PITTSBURGH, July 27, 2017
/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 2017.
Mr. John J. Engel, WESCO's
Chairman, President and CEO, commented, "Our second quarter results
were in line with the outlook we provided in April. Notably,
we returned to organic sales growth in the quarter, after eight
consecutive quarters of sales declines, driven by growth in our
Industrial and CIG end markets as well as in our Canadian and
International businesses. Our sales momentum accelerated as
the quarter progressed, and this trend has continued into July,
with all geographies growing to start the third
quarter. Backlog grew sequentially in the quarter versus the
typical seasonal decline, with June marking the highest monthly
backlog since 2012. Operating margin was also in line with our
expectations, as we continue to execute our cost management and
supply chain initiatives to mitigate the effects of a
still-challenging and demand-constrained pricing
environment. Additionally, during the quarter, we repurchased
$50 million of shares, while
remaining within our targeted financial leverage band.
The first half has developed as we expected, and we are
encouraged with the improving momentum of our business. Our
technical capabilities and service offerings promote loyal customer
relationships and growth. In the second half, as our expected
growth accelerates, we plan to invest to strengthen our
differentiated business model and improve our competitive advantage
in 2018 and beyond. Based upon our first half results and our
plan for the second half, we have narrowed our full-year
expectations for sales to be up 1% to 3%, operating margin to be
4.1% to 4.3%, and EPS to be $3.60 to
$3.90 per diluted share with an effective tax rate of
approximately 27%. We continue to expect free cash flow
generation for the year to be at least 90% of net income."
The following are results for the three months ended
June 30, 2017 compared to the three months ended June 30,
2016:
- Net sales were $1.91 billion for
the second quarter of 2017 and 2016. Organic sales for the second
quarter of 2017 grew by 1.0% as foreign exchange rates negatively
impacted net sales by 1.1%. Sequentially, net sales increased 7.7%
and organic sales increased 8.0%.
- Cost of goods sold for the second quarter of 2017 was
$1.54 billion and gross profit was
$366.1 million, compared to cost of
goods sold and gross profit of $1.53
billion and $379.5 million for
the second quarter of 2016, respectively. As a percentage of net
sales, gross profit was 19.2% and 19.9% for the second quarter of
2017 and 2016, respectively.
- Selling, general and administrative ("SG&A") expenses were
$267.3 million, or 14.0% of net
sales, for the second quarter of 2017, compared to $274.5 million, or 14.4% of net sales, for the
second quarter of 2016.
- Operating profit was $83.1
million for the current quarter, compared to $88.0 million for the second quarter of 2016.
Operating profit as a percentage of net sales was 4.4% for the
second quarter of 2017, compared to 4.6% for the second quarter of
2016.
- Interest expense for the second quarter of 2017 was
$16.8 million, compared to
$19.5 million for the second quarter
of 2016. Non-cash interest expense for the second quarter of 2017
and 2016, which includes amortization of debt discounts and
deferred financing fees, and interest related to uncertain tax
positions, was $1.1 million and
$2.2 million, respectively.
- The effective tax rate for the current quarter was 25.3%,
compared to 27.3% for the prior year second quarter. The lower
effective tax rate in the current quarter as compared to the prior
year's comparable quarter is primarily the result of favorable
discrete items and the mix of income earned in jurisdictions with
lower tax rates.
- Net income attributable to WESCO International, Inc. was
$49.5 million and $49.8 million for the second quarter of 2017 and
2016, respectively.
- Earnings per diluted share was $1.02 for the second quarter of 2017 and 2016,
based on 48.8 million and 48.6 million diluted shares,
respectively.
- Operating cash flow for the second quarter of 2017 was
$19.1 million, compared to
$60.0 million for the second quarter
of 2016. Free cash flow for the second quarter of 2017 was
$13.8 million, or 28% of net income,
compared to $56.5 million, or 113% of
net income, for the second quarter of 2016. Additionally, the
Company completed $50 million of
share repurchases in the second quarter.
The following are results for the six months ended June 30,
2017 compared to the six months ended June 30, 2016:
- Net sales were $3.68 billion for
the first six months of 2017, compared to $3.69 billion for the first six months of 2016, a
decrease of 0.1%. Acquisitions had a positive impact on net sales
of 0.4% and were partially offset by a 0.2% negative impact from
foreign exchange rates, resulting in a 0.3% decrease in organic
sales for the first six months of 2017.
- Cost of goods sold for the first six months of 2017 was
$2.97 billion and gross profit was
$716.1 million, compared to cost of
goods sold and gross profit of $2.95
billion and $734.6 million for
the first six months of 2016, respectively. As a percentage of net
sales, gross profit was 19.4% and 19.9% for the first six months of
2017 and 2016, respectively.
- Selling, general and administrative ("SG&A") expenses were
$534.3 million, or 14.5% of net
sales, for the first six months of 2017, compared to $543.8 million, or 14.7% of net sales, for the
first six months of 2016.
- Operating profit was $150.2
million for the first six months of 2017, compared to
$157.5 million for the first six
months of 2016. Operating profit as a percentage of net sales was
4.1% for the first six months of 2017, compared to 4.3% for the
first six months of 2016.
- Interest expense for the first six months of 2017 was
$33.5 million, compared to
$38.3 million for the first six
months of 2016. Non-cash interest expense for the first six months
of 2017 and 2016, which includes amortization of debt discounts and
deferred financing fees, and interest related to uncertain tax
positions, was $2.2 million and
$4.2 million, respectively.
- The effective tax rate for the first six months of 2017 was
25.1%, compared to 29.2% for the first six months of 2016. The
current year's effective tax rate is lower than the prior year
primarily due to favorable discrete items, including a benefit from
the exercise and vesting of stock-based awards, as well as the mix
of income earned in jurisdictions with lower tax rates.
- Net income attributable to WESCO International, Inc. was
$87.3 million for the first six
months of 2017, compared to $85.9
million for the first six months of 2016.
- Earnings per diluted share for the first six months of 2017 was
$1.78, based on 49.1 million diluted
shares, compared to $1.79 for the
first six months of 2016, based on 47.8 million diluted
shares.
- Operating cash flow for the first six months of 2017 was
$66.8 million, compared to
$138.6 million for the first six
months of 2016. Free cash flow for the first six months of 2017 was
$57.0 million, or 65% of net income,
compared to $131.5 million, or 156%
of net income, for the first six months of 2016.
Mr. Engel continued, "We remain focused on executing our
strategies to deliver above-market sales growth, improve
profitability, generate strong cash flow, and increase shareholder
value. The free cash flow generation capability of our
business supports continued investment in our differentiated,
services-oriented business model and One WESCO growth initiatives,
including acquisitions, while providing us with the ability to
return capital to our shareholders. Our efforts remain centered on
providing excellent customer service and delivering value to our
customers' operations and supply chains by providing comprehensive
product and service solutions that meet their capital project, MRO,
and OEM needs."
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 27, 2017, at 10:00 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. 2016 annual sales were
approximately $7.3 billion. The
company employs approximately 9,000 people, maintains relationships
with over 25,000 suppliers, and serves approximately 75,000 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, 2016, 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,
2017
|
|
|
June 30,
2016
|
|
|
Net sales
|
$
|
1,909.6
|
|
|
|
$
|
1,911.6
|
|
|
|
Cost of goods sold
(excluding
|
1,543.5
|
|
80.8
|
%
|
|
1,532.1
|
|
80.1
|
%
|
|
depreciation and amortization)
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
267.3
|
|
14.0
|
%
|
|
274.5
|
|
14.4
|
%
|
|
Depreciation and
amortization
|
15.7
|
|
|
|
17.0
|
|
|
|
Income from operations
|
83.1
|
|
4.4
|
%
|
|
88.0
|
|
4.6
|
%
|
|
Interest expense,
net
|
16.8
|
|
|
|
19.5
|
|
|
|
Income before income taxes
|
66.3
|
|
3.5
|
%
|
|
68.5
|
|
3.6
|
%
|
|
Provision for income
taxes
|
16.8
|
|
|
|
18.6
|
|
|
|
Net income
|
49.5
|
|
2.6
|
%
|
|
49.9
|
|
2.6
|
%
|
|
Net income
attributable to noncontrolling interests
|
—
|
|
|
|
0.1
|
|
|
|
Net income attributable to WESCO International, Inc.
|
$
|
49.5
|
|
2.6
|
%
|
|
$
|
49.8
|
|
2.6
|
%
|
|
|
|
|
|
|
|
Earnings per diluted
common share
|
$
|
1.02
|
|
|
|
$
|
1.02
|
|
|
|
Weighted-average
common shares outstanding and common
|
|
|
|
|
|
|
share equivalents used
in computing earnings per diluted
|
|
|
|
|
|
|
share (in
millions)
|
48.8
|
|
|
|
48.6
|
|
|
|
WESCO
INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in
millions, except per share amounts)
(Unaudited)
|
|
|
Six Months
Ended
|
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
Net sales
|
$
|
3,682.2
|
|
|
|
$
|
3,687.5
|
|
|
|
Cost of goods sold
(excluding
|
2,966.1
|
|
80.6
|
%
|
|
2,952.9
|
|
80.1
|
%
|
|
depreciation and amortization)
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
534.3
|
|
14.5
|
%
|
|
543.8
|
|
14.7
|
%
|
|
Depreciation and
amortization
|
31.6
|
|
|
|
33.3
|
|
|
|
Income from operations
|
150.2
|
|
4.1
|
%
|
|
157.5
|
|
4.3
|
%
|
|
Interest expense,
net
|
33.5
|
|
|
|
38.3
|
|
|
|
Income before income taxes
|
116.7
|
|
3.2
|
%
|
|
119.2
|
|
3.2
|
%
|
|
Provision for income
taxes
|
29.3
|
|
|
|
34.8
|
|
|
|
Net income
|
87.4
|
|
2.4
|
%
|
|
84.4
|
|
2.3
|
%
|
|
Net income (loss)
attributable to noncontrolling interests
|
0.1
|
|
|
|
(1.5)
|
|
|
|
Net income attributable to WESCO International, Inc.
|
$
|
87.3
|
|
2.4
|
%
|
|
$
|
85.9
|
|
2.3
|
%
|
|
|
|
|
|
|
|
Earnings per diluted
common share
|
$
|
1.78
|
|
|
|
$
|
1.79
|
|
|
|
Weighted-average
common shares outstanding and common
|
|
|
|
|
|
|
share equivalents used
in computing earnings per diluted
|
|
|
|
|
|
|
share (in
millions)
|
49.1
|
|
|
|
47.8
|
|
|
|
WESCO
INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(dollar amounts in
millions)
(Unaudited)
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
87.8
|
|
|
$
|
110.1
|
|
|
Trade accounts
receivable, net
|
1,145.0
|
|
|
1,034.4
|
|
|
Inventories
|
866.3
|
|
|
821.4
|
|
|
Other current
assets
|
206.5
|
|
|
206.5
|
|
|
Total current assets
|
2,305.6
|
|
|
2,172.4
|
|
|
|
|
|
|
Other
assets
|
2,318.1
|
|
|
2,318.5
|
|
|
Total assets
|
$
|
4,623.7
|
|
|
$
|
4,490.9
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
$
|
769.0
|
|
|
$
|
684.7
|
|
|
Current debt and
short-term borrowings
|
25.2
|
|
|
22.1
|
|
|
Other current
liabilities
|
170.2
|
|
|
190.0
|
|
|
Total current liabilities
|
964.4
|
|
|
896.8
|
|
|
|
|
|
|
Long-term
debt
|
1,334.5
|
|
|
1,363.1
|
|
|
Other noncurrent
liabilities
|
229.7
|
|
|
221.0
|
|
|
Total liabilities
|
2,528.6
|
|
|
2,480.9
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
Total stockholders' equity
|
2,095.1
|
|
|
2,010.0
|
|
|
Total liabilities and stockholders' equity
|
$
|
4,623.7
|
|
|
$
|
4,490.9
|
|
|
WESCO
INTERNATIONAL, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in
millions)
(Unaudited)
|
|
|
Six Months
Ended
|
|
June 30,
2017
|
|
June 30,
2016
|
|
Operating
Activities:
|
|
|
|
|
Net income
|
$
|
87.4
|
|
|
$
|
84.4
|
|
|
Add back
(deduct):
|
|
|
|
|
Depreciation and
amortization
|
31.6
|
|
|
33.3
|
|
|
Deferred income
taxes
|
6.4
|
|
|
13.4
|
|
|
Change in trade
receivables, net
|
(96.0)
|
|
|
(17.3)
|
|
|
Change in
inventories
|
(36.9)
|
|
|
(4.4)
|
|
|
Change in accounts
payable
|
76.8
|
|
|
(18.8)
|
|
|
Other
|
(2.5)
|
|
|
48.0
|
|
|
Net cash provided by
operating activities
|
66.8
|
|
|
138.6
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
Capital
expenditures
|
(9.8)
|
|
|
(7.1)
|
|
|
Acquisition
payments
|
—
|
|
|
(50.9)
|
|
|
Other
|
3.5
|
|
|
(8.2)
|
|
|
Net cash used in
investing activities
|
(6.3)
|
|
|
(66.2)
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
Debt repayments,
net
|
(30.0)
|
|
|
(76.3)
|
|
|
Equity activity,
net
|
(56.7)
|
|
|
(0.4)
|
|
|
Other
|
0.2
|
|
|
0.6
|
|
|
Net cash used in
financing activities
|
(86.5)
|
|
|
(76.1)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
3.7
|
|
|
3.7
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
(22.3)
|
|
|
—
|
|
|
Cash and cash
equivalents at the beginning of the period
|
110.1
|
|
|
160.3
|
|
|
Cash and cash
equivalents at the end of the period
|
$
|
87.8
|
|
|
$
|
160.3
|
|
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial
measures. These financial measures include organic sales growth,
gross profit, financial leverage and free cash flow. The Company
believes that these non-GAAP measures are useful to investors as
these provide a better understanding of sales performance, the use
of debt 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 organic sales data)
(Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
Organic Sales
Growth:
|
June 30,
2017
|
|
June 30,
2017
|
|
|
|
|
|
Change in net sales
|
(0.1)
|
%
|
|
(0.1)
|
%
|
|
Impact from acquisitions
|
—
|
%
|
|
0.4
|
%
|
|
Impact from foreign exchange rates
|
(1.1)
|
%
|
|
(0.2)
|
%
|
|
Impact from number of workdays
|
—
|
%
|
|
—
|
%
|
|
Organic
sales growth
|
1.0
|
%
|
|
(0.3)
|
%
|
|
Three Months
Ended
|
|
Organic Sales
Growth - Sequential:
|
June 30,
2017
|
|
|
|
Change in net sales
|
7.7
|
%
|
|
Impact from acquisitions
|
—
|
%
|
|
Impact from foreign exchange rates
|
(0.3)
|
%
|
|
Impact from number of workdays
|
—
|
%
|
|
Organic
sales growth
|
8.0
|
%
|
|
|
Note: Organic sales
growth is a measure of sales performance. 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,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,909.6
|
|
|
$
|
1,911.6
|
|
|
$
|
3,682.2
|
|
|
$
|
3,687.5
|
|
|
Cost of goods sold
(excluding depreciation
|
|
|
|
|
|
|
|
|
and
amortization)
|
1,543.5
|
|
|
1,532.1
|
|
|
2,966.1
|
|
|
2,952.9
|
|
|
Gross
profit
|
$
|
366.1
|
|
|
$
|
379.5
|
|
|
$
|
716.1
|
|
|
$
|
734.6
|
|
|
Gross
margin
|
19.2
|
%
|
|
19.9
|
%
|
|
19.4
|
%
|
|
19.9
|
%
|
|
|
Note: Gross profit is
a financial measure commonly used within the distribution industry.
Gross profit is calculated by deducting cost of goods sold,
excluding depreciation and amortization, from net sales. 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,
2017
|
|
December 31,
2016
|
|
|
|
|
|
Income from
operations
|
$
|
324.8
|
|
|
$
|
332.0
|
|
|
Depreciation and
amortization
|
65.2
|
|
|
66.9
|
|
|
EBITDA
|
$
|
390.0
|
|
|
$
|
398.9
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
Current debt and
short-term borrowings
|
$
|
25.2
|
|
|
$
|
22.1
|
|
|
Long-term
debt
|
1,334.5
|
|
|
1,363.1
|
|
|
Debt discount and
deferred financing fees(1)
|
15.3
|
|
|
17.3
|
|
|
Total debt
|
$
|
1,375.0
|
|
|
$
|
1,402.5
|
|
|
|
|
|
|
Financial leverage
ratio
|
3.5
|
|
|
3.5
|
|
|
|
(1) Long-term debt is
presented in the condensed consolidated balance sheets net of
deferred financing fees and debt discount.
|
|
Note: Financial
leverage measures the use of debt. 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,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
|
Cash flow provided by
operations
|
$
|
19.1
|
|
|
$
|
60.0
|
|
|
$
|
66.8
|
|
|
$
|
138.6
|
|
|
Less: Capital
expenditures
|
(5.3)
|
|
|
(3.5)
|
|
|
(9.8)
|
|
|
(7.1)
|
|
|
Free cash
flow
|
$
|
13.8
|
|
|
$
|
56.5
|
|
|
$
|
57.0
|
|
|
$
|
131.5
|
|
|
Percentage of net
income
|
28
|
%
|
|
113
|
%
|
|
65
|
%
|
|
156
|
%
|
|
|
Note: Free cash flow
is a measure of liquidity. Capital expenditures are deducted from
operating cash flow to determine free cash flow. Free cash flow is
available to fund other investing and financing
activities.
|
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SOURCE WESCO International, Inc.