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MSC Industrial Direct Co., Inc., Melville, NY, reported net sales for the second quarter of fiscal 2004 ended Feb. 28 increased 10.0% to $230.5 million, compared to net sales of $209.6 million in the second quarter of fiscal 2003. In the first quarter of fiscal 2004, the company reported a net sales growth rate of 5.7% over the same period in fiscal 2003. Net income for the fiscal 2004 second quarter was $18.5 million, 45.4% higher than fiscal 2003's second quarter net income of $12.8 million. Fully diluted EPS was $0.27 per diluted share, 42.1% higher than the $0.19 per diluted share earned in the same period last year.
For the first half of fiscal 2004, the ompany's net sales rose 7.8% to $453.3 million, compared to net sales of $420.3 million a year ago. Net income in the fiscal 2004 six-month period was $35.0 million, or $0.51 per diluted share, compared to $25.2 million, or $0.37 per diluted share, in the year ago period, an increase of 37.8%.
"MSC Industrial Direct has continued to benefit from the ongoing gradual improvement of the overall economy and our exceptional operational execution," said Mitchell Jacobson, chairman & CEO. "Our growth came from both external and internal sources, as we continued to gain share and win new customers and also saw improved order activity from within our current client base. The scalability of our model and our focus on cost control allowed us to convert 48% of these incremental revenues into operating income. This contributed to a 50% increase in operating income and an operating margin of 13.0%, up significantly from the 9.5% operating margin reported a year ago and a sequential improvement over the first quarter of this year. The net result was a net income increase of over 45% on a revenue increase of 10%, proving once again the leverage inherent in our business."
"Our second quarter results reflect solid performance across all aspects of our business," said David Sandler, president & COO. "We continued to execute on our diversification strategy during the quarter, and saw sales to the non-manufacturing sector increase 12% during the quarter, while sales to the manufacturing sector also rose a solid 9%, continuing the positive trend seen in the first quarter. We were also very pleased with our e-commerce programs, which continued their strong growth in the second quarter."
"As we look ahead, we feel we've never been better positioned for the future,' Jacobson said. 'However, while we are confident in our ability to execute, gain share and grow in all of our markets, we continue to approach the marketplace with cautious optimism. Although there are indications that conditions are improving, our industrial customers continue to defer significant commitments to capital investments or staffing, and remain under significant cost pressures. Foreign competition and margin pressures are also a concern. In addition, while we remain committed to our goal of converting 25% of incremental revenues into operating income, we continue to implement staffing plans to support all areas of our strongly growing business, which will reduce the contribution margins realized on incremental revenues in the second half of the year from those seen in the first half. Based on these factors, we currently expect revenues for the third quarter of fiscal 2004 to be between $248 million and $255 million, and diluted earnings per share for the period to be between $0.29 and $0.31."
MSC distributes more than 500,000 industrial products from more than 2,500 suppliers to approximately 345,000 customers. In-stock availability is approximately 99% and standard ground delivery is next day to 80% of the industrial U.S. MSC reaches its customers through a combination of more than 30 million direct-mail catalogs and CD-ROMs, 90 branch sales offices, 400 sales people, the Internet and associations with B2B e-commerce portals.