MSC reports annual financials

MSC Industrial Direct CO., Inc., Melville, NY, reported net sales for the fourth quarter of fiscal 2002 were $201.7 million compared to $207.9 million during the same quarter last year. Average daily sales increased by 3% over the fourth quarter of fiscal 2001, after adjusting for a decrease in the number of business days to 64 in the 2002 fourth quarter from 68 days in the previous year period. Net income for the fourth quarter of 2002 was $8.95 million including net, non-operating charges of $740,000 as compared to restated net income of $10.0 million in the fourth quarter of last year.

In the fourth quarter of 2002, the company recorded certain non-operating items, which included: $700,000 write-off of the remainder of the company's investment in online MRO businesses, a $535,000 accrual for expenses related to the restatement of earnings for fiscal years 2001 and 2000, and a $365,000 gain from a real estate sale. The net effect of these items, which are accounted for as 'other income and expense,' is a net charge of $870,000 before tax, and $740,000 after-tax. Before giving effect to these charges, net income for the 2002 fourth quarter was $9.7 million.

For fiscal 2002, net sales were $794.0 million compared to $869.2 million a year ago. Fiscal 2002 had fifty-two weeks versus fifty-three weeks in fiscal 2001. Income from operations for fiscal 2002 was $60.0 million, compared to a restated $86.4 million for the same period last year. Including the aforementioned non-operating charges, net income for fiscal 2002 was $36.4 million compared to restated net income of $39.9 million. In the third quarter of 2001, the company recorded a non-operating, after tax charge of $9.9 million for the company's write-off of most of its minority investment in several online MRO businesses.

Excluding the non-operating charges in both periods, net income for fiscal 2002 was $37.1 million compared with restated net income of $49.8 million a year ago.

In addition, MSC announced that its independent auditors, Ernst & Young LLP, have completed the re-audit of the company's financial statements for fiscal years 2001 and 2000. MSC expects to file re-audited and restated financials with the Securities and Exchange Commission by Nov. 29, 2002 reflecting the results of the re-audit and restatement. In line with expectations, the company will reduce reported net income by an aggregate of $7.0 million over the past several years.

A special committee of the board of directors, found no evidence that the accounting entries that led to the restatement of results were done with improper motive or with the intent to misstate the company's financial performance. The committee concluded that management of the company at all times acted with integrity, and that management responded properly and professionally when informed of the accounting errors.

'We have successfully executed our business plan for the year and continued to build our business in a difficult operating environment,' said Mitchell Jacobson, chairman & CEO. 'We continued to grow our national accounts program and our online site, MSCDirect.com. MSC's financial position remains strong, as we ended the year with $60 million in cash and generated approximately $77 million in free cash flow.

'Effective execution of our operating strategy has allowed us to gain market share, and we remain committed to continuing this trend by providing our customers with the highest levels of service. As announced last week, we are expecting approximately 40% growth in earnings per share on 10% revenue growth in the first quarter 2003. We expect first quarter 2003 revenues to be in the range of $207 million to $210 million.'