MSC Reports Fiscal 2021 First Quarter Results
MSC Industrial Supply reported fiscal Q1 2021 results with net sales of $771.9 million, down 6.3% year-over-year. Operating income decreased by 40.3% to $53.9 million, largely impacted by a $26.7 million impairment charge. Diluted EPS fell 41.5% to $0.69. Despite challenges, sales of non-jani products improved sequentially, with safety product sales up 20%. The company anticipates fiscal Q2 sales growth of 2.4% year-over-year, amid ongoing cost-reduction initiatives aiming for $90 million to $100 million by FY2023.
- Sales of non-safety and non-janitorial products showed sequential improvement.
- Safety and janitorial product sales grew approximately 20%.
- Cost-out initiatives delivered $8 million in gross cost reductions.
- Anticipated 2.4% sales growth in December over the prior year.
- Net sales declined by 6.3% year-over-year.
- Operating income down by 40.3%, affected by a $26.7 million impairment charge.
- Diluted EPS decreased by 41.5% compared to the prior year.
MELVILLE, N.Y. and DAVIDSON, N.C., Jan. 6, 2021 /PRNewswire/ --
FISCAL Q1 2021 HIGHLIGHTS
- Net sales of
$771.9 million , a6.3% YoY decrease - Operating income of
$53.9 million , or$84.6 million excluding a$26.7 million impairment charge and$4 million in restructuring and other related costs1 - Operating margin of
7.0% , or11.0% excluding the impairment charge and restructuring and other related costs1 - Diluted EPS of
$0.69 vs.$1.18 in the prior year - Adjusted diluted EPS of
$1.10 vs.$1.21 in the prior year1 - Declared special cash dividend of
$3.50 per share on November 17, 2020
MSC INDUSTRIAL SUPPLY CO. (NYSE: MSM), "MSC" or the "Company", a premier distributor of Metalworking and Maintenance, Repair and Operations ("MRO") products and services to industrial customers throughout North America, today reported financial results for its fiscal 2021 first quarter ended November 28, 2020.
Financial Highlights2 | FY21 Q1 | FY20 Q1 | Change | |||
Net Sales | - | |||||
Operating Income | 53.9 | 90.3 | - | |||
% of Net Sales | ||||||
Net Income attributable to MSC Industrial | 38.5 | 65.4 | - | |||
Diluted EPS | - | |||||
Adjusted Financial Highlights1,2 | FY21 Q1 | FY20 Q1 | Change | |||
Net Sales | - | |||||
Adjusted Operating Income | 84.6 | 92.9 | - | |||
Adjusted % of Net Sales | ||||||
Adjusted Net Income attributable to MSC Industrial | 61.7 | 67.3 | - | |||
Adjusted Diluted EPS | - |
1An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures is presented in schedules following this press release. |
2In millions except per share data or as otherwise noted. |
3Based on 55.8 million diluted shares outstanding for FY21 Q1. |
4Based on 55.4 million diluted shares outstanding for FY20 Q1. |
Erik Gershwind, president and chief executive officer, said, "Our fiscal first quarter reflected building momentum for our Mission Critical initiative against the backdrop of a challenging but improving environment. We saw continued sequential improvement in sales of non-safety and non-janitorial product lines, while sales of safety and janitorial products, anchored by our PPE program, grew roughly
Kristen Actis-Grande, executive vice president and chief financial officer, added, "Average daily sales were
Gershwind concluded, "Our company's sights are set on two goals to be achieved by the end of fiscal 2023: growing at least 400 basis points above the Industrial Production Index and returning ROIC back into the high teens. We have five growth initiatives powering our market share aspirations, and we are executing significant structural cost reductions that we expect will improve operating expenses as a percent of sales by at least 200 basis points. As we move towards the middle of our fiscal 2021, we are encouraged by the momentum that is building inside of the company, and this is evidenced both by improving operating numbers and the increasing pace with which we are operating the business. We are also encouraged by an environment that, while challenging, is showing some positive indicators, with good news on the vaccine and the recently passed stimulus package hopefully improving the economic outlook over the coming quarters."
Conference Call Information
MSC will host a conference call today at 8:30 a.m. EST to review the Company's fiscal 2021 first 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 January 13, 2021.
The Company's reporting date for fiscal 2021 second quarter results is scheduled for April 7, 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 over 75 years of working with customers across industries.
Our experienced team of more than 6,300 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, please visit mscdirect.com.
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 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 ROIC, are 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 effects of the COVID-19 pandemic, including any future resurgences, on our business operations, results of operations and financial condition; general economic conditions in the markets in which we operate; 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 a spot-buy supplier to a mission-critical partner; our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; retention of key personnel and qualified sales and customer service personnel and metalworking specialists; volatility in commodity and energy prices; the outcome of government or regulatory proceedings or future litigation; credit risk of our customers; 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 or other business interruptions (including those due to extreme weather conditions) at transportation centers, shipping ports, our headquarters or our customer fulfillment centers; disruptions or breaches of our information systems, or violations of data privacy laws; risk of loss of key suppliers, key brands or supply chain disruptions; changes to trade policies, including the impact from significant restrictions or tariffs; risks associated with opening or expanding our customer fulfillment centers; 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; interest rate uncertainty due to LIBOR reform; failure to comply with applicable environmental, health and safety laws and regulations; and goodwill and intangible assets recorded as a result of our acquisitions could be impaired. 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 the reports on Forms 10-K and 10-Q that we file with the U.S. Securities and Exchange Commission. We assume no obligation to update any of these forward-looking statements.
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES | |||||
Condensed Consolidated Balance Sheets | |||||
(In thousands) | |||||
November 28, | August 29, | ||||
2020 | 2020 | ||||
ASSETS | (unaudited) | ||||
Current Assets: | |||||
Cash and cash equivalents | $ | 53,104 | $ | 125,211 | |
Accounts receivable, net of allowance for credit losses | 493,693 | 491,743 | |||
Inventories | 521,299 | 543,106 | |||
Prepaid expenses and other current assets | 80,222 | 77,710 | |||
Total current assets | 1,148,318 | 1,237,770 | |||
Property, plant and equipment, net | 297,780 | 301,979 | |||
Goodwill | 677,891 | 677,579 | |||
Identifiable intangibles, net | 102,552 | 104,873 | |||
Operating lease assets | 56,379 | 56,173 | |||
Other assets | 3,733 | 4,056 | |||
Total assets | $ | 2,286,653 | $ | 2,382,430 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current Liabilities: | |||||
Current portion of debt including obligations under finance leases | $ | 23,225 | $ | 122,248 | |
Current portion of operating lease liabilities | 20,459 | 21,815 | |||
Accounts payable | 143,520 | 125,775 | |||
Dividends payable | 197,712 | — | |||
Accrued expenses and other current liabilities | 129,073 | 138,895 | |||
Total current liabilities | 513,989 | 408,733 | |||
Long-term debt including obligations under finance leases | 466,905 | 497,018 | |||
Noncurrent operating lease liabilities | 36,180 | 34,379 | |||
Deferred income taxes and tax uncertainties | 121,716 | 121,727 | |||
Other noncurrent liabilities | 16,976 | — | |||
Total liabilities | 1,155,766 | 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 | 702,341 | 690,739 | |||
Retained earnings | 547,957 | 749,515 | |||
Accumulated other comprehensive loss | (19,683) | (21,418) | |||
Class A treasury stock, at cost | (106,197) | (103,948) | |||
Total MSC Industrial shareholders' equity | 1,124,475 | 1,314,945 | |||
Noncontrolling interest | $ | 6,412 | $ | 5,628 | |
Total shareholders' equity | 1,130,887 | 1,320,573 | |||
Total liabilities and shareholders' equity | $ | 2,286,653 | $ | 2,382,430 |
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES | ||||||
Condensed Consolidated Statements of Income | ||||||
(In thousands, except per share data) | ||||||
(Unaudited) | ||||||
Thirteen Weeks Ended | ||||||
November 28, | November 30, | |||||
2020 | 2019 | |||||
Net sales | $ | 771,904 | $ | 823,601 | ||
Cost of goods sold | 448,586 | 476,405 | ||||
Gross profit | 323,318 | 347,196 | ||||
Operating expenses | 242,684 | 256,898 | ||||
Impairment Loss | 26,726 | — | ||||
Income from operations | 53,908 | 90,298 | ||||
Other income (expense): | ||||||
Interest expense | (3,356) | (3,171) | ||||
Interest income | 21 | 10 | ||||
Other income, net | 651 | 121 | ||||
Total other expense | (2,684) | (3,040) | ||||
Income before provision for income taxes | 51,224 | 87,258 | ||||
Provision for income taxes | 12,447 | 21,806 | ||||
Net income | 38,777 | 65,452 | ||||
Less: Net income attributable to noncontrolling interest | 323 | 34 | ||||
Net income attributable to MSC Industrial | $ | 38,454 | $ | 65,418 | ||
Per share data attributable to MSC Industrial: | ||||||
Net income per common share: | ||||||
Basic | $ | 0.69 | $ | 1.18 | ||
Diluted | $ | 0.69 | $ | 1.18 | ||
Weighted average shares used in computing net income per common share: | ||||||
Basic | 55,659 | 55,275 | ||||
Diluted | 55,850 | 55,444 |
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES | ||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||
(In thousands) | ||||||
(Unaudited) | ||||||
Thirteen Weeks Ended | ||||||
November 28, | November 30, | |||||
2020 | 2019 | |||||
Net income, as reported | $ | 38,777 | $ | 65,452 | ||
Other comprehensive income, net of tax: | ||||||
Foreign currency translation adjustments | 2,196 | 1,606 | ||||
Comprehensive income | 40,973 | 67,058 | ||||
Comprehensive income attributable to noncontrolling interest: | ||||||
Less: Net income | (323) | (34) | ||||
Foreign currency translation adjustments | (461) | (140) | ||||
Comprehensive income attributable to MSC Industrial | $ | 40,189 | $ | 66,884 |
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES | |||||
Condensed Consolidated Statements of Cash Flows | |||||
(In thousands) | |||||
(Unaudited) | |||||
Thirteen Weeks Ended | |||||
November 28, | November 30, | ||||
2020 | 2019 | ||||
Cash Flows from Operating Activities: | |||||
Net income | $ | 38,777 | $ | 65,452 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 17,105 | 17,025 | |||
Non-cash operating lease cost | 4,342 | 5,544 | |||
Stock-based compensation | 4,238 | 4,161 | |||
Loss on disposal of property, plant, and equipment | 296 | 140 | |||
Provision for credit losses | 2,503 | 2,526 | |||
Changes in operating assets and liabilities: | |||||
Accounts receivable | (3,655) | 2,565 | |||
Inventories | 22,950 | 20,627 | |||
Prepaid expenses and other current assets | (2,168) | (182) | |||
Operating lease liabilities | (4,103) | (5,425) | |||
Other assets | 324 | 669 | |||
Accounts payable and accrued liabilities | 22,621 | (27,990) | |||
Total adjustments | 64,453 | 19,660 | |||
Net cash provided by operating activities | 103,230 | 85,112 | |||
Cash Flows from Investing Activities: | |||||
Expenditures for property, plant and equipment | (7,893) | (12,689) | |||
Net cash used in investing activities | (7,893) | (12,689) | |||
Cash Flows from Financing Activities: | |||||
Repurchases of common stock | (3,159) | (3,009) | |||
Payments of cash dividends | (41,815) | (41,536) | |||
Proceeds from sale of Class A common stock in connection with associate stock purchase plan | 963 | 1,031 | |||
Proceeds from exercise of Class A common stock options | 5,600 | 4,533 | |||
Borrowings under credit facilities | — | 69,000 | |||
Payments under credit facilities | (130,000) | (107,000) | |||
Payments on finance lease and financing obligations | (516) | (180) | |||
Other, net | 1,269 | — | |||
Net cash used in financing activities | (167,658) | (77,161) | |||
Effect of foreign exchange rate changes on cash and cash equivalents | 214 | 230 | |||
Net decrease in cash and cash equivalents | (72,107) | (4,508) | |||
Cash and cash equivalents – beginning of year | 125,211 | 32,286 | |||
Cash and cash equivalents – end of year | $ | 53,104 | $ | 27,778 | |
Supplemental Disclosure of Cash Flow Information: | |||||
Cash paid for income taxes | $ | 1,605 | $ | 1,790 | |
Cash paid for interest | $ | 1,908 | $ | 895 | |
Supplemental Disclosure of non-cash Financing Activities | |||||
Cash dividends declared, but not yet paid | $ | 195,351 | $ | — |
Non-GAAP Financial Measures
- Results Excluding Impairment Loss and Restructuring and Other Related Costs
To supplement MSC's unaudited selected financial data presented consistent with GAAP, the Company discloses certain non-GAAP financial measures, including non-GAAP operating expenses, non-GAAP income from operations, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude the impairment loss and restructuring and other related costs.
These non-GAAP measures are not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect MSC's results of operations as determined in accordance with GAAP, and that these measures should only be used to evaluate MSC's results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of the Company's performance.
In calculating non-GAAP financial measures, we exclude the impairment loss and restructuring and other related costs, and the related tax effects, to facilitate a review of the Company's operating performance on a period-to-period basis, for comparison with forecasts and strategic plans, and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results "through the eyes" of management in addition to seeing GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:
- the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
- the ability to better identify trends in the Company's underlying business and perform related trend analyses;
- a better understanding of how management plans and measures the Company's underlying business; and
- an easier way to compare the Company's operating results against analyst financial models and operating results of competitors that supplement their GAAP results with non-GAAP financial measures
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES | |||||||||||||
Reconciliation of GAAP and Non-GAAP Information | |||||||||||||
Thirteen Weeks Ended November 28, 2020 | |||||||||||||
(dollars in thousands, except per share data) | |||||||||||||
GAAP Measure | Items Affecting Comparability | Non-GAAP Measure | |||||||||||
Total MSC | Restructuring and Other | Impairment Loss | MSC Excluding Impairment | ||||||||||
Thirteen | Thirteen | Thirteen Weeks Ended | Thirteen | ||||||||||
November 28, 2020 | November 28, 2020 | November 28, 2020 | November 28, 2020 | ||||||||||
Net Sales | $ | 771,904 | $ | - | $ | - | $ | 771,904 | |||||
ADS Growth % | - | - | - | - | |||||||||
Cost of Goods Sold | 448,586 | - | - | 448,586 | |||||||||
Gross Profit | 323,318 | - | - | 323,318 | |||||||||
Gross Margin | - | - | |||||||||||
Operating Expense | 242,684 | 3,979 | - | 238,705 | |||||||||
Operating Exp as % of Sales | |||||||||||||
Impairment Loss | 26,726 | - | 26,726 | - | |||||||||
Income from Operations | 53,908 | (3,979) | (26,726) | 84,613 | |||||||||
Operating Margin | - | - | |||||||||||
Total Other Expense | (2,684) | - | - | (2,684) | |||||||||
Income before provision for income taxes | 51,224 | (3,979) | (26,726) | 81,929 | |||||||||
Provision for income taxes | 12,447 | (967) | (6,494) | 19,908 | |||||||||
Net income | 38,777 | (3,012) | (20,232) | 62,021 | |||||||||
Net income attributable to noncontrolling interest | 323 | - | - | 323 | |||||||||
Net income attributable to MSC Industrial | $ | 38,454 | $ | (3,012) | $ | (20,232) | $ | 61,698 | |||||
Net income per common share: | |||||||||||||
Diluted | $ | 0.69 | $ | (0.05) | $ | (0.36) | $ | 1.10 | |||||
MSC INDUSTRIAL SUPPLY CO. AND SUBSIDIARIES | ||||||||
Reconciliation of GAAP and Non-GAAP Information | ||||||||
Thirteen Weeks Ended November 30, 2019 | ||||||||
(dollars in thousands, except per share data) | ||||||||
GAAP Measure | Items Affecting Comparability | Non-GAAP Measure | ||||||
Total MSC | Restructuring and Other | MSC Excluding Restructuring and | ||||||
Thirteen | Thirteen | Thirteen | ||||||
November 30, 2019 | November 30, 2019 | November 30, 2019 | ||||||
Net Sales | $ | 823,601 | $ | - | $ | 823,601 | ||
ADS Growth % | - | - | - | |||||
Cost of Goods Sold | 476,405 | - | 476,405 | |||||
Gross Profit | 347,196 | - | 347,196 | |||||
Gross Margin | - | |||||||
Operating Expense | 256,898 | 2,571 | 254,327 | |||||
Operating Exp as % of Sales | ||||||||
Income from Operations | 90,298 | (2,571) | 92,869 | |||||
Operating Margin | - | |||||||
Total Other Expense | (3,040) | - | (3,040) | |||||
Income before provision for income taxes | 87,258 | (2,571) | 89,829 | |||||
Provision for income taxes | 21,806 | (643) | 22,449 | |||||
Net income | 65,452 | (1,928) | 67,380 | |||||
Net income attributable to noncontrolling interest | 34 | - | 34 | |||||
Net income attributable to MSC Industrial | $ | 65,418 | $ | (1,928) | $ | 67,346 | ||
Net income per common share: | ||||||||
Diluted | $ | 1.18 | $ | (0.03) | $ | 1.21 |
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SOURCE MSC Industrial Supply Co.
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