MELVILLE, N.Y. and DAVIDSON, N.C., July
12, 2017 /PRNewswire/ --
FISCAL Q3 2017 HIGHLIGHTS
- Net sales of $743.9 million, an
increase of 2.3% year-over-year (3.8% increase on an ADS
basis)
- Gross margin of 44.3%, a 70 basis point decline
year-over-year
- Operating income of $101.8
million, a decrease of 3.8% year-over-year
- Operating margin of 13.7%, an 80 basis point decrease
year-over-year
- Diluted EPS of $1.09, versus the
prior year of $1.05
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 third quarter ended June 3,
2017.
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Financial
Highlights1
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FY17
Q3
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FY16
Q3
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Change
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FY17
YTD
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FY16
YTD
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Change
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Net Sales
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$743.9
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$727.5
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2.3%
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$2,134.0
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$2,118.4
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0.7%
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Operating
Income
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101.8
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105.8
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(3.8%)
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279.0
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276.7
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0.8%
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% of Net
Sales
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13.7%
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14.5%
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13.1%
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13.1%
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Net Income
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62.8
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64.8
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(3.1%)
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170.7
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169.4
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0.8%
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Diluted
EPS
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$1.09
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.2
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$1.05
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.3
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3.8%
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2.98
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2
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2.75
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3
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8.4%
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1In
millions unless noted. 2Based on 57.3 million and 57.0
million diluted shares outstanding for FY17 Q3 and FY17 YTD,
respectively. 3 Based on 61.4 million diluted shares
outstanding for both FY16 Q3 and FY16 YTD.
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Erik Gershwind, president and
chief executive officer, said, "The environment improved through
the quarter as the manufacturing economy continued to firm with
improving sales growth across all of our customer types, with
particular strength in National Accounts. This momentum sustained
into June, the first month of our fiscal fourth quarter. Customer
feedback was consistent with a trend of steady and moderate
improvement."
Rustom Jilla, executive vice
president and chief financial officer, added, "Our fiscal third
quarter average daily sales increased by 3.8 percent, slightly
above the midpoint of our guidance. Most of this growth came from
customer types and products with lower gross margins and, hence,
our gross profit was slightly below our expectations. However,
offsetting this was our continued focus on expense control,
resulting in operating margins 20 basis points ahead of the
midpoint of our guidance and earnings per share at the high
end."
Gershwind concluded, "As the manufacturing economy recovers and
sales growth rates improve, the expense leverage latent in the
business is beginning to demonstrate itself. Looking forward, if
this momentum continues, our leverage only grows. Importantly,
should price inflation return or core customer growth improve, our
earnings growth should accelerate and operating margins expand.
However, even if pricing does not return and mix headwinds persist,
we are still well-positioned to grow earnings."
Outlook
Based on current market conditions, the Company expects net
sales for the fourth quarter of fiscal 2017 to be between
$732 million and $746 million. At the
midpoint, average daily sales are expected to increase roughly 7
percent compared to last year's fourth quarter. The Company expects
diluted earnings per share for the fourth quarter of fiscal 2017 to
be between $0.97 and $1.01.
Conference Call Information
MSC will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2017
third 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
July 19, 2017.
The Company's reporting date for fiscal 2017 fourth quarter and
full year results is scheduled for October
31, 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, including the adoption by
competitors of aggressive pricing strategies and sales methods,
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 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
Condensed
Consolidated Balance Sheets
(In
thousands)
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June 3,
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September
3,
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2017
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2016
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(unaudited)
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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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27,578
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$
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52,890
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Accounts receivable,
net of allowance for doubtful accounts
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436,729
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392,463
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Inventories
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466,478
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444,221
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Prepaid expenses and
other current assets
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49,692
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45,290
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Deferred income
taxes
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—
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46,627
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Total
current assets
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980,477
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981,491
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Property, plant and
equipment, net
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317,297
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320,544
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Goodwill
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623,061
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624,081
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Identifiable
intangibles, net
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99,005
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105,307
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Other
assets
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31,203
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33,528
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Total
assets
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$
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2,051,043
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$
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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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Short-term
debt
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$
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314,171
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$
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267,050
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Accounts
payable
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112,160
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110,601
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Accrued
liabilities
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99,173
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100,951
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Total
current liabilities
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525,504
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478,602
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Long-term
debt
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200,976
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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
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Total
liabilities
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828,054
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966,575
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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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—
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Class A common
stock
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53
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53
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Class B common
stock
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12
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12
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Additional paid-in
capital
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618,718
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|
584,017
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Retained
earnings
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|
1,133,785
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|
1,040,148
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Accumulated other
comprehensive loss
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|
(21,259)
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(19,098)
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Class A treasury stock,
at cost
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(508,320)
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(506,756)
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Total
shareholders' equity
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1,222,989
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1,098,376
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Total liabilities and
shareholders' equity
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$
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2,051,043
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$
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2,064,951
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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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Thirteen Weeks
Ended
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Thirty-Nine Weeks
Ended
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|
June 3,
|
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May 28,
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June 3,
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May 28,
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2017
|
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2016
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2017
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2016
|
Net sales
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$
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743,923
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$
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727,495
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$
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2,133,974
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$
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2,118,431
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Cost of goods
sold
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414,423
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400,467
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1,181,177
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1,163,640
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Gross
profit
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329,500
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|
327,028
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|
952,797
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954,791
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Operating
expenses
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227,724
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221,244
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673,776
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678,077
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Income from
operations
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|
101,776
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|
105,784
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|
|
279,021
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|
276,714
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Other (expense)
income:
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|
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|
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Interest
expense
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(3,361)
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(1,204)
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(9,245)
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(4,055)
|
Interest
income
|
|
169
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|
|
164
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|
|
496
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|
|
491
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Other (expense)
income, net
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|
(2)
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|
110
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|
(340)
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|
912
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Total other
expense
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|
(3,194)
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|
|
(930)
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|
|
(9,089)
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|
|
(2,652)
|
Income before
provision for income taxes
|
|
98,582
|
|
|
104,854
|
|
|
269,932
|
|
|
274,062
|
Provision for income
taxes
|
|
35,746
|
|
|
40,038
|
|
|
99,249
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|
|
104,692
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Net income
|
$
|
62,836
|
|
$
|
64,816
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|
$
|
170,683
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|
$
|
169,370
|
Per Share
Information:
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
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Basic
|
$
|
1.10
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|
$
|
1.06
|
|
$
|
3.01
|
|
$
|
2.76
|
Diluted
|
$
|
1.09
|
|
$
|
1.05
|
|
$
|
2.98
|
|
$
|
2.75
|
Weighted average
shares used in computing net income per
common share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
56,779
|
|
|
61,133
|
|
|
56,593
|
|
|
61,206
|
Diluted
|
|
57,264
|
|
|
61,369
|
|
|
57,028
|
|
|
61,364
|
Cash dividends
declared per common share
|
$
|
0.45
|
|
$
|
0.43
|
|
$
|
1.35
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|
$
|
1.29
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
Condensed
Consolidated Statements of Comprehensive Income
(In
thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks
Ended
|
|
Thirty-Nine Weeks
Ended
|
|
June 3,
|
|
May 28,
|
|
June 3,
|
|
May 28,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income, as
reported
|
$
|
62,836
|
|
$
|
64,816
|
|
$
|
170,683
|
|
$
|
169,370
|
Foreign currency
translation adjustments
|
|
87
|
|
|
2,556
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|
|
(2,161)
|
|
|
(838)
|
Comprehensive
income
|
$
|
62,923
|
|
$
|
67,372
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|
$
|
168,522
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|
$
|
168,532
|
MSC INDUSTRIAL
SUPPLY CO. AND SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows
(In
thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Thirty-Nine Weeks
Ended
|
|
June 3,
|
|
May 28,
|
|
2017
|
|
2016
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net income
|
$
|
170,683
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|
$
|
169,370
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
46,737
|
|
|
53,343
|
Stock-based
compensation
|
|
10,375
|
|
|
10,302
|
Loss on disposal of
property, plant, and equipment
|
|
317
|
|
|
539
|
Provision for doubtful
accounts
|
|
4,713
|
|
|
5,496
|
Deferred income taxes
and tax uncertainties
|
|
—
|
|
|
(78)
|
Excess tax benefits
from stock-based compensation
|
|
—
|
|
|
(630)
|
Write-off of deferred
financing costs on previous credit facility
|
|
94
|
|
|
—
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(50,730)
|
|
|
1,990
|
Inventories
|
|
(22,834)
|
|
|
44,032
|
Prepaid expenses and
other current assets
|
|
(4,547)
|
|
|
(348)
|
Other
assets
|
|
2,259
|
|
|
2,892
|
Accounts payable and
accrued liabilities
|
|
2,064
|
|
|
(1,086)
|
Total
adjustments
|
|
(11,552)
|
|
|
116,452
|
Net cash provided by
operating activities
|
|
159,131
|
|
|
285,822
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(37,923)
|
|
|
(34,714)
|
Net cash used in
investing activities
|
|
(37,923)
|
|
|
(34,714)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
Repurchases of common
stock
|
|
(3,392)
|
|
|
(19,372)
|
Payments of cash
dividends
|
|
(76,632)
|
|
|
(79,351)
|
Payments on capital
lease and financing obligations
|
|
(904)
|
|
|
(600)
|
Excess tax benefits
from stock-based compensation
|
|
—
|
|
|
630
|
Proceeds from sale of
Class A common stock in connection with associate stock purchase
plan
|
|
3,165
|
|
|
2,896
|
Proceeds from exercise
of Class A common stock options
|
|
22,600
|
|
|
5,081
|
Borrowings under
financing obligations
|
|
739
|
|
|
453
|
Borrowings under
Credit Facility
|
|
439,000
|
|
|
88,000
|
Credit Facility
financing costs
|
|
(1,542)
|
|
|
—
|
Payments of notes
payable and revolving credit note under the Credit
Facility
|
|
(529,500)
|
|
|
(254,750)
|
Net cash used in
financing activities
|
|
(146,466)
|
|
|
(257,013)
|
Effect of foreign
exchange rate changes on cash and cash equivalents
|
|
(54)
|
|
|
(34)
|
Net decrease in cash
and cash equivalents
|
|
(25,312)
|
|
|
(5,939)
|
Cash and cash
equivalents – beginning of year
|
|
52,890
|
|
|
38,267
|
Cash and cash
equivalents – end of year
|
$
|
27,578
|
|
$
|
32,328
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
Cash paid for income
taxes
|
$
|
91,711
|
|
$
|
101,178
|
Cash paid for
interest
|
$
|
7,350
|
|
$
|
3,878
|
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SOURCE MSC Industrial Supply Co.