MSC INDUSTRIAL DIRECT CO INC
For the period ended Aug 30, 2025. Filed Oct 23, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Oct 23, 2025
MSM$113.27+2.1%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-08-31; filed 2024-10-24.
0001003078-24-000107
ITEM 1A. RISK FACTORSCurrent report: 10-K
Period ended 2025-08-30; filed 2025-10-23.
0001003078-25-000123
ITEM 1A. RISK FACTORSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 97 previous paragraphs and 98 current paragraphs.
73 unchanged; 16 reworded; 8 added; 8 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
In 2025, the U.S. announced a variety of additional tariffs on goods from multiple nations and trading blocks and has been targeted with reciprocal tariffs and other retaliatory actions in response. Although the implementation of many of these tariffs and retaliatory measures have been paused or delayed, negotiations and the state of international trade policy and relationships continue to evolve. Additional tariffs, or the uncertainty around such tariffs, may cause disruptions to foreign and domestic supply chains or result in price increases. We have incurred, and expect to continue to incur, costs as it relates to these tariffs for the foreseeable future. We expect to continue to pass price increases from our suppliers from tariffs to our customers, which may reduce demand. We have, however, experienced negative impacts on gross profit margin due to the timing difference between our pricing actions and higher levels of inflation-affected inventory.
Current report
Supply chain and sourcing efforts over time have diversified our product portfolio to reduce our exposure abroad and although we began to implement pricing and inventory management changes in response to tariffs in early 2025, we experienced the most significant impact on our financial condition and results of operations during the fourth quarter of fiscal year 2025. We expect to continue implementing countermeasures to mitigate the continued impact of tariffs in the first quarter of fiscal year 2026 and beyond. Further, we cannot predict the ultimate impact of tariffs and their effects on the global macroeconomic environment on our financial condition or results of operations.
Current report
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, MCRHC filed an amended complaint. The amended complaint alleges, among other things, breaches of fiduciary duties for actions related to the Reclassification and seeks disgorgement, unspecified damages, costs and expenses and such other relief as the court may deem proper. We have incurred, and may be required in future to incur further, legal fees and other expenses related to the Macomb Litigation. In addition, any adverse determination with regard to the Macomb Litigation could expose us to significant liabilities.
Current report
Changes in tax legislation and associated compliance requirements could adversely affect our financial results.
Current report
The Company is subject to tax laws and regulations in the United States and various foreign jurisdictions. Remaining compliant with these laws and regulations could increase the Company's tax compliance costs. In addition, the Company's future effective tax rates in the United States or foreign jurisdictions it operates in could be affected by changes in the political environment in the United States, tax laws, regulations, statutory rates, the valuation of deferred tax assets and liabilities, and interpretations of such tax laws.
Current report
In fiscal year 2025, the One Big Beautiful Bill Act (“OBBA”) was passed, which contained a broad range of tax reform. The Company did not experience any material impact to its tax rates, expenses or obligations from the legislation during fiscal year 2025. Due to the dynamic nature of tax laws, projected tax liabilities could differ significantly from eventual obligations. The total impact and interpretation of the legislation remains uncertain, and misapplication of the new laws could lead to adverse results.
Removed paragraphs (8)
Previous report
The Reclassification may not achieve the desired benefits for us or our shareholders.
Previous report
The long-term impacts of the Reclassification are still unknown, and the Reclassification may not result in an increase in shareholder value or improve the liquidity and marketability of our equity. If the Reclassification is not viewed favorably by members of the investment community, it may impair the value of our Class A Common Stock and limit its liquidity and marketability. Furthermore, securities markets worldwide have experienced significant price and volume fluctuations in recent years. This market volatility, as well as general economic, market or political conditions, could cause a reduction in the market price and liquidity of shares of our Class A Common Stock.
Previous report
Risks Related to Information Technology and Intellectual Property
Previous report
We have identified a material weakness in our internal control over financial reporting and, as a result of which, have determined that our internal control over financial reporting and our disclosure controls and procedures were not effective as of August 31, 2024. A failure to remediate this material weakness, and to maintain effective internal control over financial reporting and disclosure controls and procedures in the future, may result in a misstatement of our financial statements or the failure to detect such a misstatement.
Previous report
The Company maintains a system of internal control over financial reporting and disclosure controls and procedures to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. As required by Section 404 of the Sarbanes-Oxley Act of 2002, we perform an evaluation of and report on the effectiveness of our internal control over financial reporting and disclosure controls and procedures, and our independent registered public accounting firm provides an opinion attesting to the effectiveness of such controls and procedures. The rules governing the standard that must be met for management to assess the adequacy of our internal control over financial reporting are complex and require significant documentation, testing and, where a deficiency is identified, remediation.
Previous report
As discussed in more detail in Part II, Item 9A, “Controls and Procedures” below, management’s assessment of our internal control over financial reporting as of August 31, 2024 identified a material weakness relating to deficiencies in the operating effectiveness of our information technology general controls (“ITGCs”) relating to user access for certain information technology systems that support financial reporting processes for revenue and inventory transactions (the ITGC Material Weakness). As a result of the ITGC Material Weakness, our disclosure controls and procedures were not effective as of August 31, 2024. Although we have not identified any misstatements in our consolidated financial statements as a result of the ITGC Material Weakness, and our independent registered public accounting firm has expressed an unqualified opinion with respect to the consolidated financial statements in its report within Item 8. Financial Statements and Supplementary Data, the identified control deficiencies created the reasonable possibility that a material misstatement of the consolidated financial statements would not have been prevented or detected on a timely basis. Our management has commenced remediating the ITGC Material Weakness, however such remediation steps are ongoing.
Previous report
If we fail to remediate the ITGC Material Weakness and maintain effective disclosure controls and procedures in the future, our ability to accurately report financial information and prepare financials statements could be adversely affected and cause us to misstate our interim or annual financial statements, fail to meet our reporting obligations, incur significant expense, negatively impact investor confidence and adversely impact the price of our securities.
Reworded paragraphs (16)
Previous wording
Additionally, macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, labor and supply costs, and interest rates. We have also been affected by macroeconomic conditions specific to the principal end markets that we serve, including as the result of work stoppages and organized labor activity. Any or all of these factors may impact us, our customers, and their demand for our products.
Current wording
Additionally, macroeconomic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, commodity and energy prices, labor and supply costs, and interest rates. We have also been affected by macroeconomic conditions specific to the principal end markets that we serve, including as the result of work stoppages and organized labor activity or reduced industrial activity due to tariffs. Any or all of these factors may impact us, our customers, and their demand for our products.
Previous wording
As a distributor, our profitability is highly dependent on our gross margin, which in turn varies based on the product sold and the type of customer. From time to time, we experience changes in our customer mix and in our product mix. Changes in our customer mix have resulted from various factors, such as changes in the geographies we serve, daily selling activities within current geographic markets, and targeted selling activities to new customers. Changes in our product mix have also resulted from various factors, such as marketing activities to existing customers, needs communicated to us from existing and prospective customers and business acquisitions. As our national account and government customer program sales grow, we will face continued pressures on maintaining gross margin because these customers receive lower pricing due to their higher level of purchases from us. In addition, our continued expansion of our vending program and other E-commerce platforms places pressure on our gross margin. We may also be subject to price increases from our suppliers and independent freight carriers that we may not be able to pass along to our customers, particularly in periods of high or rapid inflation.
Current wording
As a distributor, our profitability is highly dependent on our gross margin, which in turn varies based on the product sold and the type of customer. From time to time, we experience changes in our customer mix and in our product mix. Changes in our customer mix have resulted from various factors, such as changes in the geographies we serve, daily selling activities within current geographic markets, and targeted selling activities to different customers. Changes in our product mix have also resulted from various factors, such as marketing activities to existing customers, needs communicated to us from existing and prospective customers, tariff-driven sourcing decisions, and business acquisitions. As our national account and government customer program sales grow, we will face continued pressures on maintaining gross margin because these customers receive lower pricing due to their higher level of purchases from us. In addition, our continued expansion of our vending program and other E-commerce platforms places pressure on our gross margin. We may also be subject to price increases from our suppliers and independent freight carriers that we may not be able to pass along to our customers, particularly in periods of high or rapid inflation.
Previous wording
Volatility in commodity, energy and labor prices may adversely affect operating margins.
Current wording
Volatility in commodity, energy and labor prices, as well as periods of abnormal inflation, may adversely affect operating margins.
Previous wording
The MRO supply industry, although consolidating, still remains a large, fragmented industry that is highly competitive. We face competition from traditional channels of distribution, such as retail outlets, small dealerships, regional and national distributors utilizing direct sales forces, manufacturers of MRO supplies, large warehouse stores and larger direct mail distributors. We believe that sales of MRO supplies will continue to concentrate over the next several years, which may make MRO supply distribution more competitive. Some of our competitors challenge us with a greater variety of product offerings, greater financial resources, additional services, or a combination of these factors. In addition, we also face the risk of companies that operate primarily outside of our industry entering our marketplace.
Current wording
The MRO supply industry, although consolidating, still remains a large, fragmented industry that is highly competitive. We face competition from traditional channels of distribution, such as retail outlets, dealers and wholesalers, regional and national distributors utilizing direct sales forces, manufacturers of MRO supplies, large warehouse stores and large direct mail distributors. We believe that sales of MRO supplies will continue to become more concentrated over time, which may make MRO supply distribution more competitive. Some of our competitors challenge us with a greater variety of product offerings, greater financial resources, additional services, or a combination of these factors. In addition, we also face the risk of companies that operate primarily outside of our industry entering our marketplace.
Previous wording
As a supplier to the U.S. government and public sector, we are subject to certain laws and regulations that subject us to certain compliance requirements and potential liabilities and may increase our costs of doing business.
Current wording
As a supplier to the public sector, we are subject to certain laws and regulations that mandate compliance standards, may result in potential liabilities and may increase our costs of doing business.
Previous wording
As a supplier to the U.S. government and public sector, which represented approximately 9% of total Company revenue in fiscal year 2024, we must comply with certain laws and regulations, including the Trade Agreements Act, the Buy American Act and the Federal Acquisition Regulation, relating to the formation, administration and performance of U.S. government contracts. These laws and regulations affect how we do business with government customers and, in some instances, impose added compliance and other costs on our business. From time to time, we are subject to governmental or regulatory inquiries or audits relating to our compliance with these laws and regulations. A violation of these specific laws and regulations, as well as others, could result in the imposition of fines and penalties or the termination of our U.S. government contracts and could harm our reputation and cause our business to suffer.
Current wording
As a supplier to the U.S. government and public sector, which represented approximately 10% of the Company's total revenue in fiscal year 2025, we must comply with certain laws and regulations, including the Trade Agreements Act, the Buy American Act and the Federal Acquisition Regulation, relating to the formation, administration and performance of U.S. government contracts. These laws and regulations affect how we do business with government customers and, in some instances, impose added compliance and other costs on our business. From time to time, we are subject to governmental or regulatory inquiries or audits relating to our compliance with these laws and regulations. A violation of these specific laws and regulations, as well as others, could result in the imposition of fines and penalties, the termination of our public sector contracts or harm to our reputation, all of which would cause our business to suffer.
Previous wording
Our ability to provide same-day shipping and next-day delivery of our core metalworking and MRO products is an integral component of our overall business strategy. Disruptions at transportation centers, shipping ports, or our customer fulfillment centers, including global and domestic locations, due to third-party work stoppages or labor shortages or severe weather conditions affect both our ability to maintain core products in inventory and to deliver products to our customers on a timely basis, which may in turn adversely affect our customer relationships and results of operations. In addition, severe weather conditions and work stoppages affecting the end markets we serve could adversely affect demand for our products in particularly hard-hit regions and impact our sales and/or our ability to deliver our products.
Current wording
Our ability to provide same-day shipping and next-day delivery of our core metalworking and MRO products is an integral component of our overall business strategy. Disruptions at transportation centers, shipping ports, or our customer fulfillment centers, including global and domestic locations, due to third-party work stoppages with our shipping partners or otherwise, or labor shortages or severe weather conditions affect both our ability to maintain core products in inventory and to deliver products to our customers on a timely basis, which may in turn adversely affect our customer relationships and results of operations. In addition, severe weather conditions and work stoppages affecting the end markets we serve could adversely affect demand for our products in particularly hard-hit regions and impact our sales and/or our ability to deliver our products.
Previous wording
We retain a significant portion of the risk under our healthcare insurance program. In fiscal year 2021, we began self-insuring for costs associated with associates’ health needs, which is limited by stop-loss coverage. Our healthcare insurance program accrualsare determined on an actuarial basis, based on historical claims experience and an estimate of claims incurred but not yet reported and other relevant factors. While we believe our estimation process is well designed, every estimation process is inherently subject to limitations. Fluctuations in the frequency, magnitude or number of claims make it difficult to predict the ultimate cost of claims and may lead to future adjustments of reported results of operations which, depending on the magnitude of such adjustments, may significantly affect our reported results or negatively affect the reliability of our reported results.
Current wording
We retain a significant portion of the risk under our healthcare insurance program. We currently self-insure for costs associated with associates’ healthcare needs, which is limited by stop-loss coverage. Our healthcare insurance program accrualsare determined on an actuarial basis, based on historical claims experience and an estimate of claims incurred but not yet reported and other relevant factors. While we believe our estimation process is well designed, every estimation process is inherently subject to limitations. Fluctuations in the frequency, magnitude or number of claims make it difficult to predict the ultimate cost of claims and may lead to future adjustments of reported results of operations which, depending on the magnitude of such adjustments, may significantly affect our reported results or negatively affect the reliability of our reported results.
Previous wording
As of August 31, 2024, our combined goodwill and other indefinite-lived intangible assets amounted to $734.8 million. To the extent we do not generate sufficient cash flows to recover the net amount of any investment in goodwill and other indefinite-lived intangible assets recorded, the investment could be considered impaired and subject to write-off. We expect to record further goodwill and other indefinite-lived intangible assets as a result of future acquisitions we may complete. Future amortization of such assets or impairments, if any, of goodwill or other indefinite-lived intangible assets would adversely affect our results of operations in any given period. If the financial performance of our business was to decline significantly, we could incur a material non-cash charge to our income statement for the impairment of goodwill and other indefinite-lived intangible assets.
Current wording
As of August 30, 2025, our combined goodwill and other indefinite-lived intangible assets amounted to $734.6 million. To the extent we do not generate sufficient cash flows to recover the net amount of any investment in goodwill and other indefinite-lived intangible assets recorded, the investment could be considered impaired and subject to write-off. We expect to record further goodwill and other indefinite-lived intangible assets as a result of future acquisitions we may complete. Future amortization of such assets or impairments, if any, of goodwill or other indefinite-lived intangible assets would adversely affect our results of operations in any given period. If the financial performance of our business was to decline significantly, we could incur a material non-cash charge to our income statement for the impairment of goodwill and other indefinite-lived intangible assets.
Previous wording
So long as the Jacobson / Gershwind Family Shareholders (as defined below), collectively, have beneficial or record ownership of at least 10% of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in the Reclassification Agreement (as defined below), nominate two individuals designated by the Jacobson / Gershwind Family Shareholders for election to our Board of Directors at any annual meeting of our shareholders at which directors are to be elected. So long as the Jacobson / Gershwind Family Shareholders, collectively, have beneficial or record ownership of less than 10% but 5% or more of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in the Reclassification Agreement, nominate one individual designated by the Jacobson / Gershwind Family Shareholders for election to our Board of Directors at any annual meeting of our shareholders at which directors are to be elected.
Current wording
So long as Mitchell Jacobson, Erik Gershwind, other members of the Jacobson / Gershwind Family and certain entities affiliated with the Jacobson / Gershwind family (collectively, the “Jacobson / Gershwind Family Shareholders”), collectively, have beneficial or record ownership of at least 10% of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in that Reclassification Agreement, dated as of June 20, 2023, with the Jacobson / Gershwind Family Shareholders (the “Reclassification Agreement”), nominate two individuals designated by the Jacobson / Gershwind Family Shareholders for election to our Board of Directors at any annual meeting of our shareholders at which directors are to be elected. So long as the Jacobson / Gershwind Family Shareholders, collectively, have beneficial or record ownership of less than 10% but 5% or more of the issued and outstanding shares of Class A Common Stock, our Board of Directors will, subject to the procedures and limitations set forth in the Reclassification Agreement, nominate one individual designated by the Jacobson / Gershwind Family Shareholders for election to our Board of Directors at any annual meeting of our shareholders at which directors are to be elected.
Previous wording
The implementation of our business strategy includes a commitment to technological innovation and the utilization of digital technologies, including the MSC website and other E-commerce capabilities. As our digital platforms have grown in recent years, we have increased, and expect to continue to increase, our investment in developing, managing and implementing technology information systems, proprietary software development, and other technological innovations to support our customers. In addition, we continue to invest in our Vendor Managed Inventory, Customer Managed Inventory, and vending solutions, which involve the use of vending machines that rely on network or web-based software.
Current wording
The implementation of our business strategy includes a commitment to technological innovation and the utilization of digital technologies, including the MSC website and other E-commerce capabilities. As our digital platforms have grown in recent years, we have increased, and expect to continue to increase, our investment in developing, managing and implementing IT systems, proprietary software development, and other technological innovations to support our customers. In addition, we continue to invest in our VMI, CMI, and vending solutions, which involve the use of vending machines that rely on network or web-based software.
Previous wording
We are also actively leveraging artificial intelligence (“AI”) in various contexts to improve customer experiences and drive efficiencies in certain areas of our business. As we continue to leverage, secure, and pilot the use of AI-driven technologies, we have increased and expect to continue to increase our investments in such technologies. While these innovations can present significant benefits to the Company, they also create risks and challenges. If investments in such technologies are less successful at attracting and retaining customers than similar investments by our competitors, or if we are otherwise unsuccessful at realizing the benefits of these technological investments generally, this could have a material adverse effect on our business, financial condition, or results of operations.
Current wording
We are also actively leveraging AI in various contexts to improve customer experiences and drive efficiencies in certain areas of our business. As we continue to leverage, secure, and pilot the use of AI-driven technologies, we have increased and expect to continue to increase our investments in such technologies. While these innovations can present significant benefits to the Company, they also create risks and challenges. If investments in such technologies are less successful at attracting and retaining customers than similar investments by our competitors, or if we are otherwise unsuccessful at realizing the benefits of these investments, this could have a material adverse effect on our business, financial condition, or results of operations.
Previous wording
Our IT systems are an integral part of our business and growth strategies. In recent years, we have modified our business practices, which included a shift to a hybrid work schedule for many of our office-based associates. As a result, we are dependent upon our IT systems to operate our business and our ability to effectively manage our business depends on the security, reliability, and adequacy of our IT systems. We also depend upon our IT systems to help process orders, to manage inventory and accounts receivable collections, to manage financial reporting, to purchase, sell and ship products efficiently and on a timely basis, to maintain cost-effective operations, to operate our websites and to help provide superior service to our customers. We have made and continue to make investments in technology to protect our systems, computers, software, data and networks from attacks, damage or unauthorized access. We also have implemented numerous security protocols in order to strengthen security, and we maintain a customary cyber insurance policy, but there can be no assurance that breaches will not occur in the future or be covered by our insurance policy. The costs of maintaining our IT systems are significant and require recurring investment. In the past we have experienced, and may again in the future experience, challenges with our IT systems that have caused or may cause us to not realize expected benefits of investments into our IT systems.
Current wording
Our IT systems are an integral part of our business and growth strategies. We are dependent upon our IT systems to operate our business and our ability to effectively manage our business depends on the security, reliability, and adequacy of our IT systems. We also depend upon our IT systems to help process orders, to manage inventory and accounts receivable collections, to manage financial reporting, to purchase, sell and ship products efficiently and on a timely basis, to maintain cost-effective operations, to operate our websites and to help provide superior service to our customers. In order to maintain and upgrade our core IT systems, we have made significant investments which have faced, and could in the future face, delays and cost overruns and may result in functionality gaps and therefore not achieve their intended result. We may in the future be required to make additional investments which may have an adverse impact our business, financial condition or results of operation and may also fail to achieve their desired result.
Previous wording
Our success is dependent on certain key management personnel.
Current wording
Our success is dependent on our ability to hire and retain certain key management personnel.
Previous wording
Our success depends largely on the efforts and abilities of certain key members of our senior management. The loss or disruption of the services of one or more of such key personnel could have a material adverse effect on our business, financial condition, or results of operations. We do not maintain any key-man insurance policies with respect to any of our executive officers.
Current wording
Our success depends largely on the efforts and abilities of certain key members of our senior management. The loss or disruption of the services of one or more of such key personnel or the inability to identify a suitable or temporary successor to a key role could have a material adverse effect on our business, financial condition, or results of operations. We do not maintain any key-man insurance policies with respect to any of our executive officers.
Previous wording
There is an increasing focus on corporate social and environmental responsibility in our industry. An increasing number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions that their suppliers should comply with, or they may seek to include such provisions in their procurement terms and conditions. This corporate social and environmental responsibility influence is expanding to other stakeholders such as investors, suppliers, associates and communities. We currently voluntarily comply with the sustainability standards set forth by various sustainability initiatives and organizations. These social and environmental responsibility practices, policies, provisions and initiatives are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with. In addition, the failure by us to take action or otherwise comply with the policies of our customers may negatively impact our customer relationships or reputation, which could have a material adverse effect on our business, financial condition, or results of operations.
Current wording
There is an increasing focus on corporate social and environmental responsibility in our industry, particularly among customers and suppliers outside the United States and in Europe. An increasing number of our customers have adopted, or may adopt, procurement policies that include social and environmental responsibility provisions that their suppliers should comply with, or they may seek to include such provisions in their procurement terms and conditions. This corporate social and environmental responsibility influence is also felt among other stakeholders such as investors, suppliers, associates and communities. These social and environmental responsibility practices, policies, provisions and initiatives are subject to change, can be unpredictable in the current environment, and may be difficult and expensive for us to comply with. At times, the social and environmental responsibility practices of our customers conflict with one another or may expose us to reputational or regulatory risk. In addition, the failure by us to take action or otherwise comply with the policies of our customers may negatively impact our customer relationships or reputation, which could have a material adverse effect on our business, financial condition, or results of operations.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We have made and continue to make investments in technology to protect our systems, computers, software, data and networks from attacks, damage or unauthorized access. We also have implemented numerous security protocols in order to strengthen security, and we maintain a customary cyber insurance policy, but there can be no assurance that breaches will not occur in the future or be covered by our insurance policy. The costs of maintaining our IT systems are significant and require recurring investment. In the past we have experienced, and may again in the future experience, challenges with our IT systems that have caused or may cause us to not realize expected benefits of investments into our IT systems.