-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CjBuCnolfzfIBYN8HecAWbOqcbXZiHVtLOXSsn8pyu3PaAm8gNKghwQ7/1HeVIZp V6vNhewp0XfiOf/0RHzINA== 0001005477-98-000053.txt : 19980113 0001005477-98-000053.hdr.sgml : 19980113 ACCESSION NUMBER: 0001005477-98-000053 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971129 FILED AS OF DATE: 19980112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MSC INDUSTRIAL DIRECT CO INC CENTRAL INDEX KEY: 0001003078 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 113289165 STATE OF INCORPORATION: NY FISCAL YEAR END: 0902 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14130 FILM NUMBER: 98505225 BUSINESS ADDRESS: STREET 1: 151 SUNNYSIDE BLVD CITY: PLAINVIEW STATE: NY ZIP: 11803 BUSINESS PHONE: 5163497100 MAIL ADDRESS: STREET 1: 151 SUNNYSIDE BLVD CITY: PLAINVIEW STATE: NY ZIP: 11803 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended November 29, 1997 Commission File No.: 1-14130 MSC INDUSTRIAL DIRECT CO., INC. (Exact name of registrant as specified in its charter) New York 11-3289165 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 151 Sunnyside Blvd. Plainview, NY 11803-1592 (Address of principal executive offices, including zip code) (516) 349-7100 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Shares of Common Stock, par value $.001, outstanding as of January 8, 1998: Class A - 16,687,526 Class B - 17,178,450 MSC INDUSTRIAL DIRECT CO., INC. INDEX PART I. FINANCIAL INFORMATION Page No. -------- ITEM 1. Consolidated Financial Statements Consolidated Balance Sheets - November 29, 1997 and August 30, 1997 3 Consolidated Statements of Income - Thirteen weeks ended November 29, 1997 and November 30, 1996 4 Consolidated Statement of Shareholders' Equity - Thirteen weeks ended November 29, 1997 5 Consolidated Statements of Cash Flows - Thirteen weeks ended November 29, 1997 and November 30, 1996 6 Notes to Consolidated Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 Page 2 PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements MSC INDUSTRIAL DIRECT CO., INC. Consolidated Balance Sheets
(in thousands, except share data) November 29, August 30, 1997 1997 ------------ ---------- ASSETS (unaudited) (audited) Current Assets: Cash and cash equivalents $ 16,064 $ 13,418 Accounts receivable, net of allowance for doubtful accounts of $2,556 and $2,030, respectively 65,447 55,348 Inventories 161,198 163,003 Due from officers, employees and affiliated companies 678 765 Prepaid expenses and other current assets 2,621 2,242 Current deferred income tax assets 8,542 9,237 --------- --------- Total current assets 254,550 244,013 --------- --------- Property, plant and equipment, net 59,181 49,658 --------- --------- Other Assets: Goodwill 33,805 34,270 Other 6,563 6,893 --------- --------- 40,368 41,163 --------- --------- $ 354,099 $ 334,834 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 12,390 $ 11,459 Accrued liabilities 50,429 41,997 Current portion of long-term notes payable 199 213 --------- --------- Total current liabilities 63,018 53,669 Long-term notes payable 2,703 2,744 Other long-term liabilities 50 108 Deferred income tax liabilities 3,355 3,318 --------- --------- Total liabilities 69,126 59,839 --------- --------- Shareholders' Equity: Preferred stock; $0.001 par value; 5,000,000 shares authorized; none outstanding -- -- Class A common stock; $0.001 par value; 100,000,000 shares authorized; 16,677,330 and 16,665,983 shares, respectively, issued and outstanding 17 17 Class B common stock; $0.001 par value; 50,000,000 shares authorized; 17,178,450 and 17,182,200 shares, respectively, issued and outstanding 17 17 Additional paid-in capital 212,032 211,704 Retained earnings 74,999 65,499 Treasury stock, at cost (499) (499) Deferred stock compensation (1,593) (1,743) --------- --------- Total shareholders' equity 284,973 274,995 --------- --------- $ 354,099 $ 334,834 --------- ---------
The accompanying notes are an integral part of these consolidated balance sheets. Page 3 MSC INDUSTRIAL DIRECT CO., INC. Consolidated Statements of Income (unaudited) Thirteen Weeks Ended -------------------- (in thousands, except per share data) November 29, November 30, 1997 1996 ------------ ------------ Net sales $ 135,609 $ 92,214 Cost of goods sold 80,270 53,947 --------- -------- Gross profit 55,339 38,267 Operating expenses 40,083 26,903 --------- -------- Income from operations 15,256 11,364 --------- -------- Other Income (Expense): Interest income 253 145 Interest expense (23) (57) Other income (expense), net 214 33 --------- -------- 444 121 --------- -------- Income before provision for income taxes 15,700 11,485 Provision for income taxes 6,200 4,535 --------- -------- Net income $ 9,500 $ 6,950 ========= ======== Net income per common share $ 0.28 $ 0.21 ========= ======== Weighted average number of common shares and common share equivalents outstanding 34,376 33,550 ========= ======== The accompanying notes are an integral part of these consolidated statements. Page 4 MSC INDUSTRIAL DIRECT CO., INC. Consolidated Statement of Shareholders' Equity (unaudited)
Class A Class B Additional Deferred (in thousands) Common Stock Common Stock Paid-In Retained Treasury Stock Stock ------------ ------------ ------- -------- -------------- ----- Shares Amount Shares Amount Capital Earnings Shares Amount at Cost Compensation Total ------ ------ ------ ------ ------- -------- ------ -------------- ------------ ----- Thirteen weeks ended November 29, 1997: Balance, September 1, 1997 16,666 $17 17,182 $17 $211,704 $65,499 14 $(499) $(1,743) $274,995 Exchange of Class B common stock for Class A common stock 4 -- (4) -- -- -- -- -- -- -- Exercise of common stock options, including related tax benefits of $195 7 -- -- -- 328 -- -- -- -- 328 Net income -- -- -- -- -- 9,500 -- -- -- 9,500 Amortization of deferred stock compensation -- -- -- -- -- -- -- -- 150 150 ------ --- ------ --- -------- ------- -- ----- ------- -------- Balance, November 29, 1997 16,677 $17 17,178 $17 $212,032 $74,999 14 $(499) $(1,593) $284,973 ====== === ====== === ======== ======= == ===== ======= ========
The accompanying notes are an integral part of this consolidated statement. Page 5 MSC INDUSTRIAL DIRECT CO., INC. Consolidated Statements of Cash Flows (unaudited)
(in thousands) Thirteen Weeks Ended -------------------------- November 29, November 30, 1997 1996 ------------ ------------ Cash Flows from Operating Activities: Net income $ 9,500 $ 6,950 -------- -------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,584 952 Amortization of deferred stock compensation 150 140 Provision for doubtful accounts 690 255 Deferred income taxes 927 (293) Changes in operating assets and liabilities, net of effect from acquisitions: Accounts receivable (10,789) (8,294) Inventories 1, 805 (6,120) Prepaid expenses and other current assets (379) 1,035 Other assets 323 917 Accounts payable and accrued liabilities 9,363 (2,697) Other long-term liabilities (58) (8) -------- -------- 3,616 (14,113) -------- -------- Net cash provided by (used in) operating activities 13,116 (7,163) -------- -------- Cash Flows from Investing Activities: Expenditures for property, plant and equipment (10,635) (5,428) Cash paid for acquisition, net of cash acquired -- (1,016) -------- -------- Net cash used in investing activities (10,635) (6,444) -------- -------- Cash Flows from Financing Activities: Net proceeds from public offering of common stock -- 64,444 Net proceeds from exercise of common stock options 133 385 Net proceeds from (repayments of) notes payable (55) (41,895) Repayments from affiliates 87 63 -------- -------- Net cash provided by financing activities 165 22,997 -------- -------- Net increase in cash and cash equivalents 2,646 9,390 Cash and cash equivalents - beginning of period 13,418 1,679 -------- -------- Cash and cash equivalents - end of period $ 16,064 $ 11,069 ======== ========
The accompanying notes are an integral part of these consolidated statements. Page 6 Notes to Consolidated Financial Statements (in thousands except per share data) (unaudited) 1. MSC Industrial Direct Co., Inc. (the "Company") was incorporated in the State of New York on October 24, 1995. Reference is made to the Notes to Consolidated Financial Statements contained within the Company's audited financial statements included in the Company's annual report on Form 10-K for the year ended August 30, 1997. In the opinion of management, the interim unaudited financial statements included herein reflect all adjustments necessary, consisting of normal recurring adjustments, for a fair presentation of such data in accordance with generally accepted accounting principles. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. All references to a fiscal year are to the Company's fiscal year which ends on the Saturday nearest August 31 of such year. Certain fiscal 1997 balances have been reclassified to conform to the fiscal 1998 presentation. 2. On September 25, 1996, the Company completed a secondary offering of 6,500 shares of Class A Common Stock, of which 2,000 shares were sold by the Company and 4,500 shares were converted from Class B to Class A Common Stock and sold by existing shareholders. Net proceeds received by the Company as a result of this offering were approximately $64,444. 3. Net income per common share is based on the weighted average number of common and common equivalent shares outstanding. Common equivalent shares include dilutive stock options (using the treasury stock method) exercisable under the Company's stock option plan. Weighted average shares outstanding in the first quarter of fiscal 1998 and fiscal 1997 were 34,376 and 33,550, respectively. 4. In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" ("EPS"). This statement establishes standards for computing and presenting EPS, replacing the presentation of currently required primary EPS with a presentation of basic EPS. For entities with complex capital structures, the statement requires the dual presentation of both basic EPS and diluted EPS on the face of the consolidated statements of operations. Under this new standard, basic EPS is computed based on weighted average shares outstanding and excludes any potential dilution; diluted EPS reflects potential dilution from the exercise or conversion of securities into common stock or from other contracts to issue common stock and is similar to the currently required fully diluted EPS. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods, and earlier application is not permitted. SFAS No. 128 will be effective, for the Company's purposes, during the second quarter of fiscal 1998. Once effective, the Company will be required to Page 7 restate its EPS data for all periods presented. The Company does not expect the impact of the application of this statement to be material to previously reported EPS amounts. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview MSC Industrial Direct Co., Inc. ("MSC") was formed in October 1995 as a holding company to hold all of the outstanding capital stock of Sid Tool Co., Inc. (the "Operating Subsidiary"), which has conducted business since 1941. MSC and its subsidiaries, including the Operating Subsidiary, are hereinafter referred to collectively as the "Company". The Company is one of the largest direct marketers of a broad range of industrial products to small and mid-sized industrial customers throughout the United States. The Company distributes a full line of industrial products, such as cutting tools, abrasives, measuring instruments, machine tool accessories, safety equipment, fasteners, welding supplies and electrical supplies, intended to satisfy its customers' maintenance, repair and operations ("MRO") supplies requirements. The Company offers approximately 332,000 stock keeping units ("SKUs") through its 4,075 page master catalog and weekly, monthly and quarterly specialty and promotional catalogs, newspapers and brochures, which are supported by three distribution centers and sixty customer service locations. Most of the Company's products are carried in stock, and orders for these products are typically fulfilled on the day the order is received. The Company is recording an annual non-cash deferred compensation charge of approximately $600,000 from fiscal 1996 through the first half of fiscal 2001 related to deferred compensation resulting from the issuance of restricted stock to certain employees. Results of Operations - Thirteen weeks ended November 29, 1997 and November 30, 1996 Net sales increased by $43.4 million, or 47.1%, to $135.6 million in the first quarter of fiscal 1998 from $92.2 million in the first quarter of fiscal 1997. This increase was principally attributable to an increase in sales to the Company's existing customers, an increase in the number of active customers and the effect of acquisitions made during fiscal 1997. The increase in sales to existing customers was principally derived from an increase in the number of SKUs offered as well as from more focused marketing efforts. Gross profit increased by $17.0 million, or 44.4%, to $55.3 million in the first quarter of fiscal 1998, from $38.3 million in the first quarter of fiscal 1997. The increase in gross profit was primarily attributable to increased sales. As a percentage of sales, gross profit decreased from 41.5% to 40.8% for the respective periods. The decrease in gross profit as a percentage of sales was primarily a result of slightly lower margins realized from customers and product lines gained through the Company's acquisitions. The Company's gross profit as a percentage of sales from its core business remained constant. Operating expenses increased by $13.2 million, or 49.1%, to $40.1 million in the first quarter of fiscal 1998, from $26.9 million in the first quarter of fiscal 1997. As a percentage of sales, operating expenses increased slightly from 29.2% to 29.6%. The slight increase was primarily attributable to Page 8 increased sales volume which required additional staffing and support as well as continuous investment in branches, which will enhance future growth. Income from operations increased by $3.9 million, or 34.2%, to $15.3 million in the first quarter of fiscal 1998 from $11.4 million in the first quarter of fiscal 1997. The increase was primarily attributable to increased sales and gross profit offset by an increase in operating expenses. Net income increased by $2.5 million, or 35.7%, to $9.5 million in the first quarter of fiscal 1998 from $7.0 million in the first quarter of fiscal 1997. This increase was primarily the result of previously mentioned increases in sales and gross profit offset by the increase in operating expenses necessary in order to support the increase in volume and invest in future growth. Liquidity and Capital Resources The Company's primary capital needs have been to fund the working capital requirements necessitated by its sales growth, acquisitions and facilities expansions. The Company's sources of financing have been from operations, bank borrowings under its revolving credit facility, subordinated loans from shareholders and a portion of the proceeds from the fiscal 1996 initial public offering and fiscal 1997 public offering. Net cash provided by operating activities increased $20.3 million to $13.1 million from a net cash usage of $7.2 million for the 13 week periods ended November 29, 1997 and November 30, 1996, respectively. The net usage of cash in the first quarter of fiscal 1997 was primarily due to purchases of inventory related to the introduction of new products, as well as a growth in accounts receivable commensurate with the Company's growth in sales. In the first quarter of fiscal 1998, inventory and accounts payable declined reflecting improved inventory control policies and procedures. Net cash used in investing activities for the 13 week periods ended November 29, 1997 and November 30, 1996, was approximately $10.6 million and $6.4 million, respectively. The net usage of cash in the first quarter of fiscal 1998 was primarily attributable to the purchase of a building in Long Island, New York which will serve as the new corporate headquarters in fiscal 1998. The net usage of cash in the first quarter of fiscal 1997 was principally attributable to capital expenditures related to the completion of the distribution centers and cash paid for acquisitions. Net cash provided by financing activities during the 13 week periods ended November 29, 1997 and November 30, 1996 was approximately $200,000 and $23.0 million, respectively. The change of $22.8 million is primarily attributable to the difference between the proceeds received from the completion of the Company's aforementioned public offering completed in fiscal 1997, net of the existing long-term debt repaid with such proceeds. In July 1996, the Emerging Issues Task Force of the FASB reached a consensus on Issue 96-14, "Accounting for the Costs Associated with Modifying Computer Software for the Year 2000," which requires that costs associated with modifying computer software for the Year 2000 be expensed as incurred. The Company believes, based upon its internal reviews and other factors, that future external and internal costs to be incurred relating to the modification of internal-use software for the Year 2000 will not have a material effect on the Company's results of operations or financial position. Page 9 The foregoing contains forward looking statements and there can be no assurance due to changes in local, regional or national economies and the availability of acquisition opportunities, among other things, that the foregoing shall be the case. PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial data schedule for the quarter ended November 29, 1997. (b) Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. Page 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MSC INDUSTRIAL DIRECT CO., INC. (Registrant) Dated: January 12, 1998 By: /s/ Mitchell Jacobson -------------------------------------------- Mitchell Jacobson Chairman of the Board of Directors and Chief Executive Officer Dated: January 12, 1998 By: /s/ Shelley M. Boxer -------------------------------------------- Shelley M. Boxer Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 11 EX-27 2 FDS -- MSC INDUSTRIAL DIRECT CO., INC.
5 1,000 3-MOS AUG-29-1998 SEP-01-1997 NOV-29-1997 16,064 0 68,003 2,556 161,198 254,550 77,842 18,661 354,099 63,018 0 0 0 34 284,939 354,099 135,609 135,609 80,270 80,270 40,083 690 23 15,700 6,200 9,500 0 0 0 9,500 0.28 0.28
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