MSC INDUSTRIAL SUPPLY CO. REPORTS FISCAL 2022 SECOND QUARTER RESULTS

Rhea-AI Summary

MSC Industrial Supply Co. (NYSE: MSM) reported fiscal Q2 2022 net sales of $862.5 million, an 11.4% increase year-over-year. Gross margin rose to 42.5% from 38.1%, while operating margin improved to 11.3%. Diluted EPS surged to $1.25, up from $0.32 in the previous year. The company anticipates maintaining adjusted operating margins between 12.5% and 13.1% for the fiscal year, indicating strong growth momentum despite pandemic-related challenges.

Positive

• Net sales increased by 11.4% year-over-year.
• Gross margin improved to 42.5% from 38.1%.
• Operating margin increased to 11.3%.

Negative

• None.

FISCAL 2022 Q2 HIGHLIGHTS

• Net sales of $862.5 million, an increase of 11.4% (7.9% on an average daily sales basis) compared to the prior fiscal year quarter
• Gross margin of 42.5% vs. 38.1%, or 42.0% on an adjusted basis in the prior fiscal year quarter¹
• Operating margin of 11.3%, or 11.6% excluding restructuring and other costs^1,2
• Diluted EPS of $1.25 vs. $0.32 in the prior fiscal year quarter
• Adjusted diluted EPS of $1.29 vs. $1.03 in the prior fiscal year quarter, a 25.2% increase¹

MELVILLE, N.Y. and DAVIDSON, N.C., March 30, 2022 /PRNewswire/ -- MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the "Company," a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services, today reported financial results for its fiscal 2022 second quarter ended February 26, 2022.

Financial Highlights3		FY22 Q2		FY21 Q2		Change		FY22 YTD		FY21 YTD		Change
Net Sales		$862.5		$774.0		11.4%		$1,711.1		$1,545.9		10.7%
Income from Operations		$97.2		$28.0		246.8%		$187.9		$81.9		129.3%
Operating Margin		11.3%		3.6%				11.0%		5.3%
Net Income attributable to MSC		$69.9		$18.1		286.7%		$136.0		$56.5		140.5%
Diluted EPS		$1.25	4	0.32	5	290.6%		$2.43	4	$1.01	5	140.6%
Adjusted Financial Highlights1,3		FY22 Q2		FY21 Q2		Change		FY22 YTD		FY21 YTD		Change
Net Sales		$862.5		$774.0		11.4%		$1,711.1		$1,545.9		10.7%
Income from Operations		$100.3		$80.5		24.7%		$196.3		$165.4		18.7%
Operating Margin		11.6%		10.4%				11.5%		10.7%
Net Income attributable to MSC		$72.3		$57.6		25.6%		$142.2		$119.4		19.2%
Diluted EPS		$1.29	4	$1.03	5	25.2%		$2.54	4	$2.13	5	19.2%

1 Represents a non-GAAP financial measure and reconciliations to the most directly comparable GAAP financial measure is presented in the schedules accompanying this press release.

2 Reflects severance and separation costs, consulting costs and exit-related costs to better align our strategy.

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

4 Based on 56.0 million and 55.9 million weighted average diluted shares outstanding for FY22 Q2 and FY22 YTD respectively.

5 Based on 56.1 million and 56.0 million weighted average diluted shares outstanding for FY21 Q2 and FY21 YTD respectively.

Erik Gershwind, President and Chief Executive Officer, said, "I am excited by the growing momentum inside the Company to accelerate market share capture and improve profitability. We achieved double-digit top-line growth despite Covid-related disruptions during the first two weeks of January. Our growth initiatives are in high gear and the productivity improvements we deliver to our customers are resonating. Gross margin countermeasures, including a late January price increase, are working well and give us confidence that we can keep gross margins flat or better for full year fiscal 2022 versus fiscal 2021."

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "Strong top line growth combined with gross margin execution and Mission Critical cost savings resulted in 11.6% adjusted operating margin and 22.4% adjusted incremental margin over the prior year fiscal second quarter. With the building momentum, we are adding a low double-digit growth tier to our fiscal 2022 annual adjusted operating margin framework with a corresponding annual adjusted operating margin between 12.5% and 13.1%. Should recent trends continue, we expect to be in that range."

Gershwind concluded, "I am pleased with the progress I see throughout the Company. We are already at or above our long-range target of growing sales by at least 400 basis points above the Industrial Production Index and are well on our way to achieving ROIC in 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 2022 second quarter 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 April 6, 2022.

The Company's reporting date for fiscal 2022 third quarter results is scheduled for June 29, 2022. 

About MSC Industrial Supply Co. 
MSC Industrial Supply Co. (NYSE: MSM) is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (MRO) products and services. We help our customers drive greater productivity, profitability and growth with approximately 2.0 million products, inventory management and other supply chain solutions, and deep expertise from over 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. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances, statements involving a discussion of strategy, plans or intentions, statements about management's assumptions, projections or predictions of future events or market outlook and any other statement other than a statement of present or historical fact are forward looking statements. 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. In addition, new risks may emerge from time to time and it is not possible for management to predict such risks or to assess the impact of such risks on our business or financial results. Accordingly, future results may differ materially from historical results or from those discussed or implied by these forward looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward looking statements. These risks and uncertainties include, but are not limited to, the following:  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 impact of prolonged periods of low, high and rapid inflation, and fluctuations in interest rates; the credit risk of our customers, including changes in credit risk as a result of the COVID-19 pandemic, higher inflation and fluctuations in interest rates; 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 or global geopolitical conditions; changes to governmental trade or sanctions policies, including the impact from significant import restrictions or tariffs or moratoriums on economic activity with certain countries or regions; 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.
Condensed Consolidated Balance Sheets
(In thousands)
	February 26,			August 28,
	2022			2021
ASSETS		(unaudited)
Current Assets:
Cash and cash equivalents	$	41,754		$	40,536
Accounts receivable, net of allowance for credit losses		619,913			560,373
Inventories		657,710			624,169
Prepaid expenses and other current assets		97,435			89,167
Total current assets		1,416,812			1,314,245
Property, plant and equipment, net		300,232			298,416
Goodwill		692,482			692,704
Identifiable intangibles, net		96,061			101,854
Operating lease assets		51,602			49,011
Other assets		7,726			5,885
Total assets	$	2,564,915		$	2,462,115
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of debt including obligations under finance leases	$	251,269		$	202,433
Current portion of operating lease liabilities		13,417			13,927
Accounts payable		191,436			186,330
Accrued expenses and other current liabilities		141,049			159,238
Total current liabilities		597,171			561,928
Long-term debt including obligations under finance leases		584,182			583,616
Noncurrent operating lease liabilities		39,410			36,429
Deferred income taxes and tax uncertainties		108,851			108,827
Other noncurrent liabilities		—			9,443
Total liabilities		1,329,614			1,300,243
Commitments and Contingencies
Shareholders' Equity:
Preferred Stock		—			—
Class A Common Stock		48			48
Class B Common Stock		9			9
Additional paid-in capital		766,156			740,867
Retained earnings		584,283			532,315
Accumulated other comprehensive loss		(19,121)			(17,984)
Class A treasury stock, at cost		(107,401)			(104,384)
Total MSC shareholders' equity		1,223,974			1,150,871
Noncontrolling interest	$	11,327		$	11,001
Total shareholders' equity		1,235,301			1,161,872
Total liabilities and shareholders' equity	$	2,564,915		$	2,462,115

 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	February 26,			February 27,			February 26,			February 27,
	2022			2021			2022			2021
Net sales	$	862,522		$	773,995		$	1,711,069		$	1,545,899
Cost of goods sold		496,247			479,244			992,198			927,830
Gross profit		366,275			294,751			718,871			618,069
Operating expenses		265,973			245,115			522,554			483,820
Impairment loss		—			—			—			26,726
Restructuring and other costs		3,134			21,615			8,417			25,594
Income from operations		97,168			28,021			187,900			81,929
Other income (expense):
Interest expense		(3,617)			(3,580)			(7,345)			(6,936)
Interest income		21			16			40			37
Other income (expense), net		91			(58)			(322)			593
Total other expense		(3,505)			(3,622)			(7,627)			(6,306)
Income before provision for income taxes		93,663			24,399			180,273			75,623
Provision for income taxes		23,509			6,051			43,862			18,498
Net income		70,154			18,348			136,411			57,125
Less: Net income attributable to noncontrolling interest		223			263			413			586
Net income attributable to MSC Industrial	$	69,931		$	18,085		$	135,998		$	56,539
Per share data attributable to MSC Industrial:
Net income per common share:
Basic	$	1.25		$	0.32		$	2.44		$	1.01
Diluted	$	1.25		$	0.32		$	2.43		$	1.01
Weighted average shares used in computing    net income per common share:
Basic		55,799			55,838			55,664			55,749
Diluted		55,971			56,133			55,945			56,019

   

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	February 26,			February 27,			February 26,			February 27,
	2022			2021			2022			2021
Net income, as reported	$	70,154		$	18,348		$	136,411		$	57,125
Other comprehensive income, net of tax:
Foreign currency translation adjustments		3,768			626			(1,224)			2,822
Comprehensive income		73,922			18,974			135,187			59,947
Comprehensive income attributable to noncontrolling interest:
Net income		(223)			(263)			(413)			(586)
Foreign currency translation adjustments		(824)			251			87			(210)
Comprehensive income attributable to MSC Industrial	$	72,875		$	18,962		$	134,861		$	59,151

 

MSC INDUSTRIAL DIRECT CO., INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Twenty-Six Weeks Ended
	February 26,			February 27,
	2022			2021
Cash Flows from Operating Activities:
Net income	$	136,411		$	57,125
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,985			34,571
Non-cash operating lease cost		8,012			7,537
Stock-based compensation		10,189			8,994
Loss on disposal of property, plant and equipment		230			345
Inventory write-down		—			30,091
Operating lease and fixed asset impairment due to restructuring		—			18,097
Provision for credit losses		4,245			4,280
Deferred income taxes		(341)			—
Changes in operating assets and liabilities:
Accounts receivable		(64,293)			(39,421)
Inventories		(34,024)			(18,647)
Prepaid expenses and other current assets		(8,358)			(27,214)
Operating lease liabilities		(8,136)			(9,074)
Other assets		(1,492)			494
Accounts payable and accrued liabilities		(20,007)			51,756
Total adjustments		(78,990)			61,809
Net cash provided by operating activities		57,421			118,934
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment		(31,179)			(19,954)
Net cash used in investing activities		(31,179)			(19,954)
Cash Flows from Financing Activities:
Repurchases of common stock		(4,813)			(3,519)
Payments of regular cash dividends		(83,586)			(83,685)
Payments of special cash dividends		—			(195,351)
Proceeds from sale of Class A Common Stock in connection with associate stock purchase plan		2,259			2,040
Proceeds from exercise of Class A Common Stock options		12,053			10,834
Borrowings under credit facilities		184,000			415,000
Payments under credit facilities		(134,500)			(350,000)
Borrowings under financing obligations		1,058			1,269
Other, net		(1,387)			(1,392)
Net cash used in financing activities		(24,916)			(204,804)
Effect of foreign exchange rate changes on cash and cash equivalents		(108)			855
Net increase (decrease) in cash and cash equivalents		1,218			(104,969)
Cash and cash equivalents – beginning of period		40,536			125,211
Cash and cash equivalents – end of period	$	41,754		$	20,242
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes	$	63,909		$	41,265
Cash paid for interest	$	7,068		$	6,606

Non-GAAP Financial Measures

• Results Excluding Impairment Loss (prior year), Inventory Write-downs (prior year), Legal Costs (prior year), Restructuring and Other Costs, and Other Charges

To supplement MSC's unaudited 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 incremental margin, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude impairment loss (prior year), inventory write-downs (prior year), legal costs for impairment of prepaid PPE (prior year), restructuring and other 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 loss (prior year), inventory write-downs (prior year), legal costs for impairment of prepaid PPE (prior year), restructuring and other 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 and Twenty-Six Weeks Ended February 26, 2022
(In thousands, except percentages and per share data)
	GAAP Financial Measure						Items Affecting Comparability						Non-GAAP Financial Measure
	Total MSC Industrial						Restructuring and Other Costs						Adjusted Total MSC Industrial
	Thirteen Weeks Ended			Twenty-Six Weeks Ended			Thirteen Weeks Ended			Twenty-Six Weeks Ended			Thirteen Weeks Ended			Twenty-Six Weeks Ended
Net Sales	$	862,522		$	1,711,069		$	-		$	-		$	862,522		$	1,711,069
Cost of Goods Sold		496,247			992,198			-			-			496,247			992,198
Gross Profit		366,275			718,871			-			-			366,275			718,871
Gross Margin		42.5%			42.0%									42.5%			42.0%
Operating Expenses		265,973			522,554			-			-			265,973			522,554
Operating Exp as % of Sales		30.8%			30.5%									30.8%			30.5%
Restructuring and Other Costs		3,134			8,417			3,134			8,417			-			-
Income from Operations		97,168			187,900			(3,134)			(8,417)			100,302			196,317
Operating Margin		11.3%			11.0%			-0.4%			-0.5%			11.6%			11.5%
Incremental Margin		78.1%			64.2%									22.4%			18.7%
Total Other Expense		(3,505)			(7,627)			-			-			(3,505)			(7,627)
Income before provision for income taxes		93,663			180,273			(3,134)			(8,417)			96,797			188,690
Provision for income taxes		23,509			43,862			(787)			(2,178)			24,296			46,040
Net income		70,154			136,411			(2,347)			(6,239)			72,501			142,650
Net income attributable to noncontrolling interest		223			413			-			-			223			413
Net income attributable to MSC Industrial	$	69,931		$	135,998		$	(2,347)		$	(6,239)		$	72,278		$	142,237
Net income per common share:
Diluted	$	1.25		$	2.43		$	(0.04)		$	(0.11)		$	1.29		$	2.54
*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 Ended February 27, 2021
(In thousands, except percentages and per share data)
	GAAP Financial Measure				Items Affecting Comparability								Non-GAAP Financial Measure
	Total MSC Industrial			Inventory Write-down			Restructuring and Other Costs			Legal Costs-impairment of prepaid for PPE			Adjusted Total MSC Industrial
Net Sales	$	773,995		$	-		$	-		$	-		$	773,995
Cost of Goods Sold		479,244			30,091			-			-			449,153
Gross Profit		294,751			(30,091)			-			-			324,842
Gross Margin		38.1%			-3.9%			-			-			42.0%
Operating Expenses		245,115			-			-			727			244,388
Operating Exp as % of Sales		31.7%									0.1%			31.6%
Restructuring and Other Costs		21,615			-			21,615			-			-
Income from Operations		28,021			(30,091)			(21,615)			(727)			80,454
Operating Margin		3.6%			-3.9%			-2.8%			-0.1%			10.4%
Total Other Expense		(3,622)			-			-			-			(3,622)
Income before provision for income taxes		24,399			(30,091)			(21,615)			(727)			76,832
Provision for income taxes		6,051			(7,432)			(5,339)			(180)			19,002
Net income		18,348			(22,659)			(16,276)			(547)			57,830
Net income attributable to noncontrolling interest		263			-			-			-			263
Net income attributable to MSC Industrial	$	18,085		$	(22,659)		$	(16,276)		$	(547)		$	57,567
Net income per common share:
Diluted	$	0.32		$	(0.40)		$	(0.29)		$	(0.01)		$	1.03
*Individual amounts may not agree to the total due to rounding.

 

MSC INDUSTRIAL DIRECT CO., INC.
Reconciliation of GAAP and Non-GAAP Financial Information
Twenty-Six Weeks Ended February 27, 2021
(In thousands, except percentages and per share data)
	GAAP Financial Measure			Items Affecting Comparability												Non-GAAP Financial Measure
	Total MSC Industrial			Inventory Write-down			Restructuring and Other Costs			Impairment Loss			Legal Costs - impairment of prepaid for PPE			Adjusted Total MSC Industrial
Net Sales	$	1,545,899		$	-		$	-		$	-		$	-		$	1,545,899
Cost of Goods Sold		927,830			30,091			-			-			-			897,739
Gross Profit		618,069			(30,091)			-			-			-			648,160
Gross Margin		40.0%			-1.9%			-			-			-			41.9%
Operating Expenses		483,820			-			-			-			1,020			482,800
Operating Exp as % of Sales		31.3%			-			-			-			0.1%			31.2%
Impairment Loss		26,726			-			-			26,726			-			-
Restructuring and Other Costs		25,594			-			25,594			-			-			-
Income from Operations		81,929			(30,091)			(25,594)			(26,726)			(1,020)			165,360
Operating Margin		5.3%			-1.9%			-1.7%			-1.7%			-0.1%			10.7%
Total Other Expense		(6,306)			-			-			-			-			(6,306)
Income before provision for income taxes		75,623			(30,091)			(25,594)			(26,726)			(1,020)			159,054
Provision for income taxes		18,498			(7,432)			(6,322)			(6,601)			(252)			39,105
Net income		57,125			(22,659)			(19,272)			(20,125)			(768)			119,949
Net income attributable to noncontrolling interest		586			-			-			-			-			586
Net income attributable to MSC Industrial	$	56,539		$	(22,659)		$	(19,272)		$	(20,125)		$	(768)		$	119,363
Net income per common share:
Diluted	$	1.01		$	(0.40)		$	(0.34)		$	(0.36)		$	(0.01)		$	2.13
*Individual amounts may not agree to the total due to rounding.

 

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SOURCE MSC Industrial Supply Co.

FAQ

What were MSC's earnings per share for fiscal Q2 2022?

MSC's diluted EPS for fiscal Q2 2022 was $1.25, compared to $0.32 in the previous year.

How did MSC's net sales perform in fiscal Q2 2022?

Net sales for MSC in fiscal Q2 2022 were $862.5 million, reflecting an increase of 11.4% from the prior year.

What is MSC's adjusted operating margin guidance for fiscal 2022?

MSC expects its adjusted operating margin to range between 12.5% and 13.1% for fiscal 2022.

How did MSC's gross margin change in fiscal Q2 2022?

MSC's gross margin increased to 42.5% in fiscal Q2 2022 from 38.1% in the prior year quarter.