Contact:
Shelley Boxer, V.P. Finance
MSC Industrial Direct Co., Inc.
(516) 812-1216
Investor Relations: Eric Boyriven/Lindsay Hatton
Press: Scot Hoffman
FD Morgen-Walke
(212) 850-5600
FOR IMMEDIATE RELEASE
- ---------------------
MSC INDUSTRIAL DIRECT CO., INC. REPORTS
FISCAL 2003 THIRD QUARTER RESULTS
- - REVENUES RISE 3.3%, DRIVING 19.1% INCREASE IN NET INCOME - -
MELVILLE, NY, JULY 15, 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 third
fiscal quarter ended May 31, 2003.
For the fiscal 2003 third quarter, net sales were $215.6 million, an increase of
3.3% over net sales of $208.6 million in the third quarter of fiscal 2002.
Fiscal 2003 third quarter net income increased 19.1% to $13.2 million, or $0.19
per diluted share, versus net income of $11.1 million, or $0.15 per diluted
share in the year ago period.
Net sales for the first nine months of fiscal 2003 rose 7.4% to $635.9 million,
compared to net sales of $592.2 million in the first nine months of last year.
Net income for the nine-month period was $38.4 million, or $0.57 per diluted
share, an increase of 39.8% over net income of $27.5 million, or $0.39 per
diluted share a year ago.
The Company continued to enhance its financial strength during the quarter,
generating free cash flow of $33.1 million (See Note 1). As of May 31, 2003 the
Company had a cash balance of $108.8 million.
"We are pleased by our third quarter performance, especially in light of the
prolonged downturn that continues to affect the industrial sector," said
Mitchell Jacobson, Chairman & Chief Executive Officer. "As expected, we grew
revenues by over 3% and generated gross margins of 44.9%, an increase of 140
basis points over the same period last year. Our success in the third quarter
was a result of our ongoing commitment to the basic premises of our business
model: maintaining superior customer service, leveraging our market leadership,
growing our market share, and ensuring our strong financial position. By
continuing to focus on these key initiatives, we were able to convert 42% of
incremental revenues into operating income, exceeding our stated leverage goal
of 25% for fiscal 2003."
-MORE-
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 THIRD QUARTER RESULTS
PAGE - 2 -
Mr. Jacobson continued, "The fiscal third quarter also illustrates the benefits
of our strategy to diversify into the non-manufacturing sector as a way to
enhance our growth prospects while also reducing risk. While revenues from the
manufacturing sector were relatively flat, reflecting the current economic
environment, revenues from the non-manufacturing sector grew 14% versus a year
ago. We expect to continue expanding our presence in the non-manufacturing
sector, and were recently designated as an approved supplier of MRO products to
the United States Postal Service."
As previously announced, the Company's Board of Directors has instituted a
policy of quarterly cash dividends to shareholders. The initial quarterly
dividend will be $0.05 per share. The first dividend will be payable on August
11, 2003 to shareholders of record at the close of business on July 31, 2003.
The Company noted that the dividend declaration is a signal of the Board's
confidence in its financial strength, ability to generate significant cash
flows, and dedication to enhancing shareholder value. The dividend program will
not affect the Company's ability to fund future strategic growth initiatives.
Mr. Jacobson concluded, "Despite anecdotal evidence of optimism, current
statistics indicate that the industrial sector remains depressed and the overall
business environment has shown few signs of improvement. As we move into the
fiscal fourth quarter we expect to see the typical seasonal decline in our
business, which may be further impacted by extended plant shutdowns at our
customers. Offsetting this is the continued execution of our operating strategy,
which should result in higher revenues over the prior year despite current
market conditions. Consequently, we expect fourth quarter 2003 revenues to be in
the range of $205 million to $210 million, with earnings per diluted share in
the range of $0.17 to $0.19."
The management of MSC will host a conference call today at 11:00 a.m. Eastern
Time to review the third quarter of fiscal 2003 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 was $35.8 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 more
than 340,000 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. 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
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 THIRD QUARTER RESULTS
PAGE - 3 -
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. REPORTS FISCAL 2003 THIRD QUARTER RESULTS
PAGE - 4 -
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands)
May 31, August 31,
2003 2002
---- ----
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 108,764 $ 59,978
Accounts receivable, net of allowance for
doubtful accounts 95,572 94,322
Inventories 207,540 205,563
Prepaid expenses and other current assets 9,397 6,690
Deferred income taxes 9,645 4,339
----------- -----------
Total current assets 430,918 370,892
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Property, Plant and Equipment, net 107,997 112,721
----------- -----------
Other Assets:
Goodwill 63,202 63,202
Other 9,909 16,133
----------- -----------
73,111 79,335
----------- -----------
Total Assets $ 612,026 $ 562,948
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 30,743 $ 31,561
Accrued liabilities 36,800 39,858
Current portion of long-term notes payable 187 213
----------- -----------
Total current liabilities 67,730 71,632
Long-term notes payable 1,178 1,308
Deferred income tax liability 28,739 15,329
----------- -----------
Total liabilities 97,647 88,269
----------- -----------
Shareholders' Equity:
Class A common stock 39 38
Class B common stock 32 32
Additional paid-in capital 256,916 253,564
Retained earnings 321,267 283,348
Treasury stock, at cost (63,875) (62,303)
----------- -----------
Total shareholders' equity 514,379 474,679
----------- -----------
Total Liabilities and Shareholders' Equity $ 612,026 $ 562,948
=========== ===========
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 THIRD QUARTER RESULTS
PAGE - 5 -
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except net income per share)
Thirteen Weeks Ended Thirty - Nine Weeks Ended
------------------------ ------------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
--------- --------- --------- ---------
Net sales $ 215,571 $ 208,592 $ 635,896 $ 592,235
Cost of goods sold 118,709 117,888 349,555 334,146
--------- --------- --------- ---------
Gross profit 96,862 90,704 286,341 258,089
Operating expenses 75,915 72,713 225,006 213,440
--------- --------- --------- ---------
Income from operations 20,947 17,991 61,335 44,649
--------- --------- --------- ---------
Other Income:
Interest income, net 328 320 773 686
Other income (expense), net 67 (40) 114 57
--------- --------- --------- ---------
Total other income 395 280 887 743
--------- --------- --------- ---------
Income before provision
for income taxes 21,342 18,271 62,222 45,392
Provision for income taxes 8,174 7,217 23,821 17,929
--------- --------- --------- ---------
Net income $ 13,168 $ 11,054 $ 38,401 $ 27,463
========= ========= ========= =========
Per Share Information:
Net income per common share:
Basic $ 0.20 $ 0.16 $ 0.58 $ 0.40
========= ========= ========= =========
Diluted $ 0.19 $ 0.15 $ 0.57 $ 0.39
========= ========= ========= =========
Weighted average shares used in computing
net income per common share
Basic 66,650 69,476 66,567 69,037
========= ========= ========= =========
Diluted 68,265 72,006 67,780 71,125
========= ========= ========= =========
MSC INDUSTRIAL DIRECT CO., INC. REPORTS FISCAL 2003 THIRD QUARTER RESULTS
PAGE - 6 -
MSC INDUSTRIAL DIRECT CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Thirty - Nine Weeks Ended
-------------------------------
May 31, June 1,
2003 2002
------------ ------------
Cash Flows from Operating Activities:
------------ ------------
Net income $ 38,401 $ 27,463
------------ ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization expense 11,295 11,505
Provision for doubtful accounts 1,208 1,980
Deferred income taxes 8,104 547
Stock option income tax benefit 563 1,066
Changes in operating assets and liabilities:
Accounts receivable (2,458) (1,938)
Inventories (1,977) 21,555
Prepaid expenses and other current assets (2,707) (2,120)
Other assets 6,224 8,158
Accounts payable and accrued liabilities (3,876) (3,798)
------------ ------------
Total adjustments 16,376 36,955
------------ ------------
Net cash provided by operating activities 54,777 64,418
------------ ------------
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (6,571) (5,181)
------------ ------------
Net cash used in investing activities (6,571) (5,181)
------------ ------------
Cash Flows from Financing Activities:
Purchases of treasury stock (2,958) --
Proceeds from sale of Class A common stock in connection with
associate stock purchase plan 904 841
Proceeds from exercise of Class A common stock options 2,790 13,453
Repayments of notes payable (156) (153)
------------ ------------
Net cash provided by financing activities 580 14,141
------------ ------------
Net increase in cash and cash equivalents 48,786 73,378
Cash and cash equivalents - beginning of period 59,978 12,466
------------ ------------
Cash and cash equivalents - end of period $ 108,764 $ 85,844
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest 36 34
Cash paid for income taxes 14,483 11,329