MSC Industrial Shrugs Off Slowdown: Fool by Numbers

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On April 4, MSC Industrial Direct (NYSE: MSM) released Q2 2007 earnings for the period ending Apr. 24.

• Sales for the quarter increased 32.3%. Seventy percent of the growth was from the acquisition last March of J&L Industrial Supply.
• Management reiterated its confidence in reaching $20 million in margin improvement from cost cutting related to the integration.
• However, management also noted there was a bit of slowdown in certain niches of its customer segments (notice that shares of Applied Industrial Technologies (NYSE: AIT) and Fastenal (Nasdaq FAST) are languishing). However, they believe even in a downturn they will continue to capture market share.

(Figures in thousands, except per-share data)

Income Statement Highlights

	Q2 2007	Q2 2006	Change
Sales	$404,618	$305,927	32.3%
Net Profit	$40,507	$33,329	21.5%
EPS	$0.61	$0.49	24.5%
Diluted Shares	66,781	68,327	(2.3%)

Get back to basics with the income statement.

Margin Checkup

	Q2 2007	Q2 2006	Change*
Gross Margin	46.36%	47.54%	(1.18)
Operating Margin	17.19%	17.68%	(0.49)
Net Margin	10.01%	10.89%	(0.88)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q2 2007	Q2 2006	Change
Cash + ST Invest.	$5,054	$7,718	(34.5%)
Accounts Rec.	$197,894	$146,158	35.4%
Inventory	$309,754	$241,705	28.2%

Liabilities	Q2 2007	Q2 2006	Change
Accounts Payable	$67,768	$44,943	50.8%
Long-Term Debt	$177,531	$905	NM*

*Percent change is not meaningful because of acquisition.

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q2 2007	Q2 2006	Change
Cash From Ops.	$73,717	$47,879	54.0%
Capital Expenditures	$14,729	$8,033	83.4%
Free Cash Flow	$58,988	$39,846	48.0%

Free cash flow is a Fool's best friend.

Related Foolishness:

• MSC Industrial: The Respect Continues
• More Heavy Metal for MSC Industrial
• Of Grainger and Value

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.