MSC INDUSTRIAL DIRECT CO INC

Previous wording

MSC is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (“MRO”) products and services. We help our customers drive greater productivity, profitability and growth with inventory management and other supply chain solutions and deep expertise from more than 80 years of working with customers across industries. We offer approximately 2.4 million active, saleable stock-keeping units through our catalogs; our brochures; our E-commerce channels, including our website, www.mscdirect.com (the “MSC website”); our inventory management solutions; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We service our customers from six customer fulfillment centers, 10 regional inventory centers, 41 warehouses, and four 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.

Current wording

MSC is a leading North American distributor of a broad range of metalworking and maintenance, repair and operations (“MRO”) products and services. We help our customers drive greater productivity, profitability and growth with inventory management and other supply chain solutions and deep expertise from more than 80 years of working with customers across industries. We offer approximately 2.4 million active, saleable stock-keeping units through our catalogs; our brochures; our E-commerce channels, including our website, www.mscdirect.com (the “MSC website”); our inventory management solutions; and our customer care centers, customer fulfillment centers (“CFCs”), regional inventory centers and warehouses. We service our customers from six CFCs, 10 regional inventory centers, 40 warehouses, and four 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.

Previous wording

We focus on offering inventory, process and procurement solutions that reduce MRO supply chain costs and improve plant floor productivity for our customers. We will seek to continue to achieve cost reductions throughout our business through cost-saving strategies and increased leverage from our existing infrastructure, and to continue to provide additional procurement cost-saving solutions to our customers through technology such as our Electronic Data Interchange (“EDI”) systems, vendor-managed inventory (“VMI”) systems and vending programs. Our vending machines in service totaled 25,854 as of March 2, 2024, compared to 23,286 as of March 4, 2023, and our In-Plant programs totaled 312 locations as of March 2, 2024, compared to 224 as of March 4, 2023. 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 2,640 as of March 2, 2024, compared to 2,574 as of March 4, 2023.

Current wording

We focus on offering inventory, process and procurement solutions that reduce MRO supply chain costs and improve plant floor productivity for our customers. We will seek to continue to achieve cost reductions throughout our business through cost-saving strategies and increased leverage from our existing infrastructure, and to continue to provide additional procurement cost-saving solutions to our customers through technology such as our Electronic Data Interchange (“EDI”) systems, vendor-managed inventory (“VMI”) systems and vending programs. Our vending machines in service totaled 26,438 as of June 1, 2024, compared to 24,038 as of June 3, 2023, and our In-Plant programs totaled 325 locations as of June 1, 2024, compared to 246 as of June 3, 2023. 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 2,664 as of June 1, 2024, compared to 2,580 as of June 3, 2023.

Previous wording

Highlights during the twenty-six weeks ended March 2, 2024 include the following:

Current wording

Highlights during the thirty-nine weeks ended June 1, 2024 include the following:

Previous wording

•We generated $159.9 million of cash from operations, compared to $416.4 million for the same period in the prior fiscal year. The decline was primarily due to the $300.0 million Receivables Purchase Agreement (the “RPA”) entered into during the second quarter of fiscal year 2023.

Current wording

•We generated $303.4 million of cash from operations, compared to $567.1 million for the same period in the prior fiscal year. The decline was primarily due to the $300.0 million Receivables Purchase Agreement (the “RPA”) entered into during the second quarter of fiscal year 2023.

Previous wording

•We had net borrowings of $95.0 million on our credit facilities, private placement debt and shelf facility agreements, compared to net payments of $245.0 million for the same period in the prior fiscal year.

Current wording

•We had net borrowings of $50.0 million on our credit facilities, private placement debt and shelf facility agreements, compared to net payments of $330.0 million for the same period in the prior fiscal year.

Previous wording

•We paid out an aggregate $94.0 million in regular cash dividends, compared to an aggregate $88.3 million in regular cash dividends for the same period in the prior fiscal year.

Current wording

•We paid out an aggregate $140.7 million in regular cash dividends, compared to an aggregate $132.5 million in regular cash dividends for the same period in the prior fiscal year.

Previous wording

•We repurchased $148.7 million of MSC’s Class A Common Stock, par value $0.001 per share (“Class A Common Stock”), compared to $31.0 million for the same period in the prior fiscal year. The higher share repurchase volume was primarily to offset the share dilution resulting from the Reclassification (as defined below).

Current wording

•We repurchased $167.2 million of MSC’s Class A Common Stock, par value $0.001 per share (“Class A Common Stock”), compared to $31.1 million for the same period in the prior fiscal year. The higher share repurchase volume was primarily to offset the share dilution resulting from the Reclassification (as defined below).

Previous wording

•We incurred $7.1 million in restructuring and other costs, compared to $3.9 million for the same period in the prior fiscal year, consisting of voluntary and involuntary associate severance and separation costs and consulting-related costs.

Current wording

•We incurred $11.8 million in Restructuring and other costs, compared to $5.7 million for the same period in the prior fiscal year, consisting of voluntary and involuntary associate severance and separation costs, consulting-related costs and other exit-related costs.

Previous wording

•We acquired certain intellectual property assets from Schmitz Manufacturing Research & Technology LLC (“SMRT”) for aggregate consideration of $2.9 million.

Current wording

•We acquired certain intellectual property assets from Schmitz Manufacturing Research & Technology LLC (“SMRT”) for aggregate consideration of $2.9 million and we acquired KAR Industrial Inc. (“KAR”) for aggregate consideration of $8.9 million, including post-closing working capital adjustments.

Previous wording

•In the first quarter of fiscal year 2024, we completed our previously announced reclassification (the “Reclassification”) of our common stock to eliminate our Class B Common Stock, par value $0.001 per share (“Class B Common Stock”). Pursuant to the Reclassification, each issued and outstanding share of Class B Common Stock was reclassified, exchanged and converted into 1.225 shares of Class A Common Stock. See

Current wording

•In the first quarter of fiscal year 2024, we completed our previously announced reclassification (the “Reclassification”) of our common stock to eliminate our Class B Common Stock, par value $0.001 per share

Previous wording

Our Company-wide initiative, referred to as “Mission Critical,” which focused on market share capture and improved profitability came to a close at the end of fiscal year 2023. We successfully executed on our Mission Critical initiatives, 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 is anchored in three pillars: maintaining the momentum of the first phase of the Mission Critical program and our existing growth drivers, increasing our focus on both core customers and Original Equipment Manufacturer fasteners, and driving productivity improvements and reducing operating expenses as a percentage of sales. To accomplish the next phase of our mission critical journey, we will leverage investments in advanced analytics to improve supply chain performance, maintain momentum from our category line reviews and upgrade our digital core to unlock productivity within our order-to-cash and procure-to-pay processes. In the second quarter of fiscal year 2024, we launched web pricing changes and are in the process of rolling out our E-commerce enhancements.

Current wording

Our Company-wide initiative, referred to as “Mission Critical,” which focused on market share capture and improved profitability came to a close at the end of fiscal year 2023. We successfully executed on our Mission Critical initiatives, 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 is anchored in three pillars: maintaining the momentum of the first phase of the Mission Critical program and our existing growth drivers, increasing our focus on both core customers and Original Equipment Manufacturer fasteners, and driving productivity improvements and reducing operating expenses as a percentage of net sales. To accomplish the next phase of our mission critical journey, we will leverage investments in advanced analytics to improve supply chain performance, maintain momentum from our category line reviews 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, and we are currently in the process of rolling out our E-commerce enhancements.

Previous wording

The United States economy has experienced various macroeconomic pressures including an elevated inflationary environment, sustained high interest rates and general economic and political uncertainty. Such pressures have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations. During the first and second quarters of fiscal year 2024, the Company experienced softening demand for the products and services it offers as evidenced by the decrease in the average IP Index (as defined below) during the second quarter. High finished goods inventories in the auto industry, lingering impacts from the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America strike and an extended calendar year-end holiday shutdown further softened customer demand and led many of our customers to reduce inventory rather than purchase new products during the second quarter.

Current wording

The United States economy has experienced various macroeconomic pressures including an elevated inflationary environment, sustained high interest rates and general economic and political uncertainty. Such pressures have impacted, and may continue to impact in the future, the Company’s business, financial condition and results of operations. During the first three quarters of fiscal year 2024, the Company experienced softening demand for the products and services it offers as evidenced by the decrease in the average IP Index (as defined below) during the third quarter. This demand softening was felt more acutely in the manufacturing industry, which is the largest end-market for the Company’s products.

Previous wording

We utilize various indices when evaluating the level of our business activity, including the Industrial Production (“IP”) Index. Approximately 69% and 68% of our revenues came from sales in the manufacturing sector during the thirteen- and twenty-six-week periods ended March 2, 2024, respectively. Through statistical analysis, we have found that trends in our customers’ activity have correlated to changes in the IP Index. The IP Index measures short-term changes in industrial production. Growth in the IP Index from month to month indicates growth in the manufacturing, mining and utilities industries. The IP Index over the three months ended February 2024 and the average for the three- and 12-month periods ended February 2024 were as follows:

Current wording

We utilize various indices when evaluating the level of our business activity, including the Industrial Production (“IP”) Index. Approximately 67% and 68% of our revenues came from sales in the manufacturing sector during the thirteen- and thirty-nine-week periods ended June 1, 2024, respectively. Through statistical analysis, we have found that trends in our customers’ activity have correlated to changes in the IP Index. The IP Index measures short-term changes in industrial production. Growth in the IP Index from month to month indicates growth in the manufacturing, mining and utilities industries. The IP Index over the three months ended May 2024 and the average for the three- and 12-month periods ended May 2024 were as follows:

Previous wording

The average IP Index for the three months ended February 2024 of 102.4 improved relative to the adjusted average from the prior fiscal year quarter of 102.2 but declined relative to the adjusted average from the first fiscal quarter of 2024 of 102.9, which indicates a decline in manufacturing output during the period. General economic uncertainty remains driven by an elevated inflationary environment, sustained high interest rates and political uncertainty. As we see the IP Index continue to fluctuate, 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.

Current wording

The average IP Index for the three months ended May 2024 of 102.7 increased relative to the adjusted average from the second fiscal quarter of 2024 of 102.3 but declined relative to the adjusted average from the same period in the prior fiscal year of 102.9. These readings indicate minimal improvement in a challenging macro environment, specifically in the heavy manufacturing end-market, which represented 46% of our revenues during the thirteen-week period ended June 1, 2024. General economic uncertainty remains driven by an elevated inflationary environment, sustained high interest rates and political uncertainty. As we see the IP Index continue to fluctuate, 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.

Previous wording

Net sales decreased 2.7%, or $26.3 million, to $935.3 million for the thirteen-week period ended March 2, 2024, as compared to $961.6 million for the same period in the prior fiscal year. The $26.3 million decrease in net sales was comprised of $43.6 million of lower sales volume, partially offset by $8.8 million from improved pricing, inclusive of changes in customer and product mix, discounting and other items, $6.4 million of net sales from fiscal year 2023 and 2024 acquisitions and $2.1 million of favorable foreign exchange impact. Of the $26.3 million decrease in net sales during the thirteen-week period ended March 2, 2024, sales to our core and other customers decreased by $30.5 million, partially offset by an increase in sales to our national account customers of $3.8 million and an increase in sales to our public sector customers of $0.4 million.

Current wording

Net sales decreased 7.1%, or $75.1 million, to $979.4 million for the thirteen-week period ended June 1, 2024, as compared to $1,054.5 million for the same period in the prior fiscal year. The $75.1 million decrease in net sales was comprised of $75.7 million of lower sales volume and a negative $4.4 million impact from pricing, inclusive of impacts from our web price realignment initiative and changes in customer and product mix, discounting and other items, partially offset by $3.9 million of net sales from acquisitions occurring after the third quarter of fiscal year 2023 and $1.1 million of favorable foreign exchange impact. Of the $75.1 million decrease in net sales during the thirteen-week period ended June 1, 2024, sales to our core and other customers decreased $39.8 million, sales to our public sector customers decreased $31.2 million and sales to our national account customers decreased $4.1 million.

Previous wording

(3)Includes a reclassification of certain customers during the second quarter of fiscal year 2024, primarily between national account customers and core and other customers.

Current wording

(3)Includes reclassifications of certain customers during fiscal year 2024, primarily between national account customers and core and other customers.

Previous wording

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 63.2% of consolidated net sales for the thirteen-week period ended March 2, 2024, as compared to 62.0% of consolidated net sales for the same period in the prior fiscal year.

Current wording

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 63.3% of consolidated net sales for the thirteen-week period ended June 1, 2024, as compared to 60.1% of consolidated net sales for the same period in the prior fiscal year.

Previous wording

Gross profit of $388.6 million for the thirteen-week period ended March 2, 2024 decreased $8.1 million, or 2.0%, compared to the same period in the prior fiscal year. Gross profit margin was 41.5% for the thirteen-week period ended March 2, 2024, as compared to 41.3% for the same period in the prior fiscal year. The decrease in gross profit was primarily a result of lower sales volume, as described above. The increase in gross profit margin resulted primarily from the impact of our gross margin countermeasures, including our category line reviews, which more than offset negative price-cost impacts during the quarter.

Current wording

Gross profit of $400.4 million for the thirteen-week period ended June 1, 2024 decreased $28.5 million, or 6.6%, compared to the same period in the prior fiscal year. Gross profit margin was 40.9% for the thirteen-week period ended June 1, 2024, as compared to 40.7% for the same period in the prior fiscal year. The decrease in gross profit was primarily a result of lower sales volume, as described above. The increase in gross profit margin was primarily a result of significant public sector sales in the prior fiscal year period that were transacted below our typical public sector margins, which did not repeat in the current fiscal year period. This benefit was partially offset by negative price-cost impacts during the current fiscal quarter, primarily due to temporary excess discounting during the launch of our web price realignment initiative.

Previous wording

Operating expenses increased 3.8%, or $10.6 million, to $291.2 million for the thirteen-week period ended March 2, 2024, as compared to $280.6 million for the same period in the prior fiscal year. Operating expenses were 31.1% of net sales for the thirteen-week period ended March 2, 2024, as compared to 29.2% for the same period in the prior fiscal year. The increase in operating expenses was primarily attributable to higher payroll and payroll-related costs, expenses from our recent acquisitions and investments supporting our digital initiatives and solutions growth, partially offset by a decrease in freight expense.

Current wording

Operating expenses decreased 0.9%, or $2.7 million, to $289.0 million for the thirteen-week period ended June 1, 2024, as compared to $291.7 million for the same period in the prior fiscal year. Operating expenses were 29.5% of net sales for the thirteen-week period ended June 1, 2024, as compared to 27.7% for the same period in the prior fiscal year. The decrease in Operating expenses was primarily attributable to lower variable expenses associated with lower sales volume, including lower incentive compensation and freight expense. The primary drivers of the increase in Operating expenses as a percentage of net sales were higher payroll costs, primarily due to higher associate headcount to support our strategic growth investments and our annual merit increases, and investments supporting our digital initiatives and solutions growth.

Previous wording

Payroll and payroll-related costs for the thirteen-week period ended March 2, 2024 were 57.1% of total operating expenses, as compared to 56.8% for the same period in the prior fiscal year. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, increased $6.8 million for the thirteen-week period ended March 2, 2024. The majority of this increase compared to the same period in the prior fiscal year was due to increased salary expense, primarily attributable to higher associate headcount to support our strategic growth investments and annual merit increases.

Current wording

Payroll and payroll-related costs for the thirteen-week period ended June 1, 2024 were 55.4% of total Operating expenses, as compared to 56.1% for the same period in the prior fiscal year. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission and fringe benefit costs, decreased $3.6 million for the thirteen-week period ended June 1, 2024. The majority of this decrease compared to the same period in the prior fiscal year was due to lower incentive compensation and fringe benefit costs, partially offset by higher salary expense attributable to higher associate headcount to support our strategic growth investments and our annual merit increases.

Previous wording

Freight expense was $36.5 million for the thirteen-week period ended March 2, 2024, as compared to $39.5 million for the same period in the prior fiscal year. The primary driver of the decrease in freight expense was a decrease in sales volume.

Current wording

Freight expense was $37.4 million for the thirteen-week period ended June 1, 2024, as compared to $39.4 million for the same period in the prior fiscal year. The primary driver of the decrease in freight expense was a decrease in sales volume.

Previous wording

We incurred $7.1 million in restructuring and other costs for the twenty-six-week period ended March 2, 2024, as compared to $3.9 million for the same period in the prior fiscal year. Restructuring and other costs primarily consist of associate severance and separation costs, consulting-related costs and equity award acceleration costs associated with severance related to the Company’s associate voluntary termination program and the optimization of the Company’s operations and profitability improvement. See Note 10, “Restructuring and Other Costs” in the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

We incurred $4.7 million in Restructuring and other costs for the thirteen-week period ended June 1, 2024, as compared to $1.8 million for the same period in the prior fiscal year. Restructuring and other costs primarily consist of consulting-related costs associated with the Company’s strategic realignment efforts to optimize its supply chain and distribution network. See Note 9, “Restructuring and Other Costs” in the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Income from operations decreased 20.2%, or $23.1 million, to $91.2 million for the thirteen-week period ended March 2, 2024, as compared to $114.3 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales decreased to 9.7% for the thirteen-week period ended March 2, 2024, as compared to 11.9% for the same period in the prior fiscal year. The decrease in income from operations as a percentage of net sales was primarily attributable to, as described above, a higher level of restructuring and other costs and an increase in operating expenses as a percentage of net sales, partially offset by a higher gross profit margin during the thirteen-week period ended March 2, 2024.

Current wording

Income from operations decreased 21.1%, or $28.6 million, to $106.8 million for the thirteen-week period ended June 1, 2024, as compared to $135.4 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales decreased to 10.9% for the thirteen-week period ended June 1, 2024, as compared to 12.8% for the same period in the prior fiscal year. The decrease in income from operations as a percentage of net sales was primarily attributable to, as described above, a higher level of Restructuring and other costs and an increase in Operating expenses as a percentage of net sales, partially offset by a higher gross profit margin during the thirteen-week period ended June 1, 2024.

Previous wording

Total other expense increased 32.1%, or $5.2 million, to $21.5 million for the twenty-six-week period ended March 2, 2024, as compared to $16.3 million for the same period in the prior fiscal year. The increase was primarily due to higher interest rates on our credit facilities and fees incurred associated with the RPA entered into during the second quarter of fiscal year 2023.

Current wording

Total other expense increased 27.3%, or $2.4 million, to $11.4 million for the thirteen-week period ended June 1, 2024, as compared to $9.0 million for the same period in the prior fiscal year. The increase was primarily due to higher interest rates and higher average balances on our credit facilities.

Previous wording

The Company’s effective tax rate for the twenty-six-week period ended March 2, 2024 was 23.7%, as compared to 25.0% for the same period in the prior fiscal year. The decrease in the effective tax rate was primarily due to a higher tax benefit from stock-based compensation.

Current wording

The Company’s effective tax rate for the thirteen-week period ended June 1, 2024 was 25.2%, as compared to 24.7% for the same period in the prior fiscal year. The increase in the effective tax rate was primarily due to the non-deductibility of certain transaction costs associated with the Reclassification, which were recently finalized in the prior fiscal year tax return.

Previous wording

Net sales decreased 1.6%, or $30.1 million, to $1,889.3 million for the twenty-six-week period ended March 2, 2024, as compared to $1,919.4 million for the same period in the prior fiscal year. The $30.1 million decrease in net sales was comprised of $73.3 million of lower sales volume, partially offset by $24.3 million from improved pricing, inclusive of changes in customer and product mix, discounting and other items, $14.2 million of net sales from fiscal year 2023 and 2024 acquisitions and $4.7 million of favorable foreign exchange impact. Of the $30.1 million decrease in net sales during the twenty-six-week period ended March 2, 2024, sales to our core and other customers decreased by $51.6 million, partially offset by an increase in sales to our national account customers of $14.6 million and an increase in sales to our public sector customers of $6.9 million.

Current wording

Net sales decreased 3.5%, or $105.2 million, to $2,868.7 million for the thirty-nine-week period ended June 1, 2024, as compared to $2,973.8 million for the same period in the prior fiscal year. The $105.2 million decrease in net sales was comprised of $149.0 million of lower sales volume, partially offset by $19.9 million from improved pricing, inclusive of changes in customer and product mix, discounting and other items, $18.1 million of net sales from fiscal year 2023 and 2024 acquisitions and $5.8 million of favorable foreign exchange impact. Of the $105.2 million decrease in net sales during the thirty-nine-week period ended June 1, 2024, sales to our core and other customers decreased $106.8 million and sales to our public sector customers decreased $24.3 million, partially offset by an increase in sales to our national account customers of $25.9 million.

Previous wording

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 twenty-six-week periods ended March 2, 2024 and March 4, 2023, each as compared to the same period in the prior fiscal year:

Current wording

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 June 1, 2024 and June 3, 2023, each as compared to the same period in the prior fiscal year:

Previous wording

(3)Includes a reclassification of certain customers during the second quarter of fiscal year 2024, primarily between national account customers and core and other customers.

Current wording

(3)Includes reclassifications of certain customers during fiscal year 2024, primarily between national account customers and core and other customers.

Previous wording

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 63.2% of consolidated net sales for the twenty-six-week period ended March 2, 2024, as compared to 61.9% of consolidated net sales for the same period in the prior fiscal year.

Current wording

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 63.2% of consolidated net sales for the thirty-nine-week period ended June 1, 2024, as compared to 61.3% of consolidated net sales for the same period in the prior fiscal year.

Previous wording

Gross profit of $781.7 million for the twenty-six-week period ended March 2, 2024 decreased $12.8 million, or 1.6%, compared to the same period in the prior fiscal year. Gross profit margin was 41.4% for the twenty-six-week period ended March 2, 2024, as compared to 41.4% for the same period in the prior fiscal year. The decrease in gross profit was primarily a result of lower sales volume, as described above. The consistent gross profit margin was positively impacted from gross margin countermeasures, including our category line reviews, which helped offset negative price-cost impacts during the quarter.

Current wording

Gross profit of $1,182.2 million for the thirty-nine-week period ended June 1, 2024 decreased $41.3 million, or 3.4%, compared to the same period in the prior fiscal year. Gross profit margin was 41.2% for the thirty-nine-week period ended June 1, 2024, as compared to 41.1% for the same period in the prior fiscal year. The decrease in gross profit was primarily a result of lower sales volume, as described above. The increase in gross profit margin was primarily a result of significant public sector sales in the prior fiscal year period that were transacted below our typical public sector margins, which did not repeat in the current fiscal year period. This benefit was partially offset by negative price-cost impacts during the current fiscal year period, primarily due to temporary excess discounting during the launch of our web price realignment initiative.

Previous wording

Payroll and payroll-related costs for the twenty-six-week period ended March 2, 2024 were 56.9% of total operating expenses, as compared to 56.5% for the same period in the prior fiscal year. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission, and fringe benefit costs, increased $14.6 million for the twenty-six-week period ended March 2, 2024. The majority of this increase compared to the same period in the prior fiscal year was due to increased salary expense, primarily attributable to higher associate headcount to support our strategic growth investments and annual merit increases. Fringe benefit costs also increased, resulting from higher insurance-related healthcare reserves due to recent higher healthcare claims. These increases were partially offset by a lower incentive compensation accrual.

Current wording

Payroll and payroll-related costs for both the thirty-nine-week period ended June 1, 2024 and the same period in the prior fiscal year were 56.4% of total Operating expenses. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission, and fringe benefit costs, increased $11.0 million for the thirty-nine-week period ended June 1, 2024. The majority of this increase compared to the same period in the prior fiscal year was due to increased salary expense, primarily attributable to higher associate headcount to support our strategic growth investments and our annual merit increases. Fringe benefit costs also increased, resulting from higher insurance-related healthcare reserves due to recent higher healthcare claims. These increases were partially offset by lower incentive compensation and sales commission expenses.

Previous wording

Freight expense was $73.9 million for the twenty-six-week period ended March 2, 2024, as compared to $80.0 million for the same period in the prior fiscal year. The primary driver of the decrease in freight expense was a decrease in sales volume.

Current wording

Freight expense was $111.3 million for the thirty-nine-week period ended June 1, 2024, as compared to $119.4 million for the same period in the prior fiscal year. The primary driver of the decrease in freight expense was a decrease in sales volume.

Previous wording

We incurred $6.2 million in restructuring and other costs for the thirteen-week period ended March 2, 2024, as compared to $1.8 million for the same period in the prior fiscal year. Restructuring and other costs primarily consist of associate severance and separation costs, consulting-related costs and equity award acceleration costs associated with severance related to the Company’s associate voluntary termination program and the optimization of the Company’s operations and profitability improvement. See Note 10, “Restructuring and Other Costs” in the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

We incurred $11.8 million in Restructuring and other costs for the thirty-nine-week period ended June 1, 2024, as compared to $5.7 million for the same period in the prior fiscal year. Restructuring and other costs primarily consist of associate severance and separation costs and equity award acceleration costs associated with severance related to the Company’s associate voluntary termination program and consulting-related costs associated with the Company’s strategic realignment efforts to optimize its supply chain and distribution network. See Note 9, “Restructuring and Other Costs” in the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Income from operations decreased 16.3%, or $37.5 million, to $192.8 million for the twenty-six-week period ended March 2, 2024, as compared to $230.3 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales decreased to 10.2% for the twenty-six-week period ended March 2, 2024, as compared to 12.0% for the same period in the prior fiscal year. The decrease in income from operations as a percentage of net sales was primarily attributable to, as described above, a higher level of restructuring and other costs and an increase in operating expenses as a percentage of net sales during the twenty-six-week period ended March 2, 2024.

Current wording

Income from operations decreased 18.1%, or $66.1 million, to $299.5 million for the thirty-nine-week period ended June 1, 2024, as compared to $365.7 million for the same period in the prior fiscal year. Income from operations as a percentage of net sales decreased to 10.4% for the thirty-nine-week period ended June 1, 2024, as compared to 12.3% for the same period in the prior fiscal year. The decrease in income from operations as a percentage of net sales was primarily attributable to, as described above, a higher level of Restructuring and other costs and an increase in Operating expenses as a percentage of net sales, partially offset by a higher gross profit margin during the thirty-nine-week period ended June 1, 2024.

Previous wording

Total other expense increased 38.7%, or $3.1 million, to $11.2 million for the thirteen-week period ended March 2, 2024, as compared to $8.1 million for the same period in the prior fiscal year. The increase was primarily due to higher interest rates on our credit facilities and fees incurred associated with the RPA entered into during the second quarter of fiscal year 2023.

Current wording

Total other expense increased 30.4%, or $7.7 million, to $32.9 million for the thirty-nine-week period ended June 1, 2024, as compared to $25.2 million for the same period in the prior fiscal year. The increase was primarily due to higher interest rates on our credit facilities and fees incurred associated with the RPA entered into during the second quarter of fiscal year 2023.

Previous wording

The Company’s effective tax rate for the thirteen-week period ended March 2, 2024 was 23.0%, as compared to 25.3% for the same period in the prior fiscal year. The decrease in the effective tax rate was primarily due to a higher tax benefit from stock-based compensation.

Current wording

The Company’s effective tax rate for the thirty-nine-week period ended June 1, 2024 was 24.2%, as compared to 24.9% for the same period in the prior fiscal year. The decrease in the effective tax rate was primarily due to a higher tax benefit from stock-based compensation.

Previous wording

The factors which affected net income for the twenty-six-week period ended March 2, 2024, as compared to the same period in the prior fiscal year, have been discussed above.

Current wording

The factors which affected net income for the thirty-nine-week period ended June 1, 2024, as compared to the same period in the prior fiscal year, have been discussed above.

Previous wording

As of March 2, 2024, we had $22.2 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 and net proceeds from the private placement notes, 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.

Current wording

As of June 1, 2024, we had $25.9 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 and net proceeds from the private placement notes, 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.

Previous wording

As of March 2, 2024, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $552.3 million, net of unamortized debt issuance costs of $0.8 million, as compared to total borrowings outstanding of $454.3 million, net of unamortized debt issuance costs of $1.0 million, as of the end of fiscal year 2023. The increase in total borrowings outstanding was driven by higher net borrowings under our credit facilities to fund our recent higher share repurchase volume to offset the share dilution resulting from the Reclassification. See Note 8, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these balances.

Current wording

As of June 1, 2024, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $506.1 million, net of unamortized debt issuance costs of $0.9 million, as compared to total borrowings outstanding of $454.3 million, net of unamortized debt issuance costs of $1.0 million, as of the end of fiscal year 2023. The increase in total borrowings outstanding was driven by higher net borrowings under our credit facilities to fund our recent higher share repurchase volume to offset the share dilution resulting from the Reclassification. See Note 7, “Debt” in the Notes to Condensed Consolidated Financial Statements for more information about these balances.

Previous wording

Net cash provided by operating activities was $159.9 million for the twenty-six weeks ended March 2, 2024 compared to $416.4 million for the twenty-six weeks ended March 4, 2023. The decrease was primarily due to the following:

Current wording

Net cash provided by operating activities was $303.4 million for the thirty-nine weeks ended June 1, 2024, compared to $567.1 million for the thirty-nine weeks ended June 3, 2023. The decrease was primarily due to the following: