MSC Industrial Direct Co. Inc.

04/01/2026 | Press release | Distributed by Public on 04/01/2026 12:32

Quarterly Report for Quarter Ending February 28, 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, nine 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 customer's 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 30,414 as of February 28, 2026, compared to 28,085 as of March 1, 2025, and our In-Plant programs totaled 423 locations as of February 28, 2026, compared to 387 as of March 1, 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 2,473 as of February 28, 2026, compared to 2,726 as of March 1, 2025.
Highlights
Highlights during the twenty-six weeks ended February 28, 2026 include:
•We generated $123.8 million of cash from operations, compared to $156.3 million for the same period in the prior fiscal year.
•We had net borrowings of $25.0 million on our credit facilities, compared to net borrowings of $30.3 million for the same period in the prior fiscal year.
•We paid out an aggregate $97.2 million in regular cash dividends, compared to an aggregate $94.9 million in regular cash dividends for the same period in the prior fiscal year.
•We repurchased 160 thousand shares of MSC's Class A Common Stock, par value $0.001 per share ("Class A Common Stock") for $13.7 million, excluding excise taxes, compared to 377 thousand shares repurchased for $30.5 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 $3.8 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 fiscal 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. The Company continued its sales optimization efforts during the first half of fiscal year 2026.
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 in 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.
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 twenty-six-week periods ended February 28, 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 February 2026 and the average for the three- and 12-month periods ended February 2026 were as follows:
Period IP Index
December 101.7
January 102.4
February 102.6
Fiscal Year 2026 Q2 Average 102.2
12-Month Average 101.6
The average IP Index for the three months ended February 2026 was 102.2, an increase compared to the prior quarter average of 101.7 and an increase from an average of 100.5 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 February 28, 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 levels in the first fiscal quarter as a result of the federal government shutdown but such recovery was partially offset by the partial federal government shutdowns during January and February and continuing into our third fiscal quarter. 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 February 28, 2026 Compared to the Thirteen-Week Period Ended March 1, 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
February 28, 2026 March 1, 2025 Change
$ % $ % $ %
Net sales $ 917,774 100.0 % $ 891,717 100.0 % $ 26,057 2.9 %
Cost of goods sold 540,186 58.9 % 526,487 59.0 % 13,699 2.6 %
Gross profit 377,588 41.1 % 365,230 41.0 % 12,358 3.4 %
Operating expenses 310,342 33.8 % 301,578 33.8 % 8,764 2.9 %
Restructuring and other costs 2,454 0.3 % 1,406 0.2 % 1,048 74.5 %
Income from operations 64,792 7.1 % 62,246 7.0 % 2,546 4.1 %
Total other expense (8,774) (1.0) % (10,533) (1.2) % 1,759 (16.7) %
Income before provision for income taxes 56,018 6.1 % 51,713 5.8 % 4,305 8.3 %
Provision for income taxes 13,860 1.5 % 12,566 1.4 % 1,294 10.3 %
Net income 42,158 4.6 % 39,147 4.4 % 3,011 7.7 %
Less: Net loss attributable to noncontrolling interest (326) 0.0 % (167) 0.0 % (159) 95.2 %
Net income attributable to MSC Industrial $ 42,484 4.6 % $ 39,314 4.4 % $ 3,170 8.1 %
Net Sales
Net sales increased 2.9%, or $26.1 million, to $917.8 million for the thirteen-week period ended February 28, 2026, as compared to $891.7 million for the same period in the prior fiscal year. The $26.1 million increase in net sales was comprised of a positive impact from pricing of $58.8 million and favorable foreign exchange impact of $2.9 million, partially offset by $35.6 million of lower sales volume. The positive pricing impact was inclusive of changes in customer and product mix, discounting, favorable tariff-related pricing actions and other items. Of the $26.1 million increase in net sales during the thirteen-week period ended February 28, 2026, sales to our core and other customers increased $26.5 million, sales to our national account customers increased $0.6 million and sales to our public sector customers decreased $1.0 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 February 28, 2026 and March 1, 2025, each as compared to the same period in the prior fiscal year:
ADS Percentage Change
(Unaudited)
Thirteen Weeks Ended
February 28, 2026 March 1, 2025
Net Sales (in thousands) $ 917,774 $ 891,717
Sales Days 63 63
ADS (1) (in millions)
$ 14.6 $ 14.2
Total Company ADS Percent Change(2)
2.9 % (4.7) %
Customer End-Market:
Manufacturing Customers ADS Percent Change(2)(3)
2.7 % (6.3) %
Manufacturing Customers Percent of Total Net Sales (3)
67 % 67 %
Non-Manufacturing Customers ADS Percent Change(2)(3)
3.5 % (1.2) %
Non-Manufacturing Customers Percent of Total Net Sales (3)
33 % 33 %
Customer Type:
National Account Customers ADS Percent Change (2)
0.2 % (5.4) %
National Account Customers Percent of Total Net Sales 36 % 37 %
Public Sector Customers ADS Percent Change (2)
(1.2) % 13.2 %
Public Sector Customers Percent of Total Net Sales 9 % 9 %
Core and Other Customers ADS Percent Change (2)
5.5 % (6.8) %
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.
(3)Prior year data includes the effect of a reclassification of end-markets, primarily between Manufacturing Heavy/Light and Other.
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 64.1% of consolidated net sales for the thirteen-week period ended February 28, 2026, as compared to 63.6% of consolidated net sales for the same period in the prior fiscal year.
Gross Profit
Gross profit increased 3.4%, or $12.4 million, to $377.6 million for the thirteen-week period ended February 28, 2026, compared to $365.2 million for the same period in the prior fiscal year. Gross profit margin was 41.1% for the thirteen-week period ended February 28, 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 as a result of tariff-driven product cost inflation concerns.
Operating Expenses
Operating expenses increased 2.9%, or $8.8 million, to $310.3 million for the thirteen-week period ended February 28, 2026, as compared to $301.6 million for the same period in the prior fiscal year. Operating expenses were 33.8% of net sales for both the thirteen-week periods ended February 28, 2026 and March 1, 2025. The largest contribution to the increase in Operating expenses was higher depreciation and amortization expense.
Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, were $171.2 million, or 55.2% of total Operating expenses, for the thirteen-week period ended February 28, 2026, as compared to $173.3 million, or 57.5% 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, sales commissions and incentive compensation costs, which was partially offset by our annual merit increase.
Freight expense was $35.0 million for the thirteen-week period ended February 28, 2026, as compared to $35.8 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.
Depreciation and amortization was $24.8 million for the thirteen-week period ended February 28, 2026, as compared to $22.5 million for the same period in the prior fiscal year. The primary drivers of the increase in depreciation and amortization were increased capital expenditures related to E-commerce and digital initiatives.
Restructuring and Other Costs
We incurred $2.5 million in Restructuring and other costs for the thirteen-week period ended February 28, 2026, as compared to $1.4 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 9, "Restructuring and Other Costs" in the Notes to Condensed Consolidated Financial Statements for additional information.
Income from Operations
Income from operations increased 4.1%, or $2.5 million, to $64.8 million for the thirteen-week period ended February 28, 2026, as compared to $62.2 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 7.1% for the thirteen-week period ended February 28, 2026, as compared to 7.0% 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 gross profit margin.
Total Other Expense
Total other expense decreased 16.7%, or $1.8 million, to $8.8 million for the thirteen-week period ended February 28, 2026, as compared to $10.5 million for the same period in the prior fiscal year. The decrease was primarily due to lower interest costs on our Credit Facilities and remeasurement gains from foreign exchange compared to foreign exchange losses in the prior year.
Provision for Income Taxes
The Company's effective tax rate for the thirteen-week period ended February 28, 2026 was 24.7%, as compared to 24.3% for the same period in the prior fiscal year. The increase in the effective tax rate was primarily due to lower permanent deductions compared to the prior year.
Net Income
The factors which affected net income for the thirteen-week period ended February 28, 2026, as compared to the same period in the prior fiscal year, have been discussed above.
Twenty-Six-Week Period Ended February 28, 2026 Compared to the Twenty-Six-Week Period Ended March 1, 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:
Twenty-Six Weeks Ended
February 28, 2026 March 1, 2025 Change
$ % $ % $ %
Net sales $ 1,883,458 100.0 % $ 1,820,201 100.0 % $ 63,257 3.5 %
Cost of goods sold 1,113,193 59.1 % 1,076,784 59.2 % 36,409 3.4 %
Gross profit 770,265 40.9 % 743,417 40.8 % 26,848 3.6 %
Operating expenses 621,910 33.0 % 605,141 33.2 % 16,769 2.8 %
Restructuring and other costs 7,324 0.4 % 3,750 0.2 % 3,574 95.3 %
Income from operations 141,031 7.5 % 134,526 7.4 % 6,505 4.8 %
Total other expense (17,499) (0.9) % (22,211) (1.2) % 4,712 (21.2) %
Income before provision for income taxes 123,532 6.6 % 112,315 6.2 % 11,217 10.0 %
Provision for income taxes 30,266 1.6 % 27,474 1.5 % 2,792 10.2 %
Net income 93,266 5.0 % 84,841 4.7 % 8,425 9.9 %
Less: Net loss attributable to noncontrolling interest (1,022) (0.1) % (1,096) (0.1) % 74 (6.8) %
Net income attributable to MSC Industrial $ 94,288 5.0 % $ 85,937 4.7 % $ 8,351 9.7 %
Net Sales
Net sales increased 3.5%, or $63.3 million, to $1,883.5 million for the twenty-six-week period ended February 28, 2026, as compared to $1,820.2 million for the same period in the prior fiscal year. The $63.3 million increase in net sales was comprised of a positive impact from pricing of $97.8 million and favorable foreign exchange impact of $3.9 million, partially offset by $38.4 million of lower sales volume. Of the $63.3 million increase in net sales during the twenty-six-week period ended February 28, 2026, sales to our core and other customers increased $58.4 million, sales to our national account customers increased $10.4 millionand sales to our public sector customers decreased $5.5 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 twenty-six-week periods ended February 28, 2026 and March 1, 2025, each as compared to the same period in the prior fiscal year:
ADS Percentage Change
(Unaudited)
Twenty-Six Weeks Ended
February 28, 2026 March 1, 2025
Net Sales (in thousands) $ 1,883,458 $ 1,820,201
Sales Days 125 125
ADS (1) (in millions)
$ 15.1 $ 14.6
Total Company ADS Percent Change(2)
3.5 % (3.7) %
Customer End-Market:
Manufacturing Customers ADS Percent Change(2)
3.1 % (4.9) %
Manufacturing Customers Percent of Total Net Sales 67 % 67 %
Non-Manufacturing Customers ADS Percent Change(2)
4.2 % (1.0) %
Non-Manufacturing Customers Percent of Total Net Sales 33 % 33 %
Customer Type:
National Account Customers ADS Percent Change (2)
1.5 % (3.5) %
National Account Customers Percent of Total Net Sales 36 % 37 %
Public Sector Customers ADS Percent Change (2)
(3.2) % 11.4 %
Public Sector Customers Percent of Total Net Sales 9 % 9 %
Core and Other Customers ADS Percent Change (2)
6.0 % (6.0) %
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 64.1% of consolidated net sales for the twenty-six-week period ended February 28, 2026, as compared to 63.7% of consolidated net sales for the same period in the prior fiscal year.
Gross Profit
Gross profit increased 3.6%, or $26.8 million, to $770.3 million for the twenty-six-week period ended February 28, 2026, compared to $743.4 millionfor the same period in the prior fiscal year. Gross profit margin was 40.9% for the twenty-six-week period ended February 28, 2026, as compared to 40.8% 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 as a result of tariff-driven product cost inflation concerns.
Operating Expenses
Operating expenses increased 2.8%, or $16.8 million, to $621.9 million for the twenty-six-week period ended February 28, 2026, as compared to $605.1 million for the same period in the prior fiscal year. Operating expenses were 33.0% of net sales for the twenty-six-week period ended February 28, 2026, as compared to 33.2% for the same period in the prior fiscal year. The increase in Operating expenses was primarily a result of advertising expense and higher depreciation and amortization 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 $345.7 million, or 55.6% of total Operating expenses, for the twenty-six-week period ended February 28, 2026 as compared to $347.0 million, or 57.3% 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, sales commissions and incentive compensation costs, which was partially offset by our annual merit increase.
Freight expense was $71.4 million for the twenty-six-week period ended February 28, 2026, as compared to $73.3 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.
Depreciation and amortization was $49.4 million for the twenty-six-week period ended February 28, 2026, as compared to $43.7 million for the same period in the prior fiscal year. The primary drivers of the increase in depreciation and amortization were increased capital expenditures related to E-commerce and digital initiatives.
Advertising expense was $26.5 million for the twenty-six-week period ended February 28, 2026, as compared to $22.8 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 twenty-six-week period ended February 28, 2026, as compared to $3.8 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 9, "Restructuring and Other Costs" in the Notes to Condensed Consolidated Financial Statements for additional information.
Income from Operations
Income from operations increased 4.8%, or $6.5 million, to $141.0 million for the twenty-six-week period ended February 28, 2026, as compared to $134.5 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 7.5% for the twenty-six-week period ended February 28, 2026, as compared to 7.4% 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 gross profit margin and a decrease in Operating expenses as a percentage of net sales.
Total Other Expense
Total other expense decreased 21.2%, or $4.7 million, to $17.5 million for the twenty-six-week period ended February 28, 2026, as compared to $22.2 million for the same period in the prior fiscal year. The decrease was primarily due to lower interest costs on our Credit Facilities, lower fees incurred associated with the Receivables Purchase Agreement and remeasurement gains from foreign exchange compared to foreign exchange losses in the prior year.
Provision for Income Taxes
The Company's effective tax rate was 24.5% for both the twenty-six-week periods ended February 28, 2026 and March 1, 2025.
Net Income
The factors which affected net income for the twenty-six-week period ended February 28, 2026, as compared to the same period in the prior fiscal year, have been discussed above.
Liquidity and Capital Resources
February 28,
2026 		August 30,
2025 		$ Change
(In thousands)
Total debt $ 511,750 $ 485,699 $ 26,051
Less: Cash and cash equivalents 46,192 56,228 (10,036)
Net debt $ 465,558 $ 429,471 $ 36,087
Total shareholders' equity $ 1,385,224 $ 1,396,502 $ (11,278)
As of February 28, 2026, we had $46.2 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 and net proceeds from the private placement notes, 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 February 28, 2026, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $511.8 million, net of unamortized debt issuance costs of $1.4 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 7, "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 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:
Twenty-Six Weeks Ended
February 28,
2026 		March 1,
2025
(In thousands)
Net cash provided by operating activities $ 123,809 $ 156,334
Net cash used in investing activities (42,508) (50,747)
Net cash used in financing activities (91,344) (93,090)
Effect of foreign exchange rate changes on cash and cash equivalents 7 (809)
Net (decrease) increase in cash and cash equivalents $ (10,036) $ 11,688
Cash Flows from Operating Activities
Net cash provided by operating activities was $123.8 million for the twenty-six weeks ended February 28, 2026, compared to $156.3 million for the twenty-six weeks ended March 1, 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;
•an increase in the change of prepaid expenses and other current assets in the current fiscal year due primarily to an increase in vendor rebate receivables and IT-related prepayments;
•a decrease in the change of accounts payable and accrued liabilities as compared to the prior year period due primarily to a decrease in the annual incentive compensation accrual; partially offset by
•a decrease in the change of accounts receivable in the current fiscal year primarily 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:
February 28,
2026 		August 30,
2025 		March 1,
2025
(Dollars in thousands)
Working Capital (1)
$ 520,686 $ 497,208 $ 571,722
Current Ratio (2)
1.7 1.7 1.9
Days' Sales Outstanding (3)
32.8 37.8 35.9
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 February 28, 2026 compared to March 1, 2025 primarily due to higher Current portion of debt including obligations under finance leases and lower Accounts receivable, partially offset by higher Inventories and Prepaid expenses and other current assets. Working capital increased as of February 28, 2026 compared to August 30, 2025 primarily due to higher Inventories and higher Prepaid expenses and other current assets, partially offset by lower Accounts receivable and Accrued expenses and other current liabilities balances.
Days' sales outstanding as of February 28, 2026 decreased compared to both August 30, 2025 and March 1, 2025. The improvement in days' sales outstanding was driven by both improved collections from our national account customers and the RPA amendment in the second quarter of fiscal year 2026.
Inventory turnover as of February 28, 2026 increased compared to both August 30, 2025 and March 1, 2025. Inventory turnover continues to improve due to category management efforts and supply chain efficiencies to optimize inventory levels.
Cash Flows from Investing Activities
Net cash used in investing activities for the twenty-six weeks ended February 28, 2026 and March 1, 2025 was $42.5 million and $50.7 million, respectively. The use of cash for both the twenty-six weeks ended February 28, 2026 and March 1, 2025 was primarily due to expenditures for property, plant and equipment mainly related to vending programs and other infrastructure and technology investments.
Cash Flows from Financing Activities
Net cash used in financing activities was $91.3 million for the twenty-six weeks ended February 28, 2026, compared to $93.1 million for the twenty-six weeks ended March 1, 2025, primarily due to the following:
•$13.7 million, or 160 thousand shares, in aggregate repurchases of Class A Common Stock during the twenty-six weeks ended February 28, 2026, compared to $30.5 million, or 377 thousand shares, in aggregate repurchases of Class A Common Stock during the twenty-six weeks ended March 1, 2025;
•$97.2 million of regular cash dividends paid during the twenty-six weeks ended February 28, 2026, compared to $94.9 million of regular cash dividends paid during the twenty-six weeks ended March 1, 2025;
•net borrowings of $25.0 million under our credit facilities and private placement debt during the twenty-six weeks ended February 28, 2026, compared to net borrowings of $30.3 million during the twenty-six weeks ended March 1, 2025; and
•acquisition of the remaining interest of Wm. F. Hurst Co., LLC for $8.2 million during the twenty-six weeks ended February 28, 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 $500.7 million from the revolving credit facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary. As of February 28, 2026, the Company also had three uncommitted credit facilities, totaling $230.0 million in aggregate maximum uncommitted availability. As of February 28, 2026, we were in compliance with the operating and financial covenants of our credit facilities. See Note 7, "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 7, "Debt" in the Notes to Condensed Consolidated Financial Statements for more information about these transactions.
Leases and Financing Arrangements
As of February 28, 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.
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