- Strong second quarter cash flow contributed to record
year-to-date operating cash flow of $205 million - Reduced
comparable quarter selling, general and administrative expenses by
$37 million - Productivity initiatives will deliver $90 million of
sustainable cost reductions PITTSBURGH, July 23
/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 second quarter financial
results. (Logo:
http://www.newscom.com/cgi-bin/prnh/20030508/WCCLOGO ) Consolidated
net sales for the second quarter of 2009 were $1,159 million
compared with $1,588 million for the second quarter of 2008, a
decrease of 27%. Adjusted for the negative impact of foreign
exchange, consolidated sales decreased 25.6% for the quarter. Gross
margin for the quarter was 19.3%, down 20 basis points, compared to
the same quarter of 2008. Selling, general and administrative
("SG&A") expenses were $169.9 million, which were $37.0 million
less than the second quarter of 2008 and $17.6 million less than
the first quarter of 2009. Operating income for the quarter was
$47.6 million versus $96.8 million in last year's comparable
quarter. Joint venture income was $1.1 million versus $2.6 million
in last year's comparable quarter. Total debt, net of cash, was
$863 million at quarter end, a reduction of $191 million from
December 31, 2008. Free cash flow was $67 million for the second
quarter 2009 and $199 million for the six months ended June 30,
2009. Total interest expense for the second quarter of $13.8
million compared to $16.0 million for the second quarter of 2008.
On January 1, 2009, WESCO retrospectively implemented the new
accounting standard, FSP APB14-1, for its convertible debentures.
As a result of this change, $3.8 million and $3.6 million of
non-cash interest expense was recorded in the respective second
quarters of 2008 and 2009. The overall reduction to interest
expense in the second quarter of 2009, relative to the second
quarter of 2008, was attributable to lower interest rates and
reduced debt levels. The effective tax rate for the current quarter
was 24.4% versus 30.5% in the comparable quarter of 2008. Net
income for the second quarter was $26.4 million versus $58.0
million for the comparable quarter in 2008. Diluted earnings per
share for the quarter were $0.62 per share versus $1.33 per share
in the second quarter of 2008. A total of 42.7 million shares were
outstanding as of the end of the second quarter of 2009 compared to
43.6 million shares in the comparable period in 2008. Mr. John J.
Engel, WESCO's Senior Vice President and Chief Operating Officer,
commented, "We are taking quick and decisive actions to manage the
Company through the global economic downturn. WESCO is currently
facing weaker end market demand across most of our served markets.
We continue to focus our energies on a series of sales and cost
reduction programs and LEAN productivity initiatives to efficiently
serve our customers and take market share in this challenging
environment." Mr. Stephen A. Van Oss, Senior Vice President and
Chief Administrative Officer, stated, "Our cost reduction efforts
will continue throughout the remainder of the year. Actions are
focused on branch optimization, staffing adjustments, and further
elimination of discretionary expenses. Through the second quarter,
we have made staffing adjustments of over 900 positions from last
year's employment levels. We are on target to reduce overall 2009
SG&A expenses by over $140 million compared to 2008. On a
year-over-year basis, gross margins declined by 20 basis points due
to a heavier mix of direct ship business. LEAN initiatives are
aimed at sales activities and on improving gross margin
performance. We anticipate seeing improved gross margins over the
remainder of the year." Mr. Van Oss continued, "Effective working
capital management resulted in excellent free cash flow which was
directed toward debt reduction. For the quarter, our variable rate
debt was reduced by $76 million and liquidity increased to $389
million. We continue to be focused on cash generation, debt
reduction and improving the Company's capital structure to maximize
liquidity and operational flexibility." Consolidated net sales for
the six months ended June 30, 2009 were $2,339 million versus
$3,053 million in last year's comparable period, a 23.4% decrease.
Consolidated sales decreased 21.6% for the six months ended June
30, 2009 when adjusted for the negative impact of foreign exchange.
Gross margin in the current six-month period of 19.8% was
equivalent to the prior year comparable period. SG&A expenses
for the six months ending June 30, 2009 were $357.3 million or
$61.2 million lower than the comparable period in 2008. Operating
income totaled $91.2 million versus $173.9 million last year. The
effective tax rate for the 2009 six month period was 26.4% versus
30.6% in the comparable period. Net income for the 2009
year-to-date period was $49.7 million versus $100.7 million last
year. Diluted earnings per share were $1.17 per share in 2009
versus $2.30 per share in 2008. Mr. Engel continued, "Customers are
increasingly looking for new ways to streamline their supply chains
while improving the efficiency and effectiveness of their
operations. WESCO professionals are effectively addressing these
needs and are demonstrating a high degree of personal commitment
and extra effort in serving our customers each and every day. We're
building on our leading National Accounts and Integrated Supply
business models, capturing new customers and expanding with current
customers. We're also encouraged by our efforts targeting
government and stimulus plan opportunities which are expected to
provide incremental revenue opportunities as we move through 2009
and into 2010. Our priorities remain centered on providing superior
customer satisfaction with our unparalleled product and service
offering, and continuing to develop and strengthen our team to
ensure that we will emerge an even stronger Company when the
economy rebounds." Teleconference WESCO will conduct a
teleconference to discuss the second quarter earnings as described
in this News Release on Thursday, July 23, 2009, at 11:00 a.m.
E.D.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. 2008
annual sales were approximately $6.1 billion. The Company employs
approximately 6,400 people, maintains relationships with over
23,000 suppliers, and serves more than 115,000 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 400 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 June 30, 2009(1) June 30, 2008(1)(2) Net sales $1,159.2
$1,587.8 Cost of goods sold (excluding depreciation and
amortization below) 935.3 80.7% 1,277.4 80.5% Selling, general and
administrative expenses 169.9 14.7% 206.9 13.0% Depreciation and
amortization 6.4 6.7 Income from operations 47.6 4.1% 96.8 6.1%
Interest expense, net 13.8 16.0 Other (income) expense (1.1) (2.6)
Income before income taxes 34.9 3.0% 83.4 5.3% Provision for income
taxes 8.5 25.4 Net income $26.4 2.3% $58.0 3.7% Diluted earnings
per common share $0.62 $1.33 Weighted average common shares
outstanding and common share equivalents used in computing diluted
earnings per share (in millions) 42.7 43.6 (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) Six Months Six Months Ended
Ended June 30, 2009(1) June 30, 2008(1)(2) Net sales $2,338.8
$3,053.0 Cost of goods sold (excluding depreciation and
amortization below) 1,876.8 80.2% 2,447.0 80.2% Selling, general
and administrative expenses 357.3 15.3% 418.5 13.7% Depreciation
and amortization 13.5 13.6 Income from operations 91.2 3.9% 173.9
5.7% Interest expense, net 26.4 34.1 Other (income) expense (2.7)
(5.4) Income before income taxes 67.5 2.9% 145.2 4.8% Provision for
income taxes 17.8 44.5 Net income $49.7 2.1% $100.7 3.3% Diluted
earnings per common share $1.17 $2.30 Weighted average common
shares outstanding and common share equivalents used in computing
diluted earnings per share (in millions) 42.6 43.8 (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 BALANCE SHEETS (dollar amounts in millions)
(Unaudited) Assets June 30, December 31, 2009(2) 2008(1)(2)(3)
Current Assets Cash and cash equivalents $103.3 $86.3 Trade
accounts receivable 680.5 791.4 Inventories, net 516.7 605.7 Other
current assets 93.6 74.3 Total current assets 1,394.1 1,557.7 Other
assets 1,186.0 1,162.1 Total assets $2,580.1 $2,719.8 Liabilities
and Stockholders' Equity Current Liabilities Accounts payable
$487.5 $556.5 Other current liabilities 127.1 449.5 Total current
liabilities 614.6 1,006.0 Long-term debt 929.9 801.4 Other
noncurrent liabilities 214.0 157.3 Total liabilities 1,758.5
1,964.7 Stockholders' Equity Total stockholders' equity 821.6 755.1
Total liabilities and stockholders' equity $2,580.1 $2,719.8 (1)
Balances have been revised to reflect retrospective implementation
of the new accounting standard for the convertible debentures. (2)
See Exhibit B for footnote detail regarding the new accounting
standard for the convertible debentures. (3) Certain balances have
been reclassified to conform with current year presentation. WESCO
INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands) (Unaudited) Twelve Months Twelve
Months Ended Ended Financial Leverage: June 30, 2009(1) December
31, 2008(1) Income from operations $262,940 $345,667 Depreciation
and amortization 26,622 26,731 EBITDA $289,562 $372,398 Short-term
debt $- $295,000 Current debt 3,872 3,823 Long-term debt 929,905
801,427 Debt discount 32,810 40,501 Total debt $966,587 $1,140,751
Financial leverage ratio 3.3 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
by the trailing twelve months earnings before interest, taxes,
depreciation and amortization. Free Cash Flow: Three Months Six
Months Ended Ended June 30, 2009 June 30, 2009 Cash flow provided
by operations $70.1 $204.7 Less: Capital expenditures (3.4) (6.2)
Free cash flow $66.7 $198.5 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) Balances have been revised to
reflect retrospective implementation of the new accounting standard
for the convertible debentures. WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED) (dollar
amounts in millions) (Unaudited) Three Months Three Months Ended
Ended Gross Profit: June 30, 2009 June 30, 2008 Net sales $1,159.2
$1,587.8 Cost of goods sold (excluding depreciation and
amortization) 935.3 1,277.4 Gross profit $223.9 $310.4 Gross margin
19.3% 19.5% Gross Profit: Six Months Six Months Ended Ended June
30, 2009 June 30, 2008 Net sales $2,338.8 $3,053.0 Cost of goods
sold (excluding depreciation and amortization) 1,876.8 2,447.0
Gross profit $462.0 $606.0 Gross margin 19.8% 19.8% 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 FSP APB 14-1,
Accounting for Convertible Debt Instruments That May Be Settled in
Cash Upon Conversion (Including Partial Cash Settlement) ("FSP APB
14-1"), for its 2.625% Convertible Senior Debentures due 2025 (the
"2025 Debentures") and 1.75% Convertible Senior Debentures due 2026
(the "2026 Debentures"). Prior to the adoption of FSP APB 14-1,
WESCO accounted for its convertible debt instruments as long-term
debt. FSP APB 14-1 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. Interest
expense for the 2025 and 2026 Debentures under the new accounting
standard totaled $6.1 million and $5.9 million for the three months
ended June 30, 2009 and 2008, respectively, of which $3.8 million
and $3.6 million, respectively, was non-cash interest. For the six
months ended June 30, 2009, interest expense totaled $12.3 million
and $11.8 million, respectively, of which $7.7 million and $7.3
million, respectively, was non-cash interest. The following table
provides the incremental effect of applying FAS APB 14-1 on
individual line items in the 2008 consolidated income statement:
Previously Reported Revised Three Months Three Months Ended June
30, Ended June 30, Condensed Consolidated Statement of Income 2008
2008 Interest Expense, net $12.5 $16.0 Income before income taxes
$86.9 $83.4 Provision for income taxes $26.8 $25.4 Net Income $60.1
$58.0 Earnings per share: Diluted $1.38 $1.33 Six Months Six Months
Ended June 30, Ended June 30, Condensed Consolidated Statement of
Income 2008 2008 Interest Expense, net $27.1 $34.1 Income before
income taxes $152.2 $145.2 Provision for income taxes $47.2 $44.5
Net Income $105.0 $100.7 Earnings per share: Diluted $2.39 $2.30
Exhibit B As previously mentioned, on January 1, 2009, WESCO
retrospectively implemented the provisions of FSP APB 14-1 for its
2025 Debentures and 2026 Debentures. Proceeds of $150 million and
$300 million were received in connection with the issuance of the
2025 Debentures and 2026 Debentures, respectively. WESCO utilized
an interest rate of 6% for both the 2025 Debentures and 2026
Debentures to reflect the non-convertible market rate of its
offerings upon issuance. As of June 30, 2009, the unamortized
discount for the 2025 Debentures and 2026 Debentures was $5.8
million and $27.0 million, respectively. As of December 31, 2008,
the unamortized discount for the 2025 Debentures and 2026
Debentures was $8.1 million and $32.4 million, respectively. The
net carrying amounts of the liability components are classified as
long-term debt in the consolidated balance sheets. As of June 30,
2009 and December 31, 2008, the aggregate equity component for the
2025 Debentures and 2026 Debentures totaled $12.3 million and $31.2
million, respectively. WESCO recorded a deferred tax liability for
the basis difference associated with the liability components. The
initial recognition of deferred taxes was recorded as an adjustment
to additional capital. In subsequent periods, the deferred tax
liability is reduced and a deferred tax benefit is recognized in
earnings as the debt discount is amortized to pre-tax income. The
following table provides the incremental effect of applying FAS APB
14-1 on individual line items in the 2008 consolidated balance
sheet: Previously Reported Revised December 31, December 31,
Condensed Consolidated Balance Sheet 2008 2008 Other assets
$1,163.3 $1,162.1 Total assets $2,721.0 $2,719.8 Long-term debt
$841.9 $801.4 Other noncurrent liabilities $141.0 $157.3 Total
liabilities $1,988.9 $1,964.7 Total stockholder's equity $732.0
$755.1 Total liabilities and stockholder's equity $2,721.0 $2,719.8
http://www.newscom.com/cgi-bin/prnh/20030508/WCCLOGO
http://photoarchive.ap.org/ DATASOURCE: WESCO International, Inc.
CONTACT: Stephen A. Van Oss, Senior Vice President and Chief
Administrative Officer of WESCO International, Inc.,
+1-412-454-2271, Fax: +1-412-454-2477 Web Site:
http://www.wesco.com/
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