Exhibit 99.1
Contact: |
Shelley Boxer, V.P. Finance |
MSC Industrial Direct Co., Inc. |
(516) 812-1216 |
Investor Relations: Eric Boyriven/Lindsay Hatton |
Press: Scot Hoffman |
Financial Dynamics |
(212) 850-5600 |
FOR IMMEDIATE RELEASE
MSC INDUSTRIAL DIRECT CO., INC. REPORTS
FISCAL 2004 THIRD QUARTER RESULTS
— Net income grows 81% year-over-year, on revenue growth of 18.4% —
— Operating margin increases to 14.8% —
Melville, NY, July 7, 2004 - MSC INDUSTRIAL DIRECT CO., INC. (NYSE: MSM), “MSC,” one of the premier distributors of MRO supplies to industrial customers throughout the United States, today reported financial results for its third fiscal quarter ended May 29, 2004.
Net sales for the third quarter of fiscal 2004 increased 18.4% to $255.3 million, compared to net sales of $215.6 million in the third quarter of fiscal 2003. Net income for the third quarter of fiscal 2004 was $23.9 million, an increase of 81.3%, compared to net income for the third quarter of fiscal 2003 of $13.2 million. Earnings per diluted share were $0.34 for the third quarter of fiscal 2004, compared to $0.19 earned in the same period last year. There was one more day in this year’s third quarter than in the third quarter of last year.
For the first nine months of fiscal 2004, the Company’s net sales rose 11.4% to $708.6 million, compared to net sales of $635.9 million in the year ago period. Net income in the first nine months of fiscal 2004 increased 53.4% to $58.9 million, compared to $38.4 million in the first nine months of fiscal 2003. Earnings per diluted share for the first nine months of fiscal 2004 increased 49% to $0.85, compared to $0.57 in the year ago period.
“We are thrilled with our results for the third quarter, which reflect our strong operational execution and the ongoing recovery of the manufacturing sector,” said David Sandler, President & Chief Operating Officer. “During the quarter we saw sales increase across all our markets, with sales from the manufacturing and non-manufacturing sectors growing 17% and 15%, respectively. This growth was consistent in all of our geographies, and also included significant traction in our sales efforts to government customers and continued solid growth in our e-commerce business.”
-MORE-
“Both operationally and financially, this was a great quarter for MSC Industrial Direct,” commented Chuck Boehlke, Executive Vice President & Chief Financial Officer. “Outstanding sales execution resulted in strong revenue growth, while our ability to deliver on our cost control initiatives enabled us to convert 43% of incremental revenues into operating income, generating operating margins of 14.8%, and a net income increase of over 80%. Our financial discipline also led to improved inventory turns and free cash flow for the period of $26.6 million (See Note 1). Financially, MSC Industrial Direct is well positioned for the future.”
Mitchell Jacobson, Chairman & Chief Executive Officer concluded, “As we move into the final quarter of fiscal 2004, we will build on the momentum we’ve generated throughout the year and remain confident in our continued ability to execute on our strategy, gain share and grow in all of our markets. Overall, our customers appear to be purchasing with more confidence, and we continue to grow sales across our customer base. While we expect to continue to benefit from the improving economy and the strengthening industrial marketplace, we expect contribution margins in the fourth quarter to be somewhat lower as a result of planned increases to our salesforce, coupled with one less sales day in the fourth quarter and the typical seasonal revenue decline seen in the summer months. As a result, we expect revenues for the fourth quarter of fiscal 2004 to be in the range of $243 million to $247 million, with fully diluted earnings per share in the range of $0.29 to $0.31.”
In the third quarter of fiscal 2004, MSC repurchased 250,000 shares of its Class A Common Stock for approximately $6.75 million. The shares were purchased under the Company’s current stock repurchase program, which was authorized on September 26, 2002.
The management of MSC will host a conference call today at 11:00 a.m. Eastern Time to review the third quarter of fiscal 2004 results and to comment on current operations. The call may be accessed via the Internet at: http://www.mscdirect.com.
Note 1 - Free cash flow is defined as net cash provided by operating activities less expenditures for property, plant and equipment. Net cash flow provided by operating activities in the third fiscal quarter was $29.3 million and expenditures for property, plant and equipment were $2.7 million. Management considers free cash flow to be an important indicator of the Company’s financial strength and the ability to generate liquidity because it reflects cash generated from operations that can be used for strategic initiatives, dividends, and repurchases of the Company’s stock.
MSC Industrial Direct (NYSE: MSM) is one of the premier distributors of MRO supplies to industrial customers throughout the United States. MSC distributes more than 500,000 industrial products from more than 2,500 suppliers to approximately 345,000 customers. In-stock availability is approximately 99% and standard ground delivery is next day to 80% of the industrial United States. MSC reaches its customers through a combination of more than 30 million direct-mail catalogs and CD-ROMs, approximately 90 branch sales offices, more than 450 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 market conditions, competitive and regulatory matters, general economic conditions in the markets in which the Company operates, risk of cancellation or rescheduling of orders, work stoppages at transportation centers or shipping ports, the risk of war, terrorism and similar hostilities, availability of suitable acquisition opportunities, 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)
|
| May 29, |
| August 30, |
| ||
|
| (Unaudited) |
| (Audited) |
| ||
ASSETS |
|
|
|
|
| ||
Current Assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 37,825 |
| $ | 114,294 |
|
Available-for-sale securities |
| 2,926 |
| — |
| ||
Accounts receivable, net of allowance for doubtful accounts |
| 112,809 |
| 93,598 |
| ||
Inventories |
| 220,576 |
| 201,602 |
| ||
Prepaid expenses and other current assets |
| 15,116 |
| 12,039 |
| ||
Deferred income taxes |
| 11,132 |
| 11,051 |
| ||
Total current assets |
| 400,384 |
| 432,584 |
| ||
|
|
|
|
|
| ||
Available-for-sale securities |
| 116,709 |
| — |
| ||
Property, Plant and Equipment, net |
| 104,250 |
| 106,935 |
| ||
Goodwill |
| 63,202 |
| 63,202 |
| ||
Other assets |
| 9,488 |
| 16,249 |
| ||
Total Assets |
| $ | 694,033 |
| $ | 618,970 |
|
|
|
|
|
|
| ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
| ||
Accounts payable |
| $ | 38,820 |
| $ | 30,069 |
|
Accrued liabilities |
| 48,780 |
| 48,406 |
| ||
Current portion of long-term notes payable |
| 149 |
| 169 |
| ||
Total current liabilities |
| 87,749 |
| 78,644 |
| ||
Long-term notes payable |
| 1,023 |
| 1,132 |
| ||
Deferred income tax liability |
| 26,911 |
| 28,839 |
| ||
Total liabilities |
| 115,683 |
| 108,615 |
| ||
Shareholders’ Equity: |
|
|
|
|
| ||
Preferred Stock |
| — |
| — |
| ||
Class A common stock |
| 48 |
| 39 |
| ||
Class B common stock |
| 25 |
| 32 |
| ||
Additional paid-in capital |
| 292,227 |
| 261,849 |
| ||
Retained earnings |
| 376,413 |
| 331,568 |
| ||
Accumulated other comprehensive loss |
| (77 | ) | — |
| ||
Class A treasury stock, at cost |
| (88,895 | ) | (83,133 | ) | ||
Deferred Stock Compensation |
| (1,391 | ) | — |
| ||
Total shareholders’ equity |
| 578,350 |
| 510,355 |
| ||
Total Liabilities and Shareholders’ Equity |
| $ | 694,033 |
| $ | 618,970 |
|
MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
|
| Thirteen Weeks Ended |
| Thirty-Nine Weeks Ended |
| ||||||||
|
| May 29, |
| May 31, |
| May 29, |
| May 31, |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
| $ | 255,297 |
| $ | 215,571 |
| $ | 708,595 |
| $ | 635,896 |
|
Cost of goods sold |
| 140,417 |
| 118,709 |
| 389,176 |
| 349,555 |
| ||||
Gross profit |
| 114,880 |
| 96,862 |
| 319,419 |
| 286,341 |
| ||||
Operating expenses |
| 76,993 |
| 75,915 |
| 224,639 |
| 225,006 |
| ||||
Income from operations |
| 37,887 |
| 20,947 |
| 94,780 |
| 61,335 |
| ||||
Other Income: |
|
|
|
|
|
|
|
|
| ||||
Interest income, net |
| 684 |
| 328 |
| 1,444 |
| 773 |
| ||||
Other income, net |
| 91 |
| 67 |
| 319 |
| 114 |
| ||||
Total other income |
| 775 |
| 395 |
| 1,763 |
| 887 |
| ||||
Income before provision for income taxes |
| 38,662 |
| 21,342 |
| 96,543 |
| 62,222 |
| ||||
Provision for income taxes |
| 14,789 |
| 8,174 |
| 37,652 |
| 23,821 |
| ||||
Net income |
| $ | 23,873 |
| $ | 13,168 |
| $ | 58,891 |
| $ | 38,401 |
|
|
|
|
|
|
|
|
|
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Per Share Information: |
|
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|
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| ||||
Net income per common share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | .35 |
| $ | 0.20 |
| $ | .88 |
| $ | 0.58 |
|
Diluted |
| $ | .34 |
| $ | 0.19 |
| $ | .85 |
| $ | 0.57 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares used in computing net income per common share |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 67,474 |
| 66,650 |
| 66,801 |
| 66,567 |
| ||||
Diluted |
| 70,082 |
| 68,265 |
| 69,337 |
| 67,780 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash dividend per common share |
| $ | .08 |
| $ | — |
| $ | .21 |
| $ | — |
|
MSC INDUSTRIAL DIRECT CO., INC.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
| Thirty-Nine Weeks Ended |
| ||||
|
| May 29, |
| May 31, |
| ||
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Net income |
| $ | 58,891 |
| $ | 38,401 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
|
|
|
|
|
| ||
Depreciation and amortization expense |
| 9,457 |
| 11,295 |
| ||
Amortization of deferred stock compensation |
| 86 |
| — |
| ||
Provision for doubtful accounts |
| 1,748 |
| 1,208 |
| ||
Deferred income taxes |
| (2,009 | ) | 8,104 |
| ||
Stock option income tax benefit |
| 4,148 |
| 563 |
| ||
Amortization of bond premium |
| 148 |
| — |
| ||
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
| (20,959 | ) | (2,458 | ) | ||
Inventories |
| (18,974 | ) | (1,977 | ) | ||
Prepaid expenses and other current assets |
| (3,077 | ) | (2,707 | ) | ||
Other assets |
| 6,761 |
| 6,224 |
| ||
Accounts payable and accrued liabilities |
| 9,125 |
| (3,876 | ) | ||
|
|
|
|
|
| ||
Total adjustments |
| (13,546 | ) | 16,376 |
| ||
|
|
|
|
|
| ||
Net cash provided by operating activities |
| 45,345 |
| 54,777 |
| ||
|
|
|
|
|
| ||
Cash Flows from Investing Activities: |
|
|
|
|
| ||
Proceeds from sales of investments in available-for-sale securities |
| 31,664 |
| — |
| ||
Purchases of investments in available-for-sale securities |
| (151,524 | ) | — |
| ||
Purchases of property, plant and equipment |
| (6,772 | ) | (6,571 | ) | ||
|
|
|
|
|
| ||
Net cash used in investing activities |
| (126,632 | ) | (6,571 | ) | ||
|
|
|
|
|
| ||
Cash Flows from Financing Activities: |
|
|
|
|
| ||
Purchases of treasury stock |
| (6,754 | ) | (2,958 | ) | ||
Payment of cash dividend |
| (14,069 | ) | — |
| ||
Proceeds from sale of Class A common stock in connection with associate stock purchase plan |
| 1,015 |
| 904 |
| ||
Proceeds from exercise of Class A common stock options |
| 24,755 |
| 2,790 |
| ||
Repayments of notes payable |
| (129 | ) | (156 | ) | ||
|
|
|
|
|
| ||
Net cash provided by financing activities |
| 4,818 |
| 580 |
| ||
Net (decrease) increase in cash and cash equivalents |
| (76,469 | ) | 48,786 |
| ||
Cash and cash equivalents – beginning of period |
| 114,294 |
| 59,978 |
| ||
Cash and cash equivalents – end of period |
| $ | 37,825 |
| $ | 108,764 |
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
| ||
Cash paid for interest |
| $ | 29 |
| $ | 36 |
|
Cash paid for income taxes |
| $ | 31,900 |
| $ | 14,483 |
|
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