MSC Industrial Direct : FY21 Q3 Non-GAAP Reconciliations

Non-GAAP Financial Measures

• Free Cash Flow ("FCF")

FCF is a non-GAAP financial measure. FCF is used in addition to and in conjunction with results presented in accordance with accounting principles generally accepted in the United States ("GAAP"), and FCF should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure. FCF, which we reconcile to "Net cash provided by operating activities," is cash flow from operations reduced by "Expenditures for property, plant and equipment". We believe that FCF, although similar to cash flow from operations, is a useful additional measure since capital expenditures are a necessary component of ongoing operations. Management also views FCF, as a measure of the Company's ability to reduce debt, add to cash balances, pay dividends, and repurchase stock. FCF has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, FCF does not incorporate payments made on finance lease obligations or required debt service payments. In addition, different companies define FCF differently. Therefore, we believe it is important to view FCF as a complement to our entire consolidated statements of cash flows. A reconciliation of cash provided by operating activities to FCF for the thirteen- and thirty-nine- week periods ended May 29, 2021 and May 30, 2020, respectively is shown below.

• Return on Invested Capital ("ROIC")

ROIC is calculated using a non-GAAP financial measure. We calculate ROIC by dividing non-GAAP net operating profit after tax ("NOPAT") by average invested capital, a GAAP measure. NOPAT is defined as tax effected income from operations. Average invested capital is defined as net debt plus shareholder's equity using a trailing 13-month average. We believe that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations. We use ROIC as one measure to monitor and evaluate operating performance. This method of determining non-GAAP ROIC may differ from other companies' methods and therefore may not be comparable to those used by other companies. ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The financial measure calculated under GAAP which is most directly comparable to ROIC is considered to be the ratio of Net income to Average invested capital. See below for the calculation of ROIC and the reconciliation to the comparable GAAP measure.

• Results Excluding Impairment Loss (Loss Recovery), Restructuring Costs, Inventory Write-downs, and Other Charges

To supplement MSC Industrial's unaudited selected financial data presented consistent with accounting principles generally accepted in the United States ("GAAP"), the Company discloses certain non-GAAP financial measures, including non-GAAP gross profit, non- GAAP operating expenses, non-GAAP income from operations, non-GAAP operating margin, non-GAAP provision for income taxes, non-GAAP net income and non-GAAP diluted earnings per share, that exclude impairment losses (loss recovery), restructuring costs, inventory write-downs related to certain PPE inventory, and other related costs and tax effects.

These non-GAAP financial measures are not presented in accordance with GAAP or an alternative for GAAP financial measures and may be different from similar non-GAAP financial measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures and should only be used to evaluate MSC Industrial's results of operations in conjunction with the corresponding GAAP financial measures.

In calculating non-GAAP financial measures, we exclude impairment losses (loss recovery), restructuring costs, inventory write-downs related to certain PPE inventory, and other related costs and tax effects. Management makes these adjustments to facilitate a review of the Company's operating performance on a comparable basis between periods, for comparison with forecasts and strategic plans, for identifying and analyzing trends in the Company's underlying business and for benchmarking performance externally against competitors. We believe that investors benefit from seeing results from the perspective of management in addition to seeing results presented in accordance with GAAP for the same reasons and purposes for which management uses such non-GAAP financial measures.

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Information

Thirteen and Thirty-Nine Weeks Ended May 29, 2021 and May 30, 2020

(dollars in thousands)

	GAAP Measure			Items Affecting Comparability			Non-GAAP Measure
	Net cash provided by operating activities			Expenditures for property, plant and equipment			Free cash flow
	Thirteen Weeks Ended			Thirteen Weeks Ended			Thirteen Weeks Ended
	May 29, 2021		May 30, 2020			May 29, 2021		May 30, 2020			May 29, 2021		May 30, 2020
$	20,426	$	59,126		$	(17,644)	$	(10,183)		$	2,782	$	48,943
	GAAP Measure			Items Affecting Comparability			Non-GAAP Measure
	Net cash provided by operating activities			Expenditures for property, plant and equipment			Free cash flow
	Thirty-Nine Weeks Ended			Thirty-Nine Weeks Ended			Thirty-Nine Weeks Ended
	May 29, 2021		May 30, 2020			May 29, 2021		May 30, 2020			May 29, 2021		May 30, 2020
$	139,360	$	214,941		$	(37,598)	$	(35,920)		$	101,762	$	179,021

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen Weeks Ended May 29, 2021

(dollars in thousands, except percentages and per share data)

		GAAP Financial														Non-GAAP
			Measure				Items Affecting Comparability			Financial Measure
			Total MSC			Impairment		Restructuring	Legal Costs-		Adjusted Total
						Loss (Loss		impairment of
			Industrial						Costs		MSC Industrial
						Recovery)			prepaid for PPE
Net Sales	$		866,294	$		-	$	- $	-		$	866,294
Cost of Goods Sold			499,823			-			-			-			499,823
Gross Profit		366,471			-			-			-			366,471
Gross Margin		42.3%			-		-		-		42.3%
Operating Expenses		257,336			-		-		401		256,935
Operating Exp as % of Sales		29.7%			-			-			0.0%		29.7%
Impairment Loss (Loss Recovery)		(20,840)			(20,840)			-		-		-
Restructuring Costs			1,349				-			1,349			-			-
Income from Operations			128,626				20,840			(1,349)		(401)		109,536
Operating Margin		14.8%			2.4%		-0.2%		0.0%		12.6%
Total Other Expense		(2,550)			-		-		-		(2,550)
Income before provision for income taxes		126,076			20,840			(1,349)			(401)			106,986
Provision for income taxes		31,141			5,263		(341)			(100)			26,319
Net income		94,935			15,577		(1,008)			(301)			80,667
Net income attributable to noncontrolling interest		501			-		-		-		501
Net income attributable to MSC Industrial	$	94,434		$	15,577	$	(1,008)		$	(301)		$	80,166
Net income per common share:
Diluted	$	1.68		$	0.28	$	(0.02)		$	(0.01)		$	1.42

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirty-Nine Weeks Ended May 29, 2021

(dollars in thousands, except percentages and per share data)

		GAAP														Non-GAAP
		Financial															Financial
		Measure				Items Affecting Comparability				Measure
	Total MSC	Inventory	Restructuring		Impairment				Legal Costs -		Adjusted
			impairment of	Total MSC
		Industrial	Write-down		Costs			Loss
						prepaid for PPE		Industrial
Net Sales	$	2,412,193	$	- $	-		$	- $		- $	2,412,193
Cost of Goods Sold		1,427,653		30,091			-			-				-		1,397,562
Gross Profit		984,540		(30,091)			-			-				-		1,014,631
Gross Margin		40.8%		-1.2%		-			-				-		42.1%
Operating Expenses		741,156		-			-			-				1,421		739,735
Operating Exp as % of Sales		30.7%		-			-			-				0.1%		30.7%
Impairment Loss		5,886		-			-			5,886				-		-
Restructuring Costs		26,943		-			26,943			-				-		-
Income from Operations		210,555		(30,091)			(26,943)			(5,886)				(1,421)			274,896
Operating Margin		8.7%		-1.2%		-1.1%			-0.2%				-0.1%		11.4%
Total Other Expense		(8,856)			-			-			-				-		(8,856)
Income before provision for income taxes		201,699		(30,091)			(26,943)			(5,886)				(1,421)			266,040
Provision for income taxes		49,639		(7,392)			(6,620)			(1,446)				(349)			65,446
Net income								(20,323)			(4,440)							200,594
	152,060		(22,699)							(1,072)
Net income attributable to noncontrolling interest		1,087		-			-			-				-		1,087
Net income attributable to MSC Industrial	$	150,973		$	(22,699)		$	(20,323)		$	(4,440)		$		(1,072)		$	199,507
Net income per common share:
Diluted	$	2.69	$	(0.40)		$	(0.36)		$	(0.08)		$		(0.02)		$	3.55

MSC INDUSTRIAL DIRECT CO., INC.

Reconciliation of GAAP and Non-GAAP Financial Information

Thirteen and Thirty-Nine Weeks Ended May 30, 2020

(dollars in thousands, except percentages and per share data)

		GAAP Financial Measure		Items Affecting Comparability 1			Non-GAAP Financial Measure
														MSC Industrial excluding
		Total MSC Industrial		Restructuring Costs		Restructuring Costs
		Thirteen		Thirty-Nine		Thirteen		Thirty-Nine		Thirteen		Thirty-Nine
		Weeks Ended	Weeks Ended	Weeks Ended		Weeks Ended	Weeks Ended		Weeks Ended
		May 30, 2020		May 30, 2020		May 30, 2020
Net Sales	$	834,972		$	2,444,667	$	-	$	-	$	834,972	$	2,444,667
Cost of Goods Sold		481,010			1,412,457		-		-		481,010		1,412,457
Gross Profit		353,962			1,032,210		-		-		353,962		1,032,210
Gross Margin		42.4%			42.2%		-		-		42.4%		42.2%
Operating Expenses		242,751			748,519								242,751		748,519
Operating Exp as % of Sales		29.1%			30.6%		-		-		29.1%		30.6%
Restructuring Costs		1,359			5,871		1,359		5,871		-			-
Income from Operations		109,852			277,820		(1,359)			(5,871)			111,211		283,691
Operating Margin		13.2%			11.4%		-0.2%		-0.2%		13.3%		11.6%
Total Other Expense		(5,838)			(12,375)			-			-			(5,838)			(12,375)
Income before provision for income		104,014			265,445		(1,359)			(5,871)			105,373		271,316
Provision for income taxes		25,900		66,323		(338)			(1,468)			26,238		67,791
Net income		78,114			199,122		(1,021)		(4,403)		79,135		203,525
Net income attributable to
noncontrolling interest		411		501		-		-		411		501
Net income attributable to MSC
Industrial	$	77,703		$	198,621	$	(1,021)	$	(4,403)	$	78,724	$	203,024
Net income per common share:
Diluted	$	1.40		$	3.57	$	(0.02)	$	(0.08)	$	1.42	$	3.65

1The thirteen and thirty-nine weeks ended May 30, 2020 include only restructuring costs. Items of note excluded from the current period results, including inventory write- downs, an impairment loss (loss recovery) and associated legal costs, did not occur in the prior year periods.