MSC INDUSTRIAL SUPPLY CO. William Blair Growth Stock Conference Chicago June 15, 2017

Transcription

1 MSC INDUSTRIAL SUPPLY CO. William Blair Growth Stock Conference Chicago June 15, 2017

2 SAFE HARBOR STATEMENT CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF This presentation contains forward-looking statements within the meaning of U.S. securities laws, including guidance about expected future results, expectations regarding our ability to gain market share, expected benefits from our investment and strategic plans, and expected future margins. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements; are based on our current expectations; and we assume no obligation to update them. Factors that could cause actual results to differ materially from those in forward-looking statements include: general economic conditions in the markets in which we operate, worldwide economic, social, political, and regulatory conditions, including conditions that may result from legislative, regulatory and policy changes, changing customer and product mixes, competition, industry consolidation, volatility in commodity and energy prices, credit risk of our customers, 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, financial restrictions on outstanding borrowings, dependence on our information systems and the risk of business disruptions arising from changes to our information systems, disruptions due to computer system or network failures, computer viruses, physical or electronics break-ins and cyber-attacks, the inability to successfully manage the upgrade of our core financial systems, the loss of key suppliers or supply chain disruptions, problems with successfully integrating acquired operations, opening or expanding our customer fulfillment centers exposes us to risks of delays, the risk of war, terrorism and similar hostilities, dependence on key personnel, goodwill and intangible assets recorded as a result of our acquisitions could be impaired, and the outcome of potential government or regulatory proceedings or future litigation relating to pending or future claims, inquiries or audits. Information about these risks is noted in the earnings press release and in the Risk Factors and MD&A sections of our latest annual and quarterly reports filed with the SEC, as well as in our other SEC filings. Investors are cautioned not to place undue reliance on these forward-looking statements. Throughout this presentation we will reference both GAAP and adjusted financial results, which are non-gaap financial measures. Please refer to the reconciliation tables at the end of this presentation for a reconciliation of the adjusted financial measures to the most directly comparable GAAP measures.

3 INDUSTRY OVERVIEW MSC The top 50 companies represent less than 30% of the market $525B MRO Market in the US* ($160B directly addressable by MSC**) Highly Fragmented 145,000 Distributors in the US* *Source: MDM Analytics (figures are approximate) **Source: Calculation performed by MSC (calculation is approximate)

4 COMPANY OVERVIEW MSC is a value added distributor of services, solutions & products that helps customers reduce their MRO supply chain costs Founded in 1941 by Sid Jacobson > 6,000 associates > 80 branches and 5 primary distribution centers > 3,000 suppliers > 1 Million SKUs, many with 99% fill rates $2.9 Billion Revenue* 13% Operating Margin* 12% 20-Year Sales CAGR** 13% 20-Year EPS CAGR**. Year Ended September 3, 2016 ** 20-Year CAGR calculated through September 3, 2016

5 BY FOCUSING ON PRODUCT COSTS TO REDUCE OUR TCO WE RE MISSING THE BIGGER OPPORTUNITY Hidden Costs Inventory Carrying Obsolescence Tool Crib Receiving & Inspecting Material Handling Productivity Risk Lean Demand Planning Supply Planning Data & Supplier Management Accounting Expediting Inventory and Operational Costs Procurement Costs Product Costs Item Price 5

6 MAKING CUSTOMERS BETTER Cost Savings Documentation ControlPoint Inventory Management Solutions Procurement Savings Pricing Advantage Process Improvements Actual customer achieved $26k of savings on $152k of spend over 2 months Training Total program savings of > $200m for MSC customers in first 6 months of fiscal 2017!

7 SKU CONSOLIDATION ITEM SPECIFIC RATIONALIZATION EXAMPLES Description 22OZ SPRAY NINE EA PURPOSE CLEANER QIA MANDRON PREMIUM CITRUS DEGREASER 22OZ 12/CS QIA Description 32 OZ CLEANER/DEGRSR ALL PURPOSE HYDROFORCE Manufacturer Spray Nine Corp. AMERICAN INDUSTRIES Manufacturer CRC MPN Image Consolidate to a single Item and standardize in all locations. Leverage MSC costs on commodity products MPN Image Pricing $.277 Oz 45,936 Units $ 12, Total $ 1.32 Oz 792 Units $ 1, Total Pricing $.20 Oz 46,728 Units $4, Savings 7

8 MSC S HIGH CUSTOMER SATISFACTION All Contact Centers MSC ranks Top 5% Overall (sample companies in benchmark) Allstate Bass Pro Shops Cabela's Citicard CVS Caremark Kohl's Marriott Nordstrom StubHub T Rowe Price Verizon Walgreens Customer satisfaction a leading indicator of customer retention and growth Source: Foresee survey for the time period: 1H FY17

9 STRONG TRACK RECORD Billions $3.5 $3.0 $2.5 $2.0 50% 40% 30% $1.5 $1.0 $0.5 20% 10% $ Revenue Operating Income Opex as a % of Revenue Operating Margin Gross Margin 0%

10 FY2017 ANNUAL OPERATING MARGIN FRAMEWORK MSC Growth Level Price Environment Slightly Negative Slightly Positive 12.6% (+/- 50 bps) 12.2% (+/- 50 bps) 13.3% (+/- 50 bps) 12.7% (+/- 50 bps) Slightly Negative Slightly Positive

11 STRONG OPERATING CASH FLOW GENERATION Operating Cash Flow ($M) Return to Shareholders ($M) Operating Cash Flow CapEx Net Share Repurchases Special Dividends Common Dividends 50% % 65 30% % Diluted Shares Outstanding (MM) Dividend Payout Ratio** 10% 0% ** Dividend Payout Ratio calculated as common dividends per share / diluted EPS.

12 . APPENDIX

13 DEFINITION & RECONCILIATION Free Cash Flows (FCF) is a Non-GAAP measure and is defined by MSC as cash flows from operating activities less capital expenditures. MSC Industrial Supply Co. Reconciliation of Non-GAAP to GAAP Measures Free Cash Flows Reconciliation (in $ millions) FY2014 FY2015 FY2016 Cash Flows From Operating Activities $272 $250 $401 Less: Capital Expenditures (96) (51) (88) Free Cash Flows $176 $199 $313. Notes: Totals may not add up due to rounding