WESCO INTERNATIONAL, INC. PITTSBURGH, April 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 first quarter of 2017.
Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "Our first quarter results were in line with our expectations and the outlook we provided in January. Our sales results reflect improving momentum in our business, driven by a return to growth in Industrial and in Canada. Operating margin was also in line with our expectations, as we continue to execute our cost management and supply chain initiatives in a still-challenging and demand-constrained pricing environment. Net income grew in the quarter, and we once again delivered strong free cash flow, enabling us to reduce our debt and further improve our financial leverage ratio. Based upon our first quarter results, we reaffirm our full-year expectations of sales in the range of flat to up 4%, EPS of $3.60 to $4.00 per diluted share, and free cash flow generation of at least 90% of net income."
The following are results for the three months ended March 31, 2017 compared to the three months ended March 31, 2016:
-- Net sales were $1.77 billion for the first quarter of 2017, compared to
$1.78 billion for the first quarter of 2016, a decrease of 0.2%.
Acquisitions and foreign exchange rates had positive impacts on net
sales of 0.9% and 0.6%, respectively, resulting in a 1.7% decrease in
organic sales.
-- Cost of goods sold for both the first quarter of 2017 and 2016 was $1.42
billion. Gross profit was $350.0 million and $355.2 million for the
first quarter of 2017 and 2016, respectively. As a percentage of net
sales, gross profit was 19.7% and 20.0% for the first quarter of 2017
and 2016, respectively.
-- Selling, general, and administrative ("SG&A") expenses were $266.9
million, or 15.1% of net sales for the first quarter of 2017, compared
to $269.3 million, or 15.2% of net sales, for the first quarter of 2016.
-- Operating profit was $67.1 million for the current quarter, compared to
$69.5 million for the first quarter of 2016. Operating profit as a
percentage of net sales was 3.8% for the first quarter of 2017, compared
to 3.9% for the first quarter of 2016.
-- Interest expense for the first quarter of 2017 was $16.7 million,
compared to $18.8 million for the first quarter of 2016. Non-cash
interest expense for the first 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 $2.1 million,
respectively.
-- The effective tax rate for the current quarter was 25.0%, compared to
31.9% for the prior year first quarter. In the current quarter, the
application of Accounting Standards Update No. 2016-09 resulted in a
discrete benefit from the exercise of stock-based awards, which lowered
the effective tax rate by 3.1 percentage points. In the first quarter of
2016, the settlement of an outstanding tax matter increased the
effective tax rate by 3.4 percentage points.
-- Net income attributable to WESCO International, Inc. was $37.7 million
and $36.0 million for the first quarter of 2017 and 2016, respectively.
-- Earnings per diluted share was $0.76 for the first quarter of 2017,
based on 49.4 million diluted shares, compared to earnings per diluted
share of $0.77 for the first quarter of 2016, based on 46.8 million
diluted shares.
-- Operating cash flow for the first quarter of 2017 was $47.6 million,
compared to $78.6 million for the first quarter of 2016. Free cash flow
for the first quarter of 2017 was $43.1 million, or 114% of net income,
compared to $75.0 million, or 217% of net income for the first quarter
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 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, which meet their capital project, MRO, and OEM needs."
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the first quarter earnings as described in this News Release on Thursday, April 27, 2017, 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. 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
March 31, March 31,
2017 2016
---- ----
Net sales $1,772.6 $1,776.0
Cost of goods sold (excluding 1,422.6 80.3% 1,420.8 80.0%
depreciation and amortization)
Selling, general and administrative expenses 266.9 15.1% 269.3 15.2%
Depreciation and amortization 16.0 16.4
---- ----
Income from operations 67.1 3.8% 69.5 3.9%
Interest expense, net 16.7 18.8
---- ----
Income before income taxes 50.4 2.8% 50.7 2.9%
Provision for income taxes 12.6 16.2
---- ----
Net income 37.8 2.1% 34.5 1.9%
Net income (loss) attributable to noncontrolling interests 0.1 (1.5)
--- ----
Net income attributable to WESCO International, Inc. $37.7 2.1% $36.0 2.0%
===== =====
Earnings per diluted common share $0.76 $0.77
Weighted-average common shares outstanding and common
share equivalents used in computing earnings per diluted
share (in millions) 49.4 46.8
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
March 31, December 31,
2017 2016
---- ----
Assets
Current Assets
Cash and
cash
equivalents $103.0 $110.1
Trade
accounts
receivable,
net 1,060.6 1,034.4
Inventories 850.1 821.4
Other
current
assets 189.7 206.5
----- -----
Total
current
assets 2,203.4 2,172.4
Other
assets 2,307.9 2,318.5
Total
assets $4,511.3 $4,490.9
======== ========
Liabilities and
Stockholders' Equity
Current Liabilities
Accounts
payable $712.4 $684.7
Current
debt and
short-
term
borrowings 29.3 22.1
Other
current
liabilities 178.4 190.0
----- -----
Total
current
liabilities 920.1 896.8
Long-term
debt 1,309.8 1,363.1
Other
noncurrent
liabilities 223.9 221.0
----- -----
Total
liabilities 2,453.8 2,480.9
Stockholders' Equity
Total
stockholders'
equity 2,057.5 2,010.0
------- -------
Total
liabilities
and
stockholders'
equity $4,511.3 $4,490.9
======== ========
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Three Months Ended
March 31, March 31,
2017 2016
---- ----
Operating Activities:
Net income $37.8 $34.5
Add back (deduct):
Depreciation and
amortization 16.0 16.4
Deferred income
taxes 2.3 6.5
Change in trade
receivables, net (22.1) 10.6
Change in
inventories (26.4) (17.5)
Change in
accounts payable 26.1 3.2
Other 13.9 24.9
---- ----
Net cash provided
by operating
activities 47.6 78.6
Investing Activities:
Capital
expenditures (4.5) (3.6)
Acquisition
payments - (50.3)
Other - (8.2)
--- ----
Net cash used in
investing
activities (4.5) (62.1)
Financing Activities:
Debt repayments,
net (48.2) (46.3)
Equity activity,
net (6.5) (0.5)
Other 4.0 12.0
--- ----
Net cash used in
financing
activities (50.7) (34.8)
Effect of
exchange rate
changes on cash
and cash
equivalents 0.5 5.8
--- ---
Net change in
cash and cash
equivalents (7.1) (12.5)
Cash and cash
equivalents at
the beginning of
the period 110.1 160.3
-----
Cash and cash
equivalents at
the end of the
period $103.0 $147.8
====== ======
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 in order to provide a better understanding of the Company's sales 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 organic sales data)
(Unaudited)
Three Months Ended
Organic Sales Growth: March 31,
2017
----
Change in net sales (0.2)%
Impact from acquisitions 0.9%
Impact from foreign exchange
rates 0.6%
Impact from number of workdays -%
---
Organic sales growth (1.7)%
=====
Note: Organic sales growth is an additional financial measure
provided to illustrate the Company's sales trends. 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
Gross Profit: March 31, March 31,
2017 2016
---- ----
Net sales $1,772.6 $1,776.0
Cost of goods sold (excluding depreciation
and amortization) 1,422.6 1,420.8
------- -------
Gross profit $350.0 $355.2
====== ======
Gross margin 19.7% 20.0%
Note: Gross profit, which is a commonly used financial measure within the distribution industry, is an additional financial measure provided by the Company. 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: March 31, December 31,
2017 2016
---- ----
Income from operations $329.6 $332.0
Depreciation and
amortization 66.4 66.9
---- ----
EBITDA $396.0 $398.9
====== ======
March 31, December 31,
2017 2016
---- ----
Current debt and short-
term borrowings $29.3 $22.1
Long-term debt 1,309.8 1,363.1
Debt discount and
deferred financing
fees(1) 16.3 17.3
Total debt $1,355.4 $1,402.5
======== ========
Financial leverage ratio 3.4 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 is a 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
Free Cash Flow: March 31, March 31,
2017 2016
---- ----
Cash flow
provided by
operations $47.6 $78.6
Less: Capital expenditures (4.5) (3.6)
----
Free cash flow $43.1 $75.0
===== =====
Percentage of net income 114% 217%
Note: Free cash flow is as an additional liquidity measure provided by the Company. 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.
