SAFE HARBOR STATEMENT

This Quarterly Report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Discussions containing such forward-looking statements may be found in Items 2 and 3 hereof, as well as within this Report generally. In addition, when used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “plans,” “intends,” and similar expressions are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results, as discussed below under the heading “Risk Factors”. Factors that may cause these differences include, but are not limited to:

• changing customer and product mixes;

• changing market conditions and industry consolidation;

• competition;

• general economic conditions in the markets in which the Company operates;

• recent changes in accounting for equity-related compensation;

• rising commodity and energy prices;

• risk of cancellation or rescheduling of orders;

• work stoppages at transportation centers or shipping ports;

• the risk of war, terrorism and similar hostilities;

• dependence on our information systems;

• dependence on key personnel; and

• the other matters discussed in the Business Description contained in the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2004.

Consequently, such forward-looking statements should be regarded solely as the Company’s current plans, estimates and beliefs. The Company does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

Available Information

We file annual, quarterly and current reports, information statements and other information with the Securities and Exchange Commission (the “SEC”). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

Internet Address

The Company’s Internet address is www.mscdirect.com. We make available on or through our investor relations page on our web site, free of charge, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and beneficial ownership reports on Forms 3, 4, and 5 and amendments to those reports as soon as reasonably practicable after this material is electronically filed or furnished to the SEC. We also make available, on our website, the charters of the committees of our Board of Directors and Management’s Code of Ethics, the Code of Business Conduct and Corporate Governance Guidelines pursuant to SEC requirements and New York Stock Exchange listing standards.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Balance Sheets

(In thousands, except share data)

	May 28, 2005			August 28, 2004
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	36,379		$	39,517
Available-for-sale securities	7,268			6,000
Accounts receivable, net of allowance for doubtful accounts of $2,816 and $2,447, respectively	127,482			114,077
Inventories	238,159			225,427
Prepaid expenses and other current assets	16,785			16,368
Deferred income taxes	10,123			10,000
Total current assets	436,196			411,389
Available-for-sale securities	139,787			137,797
Property, Plant and Equipment, net	102,038			103,284
Goodwill	63,202			63,202
Other assets	6,989			13,715
Total assets	$	748,212		$	729,387

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	40,249		$	36,233
Accrued liabilities	59,883			48,638
Current portion of long-term notes payable	150			142
Total current liabilities	100,282			85,013
Long-term notes payable	868			997
Deferred income tax liabilities	27,989			25,171
Total liabilities	129,139			111,181
Shareholders’ Equity:
Preferred stock; $0.001 par value; 5,000,000 shares authorized; none issued and outstanding
Class A common stock (one vote per share); $0.001 par value; 100,000,000 shares authorized; 53,785,837 and 52,428,363 shares issued, and 45,665,505 and 47,056,952 shares outstanding, respectively	54			52
Class B common stock (ten votes per share); $0.001 par value; 50,000,000 shares authorized; 21,006,394 and 21,246,394 shares issued and outstanding, respectively	21			21
Additional paid-in capital	340,910			314,710
Retained earnings	455,700			393,341
Accumulated other comprehensive loss	(98		)	(12		)
Class A treasury stock, at cost, 8,120,332, and 5,371,411 shares, respectively	(171,714		)	(88,580		)
Deferred stock compensation	(5,800		)	(1,326		)
Total shareholders’ equity	619,073			618,206
Total Liabilities and Shareholders’ Equity	$	748,212		$	729,387

See accompanying notes.

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	May 28, 2005		May 29, 2004		May 28, 2005		May 29, 2004
Net sales	$	288,465	$	255,297	$	823,158	$	708,595
Cost of goods sold	155,460		140,417		446,490		389,176
Gross profit	133,005		114,880		376,668		319,419
Operating expenses	84,047		76,993		241,914		224,639
Income from operations	48,958		37,887		134,754		94,780

Other income:
Interest income, net	1,291		684		3,029		1,444
Other income, net	59		91		76		319
Total other income	1,350		775		3,105		1,763
Income before provision for income taxes	50,308		38,662		137,859		96,543
Provision for income taxes	19,620		14,789		53,765		37,652
Net income	$	30,688	$	23,873	$	84,094	$	58,891

Per Share Information (Note 1):
Net income per common share:
Basic	$	0.45	$	0.35	$	1.23	$	.88
Diluted	$	0.44	$	0.34	$	1.19	$	.85

Weighted average shares used in computing net income per common share (Note 1):
Basic	68,341		67,474		68,573		66,801
Diluted	70,112		70,082		70,603		69,337

Cash dividend paid per common share	$	0.12	$	0.08	$	0.32	$	0.21

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Statement of Shareholders’ Equity

Thirty-Nine weeks ended May 28, 2005

(In thousands)

(Unaudited)

	Class A Common Stock				Class B Common Stock				Additional						Accumulated Other			Class A Treasury Stock					Deferred
	Shares		Amount		Shares		Amount		Paid-In Capital			Retained Earnings			Comprehensive Loss			Shares		Amount at Cost			Stock Compensation			Total
Balance at August 28, 2004	52,428		$	52	21,246		$	21	$	314,710		$	393,341		$	(12	)	5,371		$	(88,580	)	$	(1,326	)	$	618,206
Exchange of Class B common stock for Class A common stock	240		—		(240	)	—		—			—			—			—		—			—			—
Grant of restricted common stock	145		—		—		—		5,088			—			—			—		—			(5,088		)	—
Cancellation of restricted common stock	(2	)	—		—		—		(76		)	—			—			—		—			76			—

Amortization of restricted stock	—		—		—		—		—			—			—			—		—			538			538
Common stock issued under associate stock purchase plan	—		—		—		—		—			341			—			(51	)	1,000			—			1,341
Purchase of treasury stock	—		—		—		—		—			—			—			2,800		(84,134		)	—			(84,134		)
Exercise of common stock options, including income tax benefits of $6,759	975		2		—		—		21,188			—			—			—		—			—			21,190
Cash dividends paid	—		—		—		—		—			(22,076		)	—			—		—			—			(22,076		)

Net income	—		—		—		—		—			84,094			—			—		—			—			84,094
Unrealized losses on available-for-sale securities, net of tax benefit	—		—		—		—		—			—			(86		)	—		—			—			(86		)

Comprehensive income																										84,008

Balance at May 28, 2005	53,786		$	54	21,006		$	21	$	340,910		$	455,700		$	(98	)	8,120		$	(171,714	)	$	(5,800	)	$	619,073

See accompanying notes.

MSC INDUSTRIAL DIRECT CO., INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Thirty-Nine Weeks Ended
	May 28, 2005			May 29, 2004

Cash Flows from Operating Activities:
Net income	$	84,094		$	58,891
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,117			9,457
Loss on disposal of property, plant and equipment	189			—
Amortization of deferred stock compensation	538			86
Provision for doubtful accounts	1,673			1,748
Deferred income taxes	2,695			(2,009		)
Stock option income tax benefit	6,759			4,148
Amortization of bond premiums	381			148
Changes in operating assets and liabilities:
Accounts receivable	(15,078		)	(20,959		)
Inventories	(12,732		)	(18,974		)
Prepaid expenses and other current assets	(417		)	(3,077		)
Other assets	6,726			6,761
Accounts payable and accrued liabilities	4,314			9,125

Total adjustments	4,165			(13,546		)

Net cash provided by operating activities	88,259			45,345

Cash Flows from Investing Activities:
Proceeds from sales of investments in available-for-sale securities	79,555			31,664
Purchases of investments in available-for-sale securities	(83,280		)	(151,524		)
Expenditures for property, plant and equipment	(8,060		)	(6,772		)

Net cash used in investing activities	(11,785		)	(126,632		)

Cash Flows from Financing Activities:
Payment of cash dividends	(22,076		)	(14,069		)
Purchase of treasury stock	(73,187		)	(6,754		)
Proceeds from sale of Class A common stock in connection with associate stock purchase plan	1,341			1,015
Proceeds from exercise of Class A common stock options	14,431			24,755
Repayments of notes payable	(121		)	(129		)

Net cash (used in) provided by financing activities	(79,612		)	4,818

Net decrease in cash and cash equivalents	(3,138		)	(76,469		)
Cash and cash equivalents—beginning of period	39,517			114,294

Cash and cash equivalents—end of period	$	36,379		$	37,825

Supplemental Disclosure of Cash Flow Information:

Cash paid for income taxes	$	39,980		$	31,900

See accompanying notes.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

(Unaudited)

Note 1. Basis of Presentation

MSC Industrial Direct Co., Inc. (“MSC”) was incorporated in the State of New York on October 24, 1995. The accompanying consolidated financial statements include MSC and all of its subsidiaries, including its principal operating subsidiary, Sid Tool Co., Inc. and is hereinafter referred to collectively as the “Company.” All intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. Operating results for the thirty-nine weeks of fiscal 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending August 27, 2005. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2004.

The Company’s fiscal year ends on a Saturday close to August 31 of each year.

A reconciliation between the numerator and denominator of the basic and diluted EPS calculation is as follows:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	May 28, 2005		May 29, 2004		May 28, 2005		May 29, 2004
Net income for EPS Computation	$	30,688	$	23,873	$	84,094	$	58,891

Basic EPS:
Weighted average Common shares	68,341		67,474		68,573		66,801

Basic EPS	$	0.45	$	0.35	$	1.23	$	0.88

Diluted EPS:
Weighted average Common shares	68,341		67,474		68,573		66,801
Shares issuable from assumed conversion of Common stock equivalents	1,770		2,608		2,030		2,536
Weighted average Common and Common equivalent shares	70,112		70,082		70,603		69,337

Diluted EPS	$	0.44	$	0.34	$	1.19	$	0.85

Employee stock options to purchase approximately 360 shares of Class A common stock were outstanding, but were not included in the computation of diluted earnings per share for the thirteen and thirty-nine weeks ended May 28, 2005 because the exercise price exceeded the average market price of common shares for these periods.

Note 2. Fair Value Disclosure Of Stock Options

The Company accounts for its stock option plans utilizing the intrinsic value method, under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations (“APB 25”). No compensation expense is reflected in net income, as all options granted under the stock option plans had an exercise price equal to the

market value of the underlying common stock on the date of grant. Interim pro-forma information regarding net income and net income per common share is required by Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“SFAS 148”), if the Company accounts for its stock options granted under the intrinsic value method.

The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions, under which compensation expense would be recognized as incurred, of SFAS No. 123, “Accounting for Stock-Based Compensation”, to stock-based employee compensation.

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	May 28, 2005			May 29, 2004			May 28, 2005			May 29, 2004
	(a)						(a)
Net income, as reported	$	30,688		$	23,873		$	84,094		$	58,891
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects	167			33			328			53
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(1,590		)	(1,916		)	(3,334		)	(5,930		)
Pro forma net income	$	29,265		$	21,990		$	81,088		$	53,014

Net income per common share:
Net income per common share, as reported	$	0.45		$	0.35		$	1.23		$	0.88
Net income per common share, pro forma	$	0.43		$	0.33		$	1.18		$	0.79
Diluted net income per common share, as reported	$	0.44		$	0.34		$	1.19		$	0.85
Diluted net income per common share, pro forma	$	0.42		$	0.31		$	1.15		$	0.76

a) The stock-based employee compensation expense has been reduced for tax benefits received for disqualifying dispositions made by stock option plan participants resulting in an increase to pro forma net income of $345 and $2,340 for the thirteen and thirty-nine week periods ended May 28, 2005, respectively.

Note 3. Available-For-Sale Securities

The Company’s investments consist of municipal notes and bonds and corporate bonds. Investments with original or remaining maturities of less than one year are considered to be short-term. The custodians of these investments are high quality financial institutions. The Company’s investments are classified as available-for-sale and are recorded on the consolidated balance sheet at fair value. Unrealized gains and losses on investments are included as a separate component of accumulated other comprehensive income (loss), net of any related tax effect. The Company will recognize an impairment charge if a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Cumulative, unrealized losses, net of taxes, included in accumulated other comprehensive loss at May 28, 2005 were approximately $98.

The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses, interest and dividends and declines in value judged to be other-than-temporary on available-for-sale securities are included in interest income. The cost of securities sold is based on the first-in, first-out method.

Note 4. Comprehensive Income

The Company complies with the provisions of SFAS No. 130, “Reporting Comprehensive Income”, which establishes standards for the reporting of comprehensive income and its components. The components of comprehensive income, net of tax are as follows:

	Thirteen Weeks Ended						Thirty-Nine Weeks
	May 28, 2005			May 29, 2004			May 28, 2005			May 29, 2004

Net income as reported:	$	30,688		$	23,873		$	84,094		$	58,891
Unrealized losses on available-for-sale securities, net of tax benefit, for the period	(22		)	(77		)	(86		)	(77		)
Comprehensive income	$	30,666		$	23,796		$	84,008		$	58,814

Note 5. Shareholders’ Equity

Each holder of the Company’s Class A common stock is entitled to one vote for each share held of record on the applicable record date on all matters presented to a vote of shareholders, including the election of directors. The holders of Class B common stock are entitled to ten votes per share on the applicable record date and are entitled to vote, together with the holders of the Class A common stock, on all matters which are subject to shareholder approval. Holders of Class A common stock and Class B common stock have no cumulative voting rights or preemptive rights to purchase or subscribe for any stock or other securities and except as described below there are no conversion rights or redemption or sinking fund provisions with respect to such stock.

The Company reissued approximately 51 shares of treasury stock during the first thirty-nine weeks of fiscal 2005 to fund the Associate Stock Purchase Plan. On January 4, 2005, shareholders of the Company approved a 300 share increase to the Associate Stock Purchase Plan.

During the first thirty-nine weeks of fiscal 2005, the Company repurchased 2,800 shares of its Class A common stock for approximately $84,134 (approximately $10,947 of this amount settled and was paid subsequent to May 28, 2005) which is reflected at cost as treasury stock in the accompanying consolidated financial statements. In addition, subsequent to May 28, 2005 the Company repurchased 667 shares of its Class A common stock for approximately $20,625. On June 29, 2005 the Board of Directors reaffirmed and replenished the stock purchase plan so that the total number of shares of Class A common stock authorized for future repurchase was restored to 5,000 shares.

The holders of the Company’s Class B common stock have the right to convert their shares of Class B common stock into shares of Class A common stock at their election and on a one-to-one basis, and all shares of Class B common stock convert into shares of Class A common stock on a one-to-one basis upon the sale or transfer of such shares of Class B common stock to any person who is not a member of the Jacobson or Gershwind families or any trust not established principally for members of the Jacobson and Gershwind families or is not an executor, administrator or personal representative of an estate of a member of the Jacobson and Gershwind families.

The Company has 5,000 shares of preferred stock authorized. The Company’s Board of Directors has the authority to issue shares of preferred stock. Shares of preferred stock have priority over the Company’s Class A common stock and Class B common stock with respect to dividend or liquidation rights, or both. As of May 28, 2005, there were no shares of preferred stock issued or outstanding.

On January 4, 2005, shareholders of the Company approved an increase in the number of shares eligible for issuance under the Company’s Restricted Stock Plan of 175 shares and a change in the vesting period to five years for restricted shares granted on or after January 4, 2005. The Company, on January 4, 2005, awarded approximately 145 shares to management. The value of these shares at the date awarded is included as a separate component of shareholders’ equity, and the related compensation charge is recorded over the applicable vesting period. Associates will forfeit all non vested shares upon departure from the Company. Approximately 2 restricted shares were forfeited during the thirty-nine week period ended May 28, 2005. As of May 28, 2005, approximately 65 additional shares remain reserved for future issuance under the Restricted Stock Plan which expires on November 16, 2005.

The Company paid a dividend of approximately $8,275 on April 11, 2005 to shareholders of record at the close of business on April 4, 2005. On March 21, 2005, the Board of Directors increased the quarterly dividend payable to shareholders to $0.12 per share. On June 24, 2005, the Board of Directors approved a dividend of $0.12 per share payable on July 18, 2005 to shareholders of record at the close of business on July 11, 2005. The dividend payable will result in a payout of approximately $7,922, based on the number of shares outstanding at June 28, 2005. On June 29, 2005, the Board of Directors approved a special one time dividend of $1.50 per share payable on August 15, 2005 to holders of record on August 8, 2005. This dividend payable will result in a payout of approximately $100,000.

Note 6. Product Warranties

The Company offers a one-year warranty for certain of its machinery products. The specific terms and conditions of those warranties vary depending upon the product sold. Generally, the Company provides a basic limited warranty, including parts and labor, for these products for one year. The Company would be able to recoup certain of these costs through product warranties it holds with its original equipment manufacturers, which typically range from thirty to ninety days. In addition, certain of the Company’s general merchandise products are covered by third party original equipment manufacturers’ warranties. The Company’s warranty expense for the thirty-nine week periods ended May 28, 2005 and May 29, 2004 has been minimal.

Note 7. Legal Proceedings

There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses in the ordinary course. It is the opinion of management that the ultimate resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 28, 2004 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 Form 10-K.

This Quarterly Report on Form 10-Q contains or incorporates certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. Such forward-looking statements involve known and unknown risks and uncertainties and include, but are not limited to, statements regarding future events and our plans, goals and objectives. Such statements are generally accompanied by words such as “believe,” “anticipate,” “think,” “intend,” “estimate,” “expect,” or similar terms. Our actual results may differ materially from such statements. Factors that could cause or contribute to such differences include, without limitation, changing customer and product mixes, market conditions, industry consolidation, competition, general economic conditions in the markets in which the Company operates, rising commodity and energy prices, risk of cancellation or rescheduling of orders, work stoppages at transportation centers or shipping ports, the risk of war, terrorism and similar hostilities, dependence on the Company’s information systems and on key personnel. See “Risk Factors” at page 15. Although the Company believes that the assumptions underlying its forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, the Company cannot make any assurances that the results contemplated in such forward-looking statements will be realized. The inclusion of such forward-looking information should not be regarded as a representation by the Company or any other person that the future events, plans or expectations contemplated by the Company will be achieved. Furthermore, past performance is not necessarily an indicator of future performance. The Company does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

The dollar amounts in the financial tables in this section, except per share amounts, are in thousands.

Overview

MSC Industrial Direct Co., Inc. (“MSC”) was formed in October 1995 and has conducted business through its predecessor companies since 1941. MSC and its subsidiaries, including Sid Tool Co., Inc. (the “Operating Subsidiary”), are hereinafter referred to collectively as the “Company.”

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 distribute a full line of industrial products intended to satisfy our customers’ maintenance, repair and operations (“MRO”) supplies requirements. We offer in excess of 500,000 stock-keeping units (“SKUs”) through our master catalogs, weekly, monthly and quarterly specialty and promotional catalogs and brochures and service our customers from four distribution centers and approximately 90 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.

The Company is continuing to benefit from a strong U.S. economy as well as the execution of its growth strategies to increase revenues. Net sales increased 13.0% and 16.2% for the thirteen and thirty-nine week periods ended May 28, 2005, respectively as compared to the same periods in fiscal 2004. We have been able to gain market share in the national account and government program sectors, which have become important components of our overall customer mix, revenue base, recent growth and planned business expansion. By expanding in these sectors, which involve customers with multiple locations and high volume MRO needs, we are diversifying our customer base beyond small and mid-sized customers, thereby reducing the cyclical nature of our business. As a result of passing on most of our vendors’ product price increases and freight surcharges from our independent freight carriers (due to rising energy costs) during the previous quarter, our gross profit margins have increased to 46.1% and 45.8% for the thirteen and thirty-nine week periods ended May 28, 2005, respectively compared to 45.0% and 45.1% for the same periods in fiscal 2004. In addition to continuing to increase the number of sales associates in existing markets, the Company has opened up a new branch in the Los Angeles area with its own sales force as part of the Company’s west coast expansion strategy. Sales related to the new branch did not have a significant impact on the Company’s total sales for the thirteen and thirty-nine week periods ended May 28, 2005. The Company has increased the number of sales associates (including those in the new Los Angeles area branch) to 498 at May 28, 2005 compared to 457 at May 29, 2004, and expects to continue to increase the sales force to the 500 to 510 range by the end of fiscal 2005.

Operating expenses increased as a result of increases in the field sales force, increases in freight costs, increased sales volume related expenses, increased medical benefits expenses and increased incentive compensation accruals for the thirteen and thirty-nine week periods ended May 28, 2005 as compared to the same periods in fiscal 2004. The increase in gross margin and operating leverage from prior investments in our infrastructure enabled the Company to increase operating margins for the thirteen and thirty-nine week periods ended May 28, 2005 to 17.0% and 16.4%, respectively as compared to 14.8% and 13.4% for the same periods in fiscal 2004. We expect operating expenses to continue to increase through the remainder of fiscal 2005 as a result of increased sales volume, increased spending on sales force expansion and increased freight costs due to rising energy prices.

Through the thirty-nine week period ended May 28, 2005, we have kept direct mail advertising levels comparable to the levels of the same period in fiscal 2004. As part of the Company’s focus to lower costs throughout the business and increase the productivity of the direct marketing efforts, mailing levels were reduced over the last two fiscal years (15.8% and 6.9% reduction in fiscal 2004 and fiscal 2003, respectively). For the remainder of fiscal 2005, we expect mailing levels to be comparable to fiscal 2004 levels. The Company’s focus on discontinuing mailings to smaller accounts that made limited purchases over the last 12 months has led to an expected

decrease in the number of active customers. The number of active customers (defined as those that have made at least one purchase in the last 12 months) at May 28, 2005 is approximately 343,000, as compared to 346,000 at May 29, 2004. We continue to see the benefits of our more focused mailing strategy as our sales per advertising piece continues to grow.

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 73% of our revenues came from sales in the manufacturing sector during the thirty-nine weeks ended May 28, 2005, including some national account customers. The ISM has come down from its fiscal 2004 high of 62.8% for the month of May 2004 to 51.4% for the month of May 2005. This level still indicates growth for the industrial economy and based on historical information, has been a good predictor of future sales growth for the Company. It is possible that the impact of rising energy prices and interest rates and raw material availability will have an adverse effect on customer order flow. We 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

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	May 28, 2005		May 29, 2004		Percentage Change		May 28, 2005		May 29, 2004		Percentage Change

Net sales	$	288,465	$	255,297	13.0	%	$	823,158	$	708,595	16.2	%

The increase in net sales for the thirteen and thirty-nine week periods ended May 28, 2005 was primarily the result of an increase in sales to existing customers and the growth of our national accounts and government programs. There was also a minimal increase related to supplier cost increases and freight surcharge increases that we began to pass along to our customers in the prior quarter. Sales to manufacturing and non-manufacturing sectors grew 12.1% and 15.2%, respectively during the thirteen weeks ended May 28, 2005 and 15.6% and 17.5% respectively, for the thirty-nine weeks ended May 28, 2005, as compared to the same periods during fiscal 2004.

The primary reasons for the increase in sales to existing customers during the thirteen and thirty-nine week periods ended May 28, 2005 is a combination of the success of our sales force in expanding the accounts as well as the continued strength of the U.S. economy. Our national account and government programs sales initiative has been successful throughout fiscal 2005 and contributed strongly to the Company’s total sales growth and the diversification of our customer mix and revenue base. We expect this to continue throughout fiscal 2005. The growth of the national account and government programs (these customers tend to order larger amounts) and the strong U.S. economy are the primary reasons for the increase in average order size to approximately $253 in the third quarter of fiscal 2005 from $236 in the third quarter of fiscal 2004. These large customers tend to require advanced e-commerce capabilities. We believe that our ability to transact with our customers through various portals and directly through our website, MSCDirect.com, gives us a competitive advantage over smaller suppliers. Sales through MSCDirect.com increased to $50.3 million for the thirteen weeks ended May 28, 2005 and $134.4 million for the thirty-nine weeks ended May 28, 2005, an increase of 41.7% and 43.4% respectively, compared to the same periods in fiscal 2004. As our national account and government programs continue to grow we will benefit from processing more sales through electronic transactions that carry lower operating costs than orders processed manually through our call centers and branches. These cost savings may be offset by the lower gross margins on national accounts and government business.

The Company grew the field sales force to 498 associates at May 28, 2005, an increase of approximately 9.0% from sales associate levels of 457 at May 29, 2004, as part of our strategy to acquire new accounts and expand existing

accounts across all customer types. Included in the sales force numbers is the sales team for the Los Angeles area branch that was opened as part of the Company’s west coast expansion. Sales related to the new branch did not have a significant impact on the Company’s total sales for the thirteen and thirty-nine week periods ended May 28, 2005.

We introduced approximately 22,000 new SKUs in our fiscal 2005 catalog and removed approximately 22,000 non-productive SKUs. We believe that the new SKUs improve the overall quality of our offering and will be important factors in our sales growth. The Company expects to add approximately 21,000 new SKUs and remove approximately 25,000 existing SKUs in its fiscal 2006 catalog which will be distributed in September 2005.

Gross Profit

	Thirteen Weeks Ended								Thirty-Nine Weeks Ended
	May 28, 2005			May 29, 2004			Percentage Change		May 28, 2005			May 29, 2004			Percentage Change

Gross Profit	$	133,005		$	114,880		15.8	%	$	376,668		$	319,419		17.9	%
Gross Profit Margin	46.1		%	45.0		%			45.8		%	45.1		%

The increase in gross profit margin for the thirteen and thirty-nine week periods ended May 28, 2005 is primarily attributable to the full quarter impact of the Company passing along most vendor and independent freight carrier price increases incurred in the previous quarter to our customers, raising prices on certain SKUs based on market conditions, increased rebate revenue due to higher buying levels to support sales growth, increased efforts to buy better by employing competitive reverse auctions, the benefits of volume buying from our vendors, and expanding our selection of higher margin imported private label and generic products coupled with a strong U.S. economy. As our national account and government programs sales continue to grow, the Company will face continued pressures on maintaining this gross profit margin because these customers receive lower pricing due to their higher sales volumes. The Company plans to continue its efforts to buy better in order to maintain current margin levels. Any current quarter price increases from vendors have been absorbed by the Company rather than passed along to our customers. We expect to maintain our gross profit margin at approximately 46% for the remainder of fiscal 2005.

Operating Expenses

	Thirteen Weeks Ended								Thirty-Nine Weeks Ended
	May 28, 2005			May 29, 2004			Percentage Change		May 28, 2005			May 29, 2004			Percentage Change

Operating Expenses	$	84,047		$	76,993		9.2	%	$	241,914		$	224,639		7.7	%
Percentage of Net Sales	29.1		%	30.2		%			29.4		%	31.7		%

The increase in operating expenses in dollars for the thirteen and thirty-nine week periods ended May 28, 2005 as compared to the same periods in fiscal 2004 was primarily the result of an increase in payroll and payroll related costs and an increase in freight expense to support increased sales. The increase in freight expense includes the freight cost surcharges discussed above, most of which were passed along to customers.

Payroll and payroll related costs continue to make up a significant portion of our operating expenses. These costs increased primarily as a result of an increase in headcount, annual payroll increases, medical benefits expense and accruals for incentive compensation, as internal performance goals to date have been exceeded. The increase in headcount is primarily the result of an increase in sales associates as part of our overall growth strategy (which includes additional sales associates in the new Los Angeles area branch) to build sales as well as an increase in personnel in our distribution centers and branches to handle increased sales volume. We expect to continue to build the sales force during the remainder of fiscal 2005 resulting in increased payroll and payroll related costs.

The Company has experienced an increase in the cost of claims filed by participants for medical expenses for its self-insured group health plan. As such, the Company has continued to record increases to its medical costs during the current quarter resulting in an increase to operating expenses. It is uncertain as to whether the medical costs will continue to increase through the remainder of fiscal 2005.

We expect that the medical costs will be approximately $3.0 million greater in the fourth quarter of fiscal 2005 as compared to the fourth quarter of fiscal 2004, in part because last year's fourth quarter reflected an exceptionally good experience rating as compared to what we are trending at for fiscal 2005.

The decrease in operating expenses as a percentage of net sales for the thirteen and thirty-nine week periods ended May 28, 2005, as compared to the same periods in fiscal 2004 is primarily the result of productivity gains and the allocation of fixed expenses over a larger revenue base.

Income From Operations

	Thirteen Weeks Ended								Thirty-Nine Weeks Ended
	May 28, 2005			May 29, 2004			Percentage Change		May 28, 2005			May 29, 2004			Percentage Change

Income from Operations	$	48,958		$	37,887		29.2	%	$	134,754		$	94,780		42.2	%
Percentage of Net Sales	17.0		%	14.8		%			16.4		%	13.4		%

The increase in dollars for the thirteen and thirty-nine week periods ended May 28, 2005 as compared to the same periods in fiscal 2004 was primarily attributable to the increase in net sales offset in part by the increase in operating expenses as described above. As a percentage of net sales, the increase is primarily the result of the distribution of expenses over a larger revenue base and the increase in gross profit margin as described above offset by the dollar increase in operating expenses also described above.

Interest Income, Net

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	May 28, 2005		May 29, 2004		Percentage Change		May 28, 2005		May 29, 2004		Percentage Change

Interest Income, net	$	1,291	$	684	88.7	%	$	3,029	$	1,444	109.8	%

The increase in interest income for the thirteen and thirty-nine week periods ended May 28, 2005 as compared to the same periods in fiscal 2004 is a result of higher average cash and investments balances and higher interest rates. The Company’s cash balances decreased at the end of the current quarter as a result of purchases of the Company’s Class A common stock. The cash and investment balances are expected to continue to decrease next quarter as a result of the funding of the $1.50 per share special one time dividend, that was approved by the Board of Directors on June 29, 2005, to be paid on August 15, 2005 to holders of record on August 8, 2005. As such, the interest income is expected to decrease as well next quarter.

Provision for Income Taxes

	Thirteen Weeks Ended								Thirty-Nine Weeks Ended
	May 28, 2005			May 29, 2004			Percentage Change		May 28, 2005			May 29, 2004			Percentage Change

Provision for Income Taxes	$	19,620		$	14,789		32.7	%	$	53,765		$	37,652		42.8	%
Effective Tax Rate	39.0		%	38.3		%			39.0		%	39.0		%

The increase in the effective tax rate for the quarter ended May 29, 2005 as compared to the same quarter in fiscal 2004 was due to lower state taxes in fiscal 2004.

Net Income

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	May 28, 2005		May 29, 2004		Percentage Change		May 28, 2005		May 29, 2004		Percentage Change

Net Income	$	30,688	$	23,873	28.5	%	$	84,094	$	58,891	42.8	%
Diluted Earnings Per Share	$	0.44	$	0.34	29.4	%	$	1.19	$	0.85	40.0	%

The factors which affected net income and diluted earnings per share for the thirteen and thirty-nine week periods ended May 28, 2005 as compared to the same periods in fiscal 2004 have been discussed above. Due to the Company’s buy back of Class A common stock this quarter occurring towards the end of the period, the impact to the diluted weighted average shares was not significant.

Liquidity and Capital Resources

Our primary capital needs have been to fund the working capital requirements necessitated by our sales growth, adding new products, and facilities expansions. In the past, our primary sources of financing have been cash generated from operations. Taken as a whole, cash, cash equivalents and all available-for-sale securities increased slightly to $183.4 million at May 28, 2005 from $183.3 million at the fiscal year ended August 28, 2004. We anticipate cash flows from operations, available cash reserves and available lines of credit will be adequate to support our operations for at least the next twelve months.

The Company has obtained an uncommitted $30.0 million line of credit, up to $5.0 million of which can be used for letters of credit, with a large financial institution (the “Lender”). The Company can draw funds on this line subject to future due diligence and negotiation with the Lender; because the line of credit is uncommitted, there is no assurance the Lender will advance funds if and when requested. Borrowings will bear interest at rates mutually agreed to when a borrowing request is made. The Company expects borrowings to bear interest at the bank’s base prime rate in effect (6.0% at May 28, 2005) or, at the Company’s option, 0.75% above the reserve adjusted LIBOR rates for loans with interest periods of thirty, sixty or ninety days. There are no covenants associated with this line of credit and no funds have been drawn down to date.

Net cash provided by operating activities for the thirty-nine week periods ended May 28, 2005 and May 29, 2004 was $88.3 million and $45.3 million, respectively. The increase of approximately $43.0 million in net cash provided from operations resulted primarily from higher net income, lower growth in accounts receivables and inventories, offset by lower growth in accounts payable and accrued liabilities.

Net cash used in investing activities for the thirty-nine week periods ended May 28, 2005 and May 29, 2004 was $11.8 million and $126.6 million, respectively. The decrease in the usage of cash is primarily the net result of lower investment in available-for-sale securities and higher proceeds during the thirty-nine week period ended May 28, 2005 compared to the same period in fiscal 2004.

The net cash used in financing activities for the thirty-nine week periods ended May 28, 2005 was $79.6 million and the net cash provided by financing activities for the thirty-nine weeks ended May 29, 2004 was $4.8 million. The change in these amounts are a result of the Company repurchasing shares of Class A common stock, increasing the dividend per share rate and a reduction in the amount of proceeds from stock option exercise activity during the thirty-nine week period ended May 28, 2005.

Based upon market conditions, future expectations, the Company’s strong cash position and the evident value to shareholders the Company repurchased 2.8 million shares of the Company’s Class A common stock during the thirty-nine weeks ended May 28, 2005 through its stock purchase plan at a cost of approximately $84.1 million (approximately $10.9 million of this amount settled and was paid subsequent to May 28, 2005). In addition, subsequent to May 28, 2005 the Company repurchased 667,000 shares of its Class A common stock for approximately $20.6 million. On June 29, 2005, the Board of Directors reaffirmed and replenished the stock purchase plan so that the total number of shares of Class A common stock authorized for future repurchase was restored to 5.0 million shares. The Company currently anticipates that it will continue to make repurchases of Class A common stock based upon market conditions and other investment criteria. The Company has adequate reserves to fund such future repurchases. The Company reissued approximately 51,000 shares of treasury stock during the first thirty-nine weeks of fiscal 2005 to fund the associate stock purchase plan.

On March 21, 2005, the Board of Directors increased the quarterly dividend payable to shareholders to $0.12 per share. The Company paid a dividend of approximately $8.3 million on April 11, 2005 to shareholders of record at the close of business on April 4, 2005. On June 24, 2005 the Board of Directors approved a dividend of $0.12 per share payable on July 18, 2005 to shareholders of record at the close of business on July 11, 2005. The dividend payable will result in a payout of approximately $7.9 million, based on the number of shares outstanding at June 28, 2005. On June 29, 2005, the Board of Directors approved a special one time dividend of $1.50 per share payable on August 15, 2005 to holders of record on August 8, 2005. This dividend payable will result in a payout of approximately $100.0 million. The Company has adequate resources to pay the dividend out of existing cash and available-for-sale investments.

As a result of expanding storage capacity in our Reno distribution center and implementing operational enhancements in other distribution centers, we may see an increase in capital expenditures in fiscal 2006. The Company has adequate resources to fund these plans out of cash, available-for-sale investments and its line of credit.

Related Party Transactions

The Company is affiliated with two real estate entities (together, the “Affiliates”). The Affiliates are owned primarily by the Company’s principal shareholders. The Company paid rent under operating leases to Affiliates for the first thirty-nine weeks of fiscal 2005 of approximately $1.3 million. In the opinion of the Company’s management, based on its market research, the leases with Affiliates are on terms which approximate fair market value.

Contractual Obligations

Certain of the operations of the Company are conducted on leased premises, two of which are leased from Affiliates. The leases (most of which require the Company to provide for the payment of real estate taxes, insurance and other operating costs) are for varying periods, the longest extending to the year 2023. In addition, the Company is obligated under certain equipment and automobile operating leases, which expire on varying dates through 2009. At August 28, 2004, approximate minimum annual rentals on such leases were as follows (in thousands):

Fiscal Year	Total (Including Related Party Commitments)		Related Party Commitments
2005	5,676		1,734
2006	4,942		1,736
2007	4,168		1,745
2008	2,911		1,745
2009	2,517		1,747
Thereafter	24,668		24,514
Total	$	44,882	$	33,221

Since August 28, 2004 there has been no material change in these obligations.

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet arrangements.

Critical Accounting Estimates

The Company makes estimates, judgments and assumptions in determining the amounts reported in the consolidated financial statements and accompanying notes. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The estimates are used to form the basis for making judgments about the carrying values of assets and liabilities and the amount of revenues and expenses reported that are not readily apparent from other sources. Actual results may differ from these estimates. The Company’s significant accounting policies are described in the notes to the consolidated financial statements in its Annual Report on Form 10-K for the fiscal year ended August 28, 2004. The accounting policies described below are impacted by the Company’s critical accounting estimates.

Allowance for Doubtful Accounts

The Company performs periodic credit evaluations of its customers’ financial condition and collateral is generally not required. The Company evaluates the collectibility of accounts receivable based on numerous factors, including past transaction history with customers and their credit-worthiness. The Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience and adjusts it for changes in the overall aging of accounts receivable as well as specifically identified customers that are having difficulty meeting their financial obligations (e.g. bankruptcy, etc.). Historically, there has not been significant volatility in our bad debt expense due to strict adherence to our credit policy.

Inventory Valuation Reserve

Inventories consist of merchandise held for resale and are stated at the lower of weighted average cost or market. Management evaluates the need to record adjustments to reduce inventory to net realizable value on a quarterly basis. The reserve is initially provided for based on a percentage of sales. Each quarter items to be liquidated are specifically identified and written-down, using historical data and reasonable assumptions, to its estimated market value, if less than its cost. Inherent in the estimates of market value

are management’s estimates related to customer demand, technological and/or market obsolescence, possible alternative uses and ultimate realization of excess inventory.

Sales Returns

The Company establishes a reserve for anticipated sales returns based on historical return rates. The return rates are periodically analyzed for changes in current return trends. Historically, material adjustments to the estimated sales reserve have not been required based on actual returns. In the second quarter of fiscal 2005, based on an improvement in return trends the Company was able to adjust the reserve downward. If future returns are materially greater than estimated returns the sales return reserve may need to be increased which would adversely impact recorded sales.

Reserve for Self-insured Group Health Plan

The Company has a self-insured group health plan. The Company is responsible for all covered claims to a maximum liability of $300,000 per participant during a September 1 plan year. Benefits paid in excess of $300,000 are reimbursed to the plan under the Company’s stop loss policy. Due to the time lag between the time claims are incurred and the time claims are paid by the Company, a reserve for these incurred but not reported (“IBNR”) amounts is established. The amount of this reserve is reviewed quarterly and is evaluated based on a historical analysis of claim trends, reporting and processing lag times and medical costs inflation. In the second quarter of fiscal 2005, the Company increased the IBNR reserve due to a trend of increased dollar amounts of medical claims by plan participants. If this trend continues the IBNR reserve may continue to increase.

Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, the following factors should be considered in evaluating the Company and its business. Our future operating results depend upon many factors and are subject to various risks and uncertainties. The known material risks and uncertainties which may cause our operating results to vary from anticipated results or which may negatively affect our operating results and profitability are as follows:

Changes in our customer and product mix could cause our gross margin percentage to fluctuate.

From time to time, since our formation, we have experienced changes in our customer mix and in our product mix. Changes in our customer mix have resulted from geographic expansion, daily selling activities within current geographic markets, and targeted selling activities to new customer segments. Changes in our product mix have resulted from marketing activities to existing customers and needs communicated to us from existing and prospective customers. As our national accounts and government program sales grow, the Company will face continued pressures on maintaining gross margin because these customers receive lower pricing due to their higher sales volumes. There can be no assurance that we will be able to maintain our historical gross margins. The Company plans to continue its efforts to buy better in order to maintain current margin levels. Although we have been successful in incrementally increasing our gross margin percentage by varying our customer and product mix over the last several years and our strategy has emphasized higher margin, lower volume orders, changes in our customer and product mix, including increased sales to lower margin, higher volume national account and government programs, could cause our gross margin percentage to fluctuate or decline from time to time in the future.

Our industry is consolidating which could cause it to become more competitive.

The business of selling MRO supplies in North America is currently undergoing some consolidation. This consolidation is being driven by customer needs and supplier capabilities, which could cause the industry to become more competitive as greater economies of scale are achieved by suppliers.

Traditional MRO suppliers are attempting to consolidate the market through internal expansion, through acquisition or merger with other industrial and construction suppliers, or through a combination of both. This consolidation allows suppliers to improve efficiency and spread fixed costs over a greater number of sales, and to achieve other benefits derived from economies of scale.

Customers are increasingly aware of the total costs of fulfillment, and of their need to have consistent sources of supply at multiple locations. Consistent sources of supply provide not just reliable product quantities, but also consistent pricing, quality, services and engineering capabilities. We believe these customer needs could result in fewer suppliers as the industry consolidates, and as the remaining suppliers become larger and capable of being a consistent source of supply.

The trend of our industry toward consolidation could make it more difficult for us to maintain our operating margins. There can be no assurance that we will be able to take advantage of the trend or that we can do so effectively.

In addition, as various sectors of the industrial and construction customer base face increased foreign competition, and in fact lose business to foreign competitors or shift their operations overseas in an effort to reduce expenses, we may face increased difficulty in growing and maintaining our market share and growth prospects.

We operate in a highly competitive industry.

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 or 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 become more concentrated over the next few years, which may make the industry more competitive. Our competitors challenge us with a greater variety of product offerings, financial resources, services or a combination of all of these factors.

Although we have recently had success in diversifying our customer base, which we believe will assist us to better manage periodic downturns in the manufacturing industry, there can be no assurance that sales to these additional customers will offset the adverse effects of other competitive trends in our industry, including those discussed above.

Recent changes in accounting for equity-related compensation could impact our financial statements.

On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“FAS 123R”). Adoption of FAS 123R will require us to measure all employee stock-based compensation awards using a fair value method and to record such expense in our consolidated financial statements, as opposed to the pro forma note presentation (based on the intrinsic value method) previously used. FAS 123R will be effective for us at the beginning of our next fiscal year on August 28, 2005. We are currently evaluating which fair value method we will use upon adoption of FAS 123R and the potential impacts adoption could have on our compensation plans and reported financial results. The impact of the adoption of FAS 123R and the fair value method on the Company’s consolidated financial statements is expected to result in lower reported net income than that reported under the intrinsic value method as previously disclosed on a pro forma basis in the Notes to our Consolidated Financial Statements.

Rising commodity and energy prices may adversely affect operating margins.

As commodity and energy prices increase, the Company may be subject to price increases from vendors that we may be unable to pass along to our customers. Raw material costs used in our products (steel, tungsten, etc.) and energy costs have been rising resulting in increased production costs for our vendors. The fuel costs of our independent freight companies are rising as well. Our vendors and independent freight carriers typically look to pass these costs along to us through price increases. When we are forced to accept these price increases we may not be able to pass them along to our customers resulting in lower operating margins.

The risk of cancellation or rescheduling of orders may cause our operating results to fluctuate.

The cancellation or rescheduling of orders may cause our operating results to fluctuate. Although we strive to maintain ongoing relationships with our customers, there is an ongoing risk that orders may be cancelled or rescheduled due to fluctuations in our customers’ business needs or purchasing budgets. Additionally, although our customer base is diverse, ranging from one-person machine shops to Fortune 1000 companies and large government agencies, the cancellation or rescheduling of significant orders by larger customers may still have a material adverse effect on our operating results from time to time.

Work stoppages and other disruptions at transportation centers or shipping ports may adversely affect our ability to obtain inventory and make deliveries to our customers.

Our ability to provide same-day shipping of our core business products is an integral component of our overall business strategy. Disruptions at transportation centers or shipping ports, such as the severe winter weather experienced during the third quarter of fiscal 2003 and the longshoreman’s strike on the West Coast in fiscal 2002, affect both our ability to maintain core products in inventory and deliver products to our customers on a timely basis, which may in turn adversely affect our results of operations.

The risks of war, terrorism, and similar hostilities may adversely affect our operating results.

In addition to having an impact on general economic conditions, events such as the attacks of September 11, 2001 and the recent conflict in Iraq may adversely affect our revenues and our ability to service our customers. We believe that both the events of September 11, 2001 and the Iraq conflict had an adverse effect on our results of operations, although the impact of such events can be difficult to quantify.

Disruptions of our information systems could adversely affect us.

We believe that our computer software programs are an integral part of our business and growth strategies. We depend upon our information systems to help process orders, to manage inventory and accounts receivable collections, to purchase, sell and ship products efficiently and on a timely basis, to maintain cost-effective operations, and to help provide superior service to our customers. Any disruption in the operation of our information systems, including widespread power outages such as those that affected the northeastern and midwest United States in August 2003, could have a material adverse effect on our business, financial condition and results of operations. Although we utilize disaster recovery techniques and procedures, which we believe are adequate to fulfill our needs, and we believe that planned enhancements and upgrades to the next generation of our existing operating platforms will be sufficient to sustain our present operations and our anticipated growth for the foreseeable future, there can be no assurance that disruptions of our information systems will not occur.

Our success is dependent on certain key personnel.

Our success depends largely on the efforts and abilities of certain key senior management. The loss of the services of one or more of such key personnel could have a material adverse effect on our business and financial results. We do not maintain any key-man insurance policies with respect to any of our executive officers.

Distribution Center Expansions and Enhancements

In the future, as part of our long term strategic planning, we may open new distribution centers to improve our efficiency, geographic distribution and market penetration and will make capital improvements and operational enhancements to certain of our existing distribution centers. Moving or opening distribution centers and effecting such improvements requires a substantial capital investment, including expenditures for real estate and construction, and opening new distribution centers requires a substantial investment in inventory. In addition, new distribution centers will have an adverse impact on distribution expenses as a percentage of sales, inventory turnover and return on investment in the periods prior to and for some time following the commencement of operations of each new distribution center. Additionally, until sales volumes mature at new distribution centers, operating expenses as a percentage of sales may be adversely impacted. Further,

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth repurchases, by the Company, of its outstanding shares of Class A common stock during the quarter ended May 28, 2005:

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
02/27/05-04/02/05	—	$	—	—	2,987,000
04/03/05-04/30/05	5,900	$	26.92	5,900	2,981,100
05/01/05-05/28/05 (2)	2,313,870	$	29.70	2,313,870	667,230
Total	2,319,770	$	29.69	2,319,770

(1) During fiscal 1999, the Board of Directors approved the Company’s stock repurchase plan to allow for the repurchase of up to 5,000,000 shares of the Company’s Class A common stock. In September 2002, the Board of Directors reaffirmed and replenished the stock purchase plan so that the total number of shares of Class A common stock authorized for future repurchase was restored to 5,000,000 shares. On June 29, 2005 the Board of Directors reaffirmed and replenished the stock purchase plan so that the total number of shares of Class A common stock authorized for future repurchase was restored to 5,000,000 shares. There is no expiration date for this program.

(2) Of the 2,313,870 shares of Class A common stock repurchased by the Company, 351,750 shares settled subsequent to May 28, 2005. The Company repurchased 667,230 shares of Class A common stock subsequent to May 28, 2005 at an average price paid of $31.90 per share.

New York		11-3289165
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

75 Maxess Road, Melville, NY		11747
(Address of principal executive offices)		(Zip Code)

31.1		Chief Executive Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Chief Financial Officer’s Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

		MSC INDUSTRIAL DIRECT CO., INC.
		(Registrant)


Dated: June 28, 2005	By:		/s/ MITCHELL JACOBSON
			Chairman and Chief Executive Officer


Dated: June 28, 2005	By:		/s/ CHARLES BOEHLKE
			Executive Vice President and Chief Financial Officer

PART I.	FINANCIAL INFORMATION	1
Item 1.	Consolidated Financial Statements (Unaudited)	1
	Consolidated Balance Sheets May 28, 2005 and August 28, 2004	1
	Consolidated Statements of Income Thirteen and Thirty-Nine weeks ended May 28, 2005 and May 29, 2004	2
	Consolidated Statement of Shareholders’ Equity Thirty-Nine weeks ended May 28, 2005	3
	Consolidated Statements of Cash Flows Thirty-Nine weeks ended May 28, 2005 and May 29, 2004	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	19
PART II.	OTHER INFORMATION	20
Item 1.	Legal Proceedings	20
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	20
Item 6.	Exhibits	21
SIGNATURES		22