The following is intended to update the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended August 30, 2008 and presumes that readers have access to, and will have read, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in such Annual Report on Form 10-K.

Overview

MSC Industrial Direct Co., Inc. (together with its subsidiaries, "MSC," the "Company," "we," "our," or "us") is one of the largest direct marketers of a broad range of industrial products to industrial customers throughout the United States. We distribute a full line of industrial products intended to satisfy our customers' requirements for maintenance, repair and operations ("MRO") supplies, which includes our metalworking products.

MSC is one of the largest direct marketers of a broad range of industrial products to small and mid-sized industrial customers throughout the United States. We offer approximately 590,000 stock-keeping units ("SKUs") through our master catalogs; weekly, monthly and quarterly specialty and promotional catalogs; newspapers; brochures; and the Internet, including our websites, MSCDirect.com, MSCJLMetalworking.com and Use-Enco.com (the "MSC Websites"). We service our customers from five customer fulfillment centers and 96 branch offices. Most of our products are carried in stock, and orders for these in-stock products are typically fulfilled the day on which the order is received. Effective in September 2008, we improved our service levels to customers in the contiguous United States. We now offer a nationwide cutoff time of 8:00 PM Eastern time on qualifying orders, which will be delivered to the customer the next day at no additional cost.

Net sales decreased by 19.4% and 10.2% for the thirteen and twenty-six week periods ended February 28, 2009, as compared to the same periods in fiscal 2008, as our business was impacted by the slowdown in the global economy. Recent severe disruptions in the financial markets, together with continued tightening in the credit markets impacted, and are expected to continue to have a significant impact on our sales as this affects our customers' ability to raise debt or equity capital. This will reduce the amount of liquidity available to our customers which, in turn, will limit their ability to make purchases. This global economic slowdown impacted both our core manufacturing customers and our national account and government program (the "Large Account Customer"). There is also uncertainty over the direction of the U.S. and global economies as a result of slower growth rates, higher unemployment and weak housing markets. We are continuing to monitor the economic conditions for their impact on our customers and markets and assessing both risks and opportunities that may affect our business. See discussion below describing recent weakness in economic indicators and the possible impact on our future sales and margins.

Our gross profit margins were 46.5% and 46.9%, respectively, for the thirteen and twenty-six week periods ended February 28, 2009, as compared to 46.5% and 46.4% for the same periods in fiscal 2008. The increase in gross margin for the twenty-six week period ended February 28, 2009 was driven by our increase in pricing on certain SKUs. This is partially offset by the change in customer and product mix as our Large Account Customers, which typically generate lower margins and also purchase more of our lower margin products, constitute a larger portion of our total sales.

Operating expenses decreased for the thirteen-week period ended February 28, 2009, as compared to the same period in fiscal 2008, as a result of decreased freight expenses due to lower sales, a decrease in the Company's annual incentive plan bonus accrual as a result of the Company's performance relating to the current economic conditions, and a decrease in sales associate commissions as a result of decreased sales. This is partially offset by an increase in payroll, primarily due to an increase in the field sales force. As a result of the decrease in sales, our operating margins decreased for the thirteen-week period ended February 28, 2009 to 12.3% as compared to 18.0% for the same period in fiscal 2008.

Operating expenses increased for the twenty-six week period ended February 28, 2009, as compared to the same period in fiscal 2008, primarily due to increases in the field sales force, partially offset by a decrease in sales associate commissions and the Company's annual incentive plan bonus accrual as a result of the Company's performance relating to the current economic conditions. As a result of the decrease in sales and

We will continue to work proactively to manage and control discretionary spending as we closely monitor economic conditions. In an effort to reduce operating expenses, the Company has implemented several cost containment measures. In general, except for certain strategic hiring opportunities, the Company has instituted strict restrictions on all hiring. In addition, effective January 1, 2009, the Company has implemented a salary freeze for all associates and effective in March 2009, the Company reduced its workforce hours in the customer fulfillment centers, call-centers, and branches, and has temporarily suspended its matching contribution under its 401(k) savings plan for all associates.

We will also continue to opportunistically seek growth investments that will help position us for future expansion.

We anticipate cash flows from operations, available cash and funds available under the revolving credit facility will be adequate to support our operations for the next 12 months.

The Institute for Supply Management ("ISM") index, which measures the economic activity of the U.S. manufacturing sector, is important to our planning because it historically has been an indicator of our manufacturing customers' activity. Approximately 71% of our revenues (excluding the UK operations of J&L, which we refer to as "J&L UK") came from sales to the manufacturing sector during the twenty-six week period ended February 28, 2009. An ISM reading below 50.0% generally indicates that the manufacturing sector is contracting. The ISM was 35.8% for the month of February 2009. Details released with the most recent index indicate that economic activity in the manufacturing sector failed to grow in February 2009 for the thirteenth consecutive month, and the overall economy contracted for the fifth consecutive month. This is a result of new orders, production, employment and inventories contracting, in addition to the majority of commodities declining in price. The ISM index at these levels, coupled with the current instability in the financial markets, is an indication of a contraction of the overall economy as well as of the manufacturing sector. We believe that the impact of volatile energy prices, the credit crisis, inflation, interest rate fluctuations, along with the general condition of the United States economy, will continue to have an adverse effect on our sales and margins throughout the remainder of fiscal 2009. We are uncertain as to the long term impact of this economic cycle, but we will continue to look for opportunities to increase market share and deliver value added services to our customers. We believe that our strong balance sheet will enable us to continue to extend credit to our credit worthy customers during this credit crisis, while many of our smaller competitors in our fragmented industry may struggle to meet their cash needs. We also believe that companies will be seeking cost reductions and shorter cycle times from their suppliers. Our business model focuses on providing overall procurement cost reduction and just-in-time delivery to meet our customers' needs. To meet our customers' needs and our business goals, we will seek to continue to drive cost reduction throughout our business through cost saving strategies and increased leverage from our existing infrastructure, and continue to provide additional procurement cost savings solutions to our customers through technology such as with our Customer Managed Inventory and Vendor Managed Inventory programs.

Results of Operations

Net Sales

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                                          Thirteen Weeks Ended                                              Twenty-Six Weeks Ended
                       February 28,            March 1,              Percentage           February 28,            March 1,              Percentage
                           2009                  2008                  Change                 2009                  2008                  Change
                                                                          (Dollars in Thousands)
Net Sales           $         351,910     $         436,486             (19.4 )%       $         784,932     $         874,040             (10.2 )%

Net sales decreased by approximately $85 million and $89 million for the thirteen and twenty-six week periods ended February 28, 2009, respectively, as compared to the same periods in fiscal 2008, related to our business being impacted by the slowdown in the global economy. For the thirteen and twenty-six week periods ended February 28, 2009, we estimate that this decrease is comprised of a core business decline of approximately $81 million and $109 million, respectively, and a decline in our Large Account Customer

The global economic slowdown has negatively impacted our net sales, as mentioned above, as well as resulted in a decrease in average order size to approximately $302 (excluding J&L UK) in the second quarter of fiscal 2009 from $307 (excluding J&L UK) in the second quarter of fiscal 2008. We believe that our ability to transact with our customers through various portals and directly through the MSC Websites, gives us a competitive advantage over smaller suppliers. Sales through the MSC Websites were $103.6 million for the second quarter of fiscal 2009, representing 29.4% of consolidated net sales. We grew our field sales associate headcount to 914 at February 28, 2009, an increase of approximately 6.7% from field sales associates of 857 at March 1, 2008, in order to support our strategy to acquire new accounts and expand existing accounts across all customer types. We will continue to manage the timing of field sales associate increases and branch openings based on economic conditions.

In the fiscal 2009 MSC catalog, distributed in September 2008, we added approximately 20,000 new SKUs and removed approximately 15,000 SKUs. We believe that the new SKUs improve the overall quality of our offering.

Gross Profit

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                                             Thirteen Weeks Ended                                                Twenty-Six Weeks Ended
                          February 28,             March 1,              Percentage            February 28,             March 1,              Percentage
                              2009                   2008                  Change                  2009                   2008                  Change
                                                                               (Dollars in Thousands)
Gross Profit          $       163,799        $       203,058                (19.3 )%       $       367,873        $       405,628                 (9.3 )%
Gross Profit Margin              46.5 %                 46.5 %                                        46.9 %                 46.4 %

Gross profit margin for the thirteen week period ended February 28, 2009 remained the same as the comparable period in fiscal 2008. Gross profit margin for the twenty-six week period ended February 28, 2009 increased from the comparable period in fiscal 2008. This is primarily a result of increases in pricing on certain SKUs based on market conditions. This is partially offset by supplier cost increases on certain products and the change in customer and product mix as our Large Account Customers, which typically generate lower margins and which also purchase more of our lower margin products, continue to increase as a percentage of our total sales.

Operating Expenses

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                                           Thirteen Weeks Ended                                                 Twenty-Six Weeks Ended
                        February 28,             March 1,              Percentage             February 28,             March 1,              Percentage
                            2009                   2008                  Change                   2009                   2008                  Change
                                                                             (Dollars in Thousands)
Operating           $       120,557        $       124,443                 (3.1 )%        $       250,203        $       249,043                  0.5 %
Expenses
Percentage of Net              34.3 %                 28.5 %                                         31.9 %                 28.5 %
Sales

The decrease in operating expenses in dollars for the thirteen week period ended February 28, 2009 as compared to the same period in fiscal 2008, was a result of a decreased freight expenses due to lower sales, a decrease in the Company's annual incentive plan bonus accrual as a result of the Company's performance relating to the current economic conditions, and a decrease in sales associate commissions as a result of decreased sales. This is partially offset by an increase in payroll, primarily due to an increase in the field sales force.

The increase in operating expenses in dollars for the twenty-six week period ended February 28, 2009 as compared to the same period in fiscal 2008, was a result of an increase in payroll related costs primarily due to an increase in the field sales force, partially offset by a decrease in sales associate commissions as a result of the decrease in sales. The increase was also partially offset by a reduction in the Company's annual incentive plan bonus accrual as a result of the Company's performance relating to the current economic conditions.

The increases in the operating expenses as a percentage of net sales for the thirteen and twenty-six week periods ended February 28, 2009, as compared to the same periods in fiscal 2008, was primarily due to our increased payroll costs in addition to various fixed costs distributed over a smaller revenue base.

Income from Operations

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                                           Thirteen Weeks Ended                                                Twenty-Six Weeks Ended
                        February 28,             March 1,              Percentage            February 28,             March 1,              Percentage
                            2009                   2008                  Change                  2009                   2008                  Change
                                                                            (Dollars in Thousands)
Income from         $        43,242        $        78,615                (45.0 )%       $       117,670        $       156,585                (24.9 )%
Operations
Percentage of Net              12.3 %                 18.0 %                                        15.0 %                 17.9 %
Sales

The decrease in income from operations for the thirteen week period ended February 28, 2009, as compared to the same period in fiscal 2008, was primarily attributable to the decrease in net sales, offset in part by the decrease in operating expenses as described above. As a percentage of net sales, the decrease is primarily the result of the distribution of expenses over a smaller revenue base.

The decrease in income from operations for the twenty-six week period ended February 28, 2009, as compared to the same period in fiscal 2008, was primarily attributable to the decrease in net sales and the increase in operating expenses as described above, offset in part by the increase in gross profit margin as described above. As a percentage of net sales, the decrease is primarily the result of the distribution of expenses over a smaller revenue base.

Interest Expense

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                                           Thirteen Weeks Ended                                                Twenty-Six Weeks Ended
                        February 28,             March 1,              Percentage            February 28,             March 1,              Percentage
                            2009                   2008                  Change                  2009                   2008                  Change
                                                                            (Dollars in Thousands)
Interest Expense    $         (774 )       $        (2,459 )              (68.5 )%       $        (2,668 )      $        (4,923 )              (45.8 )%

The decrease in interest expense for the thirteen and twenty-six week periods ended February 28, 2009, as compared to the same periods in fiscal 2008, was primarily due to lower average interest rates. Average loan balances outstanding for the term loan and revolving loans for the thirteen and twenty-six week periods ended February 28, 2009 were approximately $219.4 million and $214.8 million, respectively, as compared to approximately $203.8 million and $187.2 million for the same periods in fiscal 2008. The increase in average loan balances resulted from draw downs of the credit line commitment to enable the Company to maintain a highly liquid position during the current economic environment.

Interest Income

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                                            Thirteen Weeks Ended                                                  Twenty-Six Weeks Ended
                        February 28,              March 1,               Percentage            February 28,              March 1,               Percentage
                            2009                    2008                   Change                  2009                    2008                   Change
                                                                              (Dollars in Thousands)
Interest Income     $            234        $            136                  72.1 %       $            546        $            375                  45.6 %

Provision for Income Taxes

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                                           Thirteen Weeks Ended                                                Twenty-Six Weeks Ended
                        February 28,             March 1,              Percentage            February 28,             March 1,              Percentage
                            2009                   2008                  Change                  2009                   2008                  Change
                                                                            (Dollars in Thousands)
Provision for       $        16,398        $        28,867                (43.2 )%       $        44,154        $        57,787                (23.6 )%
Income Taxes
Effective Tax                 38.42 %                37.82 %                                       38.22 %                37.99 %
Rate

The effective tax rate for the thirteen and twenty-six week periods ended February 28, 2009 was 38.42% and 38.22% as compared to 37.82% and 37.99% for the comparable periods in fiscal 2008. The increase in the rates is primarily attributable to an increase in the State tax rate.

Net Income

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                                          Thirteen Weeks Ended                                              Twenty-Six Weeks Ended
                       February 28,            March 1,              Percentage           February 28,            March 1,              Percentage
                           2009                  2008                  Change                 2009                  2008                  Change
                                                                          (Dollars in Thousands)
Net Income          $          26,278     $          47,460             (44.6 )%       $          71,373     $          94,326             (24.3 )%
Diluted Earnings    $            0.42     $            0.73             (42.5 )%       $            1.14     $            1.43             (20.3 )%
Per Share

The factors which affected net income for the thirteen and twenty-six week periods ended February 28, 2009, as compared to the same periods in fiscal 2008, have been discussed above. In addition to the decrease in net income, the diluted earnings per share for the thirteen and twenty-six week periods ended February 28, 2009 was affected by the repurchase of shares of our Class A common stock in fiscal 2008, which resulted in fewer shares outstanding at February 28, 2009.

Liquidity and Capital Resources

As of February 28, 2009, we held $137.9 million in cash and cash equivalent funds. As of February 28, 2009, cash equivalents consisted of money market funds that invest primarily in U.S. government and government agency securities and municipal bond securities and contain portfolios with average maturities of less than three months. We maintain a substantial portion of our cash and cash equivalents with a well-known financial institution. The Company's investments in the municipal bond securities money market fund are guaranteed by the U.S. Federal Government under the U.S. Department of Treasury temporary guarantee program (the "Program"). The Program is currently set to expire on April 30, 2009, but could be extended by the Treasury until September 18, 2009.

Historically, our primary capital needs have been to fund the working capital requirements necessitated by our sales growth, adding new products, and facilities expansions and in the past, our primary sources of financing have been cash generated from operations. Borrowings under the Credit Facility, together with cash generated from operations, have been used to fund our working capital needs, repurchase shares of our Class A common stock, and pay dividends. At February 28, 2009, total borrowings outstanding were $216.6 million, as compared to $254.2 million at March 1, 2008.

We have an unsecured Credit Facility that consists of a revolving credit line commitment and term loan facility that expires on June 8, 2011. We have a $150.0 million revolving credit line commitment, of which we had $95.0 million outstanding at February 28, 2009. The interest rate payable for borrowings under the revolving credit line commitment is currently 40 basis points over LIBOR rates and the weighted average borrowing rate in effect at February 28, 2009 was 0.87%. We are also charged a fee of 10 basis points on the borrowed and unborrowed balances of the revolving loans. The loans under the revolving credit line commitment are generally due in thirty days, although, sixty, ninety and one hundred eighty day increments are available.

Under the terms of the Credit Facility, we are subject to various operating and financial covenants, including a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio. At February 28, 2009, we were in compliance with the operating and financial covenants of the Credit Facility.

Net cash provided by operating activities for the twenty-six week periods ended February 28, 2009 and March 1, 2008 was $147.8 million and $67.0 million, respectively. The increase of $80.8 million in net cash provided by operating activities resulted primarily from a reduction of accounts receivable and inventory, partially offset by the decline in net income.

Net cash used in investing activities for the twenty-six week periods ended February 28, 2009 and March 1, 2008 was $12.3 million and $5.9 million, respectively. The increase of $6.4 million is due primarily to higher expenditures for property, plant and equipment that occurred during the twenty-six week period ended February 28, 2009.

Net cash used in financing activities for the twenty-six week periods ended February 28, 2009 and March 1, 2008 was $40.2 million and $61.5 million, respectively. The decrease in net cash used in financing activities for the twenty-six week period ended February 28, 2009 was primarily attributable to the . . .