<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 1, 1996 Commission File No.: 1-14130
MSC INDUSTRIAL DIRECT CO., INC.
(Exact name of registrant as specified in its charter)
New York 11-3289165
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
151 Sunnyside Blvd.
Plainview, NY 11803-1592
(Address of principal executive offices, including zip code)
(516) 349-7100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Shares of Common Stock, par value $.001, outstanding as of July 12, 1996:
Class A - 8,311,394 Class B - 23,475,000
<PAGE>
MSC INDUSTRIAL DIRECT CO., INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
ITEM 1. Consolidated Financial Statements (Note 1)
Consolidated Balance Sheets -
June 1, 1996 and September 2, 1995 3
Statements of Consolidated Income -
Thirteen and thirty-nine weeks ended June 1, 1996
and May 27, 1995 4
Statement of Consolidated Shareholders' Equity -
Thirty-nine weeks ended June 1, 1996 5
Statements of Consolidated Cash Flows -
Thirty-nine weeks ended June 1, 1996 and May 27, 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. Consolidated Financial Statements
MSC INDUSTRIAL DIRECT CO., INC.
Consolidated Balance Sheets
(Note 1)
(in thousands, except share data) June 1, September 2,
1996 1995
------- ------------
(unaudited) (audited)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 1,791 $ 681
Accounts receivable, net of allowance for
doubtful accounts of $951 and $877,
respectively 40,031 31,078
Inventories 130,935 83,448
Due from affiliated companies - 791
Prepaid expenses and other current assets 1,783 1,070
Deferred income taxes 8,513 -
-------- --------
Total current assets 183,053 117,068
-------- --------
Property, Plant and Equipment, net 28,061 14,648
-------- --------
Other Assets:
Prepaid Federal income taxes 4,512 3,115
Other 3,939 4,201
-------- --------
8,451 7,316
-------- --------
$219,565 $139,032
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 10,256 $ 7,821
Accrued liabilities 27,596 18,811
Income taxes payable 1,415 -
Current portion of long-term debt 51 51
Current portion of subordinated debt to
shareholders - 9,157
-------- --------
Total current liabilities 39,318 35,840
Long-Term Notes Payable 14,057 28,348
Subordinated Debt to Shareholders - 2,621
Deferred Income Taxes 971 -
Other Long-Term Liabilities 114 135
-------- --------
Total liabilities 54,460 66,944
-------- --------
Shareholders' Equity:
Class A common stock; $0.001 par value;
100,000,000 shares authorized in 1996;
8,311,657 shares issued and outstanding 8 -
Class B common stock; $0.001 par value;
50,000,000 shares authorized;
23,475,000 shares and 24,000,000 shares,
respectively, issued and outstanding 24 24
Additional paid-in capital 144,471 8,034
Retained earnings 23,313 64,030
-------- --------
167,816 72,088
Deferred stock compensation (2,711) -
-------- --------
Total shareholders' equity 165,105 72,088
-------- --------
$219,565 $139,032
======== ========
The accompanying notes are an integral part of these consolidated
balance sheets.
Page 3
<PAGE>
MSC INDUSTRIAL DIRECT CO., INC.
Statements of Consolidated Income
(Note 1)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- ------------------------
(in thousands, except per share data) June 1, May 27, June 1, May 27,
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Sales $ 80,215 $ 66,720 $ 224,527 $ 182,025
Cost of Goods Sold 46,660 38,794 131,264 106,491
-------- -------- --------- ---------
Gross Profit 33,555 27,926 93,263 75,534
Operating Expenses 20,577 17,678 61,214 50,170
Distribution Center Restructuring Charge (Note 4) 8,600 - 8,600 -
-------- -------- --------- ---------
Income from Operations 4,378 10,248 23,449 25,364
-------- -------- --------- ---------
Other Income (Expense):
Interest income 199 4 748 18
Interest expense (86) (493) (1,293) (1,279)
Other income (expense), net 67 (204) 289 (59)
-------- -------- --------- ---------
180 (693) (256) (1,320)
-------- -------- --------- ---------
Income before Provision for Income Taxes 4,558 9,555 23,193 24,044
Provision for Income Taxes 1,800 244 1,947 612
-------- -------- --------- ---------
Net Income $ 2,758 $ 9,311 $ 21,246 $ 23,432
======== ======== ========= =========
Net Income per Common Share (Note 5) $ 0.09
========
Weighted Average Number of Common Shares Outstanding 32,049
========
Pro Forma Information (Note 5):
Income before provision for income taxes $ 23,193
Pro forma provision for income taxes 9,160
---------
Pro forma net income $ 14,033
=========
Pro forma net income per common share (Note 5) $ 0.46
==========
Pro forma weighted average number of
common shares outstanding 30,205
==========
Supplemental Information (Note 5):
Supplemental net income $ 14,506
===========
Supplemental net income per common share $ 0.46
===========
Supplemental weighted average number
of common shares outstanding 31,279
===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 4
<PAGE>
MSC INDUSTRIAL DIRECT CO., INC.
Statement of Consolidated Shareholders' Equity
(unaudited)
<TABLE>
<CAPTION>
Additional Deferred
(in thousands) Class A Common Stock Class B Common Stock Paid-In Retained Stock
Shares Amount Shares Amount Capital Earnings Compensation Total
----- ------ ------ ------ ------- -------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thirty-nine weeks ended June 1, 1996:
Balance, September 2, 1995 (Note 1) - $ - 24,000 $ 24 $ 8,034 $ 64,030 $ - $ 72,088
Initial public offering of common
stock, net of costs of offering
of $11,509 7,525 8 - - 131,466 - - 131,474
Exchange of Class B common stock
for Class A common stock 525 - (525) - - - - -
Issuance of restricted common stock 157 - - - 2,971 - (2,971) -
Issuance of common stock for
acquisition of subsidiaries 105 - - - 2,000 - - 2,000
Net income - - - - - 21,246 - 21,246
Amortization of deferred stock
compensation - - - - - - 260 260
Distributions to shareholders
(Note 3) - - - - - (61,963) - (61,963)
----- ------ ------ ----- -------- -------- ------- --------
Balance, June 1, 1996 8,312 $ 8 23,475 $ 24 $144,471 $ 23,313 $(2,711) $165,105
===== ====== ====== ===== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
Page 5
<PAGE>
MSC INDUSTRIAL DIRECT CO., INC.
Statements of Consolidated Cash Flows
(Note 1)
(unaudited)
(in thousands) Thirty-Nine Weeks Ended
-----------------------
June 1, May 27,
1996 1995
------- -------
Cash Flows from Operating Activities:
Net income $ 21,246 $ 23,432
-------- --------
Adjustments to reconcile net income to net cash
used in operating activities:
Deferred income taxes (7,542) -
Depreciation and amortization 2,282 1,380
Provision for doubtful accounts 618 509
Loss (gain) on disposal of property and equipment (33) 1
Changes in operating assets and liabilities:
Accounts receivable (9,043) (9,326)
Inventories (45,637) (19,390)
Prepaid expenses and other current assets (700) 1,494
Other assets (1,056) (544)
Accounts payable and other current liabilities 12,611 (1,369)
Other long-term liabilities (21) 6
-------- --------
(48,521) (27,239)
-------- --------
Net cash used in operating activities (27,275) (3,807)
-------- --------
Cash Flows from Investing Activities:
Expenditures for property, plant and equipment (15,359) (7,690)
-------- --------
Cash Flows from Financing Activities:
Net proceeds from initial public offering of
common stock 131,466 -
Long-term borrowings 67,614 13,754
Repayments of long-term debt (82,386) -
Repayments of subordinated debt to shareholders (11,778) 4,891
Repayments from affiliates 791 (348)
Distributions to shareholders (61,963) (10,192)
-------- --------
Net cash provided by financing activities 43,744 8,105
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 1,110 (3,392)
Cash and Cash Equivalents - beginning of period 681 3,496
-------- --------
Cash and Cash Equivalents - end of period $ 1,791 $ 104
======== ========
The accompanying notes are an integral part of these consolidated statements.
Page 6
<PAGE>
Notes to Consolidated Financial Statements
(in thousands except share data)
(unaudited)
1. MSC Industrial Direct Co., Inc. ("MSC" or the "Company") was incorporated
on October 24, 1995, as a holding company for the purpose of (i) issuing
8,050,000 shares of Class A Common Stock in an initial public offering and
(ii) iss uing 24,000,000 shares of Class B Common Stock to the shareholders
of Sid Tool Co., Inc. (the "Operating Subsidiary") in exchange for their
then outstanding 30,000 shares of common stock of the Operating Subsidiary
immediately prior to the effective date of MSC's initial public offering.
On November 14, 1995, MSC issued 1 share of Class A Common Stock to a
shareholder of the Operating Subsidiary in exchange for cash in the
amount of $17. MSC did not have any significant operating activity
from its inception until De cember 20, 1995, the closing date of the
initial public offering.
The 1995 financial statements included herein are those of the Operating
Subsid iary. The 1996 consolidated financial statements are those of
the Company and its subsidiaries which, prior to December 20, 1995,
reflect only the activity of the Operating Subsidiary. All references to
a year are to the Company's fiscal year, which ends on the Saturday nearest
August 31 of such year.
2. Reference is made to the Notes to Financial Statements contained within
the Operating Subsidiary's audited financial statements included in the
Company's De cember 14, 1995 prospectus. In the opinion of management,
the interim unaudited financial statements included herein reflect all
adjustments necessary, consisting of normal recurring adjustments, for a
fair presentation of such data on a basis consistent with that of the
audited data presented therein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for a
full year.
3. On December 20, 1995, the Company consummated its initial pu blic of
fering relating to the offer and sale of 8,050,000 shares of Class A
Com mon Stock, 7,525,000 of which shares were offered by the Company
and 525,000 of which shares were offered by a principal shareholder of
the Company, at a price of $19.00 per share. These 525,000 shares were
converted to Class A Common Stock from previously issued Class B Common
Stock. Net proceeds received by the Company were approximately $131,500.
As a result of the public offering, the Operating Subsidiary no longer
qualified as a Subchapter "S" corporation, and became subject to "C"
corporation taxation. Prior to the offering, the Operating Subsidiary
declared an "S" corporation dividend to the then existing shareholders in
the aggregate amount of approximately $62,000, which amount was equal to
substantially all previously taxed, undistributed "S" corporation earnings.
The Operating Subsidiary paid the "S" corporation dividend by delivery to
the then existing shareholders of promissory notes in the principal amount
of such dividends, which notes have been repaid with a portion of the net
proceeds from the offering. The provision for income taxes for the
thirty-nine week period ended June 1, 1996 reflects "S" corporation
taxation through the date of the public offering, and "C" corporation
taxation thereafter. (See Note 6.)
Page 7
<PAGE>
4. On May 9, 1996, the Company announced that it would be relocating its
multi-location Long Island, New York warehouse and distribution
center operation to a new, single-location, 104 acre Company-owned
facility near Harrisburg, Pennsylvania. The Company anticipates that it
will realize substantial savings in construction and operating costs over
those which would have been incurred had it remained and expanded its
operations on Long Island. The estimated cost of relocation of the
Company's existing Long Island facilities is approximately $8,600, and has
been reflected as a charge to income from operations for the thirteen and
thirty-nine week periods ended June 1, 1996.
5. Pro forma net income per common share was computed by dividing the
Com pany's pro forma net income by the pro forma weighted average
number of common shares, which consist of the 24,000,000 shares of
Class B Common Stock outstanding during the thirty-nine week period ended
June 1, 1996 (of which 525,000 shares were exchanged during the period for
Class A Common Stock), as well as the weighted average effect of the
issuance of approximately 6,205,000 shares of Class A Common Stock as of
the beginning of such period reflecting the number of shares to be issued
in the initial public offering necessary to (i) repay the notes as
discussed in Note 3, (ii) acquire a related entity for approximately $2,000
in stock, and (iii) deliver certain restricted shares, valued at
approximately $3,000, to employees of the Company. Pro forma net income
reflects the pro forma effect of "C" corporation taxation.
Supplemental net income per common share was computed by dividing the
Company's supplemental net income by the supplemental weighted average
number of common shares outstanding during the thirty-nine week period
ended June 1, 1996. The supplemental weighted average number of common
shares represents the pro forma weighted average number of shares of common
stock outstanding during the period as well as the supplemental weighted
effect of the issuance of approximately 1,074,000 shares of Class A Common
Stock as of the beginning of such period, reflecting the number of shares
issued in the initial public offering necessary to repay certain
indebtedness as of December 20, 1995, the date of the offering.
Supplemental net income also reflects the tax-effected impact of the
reduction of interest expense of $785 attributable to debt to be repaid
with proceeds from the Company's initial public offering, as though this
debt was repaid at the beginning of the fiscal year.
Had the initial public offering occurred on the first day of fiscal 1995,
the weighted average number of common shares used in the computation
of pro forma earnings per share would have resulted in pro forma net
income and pro forma earnings per share as follows:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
June 1, May 27, June 1, May 27,
Including Restructuring (Note 4) 1996 1995 1996 1995
---- ---- ---- ----
Pro forma net income $2,758 $5,781 $ 14,033 $ 14,547
Pro forma earnings per share $0.09 $0.18 $0.45 $0.45
Excluding Restructuring (Note 4)
Pro forma net income $7,958 $5,781 $ 19,233 $ 14,547
Pro forma earnings per share $0.25 $0.18 $0.61 $0.45
Page 8
<PAGE>
6.The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". Under the asset and liability method specified by
SFAS No. 109, the deferred tax amounts included in the balance sheet are
determined based on the differences between the financial statement and tax
bases of assets and liabilities as measured by the enacted tax rates that
will be in effect when these differences reverse. Differences between
assets and liabilities for financial statement and tax return purposes are
principally related to inventories and certain accrued liabilities related
to the restructuring charge described in Note 4. Deferred tax assets and
liabilities, which were established in the second quarter due to the
Company's taxation as a "C" Corporation since the closing date of its
initial public offering in December 1995, resulted in a credit to the
provision for income taxes of $3,966 for the thirty-nine week period ended
June 1, 1996.
7.
During March 1995, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of", was issued by the Financial
Accounting Standards Board ("FASB"). This statement establishes
financial accounting and repor ting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related
to those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. This statement is effective
for financial statements for fiscal years beginning after December 15,
1995.
During October 1995, the FASB issued SFAS No. 123, "Accounting for Stock
Based Compensation". This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. The
provisio ns of SFAS No. 123 encourage entities to adopt a fair value based
method of accounting for stock compensation plans; however, these
provisions also permit the Company to continue to measure compensation
costs under pre-existing accounting pronouncements. If the fair value
based method of accounting is not adopted, SFAS No. 123 requires pro forma
disclosures of net income and net income per share in the notes to the
financial statements. The accounting requirements of SFAS No. 123 are
effective for transactions entered into in fiscal years that begin after
December 15, 1995. The disclosure requirements of SFAS No. 123 are
effective for financial statements for fiscal years beginning after
December 15, 1995, or for an earlier fiscal year for which SFAS No. 123 is
initially adopted for recognizing compensation cost.
The Company will be required to comply with the accounting and disclosure
provisions of SFAS No. 121, and SFAS No. 123 if adopted, no later than
fiscal 1997. The effect, if any, on the financial statements, of
implementation of these pronouncements has not been determined.
Page 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<PAGE>
Overview
MSC Industrial Direct Co., Inc. ("MSC" or the "Company") was formed in October
1995 as a holding company to hold all of the outstanding capital stock of Sid
Tool Co., Inc. (the "Operating Subsidiary"), which has conducted business since
1941.
MSC is one of the largest direct marketers of a broad range of industrial
products to small and mid-sized industrial customers throughout the United
States. The Company distributes a full line of industrial products, such as
cutting tools, abrasives, measuring instruments, machine tool accessories,
safety equipment, fasteners, welding supplies and electrical supplies, intended
to satisfy its customers' maintenance, repair and operations ("MRO") supplies
requirements. The Company offers over 250,000 stock keeping units ("SKUs")
through its 3,400 page master catalog and weekly, monthly and quarterly
specialty and promotional catalogs, newspapers and brochures, which are
supported by three distribution centers and 30 customer service locations. Most
of the Company's products are carried in stock, and orders for these products
are typically fulfilled on the day the order is received.
Results of operations reflect the operations of the Operating Subsidiary only,
for all periods through December 20, 1995, the date of the Company's initial
public offering, and of the Company and its subsidiaries subsequent to that
date. Pro forma net income reflects the pro forma effect of "C" corporation
taxation for the entire respective periods at an assumed annual rate of 39.5%.
The Company is recording an annual non-cash deferred compensation charge of
approximately $0.6 million for fiscal 1996 through fiscal 2000 related to the
issuance of restricted stock to certain employees.
Results of Operations -
Thirteen weeks ended June 1, 1996 and May 27, 1995
Net sales increased by $13.5 million, or 20.2%, to $80.2 million in the third
quarter of 1996 from $66.7 million in the third quarter of 1995. This increase
was primarily attributable to an increase in sales to the Company's existing
customers and, to a lesser extent, to an increase in the number of active
customers. The increase in sales to existing customers was derived primarily
from an increase in the number of SKUs offered.
Gross profit increased by $5.6 million, or 20.2%, to $33.5 million in the third
quarter of 1996, from $27.9 million in the third quarter of 1995, primarily
attributable to increased sales. As a percentage of sales, gross profit
remained relatively constant, at 41.8% and 41.9% for the respective periods.
Operating expenses, exclusive of a restructuring charge, increased by $2.9
million, or 16.4%, to $20.6 million in the third quarter of 1996, from $17.7
million in the third quarter of 1995. As a percentage of sales, recurring
operating expenses decreased over these respective periods from 26.5% to 25.7%.
The increase in operating expenses was attributable to increased sales volume,
which required added staffing and support. The decrease, as a percentage of
sales, was primarily the result of a continued emphasis on cost control during
the third quarter of 1996.
Page 10
Restructuring charge of $8.6 million, recorded during the third quarter, is the
estimated cost of the relocation of the Company's Long Island distribution
center and warehouses. This is the equivalent of $5.2 million after taxes, or
$0.16 per share. The restructuring charge includes the cost of relocating or
replacing the Company's Long Island workforce, the cost to physically move the
inventory from Long Island to Harrisburg, Pennsylvania, and the cost of leases
and assets associated with abandoned facilities. The move is expected to be
completed by the end of February, 1997.
Income from operations decreased by $5.9 million, or 57.3%, to $4.4 million in
the third quarter of 1996, from $10.3 million in the third quarter of 1995.
This decrease was attributable to the restructuring charge of $8.6 million and
increased operating expenses of $2.9 million, partially offset by a $5.6 million
increase in gross profit. As a percentage of sales, income from operations
(exclusive of the restructuring charge) increased to 16.2% from 15.4% over these
respective periods, primarily as a result of the decrease in operating expenses
as a percentage of sales.
Net income decreased by $6.5 million, to $2.8 million in the third quarter of
1996 from $9.3 million in the third quarter of 1995. The decrease in net income
is primarily attributable to the restructuring charge of $8.6 million and
taxation at "C" corporation rates, partially offset by increased sales and gross
profit.
Thirty-nine weeks ended June 1, 1996 and May 27, 1995
Net sales increased by $42.5 million, or 23.3%, to $224.5 million in the first
nine months of 1996, from $182.0 million in the first nine months of 1995. This
increase was primarily attributable to an increase in sales to the Company's
existing customers and, to a lesser extent, to an increase in the number of
active customers. The increase in sales to existing customers was derived
primarily from an increase in the number of SKUs offered.
Gross profit increased by $17.7 million, or 23.5%, to $93.2 million in the first
nine months of 1996, from $75.5 million in the first nine months of 1995. The
increase in gross profit was attributable to increased sales. As a percentage
of sales, gross profit remained constant at 41.5% for each of the respective
periods.
Operating expenses, exclusive of the restructuring charge, increased by $11.0
million, or 22.0%, to $61.2 million in the first nine months of 1996 from $50.2
million in the first nine months of 1995. This increase was attributable to
increased sales volume, which required added staffing and support. As a
percentage of sales, operating expenses declined slightly from 27.6% to 27.3%.
Income from operations decreased by $1.9 million, or 7.6%, to $23.5 million in
the first nine months of 1996, from $25.4 million in the first nine months of
1995. This decrease was attributable to the aforementioned restructuring charge
and increases in operating expenses, offset in part by increased sales and gross
profit.
Net income decreased by $2.2 million, or 9.3%, to $21.2 million in the first
nine months of 1996, from $23.4 million in the first nine months of 1995. The
decrease in net income is primarily attributable to the restructuring charge of
$8.6 million and taxation at "C" corporation rates, partially offset by
increased sales and gross profit.
Page 11
Liquidity and Capital Resources
The Company's primary capital needs have been to fund (i) the working capital
requirements necessitated by its sales growth and (ii) distributions to its then
existing shareholders, primarily to satisfy their tax liabilities resulting from
the previous "S" corporation status of the Operating
<PAGE>
Subsidiary. The Company's sources of financing have been primarily cash from
operations and, also, bank borrowings under its $80 million credit facility and
subordinated loans from shareholders. The Company completed its initial public
offering on December 20, 1995, and outstanding subordinated debt to shareholders
and credit facility debt was repaid out of the net proceeds. The Company
anticipates that its cash flows from operations and available lines of credit
will be adequate to support its operations and its growth for the immediate
future and for at least the next 24 months.
In March 1996, the Company commenced shipments from its Elkhart, Indiana
distribution center, which will provide next day service to most of the
midwestern United States. The increases in inventory reflected in the June 1,
1996 balance sheet are substantially the result of the opening of this facility.
Net cash used in operating activities increased $23.5 million to $27.3 million
from $3.8 million for the thirty-nine week periods ended June 1, 1996 and May
27, 1995, respectively, primarily due to purchases of inventory in connection
with the stocking of the Elkhart distribution center and introduction of new
products.
Net cash used in investing activities for the thirty-nine week periods ended
June 1, 1996 and May 27, 1995 was approximately $15.4 million and $7.7 million,
respectively. The increase substantially represents costs associated with the
construction of the distribution centers in Elkhart, Indiana and Harrisburg,
Pennsylvania.
Net cash provided by financing activities during the thirty-nine week periods
ended June 1, 1996 and May 27, 1995 was approximately $43.7 million and $8.1
million, respectively. The increase is primarily attributable to proceeds
received from the Company's initial public offering, net of repayments of
borrowings and distributions to "S" corporation shareholders.
Prior to the Reorganization, the Operating Subsidiary was treated as an "S"
corporation. Accordingly, the then existing shareholders were taxed directly on
the earnings of the Operating Subsidiary. Upon consummation of the
Reorganization, the status of the Operating Subsidiary as an "S" corporation was
terminated and the Operating Subsidiary and the Company are now subject to
federal and state income taxes at applicable corporate rates. Prior to the
Offering, the Operating Subsidiary declared an "S" corporation dividend to the
then existing shareholders in the aggregate amount of approximately $62 million,
which amount was equal to substantially all previously taxed and undistributed
"S" corporation earnings. The Operating Subsidiary paid the dividend by
delivery of promissory notes, which were repaid with a portion of the net
proceeds from the offering.
Page 12
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
<PAGE>
( a ) Exhibit 27 -- Financial Data Schedule.
( b ) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
Page 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MSC INDUSTRIAL DIRECT CO., INC.
(Registrant)
Dated: July 15, 1996 By: /s/ Mitchell Jacobson
------------------------------------
Mitchell Jacobson
President and Chief Executive Officer
Dated: July 15, 1996 By: /s/ Shelley M. Boxer
------------------------------------
Shelley M. Boxer
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> MAR-03-1996
<PERIOD-END> JUN-01-1996
<CASH> 1,791
<SECURITIES> 0
<RECEIVABLES> 40,031
<ALLOWANCES> 0
<INVENTORY> 130,935
<CURRENT-ASSETS> 183,053
<PP&E> 41,847
<DEPRECIATION> (13,786)
<TOTAL-ASSETS> 219,565
<CURRENT-LIABILITIES> 39,318
<BONDS> 0
0
0
<COMMON> 32
<OTHER-SE> 165,073
<TOTAL-LIABILITY-AND-EQUITY> 219,565
<SALES> 80,215
<TOTAL-REVENUES> 80,215
<CGS> 46,660
<TOTAL-COSTS> 46,660
<OTHER-EXPENSES> 29,177
<LOSS-PROVISION> 78
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 4,558
<INCOME-TAX> 1,800
<INCOME-CONTINUING> 2,758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,758
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
