MELVILLE, N.Y. and DAVIDSON, N.C., July 7, 2021 /PRNewswire/ --

FISCAL 2021 Q3 HIGHLIGHTS

Net sales of $866.3 million, a 3.8% increase from the prior year quarter (2.2% on an average daily sales basis)
$20.8 million loss recovery related to the nitrile glove impairment originally recorded in the fiscal first quarter
Operating income of $128.6 million, or $109.5 million excluding loss recovery, restructuring and other costs¹
Operating margin of 14.8%, or 12.6% excluding the adjustments described above¹
Diluted EPS of $1.68 vs. $1.40 in the prior year quarter; Adjusted diluted EPS of $1.42, same as prior year¹
Repurchased 507,000 shares during the quarter

MSC INDUSTRIAL DIRECT CO., INC. (NYSE:MSM), "MSC Industrial" 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 third quarter ended May 29, 2021.


Financial Highlights²	FY21 Q3		FY20 Q3		Change	FY21 YTD		FY20 YTD		Change
Net Sales	$866.3		$835.0		3.8%	$2,412.2		$2,444.7		-1.3%
Income from Operations	$128.6		$109.9		17.1%	$210.6		$277.8		-24.2%
Operating Margin	14.8%		13.2%			8.7%		11.4%
Net Income attributable to MSC Industrial	$94.4		$77.7		21.5%	$151.0		$198.6		-24.0%
Diluted EPS	$1.68	³	1.40	⁴	20.0%	$2.69	³	$3.57	⁴	-24.6%

Adjusted Financial Highlights^1,2	FY21 Q3		FY20 Q3		Change	FY21 YTD		FY20 YTD		Change
Unadjusted Net Sales	$866.3		$835.0		3.8%	$2,412.2		$2,444.7		-1.3%
Adjusted Income from Operations	$109.5		$111.2		-1.5%	$274.9		$283.7		-3.1%
Adjusted Operating Margin	12.6%		13.3%			11.4%		11.6%
Adjusted Net Income attributable to MSC Industrial	$80.2		$78.7		1.8%	$199.5		$203.0		-1.7%
Adjusted Diluted EPS	$1.42	³	$1.42	⁴	0.0%	$3.55	³	$3.65	⁴	-2.7%

¹Represents 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.

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

³Based on 56.4 million and 56.1 million diluted shares outstanding for FY21 Q3 and FY21 YTD respectively.

⁴Based on 55.6 million diluted shares outstanding for both FY20 Q3 and FY20 YTD.

Erik Gershwind, President and Chief Executive Officer, said, "The economic environment improved significantly and most of our manufacturing end markets turned positive during our fiscal third quarter. Total company sales returned to growth and, while muted by PPE-related comparisons, our non-safety and non-janitorial product lines grew 21 percent. Execution on our Mission Critical initiatives continued at a high level and we have lifted our expectations both in terms of gross and net savings for fiscal 2021."

Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "Average daily sales growth turned positive during our fiscal third quarter and was 2.2 percent. Solid execution of our March price increase contributed to a lift in our gross margin sequentially to 42.3 percent. On our Mission Critical programs, we delivered another $12 million of gross savings, bringing our cumulative savings for fiscal 2021 to $29 million, against our original goal of $25 million. We also reinvested approximately $7 million into growth programs, bringing our cumulative investment for fiscal 2021 to roughly $15 million. In total, we now expect to drive gross savings of $40 million and to invest roughly $25 million in fiscal 2021, such that we will achieve net savings above our original goal of $10 million for the year. Finally, we continued to use our strong balance sheet to support our customers with higher inventory levels and our shareholders through our share buyback program."

Gershwind concluded, "We are gaining steam internally and our end markets are strengthening. Strong execution on our Mission Critical initiatives will further support our share capture programs and deliver additional savings over the next two years and beyond. We remain on-track to achieve our 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 Industrial will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2021 third 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 under the events section at http://investor.mscdirect.com for one year.

The Company's reporting date for fiscal 2021 fourth quarter and full year results is scheduled for October 20, 2021.

About MSC Industrial Direct Co., Inc.

MSC Industrial Direct Co., Inc. (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 6,200 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 Industrial 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 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 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 that are in the best interests of other shareholders. 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)


	May 29,		August 29,
	2021		2020
ASSETS		(Unaudited)
Current Assets:
Cash and cash equivalents	$	27,429	$	125,211
Accounts receivable, net of allowance for credit losses		564,963		491,743
Inventories		598,328		543,106
Prepaid expenses and other current assets		116,947		77,710
Total current assets		1,307,667		1,237,770
Property, plant and equipment, net		296,200		301,979
Goodwill		679,920		677,579
Identifiable intangibles, net		97,610		104,873
Operating lease assets		39,401		56,173
Other assets		3,520		4,056
Total assets	$	2,424,318	$	2,382,430

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of debt including obligations under finance leases	$	412,547	$	122,248
Current portion of operating lease liabilities		14,570		21,815
Accounts payable		195,858		125,775
Accrued expenses and other current liabilities		145,841		138,895
Total current liabilities		768,816		408,733
Long-term debt including obligations under finance leases		346,458		497,018
Noncurrent operating lease liabilities		26,008		34,379
Deferred income taxes and tax uncertainties		121,715		121,727
Other noncurrent liabilities		9,443		—
Total liabilities		1,272,440		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		735,562		690,739
Retained earnings		528,766		749,515
Accumulated other comprehensive loss		(14,780)		(21,418)
Class A treasury stock, at cost		(104,951)		(103,948)
Total MSC Industrial shareholders' equity		1,144,654		1,314,945
Noncontrolling interest	$	7,224	$	5,628
Total shareholders' equity		1,151,878		1,320,573
Total liabilities and shareholders' equity	$	2,424,318	$	2,382,430

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited)


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	May 29,		May 30,		May 29,		May 30,
	2021		2020		2021		2020
Net sales	$	866,294	$	834,972	$	2,412,193	$	2,444,667
Cost of goods sold		499,823		481,010		1,427,653		1,412,457
Gross profit		366,471		353,962		984,540		1,032,210
Operating expenses		257,336		242,751		741,156		748,519
Impairment loss (loss recovery)		(20,840)		-		5,886		-
Restructuring costs		1,349		1,359		26,943		5,871
Income from operations		128,626		109,852		210,555		277,820
Other income (expense):
Interest expense		(3,696)		(5,451)		(10,632)		(12,117)
Interest income		15		173		52		251
Other income (expense), net		1,131		(560)		1,724		(509)
Total other expense		(2,550)		(5,838)		(8,856)		(12,375)
Income before provision for income taxes		126,076		104,014		201,699		265,445
Provision for income taxes		31,141		25,900		49,639		66,323
Net income		94,935		78,114		152,060		199,122
Less: Net income attributable to noncontrolling interest		501		411		1,087		501
Net income attributable to MSC Industrial	$	94,434	$	77,703	$	150,973	$	198,621
Per share data attributable to MSC Industrial:
Net income per common share:
Basic	$	1.69	$	1.40	$	2.70	$	3.58
Diluted	$	1.68	$	1.40	$	2.69	$	3.57
Weighted-average shares used in computing net income per common share:
Basic		55,944		55,563		55,814		55,435
Diluted		56,352		55,599		56,139		55,581

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Comprehensive Income (In thousands) (Unaudited)


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	May 29,		May 30,		May 29,		May 30,
	2021		2020		2021		2020
Net income, as reported	$	94,935	$	78,114	$	152,060	$	199,122
Other comprehensive income, net of tax:
Foreign currency translation adjustments		4,325		(4,065)		7,147		(3,247)
Comprehensive income		99,260		74,049		159,207		195,875
Comprehensive income attributable to noncontrolling interest:
Net income		(501)		(411)		(1,087)		(501)
Foreign currency translation adjustments		(299)		536		(509)		441
Comprehensive income attributable to MSC Industrial	$	98,460	$	74,174	$	157,611	$	195,815

MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)


	Thirty-Nine Weeks Ended
	May 29,		May 30,
	2021		2020
Cash Flows from Operating Activities:
Net income	$	152,060	$	199,122
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		51,575		51,354
Non-cash operating lease cost		11,650		16,852
Stock-based compensation		13,407		12,463
Loss on disposal of property, plant and equipment		460		278
Inventory write-down		30,091		—
Operating lease and fixed asset impairment due to restructuring		15,819		—
Provision for credit losses		5,303		8,008
Changes in operating assets and liabilities:
Accounts receivable		(77,130)		(13,788)
Inventories		(82,864)		(17,049)
Prepaid expenses and other current assets		(38,658)		(17,082)
Operating lease liabilities		(25,576)		(16,634)
Other assets		585		2,008
Accounts payable and accrued liabilities		82,638		(10,591)
Total adjustments		(12,700)		15,819
Net cash provided by operating activities		139,360		214,941
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment		(37,598)		(35,920)
Cash used in business acquisitions, net of cash acquired		—		(2,286)
Net cash used in investing activities		(37,598)		(38,206)
Cash Flows from Financing Activities:
Repurchases of common stock		(50,700)		(3,236)
Payments of regular cash dividends		(125,707)		(124,851)
Payments of special cash dividends		(195,351)		(277,634)
Proceeds from sale of Class A Common Stock in connection with associate stock purchase plan		3,112		3,287
Proceeds from exercise of Class A Common Stock options		28,969		13,530
Borrowings under credit facilities		505,000		1,012,200
Payments under credit facilities		(365,000)		(578,000)
Proceeds from long-term debt		—		100,000
Payments on finance lease and financing obligations		(1,896)		(1,629)
Other, net		1,286		1,162
Net cash provided by (used in) financing activities		(200,287)		144,829
Effect of foreign exchange rate changes on cash and cash equivalents		743		(457)
Net increase (decrease) in cash and cash equivalents		(97,782)		321,107
Cash and cash equivalents – beginning of period		125,211		32,286
Cash and cash equivalents – end of period	$	27,429	$	353,393
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes	$	60,903	$	39,672
Cash paid for interest	$	8,776	$	8,501

Non-GAAP Financial Measures

Results Excluding Impairment Loss (Loss Recovery), Restructuring Costs, Inventory Write-downs, and Other Charges

To supplement MSC Industrial'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 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, 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 Industrial'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, 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 May 29, 2021
(dollars in thousands, except percentages and per share data)

	GAAP Financial Measure			Items Affecting Comparability					Non-GAAP Financial Measure
	Total MSC Industrial		Impairment Loss (Loss Recovery)		Restructuring Costs		Legal Costs- impairment of prepaid for PPE		Adjusted Total MSC Industrial
Net Sales	$	866,294	$	-	$	-	$	-	$	866,294

Cost of Goods Sold		499,823		-		-		-		499,823

Gross Profit		366,471		-		-		-		366,471
Gross Margin		42.3%		-		-		-		42.3%

Operating Expenses		257,336		-		-		401		256,935
Operating Exp as % of Sales		29.7%		-		-		0.0%		29.7%

Impairment Loss (Loss Recovery)		(20,840)		(20,840)		-		-		-

Restructuring Costs		1,349		-		1,349		-		-

Income from Operations		128,626		20,840		(1,349)		(401)		109,536
Operating Margin		14.8%		2.4%		-0.2%		0.0%		12.6%

Total Other Expense		(2,550)		-		-		-		(2,550)

Income before provision for income taxes		126,076		20,840		(1,349)		(401)		106,986

Provision for income taxes		31,141		5,263		(341)		(100)		26,319
Net income		94,935		15,577		(1,008)		(301)		80,667
Net income attributable to noncontrolling interest		501		-		-		-		501
Net income attributable to MSC Industrial	$	94,434	$	15,577	$	(1,008)	$	(301)	$	80,166

Net income per common share:
Diluted	$	1.68	$	0.28	$	(0.02)	$	(0.01)	$	1.42


MSC INDUSTRIAL DIRECT CO., INC.
Reconciliation of GAAP and Non-GAAP Financial Information
Thirty-Nine Weeks Ended May 29, 2021
(dollars 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 Costs		Impairment Loss		Legal Costs - impairment of prepaid for PPE		Adjusted Total MSC Industrial
Net Sales	$	2,412,193	$	-	$	-	$	-	$	-	$	2,412,193

Cost of Goods Sold		1,427,653		30,091		-		-		-		1,397,562

Gross Profit		984,540		(30,091)		-		-		-		1,014,631
Gross Margin		40.8%		-1.2%		-		-		-		42.1%

Operating Expenses		741,156		-		-		-		1,421		739,735
Operating Exp as % of Sales		30.7%		-		-		-		0.1%		30.7%

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

Restructuring Costs		26,943		-		26,943		-		-		-

Income from Operations		210,555		(30,091)		(26,943)		(5,886)		(1,421)		274,896
Operating Margin		8.7%		-1.2%		-1.1%		-0.2%		-0.1%		11.4%

Total Other Expense		(8,856)		-		-		-		-		(8,856)

Income before provision for income taxes		201,699		(30,091)		(26,943)		(5,886)		(1,421)		266,040

Provision for income taxes		49,639		(7,392)		(6,620)		(1,446)		(349)		65,446
Net income		152,060		(22,699)		(20,323)		(4,440)		(1,072)		200,594
Net income attributable to noncontrolling interest		1,087		-		-		-		-		1,087
Net income attributable to MSC Industrial	$	150,973	$	(22,699)	$	(20,323)	$	(4,440)	$	(1,072)	$	199,507

Net income per common share:
Diluted	$	2.69	$	(0.40)	$	(0.36)	$	(0.08)	$	(0.02)	$	3.55


MSC INDUSTRIAL DIRECT CO., INC.
Reconciliation of GAAP and Non-GAAP Financial Information
Thirteen and Thirty-Nine Weeks Ended May 30, 2020
(dollars in thousands, except percentages and per share data)

	GAAP Financial Measure				Items Affecting Comparability ¹				Non-GAAP Financial Measure
	Total MSC Industrial				Restructuring Costs				MSC Industrial excluding Restructuring Costs
	Thirteen Weeks Ended		Thirty-Nine Weeks Ended		Thirteen Weeks Ended		Thirty-Nine Weeks Ended		Thirteen Weeks Ended		Thirty-Nine Weeks Ended
	May 30, 2020				May 30, 2020				May 30, 2020
Net Sales	$	834,972	$	2,444,667	$	-	$	-	$	834,972	$	2,444,667

Cost of Goods Sold		481,010		1,412,457		-		-		481,010		1,412,457

Gross Profit		353,962		1,032,210		-		-		353,962		1,032,210
Gross Margin		42.4%		42.2%		-		-		42.4%		42.2%

Operating Expenses		242,751		748,519						242,751		748,519
Operating Exp as % of Sales		29.1%		30.6%		-		-		29.1%		30.6%

Restructuring Costs		1,359		5,871		1,359		5,871		-		-

Income from Operations		109,852		277,820		(1,359)		(5,871)		111,211		283,691
Operating Margin		13.2%		11.4%		-0.2%		-0.2%		13.3%		11.6%

Total Other Expense		(5,838)		(12,375)		-		-		(5,838)		(12,375)

Income before provision for income taxes		104,014		265,445		(1,359)		(5,871)		105,373		271,316

Provision for income taxes		25,900		66,323		(338)		(1,468)		26,238		67,791
Net income		78,114		199,122		(1,021)		(4,403)		79,135		203,525
Net income attributable to noncontrolling interest		411		501		-		-		411		501
Net income attributable to MSC Industrial	$	77,703	$	198,621	$	(1,021)	$	(4,403)	$	78,724	$	203,024

Net income per common share:
Diluted	$	1.40	$	3.57	$	(0.02)	$	(0.08)	$	1.42	$	3.65

¹The thirteen and thirty-nine weeks ended May 30, 2020 include only restructuring costs. Items of note excluded from the current period results, including inventory write-downs, an impairment loss (loss recovery) and associated legal costs, did not occur in the prior year periods.

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SOURCE MSC Industrial Supply Co.

MSC Industrial Reports Fiscal 2021 Third Quarter Results