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WESCO INTERNAT : WESCO International, Inc. Reports Fourth Quarter and Full-Year 2009 Results

01/28/2010 | 07:05am US/Eastern
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PITTSBURGH, Jan. 28 /PRNewswire-FirstCall/ -- WESCO International, Inc. (NYSE: WCC), a leading provider of electrical MRO products, construction materials, and advanced integrated supply procurement outsourcing services, today announced its 2009 fourth quarter and full-year financial results.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030508/WCCLOGO )

The following results are for the quarter-ended December 31, 2009 compared to the quarter-ended December 31, 2008:

    --  Consolidated net sales were $1,132.7 million compared to $1,429.8
        million, a decline of 20.8%, including a 0.7% positive impact from
        foreign exchange rates.  Fourth quarter 2009 consolidated net sales were
        down 1.7% compared to third quarter 2009 levels.
    --  Gross profit was $217.0 million, or 19.2% of sales, compared to $284.4
        million, or 19.9% of sales.  Fourth quarter 2009 gross margin was equal
        to the third quarter 2009 gross margin.
    --  Sales, general & administrative (SG&A) expenses were $168.3 million, or
        14.9% of sales, compared to $204.6 million, or 14.3% of sales.  SG&A
        expenses were down $36.3 million, or 17.7% over the comparable quarter.
    --  Operating profit was $42.6 million, or 3.8% of sales, compared to $73.2
        million or 5.1% of sales.
    --  Total interest expense was $13.8 million compared to $14.4 million.
        Interest expense in the current quarter was comprised of $12.6 million
        of cash interest expense and $1.2 million of non-cash interest expense. 
        Interest expense in the prior year quarter was comprised of $10.8
        million of cash interest and $3.6 million of non-cash interest.
    --  Effective tax rate for the quarter was 26.6% compared to 34.4%.
    --  Net income for the quarter was $21.8 million compared to $39.7 million.
    --  Diluted earnings per share were $0.51 based on 42.9 million shares
        compared to $0.94 with 42.4 million shares.
    --  Free cash flow in the current quarter was a use of $1.7 million.

Mr. John J. Engel, WESCO's Chief Executive Officer, stated, "We successfully closed a very challenging year having taken quick and decisive actions resulting in operating cost reductions of $140 million. The economy appears to be in the bottoming process as we have experienced two consecutive quarters of stable sequential sales and margins. We are beginning to see signs of positive momentum in certain end markets with continued pressure in non-residential construction and utility. Overall, our 2009 performance was favorable compared to the last economic downturn and demonstrates the improvements made to our business."

The following results are for the full-year period ended December 31, 2009 compared to the full-year period ended December 31, 2008:

    --  Consolidated net sales were $4,624 million compared to $6,111 million, a
        decline of 24.3% including a 0.9% negative impact from foreign exchange
        rates, and a negative impact as a result of one less workday.
    --  Gross profit was $900 million, or 19.5% of sales, compared to $1,207
        million, or 19.7% of sales.
    --  SG&A expenses were $694 million, or 15.0% of sales, compared to $834
        million, or 13.7% of sales.  SG&A expenses were down $140 million, or
        16.8% over the comparable full-year.
    --  Operating profit was $180 million or 3.9% of sales compared to $346
        million, or 5.7% of sales.
    --  Total interest expense was $53.8 million compared to $64.2 million.
        Interest expense in 2009 was comprised of $42.0 million cash interest
        expense and $11.8 million non-cash interest expense.  Interest expense
        in the prior year was comprised of $49.7 million cash interest expense
        and $14.5 million non-cash interest expense.
    --  Full-year pre-tax income includes a $6.0 million gain, net of expenses,
        related to the third quarter exchange of $357 million of convertible
        debentures.
    --  Effective full-year tax rate was 23.4% compared to 29.8%.  Without the
        impact of the convertible debenture exchange completed in the third
        quarter, the effective 2009 year-to-date tax rate would have been 24.0%.
    --  Net income for the full-year was $105 million compared to $204 million.
    --  Diluted earnings per share were $2.46 based on 42.7 million shares
        compared to $4.71 based on 43.3 million shares. Previously, the Company
        recorded a pre-tax gain on its third quarter convertible debt exchange
        which had a $0.16 per share favorable impact on reported results.
    --  Full-year free cash flow was $279 million, a record for the Company.
    --  Total debt, including debt discount, was $875 million compared to $1,141
        million.  The debt discount related to the convertible notes was $183
        million compared to $40.5 million.  Total net debt was reduced by $292
        million or 27.7% to $762 million from year-end 2008 levels.

Mr. Engel continued, "WESCO provides leading supply chain solutions for customers and suppliers supported by an extensive portfolio of products and services. During this period of economic uncertainty and slow market recovery, we remain focused on growing sales and margins while providing excellent customer service. I am very proud of the extra effort demonstrated by all WESCO employees in 2009 and am confident in our team's ability to perform well in 2010."

Teleconference

WESCO will conduct a teleconference to discuss the fourth quarter earnings as described in this News Release on Thursday, January 28, 2010, at 11:00 a.m. E.S.T. The conference call will be broadcast live over the Internet and can be accessed from the Company's website at http://www.wesco.com. The conference call will be archived on this Internet site for seven days.

WESCO International, Inc. (NYSE: WCC) is a publicly traded Fortune 500 holding company, headquartered in Pittsburgh, Pennsylvania, whose primary operating entity is WESCO Distribution, Inc. WESCO Distribution is a leading distributor of electrical construction products and electrical and industrial maintenance, repair and operating (MRO) supplies, and is the nation's largest provider of integrated supply services. 2009 annual sales were approximately $4.6 billion. The Company employs approximately 6,100 people, maintains relationships with over 17,000 suppliers, and serves more than 113,000 customers worldwide. Major markets include commercial and industrial firms, contractors, government agencies, educational institutions, telecommunications businesses and utilities. WESCO operates seven fully automated distribution centers and approximately 380 full-service branches in North America and select international markets, providing a local presence for area 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, 2008, 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         Three Months
                                      Ended                Ended
                                  December 31,         December 31,
                                    2009 (1)           2008 (1) (2)
                                                    
    Net sales                       $1,132.7             $1,429.8
    Cost of goods sold
     (excluding depreciation 
     and amortization below)           915.7  80.8%       1,145.4  80.1%
    Selling, general and
     administrative expenses           168.3  14.9%         204.6  14.3%
    Depreciation and amortization        6.1                  6.6
                                         ---                  ---
      Income from operations            42.6   3.8%          73.2   5.1%
    Interest expense, net               13.8                 14.4
    Gain on debt exchange                  -                    -
    Other income                        (0.9)                (1.7)
                                        ----                 ----
      Income before income taxes        29.7   2.6%          60.5   4.2%
    Provision for income taxes           7.9                 20.8
                                         ---                 ----
      Net income                       $21.8   1.9%         $39.7   2.8%
                                       =====                =====

    Diluted earnings per common
     share                             $0.51                $0.94
    Weighted average common
     shares outstanding and
     common share equivalents
     used in computing diluted
     earnings per share (in
     millions)                          42.9                 42.4

    (1) See Exhibit A for footnote detail regarding the new accounting
        standard for the convertible debentures.
    (2) Balances have been revised to reflect retrospective implementation 
        of the new accounting standard for the convertible debentures.



                                  WESCO INTERNATIONAL, INC.
                         CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   (dollar amounts in millions, except per share amounts)
                                         (Unaudited)

                                   Twelve Months        Twelve Months
                                       Ended               Ended
                                   December 31,         December 31,
                                      2009 (1)             2008 (1)
                                                        
    Net sales                        $4,624.0              $6,110.8
    Cost of goods sold
     (excluding depreciation 
     and amortization below)          3,724.1  80.5%        4,904.2  80.3%
    Selling, general and
     administrative expenses            693.9  15.0%          834.3  13.7%
    Depreciation and
     amortization                        26.0                  26.7
                                         ----                  ----
      Income from operations            180.0   3.9%          345.6   5.7%
    Interest expense, net                53.8                  64.2
    Gain on debt exchange                (6.0)                    -
    Other income                         (5.0)                 (9.4)
                                         ----                  ----
      Income before income taxes        137.2   3.0%          290.8   4.8%
    Provision for income taxes           32.1                  86.7
                                         ----                  ----
      Net income                       $105.1   2.3%         $204.1   3.3%
                                       ======                ======

    Diluted earnings per
     common share                       $2.46                 $4.71
    Weighted average common
     shares outstanding and
     common share equivalents
     used in computing diluted
     earnings per share (in
     millions)                           42.7                  43.3

    (1) See Exhibit A for footnote detail regarding the new accounting
        standard for the convertible debentures.



                              WESCO INTERNATIONAL, INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                             (dollar amounts in millions)
                                     (Unaudited)

                                                     December 31, December 31,
                                                       2009 (1)   2008 (1)(2)
                               Assets
    Current Assets
      Cash and cash equivalents                           $112.3        $86.3
      Trade accounts receivable                            635.8        791.4
      Inventories, net                                     507.2        605.7
      Other current assets                                  75.7         74.3
                                                            ----         ----
         Total current assets                            1,331.0      1,557.7
    Other assets                                         1,163.2      1,162.1
                                                         -------      -------
         Total assets                                   $2,494.2     $2,719.8
                                                        ========     ========

              Liabilities and Stockholders' Equity
    Current Liabilities
      Accounts payable                                    $453.1       $556.5
      Short-term and current debt                           94.0        298.8
      Other current liabilities                            133.7        150.7
                                                           -----        -----
         Total current liabilities                         680.8      1,006.0

    Long-term debt                                         597.9        801.4
    Other noncurrent liabilities                           219.2        157.3
                                                           -----        -----
         Total liabilities                               1,497.9      1,964.7

    Stockholders' Equity
         Total stockholders' equity                        996.3        755.1
                                                           -----        -----
         Total liabilities and stockholders' equity     $2,494.2     $2,719.8
                                                         =======     ========

    (1) See Exhibit A for footnote detail regarding the new accounting
        standard for the convertible debentures.
    (2) Certain balances have been reclassified to conform with current 
        year presentation.



                              WESCO INTERNATIONAL, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollar amounts in millions)
                                     (Unaudited)

                                                Twelve Months   Twelve Months
                                                   Ended             Ended 
                                                 December 31,    December 31,
                                                     2009             2008
    Operating Activities:
      Net income                                     $105.1           $204.1
          Add back (deduct):
         Depreciation and amortization                 26.0             26.7
         Deferred income taxes                         (8.0)            (3.7)
         Change in Trade and other receivables, net   179.7             28.4
         Change in Inventories, net                   107.8             26.6
         Change in Accounts Payable                  (114.3)           (31.2)
         Other                                         (4.7)            29.0
                                                       ----             ----
               Net cash provided by operating
                activities                            291.6            279.9

    Investing Activities:
      Capital expenditures                            (13.0)           (35.3)
      Proceeds from sale of subsidiary                    -             60.0
      Other                                             2.3             (8.3)
                                                        ---             ----
              Net cash (used) provided by
               investing activities                   (10.7)            16.4

    Financing Activities:
      Debt borrowings (repayments), net              (255.6)          (178.1)
      Equity activity, net                              2.6            (57.9)
      Other                                           (11.9)           (29.0)
                                                      -----            -----
             Net cash used by financing
              activities                             (264.9)          (265.0)

      Effect of exchange rate changes
       on cash and cash equivalents                    10.0            (17.3)
                                                       ----            -----

      Net change in cash and cash equivalents          26.0             14.0
      Cash and cash equivalents at the
       beginning of the period                         86.3             72.3
                                                       ----             ----
      Cash and cash equivalents at the
       end of the period                             $112.3            $86.3
                                                     ======            =====



                            WESCO INTERNATIONAL, INC.
                RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                          (dollar amounts in thousands)
                                   (Unaudited)

                                    Twelve Months  Twelve Months
                                       Ended          Ended
                                     December 31,  December 31,
    Financial Leverage:                 2009           2008

          Income from operations     $179,952       $345,667
      Depreciation and amortization    26,045         26,731
                                       ------         ------
         EBITDA                      $205,997       $372,398
                                      =======       ========


                                   December 31,    December 31,
                                       2009           2008

      Short-term debt                      $-       $295,000
      Current debt                     93,977          3,823
      Long-term debt                  597,869        801,427
      Debt discount related
       to convertible notes (1)       182,689         40,501
                                      -------         ------
         Total debt including
          debt discount              $874,535     $1,140,751
                                     ========     ==========
      Financial leverage ratio            4.2            3.1


    Note: Financial leverage is provided by the Company as an indicator of
    capital structure position.  Financial leverage is calculated by dividing
    total debt, including debt discount, by the trailing twelve months 
    earnings before interest, taxes, depreciation and amortization (EBITDA).



                                            Three Months      Twelve Months
                                                Ended            Ended
    Free Cash Flow:                          December 31,     December 31,
    (dollar amounts in millions)                 2009             2009

       Cash flow  provided by operations          $0.8           $291.6
       Less:  Capital expenditures                (2.5)           (13.0)
                                                  ----            -----
         Free cash flow                          $(1.7)          $278.6
                                                 =====           ======

    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 provide
    a source of funds for any of the Company's financing needs.

    (1) The convertible debentures are presented in the consolidated balance
        sheets in long-term debt net of the unamortized discount.



                           WESCO INTERNATIONAL, INC.
         RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
                        (dollar amounts in millions)
                                (Unaudited)

                                    Three Months    Three Months
                                       Ended           Ended
                                     December 31,   December 31,
    Gross Profit:                       2009            2008

    Net sales                        $1,132.7        $1,429.8
    Cost of goods sold
     (excluding depreciation and
     amortization)                      915.7         1,145.4
                                        -----         -------
    Gross profit                       $217.0          $284.4
                                        =====          ======
    Gross margin                         19.2%           19.9%


                                    Twelve Months  Twelve Months
                                        Ended          Ended
                                     December 31,   December 31,
    Gross Profit:                       2009           2008

    Net sales                        $4,624.0        $6,110.8
    Cost of goods sold
     (excluding
     depreciation and
     amortization)                    3,724.1         4,904.2
                                      -------         -------
    Gross profit                       $899.9        $1,206.6
                                        =====        ========
    Gross margin                         19.5%           19.7%

    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.

Exhibit A

On January 1, 2009, WESCO retrospectively implemented the provisions of new guidance concerning convertible debt instruments to its 2.625% Convertible Senior Debentures due 2025 and 1.75% Convertible Senior Debentures due 2026 and on August 27, 2009 WESCO applied the guidance to its 6.0% Convertible Senior Debentures due 2029. Prior to the adoption of this guidance, WESCO accounted for its convertible debt instruments solely as long-term debt. The new guidance requires an issuer of certain convertible debt instruments to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer's nonconvertible debt borrowing rate. This accounting treatment results in an increase in non-cash interest reported in the financial statements, a decrease in long term debt, an increase in equity and an increase in deferred income taxes.

The following table provides the incremental effect of applying the new guidance on individual line items in the three months ended December 31, 2008 consolidated income statement:




                                               Previously
                                                Reported        Revised
                                               ----------       -------
                                               Three Months  Three Months
                                                  Ended          Ended
                                               December 31,  December 31,
                                                  2008           2008
                                                  ----           ----
    Condensed Consolidated Statement of Income                       
    Interest Expense, net                         $10.8          $14.4
    Income before income taxes                    $64.1          $60.5
    Provision for income taxes                    $22.2          $20.8
    Net Income                                    $41.9          $39.7
    Earnings per share:
    Diluted                                       $0.99          $0.94

SOURCE WESCO International, Inc.

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