MSC Industrial Direct Co. Earnings Call Insights: Metalworking and Product Line Sales

MSC Industrial Direct Co. (NYSE:MSM) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.


Ryan Merkel – William Blair & Company: So, the first question I had, I want to start off with this relative weakness in metalworking because you can’t see it in the numbers. And I’m wondering what do you think explains that first of all, and then second of all, what do you think can change that and what makes it get better?

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Erik Gershwind – President and COO: Ryan, it’s Erik. Yes, good question, look as I said in the remarks we wanted to take what would be the logical question which is the growth trending relative to ISM and hit it head on. As we always do as part of our operating process, we follow a very similar methodology in how we get at, what’s going on in the market. So, we will look at comps, we will look at supplier comps, we look at a series of metalworking activity indicators and then what I think is even most important is we talk to customers and we talk to suppliers. And the picture, what our job is to give you guys a window into our world and let you know exactly what we see out there and that is the picture that we describe. And particularly the closer we got into the core of the core of metalworking, the segments that are really tied to our core business, the softer we saw things. I think if there was one seem to answer your question directly about what’s driving it, it would be primarily lingering effects from fiscal cliff towards the end of 2012, and just a sluggish start to not ramping up the way many thought. If you remember back to our comments, we were kind of skeptical as to whether the flood gates would really open as there were lingering effects in government spending and so forth and I think that’s really how it’s played out. So, certainly there are pockets within the economy and even within the metalworking umbrella where you got a stronger picture and we pointed to a couple that probably are no surprise to you, automotive being one, commercial aerospace would be another, but outside of those pockets there is pretty broad spread, wide spread weakness.

Ryan Merkel – William Blair & Company: And then secondly, I want to ask you a question on government, I think it’s appropriate to be guiding assuming government stays pretty flat, pretty weak. Do you have any view on does that last all year, does it get worse, does it get better, is there any read into that that you have that you can share?