PITTSBURGH, July 28, 2016
/PRNewswire/ -- WESCO International, Inc. (NYSE: WCC), a
leading provider of electrical, industrial, and communications MRO
and OEM products, construction materials, and advanced supply chain
management and logistics services, announces its results for the
second quarter of 2016.
Mr. John J. Engel, WESCO's
Chairman, President and CEO, commented, "Our second quarter results
were in line with our expectations. Sales were flat to prior
year and margins were stable. While the industrial end market
continues to pressure our top-line, all three of our other end
markets posted positive organic sales growth in the quarter,
including construction. Earnings per share grew in the quarter, and
free cash flow remained strong, again exceeding 100% of net
income."
The following are results for the three months ended
June 30, 2016 compared to the three months ended June 30,
2015:
- Net sales were $1,911.6 million
for the second quarter of 2016, compared to $1,916.7 million for the second quarter of 2015,
a decrease of 0.3%. Acquisitions had a 3.7% positive impact on net
sales and were partially offset by a 0.9% impact from foreign
exchange rates, resulting in a 3.1% decrease in normalized organic
sales. Sequentially, net sales increased 7.6% and normalized
organic sales increased 4.8%.
- Cost of goods sold for the second quarter of 2016 was
$1,532.1 million and gross profit was
$379.5 million, compared to cost of
goods sold and gross profit of $1,535.1
million and $381.6 million for
the second quarter of 2015, respectively. As a percentage of net
sales, gross profit was 19.9% for the second quarter of 2016 and
2015.
- Selling, general and administrative ("SG&A") expenses were
$274.5 million, or 14.4% of net sales
for the second quarter of 2016, compared to $275.2 million, or 14.4% of net sales, for the
second quarter of 2015.
- Operating profit was $88.0
million for the current quarter, compared to $90.3 million for the second quarter of 2015.
Operating profit as a percentage of net sales was 4.6% for the
second quarter of 2016, compared to 4.7% for the second quarter of
2015.
- Interest expense for the second quarter of 2016 was
$19.5 million, compared to
$18.6 million for the second quarter
of 2015. Non-cash interest expense for the second quarter of 2016
and 2015, which includes amortization of debt discounts and
deferred financing fees, interest related to uncertain tax
positions, and accrued interest, was $1.2
million and $1.6 million,
respectively.
- The effective tax rate for the current quarter was 27.3%,
compared to 29.3% for the prior year second quarter. The decrease
in the effective tax rate in the second quarter of 2016 as compared
to the prior year's comparable quarter was primarily due to the
relative amounts of income earned in the
United States and foreign jurisdictions, primarily
Canada, and the tax rates in these
jurisdictions.
- Net income attributable to WESCO International, Inc. was
$49.8 million for the current
quarter, compared to $51.8 million
for the second quarter of 2015.
- Earnings per diluted share for the second quarter of 2016 of
$1.02 per share, based on 48.6
million diluted shares, increased 2.0% from $1.00 per share for the second quarter of 2015,
based on 51.9 million diluted shares.
- Operating cash flow for the second quarter of 2016 was
$60.0 million, compared to
$42.5 million for the second quarter
of 2015. Free cash flow for the second quarter of 2016 of
$56.5 million, or 113% of net income,
increased 62% from $34.9 million, or
68% of net income for the second quarter of 2015.
The following are results for the six months ended June 30,
2016 compared to the six months ended June 30, 2015:
- Net sales were $3,687.5 million
for the first six months of 2016, compared to $3,733.0 million for the first six months of
2015, a decrease of approximately 1.2%. Acquisitions and workdays
had positive impacts on net sales of 3.8% and 1.6%, respectively,
and were partially offset by a 1.7% impact from foreign exchange
rates, resulting in a 4.9% decrease in normalized organic sales
growth.
- Cost of goods sold for the first six months of 2016 was
$2,952.9 million and gross profit was
$734.6 million, compared to cost of
goods sold and gross profit of $2,983.7
million and $749.3 million for
the first six months of 2015, respectively. As a percentage of net
sales, gross profit was 19.9% and 20.1% for the first six months of
2016 and 2015, respectively.
- Selling, general and administrative ("SG&A") expenses were
$543.8 million, or 14.7% of net sales
for the first six months of 2016, compared to $539.8 million, or 14.5% of net sales, for the
first six months of 2015.
- Operating profit was $157.5
million for the first six months of 2016, compared to
$177.4 million for the first six
months of 2015. Operating profit as a percentage of net sales was
4.3% for the first six months of 2016, compared to 4.8% for the
first six months of 2015.
- Interest expense for the first six months of 2016 was
$38.3 million, compared to
$39.5 million for the first six
months of 2015. Non-cash interest expense for the first six months
of 2016 and 2015, which includes amortization of debt discounts and
deferred financing fees, interest related to uncertain tax
positions, and accrued interest, was $5.0
million and $7.0 million,
respectively.
- The effective tax rate for the first six months of 2016 was
29.2%, compared to 29.4% for the first six months of 2015.
- Net income attributable to WESCO International, Inc. was
$85.9 million for the first six
months of 2016, compared to $98.7
million for the first six months of 2015.
- Earnings per diluted share for the first six months of 2016 was
$1.79 per share, based on 47.8
million diluted shares, compared to $1.90 per share for the first six months of 2015,
based on 52.1 million diluted shares.
- Operating cash flow for the first six months of 2016 was
$138.6 million, compared to
$132.6 million for the first six
months of 2015. Free cash flow for the first six months of 2016 was
$131.5 million, or 156% of net
income, compared to $120.0 million,
or 123% of net income for the first six months of 2015.
Convertible Debt Redemption
As previously announced, in June
2016 we issued $350 million
aggregate principal amount of 5.375% senior notes due 2024 (the
"2024 Notes"). We intend to use the net proceeds from the 2024
Notes to repay our 6.0% Convertible Senior Debentures due 2029 (the
"2029 Debentures"), which are redeemable on or after September 15, 2016.
- Upon redemption of the 2029 Debentures, we expect to incur a
non-cash, non-recurring charge, the amount of which depends on the
carrying value of the 2029 Debentures and debt market conditions on
the redemption date. If debt market conditions are similar to those
prevailing as of June 30, 2016, we
estimate that the charge would be approximately $120 million on a pre-tax basis, or an
approximate $1.70 unfavorable impact
to EPS.
- Shares underlying the 2029 Debentures would be removed from our
diluted share calculation and newly issued shares resulting from
the conversion would be added to our basic shares, which we
estimate would result in no net change to our fully diluted share
count.
"Redeeming our convertible bonds simplifies our capital
structure and eliminates future EPS dilution associated with these
debt instruments," Mr. Engel said. "We also expect an ongoing
benefit from reduced interest expense as a result of replacing the
2029 Debentures with lower-cost debt."
Outlook
Mr. Engel continued, "We expect weakness in commodity-driven end
markets and foreign exchange headwinds to continue into the second
half of this year. However, we are maintaining our current outlook
for 2016 within the original guidance we provided last December. We
have narrowed our full year outlook for sales to be down 2% to flat
and EPS to be $3.85 to $4.10 per
diluted share, while increasing our free cash flow to at least 100%
of net income. Our full year outlook excludes any impact from the
potential redemption of the convertible bonds previously discussed.
We remain focused on executing our One WESCO strategy to deliver
above-market sales growth, improve profitability, generate strong
free cash flow, and increase shareholder value. In this challenging
environment, our One WESCO value proposition is more important than
ever in providing the comprehensive product and service solutions
customers need to cost-effectively meet their MRO, OEM, and capital
project management requirements."
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the
second quarter earnings as described in this News Release on
Thursday, July 28, 2016, at 11:00 a.m.
E.T. The call will be broadcast live over the Internet and
can be accessed from the Company's Website at http://www.wesco.com.
The call will be archived on this Internet site for seven days.
WESCO International, Inc. (NYSE: WCC), a publicly traded
Fortune 500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading
provider of electrical, industrial, and communications maintenance,
repair and operating (MRO) and original equipment manufacturers
(OEM) products, construction materials, and advanced supply chain
management and logistic services. 2015 annual sales were
approximately $7.5 billion. The
company employs approximately 9,300 people, maintains relationships
with over 25,000 suppliers, and serves over 80,000 active customers
worldwide. Customers include commercial and industrial businesses,
contractors, government agencies, institutions, telecommunications
providers, and utilities. WESCO operates nine fully automated
distribution centers and approximately 500 full-service branches in
North America and international
markets, providing a local presence for customers and a global
network to serve multi-location businesses and multi-national
corporations.
The matters discussed herein may contain forward-looking
statements that are subject to certain risks and uncertainties that
could cause actual results to differ materially from expectations.
Certain of these risks are set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2015, as well as the Company's other
reports filed with the Securities and Exchange Commission.
WESCO
INTERNATIONAL, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(dollar amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Net sales
|
$
|
1,911.6
|
|
|
|
$
|
1,916.7
|
|
|
Cost of goods sold
(excluding
|
1,532.1
|
|
80.1%
|
|
1,535.1
|
|
80.1%
|
depreciation and amortization)
|
|
|
|
|
|
Selling, general and
administrative expenses
|
274.5
|
|
14.4%
|
|
275.2
|
|
14.4%
|
Depreciation and
amortization
|
17.0
|
|
|
|
16.1
|
|
|
Income from operations
|
88.0
|
|
4.6%
|
|
90.3
|
|
4.7%
|
Interest expense,
net
|
19.5
|
|
|
|
18.6
|
|
|
Income before income taxes
|
68.5
|
|
3.6%
|
|
71.7
|
|
3.7%
|
Provision for income
taxes
|
18.6
|
|
|
|
21.0
|
|
|
Net income
|
49.9
|
|
2.6%
|
|
50.7
|
|
2.6%
|
Net income (loss)
attributable to noncontrolling interests
|
0.1
|
|
|
|
(1.1)
|
|
|
Net income attributable to WESCO International, Inc.
|
$
|
49.8
|
|
2.6%
|
|
$
|
51.8
|
|
2.7%
|
|
|
|
|
|
|
Earnings per diluted
common share
|
$
|
1.02
|
|
|
|
$
|
1.00
|
|
|
Weighted-average
common shares outstanding and common
|
|
|
|
|
|
share equivalents used
in computing earnings per diluted
|
|
|
|
|
|
share (in
millions)
|
48.6
|
|
|
|
51.9
|
|
|
WESCO
INTERNATIONAL, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(dollar amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
Six Months
Ended
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
Net sales
|
$
|
3,687.5
|
|
|
|
$
|
3,733.0
|
|
|
Cost of goods sold
(excluding
|
2,952.9
|
|
80.1%
|
|
2,983.7
|
|
79.9%
|
depreciation and amortization)
|
|
|
|
|
|
Selling, general and
administrative expenses
|
543.8
|
|
14.7%
|
|
539.8
|
|
14.5%
|
Depreciation and
amortization
|
33.3
|
|
|
|
32.1
|
|
|
Income from operations
|
157.5
|
|
4.3%
|
|
177.4
|
|
4.8%
|
Interest expense,
net
|
38.3
|
|
|
|
39.5
|
|
|
Income before income taxes
|
119.2
|
|
3.2%
|
|
137.9
|
|
3.7%
|
Provision for income
taxes
|
34.8
|
|
|
|
40.5
|
|
|
Net income
|
84.4
|
|
2.3%
|
|
97.4
|
|
2.6%
|
Net loss attributable
to noncontrolling interests
|
(1.5)
|
|
|
|
(1.3)
|
|
|
Net income attributable to WESCO International, Inc.
|
$
|
85.9
|
|
2.3%
|
|
$
|
98.7
|
|
2.6%
|
|
|
|
|
|
|
Earnings per diluted
common share
|
$
|
1.79
|
|
|
|
$
|
1.90
|
|
|
Weighted-average
common shares outstanding and common
|
|
|
|
|
|
share equivalents used
in computing earnings per diluted
|
|
|
|
|
|
share (in
millions)
|
47.8
|
|
|
|
52.1
|
|
|
WESCO
INTERNATIONAL, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollar amounts in
millions)
|
(Unaudited)
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
Assets
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
160.3
|
|
|
$
|
160.3
|
|
Trade accounts
receivable, net
|
1,118.0
|
|
|
1,075.3
|
|
Inventories
|
831.1
|
|
|
810.1
|
|
Current deferred
income taxes (1)
|
—
|
|
|
8.5
|
|
Other current
assets
|
197.3
|
|
|
203.4
|
|
Total current assets
|
2,306.7
|
|
|
2,257.6
|
|
Other assets
(2)
|
2,386.0
|
|
|
2,312.2
|
|
Total assets
|
$
|
4,692.7
|
|
|
$
|
4,569.8
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
$
|
712.9
|
|
|
$
|
715.5
|
|
Current debt and
short-term borrowings
|
44.7
|
|
|
44.3
|
|
Other current
liabilities
|
213.3
|
|
|
188.0
|
|
Total current liabilities
|
970.9
|
|
|
947.8
|
|
|
|
|
|
Long-term debt
(2)
|
1,360.7
|
|
|
1,439.1
|
|
Other noncurrent
liabilities
|
418.5
|
|
|
409.0
|
|
Total liabilities
|
2,750.1
|
|
|
2,795.9
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
Total stockholders' equity
|
1,942.6
|
|
|
1,773.9
|
|
Total liabilities and stockholders' equity
|
$
|
4,692.7
|
|
|
$
|
4,569.8
|
|
(1)
|
The Company early
adopted Accounting Standards Update (ASU) 2015-17, Balance Sheet
Classification of Deferred Taxes, on a prospective
basis during the first quarter of 2016. This guidance requires that
all deferred tax assets and liabilities, along with any related
valuation
allowance, be classified as noncurrent on the balance
sheet.
|
|
|
(2)
|
The Company adopted
ASU 2015-03, Simplifying the Presentation of Debt Issuance
Costs, and ASU 2015-15, Presentation and Subsequent
Measurement of Debt Issuance Costs Associated with Line-of-Credit
Arrangements, on a retrospective basis during the first quarter
of 2016.
These ASUs simplify the presentation of debt issuance costs by
requiring that debt issuance costs related to a recognized
liability be presented in
the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. As a result of
adopting this
guidance, the Company reclassified approximately $17.7 million of
deferred financing fees from other noncurrent assets to long-term
debt in the
balance sheet as of December 31, 2015.
|
|
|
|
|
|
WESCO
INTERNATIONAL, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollar amounts in
millions)
|
(Unaudited)
|
|
|
|
|
|
Six Months
Ended
|
|
|
June 30,
2016
|
|
June 30,
2015
|
Operating
Activities:
|
|
|
|
|
Net income
|
|
$
|
84.4
|
|
$
|
97.4
|
Add back
(deduct):
|
|
|
|
|
Depreciation and
amortization
|
|
33.3
|
|
32.1
|
Deferred income
taxes
|
|
13.4
|
|
16.7
|
Change in trade
receivables, net
|
|
(17.3)
|
|
(3.8)
|
Change in
inventories
|
|
(4.4)
|
|
(26.7)
|
Change in accounts
payable
|
|
(18.8)
|
|
0.8
|
Other
|
|
48.0
|
|
16.1
|
Net cash provided by
operating activities
|
|
138.6
|
|
132.6
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
Capital
expenditures
|
|
(7.1)
|
|
(12.6)
|
Acquisition
payments
|
|
(50.9)
|
|
(68.5)
|
Other
|
|
(8.2)
|
|
1.4
|
Net cash used in
investing activities
|
|
(66.2)
|
|
(79.7)
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
Debt (repayments)
borrowings, net
|
|
(76.3)
|
|
74.4
|
Equity activity,
net
|
|
(0.4)
|
|
(79.1)
|
Other
|
|
0.6
|
|
2.7
|
Net cash used in
financing activities
|
|
(76.1)
|
|
(2.0)
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
3.7
|
|
(4.9)
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
|
—
|
|
46.0
|
Cash and cash
equivalents at the beginning of the period
|
|
160.3
|
|
128.3
|
Cash and cash
equivalents at the end of the period
|
|
$
|
160.3
|
|
$
|
174.3
|
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial
measures. These financial measures include normalized organic sales
growth, gross profit, financial leverage and free cash flow. The
Company believes that these non-GAAP measures are useful to
investors in order to provide a better understanding of the
Company's organic growth trends, capital structure position and
liquidity on a comparable basis. Management does not use these
non-GAAP financial measures for any purpose other than the reasons
stated above.
WESCO
INTERNATIONAL, INC.
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(dollar amounts in
millions, except sales growth data)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
Normalized Organic
Sales Growth - Year-Over-Year:
|
June 30,
2016
|
|
June 30,
2016
|
|
|
|
|
Change in net sales
|
(0.3)%
|
|
(1.2)%
|
Impact from acquisitions
|
3.7%
|
|
3.8%
|
Impact from foreign exchange rates
|
(0.9)%
|
|
(1.7)%
|
Impact from number of workdays
|
—%
|
|
1.6%
|
Normalized
organic sales growth
|
(3.1)%
|
|
(4.9)%
|
|
Three Months
Ended
|
Normalized Organic
Sales Growth - Sequential:
|
June 30,
2016
|
|
|
Change in net sales
|
7.6%
|
Impact from acquisitions
|
1.2%
|
Impact from foreign exchange rates
|
1.6%
|
Impact from number of workdays
|
—%
|
Normalized
organic sales growth
|
4.8%
|
Note: Normalized
organic sales growth is provided by the Company as an additional
financial measure to provide a better understanding of the
Company's sales growth trends. Normalized organic sales growth is
calculated by deducting the percentage impact from acquisitions in
the first
year of ownership, foreign exchange rates and number of workdays
from the overall percentage change in consolidated net
sales.
|
|
Three Months
Ended
|
|
Six Months
Ended
|
Gross
Profit:
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,911.6
|
|
|
$
|
1,916.7
|
|
|
$
|
3,687.5
|
|
|
$
|
3,733.0
|
|
Cost of goods sold
(excluding depreciation and
amortization)
|
1,532.1
|
|
|
1,535.1
|
|
|
2,952.9
|
|
|
2,983.7
|
|
Gross
profit
|
$
|
379.5
|
|
|
$
|
381.6
|
|
|
$
|
734.6
|
|
|
$
|
749.3
|
|
Gross
margin
|
|
19.9%
|
|
|
|
19.9%
|
|
|
|
19.9%
|
|
|
|
20.1%
|
|
Note: Gross profit is
provided by the Company as an additional financial measure. Gross
profit is calculated by deducting cost of goods sold,
excluding depreciation and amortization, from net sales. This
amount represents a commonly used financial measure within the
distribution industry.
Gross margin is calculated by dividing gross profit by net
sales.
|
WESCO
INTERNATIONAL, INC.
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
|
(dollar amounts in
millions)
|
(Unaudited)
|
|
|
|
Twelve Months
Ended
|
Financial
Leverage:
|
June 30,
2016
|
|
December 31,
2015
|
|
|
|
|
Income from
operations
|
$
|
353.8
|
|
|
$
|
373.7
|
|
Depreciation and
amortization
|
|
66.2
|
|
|
|
65.0
|
|
EBITDA
|
$
|
420.0
|
|
|
$
|
438.7
|
|
|
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
Current debt and
short-term borrowings
|
$
|
44.7
|
|
|
$
|
44.3
|
|
Long-term
debt
|
|
1,360.7
|
|
|
|
1,439.1
|
|
Debt discount and
deferred financing fees(1)
|
|
184.0
|
|
|
|
182.0
|
|
Total debt
|
$
|
1,589.4
|
|
|
$
|
1,665.4
|
|
|
|
|
|
Financial leverage
ratio
|
3.8
|
|
|
3.8
|
|
(1)
|
Long-term debt is
presented in the condensed consolidated balance sheets net of
deferred financing fees and debt discount related to the
convertible debentures and term loan.
|
|
Note: Financial
leverage is a non-GAAP financial measure provided by the Company to
illustrate its capital structure position. Financial leverage
ratio is calculated by dividing total debt, including debt discount
and deferred financing fees, by EBITDA. EBITDA is defined as the
trailing twelve
months earnings before interest, taxes, depreciation and
amortization.
|
|
Three Months
Ended
|
|
Six Months
Ended
|
Free Cash
Flow:
|
June 30,
2016
|
|
June 30,
2015
|
|
June 30,
2016
|
|
June 30,
2015
|
|
|
|
|
|
|
|
|
Cash flow provided by
operations
|
$
|
60.0
|
|
|
$
|
42.5
|
|
|
$
|
138.6
|
|
|
$
|
132.6
|
|
Less: Capital
expenditures
|
(3.5)
|
|
|
(7.6)
|
|
|
(7.1)
|
|
|
(12.6)
|
|
Free cash
flow
|
$
|
56.5
|
|
|
$
|
34.9
|
|
|
$
|
131.5
|
|
|
$
|
120.0
|
|
Percent of net
income
|
113%
|
|
|
68%
|
|
|
156%
|
|
|
123%
|
|
|
Note: Free cash flow
is provided by the Company as an additional liquidity measure.
Capital expenditures are deducted from operating cash flow to
determine free cash flow. Free cash flow is available to fund the
Company's financing needs.
|
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SOURCE WESCO International, Inc.