Fiscal 2018 Q4 Earnings Presentation October 30, 2018 Risks and - PowerPoint PPT Presentation

Fiscal 2018 Q4 Earnings Presentation October 30, 2018

Risks and Non-GAAP Disclosures This presentation contains forward-looking statements within the meaning of U.S. securities laws, including guidance about expected future results, expectations regarding our ability to gain market share, expected benefits from our investment and strategic plans, including from our recent acquisitions, and expected future margins. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements; are based on our current expectations; and we assume no obligation to update them. Factors that could cause actual results to differ materially from those in forward-looking statements include: general economic conditions in the markets in which we operate; changing customer and product mixes; competition, including the adoption by competitors of aggressive pricing strategies and sales methods; industry consolidation; volatility in commodity and energy prices; government or regulatory proceedings or future litigation; credit risk of our customers; risk of cancellation or rescheduling of orders; work stoppages or other business interruptions (including those due to extreme weather conditions) at transportation centers or shipping ports, our headquarters or our customer fulfillment centers; dependence on our information systems and the risk of business disruptions arising from changes to our information systems, disruptions due to computer system or network failures, computer viruses, physical or electronics break-ins and cyber-attacks; retention of key personnel; the loss of key suppliers or supply chain disruptions; risks associated with changes to trade policies; failure to comply with environmental, health and safety laws and regulations; goodwill and intangible assets recorded as a result of our acquisitions could be impaired; risks associated with the integration of acquired businesses or other strategic transactions; and financial restrictions on outstanding borrowings. Information about these risks is noted in the earnings press release and in the Risk Factors and MD&A sections of our latest annual and quarterly reports filed with the SEC, as well as in our other SEC filings. Investors are cautioned not to place undue reliance on these forward-looking statements. Throughout this presentation we will reference both GAAP and adjusted financial results, which are non-GAAP financial measures. Please refer to the reconciliation tables at the end of this presentation for a reconciliation of the adjusted financial measures to the most directly comparable GAAP measures. | 30-Oct-2018 2

FY 2018 Q4 Results (dollars in millions, except per share data and as otherwise noted) FY 2018 Q4 Guidance FY 2018 Q4 FY 2018 Q4 FY 2018 Q4 Midpoint FY 2017 Q4 Reported Impact of Excluding Excluding Reported Acquisitions (2)(3) Results Acquisitions Acquisitions Results Net Sales $838.0 $49.0 $789.0 $785.2 $753.8 Gross Margin 42.9% (140bps) 44.3% 44.1% 44.2% Operating Expenses $251.9 $10.6 $241.3 $238.9 $233.5 Effective Tax Rate (4) 29.6% --- 29.6% 29.6% 38.1% $1.29 (1) $1.32 (1) Diluted EPS ($0.03) $1.29 $1.07 (1) Includes $0.01 dilution from net balance sheet revaluation resulting from the Tax Cuts & Jobs Act (TCJA). (2) Non-GAAP reconciliations provided on slides 9 – 18. (3) Excludes impact of DECO and AIS acquisitions. (4) FY 2018 Q4 effective tax rate reflects a reduction of the federal tax rate resulting from the TCJA. | 30-Oct-2018 3

FY 2018 Full Year Results (dollars in millions, except per share data and as otherwise noted) FY 2018 FY 2018 FY 2018 FY 2017 Reported Impact of Excluding Reported Acquisitions (1)(2) Results Acquisitions Results Net Sales $3,203.9 $148.1 $3,055.8 $2,887.7 Gross Margin 43.5% (110bps) 44.6% 44.5% Operating Expenses $972.4 $30.3 $942.1 $907.2 Effective Tax Rate (3) 18.9% --- 18.9% 37.1% Diluted EPS $5.80 ($0.02) $5.82 $4.05 (1) Non-GAAP reconciliations provided on slides 9 – 18. (2) Excludes impact of DECO and AIS acquisitions. (3) FY 2018 effective tax rate reflects a reduction of the federal tax rate resulting from the Tax Cuts & Jobs Act. | 30-Oct-2018 4

IMPACT OF TAX CUTS & JOBS ACT (TCJA) ON FY 2018 EPS QUARTERLY FY 2018 EFFECTIVE TAX RATES FY 2018 EPS TAX IMPACT FY18 Q1 37.8% FY18 EPS $5.80 -23.9% (1) -0.71 (2) FY18 Q2 Less: Net balance sheet revaluation FY18 Q3 29.3% Adjusted FY18 EPS before one time net tax benefit $5.09 FY18 Q4 29.6% Less: Impact of lower US Federal tax rate -0.62 Adjusted FY18 EPS (excluding tax impact) $4.47 FY 2018 EFFECTIVE TAX RATES FY 2018 CASH TAXES PAID/RATE FY18 18.9% Cash taxes paid in FY18 $100.5m 24.7% Add-back: Net balance sheet 10.0% (2) Cash taxes paid in FY17 $121.7m 33.1% revaluation ‘Normalized’ FY18 Effective Tax 28.90% Rate (1) Includes impact of revaluation of net deferred tax liabilities as of the enactment date of the TCJA along with a reduction in the federal corporate tax rate, representing a blended rate as eight months of our fiscal year were impacted by the new legislation, on our current fiscal year earnings. (2) Net balance sheet revaluation: one-time net tax benefit from TCJA due to revaluation of net deferred tax liabilities primarily related to the lower federal corporate tax rate, partially offset by the lower federal benefit for state taxes, and the change from a worldwide to a territorial tax system ($0.72 non-cash EPS accretion in FY18 Q2 partially offset by $0.01 non-cash EPS dilution in FY18 Q4). | 30-Oct-2018 5

FY 2019 Q1 Guidance (dollars in millions, except per share data and as otherwise noted) FY 2019 Q1 FY 2018 Q1 FY 2019 Q1 FY 2018 Q1 Guidance Results Total Company Reported Excluding Excluding Acquisitions (1)(2) Acquisitions (1)(3) Guidance Results Net Sales $821 – $837 $768.6 $803 – $819 $738.9 Gross Margin 42.8% – 43.2% 43.6% 43.1% – 43.5% 44.5% Effective Tax Rate 25.2% 37.8% 25.2% 37.8% Diluted EPS $1.28 – $1.34 $1.05 $1.29 – $1.35 $1.05 (1) Non-GAAP reconciliations provided on slides 9 –18. (2) Excludes impact of AIS acquisition (3) Excludes impact of DECO and AIS acquisitions | 30-Oct-2018 6

FY 2019 Annual Operating Margin Framework Base Business Excluding Acquisitions (1) MSC Growth Level (43.3% to 44.1%) MSC Gross Margin Range Expansion 13.9% 14.4% (+/- 50 bps) (+/- 50 bps) (42.5% to 43.3%) Contraction 13.2% 13.7% (+/- 50 bps) (+/- 50 bps) Moderate Strong (4% to 8%) (8% to 12%) (1) Excludes the impact of the acquisition of AIS, which closed April 30, 2018. | 30-Oct-2018 7

FY 2019 Annual Operating Margin Framework Including Acquisitions (1) MSC Growth Level MSC Growth Level (43.1% to 43.9%) MSC Gross Margin Range Expansion 13.7% 14.2% (+/- 50 bps) (+/- 50 bps) (42.3% to 43.1%) Contraction 12.9% 13.4% (+/- 50 bps) (+/- 50 bps) Moderate Strong (5.5% to 9.5%) (9.5% to 13.5%) (1) Includes the impact of the acquisition of AIS, which closed April 30, 2018. | 30-Oct-2018 8