Contact:
Shelley Boxer, V.P. Finance
MSC Industrial Direct Co., Inc.
(516) 812-1216
Investor Relations: Eric Boyriven/Lindsay Hatton
Press: Scot Hoffman/Jason Rando
FD Morgen-Walke
(212) 850-5600
FOR IMMEDIATE RELEASE
- ---------------------
MSC INDUSTRIAL DIRECT CO., INC. REPORTS
FISCAL 2003 SECOND QUARTER RESULTS
- - REVENUES RISE 7.6%, DRIVING 50.4% INCREASE IN NET INCOME - -
- - FREE CASH FLOW OF $7.3 MILLION DURING THE PERIOD - -
MELVILLE, NY, APRIL 3, 2003 - 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 second
fiscal quarter ended March 1, 2003.
For the fiscal 2003 second quarter, net sales were $209.6 million, an increase
of 7.6% over net sales of $194.8 million in the second quarter of fiscal 2002.
Fiscal 2003 second quarter net income increased 50.4% to $12.8 million, or $0.19
per diluted share, versus net income of $8.5 million, or $0.12 per diluted share
in the year ago period.
Net sales for the first six months of fiscal 2003 rose 9.6% to $420.3 million,
compared to net sales of $383.6 million in the first six months of last year.
Net income for the six-month period was $25.2 million, or $0.37 per diluted
share, an increase of 53.8% over net income of $16.4 million, or $0.23 per
diluted share a year ago.
"Our results for the fiscal second quarter reflect continued excellent
operational execution that demonstrates the leverage inherent in our business,"
said Mitchell Jacobson, Chairman & Chief Executive Officer. "Despite the timing
of the holidays and the impact of tough weather conditions in certain of our
markets, we were able to deliver sales growth and strong profitability
improvements that surpassed our internal plan. Through a combination of modest
price increases, favorable product mix, purchasing power and higher than
expected vendor rebates, we achieved a 160 basis point increase in gross
margins, which rose to 45.3%. The result was a conversion of 42% of incremental
revenues into operating income, well ahead of our stated leverage goal of 25%."
During the quarter, MSC also maintained its commitment to financial strength.
The Company generated free cash flow of $7.3 million, while cash reserves at the
end of the period increased to $73.9 million.
- MORE -
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 SECOND QUARTER
RESULTS PAGE - 2 -
Mr. Jacobson concluded, "While we did not see clear signs of economic recovery
during the period, MSC was able to leverage our financial strength, broad
product offerings and commitment to customer service to gain market share and
generate revenue and profitability growth. Although we are confident in our
ability to continue the strong execution of our operating strategy and gain
market share, the continued uncertain outlook for the industrial sector and the
apparent effect of the war in Iraq on some of our customers' purchasing
decisions have combined to impact our ability to project revenue levels, and
therefore provide financial guidance for the third quarter of fiscal 2003. After
adjusting for the timing of the 2002 Easter holiday, which occurred in March
last year, fiscal 2003 third quarter revenues to date reflect a growth rate of
approximately 4.0% versus this time a year ago. However, we have seen a slowing
of momentum throughout the second fiscal quarter as well as March, and a
drop-off in orders when the Iraq conflict began. We expect gross margins for the
third quarter to decrease slightly from second quarter levels to approximately
45%, and expect approximately $76 million in fiscal 2003 third quarter operating
expenses as we maintain the levels of service our customers have come to expect
from us."
The management of MSC will host a conference call today at 11:00 a.m. Eastern
Time to review the second quarter of fiscal 2003 results and to comment on
current operations. The call may be accessed via the Internet at:
http://www.mscdirect.com.
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 more
than 330,000 customers. In-stock availability exceeds 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 35 million direct-mail catalogs and
CD-ROMs, 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.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
Statements on 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 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 general economic and business conditions, changes in customer
preferences, competition, changes in business strategy, availability of
products, acts of war or terrorism, and various other risk factors listed from
time to time in the Company's SEC reports.
(Tables Follow)
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 SECOND QUARTER
RESULTS PAGE - 3 -
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands)
March 1, August 31,
2003 2002
---- ----
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 73,888 $ 59,978
Accounts receivable, net of allowance for
doubtful accounts 99,513 94,322
Inventories 215,764 205,563
Prepaid expenses and other current assets 7,558 6,690
Deferred income taxes 2,185 4,339
--------------- ---------------
Total current assets 398,908 370,892
--------------- ---------------
Property, Plant and Equipment, net 108,896 112,721
--------------- ---------------
Other Assets:
Goodwill 63,202 63,202
Other 11,408 16,133
--------------- ---------------
74,610 79,335
--------------- ---------------
Total Assets $ 582,414 $ 562,948
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 37,836 $ 31,561
Accrued liabilities 28,587 39,858
Current portion of long-term notes payable 225 213
--------------- ---------------
Total current liabilities 66,648 71,632
Long-term notes payable 1,194 1,308
Deferred income tax liability 15,092 15,329
--------------- ---------------
Total liabilities 82,934 88,269
Shareholders' Equity:
Class A common stock 39 38
Class B common stock 32 32
Additional paid-in capital 255,449 253,564
Retained earnings 308,180 283,348
Treasury stock, at cost (64,220) (62,303)
--------------- ---------------
Total shareholders' equity 499,480 474,679
--------------- ---------------
Total Liabilities and Shareholders' Equity $ 582,414 $ 562,948
=============== ===============
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 SECOND QUARTER
RESULTS PAGE - 4 -
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------------------- -----------------------------------
March 1, March 2, March 1, March 2,
2003 2002 2003 2002
--------------- --------------- -------------- -------------
Net sales $ 209,633 $ 194,791 $ 420,325 $ 383,643
Cost of goods sold 114,671 109,674 230,846 216,258
----------- ----------- ----------- -----------
Gross profit 94,962 85,117 189,479 167,385
Operating expenses 74,944 71,387 149,091 140,727
----------- ----------- ----------- -----------
Income from operations 20,018 13,730 40,388 26,658
----------- ----------- ----------- -----------
Other Income:
Interest income, net 196 227 445 366
Other income, net 37 54 47 97
----------- ----------- ----------- -----------
Total other income 233 281 492 463
----------- ----------- ----------- -----------
Income before provision
for income taxes 20,251 14,011 40,880 27,121
Provision for income taxes 7,499 5,534 15,647 10,712
----------- ----------- ----------- -----------
Net income $ 12,752 $ 8,477 $ 25,233 $ 16,409
=========== =========== =========== ===========
Per Share Information:
Net income per common share:
Basic $ 0.19 $ 0.12 $ 0.38 $ 0.24
=========== =========== =========== ===========
Diluted $ 0.19 $ 0.12 $ 0.37 $ 0.23
=========== =========== =========== ===========
Weighted average shares used in computing
net income per common share
Basic 66,532 69,012 66,525 68,821
=========== =========== =========== ===========
Diluted 68,117 71,429 67,358 70,838
=========== =========== =========== ===========
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 SECOND QUARTER
RESULTS PAGE - 5 -
MSC INDUSTRIAL DIRECT CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Twenty-Six Weeks Ended
-------------------------------------------
March 1, March 2,
2003 2002
----------------- ------------------
Cash Flows from Operating Activities:
Net income $ 25,233 $ 16,409
----------------- ------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization expense 7,674 7,648
Provision for doubtful accounts 857 1,432
Deferred income taxes 1,917 42
Stock option income tax benefit 630 567
Changes in operating assets and liabilities:
Accounts receivable (6,048) 722
Inventories (10,201) 22,802
Prepaid expenses and other current assets (868) (2,019)
Other assets 4,725 5,220
Accounts payable and accrued liabilities (4,996) (6,751)
----------------- ------------------
Total adjustments (6,310) 29,663
----------------- ------------------
Net cash provided by operating activities 18,923 46,072
----------------- ------------------
Cash Flows from Investing Activities:
Expenditures for property, plant and
equipment (3,849) (3,673)
----------------- ------------------
Net cash used in investing activities (3,673)
(3,849)
----------------- ------------------
Cash Flows from Financing Activities:
Purchases of treasury stock (2,958) -
Proceeds from sale of common stock in connection with associate
stock purchase plan 640 606
Proceeds from exercise of common stock options 1,256 7,118
Net repayments of notes payable (102) (104)
----------------- ------------------
Net cash (used in) provided by financing activities (1,164) 7,620
----------------- ------------------
Net increase in cash and cash equivalents 13,910 50,019
Cash and cash equivalents - beginning of period 59,978 12,466
----------------- ------------------
Cash and cash equivalents - end of period $ 73,888 $ 62,485
================= ==================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest 22 22
Cash paid for income taxes 15,549 7,970
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