EX-99.1 2 kl04018_ex99-1.htm EXHIBIT 99.1 PRESS RELEASE kl04018_ex99-1.htm

EXHIBIT 99.1

Contact:
Shelley Boxer, V.P. Finance
MSC Industrial Direct Co., Inc.
(516) 812-1216
 
Investor Relations: Eric Boyriven/Bob Joyce
Press: Scot Hoffman
FD
(212) 850-5600
 
For Immediate Release
 
MSC INDUSTRIAL DIRECT CO., INC. REPORTS BETTER THAN EXPECTED
SECOND QUARTER FISCAL YEAR 2008 RESULTS
- Net sales increase 7.9% to $436.5 million -
- Earnings per diluted share increase 19.7% to $0.73 -
 
Melville, NY, April 8, 2008 - MSC INDUSTRIAL DIRECT CO., INC. (NYSE: MSM), “MSC” or the “Company,” one of the premier distributors of Metalworking and Maintenance, Repair and Operations (“MRO”) supplies to industrial customers throughout the United States, today reported financial results for its second quarter of fiscal 2008 ended March 1, 2008.
 
For the fiscal 2008 second quarter, net sales rose 7.9% to $436.5 million from $404.6 million in the second quarter of fiscal 2007.  Operating income increased 13.0% in the fiscal 2008 second quarter to $78.6 million, or 18.0% of net sales, from $69.6 million, or 17.2% of net sales, in the second quarter of fiscal 2007.  Net income for the fiscal 2008 second quarter was $47.5 million, an increase of 17.2% over net income of $40.5 million in the year ago period.  Diluted earnings per share were $0.73 in the fiscal 2008 second quarter (based on 65.2 million diluted shares outstanding), versus $0.61 per diluted share (based on 66.8 million diluted shares outstanding) a year ago, an increase of 19.7%.  The Company’s results for the second quarter of fiscal 2007 included pre-tax charges totaling $2.2 million, or $0.02 per diluted share on an after-tax basis, for costs related to the integration of the J&L acquisition, as previously announced.
 
Net sales for the first half of fiscal 2008 increased 8.4% to $874.0 million from $806.6 million a year ago.  Operating income for the first half of fiscal 2008 was $156.6 million, or 17.9% of net sales, versus $138.8 million, or 17.2% of net sales, in the first half of fiscal 2007, an increase of 12.8%.  For the first half of fiscal 2008, net income rose 16.7% to $94.3 million from $80.8 million in the year ago period.  Diluted earnings per share for the first half of fiscal 2008 were $1.43 (based on 66.0 million diluted shares outstanding), versus $1.20 per diluted share (based on 67.3 million diluted shares outstanding) a year ago, an increase of 19.2%.  The Company’s results for the first half of fiscal 2007 include pre-tax charges totaling $3.3 million, or $0.03 per diluted share on an after-tax basis, for costs related to the integration of the J&L acquisition, as previously announced.
 
“The fiscal 2008 second quarter marked another period of strong performance for MSC in the face of a challenging market environment,” said David Sandler, President and Chief Executive Officer. “During the quarter, we continued to execute our business model, providing our customers with the products and services they needed, when they needed them, and at the same time we worked very hard to maintain our margins.  The net result was that MSC continued to grow and take market share during the period.”
 
 
 
 
 
 
 
“We are very pleased with our financial performance in the fiscal 2008 second quarter, which reflects the effectiveness of our efforts to grow the business,” said Chuck Boehlke, Executive Vice President and Chief Financial Officer.  “We once again met or exceeded our financial targets, as we effectively executed our business model while continuing to make investments in our future growth.   In addition, we generated excellent cash flows during the fiscal 2008 second quarter as we executed on our stated goal of reducing inventories to more normalized levels from those seen in the first quarter of fiscal 2008.  We took advantage of the opportunity to buy our stock at attractive prices. We purchased approximately 2.5 million shares for $96.0 million in the quarter. We increased our maximum borrowing line under our revolving credit agreement to $150.0 million, a portion of which was used to finance the repurchase of these shares.  Going forward we will continue to invest in MSC’s future growth and we expect cash flows to remain strong as we execute on our model.”
 
Mr. Sandler concluded, “As we enter the third quarter, our customers continue to face a number of issues, including rising raw material and transportation costs, and are seeking to reduce their MRO inventory levels in response, as is typical in a challenging economy.  We have seen this cycle many times, and MSC’s financial strength, broad and deep product offerings, 99% fill rate and same day delivery capability allow us to continue to take share and grow in this environment as we effectively meet and support our customers’ needs.  In short, we are ideally positioned to further enhance our position as a leader in the marketplace, and will benefit from our efforts even more strongly when the economy begins to recover.”
 
Based on current market factors, the Company expects net sales for the third quarter of fiscal 2008 to be between $457 million and $463 million.  The Company expects diluted earnings per share for the fiscal 2008 third quarter to be between $0.77 and $0.79. The Company also noted that there will be 64 business days in the third quarter of fiscal 2008 compared to 65 business days in the third quarter of fiscal 2007.
 
The management of MSC will host a conference call today at 11:00 a.m. Eastern Time to review the Company’s results for the second quarter of fiscal 2008, and to comment on current operations. The call may be accessed via the Internet at: http://www.mscdirect.com.
 
About MSC Industrial Direct
MSC Industrial Direct is one of the premier distributors of Metalworking and Maintenance, Repair and Operation (“MRO”) supplies to industrial customers throughout the United States. MSC distributes in excess of 550,000 industrial products from approximately 3,000 suppliers to approximately 384,000 customers. In-stock availability is approximately 99%, with next day, standard ground delivery to the majority of the industrial United States. MSC reaches its customers through a combination of approximately 30 million direct-mail catalogs and CD-ROMs, 98 branch sales offices, 857 sales people, the Internet and associations with some of the world’s most prominent B2B e-commerce portals. For more information, visit the Company’s Web site at http://www.mscdirect.com.
 
 

 
 
 
 

 
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Statements in this Press Release may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein which are not statements of historical facts and that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future shall be deemed to be forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events, actual results and performance, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 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, without limitation, changing customer and product mixes, changing market conditions, industry consolidations, competition, general economic conditions in the markets in which the Company operates, rising commodity and energy prices, 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, the risk of war, terrorism and similar hostilities, dependence on the Company’s information systems and on key personnel, the outcome of potential government or regulatory proceedings or future litigation relating to pending or future claims, inquiries or audits, and various other risk factors listed from time to time in the Company’s SEC reports.
 
(Tables Follow)
 

 
 
 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Balance Sheets
 
(In thousands)

   
March 1,
2008
(Unaudited)
    
September 1, 2007
  
ASSETS
            
Current Assets:
            
Cash and cash equivalents
   $ 7,351     $ 7,797  
Accounts receivable, net of allowance for doubtful accounts
     223,508       204,186  
Inventories
     343,473       338,366  
Prepaid expenses and other current assets
     18,382       20,748  
Deferred income taxes
     21,000       18,705  
Total current assets
     613,714       589,802  
                 
Property, plant and equipment, net
     123,947       127,608  
Goodwill
     272,806       272,806  
Identifiable intangibles, net
     66,988       70,832  
Other assets
     10,361       14,279  
Total Assets
   $ 1,087,816     $ 1,075,327  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current Liabilities:
                
Revolving credit notes
   $ 94,000     $ --  
Current maturities of long-term notes payable
     38,599       33,471  
Accounts payable
     59,068       69,579  
Accrued liabilities
     53,186       70,237  
Total current liabilities
     244,853       173,287  
Long-term notes payable
     121,619       142,200  
Deferred income tax liabilities
     34,048       31,963  
Total liabilities
     400,520       347,450  
Shareholders’ Equity:
                
Preferred Stock
     --       --  
Class A common stock
     59       59  
Class B common stock
     18       18  
Additional paid-in capital
     417,551       408,996  
Retained earnings
     680,406       609,713  
Accumulated other comprehensive income
     509       694  
Class A treasury stock, at cost
     (411,247 )     (291,603 )
Total shareholders’ equity
     687,296       727,877  
Total Liabilities and Shareholders’ Equity
   $ 1,087,816     $ 1,075,327  


 
 
 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Income
 
(In thousands, except per share data)
(Unaudited)

             
   
Thirteen Weeks Ended
    
Twenty-Six Weeks Ended
  
   
March 1,
2008
    
February 24,
2007
    
March 1,
2008
    
February 24,
2007
  
Net sales
   $ 436,486     $ 404,618     $ 874,040     $ 806,630  
Cost of goods sold
     233,428       217,017       468,412       433,338  
Gross profit
     203,058       187,601       405,628       373,292  
Operating expenses
     124,443       118,032       249,043       234,517  
Income from operations
     78,615       69,569       156,585       138,775  
Other Income (Expense):
                                
Interest expense
     (2,459 )     (3,336 )     (4,923 )     (6,542 )
Interest income
     136       161       375       437  
Other income (expense), net
     35       (12 )     76       (33 )
Total other expense
     (2,288 )     (3,187 )     (4,472 )     (6,138 )
Income before provision
for income taxes
     76,327       66,382       152,113       132,637  
Provision for income taxes
     28,867       25,875       57,787       51,834  
Net income
   $ 47,460     $ 40,507     $ 94,326     $ 80,803  
Per Share Information:
                                
Net income per common share:
                                
Basic
   $ 0.74     $ 0.62     $ 1.45     $ 1.22  
Diluted
   $ 0.73     $ 0.61     $ 1.43     $ 1.20  
Weighted average shares used in computing net income per common share:
                                
Basic
     64,489       65,599       65,067       66,050  
Diluted
     65,198       66,781       65,965       67,258  
Cash dividends declared per common share
   $ 0.18     $ 0.14     $ 0.36     $ 0.28  


 
 
 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Cash Flows
 
(In thousands)
(Unaudited)

   
Twenty-Six Weeks Ended
  
   
March 1,
2008
    
February 24,
2007
  
             
Cash Flows from Operating Activities:
            
             
Net income
   $ 94,326     $ 80,803  
Adjustments to reconcile net income to net cash
provided by operating activities:
                
                 
Depreciation and amortization
     13,372       12,558  
Stock-based compensation
     5,220       4,296  
Loss on disposal of property, plant and equipment
     3       152  
Provision for doubtful accounts
     839       2,112  
Deferred income taxes
     (210 )     (1,034 )
Reclassification of excess tax benefits from stock-based compensation
     (657 )     (1,654 )
                 
Changes in operating assets and liabilities:
                
Accounts receivable
     (20,299 )     (14,272 )
Inventories
     (5,273 )     (11,363 )
Prepaid expenses and other current assets
     2,354       1,530  
Other assets
     3,969       5,212  
Accounts payable and accrued liabilities
     (26,657 )     (4,623 )
                 
Total adjustments
     (27,339 )     (7,086 )
                 
Net cash provided by operating activities
     66,987       73,717  
                 
Cash Flows from Investing Activities:
                
Business acquisition
     --       (12,798 )
Expenditures for property, plant and equipment
     (5,940 )     (14,729 )
                 
Net cash used in investing activities
     (5,940 )     (27,527 )
                 
Cash Flows from Financing Activities:
                
Purchase of treasury stock
     (120,429 )     (67,096 )
Payment of cash dividends
     (23,633 )     (18,569 )
Reclassification of excess tax benefits from stock-based compensation
     657       1,654  
Proceeds from sale of Class A common stock in connection with
associate stock purchase plan
     1,510       1,547  
Proceeds from exercise of Class A common stock options
     1,877       3,688  
Net proceeds under revolving loans from credit facility
     94,000       30,000  
Repayments of notes payable under the credit facility and other notes
     (15,454 )     (78 )
                 
Net cash used in financing activities
     (61,472 )     (48,854 )
Effect of exchange rate changes on cash and cash equivalents
     (21 )     --  
Net decrease in cash and cash equivalents
     (446 )     (2,664 )
Cash and cash equivalents – beginning of period
     7,797       7,718  
Cash and cash equivalents – end of period
   $ 7,351     $ 5,054  
Supplemental Disclosure of Cash Flow Information:
                
Cash paid for income taxes
   $ 55,726     $ 55,917  
Cash paid for interest
   $ 5,047     $ 6,174