MSC Industrial Supply Co.Jeff Kaczka, Chief Financial Officer
Raymond JamesInstitutional Investor ConferenceOrlando, March 4, 2014
Safe Harbor Statement
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
Statements in this Presentation may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein which are not statements of historical facts and that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future shall be deemed to be forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events, actual results and performance, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by MSC or any other person that the events or circumstances described in such statement are material. Factors that could cause actual results to differ materially from those in forward-looking statements include, without limitation, the Company’s ability to timely and efficiently integrate the J&L business acquired in June 2006 and realize the anticipated synergies from this transaction, changing customer and product mixes, changing market conditions, industry consolidations, competition, general economic conditions in the markets in which the Company operates, rising commodity and energy prices, risk of cancellation or rescheduling of orders, work stoppages or other business interruptions (including those due to extreme weather conditions) at transportation centers or shipping ports, the risk of war, terrorism and similar hostilities, dependence on the Company’s information systems and on key personnel, the outcome of potential government or regulatory proceedings or future litigation relating to pending or future claims, inquiries or audits, and various other risk factors listed from time to time in the Company's SEC reports.
Company Overview
MSC is a value added distributor of services, solutions & products that helps customers reduce their MRO supply chain costs
$2.6 BillionPro-Forma Revenue*
13%3-Year Sales CAGR
16.3%Adjusted Operating
Margin*
17%3-Year EPS CAGR
Founded in 1941 by Sid Jacobson
> 6,000 associates
> 100 branches and 4 major distribution centers
> 3,000 suppliers
> 700,000 SKUs with 99% fill rates* Unaudited data for fiscal year ended August 31, 2013.
Key Investment Highlights
Uniquely positioned to gain share in a large, fragmented market
Scalable and very profitable business model with repeatable growth
formula
Track record of capitalizing on growth opportunities
– Product category expansion yields deeper wallet share
– Scalable infrastructure supports organic growth
– Industry consolidation presents significant M&A opportunity
High free cash flow generation (+$600 million in past 3 fiscal years)
Industry Overview
The top 50 companies represent less than 30% of the market
MSC
$140B MRO Market in the US Highly Fragmented 150,000 Distributors in the US
Competitive Position
MSC Industry Average
Products 725,000 15,000
Fill Rate 99% 58%
# of Orders/Yr. 6 million N/A
Customers 325,000 2,000
Unique Buyers 550,000 N/A
Gross Margin 46% 23%
(amounts are approximate)
Fulfillment Center Network
Next Day Delivery
Scalable & Repeatable
Customer Fulfillment Centers (CFCs)
BDNA CFCs
CFC under construction
Broad Product Offering
Significant competitive advantage
>700,000Items in Stock
99%Fill Rate
Customer Landscape
Top Customers Demand Value-added ServicesSmaller Customers Require Efficient Cost-to-Serve Model
Source: D&B; Infogroup
Customer Count
2%
10%
31%
57%
Revenue Potential
42%
34%
19%
5%
Simple Transactions
Complex Solutions
Company Size(# employees)
Medium
(50-249)
Small (10-49)
Very small
(10-49)
Large(>250)
Customer Challenges
Non-Core Activities
Excess Inventory
Disruption of Supply
Freight and Handling
Costs
Service and Delivery Issues
Data Collection and Management
Too Many Suppliers
Too Many SKUs
Too Many Purchase
Orders
Difficult to Drive
Compliance
Operationally Expensive
Time Consuming to
Manage
Challenges
MSC Value Proposition
SaveTime
SaveMoney
MSC Value Proposition
Over 1 Million Items in 40 Major Categories
mscdirect.com & eProcurement
Same-Day Shipping with Service Guarantee
Next Day Delivery when ordered by
8 p.m. ET
SaveTime
SaveMoney
Product Supermarket
Private Brands
Inventory Management
& Supply Chain Solutions
Technical Team
MSC Value Proposition
Over 1 Million Items in 40 Major Categories
mscdirect.com & eProcurement
Same-Day Shipping with Service Guarantee
Next Day Delivery when ordered by
8 p.m. ET
SaveTime
SaveMoney
Repeatable Growth Formula
Logistics Sales Force Products Solutions Technology e-commerce Scalable Foundation
Repeatable Growth Formula
Metalworking
Strategic M&A
Customized Supply Chain Solutions
Expertly Trained Sales Organization
Metalworking Specialists
Technical Service & Support
Private Brands
Logistics Sales Force Products Solutions Technology e-commerce Scalable Foundation
Repeatable Growth Formula
Product Growth Segments
Material Handling
Safety
Hand and Power Tools
Fasteners
Power Transmission
Electrical and Lighting
Motion Control
…and more
Metalworking
Strategic M&A
Customized Supply Chain Solutions
Expertly Trained Sales Organization
Metalworking Specialists
Technical Service & Support
Private Brands
Logistics Sales Force Products Solutions Technology e-commerce Scalable Foundation
Repeatable Growth Formula
Product Growth Segments
Material Handling
Safety
Hand and Power Tools
Fasteners
Power Transmission
Electrical and Lighting
Motion Control
…and more
End-market Growth Segments
Aerospace
Automotive
Processing
Government
Education
Healthcare
Energy
…and more
Metalworking
Strategic M&A
Customized Supply Chain Solutions
Expertly Trained Sales Organization
Metalworking Specialists
Technical Service & Support
Private Brands
Logistics Sales Force Products Solutions Technology e-commerce Scalable Foundation
Strategic Investment and Focus on Adjacent Growth Segments
Logistics Sales Force Products Technology/Solutions e-commerce
Repeatable Growth Formula
Scalable Foundation
Strategic Investment and Focus on Adjacent Growth Segments
Geographically Scalable Opportunities
Product Growth Segments
Material Handling
Safety
Hand and Power Tools
Fasteners
Power Transmission
Electrical and Lighting
Motion Control
…and more
End-market Growth Segments
Aerospace
Automotive
Processing
Government
Education
Healthcare
Energy
…and more
Metalworking
Strategic M&A
Customized Supply Chain Solutions
Expertly Trained Sales Organization
Metalworking Specialists
Technical Service & Support
Private Brands
U.S. The Americas Europe Asia
Growth Drivers
Vending SKU Expansion
e-Commerce M&A
National Accounts Salesforce Expansion
Organic Growth Strategies(11% historical)
M&A(2% historical)
Update on Growth and Infrastructure Investments
Vending(On-Track)
SKU Expansion(On-Track)
e-Commerce(On-Track)
BDNA Integration(On-Track)
Salesforce Expansion(On-Track)
Davidson HQ Relocation(Complete)
5th CFC Expansion(On-Track)
Data Center(On-Track)
Strict Acquisition Evaluation Criteria
Strategic Fit with our growth plan
Synergy Potential on both the cost and revenue sides of the equation
Enhance MSC’s value proposition and go-to-market product
Cultural fit between MSC and the acquisition target
Recent Acquisitions
• Barnes Distribution North America (2013)
• ATS Industrial Supply, Inc. (2012)
• American Tool Supply (2011)
• American Specialty Grinding (2011)
• Rutland Tool & Supply Co. (2010)
• J&L Industrial Supply (2006)
Leading North American VMI platform supplying a comprehensive range of high margin “C” class MRO products and tailored customer solutions
Broad, balanced geographic coverage serving all 50 U.S. states and 10 Canadian provinces
Diverse customer base and longstanding customer relationships with roughly 31,000 active accounts
Industry leading sales force including over 800 field sales professionals, supported by dedicated inside sales professionals and technical product experts
Broad, high margin product offering including a robust private label offering
Strong financial performance – 2012F unaudited sales of roughly $300 million
Strong strategic fit and significant synergy potential.
Example: BDNA Overview
Financial ReviewFinancial Review
Track Record of Growth*
* An explanation and reconciliation of the non-GAAP financial measures contained in this presentation to the most directly comparable GAAP financial measures can be found on www.mscdirect.com.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0.0
$500.0
$1,000.0
$1,500.0
$2,000.0
$2,500.0
0%
10%
20%
30%
40%
50%
Revenue Adj. Operating Income Adj. Operating Margin Gross Margin
Financial Strengths
Strong balance sheet supports growth
– Cash of $48M*
– Debt of $322M*
– Shareholders equity = $1.3B*
Total free cash flow in excess of $640M* over last 3 years
Re-purchased approx. $235M* of MSC stock and paid approx. $200M* in dividends over last 3 years
* As of November 30, 2013.
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