MELVILLE, N.Y. and DAVIDSON, N.C., April 10, 2019 /PRNewswire/ --
FISCAL Q2 2019 HIGHLIGHTS
- Net sales of $823.0 million, a 7.0% YoY increase
- Average daily sales increased 8.8% YoY, with 270 basis points of acquisitive growth
- Operating income of $96.0 million, a decrease of approximately 2.2% YoY
- Operating margin of 11.7% (11.9% excluding acquisitions*)
- Diluted EPS of $1.24
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 2019 second quarter ended March 2, 2019.
Erik Gershwind, president and chief executive officer, said, "Conditions generally remained solid in the industrial economy in the fiscal second quarter of 2019, although we did see some moderation in February and this continued into March. Our core and national account customer growth in the quarter was in the high single digits, while Government sales were negative as expected. As a result, our total company growth rate was slightly below our expectations. The pricing environment remained stable in the fiscal second quarter, and we were pleased with the strong realization that we achieved on our mid-year price increase."
Rustom Jilla, executive vice president and chief financial officer, added, "Our fiscal second quarter total ADS increased 8.8% year-over-year, with acquisitions contributing 270 basis points. Our gross margin was in-line with our expectations. Price realization was strong, while purchase cost and mix remained headwinds, as expected. Our operating expense to sales ratio was 31.1%, roughly flat with last year's second quarter and in line with our guidance, as our stepped-up growth investments offset the benefits of sales leverage. Despite our gross margins and operating expenses coming in as expected, our earnings per share were one cent below our guidance mid-point due to slightly lower than anticipated sales. Finally, in the fiscal second quarter, we paid dividends of $35 million and repurchased approximately 275 thousand shares for about $21 million."
Gershwind concluded, "Over the past few years, we have repositioned MSC from a spot buy supplier to a mission critical partner on manufacturing plant floors. More recently, we transformed our sales force and ramped hiring of sales talent. At the halfway point of the fiscal year, gross margins and operating expenses are as anticipated, but revenue growth has slightly underperformed our expectations. Looking forward, we are seeing positive signs from the implementation of our strategic plan, particularly from our sales force transformation, and are confident that it will deliver above market growth."
The Company expects net sales for the third quarter of fiscal 2019 to be between $874 million and $891 million. At the midpoint, average daily sales are expected to increase roughly 6.5% compared to last year's third quarter. The Company expects diluted earnings per share for the third quarter of fiscal 2019 to be between $1.46 and $1.52.
Excluding acquisitions*, the Company expects net sales for the third quarter of fiscal 2019 to be between $846 million and $863 million, with average daily sales at the midpoint expected to increase roughly 4.0% compared to last year's third quarter. The Company expects the impact from acquisitions to have a roughly breakeven impact on diluted earnings per share for the third quarter of fiscal 2019.
* An explanation and reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the financial schedules of this press release.
Conference Call Information
MSC will host a conference call today at 8:30 a.m. to review the Company's fiscal 2019 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 until April 17, 2019.
The Company's reporting date for fiscal 2019 third quarter results is scheduled for July 10, 2019.
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 more than 1.6 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 over 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, 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 expected future results, expected benefits from our investment and strategic plans, including from our recent acquisitions, and expected future margins, 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 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: 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; 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; 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; dependence on our information systems and the risks of business disruptions arising from changes to our information systems and disruptions due to catastrophic events, power outages, natural disasters, computer system or network failures, computer viruses, physical or electronic break-ins and cyber-attacks; retention of key personnel; retention of qualified sales and customer service personnel and metalworking specialists; risk of loss of key suppliers, key brands or supply chain disruptions; risks associated with 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; failure to comply with applicable environmental, health and safety laws and regulations; goodwill and intangible assets recorded as a result of our acquisitions could be impaired; risks associated with the volatility of our common stock; and our principal shareholders exercise significant control over us. 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.
Non-GAAP Financial Measures
- Results excluding All Integrated Solutions (AIS) and MSC Mexico
To supplement MSC's unaudited selected financial data presented consistent with Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures, including Non-GAAP net sales, non-GAAP gross profit, non-GAAP income from operations, non-GAAP (benefit) provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude the results of our acquisition of All Integrated Solutions ("AIS") and the operations of two newly-formed entities, MSC IndustrialSupply, S. de R.L. de C.V. and MSC Import Export LLC (which completed the acquisition of certain assets in February 2019), including the non-recurring acquisition and integrations costs (collectively, referred to as "Acquisitions").
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 results of the Acquisitions 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
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SOURCE MSC Industrial Supply Co.