Msc Industrial Direct Co Inc 10-Q for FY2026 Q3
Msc Industrial Direct Co Inc (MSM)
10-Q
2026-07-01
For: 2026-05-30
View Original
Added on
July 02, 2026
About this 10-Q
Msc Industrial Direct Co Inc filed this 10-Q on July 1, 2026, covering the quarter ended May 30, 2026 (FY2026 Q3).
Headline figures
Quarter ended May 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.05B
- up 7.8% from $971.15M a year earlier
- Net income
- $80.36M
- up 41.4% from net income of $56.85M a year earlier
- Diluted EPS
- $1.44
- up 41.2% from $1.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
______________________________
| (Mark One) | |||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from _____ to _____
Commission File Number: 1-14130
__________________
(Exact name of registrant as specified in its charter)
__________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) | ||||
(516 ) 812-2000
(Registrant’s telephone number, including area code)
__________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of June 17, 2026, 55,846,298 shares of Class A Common Stock of the registrant were outstanding.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Discussions containing such forward‑looking statements may be found in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3, “Quantitative and Qualitative Disclosures About Market Risk” of Part I and Item 1, “Legal Proceedings” and Item 1A, “Risk Factors” of Part II of this Report, as well as within this Report generally. The words “will,” “may,” “believes,” “anticipates,” “thinks,” “expects,” “estimates,” “plans,” “intends” and similar expressions are intended to identify forward‑looking statements. In addition, statements which refer to expectations, projections or other characterizations of future events or circumstances, statements involving a discussion of strategy, plans or intentions, statements about management’s assumptions, projections or predictions of future events or market outlook and any other statement other than a statement of present or historical fact are forward‑looking statements. 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”) expressly disclaims any obligation to publicly disclose any revisions to these forward‑looking statements to reflect events or circumstances occurring subsequent to filing this Report with the United States Securities and Exchange Commission (the “SEC”), except to the extent required by applicable law. These forward‑looking statements are subject to risks and uncertainties, including, without limitation, those discussed in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3, “Quantitative and Qualitative Disclosures About Market Risk” of Part I and Item 1, “Legal Proceedings” and Item 1A, “Risk Factors” of Part II of this Report, as well as in Item 1A, “Risk Factors” of Part I and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of Part II of our Annual Report on Form 10-K for the fiscal year ended August 30, 2025. In addition, new risks may emerge from time to time and it is not possible for management to predict such risks or to assess the impact of such risks on our business or financial results. Accordingly, future results may differ materially from historical results or from those discussed or implied by these forward‑looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward‑looking statements. These risks and uncertainties include, but are not limited to, the following:
•general economic conditions in the markets in which we operate;
•changing customer and product mixes;
•volatility in commodity, energy and labor prices and the impact of prolonged periods of low, high or rapid inflation;
•competition, including the adoption by competitors of aggressive pricing strategies or sales methods;
•industry consolidation and other changes in the industrial distribution sector;
•the applicability of laws and regulations relating to our status as a supplier to the U.S. government and public sector and the impact of any lapse in funding for the federal government;
•the credit risk of our customers;
•our ability to accurately forecast customer demand;
•interruptions in our ability to make deliveries to customers;
•supply chain disruptions;
•our ability to attract and retain sales and customer service personnel;
•the risk of loss of key suppliers or contractors or key brands;
•changes to trade policies or trade relationships, including tariff policies;
•risks associated with opening or expanding our customer fulfillment centers (“CFCs”);
•our ability to estimate the cost of healthcare claims incurred under our self-insurance plan;
•interruption of operations at our headquarters or CFCs;
•products liability due to the nature of the products that we sell;
•impairments of goodwill and other indefinite-lived intangible assets;
•the impact of climate change;
•operating and financial restrictions imposed by the terms of our material debt instruments;
•our ability to access additional liquidity;
•the significant influence that our principal shareholders will continue to have over our decisions;
•our ability to execute on our E-commerce strategies and to maintain our digital platforms;
•costs associated with maintaining our information technology (“IT”) systems and complying with data privacy laws;
•disruptions or breaches of our IT systems or violations of data privacy laws, including such disruptions or breaches in connection with our E-commerce channels;
•risks related to online payment methods and other online transactions;
•the retention of key management personnel;
•litigation risk due to the nature of our business;
•failure to comply with environmental, health, and safety laws and regulations; and
•our ability to comply with, and the costs associated with, social and environmental responsibility policies.
MSC INDUSTRIAL DIRECT CO., INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MAY 30, 2026
TABLE OF CONTENTS
| Page | ||||||||
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| May 30, 2026 | August 30, 2025 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Identifiable intangibles, net | |||||||||||
| Operating lease assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current portion of debt including obligations under finance leases | $ | $ | |||||||||
| Current portion of operating lease liabilities | |||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt including obligations under finance leases | |||||||||||
| Noncurrent operating lease liabilities | |||||||||||
| Deferred income taxes and tax uncertainties | |||||||||||
| Total liabilities | |||||||||||
| Commitments and Contingencies | |||||||||||
| Shareholders’ Equity: | |||||||||||
| MSC Industrial Shareholders’ Equity: | |||||||||||
Preferred Stock; $ | |||||||||||
Class A Common Stock; $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Class A treasury stock, at cost, | ( | ( | |||||||||
| Total MSC Industrial shareholders’ equity | |||||||||||
| Noncontrolling interest | |||||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Restructuring and other costs | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other income (expense), net | ( | ( | ( | ||||||||||||||||||||
| Total other expense | ( | ( | ( | ( | |||||||||||||||||||
| Income before provision for income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Less: Net (loss) income attributable to noncontrolling interest | ( | ( | ( | ||||||||||||||||||||
| Net income attributable to MSC Industrial | $ | $ | $ | $ | |||||||||||||||||||
| Per share data attributable to MSC Industrial: | |||||||||||||||||||||||
| Net income per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares used in computing net income per common share: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
2
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Net income, as reported | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
Comprehensive income (1) | |||||||||||||||||||||||
| Comprehensive income attributable to noncontrolling interest: | |||||||||||||||||||||||
| Net loss (income) | ( | ||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income attributable to MSC Industrial | $ | $ | $ | $ | |||||||||||||||||||
(1)There were no material income taxes associated with other comprehensive income during the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025.
See accompanying Notes to Condensed Consolidated Financial Statements.
3
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except per share data)
(Unaudited)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Class A Common Stock | |||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | |||||||||||||||||||
| Ending Balance | |||||||||||||||||||||||
| Additional Paid-in Capital | |||||||||||||||||||||||
| Beginning Balance | |||||||||||||||||||||||
| Associate Incentive Plans | |||||||||||||||||||||||
| Repurchase and retirement of Class A Common Stock, including excise tax | ( | ( | ( | ||||||||||||||||||||
| Purchase of Noncontrolling Interest | ( | ( | |||||||||||||||||||||
| Ending Balance | |||||||||||||||||||||||
| Retained Earnings | |||||||||||||||||||||||
| Beginning Balance | |||||||||||||||||||||||
| Net Income | |||||||||||||||||||||||
| Repurchase and retirement of Class A Common Stock, including excise tax | ( | ( | ( | ||||||||||||||||||||
| Regular cash dividends declared on Class A Common Stock | ( | ( | ( | ( | |||||||||||||||||||
| Dividend equivalents declared, net of cancellations | ( | ( | ( | ( | |||||||||||||||||||
| Ending Balance | |||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||
| Beginning Balance | ( | ( | ( | ( | |||||||||||||||||||
| Foreign Currency Translation Adjustment | ( | ( | |||||||||||||||||||||
| Ending Balance | ( | ( | ( | ( | |||||||||||||||||||
| Treasury Stock | |||||||||||||||||||||||
| Beginning Balance | ( | ( | ( | ( | |||||||||||||||||||
| Associate Incentive Plans | |||||||||||||||||||||||
| Repurchase of Class A Common Stock, including excise tax | ( | ( | ( | ( | |||||||||||||||||||
| Ending Balance | ( | ( | ( | ( | |||||||||||||||||||
| Total Shareholders’ Equity Attributable to MSC Industrial | |||||||||||||||||||||||
| Noncontrolling Interest | |||||||||||||||||||||||
| Beginning Balance | |||||||||||||||||||||||
| Foreign Currency Translation Adjustment | ( | ||||||||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||||||||
| Purchase of Noncontrolling Interest | ( | ||||||||||||||||||||||
| Ending Balance | |||||||||||||||||||||||
| Total Shareholders’ Equity | $ | $ | $ | $ | |||||||||||||||||||
| Dividends declared per Class A Common Share | $ | $ | $ | $ | |||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
MSC INDUSTRIAL DIRECT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Thirty-Nine Weeks Ended | |||||||||||
| May 30, 2026 | May 31, 2025 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of cloud computing arrangements | |||||||||||
| Non-cash operating lease cost | |||||||||||
| Stock-based compensation | |||||||||||
| Loss on disposal of property | |||||||||||
| Property, plant and equipment asset impairment | |||||||||||
| Non-cash changes in fair value of estimated contingent consideration | ( | ||||||||||
| Provision for credit losses | |||||||||||
| Expenditures for cloud computing arrangements | ( | ( | |||||||||
| Deferred income taxes and tax uncertainties | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Other assets | |||||||||||
| Accounts payable and accrued liabilities | ( | ||||||||||
| Total adjustments | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Expenditures for property, plant and equipment | ( | ( | |||||||||
| Cash used in acquisitions | ( | ( | |||||||||
| Net proceeds from sale of property | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Repurchases of Class A Common Stock | ( | ( | |||||||||
| Payments of regular cash dividends | ( | ( | |||||||||
| Proceeds from sale of Class A Common Stock in connection with Associate Stock Purchase Plan | |||||||||||
| Borrowings under credit facilities | |||||||||||
| Payments under credit facilities | ( | ( | |||||||||
| Purchase of noncontrolling interest | ( | ||||||||||
| Other, net | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Net increase in cash and cash equivalents | |||||||||||
| Cash and cash equivalents—beginning of period | |||||||||||
| Cash and cash equivalents—end of period | $ | $ | |||||||||
| Supplemental Disclosure of Cash Flow Information: | |||||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Cash paid for interest | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
Note 1. Basis of Presentation
The unaudited Condensed Consolidated Financial Statements have been prepared by the management of MSC Industrial Direct Co., Inc. (together with its wholly owned subsidiaries and entities in which it maintains a controlling financial interest, “MSC Industrial” or the “Company”) and in the opinion of management include all normal recurring adjustments necessary to present fairly the Company’s financial position as of May 30, 2026 and August 30, 2025, results of operations for the thirteen and thirty-nine weeks ended May 30, 2026 and May 31, 2025, and cash flows for the thirty-nine weeks ended May 30, 2026 and May 31, 2025. The financial information as of August 30, 2025 was derived from the Company’s audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 30, 2025.
Fiscal Year
The Company operates on a 52/53-week fiscal year ending on the Saturday closest to August 31st of each year. References to “fiscal year 2026” refer to the period from August 31, 2025 to August 29, 2026, which is a 52-week fiscal year. References to “fiscal year 2025” refer to the period from September 1, 2024 to August 30, 2025, which is a 52-week fiscal year. The fiscal quarters ended May 30, 2026 and May 31, 2025 refer to the thirteen weeks ended as of those dates.
Principles of Consolidation
The unaudited Condensed Consolidated Financial Statements include the accounts of MSC Industrial Direct Co., Inc., its wholly owned subsidiaries and entities in which it maintains a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation.
Accounting Standards Not Yet Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. The ASU primarily enhances and expands both the income tax rate reconciliation disclosure and the income taxes paid disclosure. The ASU is effective for annual periods beginning after December 15, 2024 (MSC’s fiscal year 2026) on a prospective basis. The adoption of this guidance is not expected to affect the Company’s Consolidated Financial Statements and the Company is currently evaluating the standard to determine the impact of adoption on its disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires public entities to include more detailed disclosures about specific categories of expenses such as inventory purchases, employee compensation, depreciation, amortization and selling costs within the notes to the financial statements. The ASU is effective for fiscal year periods beginning after December 15, 2026 (MSC’s fiscal year 2028) and interim periods within fiscal years beginning after December 15, 2027 (MSC’s first quarter of fiscal year 2029), with early adoption permitted. The adoption of this guidance is not expected to affect the Company’s Consolidated Financial Statements and the Company is currently evaluating the standard to determine the impact of adoption on its disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40): Targeted Improvements to Accounting for Internal-Use Software. The ASU primarily amends guidance for
6
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
accounting and disclosure of internal-use software, including clarifying the requirements for capitalizing costs and removal of references to the stage-based approach for capitalizing costs. The ASU is effective for annual periods beginning after December 15, 2027 (MSC’s fiscal year 2029) on a prospective, retrospective or modified prospective approach. The Company is currently evaluating the standard to determine the impact of adoption on its Consolidated Financial Statements and disclosures.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to have a material impact on the Consolidated Financial Statements.
Reclassifications
Note 2. Revenue
Revenue Recognition
Net sales include product revenue and shipping and handling charges, net of estimated sales returns and any related sales incentives. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. All revenue is recognized when the Company satisfies its performance obligations under the contract, which is determined to occur when the customer obtains control of the products, and invoicing occurs at approximately the same point in time. The Company’s product sales have standard payment terms that do not exceed one year . The Company considers shipping and handling as activities to fulfill its performance obligations. Substantially all of the Company’s contracts have a single performance obligation, to deliver products, and are short-term in nature. The Company estimates product returns based on historical return rates. Total accrued sales returns were $6,329 and $7,089 as of May 30, 2026 and August 30, 2025, respectively, and are reported as Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets. Sales taxes and value-added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.
Consideration Payable to Customers
The Company offers customers sales incentives, which primarily consist of volume rebates, and upfront sign-on payments. These volume rebates and sign-on payments are not in exchange for a distinct good or service and result in a reduction of net sales from the goods transferred to the customer at the later of when the related revenue is recognized or when the Company promises to pay the consideration. The Company estimates its volume rebate accruals and records its sign-on payments based on various factors, including contract terms, historical experience, and performance levels. Total accrued sales incentives, primarily related to volume rebates, were $27,940 and $22,948 as of May 30, 2026 and August 30, 2025, respectively, and are included in Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets. Sign-on payments, not yet recognized as a reduction of net sales, are recorded in Prepaid expenses and other current assets in the unaudited Condensed Consolidated Balance Sheets and were $6,143 and $6,723 as of May 30, 2026 and August 30, 2025, respectively.
Contract Assets and Liabilities
The Company records a contract asset when it has a right to payment from a customer that is conditioned on events other than the passage of time. The Company records a contract liability when customers prepay but the Company has not yet satisfied its performance obligations. The Company did not
7
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
Disaggregation of Revenue
The Company serves a large number of customers of various types and in diverse industries, which are subject to different economic and industry factors. The Company’s presentation of net sales by customer end-market, customer type and geography most reasonably depicts how the nature, amount, timing and uncertainty of Company revenue and cash flows are affected by economic and industry factors. The Company does not disclose net sales information by product category as it is impracticable to do so as a result of its numerous product offerings and the way its business is managed.
The following table presents the Company’s percentage of revenue by customer end-market for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Manufacturing Heavy | % | % | % | % | |||||||||||||||||||
| Manufacturing Light | % | % | % | % | |||||||||||||||||||
| Public Sector | % | % | % | % | |||||||||||||||||||
| Retail/Wholesale | % | % | % | % | |||||||||||||||||||
| Commercial Services | % | % | % | % | |||||||||||||||||||
Other (1) | % | % | % | % | |||||||||||||||||||
| Total | % | % | % | % | |||||||||||||||||||
(1)The Other category primarily makes up specific industry classifications that do not individually exceed 3% of net sales.
The Company groups customers into three categories by type of customer: national account, public sector and core and other. National account customers include Fortune 1000 companies, large privately held companies, and international companies doing business in North America. Public sector customers are governments and their instrumentalities such as federal agencies, state governments, and public sector healthcare providers. 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. The Company has individual state and local contracts, as well as contracts through partnerships with several state co-operatives. Core and other customers are those customers that are not national account customers or public sector customers.
The following table presents the Company’s percentage of revenue by customer type for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| National Account Customers | % | % | % | % | |||||||||||||||||||
| Public Sector Customers | % | % | % | % | |||||||||||||||||||
| Core and Other Customers | % | % | % | % | |||||||||||||||||||
| Total | % | % | % | % | |||||||||||||||||||
8
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
The Company’s revenue originating from the following geographic areas was as follows for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | March 31, 2025 | ||||||||||||||||||||
| United States | % | % | % | % | |||||||||||||||||||
| Mexico | % | % | % | % | |||||||||||||||||||
| Canada | % | % | % | % | |||||||||||||||||||
| North America | % | % | % | % | |||||||||||||||||||
| Other foreign countries | % | % | % | % | |||||||||||||||||||
| Total | % | % | % | % | |||||||||||||||||||
Note 3. Net Income per Share
Basic net income per share is computed by dividing net income by the weighted-average number of shares of the Company’s Class A Common Stock (“Class A Common Stock”) outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of Class A Common Stock outstanding during the period, including potentially dilutive shares of Class A Common Stock equivalents outstanding during the period. The dilutive effect of potential shares of Class A Common Stock is determined using the treasury stock method. The following table sets forth the computation of basic and diluted net income per common share under the treasury stock method for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income attributable to MSC Industrial, as reported | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares outstanding for basic net income per share | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Weighted-average shares outstanding for diluted net income per share | |||||||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Potentially dilutive securities | |||||||||||||||||||||||
Potentially dilutive securities attributable to outstanding share-based awards are excluded from the calculation of diluted net income per share when the combined exercise price and average unamortized fair value are greater than the average market price of Class A Common Stock, and, therefore, their inclusion would be anti-dilutive.
9
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
Note 4. Stock-Based Compensation
The Company accounts for all stock-based payments in accordance with Accounting Standards Codification Topic 718, “Compensation—Stock Compensation,” as amended. Stock-based compensation expense included in Operating expenses for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025 was as follows:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
Stock-based compensation expense (1) | $ | $ | $ | $ | |||||||||||||||||||
| Deferred income tax benefit | ( | ( | ( | ( | |||||||||||||||||||
| Stock-based compensation expense, net | $ | $ | $ | $ | |||||||||||||||||||
(1)Includes equity award acceleration costs associated with associate severance and separation, which are included in Restructuring and other costs in the unaudited Condensed Consolidated Statements of Income for the thirty-nine-week period ended May 30, 2026 and for the thirteen- and thirty-nine-week periods ended May 31, 2025. See Note 10, “Restructuring and Other Costs” for additional information.
Restricted Stock Units and Performance Share Units
The Company grants restricted stock units (“RSUs”) and performance share units (“PSUs”) as part of its long-term stock-based compensation program. RSUs vest over four-years or five-years , depending on the position of the associate, and PSUs cliff vest after a three-year performance period based on the achievement of specific performance goals as set forth in the applicable award agreement. Based on the extent to which the performance goals are achieved, vested shares may range from 0 % to 200 % of the target award amount. If the performance conditions are not met or are not expected to be met, recognized compensation expense associated with the grant will be reversed.
The following table summarizes the Company’s non-vested RSU and PSU award activity under the MSC Industrial Direct Co., Inc. 2015 Omnibus Incentive Plan (the “2015 Omnibus Incentive Plan”) and the 2023 Omnibus Incentive Plan (the “2023 Omnibus Incentive Plan”) (based on target award amounts for PSUs) for the thirty-nine-week period ended May 30, 2026:
| Restricted Stock Units | Performance Share Units | ||||||||||||||||||||||
| Shares | Weighted-Average Grant Date Fair Value per Share | Shares | Weighted-Average Grant Date Fair Value per Share | ||||||||||||||||||||
Non-vested at August 30, 2025 | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Vested | ( | ||||||||||||||||||||||
| Forfeited | ( | ( | |||||||||||||||||||||
Non-vested at May 30, 2026 (1) | $ | $ | |||||||||||||||||||||
The fair value of each RSU and PSU granted is the closing stock price on the New York Stock Exchange of Class A Common Stock on the date of grant. RSUs are expensed over the vesting period of each respective grant and PSUs are expensed over the three-year performance period of each respective grant. Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimated forfeitures. The Company uses historical data to estimate pre-vesting RSU and PSU forfeitures and records stock-based compensation expense only for RSU and PSU awards that are expected to vest. Upon vesting, and, in the case of the PSUs, subject to the achievement of specific performance goals, a portion of the RSU and PSU awards may be withheld to satisfy the statutory income tax withholding obligation, and the remaining RSUs and PSUs will be settled in shares of Class A Common Stock. These awards accrue dividend equivalents on the underlying RSUs and PSUs (in the form of additional stock units) based
10
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
on dividends declared on Class A Common Stock, and these dividend equivalents are paid to the award recipient in the form of unrestricted shares of Class A Common Stock on the vesting dates of the underlying RSUs and PSUs, subject, in the case of the dividend equivalents on the underlying PSUs, to the same performance vesting requirements. The unrecognized stock-based compensation costs related to the RSUs and PSUs at May 30, 2026 were $30,468 and $6,371 , respectively, which are expected to be recognized over a weighted-average period of 2.7 and 1.7 years, respectively.
Note 5. Fair Value
Fair value accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The below fair value hierarchy prioritizes the inputs used to measure fair value into three levels, with Level 1 being of the highest priority. The three levels of inputs used to measure fair value are as follows:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs which are supported by little or no market activity.
The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and outstanding indebtedness. Cash and cash equivalents include investments in a money market fund which are reported at fair value. The fair value of money market funds is determined using quoted prices for identical investments in active markets, which are considered to be Level 1 inputs within the fair value hierarchy. The Company uses a market approach to determine the fair value of its debt instruments, utilizing quoted prices in active markets, interest rates and other relevant information generated by market transactions involving similar instruments. Therefore, the inputs used to measure the fair value of the Company’s debt instruments are classified as Level 2 within the fair value hierarchy. The reported carrying amounts of the Company’s financial instruments approximated their fair values as of May 30, 2026 and May 31, 2025.
During the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025, the Company had no material remeasurements of non-financial assets or liabilities at fair value on a non-recurring basis subsequent to their initial recognition.
Note 6. Accounts Receivable
Accounts receivables at May 30, 2026 and August 30, 2025 consisted of the following:
| May 30, 2026 | August 30, 2025 | ||||||||||
| Accounts receivable | $ | $ | |||||||||
| Less: allowance for credit losses | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
In the second quarter of fiscal year 2023, the Company entered into a Receivables Purchase Agreement (the “RPA”), by and among MSC A/R Holding Co., LLC, a wholly owned subsidiary of the Company (the “Receivables Subsidiary”), as seller, the Company, as master servicer, certain purchasers from time to time party thereto (collectively, the “Purchasers”), and Wells Fargo Bank, National Association, as administrative agent. Under the RPA, the Receivables Subsidiary may sell certain eligible receivables to the Purchasers. The RPA was amended in December 2025, which provided for, among other things, an extension of the scheduled termination date to December 8, 2028, the addition of a joining purchaser and an increase to the maximum aggregate commitment by $50,000 to a total of $350,000 which the Company has fully utilized as of May 30, 2026. The RPA is a key component of the Company’s working capital strategy as it provides an additional source of liquidity through the sale of eligible receivables. The RPA continues to include customary representations and warranties for facilities of this type.
The Company continues to provide collection services for the receivables sold to the Purchasers. As cash is collected on sold receivables, the Receivables Subsidiary continuously sells new qualifying receivables to the Purchasers so that the total principal amount outstanding of receivables sold is approximately $350,000 . The total principal amount outstanding of receivables sold was approximately $350,000 and $300,000 as of May 30, 2026 and August 30, 2025,
11
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
respectively. The amount of receivables retained and pledged as collateral by the Company as of May 30, 2026 and August 30, 2025 was $345,274 and $359,465 , respectively.
The following table summarizes the activity and amounts outstanding under the RPA for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025.
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Receivables sold under the RPA | $ | $ | $ | $ | |||||||||||||||||||
| Cash collected on sold receivables under the RPA | $ | $ | $ | $ | |||||||||||||||||||
The receivables sold incurred fees due to the Purchasers of $3,893 and $11,410 during the thirteen- and thirty-nine-week periods ended May 30, 2026, respectively, and $3,846 and $11,911 during the thirteen- and thirty-nine-week periods ended May 31, 2025, respectively, which were recorded within Other expense, net in the unaudited Condensed Consolidated Statements of Income. The financial covenants under the RPA are substantially the same as those under the Credit Facilities (as defined below). See Note 8, “Debt” for more information about these financial covenants.
Note 7. Acquisitions
Note 8. Debt
Debt at May 30, 2026 and August 30, 2025 consisted of the following:
| May 30, 2026 | August 30, 2025 | |||||||||||||
| Amended Revolving Credit Facility | $ | $ | ||||||||||||
| Uncommitted Credit Facilities | ||||||||||||||
| Long-Term Note Payable | ||||||||||||||
| Private Placement Debt: | ||||||||||||||
| Financing arrangements | ||||||||||||||
| Obligations under finance leases | ||||||||||||||
| Less: unamortized debt issuance costs | ( | ( | ||||||||||||
| Total debt, including obligations under finance leases | $ | $ | ||||||||||||
| Less: current portion | ( | (1) | ( | (2) | ||||||||||
| Total long-term debt, including obligations under finance leases | $ | $ | ||||||||||||
(1)Consists of $217,000 from the Uncommitted Credit Facilities (as defined below), $100,000 from the 2.90 % Senior Notes, Series B, due July 28, 2026, $50,000 from the 2.60 % Senior Notes, Series B, due March 5, 2027, $50,000 from the 5.73 % Senior Notes, Series B, due April 18, 2027, $383 from financing arrangements, $180 from obligations under finance leases and net of unamortized debt issuance costs of $344 expected to be amortized in the next 12 months.
12
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
(2)Consists of $217,000 from the Uncommitted Credit Facilities (as defined below), $100,000 from the 2.90 % Senior Notes, Series B, due July 28, 2026, $17 from financing arrangements, $200 from obligations under finance leases and net of unamortized debt issuance costs of $349 expected to be amortized in the next 12 months.
In April 2017, the Company entered into a $600,000 revolving credit facility, which was subsequently amended (as amended, the “Amended Revolving Credit Facility”). The Amended Revolving Credit Facility, which matures on July 16, 2030, provides for a five-year unsecured revolving loan facility on a committed basis. The interest rate for borrowings under the Amended Revolving Credit Facility is based on either the Adjusted Term SOFR Rate (as defined in the Amended Revolving Credit Facility) or a base rate, plus a spread based on the Company’s consolidated net leverage ratio at the end of each fiscal reporting quarter. The Company currently elects to have loans under the Amended Revolving Credit Facility bear interest based on the Adjusted Term SOFR Rate with one-month interest periods.
The Amended Revolving Credit Facility permits up to $50,000 to be used to fund letters of credit. The Amended Revolving Credit Facility also permits the Company to initiate one or more incremental term loan facilities and/or to increase the revolving loan commitments in an aggregate amount not to exceed $300,000 . Subject to certain limitations, each such incremental term loan facility or revolving loan commitment increase will be on terms as agreed to by the Company, the administrative agent and the lenders providing such financing. Outstanding letters of credit were $9,328 and $6,304 at May 30, 2026 and August 30, 2025, respectively.
Uncommitted Credit Facilities
During fiscal years 2025 and 2026, the Company either extended or amended all three 230,000 217,000 one year of entering into such Uncommitted Credit Facility and contains certain limited covenants which are substantially the same as the limited covenants contained in the Amended Revolving Credit Facility. All of the Uncommitted Credit Facilities are unsecured and rank equally in right of payment with the Company’s other unsecured indebtedness.
During the thirty-nine-week period ended May 30, 2026, the Company borrowed an aggregate $271,000 and repaid an aggregate $251,000 under the Credit Facilities. As of May 30, 2026 and August 30, 2025, the weighted-average interest rates on borrowings under the Credit Facilities were 4.47 % and 5.19 %, respectively.
Private Placement Debt
In July 2016, the Company completed the issuance and sale of $100,000 aggregate principal amount of 2.90 % Senior Notes, Series B, due July 28, 2026; in March 2020, the Company completed the issuance and sale of $50,000 aggregate principal amount of 2.60 % Senior Notes, due March 5, 2027; and, in April 2024, the Company completed the issuance and sale of $50,000 aggregate principal amount of 5.73 % Senior Notes, due April 18, 2027 (collectively, the “Private Placement Debt”). Interest is payable semiannually at the fixed stated interest rates. All of the Private Placement Debt is unsecured.
Covenants
13
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
Note 9. Shareholders’ Equity
Common Stock Repurchases and Treasury Stock
In June 2021, the Board of Directors of the Company (the “Board”) terminated the existing share repurchase plan and authorized a new share repurchase plan (the “Share Repurchase Plan”) to purchase up to 5,000 shares of Class A Common Stock. There is no expiration date for the Share Repurchase Plan. As of May 30, 2026, the maximum number of shares of Class A Common Stock that were available for repurchase under the Share Repurchase Plan was 1,313 shares. The Share Repurchase Plan allows the Company to repurchase shares at any time and in any increments it deems appropriate in accordance with Rule 10b-18 under the Exchange Act.
During the thirteen- and thirty-nine-week periods ended May 30, 2026, the Company repurchased 2 shares and 162 shares, respectively, of Class A Common stock for $171 and $13,894 , respectively. From these totals, 2 shares and 62 shares, respectively, were repurchased by the Company to satisfy the Company’s associates’ tax withholding liability associated with its stock-based compensation program and are reflected at cost as treasury stock in the unaudited Condensed Consolidated Financial Statements for the thirteen- and thirty-nine-week periods ended May 30, 2026 and the remainder were immediately retired. During the thirteen- and thirty-nine-week periods ended May 31, 2025, the Company repurchased 117 shares and 494 shares, respectively, of Class A Common Stock for $8,597 and $39,138 , respectively. From these totals, 2 shares and 77 shares, respectively, were repurchased by the Company to satisfy the Company’s associates’ tax withholding liability associated with its stock-based compensation program and are reflected at cost as treasury stock in the unaudited Condensed Consolidated Financial Statements for the thirteen- and thirty-nine-week periods ended May 31, 2025 and the remainder were immediately retired.
As of August 30, 2025, the Company had accrued $71 for excise tax on share repurchases which was included in Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheets. As of May 30, 2026, no accrual was required.
The Company reissued 10 shares and 38 shares of treasury stock during the thirteen- and thirty-nine-week periods ended May 30, 2026, respectively, and reissued 14 shares and 45 shares of treasury stock during the thirteen- and thirty-nine-week periods ended May 31, 2025, respectively, to fund the MSC Industrial Direct Co., Inc. Amended and Restated Associate Stock Purchase Plan.
Dividends on Common Stock
The Company paid aggregate regular cash dividends of $2.61 per share totaling $145,752 for the thirty-nine-week period ended May 30, 2026. For the thirty-nine-week period ended May 31, 2025, the Company paid aggregate regular cash dividends of $2.55 per share totaling $142,252 .
On June 16, 2026, the Board declared a regular cash dividend of $0.87 per share, payable on July 22, 2026, to shareholders of record at the close of business on July 8, 2026. The dividend is expected to result in aggregate payments of $48,586 based on the number of shares outstanding on June 17, 2026.
Note 10. Restructuring and Other Costs
Optimization of Company Operations, Profitability Improvement and Growth Acceleration
The Company continues to identify opportunities for improvements in its workforce realignment, strategy and staffing, and its focus on performance management, to ensure it has the right skill sets and number of associates to execute its long-term vision. As such, from time to time the Company extends voluntary and involuntary severance and separation benefits to certain associates in order to facilitate its workforce realignment. During the thirty-nine weeks ended May 30, 2026, the Company reduced its headcount by eliminating various positions as part of its sales optimization efforts as the Company implements its refreshed go to market strategy. Workforce realignment actions related to this restructuring event were complete as of the end of the Company’s fiscal second quarter. During the thirty-nine weeks ended May 31, 2025, the
14
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
Company reduced its headcount by eliminating various positions to optimize its cost structure and improve operational efficiency.
As part of the Company’s strategic realignment efforts to optimize its supply chain and distribution network and enhance operational efficiency, the Company engaged consultants beginning in fiscal year 2024 and ending in fiscal year 2025. As such, the Company incurred consulting-related costs in order to facilitate its network optimization and workforce realignment that qualify as exit and disposal costs under accounting principles generally accepted in the United States of America.
In addition, from time to time, the Company incurs certain expenses that are an integral component of, and directly contribute to, its restructuring activities, which do not qualify as exit and disposal costs under accounting principles generally accepted in the United States of America. These expenses include professional and consulting-related costs directly associated with the optimization of the Company’s operations and profitability improvement, which are also included in Restructuring and other costs in the unaudited Condensed Consolidated Statements of Income.
The following table summarizes Restructuring and other costs for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Consulting-related costs | $ | $ | $ | $ | |||||||||||||||||||
| Associate severance and separation costs | |||||||||||||||||||||||
| Equity award acceleration costs associated with severance | |||||||||||||||||||||||
| Total Restructuring and other costs | $ | $ | $ | $ | |||||||||||||||||||
Liabilities associated with Restructuring and other costs are included in Accrued expenses and other current liabilities in the unaudited Condensed Consolidated Balance Sheet as of May 30, 2026. Payments related to current fiscal year restructuring actions are expected to be completed within the next 12 months. The following table summarizes activity related to liabilities associated with Restructuring and other costs for the thirty-nine-week period ended May 30, 2026:
| Consulting-related costs | Associate severance and separation costs | Total | |||||||||||||||||||||
| Balance at August 30, 2025 | $ | $ | $ | ||||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Payments and other adjustments | ( | ( | ( | ||||||||||||||||||||
| Balance at May 30, 2026 | $ | $ | $ | ||||||||||||||||||||
Note 11. Income Taxes
The Company’s effective tax rate was 24.5 % for the thirty-nine-week periods ended May 30, 2026, as compared to 24.4 % for the thirty-nine-week period ended May 31, 2025. The effective tax rate is higher than the federal statutory tax rate primarily due to state taxes.
During the third quarter of fiscal year 2026, the Company recognized $5,129 of Employee Retention Credit (“ERC”) claims to Other income (expense) in the Condensed Consolidated Statement of Income as the relevant statute of limitations lapsed. As of May 30, 2026, no ERC funds remain accrued in the Condensed Consolidated Balance Sheet.
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was passed in the United States. This act introduces significant changes to United States federal tax law, including making certain provisions of the Tax Cuts and Jobs Act of
15
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
2017 permanent and introducing new measures impacting corporate taxation. The OBBBA contains a number of tax provisions including, but not limited to, immediate expensing of domestic research and experimental expenditures and bonus depreciation modifications. These tax provisions apply to our fiscal year 2025 and future periods. The Company is in the process of analyzing its tax elections under the OBBBA however we do not expect these elections to have a material impact on the fiscal year 2026 effective tax rate.
Note 12. Legal Proceedings
In the ordinary course of business, there are various claims, lawsuits and pending actions against the Company incidental to the operation of its business. Management evaluates such matters and records a liability when a loss is both probable and the amount of the loss is reasonably estimable. Although the outcome of these matters, both individually and in aggregate, is currently not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.
Note 13. Segment Reporting
The Company operates in one
The following table presents selected financial information regarding the Company's single reportable segment for the thirteen- and thirty-nine-week periods ended May 30, 2026 and May 31, 2025:
16
MSC INDUSTRIAL DIRECT CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts and shares in thousands, except per share data)
(Unaudited)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | May 30, 2026 | May 31, 2025 | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Payroll and payroll-related costs | |||||||||||||||||||||||
| Freight expense | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Restructuring and other costs | |||||||||||||||||||||||
Other segment items (1) | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Operating Margin | |||||||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
Other income (expense), net (2) | ( | ( | ( | ||||||||||||||||||||
| Income before provision for income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following is intended to update the information contained in MSC Industrial Direct Co., Inc.’s (together with its wholly owned subsidiaries and entities in which it maintains a controlling financial interest, “MSC,” “MSC Industrial,” the “Company,” “we,” “us” or “our”) Annual Report on Form 10-K for the fiscal year ended August 30, 2025 and presumes that readers have access to, and will have read, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of such Annual Report on Form 10-K.
Our Business
MSC is a leading North American distributor of a broad range of metalworking, maintenance, repair and operations (“MRO”), and production fastener and hardware products and services. We help our customers drive greater productivity, profitability and operational performance with industry-leading inventory management and supply chain solutions and deep expertise from more than 80 years of working with customers across industries. We offer approximately 2.5 million active, saleable stock-keeping units through our E-commerce channels, including our website, www.mscdirect.com (the “MSC website”); our inventory management solutions; our catalogs; our brochures; and our customer care centers, customer fulfillment centers (“CFCs”), regional inventory centers and warehouses. We service our customers from five CFCs, eight regional inventory centers, 37 warehouses, and five manufacturing locations. We continue to implement our strategies to gain market share, generate new customers, increase sales to existing customers and diversify our customer base.
Our business model focuses on providing overall procurement cost reduction and just-in-time delivery to meet our customers’ needs. Many of our products are carried in stock, and orders for these in-stock products are typically fulfilled the day on which the order is received. We focus on offering inventory, process and procurement solutions that reduce supply chain costs and improve plant floor productivity for our customers. We aim to achieve ongoing cost reductions throughout our business by implementing cost-saving strategies and leveraging our existing infrastructure. Additionally, we provide our customers with further procurement cost-saving solutions through technologies such as our Vendor Managed Inventory (“VMI”), Customer Managed Inventory (“CMI”) and vending programs — helping reduce downtime and ensure critical products are available when and where they are needed. Our vending machines in service totaled 30,790 as of May 30, 2026, compared to 28,741 as of May 31, 2025, and our In-Plant programs totaled 426 locations as of May 30, 2026, compared to 399 as of May 31, 2025. Our sales force, which focuses on a more complex and high-touch role, drives value for our customers by enabling them to achieve higher levels of growth, profitability and productivity. Our field sales and service associate headcount was 2,496 as of May 30, 2026, compared to 2,721 as of May 31, 2025.
Highlights
Highlights during the thirty-nine weeks ended May 30, 2026 include:
•We generated $225.5 million of cash from operations, compared to $253.5 million for the same period in the prior fiscal year.
•We had net borrowings of $20.0 million on our credit facilities, compared to net borrowings of $12.5 million for the same period in the prior fiscal year.
•We paid out an aggregate $145.8 million in regular cash dividends, compared to an aggregate $142.3 million in regular cash dividends for the same period in the prior fiscal year.
•We repurchased 162 thousand shares of MSC’s Class A Common Stock, par value $0.001 per share (“Class A Common Stock”) for $13.9 million, excluding excise taxes, compared to 494 thousand shares repurchased for $39.1 million, excluding excise taxes, for the same period in the prior fiscal year.
•We amended our Receivables Purchase Agreement (the “RPA”) which increased the amount available under the facility by $50.0 million. Proceeds from the RPA were utilized to pay down existing debt on our credit facilities.
•We incurred $7.3 million in Restructuring and other costs, compared to $6.4 million for the same period in the prior fiscal year, consisting primarily of current year severance and separation costs associated with the Company’s sales optimization efforts as well as consulting-related costs in the current and prior fis xcal year.
Our Strategy
The first phase of our Company-wide initiative, referred to as “Mission Critical,” focused on market share capture and improved profitability. We successfully executed on the first phase of Mission Critical initiatives at the end of fiscal year 2023, which included solidifying our market-leading metalworking business, with an emphasis on selling our product portfolio, expanding our solutions, improving our digital and E-commerce capabilities and diversifying our customers and end-markets. The next phase of our Mission Critical journey, which began in fiscal year 2024, is anchored in three pillars:
18
(i) maintaining the momentum of the first phase of the Mission Critical program and our existing growth drivers, (ii) increasing our focus on both core customers and OEM fasteners, and (iii) driving productivity improvements and reducing operating expenses as a percentage of net sales. To accomplish the next phase of our Mission Critical journey, we intend to leverage investments in advanced analytics to improve supply chain performance and upgrade our digital core to unlock productivity within our order-to-cash and procure-to-pay processes. In fiscal year 2024, we completed our web price realignment initiative. In fiscal year 2025, we launched our enhanced marketing efforts, rolled out several E-commerce enhancements and began our sales optimization initiative, which included investment in an enhanced, data-driven territory model to optimize field seller portfolios. During fiscal year 2026, alongside its sales optimization initiative, the Company is focused on enhancing end‑to‑end customer interactions through data‑driven insights and organizational alignment to deliver a more personalized and seamless customer experience.
Our primary objective is to grow sales profitably while offering our customers highly technical and high-touch solutions to solve their most complex challenges on the plant floor. We have experienced success to date as measured by the growth rates of our high-touch programs, such as vending and in-plant programs, and the rate of new customer implementations. Our strategy is to position ourselves as a mission-critical partner to our customers. We intend to selectively pursue strategic acquisitions that expand or complement our business in new and existing markets or further enhance the value and offerings we provide.
Business Environment
The United States economy has experienced various macroeconomic pressures in recent years including pricing pressure from tariffs and inflation, sustained high interest rates, increased fuel costs and general economic and political uncertainty. The impact from tariffs was most significant in the latter half of the Company's fiscal year 2025 and has continued into fiscal year 2026. Furthermore, as a supplier to the United States federal government, the federal government shutdown during the Company’s fiscal first quarter and the partial federal government shut downs during the Company’s fiscal second quarter negatively impacted sales to our public sector end-market. Additionally, increased fuel costs resulting from the conflict within Iran and geopolitical tensions in the region has increased macroeconomic uncertainty generally and may lead to higher freight expense and cost pressure on the products offered by the Company. These pressures have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations.
International Emergency Economic Powers Act (“IEEPA”) Tariff Refunds
On February 20, 2026, the United States Supreme Court issued a ruling invalidating certain tariffs originally mandated under IEEPA. As a result, the United States Court of International Trade ordered the United States Customs and Border Patrol to process refunds for tariffs collected under IEEPA. As a distributor, we are not the importer of record for most products we sell. However, during the thirteen-week period ended May 30, 2026, we formally submitted refund claims for tariffs which had previously been paid by the Company as the importer of record and are now disallowed under the United States Supreme Court ruling. As of May 30, 2026, cash refunds received were not significant. The ultimate availability, timing and amount of potential refunds remains uncertain and subject to regulatory, legal and administrative developments. As of May 30, 2026, we have not recorded a receivable related to such tariff refunds due to the aforementioned uncertainty, however we may recognize additional benefits in future periods.
Following the Supreme Court’s ruling on IEEPA tariffs, the United States Executive Branch introduced tariffs under a different statutory authority. There remains significant uncertainty regarding the scope and duration of current and potential tariffs. The Company continues to monitor and evaluate these developments and assess their potential impact on the Company’s business, financial condition and results of operations.
We utilize various indices when evaluating the level of our business activity, including the Industrial Production (“IP”) Index. Through statistical analysis, we have found that trends in our customers’ activity have correlated to changes in the IP Index. The IP Index measures short-term changes in industrial production. Growth in the IP Index compared to the prior quarter indicates growth in the manufacturing, mining and utilities industries. Approximately 67% of our revenues came from sales in the manufacturing sector during both the thirteen- and thirty-nine-week periods ended May 30, 2026. After giving effect to the annual technical revisions to calculations of the IP Index which occurred in November 2025, the
19
IP Index over the three months ended May 2026 and the average for the three- and 12-month periods ended May 2026 were as follows:
| Period | IP Index | |||||||
| March | 101.6 | |||||||
| April | 102.5 | |||||||
| May | 102.6 | |||||||
| Fiscal Year 2026 Q3 Average | 102.3 | |||||||
| 12-Month Average | 101.7 | |||||||
The average IP Index for the three months ended May 2026 was 102.3, an increase compared to the prior quarter average of 102.2 and an increase from an average of 101.0 during the comparative quarter in the prior year.
During fiscal year 2026, the Company has experienced a more constructive demand environment compared to much of fiscal year 2025. The heavy manufacturing industry, which represented 58% of our revenues during the thirteen-week period ended May 30, 2026, showed signs of expansion. Several IP subindexes, including Aerospace, Machinery and Equipment, Primary Metals and Fabricated Metals improved. Non-manufacturing demand, in particular the Company’s public sector end-market, recovered from lower sales as a result of the federal government shutdowns earlier in fiscal year 2026. We will monitor the current economic conditions for the impact on our customers and markets and assess both risks and opportunities that may affect our business and operations.
Thirteen-Week Period Ended May 30, 2026 Compared to the Thirteen-Week Period Ended May 31, 2025
The table below summarizes the Company’s results of operations both in dollars (in thousands) and as a percentage of net sales for the periods indicated:
| Thirteen Weeks Ended | |||||||||||||||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | Change | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Net sales | $ | 1,047,083 | 100.0 | % | $ | 971,145 | 100.0 | % | $ | 75,938 | 7.8 | % | |||||||||||||||||||||||
| Cost of goods sold | 616,678 | 58.9 | % | 573,406 | 59.0 | % | 43,272 | 7.5 | % | ||||||||||||||||||||||||||
| Gross profit | 430,405 | 41.1 | % | 397,739 | 41.0 | % | 32,666 | 8.2 | % | ||||||||||||||||||||||||||
| Operating expenses | 323,660 | 30.9 | % | 312,324 | 32.2 | % | 11,336 | 3.6 | % | ||||||||||||||||||||||||||
| Restructuring and other costs | — | — | % | 2,680 | 0.3 | % | (2,680) | (100.0) | % | ||||||||||||||||||||||||||
| Income from operations | 106,745 | 10.2 | % | 82,735 | 8.5 | % | 24,010 | 29.0 | % | ||||||||||||||||||||||||||
| Total other expense | (2,501) | (0.2) | % | (7,621) | (0.8) | % | 5,120 | (67.2) | % | ||||||||||||||||||||||||||
| Income before provision for income taxes | 104,244 | 10.0 | % | 75,114 | 7.7 | % | 29,130 | 38.8 | % | ||||||||||||||||||||||||||
| Provision for income taxes | 25,539 | 2.4 | % | 18,253 | 1.9 | % | 7,286 | 39.9 | % | ||||||||||||||||||||||||||
| Net income | 78,705 | 7.5 | % | 56,861 | 5.9 | % | 21,844 | 38.4 | % | ||||||||||||||||||||||||||
| Less: Net (loss) income attributable to noncontrolling interest | (1,657) | (0.2) | % | 16 | 0.0 | % | (1,673) | (10,456.3) | % | ||||||||||||||||||||||||||
| Net income attributable to MSC Industrial | $ | 80,362 | 7.7 | % | $ | 56,845 | 5.9 | % | $ | 23,517 | 41.4 | % | |||||||||||||||||||||||
Net Sales
Net sales increased 7.8%, or $75.9 million, to $1,047.1 million for the thirteen-week period ended May 30, 2026, as compared to $971.1 million for the same period in the prior fiscal year. The $75.9 million increase in net sales was comprised of a positive impact from pricing of $70.1 million, $4.5 million of higher sales volume, and favorable foreign exchange impact of $1.3 million. The positive pricing impact was inclusive of changes in customer and product mix, discounting, favorable pricing actions and other items. Of the $75.9 million increase in net sales during the thirteen-week
20
period ended May 30, 2026, sales to our core and other customers increased $42.7 million, sales to our national account customers increased $25.6 million and sales to our public sector customers increased $7.6 million.
The table below shows, among other things, the change in our average daily sales (“ADS”) by total Company, by customer end-market and by customer type for the thirteen-week periods ended May 30, 2026 and May 31, 2025, each as compared to the same period in the prior fiscal year:
ADS Percentage Change
(Unaudited)
| Thirteen Weeks Ended | |||||||||||
| May 30, 2026 | May 31, 2025 | ||||||||||
| Net Sales (in thousands) | $ | 1,047,083 | $ | 971,145 | |||||||
| Sales Days | 64 | 64 | |||||||||
ADS (1) (in millions) | $ | 16.4 | $ | 15.2 | |||||||
Total Company ADS Percent Change (2) | 7.8 | % | (0.8) | % | |||||||
| Customer End-Market: | |||||||||||
Manufacturing Customers ADS Percent Change (2) | 6.8 | % | 0.0 | % | |||||||
| Manufacturing Customers Percent of Total Net Sales | 67 | % | 67 | % | |||||||
Non-Manufacturing Customers ADS Percent Change (2) | 9.8 | % | (2.4) | % | |||||||
| Non-Manufacturing Customers Percent of Total Net Sales | 33 | % | 33 | % | |||||||
| Customer Type: | |||||||||||
National Account Customers ADS Percent Change (2) | 7.2 | % | (1.7) | % | |||||||
| National Account Customers Percent of Total Net Sales | 36 | % | 37 | % | |||||||
Public Sector Customers ADS Percent Change (2) | 8.4 | % | 2.4 | % | |||||||
| Public Sector Customers Percent of Total Net Sales | 9 | % | 9 | % | |||||||
Core and Other Customers ADS Percent Change (2) | 8.1 | % | (0.8) | % | |||||||
| Core and Other Customers Percent of Total Net Sales | 55 | % | 54 | % | |||||||
(1)ADS is calculated using the number of business days in the United States for the periods indicated. The Company believes ADS is a key performance indicator because it shows the effectiveness of the Company’s selling performance on a consistent basis between periods.
(2)Percent reflects the change from the 2025 fiscal period to the 2026 fiscal period and the change from the 2024 fiscal period to the 2025 fiscal period, respectively.
We believe that our ability to transact business with our customers directly through the MSC website as well as through various other electronic portals gives us a competitive advantage over smaller suppliers. Sales made through our E-commerce platforms, including sales made through Electronic Data Interchange (“EDI”) systems, VMI systems, Extensible Markup Language ordering-based systems, vending, hosted systems and other electronic portals, represented 63.7% of consolidated net sales in both the thirteen-week period ended May 30, 2026 and the same period in the prior fiscal year.
Gross Profit
Gross profit increased 8.2%, or $32.7 million, to $430.4 million for the thirteen-week period ended May 30, 2026, compared to $397.7 million for the same period in the prior fiscal year. Gross profit margin was 41.1% for the thirteen-week period ended May 30, 2026, as compared to 41.0% for the same period in the prior fiscal year. The increase in gross profit was primarily a result of an increase in net sales, as described above, while the increase in gross profit margin was primarily a result of favorable pricing actions.
21
Operating Expenses
Operating expenses increased 3.6%, or $11.3 million, to $323.7 million for the thirteen-week period ended May 30, 2026, as compared to $312.3 million for the same period in the prior fiscal year. Operating expenses were 30.9% of net sales for the thirteen-week period ended May 30, 2026, as compared to 32.2% for the same period in the prior fiscal year. The largest contributions to the increase in Operating expenses were higher depreciation and amortization expense, provision for credit losses and stock-based compensation expense.
Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, were $173.8 million, or 53.7% of total Operating expenses, for the thirteen-week period ended May 30, 2026, as compared to $175.3 million, or 56.1% of total Operating expenses, for the same period in the prior fiscal year. The headcount reduction actions during fiscal year 2026 resulted in lower salary and sales commission costs, which were partially offset by our annual merit increase and larger incentive compensation accruals.
Freight expense was $37.7 million for the thirteen-week period ended May 30, 2026, as compared to $40.9 million for the same period in the prior fiscal year. The primary driver of the decrease was favorable third-party shipping rates achieved through our network optimization initiatives and higher freight costs in the prior year incurred while servicing certain customers in the public sector.
Depreciation and amortization was $24.9 million for the thirteen-week period ended May 30, 2026, as compared to $22.3 million for the same period in the prior fiscal year. The increase was primarily driven by capital expenditures to support the Company’s strategic growth initiatives and expanded solutions footprint.
Income from Operations
Income from operations increased 29.0%, or $24.0 million, to $106.7 million for the thirteen-week period ended May 30, 2026, as compared to $82.7 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 10.2% for the thirteen-week period ended May 30, 2026, as compared to 8.5% for the same period in the prior fiscal year. The increase in income from operations as a percentage of net sales was primarily attributable to, as described above, an increase in net sales along with a decrease in Operating expenses as a percentage of Net Sales.
Total Other Expense
Total other expense decreased 67.2%, or $5.1 million, to $2.5 million for the thirteen-week period ended May 30, 2026, as compared to $7.6 million for the same period in the prior fiscal year. The decrease was primarily due to the recognition of $5.1 million of Employee Retention Credit (“ERC”) claims.
Provision for Income Taxes
The Company’s effective tax rate for the thirteen-week period ended May 30, 2026 was 24.5%, as compared to 24.3% for the same period in the prior fiscal year.
Net Income
The factors which affected net income for the thirteen-week period ended May 30, 2026, as compared to the same period in the prior fiscal year, have been discussed above.
22
Thirty-Nine-Week Period Ended May 30, 2026 Compared to the Thirty-Nine-Week Period Ended May 31, 2025
The table below summarizes the Company’s results of operations both in dollars (in thousands) and as a percentage of net sales for the periods indicated:
| Thirty-Nine Weeks Ended | |||||||||||||||||||||||||||||||||||
| May 30, 2026 | May 31, 2025 | Change | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Net sales | $ | 2,930,541 | 100.0 | % | $ | 2,791,346 | 100.0 | % | $ | 139,195 | 5.0 | % | |||||||||||||||||||||||
| Cost of goods sold | 1,729,871 | 59.0 | % | 1,650,190 | 59.1 | % | 79,681 | 4.8 | % | ||||||||||||||||||||||||||
| Gross profit | 1,200,670 | 41.0 | % | 1,141,156 | 40.9 | % | 59,514 | 5.2 | % | ||||||||||||||||||||||||||
| Operating expenses | 945,570 | 32.3 | % | 917,465 | 32.9 | % | 28,105 | 3.1 | % | ||||||||||||||||||||||||||
| Restructuring and other costs | 7,324 | 0.2 | % | 6,430 | 0.2 | % | 894 | 13.9 | % | ||||||||||||||||||||||||||
| Income from operations | 247,776 | 8.5 | % | 217,261 | 7.8 | % | 30,515 | 14.0 | % | ||||||||||||||||||||||||||
| Total other expense | (20,000) | (0.7) | % | (29,832) | (1.1) | % | 9,832 | (33.0) | % | ||||||||||||||||||||||||||
| Income before provision for income taxes | 227,776 | 7.8 | % | 187,429 | 6.7 | % | 40,347 | 21.5 | % | ||||||||||||||||||||||||||
| Provision for income taxes | 55,805 | 1.9 | % | 45,727 | 1.6 | % | 10,078 | 22.0 | % | ||||||||||||||||||||||||||
| Net income | 171,971 | 5.9 | % | 141,702 | 5.1 | % | 30,269 | 21.4 | % | ||||||||||||||||||||||||||
| Less: Net loss attributable to noncontrolling interest | (2,679) | (0.1) | % | (1,080) | 0.0 | % | (1,599) | 148.1 | % | ||||||||||||||||||||||||||
| Net income attributable to MSC Industrial | $ | 174,650 | 6.0 | % | $ | 142,782 | 5.1 | % | $ | 31,868 | 22.3 | % | |||||||||||||||||||||||
Net Sales
Net sales increased 5.0%, or $139.2 million, to $2,930.5 million for the thirty-nine-week period ended May 30, 2026, as compared to $2,791.3 million for the same period in the prior fiscal year. The $139.2 million increase in net sales was comprised of a positive impact from pricing of $167.9 million and favorable foreign exchange impact of $5.2 million, partially offset by $33.9 million of lower sales volume. The positive pricing impact was inclusive of changes in customer and product mix, discounting, favorable pricing actions and other items. Of the $139.2 million increase in net sales during the thirty-nine-week period ended May 30, 2026, sales to our core and other customers increased $101.1 million, sales to our national account customers increased $36.0 million and sales to our public sector customers increased $2.1 million.
23
The table below shows, among other things, the change in our ADS by total Company, by customer end-market and by customer type for the thirty-nine-week periods ended May 30, 2026 and May 31, 2025, each as compared to the same period in the prior fiscal year:
ADS Percentage Change
(Unaudited)
| Thirty-Nine Weeks Ended | |||||||||||
| May 30, 2026 | May 31, 2025 | ||||||||||
| Net Sales (in thousands) | $ | 2,930,541 | $ | 2,791,346 | |||||||
| Sales Days | 189 | 189 | |||||||||
ADS (1) (in millions) | $ | 15.5 | $ | 14.8 | |||||||
Total Company ADS Percent Change (2) | 5.0 | % | (2.7) | % | |||||||
| Customer End-Market: | |||||||||||
Manufacturing Customers ADS Percent Change (2) | 4.4 | % | (3.3) | % | |||||||
| Manufacturing Customers Percent of Total Net Sales | 67 | % | 67 | % | |||||||
Non-Manufacturing Customers ADS Percent Change (2) | 6.2 | % | (1.4) | % | |||||||
| Non-Manufacturing Customers Percent of Total Net Sales | 33 | % | 33 | % | |||||||
| Customer Type: | |||||||||||
National Account Customers ADS Percent Change (2) | 3.5 | % | (2.9) | % | |||||||
| National Account Customers Percent of Total Net Sales | 36 | % | 37 | % | |||||||
Public Sector Customers ADS Percent Change (2) | 0.8 | % | 8.1 | % | |||||||
| Public Sector Customers Percent of Total Net Sales | 9 | % | 9 | % | |||||||
Core and Other Customers ADS Percent Change (2) | 6.7 | % | (4.2) | % | |||||||
| Core and Other Customers Percent of Total Net Sales | 55 | % | 54 | % | |||||||
(1)ADS is calculated using the number of business days in the United States for the periods indicated. The Company believes ADS is a key performance indicator because it shows the effectiveness of the Company’s selling performance on a consistent basis between periods.
(2)Percent reflects the change from the 2025 fiscal period to the 2026 fiscal period and the change from the 2024 fiscal period to the 2025 fiscal period, respectively.
We believe that our ability to transact business with our customers directly through the MSC website as well as through various other electronic portals gives us a competitive advantage over smaller suppliers. Sales made through our E-commerce platforms, including sales made through EDI systems, VMI systems, Extensible Markup Language ordering-based systems, vending, hosted systems and other electronic portals, represented 64.0% of consolidated net sales for the thirty-nine-week period ended May 30, 2026, as compared to 63.7% of consolidated net sales for the same period in the prior fiscal year.
Gross Profit
Gross profit increased 5.2%, or $59.5 million, to $1,200.7 million for the thirty-nine-week period ended May 30, 2026, compared to $1,141.2 million for the same period in the prior fiscal year. Gross profit margin was 41.0% for the thirty-nine-week period ended May 30, 2026, as compared to 40.9% for the same period in the prior fiscal year. The increase in gross profit was primarily a result of higher net sales, as described above, while the increase in gross profit margin was primarily a result of favorable pricing actions.
24
Operating Expenses
Operating expenses increased 3.1%, or $28.1 million, to $945.6 million for the thirty-nine-week period ended May 30, 2026, as compared to $917.5 million for the same period in the prior fiscal year. Operating expenses were 32.3% of net sales for the thirty-nine-week period ended May 30, 2026, as compared to 32.9% for the same period in the prior fiscal year. The largest contributions to the increase in Operating expenses were higher depreciation and amortization expense and higher share based compensation expense. The decrease in operating expenses as a percentage of net sales was primarily due to growth in net sales outpacing the increase in Operating expenses.
Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, were $519.5 million, or 55.0% of total Operating expenses, for the thirty-nine-week period ended May 30, 2026 as compared to $522.3 million, or 56.9% of total Operating expenses, for the same period in the prior fiscal year. The headcount reduction actions during fiscal year 2026 resulted in lower salary and sales commission costs, which was partially offset by our annual merit increase.
Freight expense was $109.1 million for the thirty-nine-week period ended May 30, 2026, as compared to $114.1 million for the same period in the prior fiscal year. The primary driver of the decrease was favorable third-party shipping rates achieved through our network optimization initiatives and higher freight costs in the prior year incurred while servicing certain customers in the public sector.
Depreciation and amortization was $74.4 million for the thirty-nine-week period ended May 30, 2026, as compared to $66.0 million for the same period in the prior fiscal year. The increase was primarily driven by capital expenditures to support our strategic growth initiatives and expanded solutions footprint.
Advertising expense was $39.9 million for the thirty-nine-week period ended May 30, 2026, as compared to $34.9 million for the same period in the prior fiscal year. The primary driver of the increase was higher search engine marketing spend as part of the Company's enhanced marketing efforts which began in fiscal year 2025.
Restructuring and Other Costs
We incurred $7.3 million in Restructuring and other costs for the thirty-nine-week period ended May 30, 2026, as compared to $6.4 million for the same period in the prior fiscal year. The increase was primarily related to higher severance and separation benefits associated with the Company’s workforce realignment actions in the current fiscal year. See Note 10, “Restructuring and Other Costs” in the Notes to Condensed Consolidated Financial Statements for additional information.
Income from Operations
Income from operations increased 14.0%, or $30.5 million, to $247.8 million for the thirty-nine-week period ended May 30, 2026, as compared to $217.3 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales increased to 8.5% for the thirty-nine-week period ended May 30, 2026, as compared to 7.8% for the same period in the prior fiscal year. The increase in income from operations as a percentage of net sales was primarily attributable to, as described above, an increase in net sales along with a decrease in Operating expenses as a percentage of Net Sales.
Total Other Expense
Total other expense decreased 33.0%, or $9.8 million, to $20.0 million for the thirty-nine-week period ended May 30, 2026, as compared to $29.8 million for the same period in the prior fiscal year. The decrease was primarily due to the recognition of $5.1 million of ERC funds, lower interest costs on our Credit Facilities and current year remeasurement gains from foreign exchange.
Provision for Income Taxes
The Company’s effective tax rate was 24.5% for the thirty-nine-week period ended May 30, 2026 as compared to 24.4% for the thirty-nine-week period ended May 31, 2025.
25
Net Income
The factors which affected net income for the thirty-nine-week period ended May 30, 2026, as compared to the same period in the prior fiscal year, have been discussed above.
Liquidity and Capital Resources
| May 30, 2026 | August 30, 2025 | $ Change | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Total debt | $ | 506,774 | $ | 485,699 | $ | 21,075 | |||||||||||
| Less: Cash and cash equivalents | 74,094 | 56,228 | 17,866 | ||||||||||||||
| Net debt | $ | 432,680 | $ | 429,471 | $ | 3,209 | |||||||||||
| Total shareholders’ equity | $ | 1,419,421 | $ | 1,396,502 | $ | 22,919 | |||||||||||
As of May 30, 2026, we had $74.1 million in cash and cash equivalents, substantially all with well-known financial institutions. Historically, our primary financing needs have been to fund our working capital requirements necessitated by our sales growth and the costs of acquisitions, new products, new facilities, facility expansions, investments in vending solutions, technology investments, and productivity investments. Cash generated from operations, together with borrowings under our credit facilities, net proceeds from the private placement notes and proceeds from the sale of receivables under our securitization program, have been used to fund these needs, to repurchase shares of Class A Common Stock from time to time, and to pay dividends to our shareholders.
As of May 30, 2026, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $506.8 million, net of unamortized debt issuance costs of $1.3 million, as compared to total borrowings outstanding of $485.7 million, net of unamortized debt issuance costs of $1.5 million, as of the end of fiscal year 2025. The increase in total borrowings outstanding was driven by higher net borrowings under our credit facilities. See Note 8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these balances.
We believe, based on our current business plan, that our existing cash, financial resources and cash flow from operations will be sufficient to fund anticipated capital expenditures, debt maturities and operating cash requirements for at least the next 12 months. We will continue to evaluate our financial position in light of future developments and to take appropriate action as it is warranted.
The table below summarizes certain information regarding the Company’s cash flows for the periods indicated:
| Thirty-Nine Weeks Ended | |||||||||||
| May 30, 2026 | May 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Net cash provided by operating activities | $ | 225,535 | $ | 253,461 | |||||||
| Net cash used in investing activities | (63,313) | (41,563) | |||||||||
| Net cash used in financing activities | (144,274) | (169,598) | |||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (82) | (196) | |||||||||
| Net increase in cash and cash equivalents | $ | 17,866 | $ | 42,104 | |||||||
Cash Flows from Operating Activities
Net cash provided by operating activities was $225.5 million for the thirty-nine weeks ended May 30, 2026, compared to $253.5 million for the thirty-nine weeks ended May 31, 2025. The decrease was primarily due to the following:
•an increase in the change of inventories in the current fiscal year relative to the prior year due to inventory management countermeasures in response to tariffs and to support sales growth;
26
•a decrease in the change of accounts payable and accrued liabilities as compared to the prior year period as the current year payroll and incentive compensation accrual declined compared to an increase in the prior year; partially offset by
•a decrease in the change of accounts receivable in the current year attributable to the RPA amendment; and
•an increase in net income.
The table below summarizes certain information regarding the Company’s operations as of the periods indicated:
| May 30, 2026 | August 30, 2025 | May 31, 2025 | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
Working Capital (1) | $ | 452,017 | $ | 497,208 | $ | 592,498 | |||||||||||
Current Ratio (2) | 1.5 | 1.7 | 1.9 | ||||||||||||||
Days’ Sales Outstanding (3) | 36.6 | 37.8 | 39.4 | ||||||||||||||
Inventory Turnover (4) | 3.5 | 3.4 | 3.4 | ||||||||||||||
(1)Working Capital is calculated as current assets less current liabilities.
(2)Current Ratio is calculated as total current assets divided by total current liabilities.
(3)Days’ Sales Outstanding is calculated as accounts receivable divided by net sales, using trailing two months sales data.
(4)Inventory Turnover is calculated as total cost of goods sold divided by inventory, using a 13-month trailing average inventory.
Working capital and current ratio decreased as of May 30, 2026 compared to May 31, 2025 and August 30, 2025, primarily due to higher Current portion of debt including obligations under finance leases partially offset by higher Inventories compared to both comparable periods.
Days’ sales outstanding as of May 30, 2026 decreased modestly compared to both August 30, 2025 and May 31, 2025 driven by the RPA amendment in the second quarter of fiscal year 2026.
Inventory turnover as of May 30, 2026 increased compared to both August 30, 2025 and May 31, 2025. Inventory turnover continues to improve due to category management efforts and supply chain efficiencies to optimize inventory levels. The recent higher balance of Inventories is due to inventory management countermeasures in response to tariffs and to support recent sales growth.
Cash Flows from Investing Activities
Net cash used in investing activities for the thirty-nine weeks ended May 30, 2026 and May 31, 2025 was $63.3 million and $41.6 million, respectively. The use of cash for both the thirty-nine weeks ended May 30, 2026 and May 31, 2025 was primarily due to expenditures for property, plant and equipment mainly related to vending programs and other infrastructure and technology investments. Cash used in investing activities for the prior year period was partially offset by the net proceeds received from the sale of the Columbus CFC.
Cash Flows from Financing Activities
Net cash used in financing activities was $144.3 million for the thirty-nine weeks ended May 30, 2026, compared to $169.6 million for the thirty-nine weeks ended May 31, 2025, primarily due to the following:
•$13.9 million, or 162 thousand shares, in aggregate repurchases of Class A Common Stock during the thirty-nine weeks ended May 30, 2026, compared to $39.1 million, or 494 thousand shares, in aggregate repurchases of Class A Common Stock during the thirty-nine weeks ended May 31, 2025;
•$145.8 million of regular cash dividends paid during the thirty-nine weeks ended May 30, 2026, compared to $142.3 million of regular cash dividends paid during the thirty-nine weeks ended May 31, 2025;
•net borrowings of $20.0 million under our credit facilities and private placement debt during the thirty-nine weeks ended May 30, 2026, compared to net borrowings of $12.5 million during the thirty-nine weeks ended May 31, 2025; and
27
•acquisition of the remaining interest of Wm. F. Hurst Co., LLC for $8.2 million during the thirty-nine weeks ended May 30, 2026, which increased the Company's ownership from 80% to 100%.
Capital Expenditures
We continue to invest in E-commerce and vending platforms, CFCs and distribution network, and other infrastructure and technology.
Long-Term Debt
Credit Facilities
In April 2017, the Company entered into a $600.0 million revolving credit facility, which was subsequently amended. The current unused balance of $505.7 million from the revolving credit facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary. As of May 30, 2026, the Company also had three uncommitted credit facilities, totaling $230.0 million in aggregate maximum uncommitted availability. As of May 30, 2026, we were in compliance with the operating and financial covenants of our credit facilities. See Note 8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these balances.
Private Placement Debt
In July 2016, we completed the issuance and sale of unsecured senior notes. In June 2018 and March 2020, we entered into additional note purchase agreements. In April 2024, the Company completed the issuance and sale of senior notes. See Note 8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these transactions.
Leases and Financing Arrangements
As of May 30, 2026, certain of our operations were conducted on leased premises. These leases are for varying periods, the longest extending to fiscal year 2032. In addition, we are obligated under certain equipment and automobile operating and finance leases, which expire on varying dates through fiscal year 2029.
From time to time, we enter into financing arrangements with vendors to purchase certain information technology equipment or software.
Critical Accounting Estimates
On an ongoing basis, we evaluate our critical accounting policies and estimates, including those related to revenue recognition, inventory valuation, allowance for credit losses, warranty reserves, contingencies and litigation, income taxes, and accounting for goodwill and long-lived assets. We make estimates, judgments and assumptions in determining the amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying Notes. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The estimates are used to form the basis for making judgments about the carrying values of assets and liabilities and the amount of revenues and expenses reported that are not readily apparent from other sources. Actual results may differ from these estimates.
There have been no material changes outside the ordinary course of business in the Company’s critical accounting policies, as disclosed in its Annual Report on Form 10-K for the fiscal year ended August 30, 2025.
Recently Adopted Accounting Standards
See Note 1, “Basis of Presentation” in the Notes to Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For information regarding our exposure to certain market risks, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Interest Rate Risks” under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of Part II of our Annual Report on Form 10-K for the fiscal year ended
28
August 30, 2025. Except as described in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this Report, there have been no significant changes in our financial instrument portfolio or interest rate risk since our August 30, 2025 fiscal year-end.
Item 4. Controls and Procedures.
Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, with the participation of our Chief Executive Officer and our Chief Financial Officer, as well as other key members of our management, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is (i) accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act) during the fiscal quarter ended May 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of business, there are various claims, lawsuits and pending actions against the Company incidental to the operation of its business. Management evaluates such matters and records a liability when a loss is both probable and the amount of the loss is reasonably estimable. Although the outcome of these matters, both individually and in aggregate, is currently not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.
In addition to the matters referred to above, on March 14, 2025, a complaint was filed in the Supreme Court of the State of New York, County of New York by Macomb County Retiree Health Care Fund (“MCRHC”) against the Company and certain officers, directors and shareholders of the Company (the “Macomb Litigation”). In June 2025, the MCRHC filed an amended complaint. The action is purportedly brought by MCRHC individually, and on behalf of others similarly situated, as a class action or in the alternative, as a derivative action on behalf of the Company. The amended complaint also asserts a breach of contract claim against the Company. The amended complaint alleges, among other things, breaches of fiduciary duties for actions related to the Reclassification and seeks damages, recovery of costs and expenses and such other relief as the court may deem proper. On November 14, 2025, the Company’s motion to dismiss the amended complaint was denied. On February 20, 2026, the Company filed an appeal of the trial court’s decision with respect to the Company’s motion to dismiss. We have incurred, and may be required in the future to incur further, legal fees and other expenses related to the Macomb Litigation as the Company continues to vigorously defend itself; however, the Company is unable to reasonably estimate the ultimate cost or range of potential costs to resolve this matter at this time.
Item 1A. Risk Factors.
In addition to the other information set forth in this Report, you should carefully consider the risks and the uncertainties discussed in Item 1A, “Risk Factors” of Part I of our Annual Report on Form 10-K for the fiscal year ended August 30, 2025, which could materially affect our business, financial condition and/or operating results. There have been no material changes in the Company’s risk factors from those disclosed in our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be not material also may materially and adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table sets forth repurchases by the Company of its outstanding shares of Class A Common Stock, which are listed on the New York Stock Exchange, during the thirteen-week period ended May 30, 2026:
Issuer Purchases of Equity Securities
| 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) | ||||||||||||||||||||||
| 3/1/26-3/31/26 | 896 | $ | 91.43 | — | 1,313,423 | |||||||||||||||||||||
| 4/1/26-4/30/26 | 509 | $ | 92.41 | — | 1,313,423 | |||||||||||||||||||||
| 5/1/26-5/30/26 | 414 | $ | 103.76 | — | 1,313,423 | |||||||||||||||||||||
| Total | 1,819 | — | ||||||||||||||||||||||||
(1)During the thirteen weeks ended May 30, 2026, 1,819 shares of 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. Average price paid per share excludes excise tax levied by the Inflation Reduction Act of 2022.
(3)In June 2021, the Board of Directors of the Company 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. As of May 30, 2026, the maximum number of shares of Class A Common Stock that may yet be repurchased under the Share Repurchase Plan was 1,313,423 shares.
30
Item 5. Other Information.
Disclosure in Lieu of Reporting on Current Report on Form 8-K
On June 30, 2026, the Company adopted the amendment and restatement of the Company’s Executive Severance Plan (the “Plan”) to include the Company’s Chief Executive Officer as an eligible participant under the Plan.
The foregoing description of the terms and conditions of the Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Plan, a copy of which is filed as Exhibit 10.1 hereto and is incorporated by reference herein.
Insider Trading Arrangements
During the quarter ended May 30, 2026 none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
31
Item 6. Exhibits.
EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 101.INS | Inline XBRL Instance Document.* | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document.* | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* | |||||||
* | Filed herewith. | |||||||
| ** | Furnished herewith. | |||||||
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MSC INDUSTRIAL DIRECT CO., INC. (Registrant) | ||||||||
Dated: July 1, 2026 | By: | /s/ MARTINA MCISAAC | ||||||
Martina McIsaac President and Chief Executive Officer (Principal Executive Officer) | ||||||||
Dated: July 1, 2026 | By: | /s/ GREG CLARK | ||||||
Greg Clark Vice President and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||||||
33
Exhibit 10.1
MSC EXECUTIVE SEVERANCE PLAN
Amended and Restated
Effective as to terminations on or after June 15, 2026
MSC EXECUTIVE SEVERANCE PLAN
This document sets forth the terms and conditions of the MSC Executive Severance Plan (the “Plan”), which is hereby adopted by MSC Industrial Direct Co., Inc. (“MSC”) for the benefit of the eligible employees of MSC and its subsidiaries to this document. MSC and all such designated subsidiaries hereinafter are referred to, individually and collectively, as the “Company.” This document sets forth the terms of the Plan and is applicable to such eligible employees of the Company who participate in the Plan in accordance with Sections 2 and 3 below.
Section 1.Effective Date and Plan Year. The “Effective Date” of the Plan shall be October 27, 2016. The “Plan Year” shall be the 12-consecutive month period beginning on January 1 and ending on December 31; provided, however, that, the first Plan Year shall be a short Plan Year beginning on the Effective Date and ending on December 31, 2016. This amendment and restatement of the Plan shall be effective for terminations on or after June 15, 2026. The Company is the “named fiduciary” and plan administrator of the Plan, provided, however that the Company may delegate any of its duties, rights or responsibilities as plan administrator under the Plan to an individual or committee of its choosing and at its discretion, subject to Section 9 below (the “Plan Administrator”).
Section 2.Eligibility for Participation. Each person who is customarily employed by the Company as a Vice President, Senior Vice President, Executive Vice President or as the Chief Executive Officer (an “Eligible Associate”) who experiences a “Qualifying Termination” (as defined below) shall be a participant in the Plan, other than any person who is covered by an employment, severance or similar agreement with the Company that provides for payment of severance pay under specified circumstances; provided, however, that for purposes of this Section 2, any agreement, plan or award or similar instrument providing for benefits upon a change in control of the Company shall not be deemed to be such an agreement; provided, further, that there shall be no duplication of comparable benefits under the Plan and any such agreement, plan or award or similar instrument. Notwithstanding the foregoing, any person classified by the Company as an independent consultant, contractor, or temporary worker to the Company will not be eligible for this severance program, even if it is later determined by a court or governmental agency that such person was or is an employee of the Company.
Section 3.Participation. Each Eligible Associate shall become a participant (a “Participant”) in the Plan on the later of the Effective Date, or the date on which he or she has a Qualifying Termination. A Participant’s participation in the Plan shall cease as of the date the Participant is no longer an Eligible Associate and is not entitled to any benefit provided under this Plan.
Section 4.Entitlement to a Severance Benefit.
(a)Subject to the provisions of this Section 4, each Participant who incurs a Qualifying Termination (as hereinafter defined) shall be eligible to receive a “Severance Benefit” under the Plan that is determined in accordance with Section 5 below. For purposes of the Plan, a “Qualifying Termination” means the occurrence of one of the following:
(i)The involuntary termination of the Participant’s employment by the Company as a result of the elimination of such Participants’ job or position with the Company because of reorganization, job elimination, or site closure;
2
(ii)The termination of the Participant’s employment with the Company upon the Participant’s failure to accept a material change in the geographic location where such Participant is required to primarily perform his or her services for the Company, such that the distance between the previous geographic location and the new geographic location exceeds 50 miles (one way); provided however that the Company must notify the Participant of this termination of employment within 90 days of the Participant’s refusal to accept this change in geographic location; or
(iii)The termination of the Participant’s employment with the Company upon the Participant’s failure to accept a reduction in such Participant’s base salary of 20 percent or more; provided however that the Company must notify the Participant of this termination of employment within 90 days of the Participant’s refusal to accept this reduction in base salary.
(b)As a condition of receiving any Severance Benefit under the Plan, each Participant shall be required to execute a separation agreement and general release (the “Severance Agreement”) in favor of the Company in such form and of such content as the Plan Administrator, in its sole discretion, may require and such Participant does not revoke the Severance Agreement, to the extent the Severance Agreement permits revocation. The Severance Agreement shall not be executed prior to the date of the Participant’s Qualifying Termination (the “Termination Date”). Notwithstanding any provision in the Plan to the contrary, if such required Severance Agreement is not so executed by the terminated Participant or revoked, the Participant shall not be entitled to any payments or benefits under the Plan.
(c)Participants who are notified of their Qualifying Termination during what the Plan Administrator determines is a Company-approved leave of absence of less than six months will be eligible for a Severance Benefit under the Plan. In the event that such Company-approved leave (i) is for six months or longer or, (ii) as of the Termination Date, more than six months has elapsed since the beginning of such Company-approved leave and the Participant did not resume continuous active employment with the Company prior to the end of such six-month period, no Severance Benefit shall be payable to such Participant.
(d)In the event that a Participant dies after receipt of notification of a Qualifying Termination but prior to the Termination Date or prior to the full payment of any Severance Benefit to which the Participant is entitled, (i) any Severance Allowance that would have been paid to such Participant under the Plan shall be paid to his or her Beneficiary or estate, (ii) any Benefits Subsidy payment due under Section 6 below shall be made on behalf of the Participant’s qualified beneficiaries (within the meaning of COBRA), and (iii) any Outplacement Services that are unused as of the date of a Participant’s death shall be immediately forfeited. For purposes of this Plan, “Beneficiary” shall be the same beneficiary as the Participant has elected on the Company’s life insurance plan or, if no such beneficiary is elected on the life insurance plan, the beneficiary election in place for the Company’s defined contribution plan.
(e)Notwithstanding anything in the Plan to the contrary, no Eligible Associate or Participant shall be entitled to receive a Severance Benefit in the event that the Plan Administrator determines, in its sole discretion, that (i) at the time of the Participant’s Qualifying Termination, the Company had cause to terminate the Participant’s employment for failure to meet Company-established performance criteria, the Participant’s misconduct, or the Participant’s violation of any applicable Company policy; (ii) the Participant resigned from employment with the Company prior to the date the Participant’s employment is scheduled to terminate, or (iii) prior to the Termination Date, the Participant received an offer of employment from the Company or any affiliate thereof on terms that are comparable in the aggregate to those
3
of the position held by the Participant with the Company prior to the Termination Date. Notwithstanding anything in the Plan to the contrary, payment and provision of any Severance Benefit shall cease and be forfeited, to the extent not previously paid or provided, immediately upon the Participant’s acceptance of any offer of employment with the Company or any of its affiliates.
(f)In addition, if a Participant incurs a Qualifying Termination, and the Plan Administrator determines, in its sole discretion, that thereafter (i) the Participant breached any provision(s) of the Severance Agreement described in Section 4(b) above, or (ii) the Participant breached any provision(s) of any confidentiality, non-compete, non-solicitation, non-disparagement or other restrictive covenant or similar agreement with the Company, then, to the fullest extent permitted by applicable law, any unpaid or unused Severance Benefit shall be immediately forfeited (including, without limitation, any Benefits Subsidy payment and any outplacement services) and the Participant shall immediately repay to the Company any amount(s) of Severance Allowance previously paid to such Participant on account of such Qualifying Termination.
Section 5.Determination of Severance Benefit. Subject to the provisions of Section 4 above and this Section 5, if a Participant incurs a Qualifying Termination, the Participant shall be entitled to a “Severance Benefit.” A “Severance Benefit” shall consist of a “Severance Allowance” and a “Bonus Allowance” determined in accordance with this Section 5, subject to the Participant’s eligibility (and eligibility of members of the Participant’s family), a Benefits Subsidy payment, determined in accordance with Section 6 below, the Vesting Acceleration Benefit described in Section 7 below and, at the discretion of the Plan Administrator, “Outplacement Services” described in Section 8 below.
(a)The amount of a Participant’s Severance Allowance shall be determined as of the Termination Date and shall equal the amount determined in accordance with Section 5(a), plus the amount determined in accordance with Section 5(b). The amount determined in accordance with this Section 5(a) shall be based on the Participant’s level of employment with the Company at the time of the Qualifying Termination, and shall be determined in accordance with the following chart:
Participant’s Level of Employment | Aggregate Amount of Severance Allowance Under Section 5(a) | ||||
| Chief Executive Officer | 24 months of Base Pay | ||||
| Executive Vice President | 18 months of Base Pay | ||||
| Senior Vice President | 15 months of Base Pay | ||||
| Vice President | 12 months of Base Pay | ||||
For purposes of this Plan, “Level of Employment” means the designated salary grade in the HRIS system of Sid Tool Co., Inc. DBA MSC Industrial Supply, not the associate’s title.
Notwithstanding the foregoing or anything in the Plan to the contrary, the amount of any Severance Allowance payable to any Participant under the Plan shall be reduced, dollar-for-dollar, but not below $0.00, by the amount of any payments made by the Company or any
4
affiliates thereof, to such Participant under the Worker Adjustment and Retraining Notification Act, as amended (the “WARN Act”) or any similar state law. For purposes hereof:
(i)“Base Pay” means such Participant’s monthly base rate of salary on the Termination Date, prorated to the extent necessary to take into account any reduced schedule of employment, but excluding all other forms of compensation such as bonuses.
(ii)A Participant’s level of employment with the Company shall be determined by the Plan Administrator, in its sole discretion.
(iii)The portion of the Severance Allowance determined in accordance with this Section 5(a) shall be paid in equal pro rata installments, in accordance with the normal payroll practices of the Company in effect on the date of the Qualifying Termination, over the number of months listed in the chart above under the column for the “aggregate amount of severance allowance” (i.e., 24, 18, 15 or 12 months) applicable to the Participant’s position, commencing on the first Company payroll payday (determined in accordance with the payroll schedule of the Company) following the later of (i) the date that the executed Severance Agreement is returned to the Company, or (ii) the expiration of the revocation period of the Severance Agreement (such payroll date, the “Payment Date”), provided that MSC has received from such Participant a fully executed Severance Agreement at least eight (8) days prior to the Payment Date and such Severance Agreement has not been revoked by the Participant prior to the Payment Date.
(b)In addition to the Severance Allowance as calculated above there will be an additional payment amount (the “Bonus Allowance”) for associates who are in roles that are bonus eligible. The amount to be paid shall be calculated at 100% of the individual’s bonus target prorated for the current fiscal year based on the date of the Qualifying Termination so long as the Qualifying Termination date is on or after the first day of MSC’s third fiscal quarter. Any Qualifying Termination that occurs before the first day of MSC’s third fiscal quarter shall not receive a bonus payment. This additional payment (if any) is payable in a lump sum on the Payment Date. The Bonus Allowance and the Severance Allowance are collectively the “Severance Payment.”
(c)All payments of any Severance Benefit shall be net of any required withholding, any employment taxes and other required taxes and deductions with respect to the Severance Benefit.
Section 6.Benefits Subsidy Payment. In the event a Participant who is covered under the Company’s current Healthcare Plans incurs a Qualifying Termination, and such Participant is eligible to continue health plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for periods after the date coverage would otherwise terminate on account of such Qualifying Termination, the Company shall pay to the Participant an amount equal to the credit provided by the Company toward the cost of the Participant’s healthcare coverage (determined based on the Participant’s salary band, plan election and coverage tier immediately prior to the Qualifying Termination and including any Wellness credit to which the Participant was entitled immediately prior to the Qualifying Termination) for the period determined in accordance with the following chart (the “Benefits Subsidy”):
5
Participant’s Level of Employment | Aggregate Amount of Company Benefits Subsidy | ||||
| Chief Executive Officer | 24 months of Benefits Subsidy | ||||
| Executive Vice President | 18 months of Benefits Subsidy | ||||
| Senior Vice President | 15 months of Benefits Subsidy | ||||
| Vice President | 12 months of Benefits Subsidy | ||||
The Benefits Subsidy will be paid to the Participant in one-lump sum payment on the Payment Date.
Section 7.Vesting Acceleration Benefit. In the event a Participant incurs a Qualifying Termination, subject to the provisions of Section 4 above, as of the Termination Date, any unvested Awards under the MSC Industrial Direct, Co. Inc. 2015 Omnibus Incentive Plan or the MSC Industrial Direct, Co. Inc. 2023 Omnibus Incentive Plan (collectively, the “Omnibus Plans”) held by a Participant on the Termination Date shall be deemed to be vested as follows:
(a)For any unvested Options or Stock Appreciation Rights (including any assumed or substituted options or stock appreciation rights) held by the Participant that have an exercise price that is no greater than the Fair Market Value of a Share of the underlying MSC stock on the Termination Date, each such Award will become vested and exercisable with respect to the number of Options or Stock Appreciation Rights that would have vested on the next scheduled vesting date for such Award in accordance with terms of the applicable Award Agreement and Omnibus Plan.
(b)For Restricted Stock Awards, Restricted Stock Unit Awards, Performance Share Awards and other share-based Awards (including assumed or substituted restricted stock, restricted stock units, performance shares and other share-based awards) held by the Participant, any restrictions applicable to each such Award will lapse with respect to the number of Shares that would have vested on the next scheduled vesting date for such Award and any performance conditions imposed with respect to such Shares shall be deemed to be achieved at target performance levels or as otherwise provided in the applicable Award Agreement.
For purposes of this Section 7, capitalized terms not otherwise defined in the Plan shall have the meanings prescribed under the applicable Omnibus Plan. Except as provided in this Section 7, the terms of the Omnibus Plans and the applicable Award Agreements will continue to apply.
Section 8.Outplacement Services. The Plan Administrator may determine, in its sole discretion, to provide outplacement services as part of any Severance Benefit of any Participant (“Outplacement Services”). Any such outplacement services shall be of such nature and such duration as the Plan Administrator shall determine, in its discretion, and shall be described in the applicable Participant’s Severance Agreement. A Participant must commence usage of any Outplacement Services provided in a Severance Benefit no later than ninety (90) days after the Participant’s Termination Date. Outplacement Services not commenced by the end of such ninety (90)-day period shall be immediately forfeited.
Section 9.Administration. The Plan Administrator shall be responsible for the overall operation and administration of the Plan. The Plan Administrator may appoint or employ such persons as it, he or she may deem necessary to render advice with respect to any
6
responsibility of the Company or the Plan Administrator under the Plan. The Plan Administrator shall have the exclusive discretionary power and authority to interpret the terms of the Plan and to decide all questions concerning the operation and administration of the Plan including, without limitation, the eligibility of any person to participate in the Plan, the determination whether a Qualifying Termination under the Plan has occurred, the right to and amount of any benefit payable under the Plan to any individual and the date on which any individual ceases to be a Plan Participant. The Plan Administrator’s decisions hereunder shall be final and binding on all Participants and all other persons interested or claiming any interest under the Plan. The Plan Administrator may allocate to any one or more of the Company’s associates any responsibility it may have under the Plan and may designate any other person or persons to carry out any of its responsibilities under the Plan; provided, however, that the Plan Administrator shall not allocate or designate any responsibility with respect to a Participant who is an “officer” of the Company, within the meaning of Section 16(a)(1) of the Securities Exchange Act of 1934 (“Section 16”), who is subject to the filing requirements of Section 16, to any individual or committee other than the Compensation Committee of the Board of Directors of the Company.
Section 10.Funding. The Plan, as a “severance pay arrangement” within the meaning of Section 3(2)(B)(i) of ERISA, is intended to be, and shall be administered and maintained as, an unfunded welfare benefit plan within the meaning of Section 3(1) of ERISA. This Plan is a “top hat” plan that is available to a select group of management. A ‘top hat’ election was filed for this Plan. The Plan shall not be funded through a trust, an insurance contract or otherwise, and all benefit payments under the Plan shall be made from the general assets of the Company. Accordingly, a Participant shall not have any claim against specific assets of Company, and shall be only a general creditor, with respect to any rights the Participant may have under the Plan. All expenses and costs in connection with the operation of the Plan shall be borne by Company.
Section 11.Amendment and Termination. The Plan may be amended or terminated, in whole or in part, at any time by the Company, subject to approval, as appropriate, by the Company’s Compensation Committee and Board of Directors, as applicable. Except as provided below, any such Plan amendment or termination may apply to all, or any designated class or classes of employees (including, without limitation, former employees). Except as provided below, upon termination of the Plan, the Company shall have no further obligations or liabilities hereunder, and all Plan benefits and all Company and Plan Administrator obligations under the Plan shall cease. Notwithstanding the above, except with a Participant’s consent, no such amendment or termination shall impair the rights of a Participant with respect to benefits payable hereunder if such Participant ceased to be an Eligible Associate and became entitled to payment of a Severance Benefit under Sections 4, 5, 6, 7 and 8 hereof prior to the date such amendment or termination was adopted.
Section 12.No Employment Contract. This Plan is not a contract of employment, and the terms of employment of an associate with the Company shall not be affected in any way by this Plan except as specifically provided herein. The adoption of this Plan shall not be construed as conferring any legal rights upon any employee for the continuation of an employment relationship with the Company, nor shall it interfere with the right of the Company to discharge the associate.
Section 13.Miscellaneous.
(a)The payment of a severance pay allowance under the Plan shall not be taken into account for any purpose under any other plan or policy of the Company, except as otherwise specifically provided in the Plan or in such other plan or policy.
(b)No benefit payable under this Plan may be assigned, transferred, pledged as a security for indebtedness or otherwise encumbered, or subjected to any legal process for the
7
payment of any claim against a Participant and any attempt to cause the same to be so subjected shall be null and void and without effect.
(c)Whenever appropriate in the Plan, words used in the singular may be read in the plural; words used in the plural may be read in the singular; and words importing the masculine gender shall be deemed equally to refer to the feminine or be neutral. Any reference to a Section shall refer to a Section of this Plan, unless otherwise indicated.
(d)The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of the Plan, the text shall control.
(e)In the event that the terms of the Plan conflict with the terms of any summary or other description of the Plan, the terms of the Plan shall govern.
(f)This Plan shall be construed in accordance with the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”), and except to the extent preempted by federal law, the Plan shall be construed, administered and enforced in accordance with the laws of the State of New York, without giving effect to the principles thereof relating to the conflict of laws.
Section 14.Successors. The Plan shall bind any successor to all or substantially all of the Company’s assets in the same manner and to the same extent that the Company would be obligated under the Plan if no succession had taken place.
Section 15.Nonalienation of Benefits. Except as otherwise specifically provided herein, neither the rights nor any amounts payable under the Plan shall not be subject to any manner of anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, including any liability which is for alimony of other payments for the support of a spouse or former spouse, or for any other relative of a Participant, prior to actually being received by the person entitled to payment under the terms of the Plan. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, execute, levy upon or otherwise dispose of any right to amounts payable hereunder, shall be null and void.
Section 16.Facility of Payment. If a Participant is incompetent, the Company may (i) require the appointment of a conservator or guardian, (ii) distribute amounts to his or her spouse, with respect to a Participant who is married, or to such other relative of an unmarried Participant for the benefit of such Participant, or (iii) distribute such amounts directly to or for the benefit of such Participant; provided however, in all cases, that a conservator, guardian, or other person charged with his or her care has not been appointed. Alternatively, the Company may distribute such amounts to an escrow account established by the Company in its sole and absolute discretion until the proper payee is determined.
Section 17.Overpayment. If, due to mistake or any other reason, a person receives Severance Benefits under the Plan in excess of what the Plan provides, that person shall repay the overpayment to the Company in a lump sum within 30 days of the Company providing notice to such person of the amount of overpayment. If such person fails to so repay the overpayment, then without limiting any other remedies available to the Company, the Company may deduct the amount of the overpayment from any other amounts which become payable to that person under the Plan or otherwise.
Section 18.Claims Procedures. In the event that any person (a “Claimant”) makes a claim for benefits under the Plan (a “Claim”), such Claim shall be made by the Claimant’s filing a notice thereof with the Plan Administrator within ninety (90) days after such Claimant first has
8
knowledge of such Claim. Each Claimant who has submitted a Claim to the Plan Administrator shall be afforded a reasonable opportunity to state such Claimant’s position and to present evidence and other material relevant to the Claim to the Plan Administrator for its consideration in rendering its decision with respect thereto. The Plan Administrator shall render its decision in writing within sixty (60) days after the Claim is referred to it, and a copy of such written decision shall be furnished to the Claimant. Each Claimant whose Claim has been denied by the Plan Administrator shall be provided written notice thereof, which notice shall set forth the following (in a manner calculated to be understood by such Claimant):
1.the specific reason(s) for the denial;
2.specific reference to pertinent provision(s) of the Plan upon which such denial is based;
3.a description of any additional material or information necessary for the Claimant to perfect such Claim and an explanation of why such material or information is necessary; and
4.an explanation of the procedure hereunder for review of such Claim.
Each such Claimant shall be afforded a reasonable opportunity for a full and fair review of the decision of the Plan Administrator denying the Claim. Such review shall be by the Plan Administrator. Such appeal shall be made within ninety (90) days after the Claimant received the written decision of the Plan Administrator and shall be made by the written request of the Claimant or such Claimant’s duly authorized representative to the Plan Administrator. In the event of appeal, the Claimant or such Claimant’s duly authorized representative may review pertinent documents and submit issues and comments in writing to the Plan Administrator. The Plan Administrator may approve, disapprove or modify the decision of the Plan Administrator, in whole or in part, or may take such other action with respect to such appeal as it deems appropriate. The decision of the Plan Administrator with respect to such appeal shall be made promptly, and in no event later than sixty (60) days after receipt of such appeal, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered as soon as possible and in no event later than one hundred twenty (120) days following receipt of such appeal. The decision of the Plan Administrator shall be in writing and in a manner calculated to be understood by the Claimant and shall include specific reasons for such decision and set forth specific references to the pertinent provisions of the Plan upon which such decision is based. The Claimant shall be furnished a copy of the written decision of the Plan Administrator. Such decision shall be final and conclusive upon all persons interested therein, except to the extent otherwise provided by applicable law. Not in limitation of the foregoing, the Plan Administrator shall have the discretion to decide any factual or interpretative issues in its determination of Claims, and the Plan Administrator’s exercise of such discretion shall be conclusive and binding as long as it is not arbitrary or capricious. The Company shall be the agent for service of legal process upon this Plan, and its address for such purpose shall be the address of its principal place of business in Melville, New York.
Section 19.Code Section 409A. Notwithstanding anything in the Plan to the contrary, if any amount or benefit that the Company determines would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or
9
distributable under this Plan by reason of a Participant’s termination of employment, then to the extent necessary to comply with Code Section 409A:
(a)if the payment or distribution is payable in a lump sum to a “specified employee” (within the meaning of Section 409A of the Code), the Participant’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participant’s death or the seventh month following the Participant’s Termination Date; and
(b)if the payment or distribution is payable over time to a “specified employee” (within the meaning of Section 409A of the Code), the amount of such non-exempt deferred compensation that would otherwise be payable during the six (6) month period immediately following the Participant’s Termination Date will be accumulated and the Participant’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participant’s death or the seventh month following the Participant’s Termination Date and paid on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments or distributions will commence.
(c)If the period during which the Participant has discretion to execute or revoke the Severance Agreement straddles two calendar years, the Payment Date will be no earlier than January 1st of the second calendar year.
If an amount to be paid under this Plan is payable in two or more installments, each installment shall be treated as a separate payment for purposes of Section 409A. To the extent any expense reimbursement or in-kind benefit to which a Participant is or may be entitled to receive under the Plan constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Code, then (i) such reimbursement shall be paid to the Participant as soon as administratively practicable after the Participant submits a valid claim for reimbursement, but in no event later than the last day of the Participant’s taxable year following the taxable year in which the expense was incurred, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year of the Participant shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of the Participant, and (iii) the Participant’s right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Plan providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Plan, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Nothing in this Plan shall operate or be construed to cause the Plan to fail to comply with the requirements of Code Section 409A and, to the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A and shall be administered in a manner consistent with that intent. Any provision of this Plan that would cause the Plan or any payment made hereunder to fail to satisfy Code Section 409A shall have no force and effect until amended by the Company to comply with Code Section 409A (which amendment may be retroactive to the extent permitted by Code Section 409A) and may be made by the Company without the consent of any Participant.
10
11
EXHIBIT A
DESIGNATED SUBSIDIARIES:
Sid Tool Co., Inc. DBA MSC Industrial Supply
12
Exhibit 10.2
MSC INDUSTRIAL DIRECT CO., INC.
EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN
Initially Effective June 19, 2018
As Amended and Restated Effective June 15, 2026
MSC INDUSTRIAL DIRECT CO., INC.
EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN
Article I.
ESTABLISHMENT AND PURPOSE
ESTABLISHMENT AND PURPOSE
1.1Establishment. MSC Industrial Direct Co., Inc., a New York corporation (together with its successors and assigns, the “Company”), hereby establishes and adopts this Executive Change in Control Severance Plan (as may be amended, supplemented or modified from time to time in accordance with its terms, this “Plan”), effective as of June 19, 2018. This amendment and restatement of the Plan shall be effective as of June 15, 2026.
1.2Purpose. The purpose of this Plan is to provide Participants (as hereinafter defined) with severance payments and benefits in the event the Participant’s employment is terminated under circumstances as further set forth herein. This Plan is intended to be an unfunded plan that is maintained primarily to provide severance payments and benefits for a select group of “management or highly compensated employees” within the meaning of Sections 201, 301, and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA.
Article II.
DEFINITIONS
DEFINITIONS
For purposes of interpreting this Plan, the following definitions shall apply:
2.1“Accounting Firm” shall mean Ernst & Young LLP or such other certified public accounting firm as the Compensation Committee may designate prior to a Change in Control.
2.2“ADEA Revocation Period” shall mean, with respect to a Release executed by a Participant pursuant to Section 4.3(b), the 7-day revocation period during which the Participant may revoke his or her consent to the waiver of his or her rights under the Age Discrimination in Employment Act of 1967, as amended, provided for in the Release.
2.3“Affiliate” shall have the meaning ascribed thereto under Rule 405 under the Securities Act of 1933.
2.4“Board” shall mean the Board of Directors of the Company.
2.5“Business Combination” shall mean a reorganization, merger or consolidation involving the Company.
2.6“Cause” shall mean, with respect to a Participant: (a) the willful and continued failure by the Participant to substantially perform his or her duties with the Company and its subsidiaries (other than any such failure resulting from his or her incapacity due to physical or mental illness, or any such actual or anticipated failure after the Participant has provided a Change in Circumstances of Employment Notice to the Company) after a written demand for substantial performance is delivered to the Participant by the Company which demand specifically identifies the manner in which the Company believes that the Participant has not substantially performed his or her duties, (b) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise, or (c) the Participant’s conviction of, or entering a plea of nolo contendere to, a felony. For purposes of clauses (a) and (b), no act or failure to act on the Participant’s part shall
be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith or without reasonable belief that his or her action or omission was in the best interest of the Company and its subsidiaries.
2.7“Change in Circumstances of Employment” shall mean, with respect to a Participant, the occurrence of any of the following events:
(a)a material reduction or change in the Participant’s employment duties or reporting relationship;
(b)a reduction in the annual base salary made available by the Company to the Participant from the annual base salary in effect immediately prior to a Change in Control;
(c)a material diminution in the Participant’s status, working conditions or other economic benefits from those in effect immediately prior to a Change in Control; or
(d)the Company requiring the Participant to be based at any place outside a 30-mile radius from the Company’s offices where the Participant was based prior to a Change in Control, except for reasonably required travel on the Company’s business which is not materially greater than such travel requirements prior to a Change in Control.
Notwithstanding the foregoing, the occurrence of any of the events set forth in clauses (a) through (d) above with respect to a Participant shall not be deemed to be a Change in Circumstances of Employment with respect to the Participant unless (i) the Participant shall have provided the Company with written notice specifying in reasonable detail the occurrence of such event (a “Change in Circumstances of Employment Notice”) within ninety (90) days of the occurrence of such event and (ii) the Company shall not have remedied such event within a cure period of thirty (30) days after receipt by the Company of such Change in Circumstances of Employment Notice (the “Cure Period”). Notwithstanding anything to the contrary in this Plan, for purposes of Section 4.1, if a Change in Circumstances of Employment shall have occurred with respect to a Participant, the Participant’s Employment shall be automatically deemed Terminated due to such Change in Circumstances of Employment upon the expiration of the applicable Cure Period without any further action by the Company or the Participant.
2.8“Change in Circumstances of Employment Notice” shall have the meaning set forth in Section 2.7.
2.9“Change in Control” shall mean the occurrence of any of the following events:
(a)any Person (other than Mitchell Jacobson or Marjorie Gershwind or a member of the Jacobson or Gershwind families or any trust established principally for members of the Jacobson or Gershwind families or an executor, administrator or personal representative of an estate of a member of the Jacobson or Gershwind families and/or their respective Affiliates) becomes the beneficial owner, directly or indirectly, of fifty percent (50%) or more of the combined voting power of the Company’s outstanding voting securities ordinarily having the right to vote for the election of directors of the Company; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not constitute a Change in Control: any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subparagraph (c) of this Section 2.9;
(b)during any twenty-four month period, individuals who, at the beginning of such period, constitute the Board, together with any new director(s) (other than (i) a director designated by a Person who shall have entered into an agreement with the Company to effect a transaction described in subparagraphs (a) or (c) of this Section 2.9 and (ii) a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the twenty-four (24) month period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;
(c)there is a Business Combination, unless following such Business Combination, (i) all or substantially all of the individuals and entities who were beneficial owners of the Company’s outstanding voting securities ordinarily having the right to vote for the election of directors of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities ordinarily having the right to vote for the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportion as their ownership, immediately prior to such Business Combination, of the Company’s outstanding voting securities, (ii) no Person (excluding any corporation resulting from such Business Combination) other than Mitchell Jacobson or Marjorie Gershwind or a member of the Jacobson or Gershwind families or any trust established principally for members of the Jacobson or Gershwind families or an executor, administrator or personal representative of an estate of a member of the Jacobson or Gershwind families and/or their respective Affiliates, beneficially owns, directly or indirectly, 50% or more of the combined voting power of the then outstanding voting securities of the corporation resulting from such Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination;
(d)there is a liquidation or dissolution of the Company approved by the Company’s shareholders; or
(e)there is a consummation of a sale of all or substantially all of the assets of the Company.
2.10“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
2.11“COBRA Benefit Payment” shall mean, with respect to a Participant, payment of an amount equal to the product of 18 multiplied by the total amount of the COBRA continuation monthly premium rate (medical, vision and dental) that would otherwise be payable by the Participant for COBRA continuation for the Participant and his or her eligible dependents who were covered immediately prior to the Termination of the Participant’s Employment, such payment to be made in a single lump sum payment on the Company’s first regular payroll date after the expiration of the ADEA Revocation Period following the Participant’s return of an executed Release to the Company.
2.12“Code” shall mean the Internal Revenue Code of 1986, as amended.
2.13“Company” shall have the meaning set forth in Section 1.1.
2.14“Compensation Committee” shall mean the Compensation Committee of the Board.
2.15“Confidentiality, Non-Solicitation and Non-Competition Agreement” shall mean a Confidentiality, Non-Solicitation and Non-Competition Agreement in a form reasonably satisfactory to the Company and in substantially the same form as previously executed.
2.16“Cure Period” shall have the meaning set forth in Section 2.7.
2.17“Disability” shall mean, with respect to a Participant, the Participant’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.
2.18“Eligible Associate” shall have the meaning set forth in Section 3.1.
2.19“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as may be amended from time to time.
2.20“In Year Bonus” shall have the meaning set forth in Section 2.30(b).
2.21“JAMS Rules” shall have the meaning set forth in Section 5.3(a).
2.22“Participant” shall have the meaning set forth in Section 3.2.
2.23“Participant’s Total After-Tax Payments” shall have the meaning set forth in Section 4.2.
2.24“Payments” shall have the meaning set forth in Section 4.2.
2.25“Person” shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended).
2.26“Plan” shall have the meaning set forth in Section 1.1.
2.27“Plan Administrator” shall have the meaning set forth in Section 5.1.
2.28“Release” shall mean a general release in such form and of such content as the Plan Administrator, in its sole discretion, may require.
2.29“Section 409A” shall mean Section 409A of the Code, including the regulations, rulings, notices and other guidance issued by the Internal Revenue Service interpreting the same.
2.30“Special Severance Payment” shall mean, with respect to a Participant:
(a)payment equal to the sum of (i) the product of two (2) and the annual base salary in effect immediately prior to the Participant’s Change in Circumstances of Employment or the Termination of the Participant’s Employment by the Company, as the case may be, and (ii) the product of two (2) and the Participant’s Targeted Bonus in effect immediately prior to the Participant’s Change in Circumstances of Employment or the Termination of the Participant’s Employment by the Company, as the case may be, such single lump sum payment to be made on the Company’s first regular payroll date after the expiration of the Participant’s ADEA Revocation Period following the Participant’s return of an executed Release to the Company;
(b)payment of a pro rata portion of the Participant’s Targeted Bonus in effect immediately prior to the Participant’s Change in Circumstances of Employment or the Termination of the Participant’s Employment by the Company, as the case may be (the “In Year Bonus”), calculated as the product of (i) the In Year Bonus multiplied by (ii) a fraction the numerator of which is the number of whole months elapsed in the fiscal year up to the date on which the Participant’s Change in Circumstances of Employment or the Termination of the Participant’s Employment by the Company, as the case may be, occurs, and the denominator of which is twelve (12), such single lump sum payment to be made on the Company’s first regular payroll date after the expiration of the ADEA Revocation Period following the Participant’s return of an executed Release to the Company.
2.31“Targeted Bonus” shall mean, with respect to a Participant, the Participant’s target annual incentive cash bonus then in effect and approved under the Company’s annual incentive bonus plan; provided, however, that if the Participant does not have a target annual incentive cash bonus that is in effect immediately prior to the Participant’s Change in Circumstances of Employment or the Termination of the Participant’s Employment by the Company, as the case may be, the “Targeted Bonus” shall be the Participant’s target annual incentive cash bonus most recently in effect.
2.32“Termination of the Participant’s Employment” or words of similar import shall mean, with respect to a Participant, cessation of the Participant’s full or part time employment with the Company and any of its subsidiaries.
Article III.
ELIGIBILITY; PARTICIPANT
ELIGIBILITY; PARTICIPANT
3.1Eligible Associates. Only individuals who are employed by the Company as the Chief Executive Officer of the Company, the President of the Company, an Executive Vice President of the Company and/or a Senior Vice President of the Company are eligible to participate in this Plan (each an “Eligible Associate”).
3.2Participation. Each Eligible Associate who has been designated by the Board as a participant in this Plan shall participate in this Plan (each, a “Participant”). Each Participant shall be notified of his or her participation in this Plan in writing. Notwithstanding anything to the contrary in this Plan, on or after a Change in Control, the Board may not exclude any Participant from participation in this Plan.
Article IV.
SEVERANCE BENEFITS
SEVERANCE BENEFITS
4.1Severance Payments and Benefits. If the Company Terminates a Participant’s Employment (other than for Cause or other than due to the Participant’s death or Disability) within two (2) years after a Change in Control or if a Participant’s Employment is Terminated due to a Change in Circumstances of Employment for which the Participant has provided an applicable Change in Circumstances of Employment Notice to the Company within two (2) years after a Change in Control, then:
(a)the Company shall pay to the Participant, in cash, all accrued but unpaid compensation earned by the Participant as of the date of the Termination of the Participant’s Employment;
(b)subject to the Participant’s satisfaction of the conditions set forth in Section 4.3, the Company shall pay to the Participant, in cash, the Participant’s applicable Special Severance Payment;
(c)subject to the Participant’s satisfaction of the conditions set forth in Section 4.3, any stock options or stock appreciation rights held by the Participant immediately prior to the Change in Control (including any assumed or substituted stock options or stock appreciation rights) shall become fully vested and exercisable, any restrictions applicable to any restricted stock awards, restricted stock unit awards, performance share awards and other share-based awards held by the Participant immediately prior to the Change in Control (including any assumed or substituted awards) shall lapse and the stock relating to such awards shall become free of all restrictions and fully vested and transferable, any performance conditions imposed with respect to any stock awards shall be deemed to be achieved at target performance levels (except as otherwise specifically provided in an award agreement which provides that the award shall be deemed to be earned or vest on a pro rata or other basis), and all outstanding repurchase rights of the Company with respect to any awards held by the Participant immediately prior to the Change in Control shall terminate, provided that awards which are not assumed or substituted for shall accelerate in accordance with the provisions of the Company’s 2015 Omnibus Incentive Plan or 2023 Omnibus Incentive Plan, as applicable;
(d)subject to the Participant’s satisfaction of the conditions set forth in Section 4.3, the Company shall pay to the Participant, in cash, the Participant’s applicable COBRA Benefit Payment; and
(e)subject to the Participant’s satisfaction of the conditions set forth in Section 4.3, the Participant shall be eligible for outplacement services, at the Company’s expense and with a service selected by the Company in its reasonable discretion, for up to six (6) months from the date of the Termination of the Participant’s Employment.
4.2Payment Adjustment. Payments under Section 4.1 shall be made without regard to whether the deductibility of such payments (or any other payments or benefits to or for the benefit of the Participant) would be limited or precluded by Section 280G of the Code and without regard to whether such payments (or any other payments or benefits) would subject the Participant to the federal excise tax levied on certain “excess parachute payments” under Section 4999 of the Code; provided, however (i) to the extent that any payment or distribution of any type to or for the benefit of a Participant by the Company, any Affiliate of the Company, any Person who acquires a substantial portion of the Company’s assets (within the meaning of Section 280G of the Code and the regulations thereunder), or any Affiliate of such Person, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise (the “Payments”) constitutes “parachute payments” (within the meaning of Section 280G of the Code) and (ii) if the total of all Payments to or for the benefit of the Participant, after reduction for all federal, state and local taxes (including the excise tax under Section 4999 of the Code) with respect to such Payments (the “Participant’s Total After-Tax Payments”), would be increased by the limitation or elimination of any Payment under Section 4.1, or by an adjustment to the vesting of any equity-based awards that would otherwise vest on an accelerated basis in connection with the Change in Control (and the Termination of the Participant’s Employment), then (iii) amounts payable under Section 4.1 shall be reduced and the vesting of equity-based awards shall be adjusted to the extent, and only to the extent, necessary to maximize the Participant’s Total After-Tax Payments. Any reduction in payments or adjustment of vesting required by the preceding sentence shall be applied, first, against the vesting of any stock options for which the exercise price exceeds the then fair market value which would otherwise have vested in connection with the Change in Control (and the Termination of the Participant’s Employment), second, against any benefits payable in cash under Section 4.1, and third against the vesting of any other equity-based awards that would otherwise have vested in connection with the Change in Control (and the Termination of the Participant’s Employment). The determination as to whether the Participant’s Payments and benefits include “excess parachute payments” and, if so, the amount and ordering of any reductions in payment required by the provisions of this Section 4.2 shall be made at the Company’s expense by the Accounting
Firm. In the event of any underpayment or overpayment hereunder, as determined by the Accounting Firm, the amount of such underpayment or overpayment shall forthwith and in all events within thirty (30) days of such determination be paid to the Participant or refunded to the Company, as the case may be, with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code.
4.3Conditions to Severance Payments and Benefits. Notwithstanding anything to the contrary in this Plan, as a condition to a Participant receiving the Special Severance Payment contemplated by Section 4.1(b) and the other benefits contemplated by Sections 4.1(c), (d) and (e):
(a)no later than sixty (60) days following the Termination of the Participant’s Employment, the Participant shall have executed and delivered to the Company a Confidentiality, Non-Solicitation and Non-Competition Agreement;
(b)no later than forty-five (45) days following the Termination of the Participant’s Employment, the Participant shall have executed and delivered to the Company a Release, and the Participant shall not have revoked such Release during the Release’s ADEA Revocation Period; and
(c)the Participant shall not be in breach of his or her obligations under the Confidentiality, Non-Solicitation and Non-Competition Agreement and the Release.
Article V.
MISCELLANEOUS
MISCELLANEOUS
5.1Administration. The Compensation Committee shall be the plan administrator for this Plan (the “Plan Administrator”). The Plan Administrator shall be responsible for the overall operation and administration of this Plan. The Plan Administrator may appoint or employ such persons as it may deem necessary to render advice with respect to any responsibility of the Company or the Plan Administrator under this Plan. The Plan Administrator shall have the power and authority to interpret the terms of this Plan and to decide all questions concerning the operation and administration of this Plan.
5.2Claims Procedures. A Participant may submit a claim for the benefits provided under this Plan to the Plan Administrator in writing, along with any information or documentation needed to process the claim. Upon request by a Participant, the Plan Administrator will provide the Participant with a copy of this Plan’s claims procedures.
5.3Arbitration.
(a)Any dispute, controversy or claim arising under, in connection with or relating to this Plan shall be settled by arbitration in accordance with the JAMS Employment Arbitration Rules and Procedures or any successor thereto (the “JAMS Rules”). Any interpretations or decisions of this Plan by the Plan Administrator shall be reviewed de novo in the event of any such dispute, controversy or claim. The arbitration shall be before a single arbitrator selected in accordance with the JAMS Rules or otherwise by mutual agreement of the parties. The arbitration shall take place in Suffolk County, New York, unless the parties agree to hold the arbitration in another location. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of New York, except to the extent preempted by federal law (in which case such law will apply).
(b)In consideration of the benefits provided herein, the anticipated expedition and the minimizing of expense of the arbitration remedy contemplated by this Section 5.3, and
other good and valuable consideration, the arbitration provisions of this Plan shall provide the exclusive remedy for disputes, and each party expressly waives any right such party may have to seek redress in any other forum. The arbitration and any decision and award or order of the arbitrator shall be final and binding upon the parties and judgment thereon may be entered in any court having jurisdiction.
(c)The Company and any Participant may bring an action in any court of competent jurisdiction to compel arbitration under this Plan and to enforce an arbitration award. Both the Company and the Participant agree that neither of them shall initiate or prosecute any lawsuit or administrative action in any way related to any claim covered by this Plan.
(d)The Company shall pay the arbitrator’s fees and arbitration expenses and any other costs associated with the arbitration hearing. Without limiting the generality of the foregoing, in the event that a Participant incurs any costs or expenses, including attorneys’ fees, in the enforcement of his or her rights under this Plan then, unless the Company is wholly successful in defending against the enforcement of such rights, the Company shall pay to the Participant all such costs and expenses no later than sixty (60) days following a final decision.
5.4Funding. This Plan shall not be funded through a trust, an insurance contract or otherwise, and all benefit payments under this Plan shall be made from the general assets of the Company. Accordingly, a Participant shall not have any claim against specific assets of the Company, and shall be only a general creditor, with respect to any rights the Participant may have under this Plan. All expenses and costs in connection with the operation of this Plan shall be borne by the Company.
5.5Amendment and Termination. This Plan may be amended, modified or terminated, in whole or in part, at any time by the Company, subject to approval by the Compensation Committee or Board, as applicable; provided, however, that any amendment, modification or termination that would be adverse to any Participant shall not be effective (a) without the Participant’s written consent or (b) until the date that is one (1) year after written notice of such amendment, modification or termination has been provided to the Participant. Notwithstanding the foregoing, on or after a Change in Control, this Plan may not be amended, modified or terminated in a manner that would be adverse to any Participant without the Participant’s written consent; provided, however, that, after the third anniversary of the Change in Control, this Plan may be amended, modified or terminated by the Plan Administrator, subject to approval by the Board, so long as the Company has satisfied all obligations that it may have to any Participant under this Plan.
5.6At Will Employment; No Employment Contract. Nothing in this Plan shall confer upon a Participant the right to remain in the employ of the Company, it being understood and agreed that (a) the Participant is an employee at will and serves at the pleasure of the Company at such compensation as the Company shall determine from time to time and (b) the Company shall have the right to Terminate the Participant’s Employment at any time, with or without Cause. In the event that the Company Terminates the Participant’s Employment prior to the occurrence of a Change in Control, the Participant shall not be entitled to any payments or benefits under this Plan. This Plan is not a contract of employment, and the terms of employment of an associate with the Company shall not be affected in any way by this Plan except as specifically provided herein. The adoption of this Plan shall not be construed as conferring any legal rights upon any employee for the continuation of an employment relationship with the Company, nor shall it interfere with the right of the Company to discharge the associate.
5.7Notices. All notices under this Plan shall be in writing and shall be sent by registered or certified mail, return receipt requested, and if intended for the Company shall be addressed to it, attention of its President, 75 Maxess Road, Melville, New York 11747 or at such
other address of which the Company shall have given notice to the Participant in the manner provided by this Section 5.7; and if intended for the Participant, shall be mailed to such Participant at the last address of the Participant on the Company’s books and records or at such other address of which the Participant shall have given notice to the Company in the manner provided by this Section 5.7.
5.8Withholding. The Company shall be entitled to withhold from amounts payable to a Participant under this Plan such amounts as may be required by applicable law.
5.9Section 409A.
(a)To the fullest extent applicable, amounts and other benefits payable under this Plan are intended to be exempt from the definition of “nonqualified deferred compensation” under Section 409A in accordance with one or more of the exemptions available under Section 409A. In this regard, each such payment hereunder that may be treated as payable in the form of “a series of installment payments,” as defined in Treas. Reg. §1.409A-2(b)(2)(iii) shall be deemed a separate payment for purposes of Section 409A.
(b)To the extent that any amounts or benefits payable under this Plan are or become subject to Section 409A due to a failure to qualify for an exemption from the definition of nonqualified deferred compensation under Section 409A, this Plan is intended to comply in form and operation with the applicable requirements of Section 409A with respect to such amounts or benefits. This Plan shall be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent. Without limiting the generality of the foregoing, any payments under this Plan that are subject to Section 409A and that are payable upon Termination of a Participant’s Employment shall only be paid to the Participant to the extent that such Termination of the Participant’s Employment constitutes a “separation from service” within the meaning of Section 409A.
(c)Notwithstanding anything to the contrary in the Plan, if a Participant is a “specified employee” within the meaning of Section 409A at the time of the Participant’s separation from service (other than due to the death of the Participant) and a payment subject to Section 409A to the Participant is due within the first six (6) months following the Participant’s separation from service, such payment shall be delayed for a period of six (6) months after the date of the Participant’s separation from service (or, if earlier, the death of the Participant).
(d)Notwithstanding any provision of this Plan to the contrary, the time of payment of any stock awards that are subject to Section 409A as “nonqualified deferred compensation” and that vest on an accelerated basis pursuant to this Plan shall not be accelerated unless such accelerated payment is permissible under Section 409A.
(e)The following rules shall apply to any obligation to reimburse an expense or provide an in-kind benefit that is nonqualified deferred compensation within the meaning of Section 409A: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; (ii) the reimbursement of an eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(f)If the period during which the Participant has discretion to execute or revoke the Release straddles two calendar years, the Payment Date will be no earlier than January 1st of the second calendar year.
(g)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Plan providing for the payment of any amounts or benefits subject to Code Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Plan, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Nothing in this Plan shall operate or be construed to cause the Plan to fail to comply with the requirements of Code Section 409A and, to the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A and shall be administered in a manner consistent with that intent. Any provision of this Plan that would cause the Plan or any payment made hereunder to fail to satisfy Code Section 409A shall have no force and effect until amended by the Company to comply with Code Section 409A (which amendment may be retroactive to the extent permitted by Code Section 409A) and may be made by the Company without the consent of any Participant.
5.10Treatment of Severance Pay Allowance. The payment of a severance pay allowance under this Plan shall not be taken into account for any purpose under any other plan or policy of the Company, except as otherwise specifically provided in this Plan or in such other plan or policy.
5.11No Assignment. Except as provided in Section 5.16, no right to payment or benefit under this Plan may be assigned, transferred, pledged as a security for indebtedness or otherwise encumbered, or subjected to any legal process for the payment of any claim against a Participant and any attempt to cause the same to be so subjected shall be null and void and without effect.
5.12Construction. Whenever appropriate in this Plan, words used in the singular may be read in the plural; words used in the plural may be read in the singular; and words importing the masculine gender shall be deemed equally to refer to the feminine or be neutral. Any reference to a Section shall refer to a Section of this Plan, unless otherwise indicated.
5.13Headings. The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control.
5.14Conflicting Terms. In the event that the terms of this Plan conflict with the terms of any summary or other description of this Plan, the terms of this Plan shall govern.
5.15Governing Law. Except to the extent preempted by federal law, this Plan shall be construed, administered and enforced in accordance with the laws of the State of New York, without giving effect to the principles thereof relating to the conflict of laws.
5.16Successors. This Plan shall bind any successor of the Company, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Plan if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Plan, the Company shall require such successor to expressly and unconditionally assume and agree to perform the Company’s obligations under this Plan in writing, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns. This Plan and all rights of each Participant shall inure to the benefit of and be enforceable by such Participant and his or her personal or legal representatives, executors, administrators, heirs and permitted assigns. If any Participant should die while any amounts are due and payable to such Participant hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Plan to such Participant’s devisees, legatees or other designees or, if there be no such devisees, legatees or other designees, to such Participant’s estate.
5.17Effect on Other Plans, Agreements and Benefits. Any payment or benefit to which a Participant is entitled under any plan maintained by the Company in which the Participant participates or participated shall not be modified or lessened in any way by this Plan; provided, however, that the payments and benefits under this Plan are not intended to duplicate any payment or benefit to which a Participant is entitled under any individual change in control agreement between the Company and the Participant.
5.18No Mitigation. No Participant shall be required to mitigate the amount of any payment or benefit provided for under this Plan by seeking or accepting other employment or otherwise. The amount of any payment or benefit provided for under this Plan shall not be reduced by any compensation or benefit earned by a Participant as the result of employment by another employer or otherwise.
5.19Severability. If any provision of this Plan is, becomes or is deemed to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Plan shall not be affected thereby.
5.20Claims Procedures. In the event that any person (a “Claimant”) makes a claim for benefits under the Plan (a “Claim”), such Claim shall be made by the Claimant’s filing a notice thereof with the Plan Administrator within ninety (90) days after such Claimant first has knowledge of such Claim. Each Claimant who has submitted a Claim to the Plan Administrator shall be afforded a reasonable opportunity to state such Claimant’s position and to present evidence and other material relevant to the Claim to the Plan Administrator for its consideration in rendering its decision with respect thereto. The Plan Administrator shall render its decision in writing within sixty (60) days after the Claim is referred to it, and a copy of such written decision shall be furnished to the Claimant. Each Claimant whose Claim has been denied by the Plan Administrator shall be provided written notice thereof, which notice shall set forth the following (in a manner calculated to be understood by such Claimant):
1.the specific reason(s) for the denial;
2.specific reference to pertinent provision(s) of the Plan upon which such denial is based;
3.a description of any additional material or information necessary for the Claimant to perfect such Claim and an explanation of why such material or information is necessary; and
4.an explanation of the procedure hereunder for review of such Claim.
Each such Claimant shall be afforded a reasonable opportunity for a full and fair review of the decision of the Plan Administrator denying the Claim. Such review shall be by the Plan Administrator. Such appeal shall be made within ninety (90) days after the Claimant received the written decision of the Plan Administrator and shall be made by the written request of the Claimant or such Claimant’s duly authorized representative to the Plan Administrator. In the event of appeal, the Claimant or such Claimant’s duly authorized representative may review pertinent documents and submit issues and comments in writing to the Plan Administrator. The Plan Administrator may approve, disapprove or modify the decision of the Plan Administrator, in
whole or in part, or may take such other action with respect to such appeal as it deems appropriate. The decision of the Plan Administrator with respect to such appeal shall be made promptly, and in no event later than sixty (60) days after receipt of such appeal, unless special circumstances require an extension of such time within which to render such decision, in which event such decision shall be rendered as soon as possible and in no event later than one hundred twenty (120) days following receipt of such appeal. The decision of the Plan Administrator shall be in writing and in a manner calculated to be understood by the Claimant and shall include specific reasons for such decision and set forth specific references to the pertinent provisions of the Plan upon which such decision is based. The Claimant shall be furnished a copy of the written decision of the Plan Administrator. Such decision shall be final and conclusive upon all persons interested therein, except to the extent otherwise provided by applicable law. Not in limitation of the foregoing, the Plan Administrator shall have the discretion to decide any factual or interpretative issues in its determination of Claims, and the Plan Administrator’s exercise of such discretion shall be conclusive and binding as long as it is not arbitrary or capricious. The Company shall be the agent for service of legal process upon this Plan, and its address for such purpose shall be the address of its principal place of business in Melville, New York.
EXHIBIT 31.1
CERTIFICATION
I, Martina McIsaac, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of MSC Industrial Direct Co., Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 1, 2026
| /s/ MARTINA MCISAAC | |||||
| Martina McIsaac | |||||
| President and Chief Executive Officer (Principal Executive Officer) | |||||
EXHIBIT 31.2
CERTIFICATION
I, Greg Clark, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of MSC Industrial Direct Co., Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: July 1, 2026
| /s/ GREG CLARK | |||||
| Greg Clark | |||||
| Vice President and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES‑OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of MSC Industrial Direct Co., Inc. (the “Company”) for the fiscal quarter ended May 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martina McIsaac, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:
(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 1, 2026
| By: | /s/ MARTINA MCISAAC | |||||||
| Name: | Martina McIsaac President and Chief Executive Officer (Principal Executive Officer) | |||||||
A signed original of this written statement required by Section 906 has been provided to MSC Industrial Direct Co., Inc. and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES‑OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of MSC Industrial Direct Co., Inc. (the “Company”) for the fiscal quarter ended May 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Greg Clark, Interim Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:
(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: July 1, 2026
| By: | /s/ GREG CLARK | |||||||
| Name: | Greg Clark Vice President and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||||||
A signed original of this written statement required by Section 906 has been provided to MSC Industrial Direct Co., Inc. and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.