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.
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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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