WESCO INTERNATIONAL, INC. PITTSBURGH, Jan. 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, today announced its 2015 fourth quarter results.
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Our fourth quarter sales declined 7%, reflecting weakness in commodity-driven end markets and continued foreign exchange headwinds. Organic sales were down 8% against a strong prior year quarter, with the U.S. and Canada down 5% and 14%, respectively. Although overall sales were down, our data communications and utility sales grew again in the quarter. We continued to tightly manage our costs and streamline our organization, and the benefits of these actions partially mitigated the impact of lower sales and business mix on earnings per share, which declined versus prior year. Free cash flow generation was very strong at more than two times net income. As anticipated, our leverage ratio ended the year slightly above our target range following the acquisition of Needham Electric Supply during the fourth quarter. With continued strong cash generation, we expect to reduce our leverage ratio back within our target range of 2.0 to 3.5 times EBITDA in the near term."
The following are results for the three months ended December 31, 2015 compared to the three months ended December 31, 2014:
-- Net sales were $1,861.5 million for the fourth quarter of 2015, compared
to $1,995.5 million for the fourth quarter of 2014, a decrease of 6.7%.
Normalized organic sales decreased 7.6%; foreign exchange rates
negatively impacted sales by 3.7% and were partially offset by the
positive impacts from acquisitions and number of workdays of 3.0% and
1.6%, respectively.
-- Gross profit was $363.5 million, or 19.5% of sales, for the fourth
quarter of 2015, compared to $402.2 million, or 20.2% of sales, for the
fourth quarter of 2014.
-- Selling, general & administrative (SG&A) expenses were $256.9 million,
or 13.8% of sales, for the fourth quarter of 2015, compared to $260.9
million, or 13.1% of sales, for the fourth quarter of 2014.
-- Operating profit was $90.0 million for the current quarter, compared to
$124.2 million for the fourth quarter of 2014. Operating profit as a
percentage of sales was 4.8% and 6.2% in 2015 and 2014, respectively.
-- Interest expense for the fourth quarter of 2015 was $9.9 million,
compared to $20.2 million for the fourth quarter of 2014. Non-cash
interest expense, which includes convertible debt interest, interest
related to uncertain tax positions, the amortization of deferred
financing fees and accrued interest, for the fourth quarter of 2015 and
2014 was income of $8.1 million and expense of $0.6 million,
respectively. The resolution of transfer pricing matters associated with
previously filed tax positions resulted in non-cash interest income of
$9.4 million for the fourth quarter of 2015.
-- The effective tax rate for the current quarter was 39.3% compared to
28.8% for the prior year fourth quarter. The resolution of the tax
matter described above resulted in incremental income tax expense of
$11.7 million, which combined with the effect of the interest income
associated with this matter, increased the effective tax rate in the
fourth quarter of 2015 by 11.3 percentage points.
-- Net income attributable to WESCO International, Inc. of $48.4 million
for the current quarter was down 35.0% from $74.5 million for the prior
year quarter.
-- Earnings per diluted share for the fourth quarter of 2015 were $1.03 per
share, based on 47.2 million diluted shares, compared to earnings per
diluted share of $1.40 in the fourth quarter of 2014, based on 53.0
million diluted shares.
-- Free cash flow for the fourth quarter of 2015 was $101.6 million, or
209% of net income, compared to $106.9 million for the fourth quarter of
2014.
Mr. Engel continued, "On a full year basis, our results reflect the challenging economic and end market environment. Sales, operating margin and earnings per share declined versus prior year but were in line with the outlook we provided during our third quarter earnings call. We remain clearly focused on executing our One WESCO strategy 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 One WESCO growth initiatives, including acquisitions, while providing a return of capital to shareholders. We reaffirm our expectation of sales in the range of flat to down 5%, EPS of $3.75 to $4.20 per diluted share, and free cash flow generation of at least 90% of net income in 2016, as we outlined in our investor outlook call in December."
The following results are for the year ended December 31, 2015 compared to the year ended December 31, 2014:
-- Net sales were $7,518.5 million for 2015, compared to $7,889.6 million
for 2014, a decrease of 4.7%. Normalized organic sales decreased 3.3%;
foreign exchange rates negatively impacted sales by 3.4% and were
partially offset by a positive impact from acquisitions of 2.0%.
-- Gross profit was $1,493.7 million, or 19.9% of sales, for 2015 compared
to $1,611.0 million, or 20.4% of sales, for 2014.
-- SG&A expenses for 2015 were $1,055.0 million, or 14.0% of sales,
compared to SG&A expenses of $1,076.8 million, or 13.6% of sales, for
2014.
-- Operating profit was $373.7 million for 2015, compared to $466.2 million
for 2014. Operating profit as a percentage of sales was 5.0% and 5.9% in
2015 and 2014, respectively.
-- Interest expense for 2015 was $69.8 million, compared to $82.1 million
for 2014. Non-cash interest expense, which includes convertible debt
interest, interest related to uncertain tax positions, the amortization
of deferred financing fees and accrued interest, for 2015 and 2014 was
$3.5 million and $8.1 million, respectively. The resolution of transfer
pricing matters associated with previously filed tax positions resulted
in non-cash interest income of $9.4 million in the fourth quarter of
2015.
-- The effective tax rate was 31.4% for 2015 compared to 28.3% for 2014.
The resolution of the tax matter described above resulted in incremental
income tax expense of $11.7 million, which combined with the effect of
the interest income associated with this matter, increased the effective
tax rate in 2015 by 2.9 percentage points.
-- Net income attributable to WESCO International, Inc. of $210.7 million
for 2015 was down 23.6% from $275.9 million for 2014.
-- Earnings per diluted share for 2015 were $4.18 per share, based on 50.4
million diluted shares, compared to earnings per diluted share of $5.18
per share for 2014, based on 53.3 million diluted shares.
-- Free cash flow for 2015 was $261.4 million, or 125% of net income,
compared to $230.7 million in 2014.
Mr. Engel added, "WESCO provides leading supply chain solutions for customers and suppliers supported by a broad and expanding portfolio of products and services. During this period of economic uncertainty and slow market recovery, customers and suppliers are looking for strong value-creating supply chain partners. Our efforts are centered on providing excellent customer service and delivering value to our customers' operations and supply chains. I am very proud of the extra effort demonstrated by all WESCO associates in serving our customers last year, and I am confident in our team's ability to improve our performance in 2016."
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the fourth quarter earnings as described in this News Release on Thursday, January 28, 2016, at 11:00 a.m. E.S.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 replay will be available on the WESCO website through 9:00 A.M., February 4, 2016.
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") product, 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, 2014, as well as the Company's other reports filed with the Securities and Exchange Commission.
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months Three Months
Ended Ended
December 31, December 31,
2015 2014
---- ----
Net sales $1,861.5 $1,995.5
Cost of goods sold (excluding 1,498.0 80.5% 1,593.3 79.8%
depreciation and amortization below)
Selling, general and administrative expenses 256.9 13.8% 260.9 13.1%
Depreciation and amortization 16.6 17.1
---- ----
Income from operations 90.0 4.8% 124.2 6.2%
Interest expense, net 9.9 20.2
---
Income before income taxes 80.1 4.3% 104.0 5.2%
Provision for income taxes 31.5 29.9
---- ----
Net income 48.6 2.6% 74.1 3.7%
Less: Net income (loss) attributable to noncontrolling interest 0.2 (0.4)
--- ----
Net income attributable to WESCO International, Inc. $48.4 2.6% $74.5 3.7%
===== =====
Earnings per diluted common share $1.03 $1.40
Weighted average common shares outstanding and common share equivalents used in computing earnings per diluted
share (in millions) 47.2 53.0
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Twelve Twelve
Months Ended Months Ended
December 31, December 31,
2015 2014
---- ----
Net sales $7,518.5 $7,889.6
Cost of goods sold (excluding 6,024.8 80.1% 6,278.6 79.6%
depreciation and amortization below)
Selling, general and administrative expenses 1,055.0 14.0% 1,076.8 13.6%
Depreciation and amortization 65.0 68.0
---- ----
Income from operations 373.7 5.0% 466.2 5.9%
Interest expense, net 69.8 82.1
----
Income before income taxes 303.9 4.0% 384.1 4.9%
Provision for income taxes 95.5 108.7
---- -----
Net income 208.4 2.8% 275.4 3.5%
Less: Net income (loss) attributable to noncontrolling interest (2.3) (0.5)
---- ----
Net income attributable to WESCO International, Inc. $210.7 2.8% $275.9 3.5%
====== ======
Earnings per diluted common share $4.18 $5.18
Weighted average common shares outstanding and common share equivalents used in computing earnings per diluted
share (in millions) 50.4 53.3
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollar amounts in millions)
(Unaudited)
December 31, December 31,
2015 2014
---- ----
Assets
Current Assets
Cash and
cash
equivalents $160.3 $128.3
Trade
accounts
receivable,
net 1,075.3 1,117.4
Inventories,
net 810.1 819.5
Current
deferred
income
taxes 8.5 35.9
Other
current
assets 203.4 249.2
----- -----
Total
current
assets 2,257.6 2,350.3
Other
assets 2,329.9 2,404.0
Total
assets $4,587.5 $4,754.3
======== ========
Liabilities and
Stockholders' Equity
Current Liabilities
Accounts
payable $715.5 $765.1
Current
debt and
short-
term
borrowings 44.3 49.1
Other
current
liabilities 188.0 249.6
----- -----
Total
current
liabilities 947.8 1,063.8
Long-term
debt 1,456.8 1,366.4
Other
noncurrent
liabilities 409.0 396.0
----- -----
Total
liabilities 2,813.6 2,826.2
Stockholders' Equity
Total
stockholders'
equity 1,773.9 1,928.1
------- -------
Total
liabilities
and
stockholders'
equity $4,587.5 $4,754.3
======== ========
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Twelve Twelve
Months Ended Months Ended
December 31, December 31,
2015 2014
---- ----
Operating Activities:
Net income $208.4 $275.4
Add back (deduct):
Depreciation and amortization 65.0 68.0
Deferred income taxes 42.9 5.0
Change in trade receivables, net 40.1 (89.0)
Change in inventories, net 2.4 (36.8)
Change in accounts payable (55.9) 37.6
Other (19.8) (9.0)
----- ----
Net cash provided by operating activities 283.1 251.2
Investing Activities:
Capital expenditures (21.7) (20.5)
Acquisition payments (151.6) (138.6)
Other 3.0 15.0
--- ----
Net cash used in investing activities (170.3) (144.1)
Financing Activities:
Debt repayments, net of proceeds 91.8 (63.7)
Equity activity, net (154.2) (0.7)
Other (5.4) (31.2)
---- -----
Net cash used in financing activities (67.8) (95.6)
Effect of exchange rate changes on cash and cash equivalents (13.0) (6.9)
----- ----
Net change in cash and cash equivalents 32.0 4.6
Cash and cash equivalents at the beginning of the period 128.3 123.7
Cash and cash equivalents at the end of the period $160.3 $128.3
====== ======
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 Twelve
Ended Months Ended
Normalized Organic Sales Growth - Year-Over-Year: December 31, December 31,
2015 2015
---- ----
Change in net sales (6.7)% (4.7)%
Impact from acquisitions 3.0% 2.0%
Impact from foreign exchange rates (3.7)% (3.4)%
Impact from number of workdays 1.6% - %
---
Normalized organic sales growth (7.6)% (3.3)%
===== =====
Note: 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.
Organic sales growth is calculated
by deducting the percentage impact
on net sales from acquisitions,
foreign exchange rates and number
of workdays from the overall
percentage change in consolidated
net sales.
Three Months Ended Twelve Months Ended
------------------ -------------------
Gross Profit: December 31, December 31, December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Net sales $1,861.5 $1,995.5 $7,518.5 $7,889.6
Cost of goods sold (excluding depreciation 1,498.0 1,593.3 6,024.8 6,278.6
and amortization)
Gross profit $363.5 $402.2 $1,493.7 $1,611.0
====== ====== ======== ========
Gross margin 19.5% 20.2% 19.9% 20.4%
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: December 31, December 31,
2015 2014
---- ----
Income
from
operations $373.7 $466.2
Depreciation
and
amortization 65.0 68.0
---- ----
EBITDA $438.7 $534.2
====== ======
December 31, December 31,
2015 2014
---- ----
Current
debt $44.3 $49.1
Long-
term
debt 1,456.8 1,366.4
Debt
discount
related
to
convertible
debentures
and term
loan (1) 164.3 170.4
----- -----
Total
debt
including
debt
discount $1,665.4 $1,585.9
======== ========
Financial
leverage
ratio 3.8 3.0
The convertible debentures and
term loan are presented on the
condensed consolidated balance
sheets in long-term debt, net
(1) of the unamortized discount.
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 EBITDA. EBITDA is defined as
the trailing twelve months
earnings before interest,
taxes, depreciation and
amortization.
Three Months Ended Twelve Months Ended
------------------ -------------------
Free Cash Flow: December 31, December 31, December 31, December 31,
2015 2014 2015 2014
---- ---- ---- ----
Cash flow provided by operations $107.1 $111.4 $283.1 $251.2
Less: Capital expenditures (5.5) (4.5) (21.7) (20.5)
Free cash flow $101.6 $106.9 $261.4 $230.7
====== ====== ====== ======
Percent of net income 209% 144% 125% 84%
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.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/wesco-international-inc-reports-fourth-quarter-2015-results-300211206.html
SOURCE WESCO International, Inc.
