PITTSBURGH, May 2, 2019
/PRNewswire/ -- WESCO International, Inc. (NYSE: WCC), a
leading provider of electrical, industrial, and communications
maintenance, repair and operating (MRO) and original equipment
manufacturer (OEM) products, construction materials, and advanced
supply chain management and logistics services, announces its
results for the first quarter of 2019.
Mr. John J. Engel, WESCO's
Chairman, President and CEO, commented, "We started out 2019 with
sales and margin within our outlook range for the first quarter.
Gross margin, which expanded both sequentially and year-over-year,
reached its highest level since early 2017. Our sales growth
rebounded nicely in March and has continued into April after a slow
start in January and February. Backlog grew sequentially in the
quarter, consistent with normal seasonality, and provides a
positive set-up for the balance of the year. Operating margin was
driven by our gross margin improvement initiatives coupled with our
continued effective operating cost management and controls. We
also completed the acquisition of SLS in March and look forward to
accelerating our results in the lighting marketplace. Our end
markets are expected to remain healthy this year and provide
excellent profitable growth opportunities for WESCO."
The following are results for the three months ended
March 31, 2019 compared to the three months ended
March 31, 2018:
- Net sales were $2.0 billion for
the first quarter of 2019 and 2018. Organic sales for the first
quarter of 2019 grew by 1.0% as the number of workdays and foreign
exchange rates negatively impacted net sales by 1.6% and 1.3%,
respectively, while acquisitions positively impacted net sales by
0.3%.
- Cost of goods sold for the first quarter of 2019 and 2018 was
$1.6 billion, and gross profit was
$382.5 million and $379.9 million, respectively. As a percentage of
net sales, gross profit was 19.5% and 19.1% for the first quarter
of 2019 and 2018, respectively.
- Selling, general and administrative ("SG&A") expenses were
$296.6 million, or 15.1% of net
sales, for the first quarter of 2019 compared to $290.8 million, or 14.6% of net sales, for the
first quarter of 2018.
- Operating profit was $70.7
million for the first quarter of 2019, compared to
$73.2 million for the first quarter
of 2018. Operating profit as a percentage of net sales was 3.6% for
the current quarter, compared to 3.7% for the first quarter of the
prior year.
- Net interest and other for the first quarter of 2019 was
$17.1 million, compared to
$19.8 million for the first quarter
of 2018.
- The effective tax rate for the first quarter of 2019 was 21.7%,
compared to 19.6% for the first quarter of 2018. The higher
effective tax rate in the current quarter is primarily due to the
full application of the international provisions of U.S. tax
reform.
- Net income attributable to WESCO International, Inc. was
$42.4 million and $44.4 million for the first quarter of 2019 and
2018, respectively.
- Earnings per diluted share for the first quarter of 2019 and
2018 was $0.93, based on 45.5 million
and 47.6 million diluted shares, respectively.
- Operating cash flow for the first quarter of 2019 was
$28.9 million, compared to
$53.0 million for the first quarter
of 2018. Free cash flow for the first quarter of 2019 was
$18.1 million, or 43% of net income,
compared to $45.3 million, or 105% of
net income, for the first quarter of 2018.
Mr. Engel continued, "We maintain our full year 2019 outlook for
sales growth of 3% to 6%, as the benefit of the SLS acquisition is
offset by additional foreign currency headwinds. We reaffirm our
full year outlook for operating margin of 4.3% to 4.7%, EPS of
$5.10 to $5.70 per diluted share, and free cash flow
generation of at least 90% of net income. Our focus is on
executing our 2019 plan priorities of sales growth, margin
improvement, investments in our people and processes, and
maintaining our cost and cash management discipline. We also expect
to complete additional share repurchases of at least $75 million during the second quarter. Customers
continue to seek improvement in their operations and supply chains
in an increasingly complex and rapidly changing world. Our talented
team of associates and our robust portfolio of products and
value-added services differentiate WESCO by providing our customers
with complete solutions for their MRO, OEM and capital project
needs."
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the
first quarter of 2019 earnings as described in this News Release on
Thursday, May 2, 2019, at 10:00 a.m.
E.T. The call will be broadcast live over the internet and
can be accessed from the Investor Relations page of the Company's
website at www.wesco.investorroom.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 manufacturer
(OEM) products, construction materials, and advanced supply chain
management and logistic services. 2018 annual sales were
approximately $8.2 billion. The
company employs approximately 9,300 people, maintains relationships
with approximately 30,000 suppliers, and serves approximately
70,000 active customers worldwide. Customers include commercial and
industrial businesses, contractors, government agencies,
institutions, telecommunications providers, and utilities. WESCO
operates 10 fully automated distribution centers and approximately
500 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, 2018, 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,
2019
|
|
|
March
31,
2018
|
|
Net sales
|
$
|
1,961.3
|
|
|
|
$
|
1,993.9
|
|
|
Cost of goods sold
(excluding
|
1,578.8
|
|
80.5
|
%
|
|
1,614.0
|
|
80.9
|
%
|
depreciation and amortization)
|
|
|
|
|
|
Selling, general and
administrative expenses
|
296.6
|
|
15.1
|
%
|
|
290.8
|
|
14.6
|
%
|
Depreciation and
amortization
|
15.2
|
|
|
|
15.9
|
|
|
Income from operations
|
70.7
|
|
3.6
|
%
|
|
73.2
|
|
3.7
|
%
|
Net interest and
other
|
17.1
|
|
|
|
19.8
|
|
|
Income before income taxes
|
53.6
|
|
2.7
|
%
|
|
53.4
|
|
2.7
|
%
|
Provision for income
taxes
|
11.6
|
|
|
|
10.5
|
|
|
Net income
|
42.0
|
|
2.1
|
%
|
|
42.9
|
|
2.2
|
%
|
Net loss attributable
to noncontrolling interests
|
(0.4)
|
|
|
|
(1.5)
|
|
|
Net income attributable to WESCO International, Inc.
|
$
|
42.4
|
|
2.2
|
%
|
|
$
|
44.4
|
|
2.2
|
%
|
|
|
|
|
|
|
Earnings per diluted
common share
|
$
|
0.93
|
|
|
|
$
|
0.93
|
|
|
Weighted-average
common shares outstanding and common
|
|
|
|
|
|
share equivalents used
in computing earnings per diluted
|
|
|
|
|
|
common share (in
millions)
|
45.5
|
|
|
|
47.6
|
|
|
WESCO
INTERNATIONAL, INC.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollar amounts in
millions)
|
(Unaudited)
|
|
|
|
March
31,
2019
|
|
December
31,
2018
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
106.1
|
|
|
$
|
96.3
|
|
|
Trade accounts
receivable, net
|
1,268.6
|
|
|
1,166.6
|
|
|
Inventories
|
1,001.4
|
|
|
948.7
|
|
|
Other current
assets
|
137.7
|
|
|
174.0
|
|
|
Total current assets
|
2,513.8
|
|
|
2,385.6
|
|
|
|
|
|
|
|
Other assets
(1)
|
2,470.9
|
|
|
2,219.4
|
|
|
Total assets
|
$
|
4,984.7
|
|
|
$
|
4,605.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
$
|
870.2
|
|
|
$
|
794.3
|
|
|
Short-term borrowings
and current debt
|
28.5
|
|
|
56.2
|
|
|
Other current
liabilities (1)
|
252.0
|
|
|
211.4
|
|
|
Total current liabilities
|
1,150.7
|
|
|
1,061.9
|
|
|
|
|
|
|
|
Long-term debt,
net
|
1,214.3
|
|
|
1,167.3
|
|
|
Other noncurrent
liabilities (1)
|
423.3
|
|
|
246.1
|
|
|
Total liabilities
|
2,788.3
|
|
|
2,475.3
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
Total stockholders' equity
|
2,196.4
|
|
|
2,129.7
|
|
|
Total liabilities and stockholders' equity
|
$
|
4,984.7
|
|
|
$
|
4,605.0
|
|
|
|
(1)
|
Effective January 1,
2019, the Company adopted Accounting Standards Update 2016-02,
Leases, and all the related amendments ("Topic 842") using
the effective date method. The adoption of Topic 842 resulted in
the recognition of right-of-use assets and lease liabilities in the
balance sheet. As of March 31, 2019, other assets includes
$233.0 million of operating lease assets, and other current
liabilities and other noncurrent liabilities include $59.2 million
and $178.6 million, respectively, of operating lease
liabilities.
|
WESCO
INTERNATIONAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(dollar amounts in
millions)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
2019
|
|
March
31,
2018
|
Operating
Activities:
|
|
|
|
Net income
|
$
|
42.0
|
|
|
$
|
42.9
|
|
Add back
(deduct):
|
|
|
|
Depreciation and
amortization
|
15.2
|
|
|
15.9
|
|
Deferred
income taxes
|
0.9
|
|
|
2.7
|
|
Change in
trade receivables, net
|
(76.7)
|
|
|
(37.5)
|
|
Change in
inventories
|
(40.8)
|
|
|
3.0
|
|
Change in
accounts payable
|
68.1
|
|
|
8.1
|
|
Other
|
20.2
|
|
|
17.9
|
|
Net cash provided by
operating activities
|
28.9
|
|
|
53.0
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
Capital
expenditures
|
(10.8)
|
|
|
(7.7)
|
|
Other
|
(27.7)
|
|
|
(8.7)
|
|
Net cash used in
investing activities
|
(38.5)
|
|
|
(16.4)
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
Debt borrowings
(repayments), net
|
17.2
|
|
|
(16.6)
|
|
Equity activity,
net
|
(2.6)
|
|
|
(1.7)
|
|
Other
|
4.6
|
|
|
(10.6)
|
|
Net cash provided by
(used in) financing activities
|
19.2
|
|
|
(28.9)
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
0.2
|
|
|
(1.8)
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
9.8
|
|
|
5.9
|
|
Cash and cash
equivalents at the beginning of the period
|
96.3
|
|
|
118.0
|
|
Cash and cash
equivalents at the end of the period
|
$
|
106.1
|
|
|
$
|
123.9
|
|
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial
measures. These financial measures include organic sales growth,
gross profit, financial leverage, earnings before interest, taxes,
depreciation and amortization (EBITDA), and free cash flow. The
Company believes that these non-GAAP measures are useful to
investors as they provide a better understanding of sales
performance, and 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
|
Organic Sales
Growth:
|
March
31,
2019
|
|
|
Change in net sales
|
(1.6)
|
%
|
Impact from acquisitions
|
0.3
|
%
|
Impact from foreign exchange rates
|
(1.3)
|
%
|
Impact from number of workdays
|
(1.6)
|
%
|
Organic
sales growth
|
1.0
|
%
|
|
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
|
Gross
Profit:
|
March
31,
2019
|
|
March
31,
2018
|
|
|
|
|
Net sales
|
$
|
1,961.3
|
|
|
$
|
1,993.9
|
|
Cost of goods sold
(excluding depreciation and amortization)
|
1,578.8
|
|
|
1,614.0
|
|
Gross
profit
|
$
|
382.5
|
|
|
$
|
379.9
|
|
Gross
margin
|
19.5
|
%
|
|
19.1
|
%
|
|
|
Three Months
Ended
|
Gross
Profit:
|
December
31,
2018
|
|
|
|
Net sales
|
|
$
|
2,011.4
|
|
Cost of goods sold
(excluding depreciation and amortization)
|
|
|
1,621.1
|
|
Gross
profit
|
|
$
|
390.3
|
|
Gross
margin
|
|
|
19.4
|
%
|
|
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:
|
March
31,
2019
|
|
December
31,
2018
|
|
|
|
|
|
|
Income from
operations
|
$
|
349.9
|
|
|
$
|
352.5
|
|
|
Depreciation and
amortization
|
62.4
|
|
|
63.0
|
|
|
EBITDA
|
$
|
412.3
|
|
|
$
|
415.5
|
|
|
|
|
|
|
|
|
March
31,
2019
|
|
December
31,
2018
|
|
Short-term borrowings
and current debt
|
$
|
28.5
|
|
|
$
|
56.2
|
|
|
Long-term
debt
|
1,214.3
|
|
|
1,167.3
|
|
|
Debt discount and
debt issuance costs (1)
|
8.5
|
|
|
9.6
|
|
|
Total debt
|
1,251.3
|
|
|
1,233.1
|
|
|
Less: cash and cash
equivalents
|
106.1
|
|
|
96.3
|
|
|
Total debt, net of
cash
|
$
|
1,145.2
|
|
|
$
|
1,136.8
|
|
|
|
|
|
|
|
Financial leverage
ratio
|
3.0
|
|
|
3.0
|
|
|
Financial leverage
ratio, net of cash
|
2.8
|
|
|
2.7
|
|
|
|
(1)
|
Long-term debt is
presented in the condensed consolidated balance sheets net of debt
discount and debt issuance costs.
|
|
|
Note: Financial
leverage measures the use of debt. Financial leverage ratio is
calculated by dividing total debt, including debt discount and debt issuance
costs,
by EBITDA. Financial
leverage ratio, net of cash is calculated by dividing total debt, including debt discount and debt
issuance costs, net of cash, 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,
2019
|
|
March 31,
2018
|
|
|
|
|
|
|
Cash flow provided by
operations
|
$
|
28.9
|
|
|
$
|
53.0
|
|
|
Less: Capital
expenditures
|
(10.8)
|
|
|
(7.7)
|
|
|
Free cash
flow
|
$
|
18.1
|
|
|
$
|
45.3
|
|
|
Percentage of net
income
|
43
|
%
|
|
105
|
%
|
|
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 investing and
financing activities.
|
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SOURCE WESCO International, Inc.