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MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer Raymond James Institutional Investor Conference Orlando, March 4, 2014

MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer. Raymond James Institutional Investor Conference Orlando, March 4, 2014. Safe Harbor Statement. CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. - PowerPoint PPT Presentation

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Page 1: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

MSC Industrial Supply Co.Jeff Kaczka, Chief Financial Officer

Raymond JamesInstitutional Investor ConferenceOrlando, March 4, 2014

Page 2: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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.

Page 3: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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.

Page 4: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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)

Page 5: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 6: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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)

Page 7: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

Fulfillment Center Network

Next Day Delivery

Scalable & Repeatable

Customer Fulfillment Centers (CFCs)

BDNA CFCs

CFC under construction

Page 8: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

Broad Product Offering

Significant competitive advantage

>700,000Items in Stock

99%Fill Rate

Page 9: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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)

Page 10: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 11: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

MSC Value Proposition

SaveTime

SaveMoney

Page 12: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 13: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 14: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

Repeatable Growth Formula

Logistics Sales Force Products Solutions Technology e-commerce Scalable Foundation

Page 15: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 16: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 17: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 18: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 19: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

Growth Drivers

Vending SKU Expansion

e-Commerce M&A

National Accounts Salesforce Expansion

Organic Growth Strategies(11% historical)

M&A(2% historical)

Page 20: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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)

Page 21: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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)

Page 22: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 23: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

Financial ReviewFinancial Review

Page 24: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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

Page 25: MSC Industrial Supply Co. Jeff Kaczka, Chief Financial Officer

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.