
|
|
|
|
|
|
Fiscal Year
Ended
|
|
|
August 29,
2015
|
|
|
(in
thousands)
|
Net sales
|
|
$
|
2,910,379
|
Cost of goods
sold
|
|
|
1,593,804
|
Gross
profit
|
|
|
1,316,575
|
Operating
Expenses
|
|
|
937,046
|
Income from
Operations
|
|
|
379,529
|
Non-recurring
costs
|
|
|
4,507
|
Adjusted Operating
income
|
|
$
|
384,036
|
|
|
|
|
|
|
|
|
|
Fiscal Year
Ended
|
|
|
August 29,
2015
|
(in thousands,
except per share amounts)
|
|
$(after
tax)
|
|
Diluted
EPS
|
GAAP net
income
|
|
$
|
231,308
|
|
$
|
3.74
|
Non-recurring
costs*
|
|
|
2,794
|
|
|
0.05
|
Adjusted net
income
|
|
$
|
234,102
|
|
$
|
3.79
|
|
|
|
|
|
|
|
* On a pre-tax basis
includes approximately $1,081 of non-recurring integration costs
associated with the CCSG acquisition, approximately $2,706 for
non-recurring executive separation costs related to the departure
of the Executive Vice President of Sales, and approximately $720 of
non-recurring executive transition costs related to the planned
retirement of the Company's Chief Financial Officer for the fiscal
year ended August 29, 2015. The non-recurring costs were calculated
using an effective tax rate of 38.0%.
|
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/msc-reports-fiscal-2016-fourth-quarter-and-full-year-results-300354512.html
SOURCE MSC Industrial Supply Co.