Industrial tools distributor MSC Industrial Direct Co., Inc. (MSM) Tuesday morning reported that profit for the second quarter fell from last year, hurt by a drop in quarterly sales amid very challenging economic climate, despite cost controls. Earnings per share decreased year-over-year, but topped analysts' estimate by two cents, while quarterly revenues missed consensus estimate. The company also provided earnings and sales guidance for the third quarter, both below analysts' current estimates.

In a statement, president and chief executive officer, David Sandler said, Our performance in the fiscal second quarter represents solid execution in the face of market conditions that continued to deteriorate - During the quarter, we continued to provide our customers with unmatched levels of service and support, which we believe resulted in taking additional market share during the period.

The company also added that as the overall market conditions and sales levels deteriorated, it moved quickly to control costs and protect gross margins.

The Melville, New York based company posted net income of $26.28 million or $0.42 per share for the second quarter, lower than $47.46 million or $0.73 per share in the prior-year quarter. On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.40 per share for the second quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter dropped to $351.91 million from $436.49 million in the same quarter last year, and missed five Wall Street analysts' consensus estimate of $357.69 million.

Income from operations for the quarter declined to $43.24 million or 12.3% of sales, from $78.62 million or 18.0% of sales in the year-ago quarter. Operating expenses were $120.56 million, lower than $124.44 million in the prior-year quarter.

Gross profit for the second quarter decreased to $163.80 million from $203.06 million in the year-ago quarter.

Net cash provided by operating activities during the second quarter was $75.5 million, while expenditures for property, plant and equipment during the same period were $5.9 million.

The company ended the second quarter with cash and cash equivalents of $137.93 million, compared to $7.35 million at end of the prior-year quarter.

Six-Month Highlights

For the first six months of fiscal 2009, MSC reported net income of $71.37 million or 1.14 per share, lower than $94.33 million or $1.43 per share in the prior-year period.

Net sales for the first-half decreased to $784.93 million from $874.04 million in the same period last year


Looking ahead to the third quarter of fiscal 2009, the company currently expects earnings in a range of $0.37 to $0.41 per share on net sales between $339.0 million and $351.0 million. Street analysts expect earnings of $0.43 per share on revenues of $379.35 million for the third quarter.

The company also expects continued strong cash flow performance in the fiscal 2009 third quarter.

We remain focused on controlling our costs, and recently took additional steps which will allow us to significantly reduce our expenses and drive further reductions in operating expense in fiscal 2009, chief financial officer, Chuck Boehlke, added.

Stock Quote

MSM closed Wednesday's regular trading session at $32.13, up $2.37 on a volume of 1.62 million shares, higher than the three-month average volume of 0.85 million shares. In the past 52-week period, the stock has been trading in a range of $26.72 to $54.58.

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