WESCO International, Inc. Reports Fourth Quarter Results; Achieves Record Sales in Full Year 2012

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News Release:

WESCO International, Inc. Reports Fourth Quarter Results; Achieves Record Sales in Full Year 2012

Fourth quarter results compared to the prior year:

– Consolidated sales of $1.64 billion, growth of 3.5%

– Earnings per share of $0.95; adjusted earnings per share of $1.06, excluding EECOL Electric and non-recurring charges

– Free cash flow of $95 million or 195% of net income

Full year results compared to the prior year:

– Record sales of $6.6 billion, up 7.4%

– Earnings per share of $4.38, growth of 10.6%; adjusted earnings per share of $4.49, excluding EECOL Electric and non-recurring charges

– Free cash flow of $265 million or 118% of net income

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 2012 fourth quarter and full-year financial results.

The following results are for the quarter-ended December 31, 2012 compared to the quarter-ended December 31, 2011:

– Consolidated net sales were $1,644.4 million for the fourth quarter of 2012, compared to $1,589.5 million for the fourth quarter of 2011, an increase of 3.5%. Acquisitions and foreign exchange positively impacted consolidated sales by approximately 4.3% and 0.5%, respectively, resulting in an organic growth rate of approximately negative 1.3%. Sequentially, fourth quarter 2012 sales decreased 0.7%.

– Gross profit of $337.3 million, or 20.5% of sales, for the fourth quarter of 2012 was down 10 basis points, compared to $328.0 million, or 20.6% of sales, for the fourth quarter of 2011.

– Selling, general & administrative (SG&A) expenses of $239.8 million, or 14.6% of sales, for the fourth quarter of 2012 increased 30 basis points, compared to $227.8 million, or 14.3% of sales, for the fourth quarter of 2011. Excluding non-recurring EECOL acquisition-related charges of $4.0 million, fourth quarter SG&A expenses of $235.8 million, or 14.3% of sales, is comparable to the fourth quarter of 2011.

– Operating profit was $86.4 million for the current quarter, down 5.6% from $91.5 million for the comparable 2011 quarter. Operating profit as a percentage of sales was 5.3% in 2012, down 50 basis points from 5.8% in 2011.

– Total interest expense for the fourth quarter of 2012 was $14.7 million, compared to $12.0 million for the fourth quarter of 2011. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for the fourth quarter of 2012 and 2011 was $0.7 million and $1.6 million, respectively.

– Loss on debt extinguishment for the fourth quarter of 2012 was $3.5 million which was due to the redemption of all the outstanding 7.50% Senior Subordinated Notes due 2017.

– The effective tax rate for the current quarter was 28.7%, compared to 31.1% for the prior year quarter.

– Net income of $48.6 million for the current quarter was down 11.3% from $54.8 million for the prior year quarter.

– Earnings per diluted share for the fourth quarter of 2012 were $0.95 per share, based on 51.4 million diluted shares, down 15.2% from $1.12 per diluted share in the fourth quarter of 2011, based on 49.0 million diluted shares. Excluding the impact of EECOL Electric and non-recurring charges, fourth quarter of 2012 adjusted earnings per diluted share were $1.06.

– Free cash flow for the fourth quarter of 2012 was $94.9 million, or 195% of net income, compared to $86.4 million for the fourth quarter of 2011.

Mr. John J. Engel, WESCO’s Chairman and Chief Executive Officer, stated, “Our fourth quarter results reflect solid execution in a challenging economic environment and a continuation of the market trends experienced in the third quarter. We continued to see the positive impact of our productivity and LEAN initiatives in gross margins, operating costs, and free cash flow, excluding the non-recurring acquisition and debt extinguishment costs. In addition, we were pleased to complete the acquisition of EECOL Electric in mid-December, which strengthens our Canadian operations and establishes a solid foundation for WESCO in South America.”

Mr. Engel continued, “On a full year basis, operating margins reached 5.6%, up 20 basis points versus prior year, as sales grew 7.4% to a record $6.6 billion. As a result, earnings per share grew at a double-digit rate again last year. 2012 included many noteworthy accomplishments, and I am very proud of the extra effort and results delivered by all our associates around the globe working together as the One WESCO team.”

The following results are for the full-year period ended December 31, 2012 compared to the full-year period ended December 31, 2011:

– Consolidated net sales were $6,579.3 million, compared to $6,125.7 million, an increase of 7.4%. Acquisitions positively impacted consolidated sales by approximately 3.3%, while foreign exchange rate negatively impacted sales by approximately 0.3%, resulting in organic sales growth of approximately 4.4%.

– Gross profit was $1,331.4 million, or 20.2% of sales, compared to $1,236.6 million, or 20.2% of sales.

– SG&A expenses of $924.8 million, or 14.1% of sales, improved 10 basis points, compared to $872.0 million, or 14.2% of sales.

– Operating profit was $369.0 million, up 10.8% from $333.0 million for the comparable 2011 period. Operating profit as a percentage of sales was 5.6% in 2012, up 20 basis points from 5.4% in 2011.

– Total interest expense was $47.7 million, compared to $53.6 million. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for 2012 and 2011 was $1.5 million and $8.8 million, respectively.

– Loss on debt extinguishment in 2012 was $3.5 million which was due to the redemption of all the outstanding 7.50% Senior Subordinated Notes due 2017.

– The effective full-year tax rate was 29.5% for 2012 compared to 29.8% for 2011.

– Net income of $223.9 million for the full-year was up 14.1% from $196.3 million for the prior year.

– Earnings per diluted share for 2012 were up 10.6% to $4.38 per diluted share, based on 51.1 million diluted shares, versus $3.96 per diluted share for 2011, based on 49.6 million diluted shares. Excluding the impact of EECOL Electric and non-recurring charges, 2012 adjusted earnings per diluted share were $4.49.

– Full-year free cash flow was $265.1 million, or 118% of net income, compared to $134.2 million in the prior year.

Mr. Engel continued, “Our value proposition and go-to market strategies provide significant long-term growth and value creation opportunities for both our customers and shareholders. We continue to see the benefits of our investments, growth strategy and effective execution and expect that to continue this year with the second half stronger than the first. As a result of playing offense over the last several years, we have strengthened our business and enhanced our position in the global marketplace.”

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