Melville, NY- MSC Industrial Direct Co., Inc. reported financial results for its fiscal 2014 first quarter ended November 30, 2013.
Net sales for the first quarter of fiscal 2014 were $678.5 million, an increase of 17.5% over net sales of $577.5 million in the first quarter of fiscal 2013. The recently acquired Barnes Distribution North America ("BDNA") business contributed approximately $72.4 million to net sales in the fiscal 2014 first quarter.
Excluding non-recurring costs of $5.8 million associated with the BDNA acquisition and the co-location of the Company's headquarters, adjusted operating income for the fiscal 2014 first quarter was $102.5 million, or 15.1% of net sales, compared to $103.7 million, or 18.0% of net sales in the same quarter a year ago. GAAP operating income for the fiscal 2014 first quarter was $96.8 million, or 14.3% of net sales, compared to $102.4 million, or 17.7% of net sales in the same quarter a year ago.
Excluding the after tax effects of non-recurring costs, adjusted net income for the first quarter of fiscal 2014 was $62.6 million, or $0.99 per diluted share (based on 63.1 million diluted shares outstanding), compared to $64.0 million, or $1.01 per diluted share, a year ago (based on 62.7 million diluted shares outstanding). The BDNA operations contributed approximately $0.05 to the fiscal first quarter EPS. GAAP net income for the first quarter of fiscal 2014 was $59.0 million, or $0.93 per diluted share, compared to $63.2 million, or $1.00 per diluted share, a year ago.
Erik Gershwind, President and Chief Executive Officer, stated, "The manufacturing environment stabilized and began to show potential signs of improvement during the first fiscal quarter of 2014. Combined with strong execution of our share gain initiatives and the early stages of our BDNA growth plan, a healthier environment contributed to solid performance in the quarter and gives us even greater confidence going forward."
Jeff Kaczka, Executive Vice President and Chief Financial Officer, commented, "We are encouraged by the market stabilization and related sales growth. Furthermore, our strong operating cash flows allowed us to execute our share repurchase program opportunistically. Our fiscal second quarter guidance reflects the usual seasonality in revenues and expenses, widespread weather disruptions, and the planned increase in investment spending. From an adjusted operating margin standpoint, we expect that our fiscal second quarter will be the low point for fiscal 2014. We remain on track to achieve an annual adjusted operating margin consistent with our fiscal 2014 operating framework assuming a continuing low to moderate sales growth environment."
Mr. Gershwind concluded, "We are on pace with our 2014 plan and we are executing on the infrastructure initiatives that will support our next run of growth. We are also executing on share gain programs that will fuel growth, particularly as manufacturing recovers. Complementing the potential of our base business is our new platform for growth in the BDNA business, the integration of which is going as planned. All of this makes for a story of top-line growth and tremendous earnings leverage as we move beyond the near-term."
Outlook
The Company expects net sales for the fiscal second quarter 2014 to be between $660 million and $672 million. At the midpoint, average daily sales growth, exclusive of BDNA, is expected to be 4.6 percent. Excluding non-recurring costs related to the co-location of the Company's headquarters and non-recurring integration costs associated with BDNA, the Company expects adjusted diluted earnings per share for the fiscal second quarter 2014 to be between $0.83 and $0.87.
The Company expects the non-recurring costs related to the co-location of the Company's headquarters to have a $0.01 impact and the integration costs related to the BDNA acquisition to have approximately a $0.05 impact on its GAAP diluted earnings per share in the fiscal second quarter 2014.
The implied adjusted operating margin for the fiscal second quarter at the midpoint of guidance is approximately 13 percent and represents what is expected to be the low point of the Company's adjusted operating margin in fiscal 2014. The Company expects the non-recurring costs related to the co-location of the Company's headquarters and the integration costs related to the BDNA acquisition to have approximately a 90 basis point impact on its GAAP operating margin in the fiscal second quarter 2014.
Looking beyond the second fiscal quarter, adjusted operating expenses are expected to continue to build in support of the Company's growth and infrastructure initiatives. However, with the exception of volume-related variable costs, which are a function of sales levels, the Company's base adjusted operating expenses are expected to grow more moderately through the second half of the fiscal year. The Company remains on track to achieve fiscal year 2014 adjusted operating margin consistent with its fiscal 2014 operating framework assuming a continuing low to moderate sales growth environment.
