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Title of each class Class A Common Stock, par value $0.001 per share CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS MSC INDUSTRIAL DIRECT CO., INC. MARCH 4, 2023 PART I. FINANCIAL INFORMATION December 3, September 3, 2022 2022 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 26,331 $ 43,537 Accounts receivable, net of allowance for credit losses of $21,719 and $20,771, respectively 685,826 687,608 Inventories 726,415 715,625 Prepaid expenses and other current assets 120,001 96,853 Total current assets 1,558,573 1,543,623 Property, plant and equipment, net 297,113 286,666 Goodwill 709,746 710,130 Identifiable intangibles, net 110,702 114,328 Operating lease assets 62,803 64,780 Other assets 10,464 9,887 Total assets $ 2,749,401 $ 2,729,414 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Current portion of debt including obligations under finance leases $ 326,240 $ 325,680 Current portion of operating lease liabilities 18,531 18,560 Accounts payable 212,793 217,378 Accrued expenses and other current liabilities 169,197 164,326 Total current liabilities 726,761 725,944 Long-term debt including obligations under finance leases 453,868 468,912 Noncurrent operating lease liabilities 45,693 47,616 Deferred income taxes and tax uncertainties 124,659 124,659 Total liabilities 1,350,981 1,367,131 Commitments and Contingencies Shareholders’ Equity: MSC Industrial Shareholders’ Equity: Preferred Stock; $0.001 par value; 5,000,000 shares authorized; none issued and outstanding — — Class A Common Stock (one vote per share); $0.001 par value; 100,000,000 shares authorized; 48,584,476 and 48,447,384 shares issued, respectively 49 48 Class B Common Stock (10 votes per share); $0.001 par value; 50,000,000 shares authorized; 8,654,010 and 8,654,010 shares issued and outstanding, respectively 9 9 Additional paid-in capital 814,493 798,408 Retained earnings 703,565 681,292 Accumulated other comprehensive loss (22,186) (23,121) Class A treasury stock, at cost, 1,266,439 and 1,228,472 shares, respectively (109,592) (106,202) Total MSC Industrial shareholders’ equity 1,386,338 1,350,434 Noncontrolling interest 12,082 11,849 Total shareholders’ equity 1,398,420 1,362,283 Total liabilities and shareholders’ equity $ 2,749,401 $ 2,729,414 See accompanying Notes to Condensed Consolidated Financial Statements. MSC INDUSTRIAL DIRECT CO., INC. Thirteen Weeks Ended December 3, November 27, 2022 2021 Net sales $ 957,745 $ 848,547 Cost of goods sold 559,946 495,951 Gross profit 397,799 352,596 Operating expenses 279,695 256,581 Restructuring and other costs 2,094 5,283 Income from operations 116,010 90,732 Other income (expense): Interest expense (6,919) (3,728) Interest income 100 19 Other expense, net (1,340) (413) Total other expense (8,159) (4,122) Income before provision for income taxes 107,851 86,610 Provision for income taxes 26,639 20,353 Net income 81,212 66,257 Less: Net (loss) income attributable to noncontrolling interest (102) 190 Net income attributable to MSC Industrial $ 81,314 $ 66,067 Per share data attributable to MSC Industrial: Net income per common share: Basic $ 1.45 $ 1.19 Diluted $ 1.45 $ 1.18 Weighted-average shares used in computing net income per common share: Basic 55,891 55,530 Diluted 56,081 55,856 See accompanying Notes to Condensed Consolidated Financial Statements. MSC INDUSTRIAL DIRECT CO., INC. There were no material taxes associated with other comprehensive income during the thirteen- and twenty-six-week periods ended March 4, 2023 and February 26, 2022. Thirteen Weeks Ended December 3, November 27, 2022 2021 Net income, as reported $ 81,212 $ 66,257 Other comprehensive income, net of tax: Foreign currency translation adjustments 1,270 (4,992) Comprehensive income (1) 82,482 61,265 Comprehensive income attributable to noncontrolling interest: Net loss (income) 102 (190) Foreign currency translation adjustments (335) 911 Comprehensive income attributable to MSC Industrial $ 82,249 $ 61,986 (1) There were no material taxes associated with other comprehensive income during the thirteen-week periods ended December 3, 2022 and November 27, 2021. See accompanying Notes to Condensed Consolidated Financial Statements. Financial Statements. MSC INDUSTRIAL DIRECT CO., INC. Thirteen Weeks Ended December 3, November 27, 2022 2021 Class A Common Stock Beginning Balance $ 48 $ 48 Associate Incentive Plans 1 — Ending Balance 49 48 Class B Common Stock Beginning Balance 9 9 Ending Balance 9 9 Additional Paid-in Capital Beginning Balance 798,408 740,867 Associate Incentive Plans 16,115 15,447 Repurchase and retirement of Class A Common Stock (30) — Ending Balance 814,493 756,314 Retained Earnings Beginning Balance 681,292 532,315 Net Income 81,314 66,067 Repurchase and retirement of Class A Common Stock (14,282) — Regular cash dividends declared on Class A Common Stock (37,370) (35,249) Regular cash dividends declared on Class B Common Stock (6,837) (6,491) Dividend equivalents declared, net of cancellations (552) (56) Ending Balance 703,565 556,586 Accumulated Other Comprehensive Loss Beginning Balance (23,121) (17,984) Foreign Currency Translation Adjustment 935 (4,081) Ending Balance (22,186) (22,065) Treasury Stock Beginning Balance (106,202) (104,384) Associate Incentive Plans 837 805 Repurchase of Class A Common Stock (4,227) (4,559) Ending Balance (109,592) (108,138) Total Shareholders’ Equity Attributable to MSC Industrial 1,386,338 1,182,754 Noncontrolling Interest Beginning Balance 11,849 11,001 Foreign Currency Translation Adjustment 335 (911) Net (Loss) Income (102) 190 Ending Balance 12,082 10,280 Total Shareholders’ Equity $ 1,398,420 $ 1,193,034 Dividends declared per Class A Common Share $ 0.79 $ 0.75 Dividends declared per Class B Common Share $ 0.79 $ 0.75 See accompanying Notes to Condensed Consolidated Financial Statements. MSC INDUSTRIAL DIRECT CO., INC. Thirteen Weeks Ended December 3, November 27, 2022 2021 Cash Flows from Operating Activities: Net income $ 81,212 $ 66,257 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,566 17,407 Non-cash operating lease cost 4,872 4,223 Stock-based compensation 4,990 5,689 Loss on disposal of property, plant and equipment 229 104 Provision for credit losses 2,673 1,837 Changes in operating assets and liabilities: Accounts receivable 56 (21,805) Inventories (9,516) (755) Prepaid expenses and other current assets (22,764) 4,172 Operating lease liabilities (4,843) (4,246) Other assets (508) (27) Accounts payable and accrued liabilities 1,057 (15,052) Total adjustments (5,188) (8,453) Net cash provided by operating activities 76,024 57,804 Cash Flows from Investing Activities: Expenditures for property, plant and equipment (25,504) (15,262) Cash used in business acquisitions, net of cash acquired (87) — Net cash used in investing activities (25,591) (15,262) Cash Flows from Financing Activities: Repurchases of common stock (18,539) (4,559) Payments of regular cash dividends (44,207) — Proceeds from sale of Class A Common Stock in connection with associate stock purchase plan 1,056 1,029 Proceeds from exercise of Class A Common Stock options 8,336 7,097 Borrowings under credit facilities 84,000 26,000 Borrowings under financing obligations 1,061 1,057 Payments under credit facilities (99,000) (50,000) Payments on finance lease and financing obligations (657) (418) Net cash used in financing activities (67,950) (19,794) Effect of foreign exchange rate changes on cash and cash equivalents 311 (409) Net (decrease) increase in cash and cash equivalents (17,206) 22,339 Cash and cash equivalents—beginning of period 43,537 40,536 Cash and cash equivalents—end of period $ 26,331 $ 62,875 Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 2,767 $ 1,606 Cash paid for interest $ 5,441 $ 2,272 Supplemental Disclosure of Non-Cash Financing Activities: Cash dividends declared, but not yet paid $ — $ 41,740 See accompanying Notes to Condensed Consolidated Financial Statements. Financial Statements. Recently Adopted Accounting Standards are subject to different economic and industry factors. The Company’s presentation of net sales by customer end-market, customer type and geography most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and industry factors. The Company does not disclose net sales information by product category as it is impracticable to do so as a result of its numerous product offerings and the way its business is managed. Thirteen Weeks Ended (1) December 3, 2022 November 27, 2021 Manufacturing Heavy 48 % 49 % Manufacturing Light 21 % 21 % Government 8 % 7 % Retail/Wholesale 7 % 8 % Commercial Services 4 % 4 % Other (2) 12 % 11 % Total net sales 100 % 100 % (1)Includes the effect of a prior year period reclassification of end-markets February 26, 2022: Thirteen Weeks Ended December 3, 2022 November 27, 2021 United States $ 910,068 95 % $ 799,075 94 % Mexico 21,110 2 % 22,615 3 % Canada 13,582 2 % 12,262 1 % North America 944,760 99 % 833,952 98 % Other foreign countries 12,985 1 % 14,595 2 % Total net sales $ 957,745 100 % $ 848,547 100 % Thirteen Weeks Ended December 3, November 27, 2022 2021 Numerator: Net income attributable to MSC Industrial as reported $ 81,314 $ 66,067 Denominator: Weighted-average shares outstanding for basic net income per share 55,891 55,530 Effect of dilutive securities 190 326 Weighted-average shares outstanding for diluted net income per share 56,081 55,856 Net income per share: Basic $ 1.45 $ 1.19 Diluted $ 1.45 $ 1.18 Potentially dilutive securities 499 434 Potentially dilutive securities attributable to outstanding stock options and restricted stock units are excluded from the calculation of diluted net income per share when the combined exercise price and average unamortized fair value are greater than the average market price of Class A Common Stock, and, therefore, their inclusion would be anti-dilutive. Thirteen Weeks Ended December 3, November 27, 2022 2021 Stock options $ 101 $ 588 Restricted stock units 3,711 4,703 Performance share units 1,095 308 Associate Stock Purchase Plan 83 90 Total 4,990 5,689 Deferred income tax benefit (1,233) (1,337) Stock-based compensation expense, net $ 3,757 $ 4,352 Options Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding on September 3, 2022 614 $ 78.96 Granted — — Exercised (114) 73.36 Canceled/Forfeited/Expired (23) 80.27 Outstanding on December 3, 2022 477 $ 80.23 2.2 $ 2,583 Exercisable on December 3, 2022 477 $ 80.23 2.2 $ 2,583 March 4, 2023. The following table summarizes all transactions related to PSUs under the MSC Industrial Direct Co., Inc. 2015 Omnibus Incentive Plan (the “2015 Omnibus Incentive Plan”) and the MSC Industrial Direct Co., Inc. 2023 Omnibus Shares Weighted-Average Grant Date Fair Value Non-vested PSUs at September 3, 2022 88 $ 80.04 Granted 51 82.16 PSU adjustment (1) 4 76.32 Vested (26) 76.32 Canceled/Forfeited — — Non-vested PSUs at December 3, 2022 (2) 117 $ 81.86 (1) PSU adjustment represents the net PSUs awarded above or below their target grants resulting from the achievement of performance goals above or below the performance targets established at grant. One grant goal was achieved at 116% of its target based on fiscal year 2021 through fiscal year 2022 financial results. (2) Excludes approximately 8 shares of accrued incremental dividend equivalent rights on outstanding PSUs granted under the 2015 Omnibus Incentive Plan. Excludes approximately 42 shares of accrued incremental dividend equivalent rights on outstanding RSUs granted under the 2015 Omnibus Incentive Plan and the 2023 Omnibus Incentive Plan. Shares Weighted-Average Grant Date Fair Value Non-vested RSUs at September 3, 2022 448 $ 79.71 Granted 178 82.36 Vested (146) 79.11 Canceled/Forfeited (4) 80.55 Non-vested RSUs at December 3, 2022 (1) 476 $ 80.87 (1) Excludes approximately 39 shares of accrued incremental dividend equivalent rights on outstanding RSUs granted under the 2015 Omnibus Incentive Plan. The fair value of each RSU is the closing stock price on the NYSE of Class A Common Stock on the date of grant. RSUs are expensed over the vesting period of each respective grant. Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting RSU forfeitures and records stock-based compensation expense only for RSU Note 5. Fair Value — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2— Include other inputs that are directly or indirectly observable in the marketplace. — Unobservable inputs which are supported by little or no market activity. February 26, 2022. December 3, September 3, 2022 2022 Amended Revolving Credit Facility $ 230,000 $ 245,000 Uncommitted Credit Facilities 200,000 200,000 Long-Term Note Payable 4,750 4,750 Private Placement Debt: 2.65% Senior Notes, Series A, due July 28, 2023 75,000 75,000 2.90% Senior Notes, Series B, due July 28, 2026 100,000 100,000 3.79% Senior Notes, due June 11, 2025 20,000 20,000 2.60% Senior Notes, due March 5, 2027 50,000 50,000 3.04% Senior Notes, due January 12, 2023 (1) 50,000 50,000 2.40% Series 2019A Notes, due March 5, 2024 (1) 50,000 50,000 Financing arrangements 796 88 Obligations under finance leases 886 1,180 Less: unamortized debt issuance costs (1,324) (1,426) Total debt, including obligations under finance leases $ 780,108 $ 794,592 Less: current portion (326,240) (2) (325,680) (3) Total long-term debt, including obligations under finance leases $ 453,868 $ 468,912 as “capital” for purposes of the RPA, to the Receivables Subsidiary in accordance with the terms of the RPA. The Receivables Subsidiary may sell receivables to the Purchasers so long as certain conditions are satisfied, including that, at any date of determination, the aggregate capital paid to the Receivables Subsidiary does not exceed a “capital coverage amount”, equal to an adjusted net receivables pool balance minus a required reserve. Each Purchaser’s share of capital accrues yield at one-month Term SOFR (as defined in the RPA) plus a margin. 2026; in June 2018, the Company completed the issuance and sale of $20,000 aggregate principal amount of 3.79% Senior Notes, due June 11, 2025; and, in March 2020, the Company completed the issuance and sale of $50,000 aggregate principal amount of 2.60% Senior Notes, due March 5, 2027 (collectively, the “Private Placement Debt”). Interest is payable semiannually at the fixed stated interest rates. All of the Private Placement Debt is unsecured. Act. Dividends on Common Stock February 26, 2022: Thirteen Weeks Ended December 3, November 27, 2022 2021 Consulting-related costs $ 1,575 $ — Associate severance and separation costs 519 3,515 Equity award acceleration costs associated with severance — 1,729 Other exit-related costs — 39 Total restructuring and other costs $ 2,094 $ 5,283 March 4, 2023: Consulting-related costs Associate severance and separation costs Total Balance as of September 3, 2022 $ 840 $ 1,874 $ 2,714 Additions 1,575 519 2,094 Payments and other adjustments (1,315) (1,504) (2,819) Balance as of December 3, 2022 $ 1,100 $ 889 $ 1,989 Note Disclosure of Government Assistance. Management determined the probability threshold has not been met for $5,127 of the funds received, and, as such, were recorded in Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheet as of March 4, 2023. February 26, 2022. structural cost reductions in order to improve return on invested capital. Cost reductions will be comprised of savings in the areas of sales and service, supply chain and general and administrative expenses, and will include initiatives to optimize our distribution center network and real estate footprint, renegotiate supplier contracts, and redesign our talent acquisition and retention approach. Period IP Index Fiscal 103.8 Thirteen-Week Period Ended February 26, 2022 Thirteen Weeks Ended December 3, 2022 November 27, 2021 Change $ % $ % $ % Net sales $ 957,745 100.0% $ 848,547 100.0% $ 109,198 12.9% Cost of goods sold 559,946 58.5% 495,951 58.4% 63,995 12.9% Gross profit 397,799 41.5% 352,596 41.6% 45,203 12.8% Operating expenses 279,695 29.2% 256,581 30.2% 23,114 9.0% Restructuring and other costs 2,094 0.2% 5,283 0.6% (3,189) (60.4)% Income from operations 116,010 12.1% 90,732 10.7% 25,278 27.9% Total other expense (8,159) (0.9)% (4,122) (0.5)% (4,037) 97.9% Income before provision for income taxes 107,851 11.3% 86,610 10.2% 21,241 24.5% Provision for income taxes 26,639 2.8% 20,353 2.4% 6,286 30.9% Net income 81,212 8.5% 66,257 7.8% 14,955 22.6% Less: Net (loss) income attributable to noncontrolling interest (102) 0.0% 190 0.0% (292) (153.7)% Net income attributable to MSC Industrial $ 81,314 8.5% $ 66,067 7.8% $ 15,247 23.1% ADS Percentage Change Thirteen Weeks Ended December 3, 2022 November 27, 2021 Net Sales (in thousands) $ 957,745 $ 848,547 Sales Days 62 62 ADS (1) (in millions) $ 15.4 $ 13.7 Total Company ADS Percent Change 12.9% 9.9% Manufacturing Customers ADS Percent Change (2) 11.1% 14.5% Manufacturing Customers Percent of Total Net Sales (2) 69% 70% Non-Manufacturing Customers ADS Percent Change (2) 17.2% 0.5% Non-Manufacturing Customers Percent of Total Net Sales (2) 31% 30% (1) ADS is calculated using the number of business days in the United States for the periods indicated. (2) Includes the effect of a reclassification of end-markets which occurred during the fourth quarter of fiscal year 2022. (Unaudited) acquisitions, as well as unfavorable customer mix as our national account and public sector customers are growing at higher rates and are typically at lower gross margins than the business as a whole. In addition, we are continuing to experience higher product and freight costs, adversely impacting our gross profit margins. March 4, 2023. Provision for Income Taxes December 3, September 3, 2022 2022 $ Change (In thousands) Total debt $ 780,108 $ 794,592 $ (14,484) Less: Cash and cash equivalents 26,331 43,537 (17,206) Net debt $ 753,777 $ 751,055 $ 2,722 Equity $ 1,398,420 $ 1,362,283 $ 36,137 Thirteen Weeks Ended December 3, November 27, 2022 2021 (In thousands) Net cash provided by operating activities $ 76,024 $ 57,804 Net cash used in investing activities (25,591) (15,262) Net cash used in financing activities (67,950) (19,794) Effect of foreign exchange rate changes on cash and cash equivalents 311 (409) Net (decrease) increase in cash and cash equivalents $ (17,206) $ 22,339 an increase in the change in accounts receivable primarily attributable to the RPA entered into during the second quarter of fiscal year 2023, which resulted in a decline in accounts receivable of $300.0 million; and The table below summarizes certain information regarding the Company’s Working Capital is calculated as current assets less current liabilities. December 3, September 3, November 27, 2022 2022 2021 (In thousands) Working Capital (1) $ 831,812 $ 817,679 $ 762,133 Current Ratio (2) 2.1 2.1 2.3 Days’ Sales Outstanding (3) 64.9 65.3 61.8 Inventory Turnover (4) 3.2 3.2 3.3 (1) Working Capital is calculated as current assets less current liabilities. (2) Current Ratio is calculated by dividing total current assets by total current liabilities. (3) Days’ Sales Outstanding is calculated by dividing accounts receivable by net sales, using trailing two months sales data. (4) Inventory Turnover is calculated by dividing total cost of goods sold by inventory, using a 13-month trailing average inventory. Days’ Sales Outstanding is calculated as accounts receivable divided by net sales, using trailing two months sales data. fiscal year 2023. February 26, 2022 due to increasing inventory levels as a result of ongoing challenges in the supply chain and to meet customer demand. The use of cash for the twenty-six weeks ended March 4, 2023 also included the acquisition of Buckeye and Tru-Edge. See Note 7, “Business Combinations” in the Notes to Condensed Consolidated Financial Statements for more information about this acquisition. Capital Expenditures software. Standards contained elsewhere in this Report, there have been no significant changes in our financial instrument portfolio or interest rate risk since our September 3, 2022 fiscal year-end. March 4, 2023: Period Total Number of Shares Purchased(1) Average Price Paid Per Share(2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(3) 9/4/22-10/4/22 100 $ 79.49 — 4,700,000 10/5/22-11/3/22 193,719 $ 79.01 180,721 4,519,279 11/4/22-12/3/22 39,006 $ 82.64 — 4,519,279 Total 232,825 180,721 Exhibit No. Description 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 104 * Filed herewith. ** † SIGNATURES MSC INC. By: /s/ ERIK GERSHWIND By: /s/ KRISTEN ACTIS-GRANDE__________________________________
11-3289165
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_________________Trading Symbol(s) Name of each exchange on which registered MSM New York Stock Exchange Non-acceleratedNon-accelerated filer o
DecemberMarch 15, 2022, 47,318,1102023, 47,257,675 shares of Class A Common Stock and 8,654,010 shares of Class B Common Stock of the registrant were outstanding.forward-forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Discussions containing such forward-forward‑looking statements may be found in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3, “Quantitative and Qualitative Disclosures About Market Risk” of Part I and Item 1, “Legal Proceedings” and Item 1A, “Risk Factors” of Part II of this Report, as well as within this Report generally. The words “will,” “may,” “believes,” “anticipates,” “thinks,” “expects,” “estimates,” “plans,” “intends,” and similar expressions are intended to identify forward-forward‑looking statements. In addition, any 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-forward‑looking statements. We expressly disclaim any obligation to publicly disclose any revisions to these forward-forward‑looking statements to reflect events or circumstances occurring subsequent to filing this Report with the United States Securities and Exchange Commission (the “SEC”), except to the extent required by applicable law. These forward-forward‑looking statements are subject to risks and uncertainties, including, without limitation, those discussed in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3, “Quantitative and Qualitative Disclosures About Market Risk” of Part I and Item 1, “Legal Proceedings” and Item 1A, “Risk Factors” of Part II of this Report, as well as in Item 1A, “Risk Factors” of Part I and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of our Annual Report on Form 10-K for the fiscal year ended September 3, 2022. 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-forward‑looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-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 and rapid inflation, and fluctuations in interest rates;•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 potential impact of the COVID-19 pandemic on our sales, operations and supply chain;•the retention of key personnel;•the credit risk of our customers, higher inflation and fluctuations in interest rates;•the risk of customer cancellation or rescheduling of orders;•difficulties in calibrating customer demand for our products, such as 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) 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;•the retention of qualified sales and customer service personnel and metalworking specialists;•the risk of loss of key suppliers or contractors or key brands or supply chain disruptions, including due to import restrictions or global geopolitical conditions;•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 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 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•the significant control that our principal shareholders exercise over us, which may result in our taking actions or failing to take actions which our other shareholders do not prefer.DECEMBER 3, 2022Condensed Consolidated Balance SheetsMarch 4,
2023September 3,
2022(Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 49,615 $ 43,537 Accounts receivable, net of allowance for credit losses of $22,628 and $20,771, respectively Accounts receivable, net of allowance for credit losses of $22,628 and $20,771, respectively 412,687 687,608 Inventories 747,470 715,625 Prepaid expenses and other current assets 104,996 96,853 Total current assets 1,314,768 1,543,623 Property, plant and equipment, net 298,664 286,666 Goodwill 718,179 710,130 Identifiable intangibles, net 117,865 114,328 Operating lease assets 64,299 64,780 Other assets 10,680 9,887 Total assets $ 2,524,455 $ 2,729,414 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Current portion of debt including obligations under finance leases $ 275,758 $ 325,680 Current portion of operating lease liabilities 19,174 18,560 Accounts payable 207,553 217,378 Accrued expenses and other current liabilities 142,796 164,326 Total current liabilities 645,281 725,944 Long-term debt including obligations under finance leases 273,941 468,912 Noncurrent operating lease liabilities 46,583 47,616 Deferred income taxes and tax uncertainties 124,659 124,659 Total liabilities 1,090,464 1,367,131 Commitments and Contingencies Shareholders’ Equity: MSC Industrial Shareholders’ Equity: Preferred Stock; $0.001 par value; 5,000,000 shares authorized; none issued and outstanding — — Class A Common Stock (one vote per share); $0.001 par value; 100,000,000 shares authorized; 48,509,408 and 48,447,384 shares issued, respectively Class A Common Stock (one vote per share); $0.001 par value; 100,000,000 shares authorized; 48,509,408 and 48,447,384 shares issued, respectively 49 48 Class B Common Stock (10 votes per share); $0.001 par value; 50,000,000 shares authorized; 8,654,010 and 8,654,010 shares issued and outstanding, respectively 9 9 Additional paid-in capital 824,268 798,408 Retained earnings 725,826 681,292 Accumulated other comprehensive loss (20,437) (23,121) Class A treasury stock, at cost, 1,251,733 and 1,228,472 shares, respectively Class A treasury stock, at cost, 1,251,733 and 1,228,472 shares, respectively (108,781) (106,202) Total MSC Industrial shareholders’ equity 1,420,934 1,350,434 Noncontrolling interest 13,057 11,849 Total shareholders’ equity 1,433,991 1,362,283 Total liabilities and shareholders’ equity $ 2,524,455 $ 2,729,414 Condensed Consolidated Statements of IncomeThirteen Weeks Ended Twenty-Six Weeks Ended March 4,
2023February 26,
2022March 4,
2023February 26,
2022Net sales $ 961,632 $ 862,522 $ 1,919,377 $ 1,711,069 Cost of goods sold 564,937 496,247 1,124,883 992,198 Gross profit 396,695 366,275 794,494 718,871 Operating expenses 280,630 265,973 560,325 522,554 Restructuring and other costs 1,783 3,134 3,877 8,417 Income from operations 114,282 97,168 230,292 187,900 Other income (expense): Interest expense (5,956) (3,617) (12,875) (7,345) Interest income 151 21 251 40 Other (expense) income, net Other (expense) income, net (2,299) 91 (3,639) (322) Total other expense (8,104) (3,505) (16,263) (7,627) Income before provision for income taxes 106,178 93,663 214,029 180,273 Provision for income taxes 26,863 23,509 53,502 43,862 Net income 79,315 70,154 160,527 136,411 Less: Net income attributable to noncontrolling interest Less: Net income attributable to noncontrolling interest 175 223 73 413 Net income attributable to MSC Industrial $ 79,140 $ 69,931 $ 160,454 $ 135,998 Per share data attributable to MSC Industrial: Net income per common share: Basic $ 1.42 $ 1.25 $ 2.87 $ 2.44 Diluted $ 1.41 $ 1.25 $ 2.86 $ 2.43 Weighted-average shares used in computing net income per common share: Basic 55,880 55,799 55,885 55,664 Diluted 56,001 55,971 56,074 55,945 Thirteen Weeks Ended Twenty-Six Weeks Ended March 4,
2023February 26,
2022March 4,
2023February 26,
2022Net income, as reported $ 79,315 $ 70,154 $ 160,527 $ 136,411 Other comprehensive income, net of tax: Foreign currency translation adjustments 2,549 3,768 3,819 (1,224) 81,864 73,922 164,346 135,187 Comprehensive income attributable to noncontrolling interest: Net income (175) (223) (73) (413) Foreign currency translation adjustments (800) (824) (1,135) 87 Comprehensive income attributable to MSC Industrial $ 80,889 $ 72,875 $ 163,138 $ 134,861 Statements of Comprehensive Income(In thousands)(Unaudited)Condensed Consolidated Statements of Shareholders’ EquityThirteen Weeks Ended Twenty-Six Weeks Ended March 4,
2023February 26,
2022March 4,
2023February 26,
2022Class A Common Stock Beginning Balance $ 49 $ 48 $ 48 $ 48 Associate Incentive Plans — — 1 — Ending Balance 49 48 49 48 Class B Common Stock Beginning Balance 9 9 9 9 Ending Balance 9 9 9 9 Additional Paid-in Capital Beginning Balance 814,493 756,314 798,408 740,867 Associate Incentive Plans 9,800 9,842 25,915 25,289 Repurchase and retirement of Class A Common Stock (25) — (55) — Ending Balance 824,268 766,156 824,268 766,156 Retained Earnings Beginning Balance 703,565 556,586 681,292 532,315 Net Income 79,140 69,931 160,454 135,998 Repurchase and retirement of Class A Common Stock (12,240) — (26,522) — Regular cash dividends declared on Class A Common Stock (37,269) (35,356) (74,639) (70,605) Regular cash dividends declared on Class B Common Stock (6,837) (6,490) (13,674) (12,981) Dividend equivalents declared, net of cancellations (533) (388) (1,085) (444) Ending Balance 725,826 584,283 725,826 584,283 Accumulated Other Comprehensive Loss Beginning Balance (22,186) (22,065) (23,121) (17,984) Foreign Currency Translation Adjustment 1,749 2,944 2,684 (1,137) Ending Balance (20,437) (19,121) (20,437) (19,121) Treasury Stock Beginning Balance (109,592) (108,138) (106,202) (104,384) Associate Incentive Plans 1,014 991 1,851 1,796 Repurchases of Class A Common Stock Repurchases of Class A Common Stock (203) (254) (4,430) (4,813) Ending Balance (108,781) (107,401) (108,781) (107,401) Total Shareholders’ Equity Attributable to MSC Industrial 1,420,934 1,223,974 1,420,934 1,223,974 Noncontrolling Interest Beginning Balance 12,082 10,280 11,849 11,001 Foreign Currency Translation Adjustment 800 824 1,135 (87) Net Income Net Income 175 223 73 413 Ending Balance 13,057 11,327 13,057 11,327 Total Shareholders’ Equity $ 1,433,991 $ 1,235,301 $ 1,433,991 $ 1,235,301 Dividends declared per Class A Common Share $ 0.79 $ 0.75 $ 1.58 $ 1.50 Dividends declared per Class B Common Share $ 0.79 $ 0.75 $ 1.58 $ 1.50 Twenty-Six Weeks Ended March 4,
2023February 26,
2022Cash Flows from Operating Activities: Net income $ 160,527 $ 136,411 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,223 34,985 Non-cash operating lease cost 9,883 8,012 Stock-based compensation 9,969 10,189 Loss on disposal of property, plant and equipment 249 230 Provision for credit losses 5,490 4,245 Deferred income taxes — (341) Changes in operating assets and liabilities: Accounts receivable 273,835 (64,293) Inventories (27,787) (34,024) Prepaid expenses and other current assets (6,926) (8,358) Operating lease liabilities (9,820) (8,136) Other assets (552) (1,492) Accounts payable and accrued liabilities (35,651) (20,007) Total adjustments 255,913 (78,990) Net cash provided by operating activities 416,440 57,421 Cash Flows from Investing Activities: Expenditures for property, plant and equipment (40,571) (31,179) Cash used in business acquisitions, net of cash acquired (20,533) — Net cash used in investing activities (61,104) (31,179) Cash Flows from Financing Activities: Repurchases of Class A Common Stock (31,007) (4,813) Payments of regular cash dividends (88,313) (83,586) Proceeds from sale of Class A Common Stock in connection with associate stock purchase plan 2,332 2,259 Proceeds from exercise of Class A Common Stock options 12,775 12,053 Borrowings under credit facilities 208,000 184,000 Payments under credit facilities (403,000) (134,500) Borrowings under financing obligations 1,061 1,058 Payments under Shelf Facility Agreements and Private Placement Debt (50,000) — Other, net (1,171) (1,387) Net cash used in financing activities (349,323) (24,916) Effect of foreign exchange rate changes on cash and cash equivalents 65 (108) Net increase in cash and cash equivalents 6,078 1,218 Cash and cash equivalents—beginning of period 43,537 40,536 Cash and cash equivalents—end of period $ 49,615 $ 41,754 Supplemental Disclosure of Cash Flow Information: Cash paid for income taxes $ 58,641 $ 63,909 Cash paid for interest $ 10,327 $ 7,068 Statements of Cash Flows(In thousands)(Unaudited)NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSDecember 3, 2022March 4, 2023 and September 3, 2022, and results of operations for the thirteen and twenty-six weeks ended March 4, 2023 and February 26, 2022, and cash flows for the thirteentwenty-six weeks ended December 3, 2022March 4, 2023 and November 27, 2021.February 26, 2022. The financial information as of September 3, 2022 was derived from the Company’s audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 3, 2022.TheseThe unaudited Condensed Consolidated Financial Statements and these Notes to Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 3, 2022.December 3,March 4, 2023 and February 26, 2022 and November 27, 2021 refer to the thirteen weeks ended as of those dates.faces.faces and has invested in improved warehouse automation to mitigate the effects of labor inflation. The Company has also placed a larger emphasis on category management and has implemented a category line review process intended to reduce costs and streamline operational efficiencies in the supply chain.This includes a renewed focus on improved product assortment, supplier portfolio, and overall cost position. Furthermore, in light of disruptions to availability and increased or uncertain shipping times, the Company is maintaining higher purchasing levels than it did prior to its fiscal year 2020 in order to ensure sufficient inventory supply to meet customer demand.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSPronouncements annual disclosures and added transparency for entities which receive government assistance. This includes disclosure of the type of government assistance received, the entity’s method of accounting, and the impact on the entity’s financial statements. This guidance is for annual periods beginning after December 15, 2021. The guidance was adopted by the Company for fiscal year 2023 and will be applied prospectively. The Company anticipates annual disclosures within the Company’sits Annual Report on Form 10-K for fiscal year 2023 related to the Employee Retention Credit (the “ERC”) provision provided under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Substantially all of the Company’s customer contracts have a single performance obligation, to deliver products, and are short-term in nature. All revenue is recognized when the Company satisfies its performance obligations under the contract, and invoicing occurs at approximately the same point in time. The Company recognizes revenue once the customer obtains control of the products. The Company’s product sales have standard payment terms that do not exceed one year. The Company considers shipping and handling as activities to fulfill its performance obligations. Substantially all of the Company’s contracts have a single performance obligation, to deliver products, and are short-term in nature. The Company estimates product returns based on historical return rates. Total accrued sales returns were $7,469$7,842 and $7,198 as of December 3, 2022March 4, 2023 and September 3, 2022, respectively, and are reported as Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets. Sales taxes and value-added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.$27,277$29,815 and $25,274 as of December 3, 2022March 4, 2023 and September 3, 2022, respectively, and are included in Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets. Sign-on payments, not yet recognized as a reduction of revenue,net sales, are recorded in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheets and were $1,903$2,087 and $2,210 as of December 3, 2022March 4, 2023 and September 3, 2022, respectively.December 3, 2022March 4, 2023 and September 3, 2022.MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)net salesrevenue by customer end-market for the thirteen weeksthirteen- and twenty-six-week periods ended December 3, 2022March 4, 2023 and November 27, 2021:February 26, 2022:Thirteen Weeks Ended Twenty-Six Weeks Ended March 4, 2023 March 4, 2023 Manufacturing Heavy 49 % 49 % 49 % 49 % Manufacturing Light 20 % 21 % 20 % 21 % Public Sector 8 % 7 % 8 % 7 % Retail/Wholesale 7 % 8 % 7 % 8 % Commercial Services 4 % 4 % 4 % 4 % 12 % 11 % 12 % 11 % Total 100 % 100 % 100 % 100 % which occurred during the fourth quarter ofin fiscal year 2022.
The following table presents the Company’s percentage of revenue by customer type for the thirteen- and twenty-six-week periods ended March 4, 2023 and February 26, 2022:Thirteen Weeks Ended Twenty-Six Weeks Ended March 4, 2023 February 26, 2022 March 4, 2023 February 26, 2022 National Account Customers 38 % 37 % 38 % 37 % Public Sector Customers 8 % 7 % 8 % 7 % Core and Other Customers 54 % 56 % 54 % 56 % Total 100 % 100 % 100 % 100 % net salesrevenue originating from the following geographic areas were as follows for the thirteen weeksthirteen- and twenty-six-week periods ended December 3, 2022March 4, 2023 and November 27, 2021:Thirteen Weeks Ended Twenty-Six Weeks Ended March 4, 2023 February 26, 2022 March 4, 2023 February 26, 2022 United States 95 % 95 % 95 % 94 % Mexico 2 % 2 % 2 % 3 % Canada 1 % 1 % 2 % 1 % North America 98 % 98 % 99 % 98 % Other foreign countries 2 % 2 % 1 % 2 % Total Total 100 % 100 % 100 % 100 % thirteen weeks ended December 3, 2022thirteen- and November 27twenty-six-week periods ended March 4, 2023 and February 26, 2022, 2021..MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)Thirteen Weeks Ended Twenty-Six Weeks Ended March 4,
2023February 26,
2022March 4,
2023February 26,
2022Numerator: Net income attributable to MSC Industrial as reported $ 79,140 $ 69,931 $ 160,454 $ 135,998 Denominator: Weighted-average shares outstanding for basic net income per share 55,880 55,799 55,885 55,664 Effect of dilutive securities 121 172 189 281 Weighted-average shares outstanding for diluted net income per share 56,001 55,971 56,074 55,945 Net income per share: Basic $ 1.42 $ 1.25 $ 2.87 $ 2.44 Diluted $ 1.41 $ 1.25 $ 2.86 $ 2.43 Potentially dilutive securities 215 364 225 379 Stock-basedStock-based compensation expense, netthirteen weeksthirteen- and twenty-six-week periods ended December 3,March 4, 2023 and February 26, 2022 and November 27, 2021 was as follows:Thirteen Weeks Ended Twenty-Six Weeks Ended March 4,
2023February 26,
2022March 4,
2023February 26,
2022Stock options $ — $ 217 $ 101 $ 805 Restricted stock units 3,957 3,306 7,668 8,009 Performance share units 945 889 2,040 1,197 Associate Stock Purchase Plan 77 88 160 178 Total 4,979 4,500 9,969 10,189 Deferred income tax benefit (1,259) (1,139) (2,492) (2,476) Stock-based compensation expense, net $ 3,720 $ 3,361 $ 7,477 $ 7,713 Black-ScholesBlack-Scholes option pricing model.award activity for the thirteen twenty-six-weekweeks period ended December 3, 2022March 4, 2023 is as follows:Options Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (in
years)Aggregate Intrinsic Value Outstanding on September 3, 2022 614 $ 78.96 Granted — — Exercised (171) 74.57 Canceled/Forfeited/Expired (25) 80.40 Outstanding on March 4, 2023 Outstanding on March 4, 2023 418 $ 80.67 2.0 $ 2,201 Exercisable on March 4, 2023 Exercisable on March 4, 2023 418 $ 80.67 2.0 $ 2,201 totalaggregate intrinsic value of options exercised, which represents the difference between the exercise price and the market value of Class A Common Stock measured at each individual exercise date, during the thirteen weekstwenty-six-week periods ended December 3,March 4, 2023 and February 26, 2022 was $1,563 and November 27, 2021 was $970 and $2,543,$3,351, respectively. The unrecognized stock-stock‑based compensation cost related to stock option expense was fully amortized at December 3, 2022.MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)thirteen weekstwenty-six-week period ended December 3, 2022:March 4, 2023:Shares Weighted-Average Grant Date Fair Value Non-vested PSUs at September 3, 2022 88 $ 80.04 Granted 51 82.16 4 76.32 Vested (26) 76.32 Canceled/Forfeited (1) 83.75 116 $ 81.84 December 3, 2022March 4, 2023 was $7,700$6,702 and is expected to be recognized over a weighted-average period of 2.21.9 years.thirteen weekstwenty-six-week period ended December 3, 2022March 4, 2023 is as follows:Shares Weighted-Average Grant Date Fair Value Non-vested RSUs at September 3, 2022 448 $ 79.71 Granted 215 82.23 Vested (162) 79.34 Canceled/Forfeited (8) 81.18 493 $ 80.90 dividend equivalents are not included in the RSU table above. The unrecognized stock-based compensation cost related to the RSUs at December 3, 2022March 4, 2023 was $34,534$33,190 and is expected to be recognized over a weighted-average period of 3.02.9 years.MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.Level 2—Level 3—Unobservable inputs which are supported by little or no market activity.indebtedness.indebtedness. Cash and cash equivalents include investments in a money market fund which are reported at fair value. The fair value of money market funds is determined using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs within the fair value hierarchy. The Company uses a market approach to determine the fair value of its debt instruments, utilizing quoted prices in active markets,, interest rates and other relevant information generated by market transactions involving similar instruments. Therefore, the inputs used to measure the fair value of the Company’s debt instruments are classified as Level 2 within the fair value hierarchy. The reported carrying amounts of the Company’s financial instruments approximated their fair values as of December 3, 2022March 4, 2023 and November 27, 2021.thirteen-weekthirteen- and twenty-six-week periods ended December 3,March 4, 2023 and February 26, 2022, and November 27, 2021, the Company had no material remeasurements of non-financial assets or liabilities at fair value on a non-recurring basis subsequent to their initial recognition.DebtDebtAccounts ReceivableDecember 3, 2022March 4, 2023 and September 3, 2022 consisted of the following:March 4,
2023September 3,
2022Accounts receivable $ 435,315 $ 708,379 Less: allowance for credit losses 22,628 20,771 Accounts receivable, net $ 412,687 $ 687,608 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSInventories $ 1,019 Accounts receivable 2,745 Prepaid expenses and other current assets 27 Identifiable intangibles 10,600 Goodwill 8,177 Property, plant and equipment 1,291 Total assets acquired $ 23,859 Accounts payable 1,090 Accrued liabilities 29 Total liabilities assumed $ 1,119 Total purchase price consideration $ 22,740 March 4,
2023September 3,
2022Amended Revolving Credit Facility $ 50,000 $ 245,000 Uncommitted Credit Facilities 200,000 200,000 Long-Term Note Payable 4,750 4,750 Private Placement Debt: 2.65% Senior Notes, Series A, due July 28, 2023 75,000 75,000 2.90% Senior Notes, Series B, due July 28, 2026 100,000 100,000 3.79% Senior Notes, due June 11, 2025 20,000 20,000 2.60% Senior Notes, due March 5, 2027 50,000 50,000 — 50,000 50,000 50,000 Financing arrangements 531 88 Obligations under finance leases 640 1,180 Less: unamortized debt issuance costs (1,222) (1,426) Total debt, including obligations under finance leases $ 549,699 $ 794,592 Less: current portion (275,758) (2) (325,680) (3) Total long-term debt, including obligations under finance leases $ 273,941 $ 468,912 Agreements (as defined below).Agreements.$50,000 from the 3.04% Senior Notes, due January 12, 2023, $75,000$75,000 from the 2.65% Senior Notes, Series A, due July 28, 2023, $835$531 from financing arrangements, $796$605 from obligations under finance leases and net of unamortized debt issuance costs of $391$378 expected to be amortized in the next 12 months.December 3, 2022March 4, 2023 and September 3, 2022.2022,2023, the Company amended and extended all three of its uncommitted credit facilities. All three of these amendments implemented the Secured Overnight Financing Rate (“SOFR”) as the replacement of the LIBOR benchmark. These facilities (collectively, the “Uncommitted Credit Facilities” and, together with the Amended Revolving Credit Facility, the “Credit Facilities”) total $208,000$203,000 in aggregate maximum uncommitted availability, under which $200,000 was outstanding at both December 3, 2022March 4, 2023 and September 3, 2022, and is included in the Current portion of debt including obligations under finance leases on the Company’s unaudited Condensed Consolidated Balance Sheets. The interest rate on the Uncommitted Credit Facilities is based on the Secured Overnight Financing Rate. Borrowings under the Uncommitted Credit Facilities are due at the end of the applicable interest period, which is typically one month but may be up to six months and may be rolled over to a new interest period at the option of the applicable lender. The Company’s lenders have, in the past, been willing to roll over the principal amount outstanding under the Uncommitted Credit Facilities at the end of each interest period but may not do so in the future. Each Uncommitted Credit Facility matures within one year of entering into such Uncommitted Credit Facility and contains certain limited covenants which are substantially the same as the limited covenants contained in the Amended Revolving Credit Facility. All of the Uncommitted Credit Facilities are unsecured and rank equally in right of payment with the Company’s other unsecured indebtedness.thirteen-weektwenty-six-week period ended December 3, 2022March 4, 2023, the Company borrowed an aggregate $84,000$208,000 and repaid an aggregate $99,000$403,000 under the Credit Facilities. As of December 3, 2022March 4, 2023 and September 3, 2022, the weighted-average interest rates on borrowings under the Credit Facilities were 4.93%5.39% and 3.42%, respectively.MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)“MetLife“Met-Life Note Purchase Agreement”) and PGIM, Inc. (the “Prudential Note Purchase Agreement” and, together with the MetLifeMet-Life Note Purchase Agreement, the “Shelf Facility Agreements”). Each of the MetLife Note Purchase Agreement and the Prudential Note Purchase Agreement provides for an uncommitted facility for the issuance and sale of up to an aggregate total of $250,000 of unsecured senior notes, at a fixed rate. Pursuant to the terms of the Shelf Facility Agreements, no new unsecured senior notes may be issued and sold after January 12, 2021. As of December 3, 2022, $50,000 aggregate principal amount of 3.04% Senior Notes, due January 12,March 4, 2023, (which is included in the Current portion of debt including obligations under finance leases on the Company’s unaudited Condensed Consolidated Balance Sheet as of December 3, 2022), and $50,000 aggregate principal amount of 2.40% Series 2019A Notes, due March 5, 2024, werewas outstanding under notes issued in private placements pursuant to the Shelf Facility Agreements.December 3, 2022,March 4, 2023, the Company was in compliance with the operating and financial covenants of the Credit Facilities, the Private Placement Debt and the Shelf Facility Agreements.7.9. Shareholders’ EquityCompany’s Board of Directors of the Company (the “Board”) terminated the MSC Stock Repurchase Plan, which was established during fiscal year 1999, and authorized a new share repurchase program (the “Share Repurchase Program”) to purchase up to 5,000 shares of Class A Common Stock. There is no expiration date for the Share Repurchase Program. As of December 3, 2022,March 4, 2023, the maximum number of shares of Class A Common Stock that may yet be repurchased under the Share Repurchase Program was 4,5194,369 shares. The Share Repurchase Program allows the Company to repurchase shares at any time and in any increments it deems appropriate in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended.thirteen-week periodthirteen- and twenty-six-week periods ended March 4, 2023December 3, 2022,, the Company repurchased 233152 shares and 385 shares, respectively, of Class A Common Stock for $18,539. $12,468 and $31,007, respectively. From this total, 181these totals, 150 shares and 331 shares, respectively, were immediately retired and 522 shares and 54 shares, respectively, were repurchased by the Company to satisfy the Company’s associates’ tax withholding liability associated with its stock-based compensation program and are reflected at cost as treasury stock in the unaudited Condensed Consolidated Financial Statements for the thirteen-week periodthirteen- and twenty-six-week periods ended December 3, 2022.March 4, 2023. During the thirteen-week periodthirteen- and twenty-six-week periods ended February 26, 2022November 27, 2021,, the Company repurchased 534 shares and 57 shares, respectively, of Class A Common Stock for $4,559. $254 and $4,813, respectively. All of these shares were repurchased by the Company to satisfy the Company’s associates’ tax withholding liability associated with its stock-based compensation program and are reflected at cost as treasury stock in the unaudited Condensed Consolidated Financial Statements for the thirteen-week periodthirteen- and twenty-six-week periods ended November 27, 2021.February 26, 2022.1417 shares and 31 shares of Class A treasury stock during both the thirteen-weekthirteen- and twenty-six-week periods ended December 3,March 4, 2023,respectively, and reissued 16 shares and 30 shares of treasury stock during the thirteen- and twenty-six-week periods ended February 26, 2022, and November 27, 2021 respectively, to fund the MSC Industrial Direct Co., Inc. Amended and Restated Associate Stock Purchase Plan.MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)$0.79$1.58 per share totaling $44,207$88,313 for the thirteentwenty-six weeks ended December 3, 2022. The $0.75March 4, 2023. For the twenty-six weeks ended February 26, 2022, the Company paid aggregate regular cash dividends of $1.50 per share regular cash dividend declared bytotaling $83,586.Company’s Board of Directors during the thirteen weeks ended November 27, 2021 resulted in aggregate payments of $41,740 on November 30, 2021, after the thirteen weeks ended November 27, 2021.On December 16, 2022, the Company’s Board of Directors declared a regular cash dividend of $0.79 per share, payable on January 24,April 25, 2023, to shareholders of record at the close of business on January 10,April 11, 2023. The dividend is expected to result in aggregate payments of $44,218,$44,170, based on the number of shares outstanding at DecemberMarch 15, 2022.2023.8.10. Restructuring and Other Costs
Thethirteen weeksthirteen- and twenty-six-week periods ended December 3, 2022March 4, 2023 and November 27, 2021:Thirteen Weeks Ended Twenty-Six Weeks Ended March 4,
2023February 26,
2022March 4,
2023February 26,
2022Consulting-related costs $ 1,540 $ 2,520 $ 3,115 $ 2,520 Associate severance and separation costs 243 517 762 4,032 Equity award acceleration costs associated with severance — — — 1,729 Other exit-related costs — 97 — 136 Total restructuring and other costs $ 1,783 $ 3,134 $ 3,877 $ 8,417 December 3, 2022.March 4, 2023. The following table summarizes activity related to liabilities associated with restructuring and other costs for the thirteen weekstwenty-six-week period ended December 3, 2022:Consulting-related costs Associate severance and separation costs Total Balance at September 3, 2022 Balance at September 3, 2022 $ 840 $ 1,874 $ 2,714 Additions 3,115 762 3,877 Payments and other adjustments (2,195) (2,043) (4,238) Balance at March 4, 2023 Balance at March 4, 2023 $ 1,760 $ 593 $ 2,353 9.11. Product Warrantiesthirteen-weekthirteen- and twenty-six-week periods ended December 3,March 4, 2023 and February 26, 2022 and November 27, 2021 was immaterial.MSC INDUSTRIAL DIRECT CO., INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar amounts and shares in thousands, except per share data)(Unaudited)10.12. Income Taxesthirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, there were no material changes in unrecognized tax benefits.On March 27, 2020,was signed into law, which is intended to provide economiccertain relief to those impacted byas a result of the COVID-19 pandemic. On March 11, 2021, the American Rescue PlanThe CARES Act (the “ARPA”) was signed into law. The ARPA includes several provisions, such asprovides tax relief, along with other stimulus measures, that extend and expandincluding the ERC, provision, previously enacted underwhich allows for employers to claim a refundable tax credit against the CARES Act, throughemployer share of Social Security tax equal to 50% of qualified wages paid to qualified employees between March 13, 2020 and December 31, 2020 and 70% of qualified wages paid to employees after December 31, 2020 through September 30, 2021. The ERC was designed to encourage businesses to keep employees on the payroll during the COVID-19 pandemic. During the thirteen-week period ended March 4, 2023, the Company has filed a refund claimreceived $6,096 related to ERC claims previously submitted. As there is no authoritative guidance under accounting principles generally accepted in connection with the ERC and willUnited States of America on accounting for government assistance to for-profit business entities, we account for the potential ERC refund, if any, upon Internal Revenue Service approvalby analogy to International Accounting Standard 20, Accounting for Government Grants and receipt.24.7%25.0% for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to 23.5%24.3% for the thirteen-weektwenty-six-week period ended November 27, 2021. February 26, 2022. The increase in the effective tax rate was primarily due to an increase in unfavorable permanent tax items as well as a lower tax benefit from stock-based compensation.11.13. Legal ProceedingsNote 12. Subsequent EventsOn December 19, 2022, the Company and two of its subsidiaries entered into an arrangement with certain financial institutions, pursuant to which such financial institutions will purchase existing and future trade receivables and certain related rights from one of the subsidiaries (the “Receivables Facility”). The Receivables Facility is a committed senior secured revolving trade receivables facility in an initial aggregate amount of $300,000. Amounts purchased under the Receivables Facility will be priced at one-month term SOFR plus a margin.During December 2022, proceeds from the Receivables Facility were used to pay down $230,000 on the Amended Revolving Credit Facility and $40,000 on the Uncommitted Credit Facilities. The current outstanding balances are $30,000 on the Amended Revolving Credit Facility and $160,000 on the Uncommitted Credit Facilities.The Receivables Facility contains certain representations and warranties by the Company customary for facilities of this type. The financial covenants under the Receivables Facility are identical to those under the Credit Facilities, the Private Placement Debt and the Shelf Facility Agreements. See Note 6, “Debt” for more information about these financial covenants.Overview2.22.3 million active, saleable SKUs through our catalogs; our brochures; our eCommerce channels, including our website, www.mscdirect.com (the “MSC website”); our inventory management solutions; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We service our customers from six customer fulfillment centers, 1011 regional inventory centers, 39 warehouses, and 38 warehouses.four manufacturing locations, including two locations acquired in the acquisition of Buckeye Industrial Supply Co. (“Buckeye”) and Tru-Edge Grinding, Inc. (“Tru-Edge”). We continue to implement our strategies to gain market share, generate new customers, increase sales to existing customers, and diversify our customer base.2,5452,574 at December 3, 2022,March 4, 2023, compared to 2,4452,448 at November 27, 2021.thirteen-week periodtwenty-six weeks ended December 3, 2022March 4, 2023 include the following:•We generated $76.0$416.4 million of cash from operations, compared to $57.8$57.4 million for the same period in the prior fiscal year, primarily from the $300.0 million Receivables Purchase Agreement (the “RPA”).•We had net repaymentsentered into the RPA with an initial aggregate amount of $15.0 million$300.0 million. Proceeds from the RPA were primarily utilized to pay down existing debt on our credit facilities,facilities.net repayments of $24.0an aggregate $83.6 million in regular cash dividends for the same period in the prior fiscal year.We paid out an aggregate $44.2 million in regular cash dividends. Due to the timing of the payable date, no cash dividends were paid during the same period in the prior fiscal year.•We repurchased and immediately retired $14.3$31.0 million of MSC’s Class A Common Stock, par value $0.001 per share (“Class A Common Stock”)., compared to $4.8 million for the same period in the prior fiscal year.•In January 2023, we acquired Buckeye and Tru-Edge for aggregate consideration of $22.7 million, which includes cash paid of $20.5 million, the fair value of contingent consideration to be paid out of $2.3 million and a post-closing working capital adjustment in the amount of $0.1 million received from the sellers that is subject to finalization.$2.1$3.9 million in restructuring and other costs, compared to $5.3$8.4 million for the same period in the prior fiscal year. Restructuring and other costs primarily includeconsist of consulting-related costs associated with the optimization of the Company’s operations and associate severance and separation costs. Restructuring and other costs for the same period in the prior fiscal year also include equity award acceleration costs associated with severance and other exit-related costs.faces.faces and has invested in improved warehouse automation to mitigate the effects of labor inflation. The Company has also placed a larger emphasis on category management and has implemented a category line review process intended to reduce costs and streamline operational efficiencies in the supply chain. This includes a renewed focus on improved product assortment, supplier portfolio, and overall cost position. Furthermore, in light of disruptions to availability and increased or uncertain shipping times, the Company is maintaining higher purchasing levels than it did prior to its fiscal year 2020 in order to ensure sufficient inventory supply to meet customer demand.thirteen weeksthirteen- and twenty-six-week periods ended December 3, 2022.March 4, 2023. Through statistical analysis, we have found that trends in our customers’ activity have correlated to changes in the IP index. The IP index measures short-term changes in industrial production. Growth in the IP index from month to month indicates growth in the manufacturing, mining and utilities industries. TheThe IP index over the three months ended November 2022February 2023 and the average for the three- and 12-month periods ended November 2022February 2023 were as follows:SeptemberDecember104.8102.4OctoberJanuary104.7102.6NovemberFebruary104.5102.6yearYear 2023 Q1 averageQ2 Average104.7102.612-month average12-Month AverageDecember 3, 2022March 4, 2023 of 104.7 improved102.6 declined from the adjusted average from the prior quarter of 104.3, indicatingdriven by economic uncertainty arising from higher interest rates and continued growth in key industries and end-markets from the lowerelevated levels seen during the COVID-19 pandemic. Beginning in calendar year 2021 and continuing through calendar year 2022,of inflation. Recently, the United States economy has experienced supply chain disruptions and significant levels of inflation, which have included higher prices for labor, freight, fuel and the products that the Company sells. The Company has implemented price realization strategies in response to increased costs the Company faces. We willAs we see the IP index continue to moderate, we will monitor the current economic conditions for the impact on our customers and markets and assess both risks and opportunities that may affect our business and operations. See “Impact of Economic Trends” above.December 3, 2022March 4, 2023 Compared to the Thirteen-Week Period Ended November 27, 2021Thirteen Weeks Ended March 4, 2023 February 26, 2022 Change $ % $ % $ % Net sales $ 961,632 100.0 % $ 862,522 100.0 % $ 99,110 11.5 % Cost of goods sold 564,937 58.7 % 496,247 57.5 % 68,690 13.8 % Gross profit 396,695 41.3 % 366,275 42.5 % 30,420 8.3 % Operating expenses 280,630 29.2 % 265,973 30.8 % 14,657 5.5 % Restructuring and other costs 1,783 0.2 % 3,134 0.4 % (1,351) (43.1) % Income from operations 114,282 11.9 % 97,168 11.3 % 17,114 17.6 % Total other expense (8,104) (0.8) % (3,505) (0.4) % (4,599) 131.2 % Income before provision for income taxes 106,178 11.0 % 93,663 10.9 % 12,515 13.4 % Provision for income taxes 26,863 2.8 % 23,509 2.7 % 3,354 14.3 % Net income 79,315 8.2 % 70,154 8.1 % 9,161 13.1 % Less: Net income attributable to noncontrolling interest Less: Net income attributable to noncontrolling interest 175 0.0 % 223 — % (48) (21.5) % Net income attributable to MSC Industrial $ 79,140 8.2 % $ 69,931 8.1 % $ 9,209 13.2 % 12.9%11.5%, or $109.2$99.1 million, to $957.7$961.6 million for the thirteen-week period ended December 3, 2022,March 4, 2023, as compared to $848.5$862.5 million for the same period in the prior fiscal year. The $109.2$99.1 million increase in net sales was comprised of $56.1$41.9 million from improved pricing, inclusive of changes in customer and product mix, discounting and other items, $26.8$32.8 million of net sales from fiscal year 2022 and 2023 acquisitions and $25.2 million of higher sales volume, and $29.1 million of net sales from fiscal year 2022 acquisitions, partially offset by $2.8$0.8 million of unfavorable foreign exchange impact.impact. Of the $109.2$99.1 million increase in net sales during the thirteen-week period ended December 3, 2022,March 4, 2023, national account customer sales increased by $42.2$49.4 million, sales to our core and other customers increased by $24.3$37.9 million and sales to our governmentpublic sector customers increased by $13.6 million and sales from fiscal year 2022 acquisitions were $29.1$11.8 million.periodsperiod ended December 3, 2022 and November 27, 2021,March 4, 2023, as compared to the same period in the prior fiscal year:Thirteen Weeks Ended March 4, 2023 February 26, 2022 Net Sales (in thousands) $ 961,632 $ 862,522 Sales Days 63 63 $ 15.3 $ 13.7 Total Company ADS Percent Change 11.5 % 7.9 % 10.0 % 8.7 % 69 % 70 % 15.1 % 6.0 % 31 % 30 % Twenty-Six Weeks Ended March 4, 2023 February 26, 2022 Change $ % $ % $ % Net sales $ 1,919,377 100.0 % $ 1,711,069 100.0 % $ 208,308 12.2 % Cost of goods sold 1,124,883 58.6 % 992,198 58.0 % 132,685 13.4 % Gross profit 794,494 41.4 % 718,871 42.0 % 75,623 10.5 % Operating expenses 560,325 29.2 % 522,554 30.5 % 37,771 7.2 % Restructuring and other costs 3,877 0.2 % 8,417 0.5 % (4,540) (53.9) % Income from operations 230,292 12.0 % 187,900 11.0 % 42,392 22.6 % Total other expense (16,263) (0.8) % (7,627) (0.4) % (8,636) 113.2 % Income before provision for income taxes 214,029 11.2 % 180,273 10.5 % 33,756 18.7 % Provision for income taxes 53,502 2.8 % 43,862 2.6 % 9,640 22.0 % Net income 160,527 8.4 % 136,411 8.0 % 24,116 17.7 % Less: Net income attributable to noncontrolling interest 73 0.0 % 413 0.0 % (340) (82.3) % Net income attributable to MSC Industrial $ 160,454 8.4 % $ 135,998 7.9 % $ 24,456 18.0 % Twenty-Six Weeks Ended March 4, 2023 February 26, 2022 Net Sales (in thousands) $ 1,919,377 $ 1,711,069 Sales Days 125 125 $ 15.4 $ 13.7 Total Company ADS Percent Change 12.2 % 8.9 % 10.5 % 11.5 % 69 % 70 % 16.1 % 3.2 % 31 % 30 % otherADS is calculated using the number of business days in the United States for the periods indicated. The Company believes ADS is a key performance indicator because it shows the effectiveness of the Company’s selling performance on a consistent basis between periods.thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to 60.4%60.6% of consolidated net sales for the same period in the prior fiscal year. These percentages of consolidated net sales do not include eCommerce sales from our recent acquisitions.$397.8$794.5 million for the thirteen-weektwenty-six-week period ended December 3, 2022March 4, 2023 increased $45.2$75.6 million, or 12.8%10.5%, compared to the same period in the prior fiscal year. Gross profit margin was 41.5%41.4% for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to 41.6%42.0% for the same period in the prior fiscal year. The increase in gross profit was primarily a result of a higher sales level as described above and improved price realization and positive spread between sales price and cost of goods sold.above. The decline in gross profit margin was primarily attributable to the lower gross margins offrom our recent acquisitions.9.0%7.2%, or $23.1$37.8 million, to $279.7$560.3 million for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to $256.6$522.6 million for the same period in the prior fiscal year. Operating expenses were 29.2% of net sales for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to 30.2%30.5% for the same period in the prior fiscal year. The increase in Operatingoperating expenses was primarily attributable to our acquisitions in the fourth quarter of fiscal year 2022 and higher payroll and payroll-related costs, as well as higher freight expense. The decline in Operatingoperating expenses as a percentage of net sales was related to our cost savings programs and productivity improvements resulting from our Mission Critical initiatives.thirteen-weektwenty-six-week period ended December 3, 2022 were 56.2% ofMarch 4, 2023 were 56.5% of total Operatingoperating expenses, as compared to 57.0%57.4% for the same period in the prior fiscal year. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission, and fringe benefit costs, increased $11.0$16.8 million for the thirteen-weektwenty-six-week period ended December 3, 2022.March 4, 2023. The majority of this increase compared to the same period in the prior fiscal year was due to increased salary and sales commission costs.expenses.$40.5$80.0 million for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to $36.2$72.8 million for the same period in the prior fiscal year. The primary drivers of the increase in freight expense were increased sales volume and higher fuel-related charges.$2.1$3.9 million in restructuring and other costs for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to $5.3$8.4 million for the same period in the prior fiscal year. These charges primarily include consulting-related costs associated with the optimization of the Company’s operations and associate severance and separation costs. Restructuring and other costs for the same period in the prior fiscal year also include equity equity award acceleration costs associated with severance and other exit-related costs. costs. See Note 8,10, “Restructuring and Other Costs” in the Notes to Condensed Consolidated Financial Statements for additional information.27.9%22.6%, or $25.3$42.4 million, to $116.0$230.3 million for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to $90.7$187.9 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 12.1%12.0% for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to 10.7%11.0% for the same period in the prior fiscal year. ThisThe increase was primarily attributable to an overall increases in net sales, and gross margina reduction in restructuring costs and an improvement in the ratio of operating expenses toas a percentage of net sales during the thirteen-weektwenty-six-week period ended December 3, 2022.97.9%113.2%, or $4.0$8.6 million, to $8.2$16.3 million for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to $4.1$7.6 million for the same period in the prior fiscal year. ThisThe increase was primarily due to higher interest rates on our credit facilities and a higher average debt balance on our committed credit facility.facilities.was 24.7% for the thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023 was 25.0% , as compared to 23.5%24.3% for the same period in the prior fiscal year. The increase in the effective tax rate was primarily due to an increase in unfavorable permanent tax items as well as a lower tax benefit from stock-based compensation.thirteen-weektwenty-six-week period ended December 3, 2022,March 4, 2023, as compared to the same period in the prior fiscal year, have been discussed above.March 4,
2023September 3,
2022$ Change (In thousands) Total debt $ 549,699 $ 794,592 $ (244,893) Less: Cash and cash equivalents 49,615 43,537 6,078 Net debt $ 500,084 $ 751,055 $ (250,971) Total shareholders’ equity Total shareholders’ equity $ 1,433,991 $ 1,362,283 $ 71,708 December 3, 2022,March 4, 2023, we had $26.3$49.6 million in cash and cash equivalents, substantially all with well-known financial institutions. Historically, our primary financing needs have been to fund our working capital requirements necessitated by our sales growth and the costs of acquisitions, new products, new facilities, facility expansions, investments in vending solutions, technology investments, and productivity investments. Cash generated from operations, together with borrowings under our credit facilities and net proceeds from the private placement notes, have been used to fund these needs, to repurchase shares of Class A Common Stock from time to time, and to pay dividends to our shareholders.December 3, 2022,March 4, 2023, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $780.1$549.7 million, net of unamortized debt issuance costs of $1.3$1.2 million, as compared to total borrowings of $794.6 million, net of unamortized debt issuance costs of $1.4 million, as of the end of fiscal year 2022. The decrease in total borrowings outstanding was driven by higher net repayments onpayments under our committed credit facility.facility, private placement debt and shelf facility agreements. Debt payments were primarily funded through the Receivables Purchase Agreement entered into during the second quarter of fiscal year 2023. See Note 6,8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these balances.particularly those relating to changes in macroeconomic conditions, including variations in foreign currency exchange rates, commodity and energy prices, labor and supply costs, inflation, and interest rates, and to take appropriate action as it is warranted.Twenty-Six Weeks Ended March 4,
2023February 26,
2022(In thousands) Net cash provided by operating activities $ 416,440 $ 57,421 Net cash used in investing activities (61,104) (31,179) Net cash used in financing activities (349,323) (24,916) Effect of foreign exchange rate changes on cash and cash equivalents 65 (108) Net increase in cash and cash equivalents Net increase in cash and cash equivalents $ 6,078 $ 1,218 $76.0$416.4 million for the thirteentwenty-six weeks ended December 3, 2022,March 4, 2023 compared to $57.8$57.4 million for the thirteentwenty-six weeks ended November 27, 2021.February 26, 2022. The increase was primarily due to the following:•an increase in net income as described above;above.a decrease in the change in accounts receivable primarily due to prior fiscal year increases in accounts receivable attributable to changes in prior fiscal year sales volume;an increase in the change in accounts payable and accrued liabilities from increased inventory purchases; partially offset byan increase in the change in prepaid expenses and other current assets attributable to the receivables related to vendor rebate programs and an increase in the change in inventory.operations:operations as of the periods indicated:March 4,
2023September 3,
2022February 26,
2022(Dollars in thousands) $ 669,487 $ 817,679 $ 819,641 2.0 2.1 2.4 35.8 65.3 60.9 3.1 3.2 3.2 as of Decemberboth decreased relative to both September 3, 2022 remained consistent when compared to September 3,and February 26, 2022. The slight increase in working capital wasdecreases from both periods were primarily due to an increasea decrease in inventories and receivables related to vendor rebate programs. Working capital as of December 3, 2022 increased compared to November 27, 2021, primarily due to increases in both accounts receivable and inventories.resulting from the RPA entered into during the second quarter of fiscal year 2023. The current ratio as of December 3, 2022 declined slightly compared to November 27, 2021, primarily due to RPA reduced the increase in the current portion of debt.Days’ sales outstanding as of December 3, 2022 remained comparable to September 3, 2022. accounts receivable balances by $300.0 million.increasedecrease in days’ sales outstanding as of DecemberMarch 4, 2023 as compared to September 3, 2022 compared to November 27, 2021and February 26, 2022 was primarily due to the receivables portfolio consistingRPA entered into during the second quarter of a greater percentage of our national account program sales, which typically have longer payment terms.December 3, 2022 remained comparableMarch 4, 2023 declined relative to both September 3, 2022 and November 27, 2021.thirteen-week periodstwenty-six weeks ended December 3,March 4, 2023 and February 26, 2022 and November 27, 2021 was $25.6$61.1 million and $15.3$31.2 million, respectively. The use of cash for both periods was primarily due to expenditures for property, plant and equipment mainly related to vending programs and Mission Critical projects.$68.0$349.3 million for the thirteentwenty-six weeks ended December 3, 2022,March 4, 2023 compared to $19.8$24.9 million for the thirteentwenty-six weeks ended November 27, 2021,February 26, 2022, primarily due to the following:•$44.288.3 million of regular cash dividends paid during the thirteentwenty-six weeks ended December 3, 2022,March 4, 2023, compared to no$83.6 million of regular cash dividends paid during the thirteentwenty-six weeks ended November 27, 2021 (dividend declared on October 14, 2021 was paid on November 30, 2021);February 26, 2022;•net repayments of $15.0 million onpayments under our credit facilities, private placement debt and shelf facility agreements of $245.0 million during the thirteentwenty-six weeks ended December 3, 2022,March 4, 2023, compared to net repaymentsborrowings of $24.0$49.5 million on our credit facilities during the thirteentwenty-six weeks ended November 27, 2021;February 26, 2022; and•$18.531.0 million in aggregate repurchases of Class A Common Stock during the thirteentwenty-six weeks ended December 3, 2022,March 4, 2023, compared to $4.6$4.8 million in aggregate repurchases of Class A Common Stock during the thirteentwenty-six weeks ended November 27, 2021.February 26, 2022.December 3, 2022,March 4, 2023, the Company also had three uncommitted credit facilities, totaling $208.0$203.0 million of aggregate maximum uncommitted availability. See Note 6,8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about our credit facilities. As of December 3, 2022,March 4, 2023, we were in compliance with the operating and financial covenants of our credit facilities. The current unused balance of $564.7$574.7 million from the revolving credit facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary. See Note 6,8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these balances. facility agreements (together, the “Shelf Facility Agreements”). In June 2018 and March 2020, we entered into additional note purchase agreements. Pursuant to the terms of the Shelf Facility Agreements, no new unsecured senior notes weremay be issued and sold after January 12, 2021. See Note 6,8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these transactions.December 3, 2022,March 4, 2023, certain of our operations were conducted on leased premises. These leases are for varying periods, the longest extending to fiscal year 2031. In addition, we are obligated under certain equipment and automobile operating and finance leases, which expire on varying dates through fiscal year 2026.software.IssuedAdopted Accounting PronouncementsDecember 3, 2022March 4, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. and adversely affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be not material also may materially and adversely affect our business, financial condition and/or operating results.December 3, 2022:Period Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs12/4/22-1/3/23 152,124 $ 81.76 150,000 4,369,279 1/4/23-2/2/23 — $ — — 4,369,279 2/3/23-3/4/23 320 $ 81.94 — 4,369,279 Total 152,444 150,000 December 3, 2022, 52,104March 4, 2023, 2,444 shares of Class A Common Stock were withheld by the Company as payment to satisfy our associates’ tax withholding liability associated with our stock-based compensation program and are included in the total number of shares purchased.Company’s Board of Directors terminated the MSC Stock Repurchase Plan, which was established during fiscal year 1999, and authorized a new share repurchase program (the “Share Repurchase Program”) to purchase up to 5,000,000 shares of Class A Common Stock. There is no expiration date for the Share Repurchase Program. As of December 3, 2022,March 4, 2023, the maximum number of shares of Class A Common Stock that may yet be repurchased under the Share Repurchase Program was 4,519,2794,369,279 shares.
Exhibit No.10.1Description32.2Inline XBRL Instance Document.* Inline XBRL Taxonomy Extension Schema Document.* Inline XBRL Taxonomy Extension Calculation Linkbase Document.* Inline XBRL Taxonomy Extension Definition Linkbase Document.* Inline XBRL Taxonomy Extension Label Linkbase Document.* Inline XBRL Taxonomy Extension Presentation Linkbase Document.* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* *Filed herewith.Furnished herewith. Indicates a management contract or compensatory plan or arrangement.
Industrial Direct Co.INDUSTRIAL DIRECT CO., Inc.
(Registrant)Dated: January 5,April 4, 2023
Dated: January 5,April 4, 2023
Officer)Officer )