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
Financial Dynamics
(212) 850-5600
FOR IMMEDIATE RELEASE
MSC INDUSTRIAL DIRECT CO., INC. REPORTS
SECOND QUARTER FISCAL YEAR 2007 RESULTS
- Earnings per diluted share grows to $0.61, including charges of $0.02 per diluted
share for the integration of J&L -
Melville, NY, April 4, 2007 - MSC INDUSTRIAL DIRECT CO., INC. (NYSE: MSM), “MSC or the Company,” one of the premier distributors of MRO supplies to industrial customers throughout the United States, today reported financial results for its second quarter of fiscal 2007 ended February 24, 2007. The financial results of J&L prior to June 8, 2006 are not included in the consolidated statement of income or consolidated statement of cash flows for the fiscal 2006 periods in the attached tables.
Net sales for the second quarter of fiscal 2007 were $404.6 million, an increase of 32.3% from $305.9 million in the second quarter of fiscal 2006, with J&L accounting for approximately 70.0% of this growth. Net income for the second quarter of fiscal 2007 increased 21.5% to $40.5 million versus $33.3 million in the year-ago period. Second quarter fiscal 2007 diluted earnings per share increased 24.5% to $0.61 compared to $0.49 reported in the second quarter of fiscal 2006. Included in the Company’s results for the second quarter of fiscal 2007 are 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.
Net sales for the first half of fiscal 2007 were $806.6 million, an increase of 34.0% versus net sales of $601.8 million a year ago, with J&L accounting for approximately 70.0% of this growth. Net income for the first half of fiscal 2007 was $80.8 million, or $1.20 per diluted share, compared to $65.3 million, or $0.96 per diluted share, in the year-ago period, an increase of 23.8% in net income and 25.0% in diluted earnings per share. Included in the Company’s results for the first half of fiscal 2007 are 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.
“We are very pleased with our results for the second quarter,” stated David Sandler, President and Chief Executive Officer. “We continued to effectively execute on our strategy, providing our customers with the flawless performance and service they’ve come to expect from MSC. Additionally, we invested in the growth opportunities we saw in the marketplace, and maintained a strong focus on cost controls. As a result, we gained market share during the quarter and exceeded our earnings guidance, driven by better than expected operating margin performance.”
“We continue to make good progress on the integration of J&L into our business, and early steps to migrate technology systems have gone well,” continued Mr. Sandler. “Based on our progress to date, we remain confident in our ability to achieve our objective of $20 million in margin improvements and cost savings related to the integration.”
- MORE -
“Financial results for the second quarter were excellent, and met or exceeded our expectations at every level,” said Chuck Boehlke, Executive Vice President and Chief Financial Officer. “Sales increased by 32.3% over the same quarter last year. Operating margin of 17.2% was somewhat higher than expected, as we realized benefits from improved efficiency in our Customer Fulfillment Centers and from some renegotiated service contracts. We have used our strong cash flow generation to continue investing in the business to ensure we are maximizing MSC’s growth opportunities, while at the same time returning capital to our shareholders through dividends and shares repurchases. During fiscal 2007 to date we have repurchased approximately 1.6 million shares of the Company’s stock.”
Mr. Sandler concluded, “There has been some additional softening in market conditions during the quarter. While feedback from many customer segments is generally optimistic and order flow from their customers remains steady, there are more pockets of our customers experiencing lower levels of order activity than what was previously seen. Within this environment, MSC’s ability to reduce total MRO procurement cost remains a compelling value proposition for our customers overall, and we expect to continue to take market share and grow as a result. Accordingly, based on current market conditions, we expect consolidated net sales for the third quarter of fiscal 2007 to be between $428 million and $434 million and diluted earnings per share to be between $0.64 and $0.66, including a charge of approximately $0.02 per diluted share for costs related to the integration of J&L.”
The management of MSC will host a conference call today at 11:00 a.m. Eastern Time to review the second quarter of fiscal 2007 results, 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 500,000 industrial products from more than 2,100 suppliers to approximately 347,000 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 over 30 million direct-mail catalogs and CD-ROMs, 95 branch sales offices, approximately 750 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, the Company’s ability to timely and efficiently integrate the J&L
business acquired in June 2006 and realize the anticipated synergies from this transaction, 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, and various other risk factors listed from time to time in the Company's SEC reports.
MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| | | February 24, 2007 (Unaudited) | | August 26, 2006 | |
ASSETS | | | | | |
| Current Assets: | | | | | |
| Cash and cash equivalents | | $ | 5,054 | | $ | 7,718 | |
Accounts receivable, net of allowance for doubtful accounts | | | 197,894 | | | 185,734 | |
| Inventories | | | 309,754 | | | 298,391 | |
| Prepaid expenses and other current assets | | | 20,190 | | | 21,341 | |
| Deferred income taxes | | | 17,430 | | | 14,289 | |
| Total current assets | | | 550,322 | | | 527,473 | |
| | | | | | | | |
| Property, plant and equipment, net | | | 127,351 | | | 122,100 | |
| Goodwill | | | 272,568 | | | 271,652 | |
| Identifiable intangibles, net | | | 74,675 | | | 76,292 | |
| Other assets | | | 11,477 | | | 16,781 | |
| Total Assets | | $ | 1,036,393 | | $ | 1,014,298 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
| Current Liabilities: | | | | | | | |
| Revolving credit notes | | $ | 30,000 | | $ | -- | |
| Current maturities of long-term notes payable | | | 23,220 | | | 7,843 | |
| Accounts payable | | | 67,768 | | | 56,877 | |
| Accrued liabilities | | | 57,249 | | | 88,007 | |
| Total current liabilities | | | 178,237 | | | 152,727 | |
| Long-term notes payable | | | 177,531 | | | 192,986 | |
| Deferred income tax liabilities | | | 31,419 | | | 29,312 | |
| Total liabilities | | | 387,187 | | | 375,025 | |
| Shareholders’ Equity: | | | | | | | |
| Preferred Stock | | | -- | | | -- | |
| Class A common stock | | | 58 | | | 57 | |
| Class B common stock | | | 19 | | | 19 | |
| Additional paid-in capital | | | 389,398 | | | 379,630 | |
| Retained earnings | | | 540,211 | | | 477,305 | |
| Cumulative translation adjustment | | | 406 | | | 27 | |
| Class A treasury stock, at cost | | | (280,886 | ) | | (217,765 | ) |
| Total shareholders’ equity | | | 649,206 | | | 639,273 | |
Total Liabilities and Shareholders’ Equity | | $ | 1,036,393 | | $ | 1,014,298 | |
MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
| | | | | | |
| | | Thirteen Weeks Ended | | Twenty-Six Weeks Ended | |
| | | February 24, 2007 | | February 25, 2006 | | February 24, 2007 | | February 25, 2006 | |
Net sales | | $ | 404,618 | | $ | 305,927 | | $ | 806,630 | | $ | 601,833 | |
Cost of goods sold | | | 217,017 | | | 160,487 | | | 433,338 | | | 317,533 | |
Gross profit | | | 187,601 | | | 145,440 | | | 373,292 | | | 284,300 | |
Operating expenses | | | 118,032 | | | 91,358 | | | 234,517 | | | 178,694 | |
Income from operations | | | 69,569 | | | 54,082 | | | 138,775 | | | 105,606 | |
Other (Expense) Income: | | | | | | | | | | | | | |
Interest expense | | | (3,336 | ) | | (7 | ) | | (6,542 | ) | | (14 | ) |
Interest income | | | 161 | | | 1,081 | | | 437 | | | 1,935 | |
Other (expense) income, net | | | (12 | ) | | 58 | | | (33 | ) | | 151 | |
Total other (expense) income | | | (3,187 | ) | | 1,132 | | | (6,138 | ) | | 2,072 | |
Income before provision for income taxes | | | 66,382 | | | 55,214 | | | 132,637 | | | 107,678 | |
Provision for income taxes | | | 25,875 | | | 21,885 | | | 51,834 | | | 42,414 | |
Net income | | $ | 40,507 | | $ | 33,329 | | $ | 80,803 | | $ | 65,264 | |
Per Share Information: | | | | | | | | | | | | | |
| Net income per common share: | | | | | | | | | | | | | |
Basic | | $ | 0.62 | | $ | 0.50 | | $ | 1.22 | | $ | 0.98 | |
Diluted | | $ | 0.61 | | $ | 0.49 | | $ | 1.20 | | $ | 0.96 | |
Weighted average shares used in computing net income per common share | | | | | | | | | | | | | |
| Basic | | | 65,599 | | | 66,773 | | | 66,050 | | | 66,571 | |
Diluted | | | 66,781 | | | 68,327 | | | 67,258 | | | 68,054 | |
Cash dividends declared per common share | | $ | 0.14 | | $ | 0.14 | | $ | 0.28 | | $ | 0.26 | |
MSC INDUSTRIAL DIRECT CO., INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | | Twenty-Six Weeks Ended | |
| | | February 24, 2007 | | February 25, 2006 | |
| | | | | | |
| Cash Flows from Operating Activities: | | | | | |
| | | | | | |
| Net income | | $ | 80,803 | | $ | 65,264 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
| | | | | | | | |
| Depreciation and amortization | | | 12,558 | | | 6,272 | |
| Gain on sale of securities | | | -- | | | (858 | ) |
| Stock-based compensation | | | 4,296 | | | 5,040 | |
| Loss on disposal of property, plant and equipment | | | 152 | | | -- | |
| Provision for doubtful accounts | | | 2,112 | | | 1,320 | |
| Deferred income taxes | | | (1,034 | ) | | (1,974 | ) |
| Amortization of bond premiums | | | -- | | | 146 | |
| Reclassification of excess tax benefits from stock-based compensation | | | (1,654 | ) | | (4,081 | ) |
| | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | |
| Accounts receivable | | | (14,272 | ) | | (20,977 | ) |
| Inventories | | | (11,363 | ) | | (10,506 | ) |
| Prepaid expenses and other current assets | | | 1,530 | | | 2,329 | |
| Other assets | | | 5,212 | | | 4,298 | |
| Accounts payable and accrued liabilities | | | (4,623 | ) | | 1,606 | |
| | | | | | | | |
| Total adjustments | | | (7,086 | ) | | (17,385 | ) |
| | | | | | | | |
| Net cash provided by operating activities | | | 73,717 | | | 47,879 | |
| | | | | | | | |
| Cash Flows from Investing Activities: | | | | | | | |
| Proceeds from sales of investments in available-for-sale securities | | | -- | | | 138,068 | |
| Purchases of investments in available-for-sale securities | | | -- | | | (119,008 | ) |
| Business acquisition | | | (12,798 | ) | | -- | |
| Expenditures for property, plant and equipment | | | (14,729 | ) | | (8,033 | ) |
| | | | | | | | |
| Net cash (used in) provided by investing activities | | | (27,527 | ) | | 11,027 | |
| | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | |
| Purchase of treasury stock | | | (67,096 | ) | | -- | |
| Payment of cash dividends | | | (18,569 | ) | | (17,390 | ) |
| Reclassification of excess tax benefits from stock-based compensation | | | 1,654 | | | 4,081 | |
Proceeds from sale of Class A common stock in connection with associate stock purchase plan | | | 1,547 | | | 1,222 | |
| Proceeds from exercise of Class A common stock options | | | 3,688 | | | 8,068 | |
| Net proceeds under revolving loans from credit facility | | | 30,000 | | | -- | |
| Repayments of notes payable | | | (78 | ) | | (76 | ) |
| | | | | | | | |
| Net cash used in financing activities | | | (48,854 | ) | | (4,095 | ) |
Net (decrease) increase in cash and cash equivalents | | | (2,664 | ) | | 54,811 | |
Cash and cash equivalents - beginning of period | | | 7,718 | | | 41,020 | |
Cash and cash equivalents - end of period | | $ | 5,054 | | $ | 95,831 | |
Supplemental Disclosure of Cash Flow Information: | | | | | | | |
Cash paid for income taxes | | $ | 55,917 | | $ | 40,073 | |
Cash paid for interest | | $ | 6,174 | | $ | 7 | |
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