Updates NEWS: MSC Industrial Supply Co. Reports Fiscal 2021 Fourth Quarter And Full Year Results

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 Highlights2

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 Highlights1,2

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 reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial 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 FY21 Q4 and FY21, respectively.

4 Based on 55.8 million and 55.6 million diluted shares outstanding for FY20 Q4 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 Information
MSC 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: https://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 MSC Industrial 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 noncontrolling interest:

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 operating activities:

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 with business 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 purchase plan

4,136

4,140

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
Measure

Items Affecting Comparability

Non-GAAP
Financial Measure

Total MSC

Restructuring
Costs

Legal and
Acquisition
Costs(1)

Adjusted Total MSC

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 quarter includes $180 related to the impairment of prepaid PPE and 1,019 related to the acquisitions of Wm. F. Hurst Co., LLC and the outsourcing and logistics business of TAC Insumos Industriales, S. de R.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

Year Ended August 28, 2021

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

GAAP Financial
Measure

Items Affecting Comparability

Non-GAAP
Financial Measure

Total MSC

Inventory
Write-
down

Restructuring
Costs

Impairment
Loss, net

Legal and
Acquisition
Costs(1)

Adjusted Total
MSC

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 2021 include $1,601 related to the impairment of prepaid PPE and $1,019 related to the acquisitions of Wm. F. Hurst Co., LLC and the outsourcing and logistics business of TAC Insumos Industriales, S. de R.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

Weeks Ended

Year

Ended

Thirteen

Weeks Ended

Year

Ended

Thirteen

Weeks Ended

Year

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
noncontrolling interest

140

641

140

641

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: $2,571 in fiscal Q1, $1,941 in fiscal Q2, $1,359 in fiscal Q3, and $11,158 in fiscal Q4.

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

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