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On January 8, 2009,

MSC Industrial Direct

(MSM) - Get Report

, a distributor of industrial tools, reported that its net income during Q1 FY09 dropped 3.8% to $45.10 million or $0.72 per share, compared to $46.87 million or $0.70 per share in Q1 FY08. The latest quarterly earnings beat the consensus estimate of $0.67 per share.

During the quarter under review, revenue slipped 1.0% to $433.02 million from $437.55 million in the prior year's quarter as a result of the slowdown in the global economy. This decrease consisted of a core business decline of $28.00 million, partially offset by $15.00 million of increased pricing and $8.50 million related to the growth of the company's large account customer programs.

For the quarter ended Nov. 29, 2008, MSC Industrial Direct gross profit margin edged up 83 basis points to 47.13% compared to 46.30% a year ago, driven by previously announced increase in pricing. Additionally, total operating expenses increased to $129.65 million from $124.60 million fueled by rise in payroll-related costs due to larger headcount. Moreover, the company declared a quarterly dividend of $0.20 per share, payable on Feb. 3, 2009.

Looking ahead to Q2 FY09, MSM expects its revenue to be down 19.0%, ranging between $354.00 million and $366.00 million and anticipates its earnings to be in the range of $0.39 per share to $0.43 per share. Furthermore, it estimates gross margin to be 46.2% plus or minus 20 basis points, hurt by customer mix as large accounts customers continue to outpace the core business. The company also expects to convert its earnings into cash at a rate greater than 100.0% during the upcoming quarters.

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