MELVILLE, N.Y. and DAVIDSON, N.C., April
6, 2017 /PRNewswire/ --
FISCAL Q2 2017 HIGHLIGHTS
- Net sales of $703.8 million, an
increase of 2.9% year-over-year
- Gross margin of 44.7%, a 40 basis point decline
year-over-year
- Operating income of $86.6
million, an increase of 7.6% year-over-year
- Operating margin of 12.3%, a 50 basis point increase
year-over-year
- Diluted EPS of $0.93, or
5 cents above the midpoint of
guidance, including a 3 cent income
tax benefit*
MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the
"Company," a premier distributor of Metalworking and Maintenance,
Repair and Operations ("MRO") products and services to industrial
customers throughout North
America, today reported financial results for its fiscal
2017 second quarter ended March 4,
2017.
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Financial
Highlights1
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FY17
Q2
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FY16
Q2
|
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Change
|
Net Sales
|
|
$703.8
|
|
$684.1
|
|
2.9%
|
Operating
Income
|
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86.6
|
|
80.5
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7.6%
|
% of Net
Sales
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12.3%
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11.8%
|
|
|
Net Income
|
|
53.6
|
|
49.5
|
|
8.1%
|
Diluted
EPS
|
|
$0.93
|
2
|
$0.80
|
3
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16.3%
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1In
millions unless noted. 2Based on 57.2 million diluted
shares outstanding for FY17 Q2. 3 Based on 61.3 million
diluted shares outstanding for FY16 Q2.
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Erik Gershwind, president and
chief executive officer, said, "The environment continued to
improve during our fiscal second quarter and the momentum sustained
into March, the start of our fiscal third quarter. Most of our
customers continue to express an improving outlook, particularly
those in our core metalworking market. Our fiscal second quarter
results reflected these developments."
Rustom Jilla, executive vice
president and chief financial officer, added, "Our second quarter
growth of 2.9 percent was very welcomed after five quarters of
declines in average daily sales. We turned this sales growth into
an eight percent increase in operating income, with operating
expenses as a percentage of sales declining by about 100 basis
points, and operating margin improving roughly 50 basis points,
evidence of the leverage potential in our business. Diluted
earnings per share was up 16 percent over the prior year, with last
August's share buyback and the share-based compensation tax change
complementing our business performance."
Gershwind concluded, "We have used the last several years to
capitalize on the opportunities presented by the prolonged
downturn, and to focus on strengthening our business. Looking to
the future, as the environment turns and momentum is building, I
see a strong growth and leverage story playing out, particularly if
inflation tailwinds continue to build as expected."
Outlook
Based on current market conditions, the Company expects net
sales for the third quarter of fiscal 2017 to be between
$734 million and $748 million. At the
midpoint, average daily sales are expected to increase roughly 3.5
percent compared to last year's third quarter. The Company expects
diluted earnings per share for the third quarter of fiscal 2017 to
be between $1.05 and $1.09.
Conference Call Information
MSC will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2017
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 13, 2017.
The Company's reporting date for fiscal 2017 third quarter
results is scheduled for July 12,
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, worldwide economic, social,
political, and regulatory conditions, including conditions that may
result from legislative, regulatory and policy changes, 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.
*The Company recorded a reduction to income tax expense of
$1.8 million, or $0.03 per share, associated with the adoption of
FASB Accounting Standards Update No. 2016-09 ("ASU 2016-09") in the
second quarter of fiscal 2017. Under ASU 2016-09, excess tax
benefits or deficiencies generated upon the settlement or exercise
of stock awards are no longer recognized as additional paid-in
capital, but are instead recognized as a reduction or increase to
income tax expense.
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 4,
|
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September
3,
|
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2017
|
|
2016
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
35,602
|
|
$
|
52,890
|
Accounts receivable,
net of allowance for doubtful accounts
|
|
429,862
|
|
|
392,463
|
Inventories
|
|
464,592
|
|
|
444,221
|
Prepaid expenses and
other current assets
|
|
45,771
|
|
|
45,290
|
Deferred income
taxes
|
|
—
|
|
|
46,627
|
Total current
assets
|
|
975,827
|
|
|
981,491
|
Property, plant and
equipment, net
|
|
318,981
|
|
|
320,544
|
Goodwill
|
|
623,296
|
|
|
624,081
|
Identifiable
intangibles, net
|
|
101,103
|
|
|
105,307
|
Other
assets
|
|
32,310
|
|
|
33,528
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Total
assets
|
$
|
2,051,517
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|
$
|
2,064,951
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LIABILITIES AND
SHAREHOLDERS' EQUITY
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|
Current
Liabilities:
|
|
|
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|
Revolving credit
note
|
$
|
184,000
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|
$
|
217,000
|
Current maturities of
long-term debt
|
|
94,072
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|
|
50,050
|
Accounts
payable
|
|
124,304
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|
110,601
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Accrued
liabilities
|
|
95,586
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|
|
100,951
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Total current
liabilities
|
|
497,962
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|
478,602
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Long-term debt, net
of current maturities
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|
271,060
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339,772
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Deferred income taxes
and tax uncertainties
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|
101,574
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|
|
148,201
|
Total
liabilities
|
|
870,596
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|
|
966,575
|
Commitments and
Contingencies
|
|
|
|
|
|
Shareholders'
Equity:
|
|
|
|
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Preferred
Stock
|
|
—
|
|
|
—
|
Class A common
stock
|
|
53
|
|
|
53
|
Class B common
stock
|
|
12
|
|
|
12
|
Additional paid-in
capital
|
|
614,253
|
|
|
584,017
|
Retained
earnings
|
|
1,096,710
|
|
|
1,040,148
|
Accumulated other
comprehensive loss
|
|
(21,346)
|
|
|
(19,098)
|
Class A treasury
stock, at cost
|
|
(508,761)
|
|
|
(506,756)
|
Total shareholders'
equity
|
|
1,180,921
|
|
|
1,098,376
|
Total liabilities and
shareholders' equity
|
$
|
2,051,517
|
|
$
|
2,064,951
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Income
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
Twenty-Six Weeks
Ended
|
|
March 4,
|
|
February
27,
|
|
March 4,
|
|
February
27,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$
|
703,780
|
|
$
|
684,117
|
|
$
|
1,390,051
|
|
$
|
1,390,936
|
Cost of goods
sold
|
|
389,218
|
|
|
375,326
|
|
|
766,754
|
|
|
763,173
|
Gross
profit
|
|
314,562
|
|
|
308,791
|
|
|
623,297
|
|
|
627,763
|
Operating
expenses
|
|
227,917
|
|
|
228,249
|
|
|
446,052
|
|
|
456,833
|
Income from
operations
|
|
86,645
|
|
|
80,542
|
|
|
177,245
|
|
|
170,930
|
Other (expense)
income:
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(2,950)
|
|
|
(1,295)
|
|
|
(5,884)
|
|
|
(2,851)
|
Interest
income
|
|
164
|
|
|
164
|
|
|
327
|
|
|
327
|
Other (expense)
income, net
|
|
(54)
|
|
|
739
|
|
|
(338)
|
|
|
802
|
Total other
expense
|
|
(2,840)
|
|
|
(392)
|
|
|
(5,895)
|
|
|
(1,722)
|
Income before
provision for income taxes
|
|
83,805
|
|
|
80,150
|
|
|
171,350
|
|
|
169,208
|
Provision for income
taxes
|
|
30,246
|
|
|
30,625
|
|
|
63,503
|
|
|
64,654
|
Net income
|
$
|
53,559
|
|
$
|
49,525
|
|
$
|
107,847
|
|
$
|
104,554
|
Per Share
Information:
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.94
|
|
$
|
0.81
|
|
$
|
1.90
|
|
$
|
1.70
|
Diluted
|
$
|
0.93
|
|
$
|
0.80
|
|
$
|
1.89
|
|
$
|
1.70
|
Weighted average
shares used in computing net income per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
56,620
|
|
|
61,187
|
|
|
56,500
|
|
|
61,242
|
Diluted
|
|
57,213
|
|
|
61,313
|
|
|
56,910
|
|
|
61,361
|
Cash dividends
declared per common share
|
$
|
0.45
|
|
$
|
0.43
|
|
$
|
0.90
|
|
$
|
0.86
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Comprehensive Income
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
Twenty-Six Weeks
Ended
|
|
March 4,
|
|
February
27,
|
|
March 4,
|
|
February
27,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income, as
reported
|
$
|
53,559
|
|
$
|
49,525
|
|
$
|
107,847
|
|
$
|
104,554
|
Foreign currency
translation adjustments
|
|
(701)
|
|
|
(2,279)
|
|
|
(2,248)
|
|
|
(3,394)
|
Comprehensive
income
|
$
|
52,858
|
|
$
|
47,246
|
|
$
|
105,599
|
|
$
|
101,160
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks
Ended
|
|
March 4,
|
|
February
27,
|
|
2017
|
|
2016
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net income
|
$
|
107,847
|
|
$
|
104,554
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
30,815
|
|
|
35,381
|
Stock-based
compensation
|
|
6,925
|
|
|
6,999
|
Loss on disposal of
property, plant, and equipment
|
|
333
|
|
|
390
|
Provision for doubtful
accounts
|
|
3,415
|
|
|
5,241
|
Deferred income taxes
and tax uncertainties
|
|
—
|
|
|
(78)
|
Excess tax benefits
from stock-based compensation
|
|
—
|
|
|
(267)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(41,680)
|
|
|
7,581
|
Inventories
|
|
(21,289)
|
|
|
41,153
|
Prepaid expenses and
other current assets
|
|
(343)
|
|
|
(10,362)
|
Other
assets
|
|
1,056
|
|
|
653
|
Accounts payable and
accrued liabilities
|
|
9,577
|
|
|
(8,265)
|
Total
adjustments
|
|
(11,191)
|
|
|
78,426
|
Net cash provided by
operating activities
|
|
96,656
|
|
|
182,980
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(25,508)
|
|
|
(26,781)
|
Net cash used in
investing activities
|
|
(25,508)
|
|
|
(26,781)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
Repurchases of common
stock
|
|
(3,377)
|
|
|
(19,212)
|
Payments of cash
dividends
|
|
(51,010)
|
|
|
(52,948)
|
Payments on capital
lease and financing obligations
|
|
(633)
|
|
|
(367)
|
Excess tax benefits
from stock-based compensation
|
|
—
|
|
|
267
|
Proceeds from sale of
Class A common stock in connection with associate stock purchase
plan
|
|
2,196
|
|
|
1,982
|
Proceeds from exercise
of Class A common stock options
|
|
21,933
|
|
|
890
|
Borrowings under
financing obligations
|
|
739
|
|
|
453
|
Borrowings under
Credit Facility
|
|
78,000
|
|
|
66,000
|
Credit Facility
financing costs
|
|
(142)
|
|
|
—
|
Payments of notes
payable and revolving credit note under the Credit
Facility
|
|
(136,000)
|
|
|
(167,500)
|
Net cash used in
financing activities
|
|
(88,294)
|
|
|
(170,435)
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
|
(142)
|
|
|
(71)
|
Net decrease in cash
and cash equivalents
|
|
(17,288)
|
|
|
(14,307)
|
Cash and cash
equivalents – beginning of year
|
|
52,890
|
|
|
38,267
|
Cash and cash
equivalents – end of year
|
$
|
35,602
|
|
$
|
23,960
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
Cash paid for income
taxes
|
$
|
58,737
|
|
$
|
70,511
|
Cash paid for
interest
|
$
|
5,524
|
|
$
|
2,747
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/msc-reports-fiscal-2017-second-quarter-results-300435668.html
SOURCE MSC Industrial Supply Co.