MSC Industrial Direct Co. Inc. (NYSE:MSM) Q2 2020 Earnings Conference Call - Final Transcript

Apr 08, 2020 • 08:30 am ET

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MSC Industrial Direct Co. Inc. (NYSE:MSM) Q2 2020 Earnings Conference Call - Final Transcript

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Executive
John Chironna

March. Should be environment weaken further, we can and will adjust quickly. In fact, we have already made several adjustments to take down buying levels, and assuming volumes remain suppressed, we'll continue doing so in order to bring inventory levels down.

On the payable side, we continue paying on a timely basis, particularly those suppliers that give us good terms and a preferential position. Those suppliers offering timely delivery and deep discounts will be pushed to the front of the line.

Turning to our ordinary dividend. We have ample liquidity to continue running the business and paying the current level of our dividend in all but the most severe scenarios. We have conducted numerous best and worst case sensitivity analyses, and revenues would have to decline somewhere in the range of 40% to 45% before our operating cash flow turn negative. At these levels, we would take additional cost down actions and could sustain multiple quarters given our liquidity position.

I'll now turn it back over to Erik.

Executive
Erik Gershwind

Thanks, John.

Given the unprecedented uncertainty that we're all facing right now, including the lack of visibility that we have going forward and just how fast things are changing, we do not think that quarterly guidance would provide much value. However, we understand the need for transparency right now for all of our stakeholders, including our investors and analysts. So until we get through this period of heightened uncertainty, we'll be providing monthly updates on average daily sales developments as quickly as possible following our month-end close as well as comments on the business trends that we've seen over the course of the month.

I'll offer some closing thoughts. Our focus right now is on navigating the impact of COVID - 19. I'm confident that we're doing the right things to protect the health and safety of our associates, to continue serving our customers in this critical time and to play our part in keeping the manufacturing economy running. I thank our entire team for this, and I extend this appreciation to our customers and our supply chain partners we've all come together to address the challenges that all of us face.

While the impact of COVID - 19 on the industrial economy will likely get worse before it gets better, things will ultimately get better. MSC has been through difficult times before, and we will lean on our time-tested playbook, anchoring ourselves in our mission statement and our values. We will continue supporting our customers and our suppliers through these tough times, while advancing our strategy to become mission-critical on the plant floor.

Finally, our strong balance sheet, our culture and resolve mean that MSC will not only survive but we will ultimately emerge from this as a stronger company. We'll now open up the line for questions.