PR Newswire | Oct 20, 2021 06:31AM EDT

Results

10/20 05:30 CDT

MSC Industrial Supply Co. Reports Fiscal 2021 Fourth Quarter And Full Year Results MELVILLE, N.Y. and DAVIDSON, N.C., Oct. 20, 2021

MELVILLE, N.Y. and DAVIDSON, N.C., Oct. 20, 2021 /PRNewswire/ --

FISCAL 2021 Q4 HIGHLIGHTS

* Net sales of $831.0 million, an increase of 11.1% YoY (12.9% increase on an average daily sales basis) * Average daily sales growth of roughly 500 basis points above Industrial Production Index * Operating income of $91.2 million, or $96.9 million excluding restructuring and other charges1 * Operating margin of 11.0%, or 11.7% excluding restructuring and other charges1 * Diluted EPS of $1.18 vs. $0.94 in the prior fiscal year quarter * Adjusted diluted EPS of $1.26 vs. $1.09 in the prior fiscal year quarter1 * Repurchased 231,000 shares during the fiscal quarter

FISCAL 2021 HIGHLIGHTS

* Net sales of $3.2 billion, an increase of 1.6% YoY * Operating income of $301.8 million, or $371.8 million excluding write-downs, restructuring and other charges1 * Operating margin of 9.3%, or 11.5% excluding the adjustments described above1 * Diluted EPS of $3.87 vs. $4.51 in the prior fiscal year * Adjusted diluted EPS of $4.81 vs. $4.74 in the prior fiscal year1

MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the "Company," a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services, today reported financial results for its fiscal 2021 fourth quarter and full year ended August 28, 2021. The fiscal 2021 fourth quarter had one less selling day compared to the prior fiscal year quarter.

Financial Highlights^2 FY21 Q4 FY20 Q4 Change FY21 FY20 Change

Net Sales $831.0 $747.7 11.1% $3,243.2 $3,192.4 1.6%

Income from Operations $91.2 $72.9 25.1% $301.8 $350.7 -14.0%

Operating Margin 11.0% 9.8% 9.3% 11.0%

Net Income attributable to MSC $65.9 $52.5 25.6% $216.9 $251.1 -13.6%

Diluted EPS $1.18 ^3 $0.94 ^4 25.5% $3.87 ^3 $4.51 ^4 -14.2%

Adjusted Financial Highlights^1,2 FY21 Q4 FY20 Q4 Change FY21 FY20 Change

Net Sales $831.0 $747.7 11.1% $3,243.2 $3,192.4 1.6%

Income from Operations $96.9 $84.1 15.2% $371.8 $367.8 1.1%

Operating Margin 11.7% 11.2% 11.5% 11.5%

Net Income attributable to MSC $70.4 $61.0 15.4% $269.9 $263.9 2.3%

Diluted EPS $1.26 ^3 $1.09 ^4 15.6% $4.81 ^3 $4.74 ^4 1.5%

^1 Represents a non-GAAP financial measure. An explanation and a reconciliationof each non-GAAP financial measure to the most directly comparable GAAPfinancial measure are presented in schedules accompanying this press release.

^2 In millions except percentages and per share data or as otherwise noted.

^3 Based on 55.9 million and 56.1 million diluted shares outstanding for FY21Q4 and FY21, respectively.

^4 Based on 55.8 million and 55.6 million diluted shares outstanding for FY20Q4 and FY20, respectively.

?Erik Gershwind, President and Chief Executive Officer, said, "I am pleased with the progress against our long range targets. Our rate of market share capture continues to build. Our fiscal fourth quarter average daily sales growth rate of 12.9% was approximately 500 basis points above the Industrial Production Index. Fueled by the execution of our five growth drivers, our non-safety and non-janitorial product lines grew 20% during our fiscal fourth quarter."

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "In addition to revenue growth, I am encouraged by several aspects of our fiscal fourth quarter performance. We responded to a robust inflationary environment with pricing actions that enabled us to largely offset the seasonal headwinds in gross margins. As a result, our gross margin was up 40 basis points over the prior fiscal year. In addition, strong execution of our Mission Critical initiatives resulted in additional savings of $11 million and investments of $8 million. All of that resulted in fiscal fourth quarter adjusted EPS of $1.26, reflecting 15.6% growth over the prior fiscal year."

Gershwind concluded, "Looking ahead to fiscal 2022, we target growing at least 300 basis points above the Industrial Production Index and holding gross margins roughly flat once again. For our Mission Critical program, we expect to save an additional $25 million and invest an additional $15 million. Despite the additional supply chain and labor challenges, we still expect to achieve incremental margins of 20% in our likely growth scenarios. Furthermore, we remain on track to achieve our longer term goals of growing sales 400 basis points above the Industrial Production Index and returning ROIC to the high teens by the end of fiscal 2023."

Conference Call InformationMSC will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2021 fourth quarter and full year results. The call, accompanying slides, and other operational statistics may be accessed at: http://investor.mscdirect.com. The conference call may also be accessed at 1-877-443-5575 (U.S.), 1-855-669-9657 (Canada) or 1-412-902-6618 (international).

An online archive of the broadcast will be available until October 27, 2021.

The Company's reporting date for fiscal 2022 first quarter results is scheduled for December 22, 2021.

About MSCIndustrial Supply Co.MSC Industrial Supply Co. (NYSE: MSM) is a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with approximately 1.9 million products, inventory management and other supply chain solutions, and deep expertise from 80 years of working with customers across industries. Our experienced team of more than 6,500 associates is dedicated to working side by side with our customers to help drive results for their businesses - from keeping operations running efficiently today to continuously rethinking, retooling, and optimizing for a more productive tomorrow. For more information on MSC Industrial, please visit mscdirect.com.

Cautionary Note Regarding Forward-Looking Statements:Statements in this press release may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about the future impact of COVID-19 on our business operations, results of operations and financial condition, expected future results, expected benefits from our investment and strategic plans and other initiatives, and expected future growth, profitability and return on invested capital, are forward-looking statements. The words "will," "may," "believes," "anticipates," "thinks," "expects," "estimates," "plans," "intends," and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this press 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 the following, many of which are and will be amplified by the COVID-19 pandemic: the impact of the COVID-19 pandemic on our sales, operations and supply chain; general economic conditions in the markets in which we operate, including conditions resulting from the COVID-19 pandemic; changing customer and product mixes; competition, including the adoption by competitors of aggressive pricing strategies and sales methods; industry consolidation and other changes in the industrial distribution sector; our ability to realize the expected benefits from our investment and strategic plans, including our transition from being a spot-buy supplier to a mission-critical partner to our customers; our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; the retention of key personnel; volatility in commodity and energy prices; the credit risk of our customers, including changes in credit risk as a result of the COVID-19 pandemic; the risk of customer cancellation or rescheduling of orders; difficulties in calibrating customer demand for our products, in particular personal protective equipment or "PPE" products, which could cause an inability to sell excess products ordered from manufacturers resulting in inventory write-downs or could conversely cause inventory shortages of such products; work stoppages, labor shortages or other business interruptions (including those due to extreme weather conditions or as a result of the COVID-19 pandemic) at transportation centers, shipping ports, our headquarters or our customer fulfillment centers; disruptions or breaches of our information technology systems, or violations of data privacy laws; the retention of qualified sales and customer service personnel and metalworking specialists; the risk of loss of key suppliers or contractors or key brands or supply chain disruptions, including due to import restrictions resulting from the COVID-19 pandemic; changes to governmental trade policies, including the impact from significant import restrictions or tariffs; risks related to opening or expanding our customer fulfillment centers; our ability to estimate the cost of healthcare claims incurred under our self-insurance plan; litigation risk due to the nature of our business; risks associated with the integration of acquired businesses or other strategic transactions; financial restrictions on outstanding borrowings; our ability to maintain our credit facilities; the interest rate uncertainty due to the London InterBank Offered Rate ("LIBOR") reform; the failure to comply with applicable environmental, health and safety laws and regulations, including government action in response to the COVID-19 pandemic, and other laws applicable to our business; the outcome of government or regulatory proceedings or future litigation; goodwill and intangible assets recorded resulting from our acquisitions could be impaired; our common stock price may be volatile due to factors outside of our control; and our principal shareholders exercise significant control over us, which may result in our taking actions or failing to take actions which our other shareholders do not prefer. Additional information concerning these and other risks is described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively, and in the other reports and documents that we file with the U.S. Securities and Exchange Commission. We expressly disclaim any obligation to update any of these forward-looking statements, except to the extent required by applicable law.

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Balance Sheets

(In thousands)

August 28, August 29,

2021 2020

ASSETS

Current Assets:

Cash and cash equivalents $ 40,536 $ 125,211

Accounts receivable, net of allowance for credit losses 560,373 491,743

Inventories 624,169 543,106

Prepaid expenses and other current assets 89,167 77,710

Total current assets 1,314,245 1,237,770

Property, plant and equipment, net 298,416 301,979

Goodwill 692,704 677,579

Identifiable intangibles, net 101,854 104,873

Operating lease assets 49,011 56,173

Other assets 5,885 4,056

Total assets $ 2,462,115 $ 2,382,430

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Current portion of debt including obligations under finance leases $ 202,433 $ 122,248

Current portion of operating lease liabilities 13,927 21,815

Accounts payable 186,330 125,775

Accrued expenses and other current liabilities 159,238 138,895

Total current liabilities 561,928 408,733

Long-term debt including obligations under finance leases 583,616 497,018

Noncurrent operating lease liabilities 36,429 34,379

Deferred income taxes and tax uncertainties 108,827 121,727

Other noncurrent liabilities 9,443 -

Total liabilities 1,300,243 1,061,857

Commitments and Contingencies

Shareholders' Equity:

Preferred Stock - -

Class A Common Stock 48 47

Class B Common Stock 9 10

Additional paid-in capital 740,867 690,739

Retained earnings 532,315 749,515

Accumulated other comprehensive loss (17,984) (21,418)

Class A treasury stock, at cost (104,384) (103,948)

Total MSC Industrial shareholders' equity 1,150,871 1,314,945

Noncontrolling interest 11,001 5,628

Total shareholders' equity 1,161,872 1,320,573

Total liabilities and shareholders' equity $ 2,462,115 $ 2,382,430

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

Quarters Ended Fiscal Years Ended

August 28, August 29, August 28, August 29,

2021 2020 2021 2020

Net sales $ 831,031 $ 747,732 $ 3,243,224 $ 3,192,399

Cost of goods sold 482,056 436,620 1,909,709 1,849,077

Gross profit 348,975 311,112 1,333,515 1,343,322

Operating expenses 253,312 227,034 994,468 975,553

Impairment loss, net - - 5,886 -

Restructuring costs 4,449 11,158 31,392 17,029

Income from operations 91,214 72,920 301,769 350,740

Other income (expense):

Interest expense (3,878) (4,556) (14,510) (16,673)

Interest income 14 82 66 333

Other income (expense), net (670) 359 1,054 (150)

Total other expense (4,534) (4,115) (13,390) (16,490)

Income before provision for income taxes 86,680 68,805 288,379 334,250

Provision for income taxes 20,803 16,169 70,442 82,492

Net income 65,877 52,636 217,937 251,758

Less: Net income (loss) attributable to noncontrolling interest (57) 140 1,030 641

Net income attributable to MSC $ 65,934 $ 52,496 $ 216,907 $ 251,117

Per share data attributable to MSC:

Net income per common share:

Basic $ 1.19 $ 0.94 $ 3.89 $ 4.53

Diluted $ 1.18 $ 0.94 $ 3.87 $ 4.51

Weighted average shares used in computing

net income per common share:

Basic 55,509 55,585 55,737 55,472

Diluted 55,903 55,763 56,093 55,643

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Statements of Comprehensive Income

(In thousands)

Fiscal Years Ended

August 28, August 29,

2021 2020

Net income, as reported $ 217,937 $ 251,758

Other comprehensive income, net of tax:

Foreign currency translation adjustments 3,852 1,016

Comprehensive income 221,789 252,774

Comprehensive income attributable to noncontrollinginterest:

Net (income) loss (1,030) (641)

Foreign currency translation adjustments (418) 342

Comprehensive income attributable to MSC $ 220,341 $ 252,475

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Statements of Cash Flows

(In thousands)

Fiscal Years Ended

August 28, August 29,

2021 2020

Cash Flows from Operating Activities:

Net income $ 217,937 $ 251,758

Adjustments to reconcile net income to net cash provided by operatingactivities:

Depreciation and amortization 68,846 69,079

Non-cash operating lease cost 18,578 22,696

Stock-based compensation 17,721 16,932

Loss on disposal of property, plant and equipment 563 802

Inventory write-down 30,091 -

Operating lease and fixed asset impairment due to restructuring 16,335 -

Provision for credit losses 8,181 11,008

Deferred income taxes (13,611) 7,719

Changes in operating assets and liabilities, net of amounts associated withbusiness acquired:

Accounts receivable (73,041) 36,772

Inventories (107,037) 16,462

Prepaid expenses and other current assets (10,141) (11,540)

Operating lease liabilities (33,312) (22,184)

Other assets (1,055) 2,809

Accounts payable and accrued liabilities 84,407 (5,574)

Total adjustments 6,525 144,981

Net cash provided by operating activities 224,462 396,739

Cash Flows from Investing Activities:

Expenditures for property, plant and equipment (53,746) (46,991)

Cash used in business acquisitions, net of cash acquired (22,000) (2,286)

Net cash used in investing activities (75,746) (49,277)

Cash Flows from Financing Activities:

Repurchases of common stock (71,261) (3,444)

Payments of regular cash dividends (167,299) (166,537)

Payment of special cash dividend (195,351) (277,634)

Proceeds from sale of Class A Common Stock in connection with associate stock 4,136 4,140purchase plan

Proceeds from exercise of Class A Common Stock options 29,667 13,687

Borrowings under credit facilities 583,500 1,012,200

Payments under credit facilities (399,200) (916,000)

Contributions from noncontrolling interest 100 104

Proceeds from other long-term debt 4,750 100,000

Payments under Shelf Facility Agreements and Private Placement Debt (20,000) (20,000)

Payments on finance lease and financing obligations (2,584) (2,189)

Other, net (205) 1,055

Net cash used in financing activities (233,747) (254,618)

Effect of foreign exchange rate changes on cash and cash equivalents 356 81

Net increase (decrease) in cash and cash equivalents (84,675) 92,925

Cash and cash equivalents - beginning of period 125,211 32,286

Cash and cash equivalents - end of period $ 40,536 $ 125,211

Supplemental Disclosure of Cash Flow Information:

Cash paid for income taxes $ 73,116 $ 68,929

Cash paid for interest $ 13,995 $ 14,973

Non-GAAP Financial Measures

* Results Excluding Impairment Loss (Loss Recovery), Restructuring Costs, Inventory Write-downs Relating to Certain PPE Inventory, Legal and Acquisition Costs, and Other Related Costs and Tax Effects

To supplement MSC's unaudited and audited selected financial data presented consistent with accounting principles generally accepted in the United States ("GAAP"), the Company discloses certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude impairment losses (loss recovery), restructuring costs, inventory write-downs related to certain PPE inventory, legal and acquisition costs, and other related costs and tax effects.

These non-GAAP financial measures are not presented in accordance with GAAP or an alternative for GAAP financial measures and may be different from similar non-GAAP financial measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures and should only be used to evaluate MSC's results of operations in conjunction with the corresponding GAAP financial measures.

In calculating non-GAAP financial measures, we exclude impairment losses (loss recovery), restructuring costs, inventory write-downs related to certain PPE inventory, legal and acquisition costs, and other related costs and tax effects. Management makes these adjustments to facilitate a review of the Company's operating performance on a comparable basis between periods, for comparison with forecasts and strategic plans, for identifying and analyzing trends in the Company's underlying business and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results from the perspective of management in addition to seeing results presented in accordance with GAAP for the same reasons and purposes for which management uses such non-GAAP financial measures.

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen Weeks Ended August 28, 2021

(dollars in thousands, except percentages and per share data)

GAAP Financial Items Affecting Comparability Non-GAAP Measure Financial Measure

Restructuring Legal and Total MSC Costs Acquisition Adjusted Total MSC Costs^(1)

Net Sales $ 831,031 $ - $ - $ 831,031

Cost of Goods Sold 482,056 - - 482,056

Gross Profit 348,975 - - 348,975

Gross Margin 42.0% - - 42.0%

Operating Expenses 253,312 - 1,199 252,113

Operating Exp as % of Sales 30.5% - 0.1% 30.3%

Restructuring Costs 4,449 4,449 - -

Income from Operations 91,214 (4,449) (1,199) 96,862

Operating Margin 11.0% -0.5% -0.1% 11.7%

Total Other Expense (4,534) - - (4,534)

Income before provision for income taxes 86,680 (4,449) (1,199) 92,328

Provision for income taxes 20,803 (922) (249) 21,974

Net income 65,877 (3,527) (950) 70,354

Net income attributable to noncontrolling interest (57) - - (57)

Net income attributable to MSC $ 65,934 $ (3,527) $ (950) $ 70,411

Net income per common share:

Diluted $ 1.18 $ (0.06) $ (0.02) $ 1.26

^(1)Legal and acquisition costs incurred during the fourth fiscal quarterincludes $180 related to the impairment of prepaid PPE and 1,019 related to theacquisitions of Wm. F. Hurst Co., LLC and the outsourcing and logisticsbusiness of TAC Insumos Industriales, S. de R.L. de C.V. and certain of itsaffiliates.

*Individual amounts may not agree to the total due to rounding

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Year Ended August 28, 2021

(dollars in thousands, except percentages and per share data)

GAAP Financial Items Affecting Comparability Non-GAAP Measure Financial Measure

Inventory Restructuring Impairment Legal and Adjusted Total Total MSC Write- Costs Loss, net Acquisition MSC down Costs^(1)

Net Sales $ 3,243,224 $ - $ - $ - $ - $ 3,243,224

Cost of Goods Sold 1,909,709 30,091 - - - 1,879,618

Gross Profit 1,333,515 (30,091) - - - 1,363,606

Gross Margin 41.1% -0.9% - - - 42.0%

Operating Expenses 994,468 - - - 2,620 991,848

Operating Exp as % of Sales 30.7% - - - 0.1% 30.6%

Impairment Loss, net 5,886 - - 5,886 - -

Restructuring Costs 31,392 - 31,392 - - -

Income from Operations 301,769 (30,091) (31,392) (5,886) (2,620) 371,758

Operating Margin 9.3% -0.9% -1.0% -0.2% -0.1% 11.5%

Total Other Expense (13,390) - - - - (13,390)

Income before provision for income taxes 288,379 (30,091) (31,392) (5,886) (2,620) 358,368

-

Provision for income taxes 70,442 (7,309) (7,625) (1,430) (636) 87,442

Net income 217,937 (22,782) (23,767) (4,456) (1,984) 270,926

Net income attributable to noncontrolling interest 1,030 - - - - 1,030

Net income attributable to MSC $ 216,907 $ (22,782) $ (23,767) $ (4,456) $ (1,984) $ 269,896

Net income per common share:

Diluted $ 3.87 $ (0.41) $ (0.42) $ (0.08) $ (0.04) $ 4.81

^(1) Legal and acquisition costs incurred during fiscal year 2021include $1,601 related to the impairment of prepaid PPE and $1,019related to the acquisitions of Wm. F. Hurst Co., LLC and theoutsourcing and logistics business of TAC Insumos Industriales, S. deR.L. de C.V. and certain of its affiliates.

*Individual amounts may not agree to the total due to rounding

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen Weeks and Year Ended August 29, 2020

(dollars in thousands, except percentages and per share data)

GAAP Financial Measure Items Affecting Comparability Non-GAAP Financial Measure

Total MSC Restructuring Costs Adjusted Total MSC

Thirteen Year Thirteen Year Thirteen Year

Weeks Ended Ended Weeks Ended Ended Weeks Ended Ended

August 29, 2020 August 29, 2020 August 29, 2020 August 29, 2020 August 29, 2020 August 29, 2020

Net Sales $ 747,732 $ 3,192,399 $ $ $ 747,732 $ 3,192,399

ADS Growth % (12.7)% (5.1)% - - (12.7)% (5.1)%

Cost of Goods Sold 436,620 1,849,077 - - 436,620 1,849,077

Gross Profit 311,112 1,343,322 - - 311,112 1,343,322

Gross Margin 41.6% 42.1% - - 41.6% 42.1%

Operating Expenses 227,034 975,553 - - 227,034 975,553

Operating Exp as % of Sales 30.4% 30.6% - - 30.4% 30.6%

Restructuring Costs 11,158 17,029 ^(1) 11,158 17,029 ^(1) - -

Income from Operations 72,920 350,740 (11,158) (17,029) 84,078 367,769

Operating Margin 9.8% 11.0% -1.5% -0.5% 11.2% 11.5%

Total Other Expense (4,115) (16,490) - - (4,115) (16,490)

Income before provision for income taxes 68,805 334,250 (11,158) (17,029) 79,963 351,279

Provision for income taxes 16,169 82,492 (2,622) (4,206) 18,791 86,698

Net income 52,636 251,758 (8,536) (12,823) 61,172 264,581

Net income attributable to 140 641 - - 140 641noncontrolling interest

Net income attributable to MSC $ 52,496 $ 251,117 $ (8,536) $ (12,823) $ 61,032 $ 263,940

Net income per common share:

Diluted $ 0.94 $ 4.51 $ (0.15) $ (0.23) $ 1.09 $ 4.74

^(1)Restructuring costs were incurred in each fiscal quarter as follows: $2,571in fiscal Q1, $1,941 in fiscal Q2, $1,359 in fiscal Q3, and $11,158 in fiscalQ4.

*Individual amounts may not agree to the total due to rounding

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SOURCE MSC Industrial Supply Co.