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What changed in MSC INDUSTRIAL DIRECT CO INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of MSC INDUSTRIAL DIRECT CO INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+302 added−317 removedSource: 10-K (2025-10-23) vs 10-K (2023-10-25)

Top changes in MSC INDUSTRIAL DIRECT CO INC's 2025 10-K

302 paragraphs added · 317 removed · 212 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+20 added−36 removed28 unchanged
Biggest changeWe can also interface directly with many metalworking applications, marketplaces and purchasing portals; • our “Better MRO” digital platform delivers knowledge and insights to our customers that assist their associates and their business operations; • our collaboration efforts with key supplier partners and their research and development teams deliver value and productivity on the plant floor; • our inventory management solutions enable our customers to carry less inventory and still significantly limit situations when critical items are out of stock; 3 Table of Contents • our proprietary software solution, called Ap Op ® (Application Optimization), enables our metalworking specialists to document productivity savings for customers for a range of applications, including grinding, milling, turning, threading, sawing, hole-making, metalworking fluids and other manufacturing process improvements; • our exclusive service, MSC MillMax ® , focuses on maximizing milling productivity and lowering cost while reducing the milling optimization process to a fraction of the time, which helps customers increase material removal rates, reduce cycle times, improve surface finishes and extend tool life, leading to improved productivity, quality and profits; and • our strategic partnership with MachiningCloud, an industry leader in manufacturing tool data, provides a one-stop solution for manufacturing customers’ machining application needs, and MachiningCloud’s platform and manufacturer-provided data combined with MSC’s vast product offerings and inventory availability, streamline the purchasing process and deliver greater efficiency in customers’ production processes.
Biggest changeWe can also interface directly with many metalworking applications, marketplaces and purchasing portals; • our “Better MRO” digital platform delivers knowledge and insights to our customers that assist their associates and their business operations; • our collaboration efforts with key supplier partners and their research and development teams deliver value and productivity on the plant floor; • our inventory management solutions enable our customers to carry less inventory and still significantly limit situations when critical items are out of stock; 2 Table of Contents • optimized solutions and expertise allow our teams to leverage proprietary tools and services such as Application Optimization (“Ap Op”), MSC MillMax® and advanced data analysis capabilities to deliver tailored productivity improvements across a range of machining processes; and • we continue to expand our technological capabilities through strategic acquisitions and partnerships, including our acquisition of intellectual property assets from Schmitz Manufacturing Research & Technology LLC (“SMRT”) in fiscal year 2024.
We have continued to expand technical support and enhance supplier relationships, especially with our metalworking products. Our associates share their deep expertise and knowledge of metalworking and MRO products to help our customers achieve their goals. Nearly every industrial and service business has an ongoing need for MRO supplies.
We have continued to expand technical support and enhance supplier relationships, especially with our metalworking products. Our associates share their deep expertise and knowledge of metalworking and MRO to help our customers achieve their goals. Nearly every industrial and service business has an ongoing need for MRO supplies.
Federal government customers include the United States Marine Corps, the United States Coast Guard, the United States Postal Service, the United States General Services Administration, the United States Department of Defense, the United States Department of Energy, large and small military bases, Veterans Affairs hospitals, and correctional facilities.
Federal government customers include the United States General Services Administration, the United States Department of Defense, the United States Marine Corps, the United States Coast Guard, the United States Postal Service, the United States Department of Energy, large and small military bases, Veterans Affairs hospitals, and correctional facilities.
We make available, free of charge, on or through the investor relations portion of our website, https://investor.mscdirect.com , our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports, as well as proxy statements and other information, as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC.
Available Information We make available, free of charge, on or through the investor relations portion of our website, https://investor.mscdirect.com , our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports, as well as proxy statements and other information, as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC.
We use the investor relations portion of our website, https://investor.mscdirect.com, to distribute information, including as a means of disclosing material, non-public information, and for complying with our disclosure obligations under Regulation FD. We routinely post and make accessible financial and other information regarding the Company on our website.
We use the investor relations portion of our website to distribute information, including as a means of disclosing material, non-public information, and for complying with our disclosure obligations under Regulation FD. We routinely post and make accessible financial and other information regarding the Company on our website ( https://investor.mscdirect.com) .
Business Strategy MSC’s business strategy is based on helping our customers become more productive and profitable by reducing their total costs for purchasing and using metalworking, MRO, Class C Consumables and OEM products. Leveraging our expertise, knowledge and experience with metalworking products will continue to be a key tenet of our business strategy.
Business Strategy MSC’s business strategy is based on helping our customers become more productive and profitable by reducing their total costs for purchasing and using metalworking, MRO, Class C Consumables and OEM products and services. Leveraging our expertise, knowledge and experience with metalworking products will continue to be a key tenet of our business strategy.
In addition, we are enhancing our customer websites and portals to reflect this new mobile reality at a pace in line with customer adoption of mobile technology. Our customer care centers are powered via state-of-the-art telephony, case management and workforce optimization platforms.
In addition, we are enhancing our customer-facing websites and portals to reflect this new mobile reality at a pace in line with customer adoption of mobile technology. Our customer care centers are powered via state-of-the-art telephony, case management and workforce optimization platforms.
Our dedicated national account managers and operations experts provide supply chain solutions that reduce these customers’ total costs of procurement and ownership through increased visibility into their MRO purchases and improved management. We demonstrate these savings by providing these customers with detailed reporting at both the enterprise and site level.
Our dedicated national account managers and operations experts provide supply chain solutions that reduce these customers’ total costs of procurement and ownership through increased visibility into their MRO products and services purchases and improved management. We demonstrate these savings by providing these customers with detailed reporting at both the enterprise and site level.
Our warehouses are automated through the use of advanced systems and robotics platforms that allow us to rapidly process orders for next-day delivery, with greater efficiency. We also continually upgrade our distribution methods and systems and provide comprehensive electronic ordering capabilities to support our customers’ purchase order processing.
Our CFCs are automated through the use of advanced systems and robotics platforms that allow us to rapidly process orders for next-day delivery, with greater efficiency. We also continually upgrade our distribution methods and systems and provide comprehensive electronic ordering capabilities to support our customers’ purchase order processing.
Associates are given access to health plan resources, disease management, tobacco cessation, parental support, stress management and weight loss programs. In addition, MSC provides to its associates retirement savings, paid holidays and time off, educational assistance and income protection benefits, as well as a variety of other programs.
Associates are given access to health plan resources, disease management, tobacco cessation, parental support, and stress management programs. In addition, MSC provides to its associates retirement savings, paid holidays and time off, educational assistance and income protection benefits, as well as a variety of other programs.
We offer approximately 2.4 million active, saleable stock-keeping units (“SKUs”) through our catalogs; our brochures; our E-commerce channels, including our website, https://www.mscdirect.com (the “MSC website”); our inventory management solutions; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses.
We offer approximately 2.5 million active, saleable stock-keeping units (“SKUs”) through our E-commerce channels, including our website, https://www.mscdirect.com (the “MSC website”); our inventory management solutions; our catalogs; our brochures; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses.
The trend of our industry toward consolidation could cause the industry to become more competitive as greater economies of scale are achieved by competitors, or as competitors with new lower-cost business models are able to operate with lower prices and gross profit on products.
The trend of our industry toward consolidation could cause the industry to become more competitive (i) as greater economies of scale are achieved by competitors, or (ii) as competitors with new lower-cost business models are able to operate with lower prices and gross profit on products.
Compliance with Health and Safety and Environmental Laws and Regulations Our operations are subject to and affected by a variety of federal, state, local and non-U.S. health and safety and environmental laws and regulations relating to the discharge, treatment, storage, disposal, investigation and remediation of certain materials, substances and wastes.
Compliance with Health and Safety and Environmental Laws and Regulations Our operations are subject to a variety of federal, state, local and non-U.S. health and safety and environmental laws and regulations relating to the discharge, treatment, storage, disposal, investigation and remediation of certain materials, substances and wastes.
We maintain a sophisticated buying and inventory management system that monitors all of our SKUs and automatically purchases inventory from vendors for replenishment, based on proprietary forecasting models. We also maintain an Electronic Data Interchange (“EDI”) and XML purchasing program with our vendors to boost order placement efficiency, reduce order cycle processing time, and increase order accuracy.
We maintain a sophisticated buying and inventory management system that monitors our SKUs and automatically purchases inventory from vendors for replenishment, based on proprietary forecasting models. We also maintain an electronic data interchange and XML purchasing program with our vendors to boost order placement efficiency, reduce order cycle processing time, and increase order accuracy.
We strive to offer a positive work environment, with people you like and leaders you can respect. • Health and Well-being – MSC offers many available options for our associates and their families to be healthy and plan for the future. • Rewards and Recognition – Appreciation for our associates’ contributions and the opportunity to share financially and intrinsically in MSC’s success. • Growth – The opportunity to learn, take risks and develop a career.
We strive to offer a positive work environment, with people you like and leaders you can respect. • Health and Well-being – MSC offers many available options for our associates and their families to be healthy and plan for the future. 9 Table of Contents • Rewards and Recognition – Appreciation for our associates’ contributions and the opportunity to share financially and intrinsically in MSC’s success. • Growth – The opportunity to learn, take risks and develop a career.
Products and Supplier Services Our broad range of metalworking and MRO products includes cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components and electrical supplies.
Products and Supplier Services Our broad range of metalworking and MRO products includes cutting tools, abrasives, machining fluids, measuring instruments, machinery and accessories, tooling components, fasteners, flat stock, raw materials, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components and electrical supplies.
MSC is actively leveraging artificial intelligence (“AI”) in various areas to improve customer experiences and drive efficiencies in areas such as time-series forecasting models for financial planning, AI-driven recommendations for our customer-care team, order error processing, natural language processing to automate product taxonomy classification and AI-driven chatbots for our associates to quickly find relevant information.
MSC is actively leveraging AI in various areas to improve customer experiences and drive efficiencies in areas such as time-series forecasting models for financial planning, recommendations for our customer-care team, order error processing, natural language processing to automate product taxonomy classification and chatbots for our associates to quickly find relevant information.
At MSC, we refer to our workforce as our team of “associates,” rather than employees, because we believe that our associates have a stake in our success. We rely on each other to be as dedicated to MSC as MSC is dedicated to each associate.
Human Capital Resources At MSC, we refer to our workforce as our team of “associates,” rather than employees, because we believe that our associates have a stake in our success. We rely on each other to be as dedicated to MSC as MSC is dedicated to each associate.
We also make available, on our website, the charters of the committees of our Board of Directors, the Code of Ethics, the Code of Business Conduct and the Corporate Governance Guidelines pursuant to SEC requirements and New York Stock Exchange (“NYSE”) listing standards.
We also make available, on our website, the charters of the committees of the Board of Directors of the Company (our “Board of Directors”), the Code of Ethics, the Code of Business Conduct and the Corporate Governance Guidelines pursuant to SEC requirements and New York Stock Exchange (“NYSE”) listing standards.
We continually assess our compliance status and management of environmental matters to ensure that our operations are compliant with all applicable environmental laws and regulations. 10 Table of Contents Operating and maintenance costs associated with environmental compliance and management of sites are a normal and recurring part of our operations.
We continually assess our compliance status and management of environmental matters to ensure that our operations are compliant with all applicable environmental laws and regulations. Operating and maintenance costs associated with environmental compliance and management of sites are a normal and recurring part of our operations.
These solutions take advantage of advanced technologies built upon the latest innovations in E-commerce and wireless and cloud-based computing. Our core business systems run in a highly distributed computing environment and utilize world-class software and hardware platforms from key partners. We utilize disaster recovery techniques and procedures, which are consistent with best practices in enterprise information technology (“IT”).
These solutions take advantage of advanced technologies built upon the latest innovations in E-commerce and wireless and cloud-based computing. Our core business systems run in a highly distributed computing environment and utilize software and hardware platforms from key partners. We utilize disaster recovery techniques and procedures, which are consistent with best practices in enterprise IT.
Accordingly, investors should monitor the investor relations portion of our website, https://investor.mscdirect.com, in addition to our press releases, SEC filings and other public communications.
Accordingly, investors should monitor the investor relations portion of our website in addition to our press releases, SEC filings and other public communications.
We continue to take steps to understand, secure and pilot this technology in additional areas within the Company. We believe our strategic alignment with leading vendors in this space will position MSC well for a future where AI technology will be integrated into many aspects of MSC’s business.
We continue to take steps to understand and utilize this technology in additional areas 8 Table of Contents within the Company. We believe our strategic alignment with leading vendors in this space will position MSC well for a future where AI technology will be integrated into many aspects of MSC’s business.
Most of our information systems operate in real time over a secure wide area network, letting each customer fulfillment center and virtual customer care hub share information and monitor daily progress on sales activity, credit approvals, inventory levels, stock balancing, vendor returns, order fulfillment and other key performance measures.
Our information systems largely operate in real time over a secure wide area network, letting each customer fulfillment center share information and monitor daily progress on sales activity, credit approvals, inventory levels, stock balancing, vendor returns, order fulfillment and other key performance measures.
Meanwhile, the sales representative has access to inventory levels on every SKU we carry. Our associates at our customer care centers undergo an intensive seven-week training course, followed up by regular training seminars and workshops. We monitor and evaluate our sales associates at regular intervals through quality monitoring, customer satisfaction surveys and net promoter score feedback.
In addition to customer information, the sales representative also has access to inventory levels on every SKU we carry. Our associates at our customer care centers undergo an intensive training course, followed up by regular training seminars and workshops. We monitor and evaluate our sales associates at regular intervals through quality monitoring, customer satisfaction surveys and net promoter score feedback.
We also provide our sales associates with technical training by our in-house specialists and product vendors. We maintain a separate technical support group dedicated to answering customer inquiries and assisting our customers with product operation information and finding the most efficient solutions to manufacturing problems.
We also provide our sales associates with technical training by our in-house specialists and product vendors. In addition to technical specialists in the field, we maintain separate technical and sourcing support groups dedicated to answering customer inquiries and assisting our customers with product operation information and finding the most efficient solutions to manufacturing problems.
However, in some cases, these locations also operate as subsidiary headquarters and provide office space for sales associates. Sales and Marketing We serve individual machine shops, Fortune 1000 companies, government agencies and manufacturers of all sizes.
However, in some cases, these locations also operate as subsidiary headquarters and provide office space for sales associates. 6 Table of Contents Sales and Marketing We serve individual machine shops, Fortune 1000 companies, public sector agencies and manufacturers of all sizes.
With respect to all other matters that may currently be pending, in the opinion of management, based on our analysis of relevant facts and circumstances, compliance with applicable environmental laws and regulations is not likely to have a material adverse effect upon our capital expenditures, earnings or competitive position.
With respect to matters that may be pending, based on our analysis of relevant facts and circumstances, compliance with applicable environmental laws and regulations is not likely to have a material adverse effect upon our capital expenditures, earnings or competitive position.
We carry many of the products we sell in our inventory, so that orders for these in-stock products are processed and fulfilled the day the order is received. We offer next-day delivery nationwide for qualifying orders placed by 8 p.m. Eastern Time (excluding Class C Consumables category products).
We carry many of the products we sell in our inventory, so that orders for these in-stock products are processed and fulfilled the day the order is received. We offer next-day delivery nationwide in the United States for qualifying orders placed by 8 p.m. Eastern Time.
Health and Safety MSC’s safety vision is to build a culture in which safety is a top value across all levels of the organization, and that every associate has the right and responsibility to continually seek to prevent injuries and build a safe environment for everyone.
Health and Safety MSC’s safety vision is to strive for zero injuries and build a culture in which safety is a top value across all levels of the organization and every associate has the right and responsibility to continually seek to prevent injuries.
We do this in a variety of ways: • our experienced team includes customer care representatives, metalworking specialists, safety specialists, fluid connector specialists, inventory management specialists, in-plant and technical support teams and experienced sales associates focused on driving our customers’ success by reducing their operational costs; • our robust systems and transactional data enable us to provide insights to our customers to help them take costs out of their supply chains and operations; • our extensive product inventory enables our customers to deal with fewer suppliers, streamlining their purchasing work and reducing their administrative costs; • our timely shipping enables our customers to reduce their inventory investment and carrying costs; • our purchasing process consolidates multiple purchases into a single order, providing a single invoice for multiple purchases over time and offering direct shipments to specific departments and personnel at one or more facilities, which reduces our customers’ administrative costs; • our extensive E-commerce capabilities provide sophisticated search and transaction capabilities, access to real-time inventory, customer-specific pricing, workflow management tools, customized reporting and other features.
Our focus is building strong partnerships with our customers and helping them enhance productivity, profitability and growth through the following strategies: • our experienced team includes inventory management specialists, in-plant and technical support teams, metalworking specialists, abrasives specialists, fluid connector specialists, industrial safety consultants, customer care representatives and experienced sales associates focused on driving our customers’ success by reducing their operational costs; • our robust systems and transactional data enable us to provide insights to our customers to help them take costs out of their supply chains and operations; • our extensive product inventory enables our customers to deal with fewer suppliers, streamlining their purchasing work and reducing their administrative costs; • our timely shipping enables our customers to reduce their inventory investment and carrying costs; • our purchasing process consolidates multiple purchases into a single order, providing a single invoice for multiple purchases over time and offering direct shipments to specific departments and personnel at one or more facilities, which reduces our customers’ administrative costs; • our extensive E-commerce capabilities provide sophisticated search and transaction capabilities, access to real-time inventory, customer-specific pricing, workflow management tools, customized reporting and other features.
We offer approximately 2.4 million active, saleable SKUs through our distribution and E-commerce channels, including the MSC website, inventory management solutions, catalogs, brochures, customer care centers, customer fulfillment centers, regional inventory centers and warehouses. The majority of products sold are third-party manufactured products; however, SKUs sold under MSC private label brands approximate 13% of net sales.
We offer approximately 2.5 million active, saleable SKUs through our distribution and E-commerce channels, including the MSC website, inventory management solutions, catalogs, brochures, customer care centers, customer fulfillment centers, regional inventory centers and warehouses. The majority of products sold are third-party manufactured products; however, SKUs sold under MSC exclusive brands represent approximately 15% of net sales.
In calendar year 2022, the Company’s Occupational Safety and Health Administration (“OSHA”) Total Recordable Incident Rate was 1.72 and the Company’s OSHA Lost Time Incident Rate was 0.62 based upon the number of incidents per 100 associates (or per 200,000 work hours).
In the 2024 calendar year, the Company’s Occupational Safety and Health Administration (“OSHA”) Total Recordable Incident Rate was 0.77 and the Company’s OSHA Lost Time Incident Rate was 0.42 based upon the number of incidents per 100 associates (or per 200,000 work hours).
Our leadership team is highly engaged through our Safety Leadership System in identifying trends in our incidents throughout the network and working collaboratively with our safety professionals to effectively reduce incidents involving our associates and to make MSC one of the safest places to work.
Our safety team and associates are highly engaged in identifying trends in our incidents throughout the network and working collaboratively with our leadership to effectively reduce incidents and to make MSC one of the safest places to work.
Our customer-focused culture and high-touch engagement model drive value for our customers and result in deep customer relationships. Our business strategy includes the following key elements: Technical Expertise and Support. We provide technical support and one-on-one service through our field sales specialists and our centralized tech team representatives.
Our customer-focused culture and high-touch engagement model drive value for our customers and result in deep customer relationships. Our business strategy includes the following key elements: Technical Expertise and Support. MSC provides technical support and personalized service through our team of field sales specialists and centralized technical representatives.
We are continuing to implement additional functionality aimed at enhancing the engagement and personalization of the customer experience regardless of the contact method chosen.
We continue to invest in technology and implement additional functionality aimed at enhancing the engagement and personalization of the customer experience regardless of the contact method chosen.
We believe that sales of MRO supplies will become more concentrated over the next several years, which may make MRO supply distribution more competitive. Some of our competitors challenge us with a greater variety of product offerings, greater financial resources, additional services, or a combination of these factors.
Industrial distribution remains highly fragmented, however we believe that sales of MRO supplies will continue to become more concentrated over time, which may make MRO supply distribution more competitive. Some of our competitors challenge us with a greater variety of product offerings, greater financial resources, additional services, or a combination of these factors.
We believe that our current systems and practice of implementing regular updates are adequate to support our current needs. Over the next few years, we will also be upgrading and migrating many of our systems to take advantage of the flexibility and controls offered by cloud computing platforms while downsizing our on-premise data center footprint.
We believe that our current systems and practice of implementing regular updates are adequate to support our current needs. We have upgraded and migrated many of our systems to take advantage of the flexibility and controls offered by cloud computing platforms while downsizing our on-premise data center footprint.
Our sales representatives are highly trained and experienced individuals who build relationships with customers, assist customers in reducing costs, provide and coordinate technical support, coordinate special orders and shipments with vendors, and update customer account profiles in our information systems databases.
We have individual state and local contracts, as well as contracts through partnerships with several state co-operatives. Our sales representatives are highly trained and experienced individuals who build relationships with customers, assist customers in reducing costs, provide and coordinate technical support, coordinate special orders and shipments with vendors, and update customer account profiles in our information systems databases.
Recent cloud migrations include commercial off-the-shelf enterprise systems as well as our E-commerce infrastructure. Our sales representatives are equipped with proprietary mobile technology that allows them to tap into MSC’s supply chain directly from our customers’ manufacturing plants and make sure that critical inventory is always on site and available.
Our sales representatives are equipped with proprietary mobile technology that allows them to tap into MSC’s supply chain directly from our customers’ manufacturing plants and make sure that critical inventory is always on site and available.
Our goal is to attract, develop and retain a talented team of associates inspired by our greater purpose of fueling the potential of our stakeholders.
MSC has not experienced work stoppages and considers associate relations to be good. Our goal is to attract, develop and retain a talented team of associates inspired by our greater purpose of fueling the potential of our stakeholders.
We offer next-day delivery nationwide for qualifying orders placed by 8 p.m. Eastern Time (excluding Class C Consumables sales channel products). We know that our customers value this service, and areas accessible by next-day delivery generate significantly greater sales for MSC than areas where next-day delivery is not available. Superior Customer Service.
We guarantee same-day shipping of our core metalworking and MRO products, enabling customers to reduce supply inventories. We also offer next-day delivery nationwide for qualifying orders placed by 8 p.m. Eastern Time. Our customers value this service, and areas accessible by next-day delivery generate significantly greater sales for MSC than areas where next-day delivery is not available. Superior Customer Service.
We believe our value-added solutions approach to driving our customers’ success serves to differentiate MSC from traditional transaction-focused distributors. We endeavor to save our customers money when they partner with us for their metalworking, MRO, Class C Consumables and Original Equipment Manufacturer (“OEM”) product needs.
We believe our value-added solutions approach to driving our customers’ success differentiates MSC from traditional transaction-focused distributors. We are committed to saving our customers money by providing comprehensive support for their metalworking, MRO, Class C Consumables and original equipment manufacturer (“OEM”) product and service needs.
No single supplier accounted for more than 5% of our total purchases in fiscal year 2023, 2022 or 2021. Customer Fulfillment Centers and Distribution Network We continue to invest in the enhancement of our distribution efficiency and capabilities.
We purchase substantially all of our products directly from more than 3,000 suppliers. No single supplier accounted for more than 5% of our total purchases in fiscal year 2025. Customer Fulfillment Centers and Distribution Network We continue to invest in the improvement of our distribution efficiency and capabilities.
The user-friendly search engine on the MSC website allows customers to find SKUs by keyword, part description, competitive part number, vendor number or brand. Information can also be found detailing MSC’s in-plant and other inventory management solutions. The MSC website is a key component of our strategy to reduce our customers’ transaction costs and delivery time. Competitive Pricing.
The MSC website is a key component of our strategy to reduce our customers’ transaction costs and delivery time. Information can also be found detailing MSC’s in-plant and other inventory management solutions.
The average training hours completed by MSC associates in fiscal year 2023 increased nearly 18% year over year to over 20 hours per individual. Additionally, MSC’s tuition assistance program covers educational costs and provides eligible associates the financial assistance to obtain a graduate or undergraduate degree while working. Available Information The Company’s website is https://www.mscdirect.com .
The average training hours completed by each MSC associate in fiscal year 2025 was approximately 20 hours. Additionally, MSC’s tuition assistance program covers educational costs and provides eligible associates the financial assistance to obtain a graduate or undergraduate degree while working.
With a history of driving innovation in industrial product distribution for more than 80 years, we help solve our manufacturing customers’ metalworking, MRO and operational challenges.
ITEM 1. BUSINESS. General MSC is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (“MRO”) products and services. With a history of driving innovation in industrial product distribution for more than 80 years, we help solve our manufacturing customers’ metalworking and MRO challenges.
Order entry and fulfillment occurs at our main customer care centers, mostly located at our customer fulfillment centers. Customer care phone representatives enter non-digital orders into computerized order processing systems. In the event of a local or regional situation, our communications system will reroute customer exchanges to an alternative location.
The efficient handling of orders is a critical aspect of our business. Order entry and fulfillment occurs at our main customer care centers, mostly located at our customer fulfillment centers. Customer care phone representatives enter non-digital orders into computerized order processing systems.
As a result, we strategically adjust our customer pricing to maintain competitiveness, while capturing the value of our comprehensive services. 5 Table of Contents Growth Strategy Our growth strategy includes a number of initiatives to gain market share and reposition MSC from being a spot-buy supplier to a mission-critical partner to our customers.
Customers increasingly evaluate their total procurement costs, of which our industrial supplies are an important component. As a result, we strategically adjust our customer pricing to maintain competitiveness, while capturing the value of our comprehensive services. Growth Strategy Our growth strategy includes several initiatives to gain market share and to position us as a mission-critical partner to our customers.
In fiscal year 2019, we introduced a patented robotic packing solution, and we are in the process of deploying advanced robotic picking technology to several customer fulfillment centers.
In response to shifts in the labor market, we have accelerated automation in our customer fulfillment centers. We have introduced a patented robotic packing solution and deployed advanced robotic picking technology to several customer fulfillment centers.
VMI involves not only selling the Class C Consumables, but also managing appropriate stock levels for the customer, fulfilling replenishment orders, putting away the stock, and maintaining a clean and organized inventory area. MSC’s public sector customers include governments and their instrumentalities such as federal agencies, state governments, and public sector healthcare providers.
VMI involves not only selling the Class C Consumables, but also managing appropriate stock levels for the customer, fulfilling replenishment orders, putting away the stock, and maintaining a clean and organized inventory area. Our digital ecosystem, anchored by the MSC website, serves as the primary means of presenting products and solutions.
We selectively pursue strategic acquisitions that deepen our metalworking expertise, extend our capabilities into strategic adjacencies, such as OEM fasteners, hardware and components, and expand our markets in North America. We also seek to target investments in businesses and other ventures that we believe offer opportunities for growth and improved operational performance for our business.
We also seek to target investments in businesses and other ventures that we believe offer opportunities for growth and improved operational performance for our business.
During the fiscal year ended September 2, 2023, customers submitted approximately 61.1% of their orders digitally through our E-commerce platforms (the MSC website, vending machines and eProcurement). The remaining orders are primarily placed via telephone, email and fax. The efficient handling of orders is a critical aspect of our business.
Customer Service One of our goals is to make purchasing our products as convenient and effortless as possible. During fiscal year 2025, customers submitted approximately 63.8% of their orders digitally through our E-commerce platforms (the MSC website, vending machines and eProcurement). The remaining orders were primarily placed via telephone, email and fax.
We manage our primary customer fulfillment centers via computer-based SKU tracking systems and radio frequency devices that locate specific stock items to make the selection process more efficient. Our warehouses are predominantly from our acquired subsidiaries . Similar to our customer fulfillment centers, these warehouses primarily handle the stocking and fulfillment of inventory.
We manage our primary customer fulfillment centers via computer-based SKU tracking systems and radio frequency devices that locate specific stock items to make the selection process more efficient. Certain of our customer fulfillment centers also utilize robotic packing solutions and order-picking systems that improve productivity and associate safety while reducing energy consumption and saving space.
With some of our recent acquisitions, such as All Integrated Solutions, Inc. and Tower Fasteners, LLC (“Tower Fasteners”), we have increased our presence in the OEM fasteners, hardware and components business. We have also significantly increased our presence in the VMI space within the Class C Consumables sales channel.
We have scaled our tooling, regrinding and tool manufacturing service offering through recent acquisitions, such as Premier Tool Grinding, Inc. (“Premier”) and Tru-Edge Grinding, Inc. We have also expanded our presence in the OEM fasteners, hardware and components business and in the VMI space within the Class C Consumables sales channel.
MSC’s broad selection of products enables customers to choose the right combination of price and quality on every purchase to meet their needs. Same-Day Shipping and Next-Day Delivery. We guarantee same-day shipping of our core metalworking and MRO products, enabling customers to reduce supply inventories. We fulfill our same-day shipment guarantee for in-stock products about 99% of the time.
We provide “good-better-best” alternatives, comprising a spectrum of brand name, MSC exclusive brand and generic MRO products. MSC’s broad selection of products enables customers to choose the right combination of price and quality on every purchase to meet their needs. Same-Day Shipping and Next-Day Delivery.
Our large and growing number of SKUs makes us an increasingly valuable partner to our customers as they look to rationalize their supplier base. Our assortment from multiple product suppliers and MSC exclusive brands, prices and quality levels enables our customers to select from “good-better-best” options on nearly all of their purchases.
The expansive number of SKUs make us an increasingly valuable partner to our customers as they look to rationalize their supplier base. Our assortment of national branded product suppliers, MSC exclusive brands, and value-oriented generic branded products distinguishes us from competitors.
We are increasing the breadth and depth of our product offerings and pruning non-value-added SKUs. In fiscal year 2023, we added approximately 240,000 SKUs, net of SKU removals, to our active, saleable SKU count. We also leverage the depth and breadth of MSC’s product portfolio within our Class C Consumables sales channel.
We are increasing the breadth and depth of our product 5 Table of Contents offerings and pruning non-value-added SKUs. We also leverage the depth and breadth of MSC’s product portfolio within our Class C Consumables and OEM product lines. Selectively pursuing strategic acquisitions and investments.
Our customer fulfillment centers are located in or near Harrisburg, Pennsylvania; Atlanta, Georgia; Elkhart, Indiana; Columbus, Ohio; Reno, Nevada; and Hanover Park, Illinois.
We operate a sophisticated network of five customer fulfillment centers, nine regional inventory centers, 38 warehouses (36 in North America and two in other foreign countries) and five manufacturing locations. Our customer fulfillment centers are located in or near Harrisburg, Pennsylvania; Atlanta, Georgia; Elkhart, Indiana; Reno, Nevada; and Hanover Park, Illinois.
We have associations with many of these providers and continue to evaluate and expand our eProcurement capabilities. Selectively pursuing strategic acquisitions and investments. MSC is a leader in the highly fragmented industrial distribution market with significant opportunities for organic and acquisitive growth.
MSC is a leader in the highly fragmented industrial distribution market with significant opportunities for organic and acquisitive growth. We selectively pursue strategic acquisitions that deepen our metalworking expertise, extend our capabilities into strategic adjacencies, such as OEM fasteners, hardware and components, and expand our markets in North America.
Human Capital Resources As of September 2, 2023, we employed 7,377 associates worldwide, of which approximately 7,131 were full-time and 246 were part-time. No associate is represented by a labor union. Approximately 90% of our workforce is based in the United States. MSC has not experienced any major work stoppages and considers associate relations to be good.
This is a critical part of our expectations of our associates and a unique part of our culture. As of August 30, 2025, we employed 7,284 associates worldwide, of which 7,077 were full-time and 207 were part-time. No associate is represented by a labor union. Approximately 88% of our workforce is based in the United States.
We continue to invest in our VMI, CMI and vending solutions that streamline customer replenishment and trim our customers’ inventories. Our vending solutions include different kinds of machines, such as storage lockers or carousels, which can stand alone or be combined with other machines.
Our vending solutions include different kinds of machines, such as storage lockers or carousels, which can stand alone or be combined with other machines. Our vending machines use network or web-based software to enable customers to gain inventory visibility, save time and drive profitability. Competitive Pricing.
When an order enters the system, a credit check is performed; if the credit is approved, the order is usually transmitted to the customer fulfillment center closest to the customer. Customers are invoiced for merchandise and shipping and handling promptly after shipment.
In the event of a local or regional disruption, our communications system will reroute customer exchanges to an alternative location. When an order enters the system, a credit check is performed; if the credit is approved, the order is usually transmitted to the customer fulfillment center closest to the customer.
Associate Population 60.5 % 39.5 % 73.0 % 9.3 % 12.2 % 2.3 % 0.6 % 0.3 % 2.2 % 0.1 % Talent Acquisition and Development MSC focuses on creating opportunities for associate growth, development and training education, offering a comprehensive talent program that continues throughout an associate’s career.
The Company’s rates fall well below the Total Recordable Incident Rate and the Lost Time Incident Rate of the North American Industry Classification System. Talent Acquisition and Development MSC focuses on creating opportunities for associate growth, development and training education, offering a comprehensive talent program that continues throughout an associate’s career.
Information Systems MSC’s information systems are an integral part of driving growth and delivering our full value proposition to our customers. In today’s digital world, our systems allow our customers to conduct business with us securely across multiple channels and in the way they want.
In today’s digital world, our systems allow our customers to conduct business with us securely across multiple channels and in the way they want. In addition, our systems enable data visibility for faster decision making, which drives operational efficiency and supports a flexible workforce.
Expanding programs for our public sector and national account customers . Our public sector program is focused on becoming an industry leader and trusted advisor to key public sector end customers. Although MSC has been providing metalworking and MRO supplies to the commercial sector for more than 80 years, we recognize the importance of diversifying into the public sector.
With deep industry expertise, we prioritize outreach in sectors with the highest growth potential. Expanding programs for our public sector and national account customers . MSC’s public sector organization is focused on becoming an industry leader and trusted advisor to key public sector customers.
We provide customized national account programs for larger customers, often on an enterprise-wide basis. These national account customers value our ability to support their procurement needs electronically to reduce their transactional costs.
These national account customers value our ability to electronically support their procurement needs with comprehensive solutions, which reduce transactional costs and working capital requirements while enhancing data visibility.
The MSC website provides advanced features, such as order approval (workflow) and purchase order control, that our customers interact with in order to derive business value beyond merely placing an order. Many large customer accounts transact business with MSC using eProcurement solution providers that sell a suite of E-commerce products.
This includes straightforward integrations, such as embedding customer inventory levels into searches on the MSC website, as well as more sophisticated solutions like facilitating the approval and compliance processes for vending and VMI carts through the MSC website or eProcurement platforms. Many large customer accounts transact business with MSC using eProcurement solution providers that sell a suite of E-commerce products.
Increasing sales from existing customers and generating new customers with various value-added programs. Our value-added programs include business needs analysis, inventory management solutions and workflow management tools. Our customers particularly value our industrial vending solutions that can accommodate a range of products from precision cutting tools to MRO supplies.
These initiatives include the following: Increasing sales to existing customers and generating new customers with various value-added programs. We drive growth by expanding sales with existing customers and attracting new ones through targeted, value-added programs tailored to their operational needs. These programs include in-depth business needs analysis to uncover inefficiencies, advanced inventory management solutions and workflow management tools.
MSC vending machines use network or web-based software to enable customers to gain inventory visibility, save time and drive profitability. Digital Technologies and the MSC Website. The MSC website contains a searchable online catalog with electronic ordering capabilities and provides personalized real-time inventory availability, online bill payment, delivery tracking status and other enhancements, including work-flow management tools.
The MSC website is a business-to-business oriented, online storefront serving the metalworking and MRO market. The MSC website contains a searchable online catalog which allows customers to find SKUs by keyword, part description, competitive part number, vendor number or brand. The website also provides electronic ordering capabilities, online bill payment, delivery tracking status, and personalized real-time inventory availability.
When our customers order an in-stock product online or via phone, we ship it the day the order is placed about 99% of the time. We do that through our six customer fulfillment centers, 10 regional inventory centers and 38 warehouses. Some specialty or custom 7 Table of Contents items and very large orders are shipped directly from the manufacturer.
Some specialty or custom items and very large orders are shipped directly from the manufacturer. Our warehouses are predominantly from our acquired subsidiaries . Similar to our customer fulfillment centers, these warehouses primarily handle the stocking and fulfillment of inventory.
The MSC website is a key component of our strategy to reduce customers’ transaction costs and internal requisition time. MSC continues to evaluate the MSC website and solicit customer feedback, making on-going improvements to ensure that it remains a premier website in our marketplace.
The Company continues to evaluate its E-commerce platforms, including the MSC website, solicit customer feedback and make improvements to ensure that it remains a premier website in our industry. We offer advanced tools that integrate our solutions with customer purchasing platforms and workflows.
In addition, our systems enable data visibility for faster decision making, which drives operational efficiency and supports a flexible remote workforce across the globe. Our E-commerce environment is continually being upgraded and enhanced with a focus on delivering an exceptional online customer experience.
Our E-commerce environment is continually being upgraded and enhanced with a focus on delivering an exceptional online customer experience. To achieve this, we developed and utilize a proprietary search engine, deployed an integrated digital marketing platform and we continue to utilize and enrich our product data.
Our world-class sourcing, logistics and business systems provide predictable, reliable and scalable service. Broad Selection of Products. Customers want a full range of product options, even as they look to reduce the number of suppliers they partner with. We provide “good-better-best” alternatives, comprising a spectrum of brand name, MSC exclusive brand and generic MRO products.
Whether a small manufacturer or a large national enterprise, our approach is designed to drive operational efficiency, enhance productivity, and support long-term growth. Broad Selection of Products. Customers want a full range of product options, even as they look to reduce the number of suppliers they partner with.
Our extensive network of suppliers provides us access to technical application, safety, training certifications and many other value-added services for our customers. We stand apart from our competitors by offering brand name, MSC exclusive brand and generic products, depth in our core product lines and competitive pricing. We purchase substantially all of our products directly from more than 3,000 suppliers.
The variety and availability of our product base, competitive pricing and dependable product quality levels enable our customers to select from “good-better-best” options on nearly all of their purchases. Our extensive network of supplier partnerships provides us access to technical applications, safety, training certifications and many other value-added services for our customers.
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ITEM 1. BUSINESS. General MSC Industrial Direct Co., Inc. (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”) is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (“MRO”) products and services.
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Strategic initiatives enable MSC to deliver cutting-edge solutions, offer a comprehensive and streamlined support system and drive greater value and effectiveness in our customers’ operations.
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We operate a sophisticated network of six customer fulfillment centers, 10 regional inventory centers 38 warehouses (36 in North America and two in Europe) and four manufacturing locations, including two locations acquired in the January 2023 acquisition of Buckeye and Tru-Edge (each, as defined below).
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With a dedicated team of over 160 metalworking, safety, and fluid connector technical specialists, we work closely with our customers to optimize their manufacturing processes and improve efficiency. Our experts perform in-depth onsite needs analyses and identify opportunities for productivity improvements, supported by our proprietary Ap Op software, which captures and documents cost-saving measures.
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We focus on building strong partnerships with our customers to help them improve their productivity, profitability and growth.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition to increases in commodity, energy and labor prices, decreases in those costs, particularly if severe, could also adversely impact us by creating deflation in selling prices, which could cause our gross profit margin to deteriorate, or by negatively impacting customers in certain industries, which could cause our sales to those customers to decline. 13 Table of Contents Inflation impacts the costs at which we can procure products and our ability to increase prices at which we sell to customers over time.
Biggest changeWhen we are forced to accept these price increases, we may not be able to pass them along to our customers, resulting in lower margins. 11 Table of Contents In addition to increases in commodity, energy and labor prices, decreases in those costs, particularly if severe, could also adversely affect us by creating deflation in selling prices, which could cause our gross profit margin to deteriorate, or by negatively impacting customers in certain industries, which could cause our sales to those customers to decline.
When, as occurs in economic downturns, current or prospective customers reduce production levels because of lower demand or tight credit conditions, their need for our products and services diminishes. Selling prices and terms of sale with our customers come under pressure, which may adversely affect the profitability and the durability of customer relationships. Credit losses increase as well.
When current or prospective customers reduce production levels because of lower demand or tight credit conditions, as occurs in economic downturns, their need for our products and services diminishes. Selling prices and terms of sale with our customers come under pressure, which may adversely affect the profitability and the durability of customer relationships. Credit losses increase as well.
Traditional MRO suppliers are attempting to consolidate the market through internal expansion or acquisitions or mergers with other industrial suppliers, or a combination of both. This consolidation allows suppliers to improve efficiency and spread fixed costs over a greater number of sales, and to achieve other benefits derived from economies of scale.
Traditional MRO suppliers are attempting to consolidate the market through internal expansion or acquisitions or mergers with other industrial suppliers, or a combination of both. This consolidation allows suppliers to improve efficiency, spread fixed costs over a greater number of sales, and achieve other benefits derived from economies of scale.
So long as the Jacobson / Gershwind Family Shareholders, collectively, have beneficial or record ownership of less than 10% but 5% or more of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in the Reclassification Agreement, nominate one individual designated by the Jacobson / Gershwind Family Shareholders for election to the Board of Directors at any annual meeting of our shareholders at which directors are to be elected.
So long as the Jacobson / Gershwind Family Shareholders, collectively, have beneficial or record ownership of less than 10% but 5% or more of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in the Reclassification Agreement, nominate one individual designated by the Jacobson / Gershwind Family Shareholders for election to our Board of Directors at any annual meeting of our shareholders at which directors are to be elected.
In addition, changes to our IT systems could disrupt our business operations. Any one or more of these consequences could have a material adverse effect on our business, financial condition and results of operations. Additionally, our suppliers and customers also rely upon IT systems to operate their respective businesses.
In addition, changes to our IT systems could disrupt our business operations. Any one or more of these consequences could have a material adverse effect on our business, financial condition or results of operations. Additionally, our suppliers and customers also rely upon IT systems to operate their respective businesses.
Many of the primary markets for the products and services we sell are subject to cyclical fluctuations that affect demand for goods and materials that our customers produce. Consequently, demand for our products and services has been, and will continue to be, influenced by most of the same economic factors that affect demand for and production of our customers’ products.
Many of the primary markets for the products and services we sell are subject to cyclical fluctuations that affect demand for goods and materials that our customers produce. Consequently, demand for our products and services has been, and will continue to be, influenced by many of the same economic factors that affect demand for and production of our customers’ products.
Any such disruption or other catastrophic event could cause our distribution channels and networks to become limited or non-operational, adversely impact our ability to obtain or deliver products to our customers in a timely manner, limit our ability to meet customer demand, result in lost sales, increased costs, penalties, order cancellations or contract terminations, or adversely impact our customer relationships.
Any such disruption or other catastrophic event could cause our distribution channels and networks to become limited or non-operational, adversely affect our ability to obtain or deliver products to our customers in a timely manner, limit our ability to meet customer demand, result in lost sales, increased costs, penalties, order cancellations or contract terminations, or adversely affect our customer relationships.
Our healthcare insurance program accruals are determined on an actuarial basis, based on historical claims experience and an estimate of claims incurred but not yet reported and other relevant factors . While we believe our estimation process is well designed, every estimation process is inherently subject to limitations.
Ou r healthcare insurance program accruals are determined on an actuarial basis, based on historical claims experience and an estimate of claims incurred but not yet reported and other relevant factors . While we believe our estimation process is well designed, every estimation process is inherently subject to limitations.
ITEM 1A. RISK FACTORS. In addition to the other information in this Report, the following factors should be considered in evaluating the Company and its business. Our future operating results depend upon many factors and are subject to various risks and 12 Table of Contents uncertainties.
ITEM 1A. RISK FACTORS. In addition to the other information in this Report, the following factors should be considered in evaluating the Company and its business. Our future operating results depend upon many factors and are subject to various risks and 10 Table of Contents uncertainties.
Any material cyber-attack or failure of our IT systems to perform as we anticipate could disrupt our business and operations, result in transaction errors, the loss of data, processing inefficiencies, downtime, litigation, government investigation or fines, substantial remediation costs (including potential liability for stolen assets or information and the costs of repairing system damage), and the loss of sales and customers, and damage our reputation.
Any material cyber-attack or failure of our IT systems to perform as we anticipate could disrupt our business and operations, result in transaction errors, the loss of data, processing inefficiencies, downtime, litigation, government investigation or fines, substantial remediation costs (including potential liability for stolen assets or information and the 17 Table of Contents costs of repairing system damage), and the loss of sales and customers and damage our reputation.
We may also be subject to price increases from our suppliers and independent freight carriers that we may not be able to pass along to our customers, particularly in periods of high or rapid inflation. Volatility in commodity, energy and labor prices may adversely affect operating margins.
We may also be subject to price increases from our suppliers and independent freight carriers that we may not be able to pass along to our customers, particularly in periods of high or rapid inflation. Volatility in commodity, energy and labor prices, as well as periods of abnormal inflation, may adversely affect operating margins.
Raw material costs used in our suppliers’ products (steel, tungsten, etc.) and energy and labor costs may increase, which may result in increased production costs for our suppliers that they pass along to us. The fuel costs of our independent freight carriers have been volatile.
Raw material costs used in our suppliers’ products (steel, tungsten, etc.) and energy and labor costs may increase, which may result in increased production costs for our suppliers that they pass along to us. In recent years, the fuel costs of our independent freight carriers have also been volatile.
Disruptions at transportation centers or shipping ports, including global and domestic locations, due to third-party work stoppages or labor shortages or severe weather conditions affect both our ability to maintain core products in inventory and to deliver products to our customers on a timely basis, which may in turn adversely affect our customer relationships and results of operations.
Disruptions at transportation centers, shipping ports, or our customer fulfillment centers, including global and domestic locations, due to third-party work stoppages with our shipping partners or otherwise, or labor shortages or severe weather conditions affect both our ability to maintain core products in inventory and to deliver products to our customers on a timely basis, which may in turn adversely affect our customer relationships and results of operations.
An increasing number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions that their suppliers should comply with, or they may seek to include such provisions in their procurement terms and conditions. This corporate social and environmental responsibility influence is expanding to other stakeholders such as investors, suppliers, associates and communities.
An increasing number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions that their suppliers should comply with, or they may seek to include such provisions in their procurement terms and conditions. This corporate social and environmental responsibility influence is also felt among other stakeholders such as investors, suppliers, associates and communities.
We have also been affected by macroeconomic conditions specific to the principal end markets that we serve, including as the result of work stoppages and organized labor activity. Any or all of these factors may impact us, our customers, and their demand for our products.
We have also been affected by macroeconomic conditions specific to the principal end markets that we serve, including as the result of work stoppages and organized labor activity or reduced industrial activity due to tariffs. Any or all of these factors may impact us, our customers, and their demand for our products.
The known material risks and uncertainties which may cause our operating results to vary from anticipated results or which may negatively affect our operating results and profitability are as follows: Risks Related to Our Business Our business depends heavily on the operating levels of our customers and the economic factors that affect them , including general economic conditions.
The known material risks and uncertainties which may cause our operating results to vary from anticipated results or which may negatively affect our business, financial condition, or results of operations are as follows: Risks Related to Our Business Our business depends heavily on the operating levels of our customers and the economic factors that affect them , including general economic conditions.
To meet anticipated demand for our products, we may purchase products from manufacturers outside of our typical programs, including payment terms, and in advance of customer orders, which we hold in inventory and resell to customers. We are subject to the risk that we may be unable to sell excess products ordered from manufacturers.
To meet anticipated demand for our products, we may purchase products from manufacturers outside of our typical programs, including payment terms, and in advance of customer orders, which we hold in inventory and resell to customers. We are subject to the risk that we may be unable to sell all of the products we purchase for resale.
In addition, we also face the risk of companies which operate primarily outside of our industry entering our marketplace. Our industry is evolving at an accelerated pace. If we do not have the agility and flexibility to effectively respond to this accelerated pace of industry changes, our strategy could be put at risk resulting in a loss of market share.
In addition, we also face the risk of companies that operate primarily outside of our industry entering our marketplace. Our industry is evolving at a rapid pace. If we do not have the agility and flexibility to effectively respond to the accelerated pace of industry changes, our strategy could be put at risk resulting in a loss of market share.
The MRO supply industry, although consolidating, still remains a large, fragmented industry that is highly competitive. We face competition from traditional channels of distribution, such as retail outlets, small dealerships, regional and national distributors utilizing direct sales forces, manufacturers of MRO supplies, large warehouse stores and larger direct mail distributors.
The MRO supply industry, although consolidating, still remains a large, fragmented industry that is highly competitive. We face competition from traditional channels of distribution, such as retail outlets, dealers and wholesalers, regional and national distributors utilizing direct sales forces, manufacturers of MRO supplies, large warehouse stores and large direct mail distributors.
Our principal shareholders own a significant amount of our voting stock and have rights to nominate directors to our Board of Directors, and their interests may differ from those of our other shareholders.
Risks Related to our Securities Our principal shareholders own a significant amount of our voting stock and have rights to nominate directors to our Board of Directors, and their interests may differ from those of our other shareholders.
A serious, prolonged interruption due to power outage, telecommunications outage, cyber-attack, terrorist attack, 16 Table of Contents earthquake, storm, hurricane, flood, fire, drought, tornado and other extreme weather, widespread contagious disease or virus or other interruption could have a material adverse effect on our business and financial results.
A serious, prolonged interruption due to power outage, telecommunications outage, cyber-attack, terrorist attack, earthquake, storm, hurricane, flood, fire, drought, tornado and other extreme weather, widespread contagious disease or virus or other events could have a material adverse effect on our business, financial condition, or results of operations.
We are subject to litigation risk due to the nature of our business, which may have a material adverse effect on our business . From time to time, we are involved in lawsuits or other legal proceedings that arise from business transactions or the operation of our business.
We are subject to litigation risk due to the nature of our business, which could have a material adverse effect on our business, financial condition, or results of operations. From time to time, we are involved in lawsuits or other legal proceedings that arise from business transactions or the operation of our business.
We establish insurance-related healthcare reserves based on historical claims experience and actuarial estimates, which could lead to adjustments in the future based on actual claims incurred. We retain a significant portion of the risk under our healthcare insurance program. In fiscal year 2021, we began self-insuring for costs associated with associates’ health needs, which is limited by stop-loss coverage.
We establish insurance-related healthcare reserves based on historical claims experience and actuarial estimates, which could lead to adjustments in the future based on actual claims incurred. We retain a significant portion of the risk under our healthcare in surance program. We currently self-insure for costs associated with associates’ healthcare needs, which is limited by stop-loss coverage.
These changes and other changes to trade policies or trade relationships could adversely affect our ability to secure sufficient products to service our customers and/or result in increased product costs that we may not be able to pass on to our customers, resulting in lower margins. Additionally, these changes could adversely affect our foreign sales.
These changes and other changes to trade policies or trade relationships could adversely affect our ability to secure sufficient products to service our customers and/or result in i ncreased product costs that we may not be able to pass on to our customers, resulting in lower margins or otherwise adversely affecting our sales.
We believe that sales of MRO supplies will continue to concentrate over the next several years, which may make MRO supply distribution more competitive. Some of our competitors challenge us with a greater variety of product offerings, greater financial resources, additional services, or a combination of these factors.
We believe that sales of MRO supplies will continue to become more concentrated over time, which may make MRO supply distribution more competitive. Some of our competitors challenge us with a greater variety of product offerings, greater financial resources, additional services, or a combination of these factors.
We may experience adverse impacts to our business as a result of any economic recession or slowing in the rate of growth. Additionally, macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, labor and supply costs, and interest rates.
As a result of any such economic recession or slowing in the rate of growth, we may experience a material adverse effect on our business, financial condition, or results of operations. Additionally, macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, labor and supply costs, and interest rates.
Additionally, such actions could negatively impact our reputation in the impacted geographic market and more broadly. Social and environmental responsibility policies and provisions may be difficult to comply with and may impose costs on us. There is an increasing focus on corporate social and environmental responsibility in our industry.
Additionally, such actions could negatively impact our reputation in the impacted geographic market and more broadly. Social and environmental responsibility policies and provisions may be difficult to comply with and may impose costs on us.
As a supplier to the U.S. government and public sector, which currently represents approximately 10% of total Company revenue, we must comply with certain laws and regulations, including the Trade Agreements Act, the Buy American Act and the Federal Acquisition Regulation, relating to the formation, administration and performance of U.S. government contracts.
As a supplier to the U.S. government and public sector, which represented approximately 10% of the Company's total revenue in fiscal year 2025, we must comply with certain laws and regulations, including the Trade Agreements Act, the Buy American Act and the Federal Acquisition Regulation, relating to the formation, administration and performance of U.S. government contracts.
In addition, as various sectors of our industrial customer base face increased foreign competition, and in fact lose business to foreign competitors or shift their operations overseas in an effort to reduce expenses, we may face increased difficulty in growing and maintaining our market share and growth prospects.
Further, our business is highly related to the manufacturing sector. As various sectors of our manufacturing customer base face increased foreign competition, and in fact lose business to foreign competitors or shift their operations overseas in an effort to reduce expenses, we may face increased difficulty in growing and maintaining our market share and growth prospects.
The loss or disruption of the services of one or more of such key personnel could have a material adverse effect on our business and financial results. We do not maintain any key-man insurance policies with respect to any of our executive officers.
The loss or disruption of the services of one or more of such key personnel or the inability to identify a suitable or temporary successor to a key role could have a material adverse effect on our business, financial condition, or results of operations. We do not maintain any key-man insurance policies with respect to any of our executive officers.
The defense and ultimate outcome of lawsuits or other legal proceedings may result in higher operating expenses, which could have a material adverse effect on our business, financial condition or results of operations. We may encounter difficulties with acquisitions and other strategic transactions which could harm our business.
The defense and ultimate outcome of lawsuits or other legal proceedings may result in higher operating expenses, which could have a material adverse effect on our business, financial condition or results of operations.
We also have implemented numerous security protocols in order to strengthen security, and we maintain a customary cyber insurance policy, but there can be no assurance that breaches will not occur in the future or be covered by our insurance policy. The costs of maintaining adequate cybersecurity safeguards for our IT systems may be significant and recurring as technology progresses.
We also have implemented numerous security protocols in order to strengthen security, and we maintain a customary cyber insurance policy, but there can be no assurance that breaches will not occur in the future or be covered by our insurance policy. The costs of maintaining our IT systems are significant and require recurring investment.
We may not be able to pass along increased costs due to inflation in full or synchronously to customers, which may result in lower margins or changes in our relationships with customers. We operate in a highly competitive industry, which is evolving and consolidating, which could adversely affect our business and financial results.
We may not be able to pass along increased costs due to inflation in full or synchronously to customers, which may result in lower margins or changes in our relationships with customers. We operate in a highly competitive industry, which is evolving and consolidating, which could have a material adverse effect on our business, financial condition, or results of operations.
Disruptions in our supply chain due to events outside of our control, including natural and human-induced disasters, earthquakes, storms, hurricanes, floods, fires, droughts, tornados and other extreme weather, widespread contagious diseases or viruses, geopolitical events, such as war, economic sanctions, civil unrest, rioting or terrorist attacks in the United States or countries in which we operate, in which our key suppliers are located or through which products we sell are transported or distributed, transportation disruptions, labor disputes or shortages, raw material shortages, inadequate manufacturing capacity or utilization to meet demand, actions by governments and central banks that impact the flow of international goods, and the imposition of other trade limitations, prohibitions or sanctions that increase the costs of domestic and international trade and transportation, could restrict our ability to obtain products that our customers demand or to meet delivery expectations, which could adversely impact our business, operating results and financial position.
Disruptions in our supply chain due to such factors as natural and human-induced disasters, widespread contagious diseases or viruses, geopolitical events such as war, economic sanctions, civil unrest, rioting or terrorist attacks in the United States or countries in which we operate, our key suppliers are located or through which our products are transported or distributed, transportation disruptions, labor disputes or shortages, raw material shortages, inadequate manufacturing capacity or utilization to meet demand, actions by governments and central banks that impact the flow of international goods, and the imposition of other trade limitations, prohibitions or sanctions that increase the costs of domestic and international trade and transportation, could restrict our ability to obtain products that our customers demand or to meet delivery expectations, which could have a material adverse effect on our business, financial condition, or results of operations.
So long as the Jacobson / Gershwind Family Shareholders (as defined below), collectively, have beneficial or record ownership of at least 10% of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in the Reclassification Agreement (as defined below), nominate two individuals designated by the Jacobson / Gershwind Family Shareholders for election to the Board of Directors at any annual meeting of our shareholders at which directors are to be elected.
So long as Mitchell Jacobson, Erik Gershwind, other members of the Jacobson / Gershwind Family and certain entities affiliated with the Jacobson / Gershwind family (collectively, the “Jacobson / Gershwind Family Shareholders”), collectively, have beneficial or record ownership of at least 10% of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in that Reclassification Agreement, dated as of June 20, 2023, with the Jacobson / Gershwind Family Shareholders (the “Reclassification Agreement”), nominate two individuals designated by the Jacobson / Gershwind Family Shareholders for election to our Board of Directors at any annual meeting of our shareholders at which directors are to be elected.
If we are unable to hire and retain associates capable of providing a high level of customer service and technical support, our operational capabilities and ability to provide differentiated services may be adversely affected. The loss of key suppliers or contractors or key brands could adversely affect our operating results.
If we are unable to hire and retain associates capable of providing a high level of customer service and technical support, our operational capabilities and ability to provide differentiated services may be adversely affected. 13 Table of Contents The loss of key suppliers or contractors or key brands could have a material adverse effect on our business, financial condition, or results of operations.
New privacy security laws and regulations, including the United Kingdom’s Data Protection Act 2018 (DPA), the European Union General Data Protection Regulation 2016 (GDPR) that became effective May 2018, the California Consumer Protection Act that became effective on January 1, 2020, and other similar state privacy laws, pose increasingly complex compliance challenges, which may increase compliance costs, and any failure to comply with data privacy laws and regulations could result in significant penalties. 18 Table of Contents Disruptions or breaches of our IT systems, or violations of data privacy laws, could adversely affect us.
Recent privacy security laws and regulations, including the United Kingdom’s Data Protection Act 2018 (DPA), the European Union General Data Protection Regulation 2016 (GDPR) that became effective May 2018, the California Consumer Protection Act that became effective January 2020, and other similar state privacy laws, pose increasingly complex compliance challenges, which may increase compliance costs, and any failure to comply with data privacy laws and regulations could result in significant penalties.
Climate change and societal and governmental responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers. Concerns over the long-term impacts of climate change have led, and will continue to lead, to governmental efforts around the world to mitigate those impacts.
Climate change and societal and governmental responses to climate change could have a material adverse effect on our business, financial condition, or results of operations, including indirectly through impacts on our customers. Concerns over the long-term impacts of climate change have led, and will continue to lead, to governmental efforts around the world to mitigate those impacts.
To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. The difficulties of this 19 Table of Contents integration may be further complicated by geographic distances.
To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. The difficulties of this integration may be further complicated by geographic distances. The integration of acquired businesses may not be successful and could result in disruption to other parts of our business.
Additionally, the opening of new customer fulfillment centers or the expansion of existing customer fulfillment centers would have an adverse impact on operating expenses as a percentage of sales, inventory turnover and return on investment in the periods prior to and for some time following the commencement of operations of each new customer fulfillment center or the completion of such expansions.
Additionally, prior to and for some time following the commencement of operations of a new customer fulfillment center or the completion of the expansion of an existing customer fulfillment center, operating expenses as a percentage of sales, inventory turnover and return on investment will be adversely impacted.
Goodwill and other indefinite-lived intangible assets recorded as a result of our acquisitions could become impaired . As of September 2, 2023, our combined goodwill and other indefinite-lived intangible assets amounted to $729.3 million.
Goodwill and other indefinite-lived intangible assets recorded as a result of our acquisitions could become impaired . As of August 30, 2025, our combined goodwill and other indefinite-lived intangible assets amounted to $734.6 million.
Fines and penalties may be imposed for non-compliance with applicable environmental, health and safety requirements and the failure to have or to comply with the terms and conditions of required permits.
We are subject to environmental, health and safety laws and regulations. We are subject to federal, state, local, foreign and provincial environmental, health and safety laws and regulations. Fines and penalties may be imposed for non-compliance with applicable environmental, health, and safety requirements and for failure to obtain or to comply with the terms and conditions of required permits.
The loss of, or a substantial decrease in, the availability of products or services from key suppliers or contractors at competitive prices, or the loss of a key brand, could cause our revenues and profitability to decrease. 15 Table of Contents Supply chain disruptions could adversely impact our business, operating results and financial position.
The loss of, or a substantial decrease in, the availability of products or services from key suppliers or contractors at competitive prices, or the loss of a key brand, could cause our revenues and profitability to decrease.
An interruption of operations at our headquarters or customer fulfillment centers could adversely impact our business . Our business depends on maintaining operations at our co-located headquarters and customer fulfillment centers.
Our business depends on maintaining operations at our co-located headquarters and customer fulfillment centers.
Prolonged periods of low inflation or deflation could adversely affect our ability to increase the prices at which we sell to customers. Periods of high or rapid inflation, such as the historically high levels of inflation the United States has experienced recently, may also cause the prices that our suppliers and independent freight carriers charge to increase rapidly or unpredictably.
Periods of high or rapid inflation, such as the historically high levels of inflation the United States has experienced in recent years, may also cause the prices that our suppliers and independent freight carriers charge to increase rapidly or unpredictably.
We perform periodic credit evaluations of our customers’ financial condition, and collateral is generally not required. We evaluate the collectability of accounts receivable based on numerous factors, including past transaction history with customers and their creditworthiness, and we provide a reserve for accounts that we believe to be uncollectible.
We evaluate the collectability of accounts receivable based on numerous factors, including past transaction history with customers and their 12 Table of Contents creditworthiness based on our periodic reviews, and a reserve for accounts that we believe to be uncollectible.
A violation of these specific laws and regulations, as well as others, could result in the imposition of fines and penalties or the termination of our U.S. government contracts and could harm our reputation and cause our business to suffer. Our business is exposed to the credit risk of our customers, which could adversely affect our operating results.
A violation of these specific laws and regulations, as well as others, could result in the imposition of fines and penalties, the termination of our public sector contracts or harm to our reputation, all of which would cause our business to suffer.
Changes in our customer mix have resulted from various factors, such as geographic expansion, daily selling activities within current geographic markets, and targeted selling activities to new customers. Changes in our product mix have also resulted from various factors, such as marketing activities to existing customers, needs communicated to us from existing and prospective customers and business acquisitions.
Changes in our product mix have also resulted from various factors, such as marketing activities to existing customers, needs communicated to us from existing and prospective customers, tariff-driven sourcing decisions, and business acquisitions.
Fluctuations in the frequency, magnitude or number of claims make it difficult to predict the ultimate cost of claims and may lead to future adjustments of reported results of operations which, depending on the magnitude of such adjustments, may significantly affect our reported results or negatively affect the reliability of our reported results.
Fluctuations in the frequency, magnitude or number of claims make it difficult to predict the ultimate cost of claims and may lead to future adjustments of reported results of operations which, depending on the magnitude of such adjustments, may significantly affect our reported results or negatively affect the reliability of our reported results. 14 Table of Contents An interruption of operations at our headquarters or customer fulfillment centers could have a material adverse effect on our business, financial condition, or results of operations.
In addition, the failure by us to take action or otherwise comply with the policies of our customers may negatively impact our customer relationships or reputation, which may adversely impact our business and results of operations.
In addition, the failure by us to take action or otherwise comply with the policies of our customers may negatively impact our customer relationships or reputation, which could have a material adverse effect on our business, financial condition, or results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Additionally, as interest rates rise, there may be fewer alternatives to our existing credit facilities for raising additional capital or such alternatives may be more expensive. Our inability to maintain our committed and uncommitted credit facilities could materially adversely affect our liquidity and our business.
Additionally, as 15 Table of Contents interest rates rise, there may be fewer alternatives to our existing credit facilities for raising additional capital or such alternatives may be more expensive.
Our ability to manage our business and execute our business strategy is dependent, in part, on the continued availability of financing. With respect to committed facilities, lenders may decline to renew or extend credit facilities, or they may require stricter terms and conditions with respect to future facilities, and we may not find these terms and conditions acceptable.
With respect to committed facilities, lenders may decline to renew or extend credit facilities, or they may require stricter terms and conditions with respect to future facilities, and we may not find these terms and conditions acceptable.
A significant deterioration in the economy or the financial condition of our customers, including as a result of higher inflation and fluctuations in interest rates, geopolitical events or macroeconomic events, could have an adverse effect on our ability to collect our accounts receivable, including longer payment cycles and increased collection costs and defaults. 14 Table of Contents Failure to accurately forecast customer demand and timely purchase inventory could lead to excess inventories or inventory shortages, which could result in decreased operating margins, reduced cash flows and harm to our business.
A significant deterioration in the economy or the financial condition of our customers, including as a result of higher inflation and fluctuations in interest rates, geopolitical events or macroeconomic events, could have an adverse effect on our ability to collect our accounts receivable, lengthen payment cycles and increased collection costs.
In addition, severe weather conditions and work stoppages affecting the end markets we serve could adversely affect demand for our products in particularly hard-hit regions and impact our sales and/or our ability to deliver our products. Our business depends on our ability to attract, train and retain qualified sales and customer service personnel and metalworking and specialty sales specialists .
In addition, severe weather conditions and work stoppages affecting the end markets we serve could adversely affect demand for our products in particularly hard-hit regions and impact our sales and/or our ability to deliver our products. Supply chain disruptions could have a material adverse effect on our business, financial condition, or results of operations.
Changes in our customer and product mix, or adverse changes to the cost of goods we sell, could cause our gross margin percentage to fluctuate or decrease. From time to time, we experience changes in our customer mix and in our product mix.
Changes in our customer and product mix, or adverse changes to the cost of goods we sell, could cause our gross margin percentage to fluctuate or decrease. As a distributor, our profitability is highly dependent on our gross margin, which in turn varies based on the product sold and the type of customer.
There can be no assurance that these actions will achieve their intended benefits. As a supplier to the U.S. government and public sector, we are subject to certain laws and regulations which may increase our costs of doing business and which subject us to certain compliance requirements and potential liabilities.
As a supplier to the public sector, we are subject to certain laws and regulations that mandate compliance standards, may result in potential liabilities and may increase our costs of doing business.
Our business depends on our ability to attract, train and retain qualified sales and customer service personnel and metalworking specialists. We greatly benefit from having associates who are familiar with the products we sell and their applications, as well as associates, and in particular metalworking specialists, who can provide technical support to our customers.
We greatly benefit from having associates who are familiar with the products we sell and their applications, as well as associates, particularly metalworking specialists, who can provide technical support to our customers. Qualified individuals of the requisite caliber and number needed to fill these positions may be difficult to hire and retain in sufficient numbers.
Our suppliers and independent freight carriers typically look to pass increased costs along to us through price increases. When we are forced to accept these price increases, we may not be able to pass them along to our customers, resulting in lower margins.
Our suppliers and independent freight carriers typically look to pass increased costs along to us through price increases.
In addition to incurring continual costs to maintain cybersecurity, we also incur significant, recurring costs to comply with data privacy laws. Regulatory authorities have increased their focus on how companies collect, process, use, store, share and transmit personal data.
Regulatory authorities have increased their focus on how companies collect, process, use, store, share and transmit personal data.
As a result, we are dependent upon our IT systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our IT systems.
Maintaining our IT systems and complying with data privacy laws may incur significant, recurring costs. Our IT systems are an integral part of our business and growth strategies. We are dependent upon our IT systems to operate our business and our a bility to effectively manage our business depends on the security, reliability, and adequacy of our IT systems.
We have made and continue to make investments in technology to protect our systems, computers, software, data and networks from attacks, damage or unauthorized access.
We may in the future be required to make additional investments which may have an adverse impact our business, financial condition or results of operation and may also fail to achieve their desired result. We have made and continue to make investments in technology to protect our systems, computers, software, data and networks from attacks, damage or unauthorized access.
Inventory levels in excess of customer demand due to the difficulty of calibrating demand for such products, the concentration of demand for a limited number of SKUs, difficulties in product sourcing, including due to supply chain disruptions affecting us and our suppliers, or rapid changes in demand may result in inventory impairment or write-downs, and the sale of excess inventory at discounted prices could have an adverse effect on our operating results, financial condition and cash flows.
Inventory levels in excess of customer demand may result in inventory impairment or write-downs, and the sale of excess inventory at discounted prices could have a material adverse effect on our business, financial condition, or results of operations.
Qualified individuals of the requisite caliber and number needed to fill these positions may be difficult to hire and retain in sufficient numbers. Additionally, hiring and retaining such qualified individuals may be adversely impacted by global and domestic economic uncertainty, and increased competition for such qualified individuals .
Additionally, our ability to hire and retain such qualified individuals may be adversely affected by global and domestic economic uncertainty, or increased competition for such qualified individuals .
With respect to uncommitted facilities, lenders may cease making loans or demand payment of outstanding loans, which may overly restrict our ability to conduct our business successfully and adversely impact our liquidity and financial position. 17 Table of Contents Risks Related to the Reclassification The Reclassification may not achieve the desired benefits for us or our shareholders.
With respect to uncommitted facilities, lenders may cease making loans or demand payment of outstanding loans, which may overly restrict our ability to conduct our business successfully and have a material adverse effect on our business, financial condition, or results of operations.
We currently voluntarily comply with the sustainability standards set forth by various sustainability initiatives and organizations. These social and environmental responsibility practices, policies, provisions and initiatives are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with.
These social and environmental responsibility practices, policies, provisions and initiatives are subject to change, can be unpredictable in the current environment, and may be difficult and expensive for us to comply with. At times, the social and environmental responsibility practices of our customers conflict with one another or may expose us to reputational or regulatory risk.
Conversely, if we underestimate customer demand for our products or if our manufacturers fail to supply products we require at the time we need them, including due to supply chain disruptions affecting us and our suppliers, we may experience inventory shortages. Inventory shortages might delay shipments to customers and negatively impact customer relationships.
Excess inventory could result from factors such as incorrectly anticipating demand for such products or rapid changes in customer preference, product innovations, or customer financial condition. Conversely, if we underestimate customer demand for our products or if our manufacturers fail to supply products we require at the time we need them, we may experience inventory shortages.
If any of them experience a cyber-attack or other cyber incident, this could adversely impact their operations, which may in turn impact or adversely affect our operations. General Risk Factors Our success is dependent on certain key management personnel. Our success depends largely on the efforts and abilities of certain key members of our senior management.
Our success depends largely on the efforts and abilities of certain key members of our senior management.
Removed
In order to operate more efficiently, control costs and improve profitability, we incurred approximately $7.9 million in restructuring and other costs in fiscal year 2023, primarily consisting of consulting-related costs and associate severance and separation costs associated with the optimization of the Company’s operations and profitability improvement .
Added
From time to time, we experience changes in our customer mix and in our product mix. Changes in our customer mix have resulted from various factors, such as changes in the geographies we serve, daily selling activities within current geographic markets, and targeted selling activities to different customers.
Removed
The risk of cancellation or rescheduling of orders may cause our operating results to fluctuate. The cancellation or rescheduling of orders may cause our operating results to fluctuate.
Added
Inflation impacts the costs at which we can procure products and our ability to increase prices at which we sell to customers over time. Prolonged periods of low inflation or deflation could adversely affect our ability to increase the prices at which we sell to customers.
Removed
Although we strive to maintain relationships with our customers, there is an ongoing risk that orders may be cancelled or rescheduled due to fluctuations in our customers’ business needs or purchasing budgets, including changes in national and local government budgets.
Added
In order to operate more efficiently, control costs and improve profitability, we incur restructuring and other costs, which can include consulting, severance and separation costs. There can be no assurance that action taken in connection with such costs will achieve their intended benefits.
Removed
Additionally, although our customer base is diverse, ranging from individual machine shops to Fortune 1000 companies and large governmental agencies, the cancellation or rescheduling of significant orders by larger customers may still have a material adverse effect on our operating results from time to time.
Added
Our business is exposed to the credit risk of our customers, which could have a material adverse effect on our business, financial condition, or results of operations. We generally do not require collateral from our customers, which exposes us to credit risk.
Removed
Work stoppages, labor shortages or other disruptions, including those due to extreme weather conditions, at transportation centers, shipping ports, our headquarters or our customer fulfillment centers may adversely affect our ability to obtain inventory and make deliveries to our customers.
Added
Failure to accurately forecast customer demand and timely purchase inventory could lead to excess inventories or inventory shortages, which could result in decreased operating margins, reduced cash flows and harm to our business.
Removed
Our ability to fulfill customer orders using same-day shipping and next-day delivery is an integral component of our business strategy upon which our customers rely, and any such disruption could adversely impact our business, operating results and financial position.
Added
Inventory shortages could result from events such as difficulties in product sourcing, including due to supply chain disruptions affecting us and our suppliers, or the concentration of demand for a limited number of SKUs.
Removed
The long-term impacts of the Reclassification are still unknown, and the Reclassification may not result in an increase in shareholder value or improve the liquidity and marketability of our equity. If the Reclassification is not viewed favorably by members of the investment community, it may impair the value of our Class A Common Stock and limit its liquidity and marketability.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeW e also maintain 10 regional inventory centers, all of which are located in the United States, which vary in size from approximately 7,000 to 58,000 square feet. Most of these warehouses, regional inventory centers and manufacturing locations are leased. These leases are for varying periods, with the longest extending to fiscal year 2031.
Biggest changeOur warehouses range in size from approximately 1,000 to 110,000 square feet. We also maintain five manufacturing locations in the United States which range in size from approximately 3,000 to 23,000 square feet and nine regional inventory centers in the United States which vary in size from approximately 7,000 to 21,000 square feet.
Operational Date Leased/ Owned Harrisburg, Pennsylvania 821,000 1997 Owned Atlanta, Georgia 721,000 1990 Owned Elkhart, Indiana 545,000 1996 Owned Columbus, Ohio 468,000 2014 Owned Reno, Nevada 419,000 1999 Owned Hanover Park, Illinois 288,000 2003 Leased We maintain 38 warehouses, of which 36 are located in North America and two are l ocated in Europe.
Operational Date Leased/ Owned Harrisburg, Pennsylvania Customer Fulfillment Center 821,000 1997 Owned Atlanta, Georgia Customer Fulfillment Center 721,000 1990 Owned Elkhart, Indiana Customer Fulfillment Center 545,000 1996 Owned Reno, Nevada Customer Fulfillment Center 419,000 1999 Owned Hanover Park, Illinois Customer Fulfillment Center 288,000 2003 Leased We maintain 38 warehouses, of which 36 are located in North America and two are located in other foreign countries.
The aggregate annual lease payments on the leased customer fulfillment centers, warehouses, regional inventory centers and manufacturing locations in fiscal year 2023 were approximatel y $12.3 million. ITEM 3. LEGAL PROCEEDINGS. For information related to legal proceedings, see the discussion under the caption “Legal Proceedings” in Note 16, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements. ITEM 4.
ITEM 3. LEGAL PROCEEDINGS. For information related to legal proceedings, see the discussion under the caption “Legal Proceedings” in Note 15, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 21 Table of Contents PART II.
ITEM 2. PROPERTIES. We have customer fulfillment centers in or near the following locations: Location Approx. Sq. Ft.
ITEM 2. PROPERTIES. As of August 30, 2025, we operated out of the following facilities: Location Purpose Approx. Sq. Ft.
Removed
This count includes locations which were previously referred to as either branches or customer fulfillment centers. Of these locations, two are new to MSC as a result of the acquisition of Buckeye and Tru-Edge during fiscal year 2023. Our warehouses range in size from approximat ely 1,000 to 110,000 square feet.
Added
We maintain co-headquarters at a facility we lease in Melville, New York and a facility we own in Davidson, North Carolina. We also maintain additional office support centers, most of which are leased, in the United States, Canada and Mexico. These leases are for varying periods, with the longest extending to fiscal year 2031.
Removed
We also maintain four manufacturing locations, two of which were acquired as part of the Buckeye and Tru-Edge acquisition during fiscal year 2023 . These manufacturing locations range in size from approximately 2,000 to 23,000 square feet.
Added
Th e aggregate annual lease payments on our leased properties in fiscal year 2025 were approximately $14.9 million. 20 Table of Contents During fiscal year 2025, the Company disposed of its 468,000 square foot customer fulfillment center in Columbus, Ohio (the “Columbus CFC”). See Note 7, “Property, Plant and Equipment” in the Notes to Consolidated Financial Statements for additional information.
Removed
MINE SAFETY DISCLOSURES. Not applicable. 21 Table of Contents PART II.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 21 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 22 ITEM 6. [RESERVED] 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 24 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 35 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 21 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 22 ITEM 6. [RESERVED] 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 24 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 34 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+1 added−0 removed3 unchanged
Biggest changeCumulative Total Shareholder Return for the Period from September 1, 2018 through September 2, 2023 *$100 invested on 9/1/2018 in stock or index, including reinvestment of dividends 9/1/2018 8/31/2019 8/29/2020 8/28/2021 9/3/2022 9/2/2023 MSC Industrial Direct Co., Inc. 100.00 81.78 90.16 124.63 119.03 159.78 S&P Midcap 400 Index 100.00 93.57 98.52 141.86 124.58 141.38 Dow Jones US Industrial Supplier Index 100.00 86.23 120.05 147.62 145.84 185.72
Biggest changeCumulative Total Shareholder Return for the Period from August 29, 2020 through August 30, 2025 *$100 invested on 8/29/2020 in stock or index, including reinvestment of dividends 8/29/2020 8/28/2021 9/3/2022 9/2/2023 8/31/2024 8/30/2025 MSC Industrial Direct Co., Inc. $ 100.00 $ 138.24 $ 132.02 $ 177.22 $ 148.70 $ 169.95 S&P Midcap 400 Index $ 100.00 $ 144.00 $ 126.45 $ 143.51 $ 168.86 $ 180.45 Dow Jones US Industrial Supplier Index $ 100.00 $ 122.97 $ 121.48 $ 154.70 $ 200.06 $ 239.99
The Company expects its practice of paying quarterly cash dividends on its common stock will continue, although the payment of future dividends is at the discretion of the Company’s Board of Directors and will depend upon the Company’s earnings, capital requirements, financial condition and other factors.
The Company expects its practice of paying quarterly cash dividends on its common stock will continue, although the payment of future dividends is at the discretion of our Board of Directors and will depend upon the Company’s earnings, capital requirements, financial condition and other factors.
Performance Graph The following stock price performance graph and accompanying information is not deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act or the Exchange Act or be subject to the liabilities of Section 18 of the Exchange Act, regardless of any general incorporation language in any such filing.
Performance Graph The following stock price performance graph and accompanying information is not deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or be subject to the liabilities of Section 18 of the Exchange Act, regardless of any general incorporation language in any such filing.
The graph assumes that $100 was invested at the closing price of our Class A Common Stock on the NYSE and each index on September 1, 2018 and assumes that all dividends paid on such securities during the applicable fiscal years 22 Table of Contents were reinvested. Indices are calculated on a month-end basis.
The graph assumes that $100 was invested at the closing price of our Class A Common Stock on the NYSE and each index on August 29, 2020 and assumes that all dividends paid on such securities during the applicable fiscal years 22 Table of Contents were reinvested. Indices are calculated on a month-end basis.
The approximate number of holders of record of MSC’s Class A Common Stock as of October 6, 2023 was 546.
The approximate number of holders of record of MSC’s Class A Common Stock as of October 2, 2025 was 504.
On October 11, 2023, the Company’s Board of Directors declared a regular cash dividend of $0.83 per share, payable on November 28, 2023 to shareholders of record at the close of business on November 14, 2023. The dividend is expected to result in aggregate payments of $47.5 million, based on the number of shares outstanding at October 6, 2023.
On October 7, 2025, our Board of Directors declared a regular cash dividend of $0.87 per share, payable on November 26, 2025 to shareholders of record at the close of business on November 12, 2025. The dividend is expected to result in aggregate payments of $48.5 million, based on the number of shares outstanding on October 2, 2025.
The Company paid aggregate annual regular cash dividends of $3.16 per share in fiscal year 2023 and $3.00 per share in fiscal year 2022.
The Company paid aggregate annual regular cash dividends of $3.40 per share in fiscal year 2025 and $3.32 per share in fiscal year 2024.
Purchases of Equity Securities The following table sets forth repurchases by the Company of its outstanding shares of Class A Common Stock, which are listed on the NYSE, during the quarter ended September 2, 2023: Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (3) 6/4/2023-7/4/2023 2,214 $ 95.51 — 4,369,279 7/5/2023-8/3/2023 129,596 $ 96.00 129,500 4,239,779 8/4/2023-9/2/2023 516,236 $ 100.81 515,756 3,724,023 Total 648,046 645,256 ____________________ (1) During the quarter ended September 2, 2023, 2,790 shares of our Class A Common Stock were withheld by the Company as payment to satisfy our associates’ tax withholding liability associated with our share-based compensation program and are included in the total number of shares purchased.
Purchases of Equity Securities The following table sets forth repurchases by the Company of its outstanding shares of Class A Common Stock, which are listed on the NYSE, during the quarter ended August 30, 2025: Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (3) 6/1/2025-7/1/2025 389 $ 85.05 — 1,413,423 7/2/2025-7/31/2025 598 $ 90.42 — 1,413,423 8/1/2025-8/30/2025 1,022 $ 89.87 — 1,413,423 Total 2,009 — ____________________ (1) During the quarter ended August 30, 2025, 2,009 shares of our Class A Common Stock were withheld by the Company as payment to satisfy our associates’ tax withholding liability associated with our stock-based compensation program and are included in the total number of shares purchased.
(2) Activity is reported on a trade date basis. (3) On June 29, 2021, the Company’s Board of Directors terminated the MSC Stock Repurchase Plan, which was established during fiscal year 1999, and authorized a new share repurchase program (the “Share Repurchase Program”) to purchase up to 5,000,000 shares of the Company’s Class A Common Stock.
(3) In June 2021, our Board of Directors terminated the existing share repurchase plan and authorized a new share repurchase plan (the “Share Repurchase Plan”) to purchase up to 5,000,000 shares of Class A Common Stock. There is no expiration date for the Share Repurchase Plan.
There is no expiration date for the Share Repurchase Program. As of September 2, 2023, the maximum number of shares of the Company’s Class A Common Stock that may yet be repurchased under the Share Repurchase Program was 3,724,023 shares.
As of August 30, 2025, the maximum number of shares of the Class A Common Stock that may be repurchased under the Share Repurchase Plan was 1,413,423 shares.
Added
(2) Activity is reported on a trade date basis. Average price paid per share excludes excise tax levied by the Inflation Reduction Act of 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

52 edited+23 added−46 removed17 unchanged
Biggest changeOf the $317.4 million increase in net sales during the fiscal year ended September 2, 2023, national account customer sales increased by $123.0 million, sales to our public sector customers increased by $122.1 million and sales to our core and other customers increased by $72.3 million. 28 Table of Contents The table below shows, among other things, the annual 2023 average daily sales (“ADS”) by total company and by customer type compared to the same periods in the prior fiscal year: ADS Percentage Change (Unaudited) 2023 Fiscal Period Thirteen-Week Period Ended Fiscal Q1 Thirteen-Week Period Ended Fiscal Q2 Thirteen-Week Period Ended Fiscal Q3 Thirteen-Week Period Ended Fiscal Q4 Fiscal Year Ended Net Sales (in thousands) $ 957,745 $ 961,632 $ 1,054,464 $ 1,035,441 $ 4,009,282 Sales Days 62 63 64 63 252 ADS (1) (in millions) $ 15.4 $ 15.3 $ 16.5 $ 16.4 $ 15.9 Total Company ADS Percent Change (2) 12.9 % 11.5 % 11.7 % 9.3 % 11.2 % Manufacturing Customers ADS Percent Change (2) 7.5 % Manufacturing Customers Percent of Total Net Sales 68 % Non-Manufacturing Customers ADS Percent Change (2) 19.7 % Non-Manufacturing Customers Percent of Total Net Sales 32 % (1) ADS is calculated using the number of business days in the United States for the periods indicated.
Biggest changeOf the $51.4 million decrease in net sales during fiscal year 2025, sales to our core and other customers decreased by $45.5 million, sales to our national account customers decreased by $33.1 million, partially offset by an increase in sales to our public sector customers of $27.2 million. 27 Table of Contents The tables below show, among other things, the annual 2025 average daily sales (“ADS”) by total company, by customer end-market and by customer type compared to the same periods in the prior fiscal year: ADS Percentage Change by Quarter (Unaudited) 2025 Fiscal Period Thirteen-Week Period Ended Fiscal Q1 Thirteen-Week Period Ended Fiscal Q2 Thirteen-Week Period Ended Fiscal Q3 Thirteen-Week Period Ended Fiscal Q4 Fiscal Year Ended August 30, 2025 Net Sales (in thousands) $ 928,484 $ 891,717 $ 971,145 $ 978,175 $ 3,769,521 Sales Days 62 63 64 63 252 ADS (1) (in millions) $ 15.0 $ 14.2 $ 15.2 $ 15.5 $ 15.0 Total Company ADS Percent Change (2) (2.7) % (4.7) % (0.8) % 2.7 % (1.3) % ADS Percentage Change by End-Market and Customer Type Fiscal Year Ended August 30, 2025 Manufacturing Customers ADS Percent Change (2)(3) (1.7) % Manufacturing Customers Percent of Total Net Sales (3) 67 % Non-Manufacturing Customers ADS Percent Change (2)(3) (0.7) % Non-Manufacturing Customers Percent of Total Net Sales (3) 33 % National Account Customers ADS Percent Change (2)(4) (2.3) % National Account Customers Percent of Total Net Sales (4) 36 % Public Sector Customers ADS Percent Change (2)(4) 8.2 % Public Sector Customers Percent of Total Net Sales (4) 10 % Core and Other Customers ADS Percent Change (2)(4) (2.2) % Core and Other Customers Percent of Total Net Sales (4) 54 % (1) ADS is calculated using the number of business days in the United States for the periods indicated.
We help our customers drive greater productivity, profitability and growth with approximately 2.4 million products, inventory management and other supply chain solutions, and deep expertise from more than 80 years of working with customers across industries. We continue to implement our strategies to gain market share, generate new customers, increase sales to existing customers, and diversify our customer base.
We help our customers drive greater productivity, profitability and growth with approximately 2.5 million products, inventory management and other supply chain solutions, and deep expertise from more than 80 years of working with customers across industries. We continue to implement our strategies to gain market share, generate new customers, increase sales to existing customers, and diversify our customer base.
These leases are for varying periods, with the longest extending to fi scal year 2031. In ad dition, we are obligated under certain equipment and automobile operating and finance leases, which expire on varying dates through fiscal ye ar 2029. From time to time, we enter into financing arrangements with vendors to purchase certain information technology equipment or software.
These leases are for varying periods, with the longest extending to fi scal year 2031. In ad dition, we are obligated under certain equipment and automobile operating and finance leases, which expire on varying dates through fiscal ye ar 2029 . From time to time, we enter into financing arrangements with vendors to purchase certain IT equipment or software.
Policies such as revenue recognition, depreciation, intangibles, long-lived assets and warranties require judgments on complex matters that are often 34 Table of Contents subject to multiple external sources of authoritative guidance such as the Financial Accounting Standards Board and the SEC.
Policies such as revenue recognition, depreciation, intangibles, long-lived assets and warranties require judgments on complex matters that are often subject to multiple external sources of authoritative guidance such as the Financial Accounting Standards Board and the SEC.
These leases (most of which require us to provide for the payment of real estate taxes, insurance and other operating costs) are for varying periods, with the longest extending to fiscal year 2031. In addition, we are obligated under certain equipment and automobile operating leases, which expire on varying dates through fiscal year 2029.
These leases (many of which require us to provide for the payment of real estate taxes, insurance and other operating costs) are for varying periods, with the longest extending to fiscal year 2031. In addition, we are obligated under certain equipment and automobile operating leases, which expire on varying dates through fiscal year 2028.
Critical Accounting Estimates We make estimates, judgments and assumptions in determining the amounts reported in the 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.
Critical Accounting Estimates We make estimates, judgments and assumptions in determining the amounts reported in the Consolidated Financial Statements and accompanying Notes. Estimates are based on historical experience and on various other 32 Table of Contents assumptions that are believed to be reasonable under the circumstances.
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 2022 fiscal period to the 2023 fiscal period.
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 2024 fiscal period to the 2025 fiscal period.
Recently Adopted Accounting Pronouncements Refer to Note 1, “Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements Refer to Note 1, “Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements. 33 Table of Contents
See Note 8, “Income Taxes” in the Notes to Consolidated Financial Statements. 33 Table of Contents We have not entered into any off-balance sheet arrangements and there are no commitments or obligations (including, but not limited to, guarantees; retained or contingent interests in assets transferred; contractual arrangements that support the credit, liquidity or market risk for transferred assets; or risk related to derivatives or other financial products related to our equity securities), including contingent obligations, with unconsolidated entities or persons that had during the periods presented herein or are reasonably likely to have a material impact on the Consolidated Financial Statements.
We have not entered into any off-balance sheet arrangements and there are no commitments or obligations (including, but not limited to, guarantees; retained or contingent interests in assets transferred; contractual arrangements that support the credit, liquidity or market risk for transferred assets; or risk related to derivatives or other financial products related to our equity securities), including contingent obligations, with unconsolidated entities or persons that had during the periods presented herein or are reasonably likely to have a material impact on the Consolidated Financial Statements.
See Note 11, “Leases” in the Notes to Consolidated Financial Statements for additional information on our operating lease arrangements. (2) As of September 2, 2023, the Company had entered into various finance leases for certain IT equipment, which expire on varying dates through fiscal year 2026.
See Note 11, “Leases” in the Notes to Consolidated Financial Statements for additional information on our operating lease arrangements. (2) As of August 30, 2025, the Company had entered into various finance leases for certain IT equipment, which expire on varying dates through fiscal year 2029.
We offer approximately 2.4 million active, saleable SKUs through our catalogs; our brochures; our E-commerce channels, including the MSC website; our inventory management solutions; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We service our customers from six customer fulfillment centers, 10 regional inventory centers, 38 warehouses and four manufacturing locations.
We offer approximately 2.5 million active, saleable SKUs through our catalogs; our brochures; our E-commerce channels, including the MSC website; our inventory management solutions; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We service our customers from five customer fulfillment centers, nine regional inventory centers, 38 warehouses and five manufacturing locations.
Capital Expenditures We continue to invest in sales productivity initiatives, E-commerce and vending platforms, customer fulfillment centers and distribution network, and other infrastructure and technology.
Capital Expenditures We continue to invest in E-commerce and vending platforms, customer fulfillment centers and distribution networks and other infrastructure and technology.
Subsequent to fiscal year 2023, the Company made additional payments of $15.0 million through October 6, 2023 on its revolving credit facility. The current unused balance of $559.7 million from the revolving credit facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary.
Subsequent to the end of fiscal year 2025, the Company made additional net payments of $15.0 million through October 2, 2025 on the Amended Revolving Credit Facility. The current unused balance of $543.7 million from the Amended Revolving Credit Facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary.
See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about these balances. Private Placement Debt and Shelf Facility Agreements In July 2016, we completed the issuance and sale of unsecured senior notes. In January 2018, we entered into two note purchase and private shelf facility agreements.
See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about our credit facilities. 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.
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 61.1% of consolidated net sales for fiscal year 2023, compared to 61.7% of consolidated net sales for fiscal year 2022.
Sales made through our E-commerce platforms, including sales made through electronic data interchange systems, VMI systems, Extensible Markup Language ordering-based systems, vending, hosted systems and other electronic portals, represented 63.8% of consolidated net sales for fiscal year 2025, compared to 63.6% of consolidated net sales for fiscal year 2024.
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 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 IP Index over the three months ended September 2, 2023 and the average for the three- and 12-month periods ended September 2, 2023 were as follows: Period IP Index June 102.3 July 103.3 August 103.3 Fiscal Year 2023 Q4 Average 103.0 12-month average 102.8 The average IP Index for the 12 months ended September 2, 2023 of 102.8 increased from the adjusted average from the prior fiscal year of 101.8, which indicated growth in manufacturing during fiscal year 2023.
The IP Index over the three months ended August 30, 2025 and the average for the three- and 12-month periods ended August 30, 2025 were as follows: Period IP Index June 104.2 July 103.8 August 103.9 Fiscal Year 2025 Q4 Average 104.0 12-Month Average 103.3 The average IP Index for the 12 months ended August 30, 2025 of 103.3 increased from the average from the prior fiscal year of 102.7.
As of September 2, 2023, the Company had recorded a non-current liability of $5.3 million for tax uncertainties and interest. This amount is excluded from the table above, as the Company cannot make reliable estimates of these cash flows by period.
As of August 30, 2025, the Company had recorded a non-current liability of $2.6 million for tax uncertainties and interest. This amount is excluded from the table above, as the Company cannot make reliable estimates of these cash flows by period. See Note 8, “Income Taxes” in the Notes to Consolidated Financial Statements.
As of September 2, 2023, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $454.3 million, net of unamortized debt issuance costs of $1.0 million, as compared to total borrowings outstanding of $794.6 million, net of unamortized debt issuance costs of $1.4 million, as of September 3, 2022.
As of August 30, 2025, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $485.7 million, net of unamortized debt issuance costs of $1.5 million, as compared to total borrowings outstanding of $508.8 million, net of unamortized debt issuance costs of $0.8 million, as of August 31, 2024.
See Note 1, “Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for more information. Inventories Inventory is reflected at the lower of weighted-average cost or net realizable value considering future demand, market conditions and the physical condition of the inventory. We write-down inventories for shrinkage and slow-moving or obsolete inventory.
See Note 1, “Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for more information. Inventories Inventory is reflected at the lower of cost or net realizable value considering such factors as its age, the physical condition of the inventory, historic sales, historical write-down activity as well as known trends as compared to on-hand inventory.
We focus on offering inventory, process and procurement solutions that reduce MRO supply chain costs and improve plant floor productivity for our customers.
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-savings strategies and leveraging our existing infrastructure.
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 from month to month indicates growth in the manufacturing, mining and utilities industries.
Approximately 67% of our revenues came from sales in the manufacturing sector during the quarter and year ended August 30, 2025. 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.
The analysis includes inventory levels, sales information, historical write-down information, and the on-hand quantities relative to the sales history for the product. Goodwill and Other Indefinite-Lived Intangible Assets The purchase price of an acquired company is allocated between the intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill.
The Company will write-down inventories for slow-moving or obsolete considerations. Goodwill and Other Indefinite-Lived Intangible Assets The purchase price of an acquired company is allocated between the intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill.
Restructuring and other costs primarily consist of consulting-related costs and associate severance and separation costs associated with the optimization of the Company’s operations and profitability improvement. See Note 14, “Restructuring and Other Costs” in the Notes to Consolidated Financial Statements for additional information.
The decrease was primarily due to decreases in both associate severance and separation costs and consulting-related costs compared to the prior fiscal year. See Note 14, “Restructuring and Other Costs” in the Notes to Consolidated Financial Statements for additional information.
Total Other Expense Total other expense increased 56.9%, or $10.0 million, to $27.6 million for fiscal year 2023, as compared to $17.6 million for the prior fiscal year.
Total Other Expense Total other expense decreased 20.3%, or $9.7 million, to $38.0 million for fiscal year 2025, as compared to $47.6 million for the prior fiscal year.
Such disruptions and conditions have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations.
These pressures have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations. More recently, new and expanded tariffs have contributed to heightened macroeconomic uncertainty.
As of September 2, 2023, the Company also had three uncommitted credit facilities, totaling $203.0 million of aggregate maximum uncommitted availability. See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about our credit facilities. As of September 2, 2023, we were in compliance with the operating and financial covenants of our credit facilities.
As of August 30, 2025, the Company also had three uncommitted credit facilities, totaling $230.0 million of 31 Table of Contents aggregate maximum uncommitted availability. As of August 30, 2025, we were in compliance with the operating and financial covenants of our credit facilities.
Financing Activities Net cash used in financing activities for fiscal years 2023 and 2022 was $580.4 million and $148.1 million, respectively.
Financing Activities Net cash used in financing activities for fiscal year 2025 and fiscal year 2024 was $243.6 million and $307.4 million, respectively.
The $317.4 million increase in net sales was comprised of $160.5 million from improved pricing, inclusive of changes in customer and product mix, discounting and other items, $136.0 million of higher sales volume and $113.5 million of net sales from recent acquisitions, partially offset by $92.6 million in sales attributable to six fewer selling days during fiscal year 2023.
The $51.4 million decrease in net sales was comprised of $88.1 million of lower sales volume and $5.9 million of unfavorable foreign exchange impact, partially offset by $21.6 million from improved pricing, inclusive of changes in customer and product mix, discounting and other items and $21.0 million of net sales from recent acquisitions.
Future Liquidity Outlook As of September 2, 2023, our future contractual obligations were as follows (in thousands): Contractual Obligations Fiscal Year 2024 Thereafter Undiscounted operating lease obligations (1) $ 23,422 $ 49,529 Undiscounted finance lease obligations, net of interest (2) 275 237 Maturities of long-term debt obligations, net of interest (3) 50,000 224,750 Estimated interest on long-term debt (4) 9,638 18,659 Total contractual obligations $ 83,335 $ 293,175 (1) Certain of our operations are conducted on leased premises.
Future Liquidity Outlook As of August 30, 2025, our future contractual obligations were as follows (in thousands): Contractual Obligations Fiscal Year 2026 Thereafter Undiscounted operating lease obligations (1) $ 24,555 $ 32,625 Undiscounted finance lease obligations, net of interest (2) 222 269 Maturities of long-term debt obligations, net of interest (3) 100,000 169,750 Estimated interest on long-term debt (4) 10,820 19,383 Total contractual obligations $ 135,597 $ 222,027 (1) Certain of our operations are conducted on leased premises.
Investing Activities Net cash used in investing activities for fiscal years 2023 and 2022 was $112.7 million and $94.5 million, respectively. The use of cash for both fiscal years was primarily due to expenditures for property, plant and equipment mainly related to vending programs and Mission Critical projects.
The use of cash for both fiscal years was primarily due to expenditures for property, plant and equipment mainly related to vending programs and other infrastructure and technology investments.
The decrease in income from operations as a percentage of net sales was primarily attributable to a lower gross profit margin and the impact of six fewer selling days during fiscal year 2023, both as described above, partially offset by an improvement in operating expenses as a percentage of net sales from the prior fiscal year and the prior fiscal year gain on sale of property which did not recur during fiscal year 2023.
The decrease in income from operations as a percentage of net sales was primarily attributable to, as described above, lower sales volume and gross profit margin and an increase in Operating expenses as a percentage of net sales.
The decrease in total borrowings outstanding was driven by higher net payments under our credit facilities, private placement notes and shelf facility agreements. Debt payments were primarily funded through the RPA entered into during fiscal year 2023. See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about these balances.
The decrease in total borrowings outstanding was driven by a lower level of private placement debt. See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about these balances.
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. 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. Our business model centers on delivering value-added services that address complex procurement challenges for our customers, with a focus on reducing total procurement costs and enabling just-in-time delivery through integrated solutions.
Payroll and payroll-related costs, which include salary, incentive compensation, sales commission, and fringe benefit costs, increased by $22.9 million for fiscal year 2023.
Payroll and payroll-related costs were approximately 57.0% of total operating expenses in fiscal year 2025, as compared to 56.1% in fiscal year 2024. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission, and fringe benefit costs, increased by $42.4 million for fiscal year 2025.
Income from Operations Income from operations increased 3.2% to $483.7 million in fiscal year 2023, as compared to $468.7 million in fiscal year 2022. Income from operations as a percentage of net sales decreased to 12.1% in fiscal year 2023, as compared to 12.7% in fiscal year 2022.
Income from Operations Income from operations decreased 22.8% to $301.6 million in fiscal year 2025, as compared to $390.4 million in fiscal year 2024. Income from operations as a percentage of net sales decreased to 8.0% in fiscal year 2025, as compared to 10.2% in fiscal year 2024.
The components contributing to the use of cash for fiscal year 2023 were primarily the following: • $176.7 million of regular cash dividends paid during fiscal year 2023 compared to $167.4 million of regular cash dividends paid during fiscal year 2022; • net payments under our credit facilities, private placement debt and shelf facility agreements of $340.0 million during fiscal year 2023 compared to net borrowings of $9.5 million during fiscal year 2022; • $95.8 million in aggregate repurchases of Class A Common Stock during fiscal year 2023 compared to $27.4 million in aggregate repurchases of Class A Common Stock during fiscal year 2022; and • proceeds from the exercise of Class A Common Stock options of $28.7 million during fiscal year 2023 compared to $34.7 million during fiscal year 2022. 32 Table of Contents Debt Credit Facilities In April 2017, the Company entered into a $600.0 million revolving credit facility, which was subsequently amended and extended in August 2021.
The components contributing to the use of cash for fiscal year 2025 and fiscal year 2024 were primarily the following: • $189.7 million of regular cash dividends paid during fiscal year 2025 compared to $187.3 million of regular cash dividends paid during fiscal year 2024; • $39.3 million in aggregate repurchases of Class A Common Stock during fiscal year 2025 compared to $187.7 million in aggregate repurchases of Class A Common Stock during fiscal year 2024; and • net payments under our credit facilities and private placement debt of $21.5 million during fiscal year 2025 compared to net borrowings of $53.5 million during fiscal year 2024.
The table below summarizes information regarding the Company’s cash flows for the periods indicated: Fiscal Years Ended September 2, 2023 September 3, 2022 (In thousands) Net cash provided by operating activities $ 699,582 $ 246,183 Net cash used in investing activities (112,675) (94,493) Net cash used in financing activities (580,400) (148,140) Effect of foreign exchange rate changes on cash and cash equivalents 8 (549) Net increase in cash and cash equivalents $ 6,515 $ 3,001 31 Table of Contents Operating Activities Net cash provided by operating activities for fiscal years 2023 and 2022 was $699.6 million and $246.2 million, respectively.
The table below summarizes information regarding the Company’s cash flows for the periods indicated: Fiscal Years Ended August 30, 2025 August 31, 2024 (In thousands) Net cash provided by operating activities $ 333,717 $ 410,696 Net cash used in investing activities (63,294) (123,396) Net cash used in financing activities (243,572) (307,352) Effect of foreign exchange rate changes on cash and cash equivalents (211) (412) Net (decrease) increase in cash and cash equivalents $ 26,640 $ (20,464) Operating Activities Net cash provided by operating activities for fiscal year 2025 and fiscal year 2024 was $333.7 million and $410.7 million, respectively.
See Note 8, “Income Taxes” in the Notes to Consolidated Financial Statements for further information. 30 Table of Contents Net Income The factors which affected net income for fiscal year 2023, as compared to the prior fiscal year, have been discussed above.
See Note 8, “Income Taxes” in the Notes to Consolidated Financial Statements for further information.
(2) Fiscal years 2023 and 2022 had 252 and 258 sales days, respectively. 24 Table of Contents Highlights Highlights during fiscal year 2023 include the following: • We generated $699.6 million of cash from operations compared to $246.2 million in fiscal year 2022.
Highlights Highlights during fiscal year 2025 include the following: • We generated $333.7 million of cash from operations compared to $410.7 million in fiscal year 2024.
The chart below displays a two-year comparison of our net sales from fiscal year 2022 through fiscal year 2023: (1) Pricing and other is comprised of changes in customer and product mix, discounting and other items.
Our field sales and service associate headcount was 2,636 at August 30, 2025 compared to 2,697 at August 31, 2024. 24 Table of Contents The chart below displays a comparison of our net sales from fiscal year 2024 through fiscal year 2025: 1 Both fiscal years 2025 and 2024 had 252 sales days 2 Pricing and other is comprised of changes in customer and product mix, discounting and other items. 3 Individual amounts may not agree to the annual total due to rounding.
The decline in operating expenses as a percentage of net sales was related to our cost savings programs and productivity improvements resulting from our Mission Critical initiatives. 29 Table of Contents Payroll and payroll-related costs were approximately 56.1% of total operating expenses for fiscal year 2023, as compared to approximately 57.5% for fiscal year 2022.
Operating expenses were 32.5% of fiscal year 2025 net sales, as compared to 30.6% for fiscal year 2024. The increase in operating expenses and operating expenses as a percentage of net sales was primarily attributable to higher payroll and payroll-related costs and investments supporting our digital initiatives and solutions growth.
The primary drivers of the increase in depreciation and amortization were increased capital expenditures related to vending programs and Mission Critical projects. Professional fee expense was $47.9 million for fiscal year 2023, as compared to $30.3 million for fiscal year 2022.
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 $11.0 million in restructuring and other costs for fiscal year 2025, as compared to $14.5 million for the prior fiscal year.
The majority of this increase compared to the prior fiscal year was due to increased salary expenses and fringe benefit costs, including higher insurance-related healthcare reserves due to recent higher healthcare claims, partially offset by a lower incentive compensation accrual. Freight expense was $156.8 million for fiscal year 2023, as compared to $155.5 million for fiscal year 2022.
The majority of this increase compared to the prior fiscal year was due to higher incentive compensation as well as higher salary expenses from our annual merit increases. Freight expense was $150.5 million for fiscal year 2025, as compared to $148.5 million for fiscal year 2024.
Business Environment We utilize various indices when evaluating the level of our business activity, including the Industrial Production (“IP”) Index. Approximately 66% and 68% of our revenues came from sales in the manufacturing sector during the quarter and year ended September 2, 2023, respectively.
The impact from tariffs was most significant in the Company’s fourth fiscal quarter of 2025, and the Company anticipates increased pressure from tariffs in fiscal year 2026 as the impact from such tariffs continues. We utilize various indices when evaluating the level of our business activity, including the Industrial Production (“IP”) Index.
Th e decrease i n gross profit margin was primarily attributable to large sales to a public sector customer during the third and fourth quarters of fiscal year 2023 which were transacted below our typical public sector customer margins, as well as unfavorable customer mix as sales to our national account and public sector customers are growing at higher rates and are typically at lower gross margins than the business as a whole.
Th e decrease in gross profit margin was primarily a result of higher inventory cost and change in customer mix, as sales to public sector customers grew as a percentage of overall sales and our sales to public sector customers transact at lower gross profit margins than the business as a whole. 28 Table of Contents Operating Expenses Operating expenses increased 4.8% to $1,223.6 million in fiscal year 2025, as compared to $1,167.9 million in fiscal year 2024.
The increase was primarily from the $300.0 million Receivables Purchase Agreement (the “RPA”) entered into during fiscal year 2023. • We had net payments of $340.0 million on our credit facilities, private placement debt and shelf facility agreements compared to net borrowings of $9.5 million in fiscal year 2022.
The decrease was primarily from lower net income and a decline in inventories in the prior year period. • We had net payments of $21.5 million on our credit facilities and private placement debt compared to net borrowings of $53.5 million in fiscal year 2024. • We repurchased $39.3 million of Class A Common Stock compared to $187.7 million in fiscal year 2024, excluding excise taxes in both years.
Our strategy is to complete the transition from being a spot-buy supplier to a mission-critical partner to our customers. We will selectively pursue strategic acquisitions that expand or complement our business in new and existing markets or further enhance the value and offerings we provide.
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 an elevated inflationary environment, sustained high interest rates and general economic and political uncertainty.
The Company believes the technical expertise and value-added services provided by Tru-Edge will support its effort to drive cost savings for its customers. 26 Table of Contents Our Strategy 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 completed our web price realignment initiative in fiscal year 2024 and launched our enhanced marketing efforts and rolled out several E-commerce enhancements during fiscal year 2025. 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.
During fiscal year 2022, the Company disposed of the building with a sale price of $25.5 million, which resulted in a gain on sale of property of $10.1 million after the settlement of certain closing costs and fees, which is included in the Consolidated Statement of Income for the fiscal year ended September 3, 2022.
Restructuring and other costs primarily consisted of associate severance and separation costs and consulting-related costs. • We disposed of the Columbus CFC with a sales price of $32.0 million, which resulted in a loss on sale of property of approximately $1.2 million after the settlement of certain closing costs and fees.
The table below summarizes certain information regarding the Company’s operations: Fiscal Years Ended September 2, 2023 September 3, 2022 (Dollars in thousands) Working Capital (1) $ 668,077 $ 817,679 Current Ratio (2) 2.0 2.1 Days’ Sales Outstanding (3) 36.5 65.3 Inventory Turnover (4) 3.2 3.2 (1) Working Capital is calculated as current assets less current liabilities.
The decrease was primarily due to the following: • a decrease in net income, as described above; and • a decline in inventories in the prior year period primarily attributable to lower sales and purchase volume as well as inventory optimization efforts; partially offset by • an increase in the change in accounts payable and accrued liabilities as compared to the prior year period primarily due to higher accounts payable and payroll and payroll related accruals 30 Table of Contents The table below summarizes certain information regarding the Company’s operations: Fiscal Years Ended August 30, 2025 August 31, 2024 (Dollars in thousands) Working Capital (1) $ 497,208 $ 582,662 Current Ratio (2) 1.7 2.0 Days’ Sales Outstanding (3) 37.8 37.9 Inventory Turnover (4) 3.4 3.3 (1) Working Capital is calculated as current assets less current liabilities.
The use of cash for fiscal years 2023 and 2022 also included cash outflows due to acquisitions, Buckeye and Tru-Edge in fiscal year 2023 and Engman-Taylor Company, Inc. and Tower Fasteners in fiscal year 2022. In fiscal year 2022, investing outflows were partially offset by the net proceeds received from the sale of the Company’s Long Island Customer Service Center.
The use of cash in fiscal year 2025 was partially offset by proceeds from the sale of the Columbus CFC and the use of cash in fiscal year 2024 also included payments for the acquisitions of KAR Industrial Inc., ApTex, Inc., Premier and SMRT.
Removed
We will seek to continue to achieve cost reductions throughout our business through cost-savings strategies and increased leverage from our existing infrastructure, and continue to provide additional procurement cost-savings solutions to our customers through technology such as our VMI, CMI and vending programs.
Added
Additionally, we support our customers' growth and profitability by ensuring operational efficiency through technologies such as our VMI, CMI and vending programs — helping reduce downtime and ensure critical products are available when and where they are needed.
Removed
Our field sales and service associate headcount was 2,572 at September 2, 2023 compared to 2,536 at September 3, 2022 and 2,398 at August 28, 2021.
Added
Our vending machines in service totaled 29,611 as of August 30, 2025, compared to 27,003 as of August 31, 2024, and our in-plant programs totaled 411 locations as of August 30, 2025, compared to 342 as of August 31, 2024.
Removed
Proceeds from the RPA were primarily utilized to pay down debt on our credit facilities. • We repurchased $95.8 million of MSC’s Class A Common Stock, par value $0.001 per share (“Class A Common Stock”), compared to $27.4 million in fiscal year 2022. • We paid out an aggregate $176.7 million in regular cash dividends, compared to an aggregate $167.4 million in regular cash dividends in fiscal year 2022. • In January 2023, we acquired Buckeye and Tru-Edge for aggregate consideration of $22.4 million, which includes cash paid of $20.5 million and the fair value of contingent consideration to be paid out of $2.3 million, net of a post-closing working capital adjustment in the amount of $0.4 million received from the sellers. • We incurred $7.9 million in restructuring and other costs compared to $15.8 million in fiscal year 2022.
Added
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.
Removed
Restructuring and other costs primarily consist of consulting-related costs and associate severance and separation costs associated with the optimization of the Company’s operations and profitability improvement.
Added
The higher share repurchase volume in the prior year included shares purchased to offset the share dilution resulting from the Reclassification. • We paid out an aggregate $189.7 million in regular cash dividends, compared to an aggregate $187.3 million in regular cash dividends in fiscal year 2024. • We incurred $11.0 million in restructuring and other costs compared to $14.5 million in fiscal year 2024.
Removed
Recent Developments Progress on Mission Critical As previously disclosed, we initiated a Company-wide project, which we refer to as “Mission Critical,” to accelerate market share capture and improve profitability over the period through fiscal year 2023.
Added
See Note 7, “Property, Plant and Equipment” in the Notes to Consolidated Financial Statements for additional information. Our Strategy The first phase of our Company-wide initiative, referred to as “Mission Critical,” focused on market share capture and improved profitability.
Removed
To realize growth, one of our Mission Critical initiatives, we began and expect to continue investing in our market-leading metalworking business by adding to our metalworking specialist team, introducing value-added services to our customers, expanding our vending, VMI and in-plant solutions programs, building out our sales force, and diversifying our customers and end-markets.
Added
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 25 Table of Contents end-markets.
Removed
We also are focused on improving profitability through the implementation of various pricing strategies and critical structural cost reductions in order to improve return on invested capital.
Added
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.
Removed
We anticipate that the cost reductions will be comprised of savings in the areas of sales and service, supply chain and general and administrative expenses, and include initiatives to optimize our distribution center network and real estate footprint, renegotiate supplier contracts, and redesign our talent acquisition and retention approach.
Added
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.
Removed
While Mission Critical was tied to three-year financial targets ending in fiscal year 2023, the key focus areas of Mission Critical, including profitable growth, an improved operating model, and technological improvement, remain critical and ever-evolving initiatives at the Company. Maintaining a continuous improvement mindset remains a key tenet of our strategy going forward.
Added
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.
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Impact of Economic Trends The United States economy has experienced and continues to experience disruptions in the supply of certain products and services and tight conditions in the labor market.
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Growth in the IP Index from month to month indicates growth in the manufacturing, mining and utilities industries.
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These disruptions and conditions have contributed to an inflationary environment which, while falling, remains elevated and has affected the price and, at times, the availability of certain products and services necessary for the Company’s operations, including fuel, labor and certain products the Company sells or the inputs for such products.
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The IP Index for the fourth fiscal quarter of 2025 of 104.0 increased compared to the prior year period of 102.9 and increased slightly compared to the prior quarter of 103.7. During fiscal year 2025, the Company experienced soft demand for the products and services it offers.
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As a result of recent high inflation and periodic supply chain disruptions, the Company continues to implement price realization strategies in response to increased costs the Company faces and has invested in improved warehouse automation to mitigate the effects of labor inflation.
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This soft demand was felt more acutely in the heavy manufacturing industry, which represented 58% of our revenues during the year ended August 30, 2025. These trends did improve during the fourth quarter, with several subindexes such as Machinery & Equipment, Aerospace, Automotive and Primary Metals indicating expansion.
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The category line review process initiated in the second quarter of fiscal year 2023 continues to progress and shows early signs of improvements in supply chain efficiency, customer experience and supplier engagement.
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Despite moderate improvement in certain end-markets during the fourth quarter, including our public sector end-market, the demand environment for the Company’s products was softer than the demand environment for the economy as a whole during fiscal year 2025, which we believe is due to the concentration of the Company’s customers in these and other subindex industries, which lagged the IP index as a whole.
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Furthermore, in light of disruptions to availability and increased or uncertain shipping times, the Company is maintaining higher purchasing levels than it did prior to its fiscal year 2020 in order to ensure sufficient inventory supply to meet customer demand. 25 Table of Contents Reclassification On January 31, 2023, the Board of Directors of the Company (the “Board”) received a proposal (the “Proposal”) from the Company’s controlling shareholders, the Jacobson / Gershwind family, to exchange each of their shares of Class B Common Stock, par value $0.001 per share (“Class B Common Stock” and, together with Class A Common Stock, “Common Stock”), for shares of Class A Common Stock, reclassify the Class B Common Stock and the Class A Common Stock into a single class of common stock and eliminate the current dual-class share structure (the “Reclassification”).
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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. 26 Table of Contents Results of Operations Fiscal Year Ended August 30, 2025 Compared to the Fiscal Year Ended August 31, 2024 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: Fiscal Years Ended August 30, 2025 (52 weeks) August 31, 2024 (52 weeks) Change $ % $ % $ % Net sales $ 3,769,521 100.0 % $ 3,820,951 100.0 % $ (51,430) (1.3) % Cost of goods sold 2,233,386 59.2 % 2,248,168 58.8 % (14,782) (0.7) % Gross profit 1,536,135 40.8 % 1,572,783 41.2 % (36,648) (2.3) % Operating expenses 1,223,573 32.5 % 1,167,870 30.6 % 55,703 4.8 % Restructuring and other costs 10,999 0.3 % 14,526 0.4 % (3,527) (24.3) % Income from operations 301,563 8.0 % 390,387 10.2 % (88,824) (22.8) % Total other expense (37,985) (1.0) % (47,638) (1.2) % 9,653 (20.3) % Income before provision for income taxes 263,578 7.0 % 342,749 9.0 % (79,171) (23.1) % Provision for income taxes 65,742 1.7 % 86,792 2.3 % (21,050) (24.3) % Net income 197,836 5.2 % 255,957 6.7 % (58,121) (22.7) % Less: Net loss attributable to noncontrolling interest (1,492) 0.0 % (2,637) (0.1) % 1,145 (43.4) % Net income attributable to MSC Industrial $ 199,328 5.3 % $ 258,594 6.8 % $ (59,266) (22.9) % Net Sales Net sales in fiscal year 2025 decreased 1.3%, or $51.4 million, from the prior fiscal year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risks We are exposed to interest rate risk on our variable rate debt. During fiscal year 2023, the Company extended its three uncommitted credit facilities. Additionally, the Company amended its committed credit facility during fiscal year 2023.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risks We are exposed to interest rate risk on our variable rate debt. During fiscal year 2025, the Company extended, and in some cases amended, its three uncommitted credit facilities. See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about the credit facilities.
To the extent that we engage in more significant international sales in the future, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets. We have monitored and will continue to monitor our exposure to currency fluctuations. 35 Table of Contents
To the extent that we engage in more significant international sales in the future, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets. We have monitored and will continue to monitor our exposure to currency fluctuations. 34 Table of Contents
A 100-basis point increase or decrease in interest rates would impact our interest costs and fees incurred associated with the RPA by approximately $5.1 million under our current capital structure. We have monitored and will continue to monitor our exposure to interest rate fluctuations.
A 100-basis point increase or decrease in interest rates would impact our interest costs on outstanding debt, and fees incurred associated with the RPA, by approximately $5.5 million under our current capital structure. We have monitored and will continue to monitor our exposure to interest rate fluctuations.
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See Note 10, “Debt” in the Notes to Consolidated Financial Statements for more information about the credit facilities. During fiscal years 2022 and 2023, we amended our committed and uncommitted credit facilities by replacing the London InterBank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) as the primary reference rate.
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As SOFR is a relatively new reference rate with a limited history, there may or may not be more volatility than other reference rates such as LIBOR, which may result in increased borrowing costs for the Company. We will continue to actively assess the related opportunities and risks involved in this transition.

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