FISCAL 2024 Q3 HIGHLIGHTS Net sales of $979.4 million decreased 7.1% YoY and includes a roughly 300 basis point headwind from non-repeating Public Sector orders in the prior year Operating income of $106.8 million, or $111.5 million adjusted to exclude restructuring and other costs1 Operating margin of 10.9%, or 11.4% excluding the adjustments described above1 Diluted EPS of $1.27 vs. $1.69 in the prior fiscal year quarter Adjusted diluted EPS of $1.33 vs. $1.74 in the prior fiscal year quarter1 MELVILLE, N.Y. and DAVIDSON, N.C., July 2, 2024 /PRNewswire/ -- MSC INDUSTRIAL SUPPLY CO. (NYSE:MSM), "MSC," "MSC Industrial" 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 2024 third quarter ended June 1, 2024. Financial Highlights 2 FY24 Q3 FY23 Q3 Change FY24 YTD FY23 YTD Change Net Sales $  979.4 $ 1,054.5 (7.1) % $ 2,868.7 $ 2,973.8 (3.5) % Income from Operations $  106.8 $    135.4 (21.1) % $    299.5 $    365.7 (18.1) % Operating Margin 10.9 % 12.8 % 10.4 % 12.3 % Net Income Attributable to MSC $    71.7 $      95.2 (24.7) % $    202.9 $    255.6 (20.6) % Diluted EPS $    1.27 3 $      1.69 4 (24.9) % $      3.59 3 $      4.56 4 (21.3) % Adjusted Financial Highlights 2 FY24 Q3 FY23 Q3 Change FY24 YTD FY23 YTD Change Net Sales $  979.4 $ 1,054.5 (7.1) % $ 2,868.7 $ 2,973.8 (3.5) % Adjusted Income from Operations 1 $  111.5 $    138.6 (19.6) % $    313.0 $    374.0 (16.3) % Adjusted Operating Margin 1 11.4 % 13.1 % 10.9 % 12.6 % Adjusted Net Income Attributable to MSC 1 $    75.2 $      97.5 (22.9) % $    213.2 $    261.9 (18.6) % Adjusted Diluted EPS 1 $    1.33 3 $      1.74 4 (23.6) % $      3.77 3 $      4.67 4 (19.3) % 1 Represents 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 the schedules accompanying this press release. 2 In millions except percentages and per share data or as otherwise noted. 3 Based on 56.4 million and 56.5 million weighted-average diluted shares outstanding for FY24 Q3 and FY24 YTD, respectively. 4 Based on 56.2 million and 56.1 million weighted-average diluted shares outstanding for FY23 Q3 and FY23 YTD, respectively. Erik Gershwind, President and Chief Executive Officer, said, "As announced on June 13th, we began the second half of our fiscal year with unexpected gross margin pressure and a slower than expected recovery in average daily sales, particularly within our Core customer base. As a result, our third quarter performance was below expectations and led to a revised full year outlook. We responded with swift corrective actions to improve gross margin trending and accelerate progress on the rollout of our web enhancements."  Kristen Actis-Grande, Executive Vice President and Chief Financial Officer, added, "Average daily sales declined 7.1% in the fiscal third quarter driven by non-repeating Public Sector orders in the prior year and softness in manufacturing verticals where we have heavy exposure. While we are encouraged by continued strong cash flow generation, these results nonetheless fell below our expectations. We are laser focused on realizing the expected benefits of our organic growth investments to drive progress towards our long-term targets."  Gershwind concluded, "Looking forward, as our corrective actions take hold, we will remain steadfast in our approach to unlocking the value creation potential of MSC. We are doing this by leaning into the core pillars of our Mission Critical initiatives — Maintaining Momentum, Reenergizing the Core Customer, and Optimizing Cost to Serve. While results to date in fiscal 2024 are not up to our standards, we are confident we have the talent and strategy in place to achieve our long-term goals and create meaningful value for all stakeholders."    Fiscal 2024 Full Year Financial Outlook Current Prior ADS Growth (YoY) (4.7)% - (4.3)% 0% - 5% Adjusted Operating Margin1 10.5% - 10.7% 12.0% - 12.8% Depreciation and Amortization Expense ~$80M ~$85M Interest and Other Expense ~$45M $40M - $50M Operating Cash Flow Conversion2 >125% >125% Tax Rate 24.0% - 24.5% 24.0% - 24.5% (1) Guidance provided is a non-GAAP figure presented on an adjusted basis. For further details see the Non-GAAP financial measures information presented in the schedules accompanying this press release. (2) The Company defines Operating Cash Flow Conversion as Net cash provided by operating activities as a percentage of Net income. The Company's management uses Operating Cash Flow Conversion to evaluate the Company's operating performance, in particular how efficiently the Company turns its sales and profits into cash, and to assess the efficiency of the Company's use of working capital. The Company believes Operating Cash Flow Conversion is useful to investors for the foregoing reasons and as a measure of the rate at which the Company converts its net income reported in accordance with GAAP to cash inflows, which helps investors assess whether the Company is generating sufficient cash flow to provide an adequate return. Conference Call InformationMSC will host a conference call today at 8:30 a.m. EDT to review the Company's fiscal 2024 third quarter results. The call, accompanying slides, and other operational statistics may be accessed at: https://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 July 16, 2024. The Company's reporting date for its fiscal 2024 fourth quarter and full year results is scheduled for October 24, 2024. Contact Information Investors: Media: Ryan Mills, CFA Zivanai Mutize Head of Investor Relations Head of Corporate Communications 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 2.4 million products, inventory management and other supply chain solutions, and deep expertise from more than 80 years of working with customers across industries. Our experienced team of more than 7,000 associates works 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 StatementsStatements in this press release may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of present or historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including statements about 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, 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: general economic conditions in the markets in which we operate; changing customer and product mixes; volatility in commodity and energy prices, the impact of prolonged periods of low, high or rapid inflation, and fluctuations in interest rates; competition, including the adoption by competitors of aggressive pricing strategies or 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; our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; the retention of key management personnel; the credit risk of our customers; the risk of customer cancellation or rescheduling of orders; difficulties in calibrating customer demand for our 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 disruptions, 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 technology systems or violations of data privacy laws; our ability to attract, train and retain qualified sales and customer service personnel and metalworking and specialty sales specialists; the risk of loss of key suppliers or contractors or key brands or supply chain disruptions; 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 or incur additional borrowings on terms we deem attractive; the failure to comply with applicable environmental, health and safety laws and regulations and other laws and regulations applicable to our business; the outcome of government or regulatory proceedings; goodwill and other indefinite-lived intangible assets recorded as a result of our acquisitions could become impaired; our common stock price may be volatile due to factors outside of our control; the significant influence that our principal shareholders will continue to have over our decisions; and our ability to realize the desired benefits from the share reclassification. 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 United States 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) June 1,2024 September 2,2023 ASSETS (Unaudited) Current Assets:      Cash and cash equivalents $                  25,928 $                  50,052      Accounts receivable, net of allowance for credit losses 419,810 435,421      Inventories 665,638 726,521      Prepaid expenses and other current assets 101,472 105,519           Total current assets 1,212,848 1,317,513 Property, plant and equipment, net 344,787 319,660 Goodwill 721,932 718,174 Identifiable intangibles, net 102,854 110,641 Operating lease assets 60,878 65,909 Other assets 24,495 12,237           Total assets $             2,467,794 $             2,544,134 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of debt including obligations under finance leases $                206,335 $                229,935 Current portion of operating lease liabilities 22,235 21,168 Accounts payable 205,644 226,299 Accrued expenses and other current liabilities 149,298 172,034 Total current liabilities 583,512 649,436 Long-term debt including obligations under finance leases 299,812 224,391 Noncurrent operating lease liabilities 39,532 45,924 Deferred income taxes and tax uncertainties 130,729 131,801 Total liabilities 1,053,585 1,051,552 Commitments and Contingencies Shareholders' Equity:      Preferred Stock — —      Class A Common Stock 57 48      Class B Common Stock — 9      Additional paid-in capital 1,063,738 849,502      Retained earnings 470,085 755,007      Accumulated other comprehensive loss (17,553) (17,725)      Class A treasury stock, at cost (114,711) (107,677)           Total MSC Industrial shareholders' equity 1,401,616 1,479,164      Noncontrolling interest 12,593 13,418           Total shareholders' equity 1,414,209 1,492,582           Total liabilities and shareholders' equity $             2,467,794 $             2,544,134   MSC INDUSTRIAL DIRECT CO., INC. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) Thirteen Weeks Ended Thirty-Nine Weeks Ended June 1,2024 June 3,2023 June 1,2024 June 3,2023 Net sales $         979,350 $      1,054,464