MSC Industrial Direct Co. Inc.

07/01/2026 | Press release | Distributed by Public on 07/01/2026 12:30

Quarterly Report for Quarter Ending May 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following is intended to update the information contained in MSC Industrial Direct Co., Inc.'s (together with its wholly owned subsidiaries and entities in which it maintains a controlling financial interest, "MSC," "MSC Industrial," the "Company," "we," "us" or "our") Annual Report on Form 10-K for the fiscal year ended August 30, 2025 and presumes that readers have access to, and will have read, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part II of such Annual Report on Form 10-K.
Our Business
MSC is a leading North American distributor of a broad range of metalworking, maintenance, repair and operations ("MRO"), and production fastener and hardware products and services. We help our customers drive greater productivity, profitability and operational performance with industry-leading inventory management and supply chain solutions and deep expertise from more than 80 years of working with customers across industries. We offer approximately 2.5 million active, saleable stock-keeping units through our E-commerce channels, including our website, www.mscdirect.com (the "MSC website"); our inventory management solutions; our catalogs; our brochures; and our customer care centers, customer fulfillment centers ("CFCs"), regional inventory centers and warehouses. We service our customers from five CFCs, eight regional inventory centers, 37 warehouses, and five manufacturing locations. We continue to implement our strategies to gain market share, generate new customers, increase sales to existing customers and diversify our customer base.
Our business model focuses on providing overall procurement cost reduction and just-in-time delivery to meet our customers' needs. Many of our products are carried in stock, and orders for these in-stock products are typically fulfilled the day on which the order is received. We focus on offering inventory, process and procurement solutions that reduce supply chain costs and improve plant floor productivity for our customers. We aim to achieve ongoing cost reductions throughout our business by implementing cost-saving strategies and leveraging our existing infrastructure. Additionally, we provide our customers with further procurement cost-saving solutions through technologies such as our Vendor Managed Inventory ("VMI"), Customer Managed Inventory ("CMI") and vending programs - helping reduce downtime and ensure critical products are available when and where they are needed. Our vending machines in service totaled 30,790 as of May 30, 2026, compared to 28,741 as of May 31, 2025, and our In-Plant programs totaled 426 locations as of May 30, 2026, compared to 399 as of May 31, 2025. Our sales force, which focuses on a more complex and high-touch role, drives value for our customers by enabling them to achieve higher levels of growth, profitability and productivity. Our field sales and service associate headcount was 2,496 as of May 30, 2026, compared to 2,721 as of May 31, 2025.
Highlights
Highlights during the thirty-nine weeks ended May 30, 2026 include:
•We generated $225.5 million of cash from operations, compared to $253.5 million for the same period in the prior fiscal year.
•We had net borrowings of $20.0 million on our credit facilities, compared to net borrowings of $12.5 million for the same period in the prior fiscal year.
•We paid out an aggregate $145.8 million in regular cash dividends, compared to an aggregate $142.3 million in regular cash dividends for the same period in the prior fiscal year.
•We repurchased 162 thousand shares of MSC's Class A Common Stock, par value $0.001 per share ("Class A Common Stock") for $13.9 million, excluding excise taxes, compared to 494 thousand shares repurchased for $39.1 million, excluding excise taxes, for the same period in the prior fiscal year.
•We amended our Receivables Purchase Agreement (the "RPA") which increased the amount available under the facility by $50.0 million. Proceeds from the RPA were utilized to pay down existing debt on our credit facilities.
•We incurred $7.3 million in Restructuring and other costs, compared to $6.4 million for the same period in the prior fiscal year, consisting primarily of current year severance and separation costs associated with the Company's sales optimization efforts as well as consulting-related costs in the current and prior fis xcal year.
Our Strategy
The first phase of our Company-wide initiative, referred to as "Mission Critical," focused on market share capture and improved profitability. We successfully executed on the first phase of Mission Critical initiatives at the end of fiscal year 2023, which included solidifying our market-leading metalworking business, with an emphasis on selling our product portfolio, expanding our solutions, improving our digital and E-commerce capabilities and diversifying our customers and end-markets. The next phase of our Mission Critical journey, which began in fiscal year 2024, is anchored in three pillars:
(i) maintaining the momentum of the first phase of the Mission Critical program and our existing growth drivers, (ii) increasing our focus on both core customers and OEM fasteners, and (iii) driving productivity improvements and reducing operating expenses as a percentage of net sales. To accomplish the next phase of our Mission Critical journey, we intend to leverage investments in advanced analytics to improve supply chain performance and upgrade our digital core to unlock productivity within our order-to-cash and procure-to-pay processes. In fiscal year 2024, we completed our web price realignment initiative. In fiscal year 2025, we launched our enhanced marketing efforts, rolled out several E-commerce enhancements and began our sales optimization initiative, which included investment in an enhanced, data-driven territory model to optimize field seller portfolios. During fiscal year 2026, alongside its sales optimization initiative, the Company is focused on enhancing end-to-end customer interactions through data-driven insights and organizational alignment to deliver a more personalized and seamless customer experience.
Our primary objective is to grow sales profitably while offering our customers highly technical and high-touch solutions to solve their most complex challenges on the plant floor. We have experienced success to date as measured by the growth rates of our high-touch programs, such as vending and in-plant programs, and the rate of new customer implementations. Our strategy is to position ourselves as a mission-critical partner to our customers. We intend to selectively pursue strategic acquisitions that expand or complement our business in new and existing markets or further enhance the value and offerings we provide.
Business Environment
The United States economy has experienced various macroeconomic pressures in recent years including pricing pressure from tariffs and inflation, sustained high interest rates, increased fuel costs and general economic and political uncertainty. The impact from tariffs was most significant in the latter half of the Company's fiscal year 2025 and has continued into fiscal year 2026. Furthermore, as a supplier to the United States federal government, the federal government shutdown during the Company's fiscal first quarter and the partial federal government shut downs during the Company's fiscal second quarter negatively impacted sales to our public sector end-market. Additionally, increased fuel costs resulting from the conflict within Iran and geopolitical tensions in the region has increased macroeconomic uncertainty generally and may lead to higher freight expense and cost pressure on the products offered by the Company. These pressures have impacted, and may continue to impact in the future, the Company's business, financial condition and results of operations.
International Emergency Economic Powers Act ("IEEPA") Tariff Refunds
On February 20, 2026, the United States Supreme Court issued a ruling invalidating certain tariffs originally mandated under IEEPA. As a result, the United States Court of International Trade ordered the United States Customs and Border Patrol to process refunds for tariffs collected under IEEPA. As a distributor, we are not the importer of record for most products we sell. However, during the thirteen-week period ended May 30, 2026, we formally submitted refund claims for tariffs which had previously been paid by the Company as the importer of record and are now disallowed under the United States Supreme Court ruling. As of May 30, 2026, cash refunds received were not significant. The ultimate availability, timing and amount of potential refunds remains uncertain and subject to regulatory, legal and administrative developments. As of May 30, 2026, we have not recorded a receivable related to such tariff refunds due to the aforementioned uncertainty, however we may recognize additional benefits in future periods.
Following the Supreme Court's ruling on IEEPA tariffs, the United States Executive Branch introduced tariffs under a different statutory authority. There remains significant uncertainty regarding the scope and duration of current and potential tariffs. The Company continues to monitor and evaluate these developments and assess their potential impact on the Company's business, financial condition and results of operations.
We utilize various indices when evaluating the level of our business activity, including the Industrial Production ("IP") Index. Through statistical analysis, we have found that trends in our customers' activity have correlated to changes in the IP Index. The IP Index measures short-term changes in industrial production. Growth in the IP Index compared to the prior quarter indicates growth in the manufacturing, mining and utilities industries. Approximately 67% of our revenues came from sales in the manufacturing sector during both the thirteen- and thirty-nine-week periods ended May 30, 2026. After giving effect to the annual technical revisions to calculations of the IP Index which occurred in November 2025, the
IP Index over the three months ended May 2026 and the average for the three- and 12-month periods ended May 2026 were as follows:
Period IP Index
March 101.6
April 102.5
May 102.6
Fiscal Year 2026 Q3 Average 102.3
12-Month Average 101.7
The average IP Index for the three months ended May 2026 was 102.3, an increase compared to the prior quarter average of 102.2 and an increase from an average of 101.0 during the comparative quarter in the prior year.
During fiscal year 2026, the Company has experienced a more constructive demand environment compared to much of fiscal year 2025. The heavy manufacturing industry, which represented 58% of our revenues during the thirteen-week period ended May 30, 2026, showed signs of expansion. Several IP subindexes, including Aerospace, Machinery and Equipment, Primary Metals and Fabricated Metals improved. Non-manufacturing demand, in particular the Company's public sector end-market, recovered from lower sales as a result of the federal government shutdowns earlier in fiscal year 2026. We will monitor the current economic conditions for the impact on our customers and markets and assess both risks and opportunities that may affect our business and operations.
Thirteen-Week Period Ended May 30, 2026 Compared to the Thirteen-Week Period Ended May 31, 2025
The table below summarizes the Company's results of operations both in dollars (in thousands) and as a percentage of net sales for the periods indicated:
Thirteen Weeks Ended
May 30, 2026 May 31, 2025 Change
$ % $ % $ %
Net sales $ 1,047,083 100.0 % $ 971,145 100.0 % $ 75,938 7.8 %
Cost of goods sold 616,678 58.9 % 573,406 59.0 % 43,272 7.5 %
Gross profit 430,405 41.1 % 397,739 41.0 % 32,666 8.2 %
Operating expenses 323,660 30.9 % 312,324 32.2 % 11,336 3.6 %
Restructuring and other costs - - % 2,680 0.3 % (2,680) (100.0) %
Income from operations 106,745 10.2 % 82,735 8.5 % 24,010 29.0 %
Total other expense (2,501) (0.2) % (7,621) (0.8) % 5,120 (67.2) %
Income before provision for income taxes 104,244 10.0 % 75,114 7.7 % 29,130 38.8 %
Provision for income taxes 25,539 2.4 % 18,253 1.9 % 7,286 39.9 %
Net income 78,705 7.5 % 56,861 5.9 % 21,844 38.4 %
Less: Net (loss) income attributable to noncontrolling interest (1,657) (0.2) % 16 0.0 % (1,673) (10,456.3) %
Net income attributable to MSC Industrial $ 80,362 7.7 % $ 56,845 5.9 % $ 23,517 41.4 %
Net Sales
Net sales increased 7.8%, or $75.9 million, to $1,047.1 million for the thirteen-week period ended May 30, 2026, as compared to $971.1 million for the same period in the prior fiscal year. The $75.9 million increase in net sales was comprised of a positive impact from pricing of $70.1 million, $4.5 million of higher sales volume, and favorable foreign exchange impact of $1.3 million. The positive pricing impact was inclusive of changes in customer and product mix, discounting, favorable pricing actions and other items. Of the $75.9 million increase in net sales during the thirteen-week
period ended May 30, 2026, sales to our core and other customers increased $42.7 million, sales to our national account customers increased $25.6 million and sales to our public sector customers increased $7.6 million.
The table below shows, among other things, the change in our average daily sales ("ADS") by total Company, by customer end-market and by customer type for the thirteen-week periods ended May 30, 2026 and May 31, 2025, each as compared to the same period in the prior fiscal year:
ADS Percentage Change
(Unaudited)
Thirteen Weeks Ended
May 30, 2026 May 31, 2025
Net Sales (in thousands) $ 1,047,083 $ 971,145
Sales Days 64 64
ADS (1) (in millions)
$ 16.4 $ 15.2
Total Company ADS Percent Change (2)
7.8 % (0.8) %
Customer End-Market:
Manufacturing Customers ADS Percent Change (2)
6.8 % 0.0 %
Manufacturing Customers Percent of Total Net Sales 67 % 67 %
Non-Manufacturing Customers ADS Percent Change (2)
9.8 % (2.4) %
Non-Manufacturing Customers Percent of Total Net Sales 33 % 33 %
Customer Type:
National Account Customers ADS Percent Change (2)
7.2 % (1.7) %
National Account Customers Percent of Total Net Sales 36 % 37 %
Public Sector Customers ADS Percent Change (2)
8.4 % 2.4 %
Public Sector Customers Percent of Total Net Sales 9 % 9 %
Core and Other Customers ADS Percent Change (2)
8.1 % (0.8) %
Core and Other Customers Percent of Total Net Sales 55 % 54 %
(1)ADS is calculated using the number of business days in the United States for the periods indicated. The Company believes ADS is a key performance indicator because it shows the effectiveness of the Company's selling performance on a consistent basis between periods.
(2)Percent reflects the change from the 2025 fiscal period to the 2026 fiscal period and the change from the 2024 fiscal period to the 2025 fiscal period, respectively.
We believe that our ability to transact business with our customers directly through the MSC website as well as through various other electronic portals gives us a competitive advantage over smaller suppliers. Sales made through our E-commerce platforms, including sales made through Electronic Data Interchange ("EDI") systems, VMI systems, Extensible Markup Language ordering-based systems, vending, hosted systems and other electronic portals, represented 63.7% of consolidated net sales in both the thirteen-week period ended May 30, 2026 and the same period in the prior fiscal year.
Gross Profit
Gross profit increased 8.2%, or $32.7 million, to $430.4 million for the thirteen-week period ended May 30, 2026, compared to $397.7 million for the same period in the prior fiscal year. Gross profit margin was 41.1% for the thirteen-week period ended May 30, 2026, as compared to 41.0% for the same period in the prior fiscal year. The increase in gross profit was primarily a result of an increase in net sales, as described above, while the increase in gross profit margin was primarily a result of favorable pricing actions.
Operating Expenses
Operating expenses increased 3.6%, or $11.3 million, to $323.7 million for the thirteen-week period ended May 30, 2026, as compared to $312.3 million for the same period in the prior fiscal year. Operating expenses were 30.9% of net sales for the thirteen-week period ended May 30, 2026, as compared to 32.2% for the same period in the prior fiscal year. The largest contributions to the increase in Operating expenses were higher depreciation and amortization expense, provision for credit losses and stock-based compensation expense.
Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, were $173.8 million, or 53.7% of total Operating expenses, for the thirteen-week period ended May 30, 2026, as compared to $175.3 million, or 56.1% of total Operating expenses, for the same period in the prior fiscal year. The headcount reduction actions during fiscal year 2026 resulted in lower salary and sales commission costs, which were partially offset by our annual merit increase and larger incentive compensation accruals.
Freight expense was $37.7 million for the thirteen-week period ended May 30, 2026, as compared to $40.9 million for the same period in the prior fiscal year. The primary driver of the decrease was favorable third-party shipping rates achieved through our network optimization initiatives and higher freight costs in the prior year incurred while servicing certain customers in the public sector.
Depreciation and amortization was $24.9 million for the thirteen-week period ended May 30, 2026, as compared to $22.3 million for the same period in the prior fiscal year. The increase was primarily driven by capital expenditures to support the Company's strategic growth initiatives and expanded solutions footprint.
Income from Operations
Income from operations increased 29.0%, or $24.0 million, to $106.7 million for the thirteen-week period ended May 30, 2026, as compared to $82.7 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 10.2% for the thirteen-week period ended May 30, 2026, as compared to 8.5% for the same period in the prior fiscal year. The increase in income from operations as a percentage of net sales was primarily attributable to, as described above, an increase in net sales along with a decrease in Operating expenses as a percentage of Net Sales.
Total Other Expense
Total other expense decreased 67.2%, or $5.1 million, to $2.5 million for the thirteen-week period ended May 30, 2026, as compared to $7.6 million for the same period in the prior fiscal year. The decrease was primarily due to the recognition of $5.1 million of Employee Retention Credit ("ERC") claims.
Provision for Income Taxes
The Company's effective tax rate for the thirteen-week period ended May 30, 2026 was 24.5%, as compared to 24.3% for the same period in the prior fiscal year.
Net Income
The factors which affected net income for the thirteen-week period ended May 30, 2026, as compared to the same period in the prior fiscal year, have been discussed above.
Thirty-Nine-Week Period Ended May 30, 2026 Compared to the Thirty-Nine-Week Period Ended May 31, 2025
The table below summarizes the Company's results of operations both in dollars (in thousands) and as a percentage of net sales for the periods indicated:
Thirty-Nine Weeks Ended
May 30, 2026 May 31, 2025 Change
$ % $ % $ %
Net sales $ 2,930,541 100.0 % $ 2,791,346 100.0 % $ 139,195 5.0 %
Cost of goods sold 1,729,871 59.0 % 1,650,190 59.1 % 79,681 4.8 %
Gross profit 1,200,670 41.0 % 1,141,156 40.9 % 59,514 5.2 %
Operating expenses 945,570 32.3 % 917,465 32.9 % 28,105 3.1 %
Restructuring and other costs 7,324 0.2 % 6,430 0.2 % 894 13.9 %
Income from operations 247,776 8.5 % 217,261 7.8 % 30,515 14.0 %
Total other expense (20,000) (0.7) % (29,832) (1.1) % 9,832 (33.0) %
Income before provision for income taxes 227,776 7.8 % 187,429 6.7 % 40,347 21.5 %
Provision for income taxes 55,805 1.9 % 45,727 1.6 % 10,078 22.0 %
Net income 171,971 5.9 % 141,702 5.1 % 30,269 21.4 %
Less: Net loss attributable to noncontrolling interest (2,679) (0.1) % (1,080) 0.0 % (1,599) 148.1 %
Net income attributable to MSC Industrial $ 174,650 6.0 % $ 142,782 5.1 % $ 31,868 22.3 %
Net Sales
Net sales increased 5.0%, or $139.2 million, to $2,930.5 million for the thirty-nine-week period ended May 30, 2026, as compared to $2,791.3 million for the same period in the prior fiscal year. The $139.2 million increase in net sales was comprised of a positive impact from pricing of $167.9 million and favorable foreign exchange impact of $5.2 million, partially offset by $33.9 million of lower sales volume. The positive pricing impact was inclusive of changes in customer and product mix, discounting, favorable pricing actions and other items. Of the $139.2 million increase in net sales during the thirty-nine-week period ended May 30, 2026, sales to our core and other customers increased $101.1 million, sales to our national account customers increased $36.0 million and sales to our public sector customers increased $2.1 million.
The table below shows, among other things, the change in our ADS by total Company, by customer end-market and by customer type for the thirty-nine-week periods ended May 30, 2026 and May 31, 2025, each as compared to the same period in the prior fiscal year:
ADS Percentage Change
(Unaudited)
Thirty-Nine Weeks Ended
May 30, 2026 May 31, 2025
Net Sales (in thousands) $ 2,930,541 $ 2,791,346
Sales Days 189 189
ADS (1) (in millions)
$ 15.5 $ 14.8
Total Company ADS Percent Change (2)
5.0 % (2.7) %
Customer End-Market:
Manufacturing Customers ADS Percent Change (2)
4.4 % (3.3) %
Manufacturing Customers Percent of Total Net Sales 67 % 67 %
Non-Manufacturing Customers ADS Percent Change (2)
6.2 % (1.4) %
Non-Manufacturing Customers Percent of Total Net Sales 33 % 33 %
Customer Type:
National Account Customers ADS Percent Change (2)
3.5 % (2.9) %
National Account Customers Percent of Total Net Sales 36 % 37 %
Public Sector Customers ADS Percent Change (2)
0.8 % 8.1 %
Public Sector Customers Percent of Total Net Sales 9 % 9 %
Core and Other Customers ADS Percent Change (2)
6.7 % (4.2) %
Core and Other Customers Percent of Total Net Sales 55 % 54 %
(1)ADS is calculated using the number of business days in the United States for the periods indicated. The Company believes ADS is a key performance indicator because it shows the effectiveness of the Company's selling performance on a consistent basis between periods.
(2)Percent reflects the change from the 2025 fiscal period to the 2026 fiscal period and the change from the 2024 fiscal period to the 2025 fiscal period, respectively.
We believe that our ability to transact business with our customers directly through the MSC website as well as through various other electronic portals gives us a competitive advantage over smaller suppliers. Sales made through our E-commerce platforms, including sales made through EDI systems, VMI systems, Extensible Markup Language ordering-based systems, vending, hosted systems and other electronic portals, represented 64.0% of consolidated net sales for the thirty-nine-week period ended May 30, 2026, as compared to 63.7% of consolidated net sales for the same period in the prior fiscal year.
Gross Profit
Gross profit increased 5.2%, or $59.5 million, to $1,200.7 million for the thirty-nine-week period ended May 30, 2026, compared to $1,141.2 million for the same period in the prior fiscal year. Gross profit margin was 41.0% for the thirty-nine-week period ended May 30, 2026, as compared to 40.9% for the same period in the prior fiscal year. The increase in gross profit was primarily a result of higher net sales, as described above, while the increase in gross profit margin was primarily a result of favorable pricing actions.
Operating Expenses
Operating expenses increased 3.1%, or $28.1 million, to $945.6 million for the thirty-nine-week period ended May 30, 2026, as compared to $917.5 million for the same period in the prior fiscal year. Operating expenses were 32.3% of net sales for the thirty-nine-week period ended May 30, 2026, as compared to 32.9% for the same period in the prior fiscal year. The largest contributions to the increase in Operating expenses were higher depreciation and amortization expense and higher share based compensation expense. The decrease in operating expenses as a percentage of net sales was primarily due to growth in net sales outpacing the increase in Operating expenses.
Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, were $519.5 million, or 55.0% of total Operating expenses, for the thirty-nine-week period ended May 30, 2026 as compared to $522.3 million, or 56.9% of total Operating expenses, for the same period in the prior fiscal year. The headcount reduction actions during fiscal year 2026 resulted in lower salary and sales commission costs, which was partially offset by our annual merit increase.
Freight expense was $109.1 million for the thirty-nine-week period ended May 30, 2026, as compared to $114.1 million for the same period in the prior fiscal year. The primary driver of the decrease was favorable third-party shipping rates achieved through our network optimization initiatives and higher freight costs in the prior year incurred while servicing certain customers in the public sector.
Depreciation and amortization was $74.4 million for the thirty-nine-week period ended May 30, 2026, as compared to $66.0 million for the same period in the prior fiscal year. The increase was primarily driven by capital expenditures to support our strategic growth initiatives and expanded solutions footprint.
Advertising expense was $39.9 million for the thirty-nine-week period ended May 30, 2026, as compared to $34.9 million for the same period in the prior fiscal year. The primary driver of the increase was higher search engine marketing spend as part of the Company's enhanced marketing efforts which began in fiscal year 2025.
Restructuring and Other Costs
We incurred $7.3 million in Restructuring and other costs for the thirty-nine-week period ended May 30, 2026, as compared to $6.4 million for the same period in the prior fiscal year. The increase was primarily related to higher severance and separation benefits associated with the Company's workforce realignment actions in the current fiscal year. See Note 10, "Restructuring and Other Costs" in the Notes to Condensed Consolidated Financial Statements for additional information.
Income from Operations
Income from operations increased 14.0%, or $30.5 million, to $247.8 million for the thirty-nine-week period ended May 30, 2026, as compared to $217.3 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 8.5% for the thirty-nine-week period ended May 30, 2026, as compared to 7.8% for the same period in the prior fiscal year. The increase in income from operations as a percentage of net sales was primarily attributable to, as described above, an increase in net sales along with a decrease in Operating expenses as a percentage of Net Sales.
Total Other Expense
Total other expense decreased 33.0%, or $9.8 million, to $20.0 million for the thirty-nine-week period ended May 30, 2026, as compared to $29.8 million for the same period in the prior fiscal year. The decrease was primarily due to the recognition of $5.1 million of ERC funds, lower interest costs on our Credit Facilities and current year remeasurement gains from foreign exchange.
Provision for Income Taxes
The Company's effective tax rate was 24.5% for the thirty-nine-week period ended May 30, 2026 as compared to 24.4% for the thirty-nine-week period ended May 31, 2025.
Net Income
The factors which affected net income for the thirty-nine-week period ended May 30, 2026, as compared to the same period in the prior fiscal year, have been discussed above.
Liquidity and Capital Resources
May 30,
2026 		August 30,
2025 		$ Change
(In thousands)
Total debt $ 506,774 $ 485,699 $ 21,075
Less: Cash and cash equivalents 74,094 56,228 17,866
Net debt $ 432,680 $ 429,471 $ 3,209
Total shareholders' equity $ 1,419,421 $ 1,396,502 $ 22,919
As of May 30, 2026, we had $74.1 million in cash and cash equivalents, substantially all with well-known financial institutions. Historically, our primary financing needs have been to fund our working capital requirements necessitated by our sales growth and the costs of acquisitions, new products, new facilities, facility expansions, investments in vending solutions, technology investments, and productivity investments. Cash generated from operations, together with borrowings under our credit facilities, net proceeds from the private placement notes and proceeds from the sale of receivables under our securitization program, have been used to fund these needs, to repurchase shares of Class A Common Stock from time to time, and to pay dividends to our shareholders.
As of May 30, 2026, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $506.8 million, net of unamortized debt issuance costs of $1.3 million, as compared to total borrowings outstanding of $485.7 million, net of unamortized debt issuance costs of $1.5 million, as of the end of fiscal year 2025. The increase in total borrowings outstanding was driven by higher net borrowings under our credit facilities. See Note 8, "Debt" in the Notes to Condensed Consolidated Financial Statements for more information about these balances.
We believe, based on our current business plan, that our existing cash, financial resources and cash flow from operations will be sufficient to fund anticipated capital expenditures, debt maturities and operating cash requirements for at least the next 12 months. We will continue to evaluate our financial position in light of future developments and to take appropriate action as it is warranted.
The table below summarizes certain information regarding the Company's cash flows for the periods indicated:
Thirty-Nine Weeks Ended
May 30,
2026 		May 31,
2025
(In thousands)
Net cash provided by operating activities $ 225,535 $ 253,461
Net cash used in investing activities (63,313) (41,563)
Net cash used in financing activities (144,274) (169,598)
Effect of foreign exchange rate changes on cash and cash equivalents (82) (196)
Net increase in cash and cash equivalents $ 17,866 $ 42,104
Cash Flows from Operating Activities
Net cash provided by operating activities was $225.5 million for the thirty-nine weeks ended May 30, 2026, compared to $253.5 million for the thirty-nine weeks ended May 31, 2025. The decrease was primarily due to the following:
•an increase in the change of inventories in the current fiscal year relative to the prior year due to inventory management countermeasures in response to tariffs and to support sales growth;
•a decrease in the change of accounts payable and accrued liabilities as compared to the prior year period as the current year payroll and incentive compensation accrual declined compared to an increase in the prior year; partially offset by
•a decrease in the change of accounts receivable in the current year attributable to the RPA amendment; and
•an increase in net income.
The table below summarizes certain information regarding the Company's operations as of the periods indicated:
May 30,
2026 		August 30,
2025 		May 31,
2025
(Dollars in thousands)
Working Capital (1)
$ 452,017 $ 497,208 $ 592,498
Current Ratio (2)
1.5 1.7 1.9
Days' Sales Outstanding (3)
36.6 37.8 39.4
Inventory Turnover (4)
3.5 3.4 3.4
(1)Working Capital is calculated as current assets less current liabilities.
(2)Current Ratio is calculated as total current assets divided by total current liabilities.
(3)Days' Sales Outstanding is calculated as accounts receivable divided by net sales, using trailing two months sales data.
(4)Inventory Turnover is calculated as total cost of goods sold divided by inventory, using a 13-month trailing average inventory.
Working capital and current ratio decreased as of May 30, 2026 compared to May 31, 2025 and August 30, 2025, primarily due to higher Current portion of debt including obligations under finance leases partially offset by higher Inventories compared to both comparable periods.
Days' sales outstanding as of May 30, 2026 decreased modestly compared to both August 30, 2025 and May 31, 2025 driven by the RPA amendment in the second quarter of fiscal year 2026.
Inventory turnover as of May 30, 2026 increased compared to both August 30, 2025 and May 31, 2025. Inventory turnover continues to improve due to category management efforts and supply chain efficiencies to optimize inventory levels. The recent higher balance of Inventories is due to inventory management countermeasures in response to tariffs and to support recent sales growth.
Cash Flows from Investing Activities
Net cash used in investing activities for the thirty-nine weeks ended May 30, 2026 and May 31, 2025 was $63.3 million and $41.6 million, respectively. The use of cash for both the thirty-nine weeks ended May 30, 2026 and May 31, 2025 was primarily due to expenditures for property, plant and equipment mainly related to vending programs and other infrastructure and technology investments. Cash used in investing activities for the prior year period was partially offset by the net proceeds received from the sale of the Columbus CFC.
Cash Flows from Financing Activities
Net cash used in financing activities was $144.3 million for the thirty-nine weeks ended May 30, 2026, compared to $169.6 million for the thirty-nine weeks ended May 31, 2025, primarily due to the following:
•$13.9 million, or 162 thousand shares, in aggregate repurchases of Class A Common Stock during the thirty-nine weeks ended May 30, 2026, compared to $39.1 million, or 494 thousand shares, in aggregate repurchases of Class A Common Stock during the thirty-nine weeks ended May 31, 2025;
•$145.8 million of regular cash dividends paid during the thirty-nine weeks ended May 30, 2026, compared to $142.3 million of regular cash dividends paid during the thirty-nine weeks ended May 31, 2025;
•net borrowings of $20.0 million under our credit facilities and private placement debt during the thirty-nine weeks ended May 30, 2026, compared to net borrowings of $12.5 million during the thirty-nine weeks ended May 31, 2025; and
•acquisition of the remaining interest of Wm. F. Hurst Co., LLC for $8.2 million during the thirty-nine weeks ended May 30, 2026, which increased the Company's ownership from 80% to 100%.
Capital Expenditures
We continue to invest in E-commerce and vending platforms, CFCs and distribution network, and other infrastructure and technology.
Long-Term Debt
Credit Facilities
In April 2017, the Company entered into a $600.0 million revolving credit facility, which was subsequently amended. The current unused balance of $505.7 million from the revolving credit facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary. As of May 30, 2026, the Company also had three uncommitted credit facilities, totaling $230.0 million in aggregate maximum uncommitted availability. As of May 30, 2026, we were in compliance with the operating and financial covenants of our credit facilities. See Note 8, "Debt" in the Notes to Condensed Consolidated Financial Statements for more information about these balances.
Private Placement Debt
In July 2016, we completed the issuance and sale of unsecured senior notes. In June 2018 and March 2020, we entered into additional note purchase agreements. In April 2024, the Company completed the issuance and sale of senior notes. See Note 8, "Debt" in the Notes to Condensed Consolidated Financial Statements for more information about these transactions.
Leases and Financing Arrangements
As of May 30, 2026, certain of our operations were conducted on leased premises. These leases are for varying periods, the longest extending to fiscal year 2032. In addition, we are obligated under certain equipment and automobile operating and finance leases, which expire on varying dates through fiscal year 2029.
From time to time, we enter into financing arrangements with vendors to purchase certain information technology equipment or software.
Critical Accounting Estimates
On an ongoing basis, we evaluate our critical accounting policies and estimates, including those related to revenue recognition, inventory valuation, allowance for credit losses, warranty reserves, contingencies and litigation, income taxes, and accounting for goodwill and long-lived assets. We make estimates, judgments and assumptions in determining the amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying Notes. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The estimates are used to form the basis for making judgments about the carrying values of assets and liabilities and the amount of revenues and expenses reported that are not readily apparent from other sources. Actual results may differ from these estimates.
There have been no material changes outside the ordinary course of business in the Company's critical accounting policies, as disclosed in its Annual Report on Form 10-K for the fiscal year ended August 30, 2025.
Recently Adopted Accounting Standards
See Note 1, "Basis of Presentation" in the Notes to Condensed Consolidated Financial Statements.
MSC Industrial Direct Co. Inc. published this content on July 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 01, 2026 at 18:30 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]