PITTSBURGH, Jan. 26, 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 fourth quarter and full year 2016.
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Fourth quarter results were in line with our expectations, and results for the full year were within the outlook range provided in December 2015. Normalized organic sales declined versus prior year but grew sequentially, reflecting improving momentum in our business, and our first Q4 sequential sales growth in five years. Operating margin was also in line with our expectations, as we took additional actions to reduce our costs and improve productivity. Free cash flow generation remained strong, enabling us to reduce our debt and get back within our target financial leverage range."
The following are results for the three months ended December 31, 2016 compared to the three months ended December 31, 2015:
The following are results for the year ended December 31, 2016 compared to the year ended December 31, 2015:
Mr. Engel continued, "On a full year basis, our 2016 results reflect the challenging economic and end market environment, as well as the impact of political uncertainty on spending in the industries we serve. We responded to these challenges by reducing our costs and streamlining our organization while ensuring continued strong free cash flow generation. These actions partially mitigated the impact of lower sales and business mix on earnings per share. We remain focused on executing our One WESCO strategy, and as a result of our organizational changes and continued execution of our business initiatives, we are entering 2017 with a stronger team focused on driving increased profitability as our end markets return to growth. The free cash flow generation capability of our business supports continued investment in our One WESCO growth initiatives, including acquisitions, along with our other cash allocation priorities. We reaffirm our expectation of 2017 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, as we outlined in our investor outlook call in December."
Mr. Engel added, "After two years of industry sales declines and talk of an industrial recession, we are pleased to hear increased optimism from customers and see the beginning signs of a recovery. In this period of change and uncertainty, customers and suppliers need strong and reliable supply chain partners. WESCO provides leading supply chain solutions supported by our broad portfolio of products and value-added services. Our efforts are centered on providing outstanding 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 2017."
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 26, 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 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, 2015, 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 |
|||||||||||
December 31, |
December 31, |
||||||||||
Net sales |
$ |
1,793.3 |
$ |
1,861.5 |
|||||||
Cost of goods sold (excluding |
1,444.7 |
80.6 |
% |
1,498.0 |
80.5 |
% | |||||
depreciation and amortization) |
|||||||||||
Selling, general and administrative expenses |
249.9 |
13.9 |
% |
256.9 |
13.8 |
% | |||||
Depreciation and amortization |
16.6 |
16.6 |
|||||||||
Income from operations |
82.1 |
4.6 |
% |
90.0 |
4.8 |
% | |||||
Interest expense, net |
17.5 |
9.9 |
|||||||||
Income before income taxes |
64.6 |
3.6 |
% |
80.1 |
4.3 |
% | |||||
Provision for income taxes |
16.8 |
31.5 |
|||||||||
Net income |
47.8 |
2.7 |
% |
48.6 |
2.6 |
% | |||||
Net income attributable to noncontrolling interests |
0.4 |
0.2 |
|||||||||
Net income attributable to WESCO International, Inc. |
$ |
47.4 |
2.6 |
% |
$ |
48.4 |
2.6 |
% | |||
Diluted earnings per common share |
$ |
0.96 |
$ |
1.03 |
|||||||
Weighted-average common shares outstanding and common |
|||||||||||
share equivalents used in computing diluted earnings per |
|||||||||||
share (in millions) |
49.2 |
47.2 |
WESCO INTERNATIONAL, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
(dollar amounts in millions, except per share amounts) | |||||||||||
(Unaudited) | |||||||||||
Twelve Months Ended |
|||||||||||
December 31, |
December 31, |
||||||||||
Net sales |
$ |
7,336.0 |
$ |
7,518.5 |
|||||||
Cost of goods sold (excluding |
5,887.8 |
80.3 |
% |
6,024.8 |
80.1 |
% | |||||
depreciation and amortization) |
|||||||||||
Selling, general and administrative expenses |
1,049.3 |
14.3 |
% |
1,055.0 |
14.0 |
% | |||||
Depreciation and amortization |
66.9 |
65.0 |
|||||||||
Income from operations |
332.0 |
4.5 |
% |
373.7 |
5.0 |
% | |||||
Interest expense, net |
76.6 |
69.8 |
|||||||||
Loss on debt redemption |
123.9 |
- |
|||||||||
Income before income taxes |
131.5 |
1.8 |
% |
303.9 |
4.0 |
% | |||||
Provision for income taxes |
30.4 |
95.5 |
|||||||||
Net income |
101.1 |
1.4 |
% |
208.4 |
2.8 |
% | |||||
Net loss attributable to noncontrolling interests |
(0.5) |
(2.3) |
|||||||||
Net income attributable to WESCO International, Inc. |
$ |
101.6 |
1.4 |
% |
$ |
210.7 |
2.8 |
% | |||
Diluted earnings per common share |
$ |
2.10 |
$ |
4.18 |
|||||||
Weighted-average common shares outstanding and common |
|||||||||||
share equivalents used in computing diluted earnings per |
|||||||||||
share (in millions) |
48.3 |
50.4 |
WESCO INTERNATIONAL, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(dollar amounts in millions) | |||||||
(Unaudited) | |||||||
December 31, |
December 31, | ||||||
Assets |
|||||||
Current Assets |
|||||||
Cash and cash equivalents |
$ |
110.1 |
$ |
160.3 |
|||
Trade accounts receivable, net |
1,034.4 |
1,075.3 |
|||||
Inventories |
821.4 |
810.1 |
|||||
Current deferred income taxes (1) |
- |
8.5 |
|||||
Other current assets |
206.5 |
203.4 |
|||||
Total current assets |
2,172.4 |
2,257.6 |
|||||
Other assets (2) |
2,318.5 |
2,312.2 |
|||||
Total assets |
$ |
4,490.9 |
$ |
4,569.8 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current Liabilities |
|||||||
Accounts payable |
$ |
684.7 |
$ |
715.5 |
|||
Current debt and short-term borrowings |
22.1 |
44.3 |
|||||
Other current liabilities |
190.0 |
188.0 |
|||||
Total current liabilities |
896.8 |
947.8 |
|||||
Long-term debt (2) |
1,363.1 |
1,439.1 |
|||||
Other noncurrent liabilities |
221.0 |
409.0 |
|||||
Total liabilities |
2,480.9 |
2,795.9 |
|||||
Stockholders' Equity |
|||||||
Total stockholders' equity |
2,010.0 |
1,773.9 |
|||||
Total liabilities and stockholders' equity |
$ |
4,490.9 |
$ |
4,569.8 |
|||
(1) The Company early adopted Accounting Standards Update (ASU) 2015-17 , Balance Sheet Classification of Deferred Taxes, on a prospective basis during the first quarter of 2016. This guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. | |||||||
(2) The Company adopted ASU 2015-03, Simplifying the Presentationof Debt Issuance Costs, and ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, on a retrospective basis during the first quarter of 2016. These ASUs simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. As a result of adopting this guidance, the Company reclassified approximately $17.7 million of deferred financing fees from other noncurrent assets to long-term debt in the balance sheet as of December 31, 2015. |
WESCO INTERNATIONAL, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(dollar amounts in millions) | |||||||
(Unaudited) | |||||||
Twelve Months Ended | |||||||
December 31, |
December 31, | ||||||
Operating Activities: |
|||||||
Net income |
$ |
101.1 |
$ |
208.4 |
|||
Add back (deduct): |
|||||||
Depreciation and amortization |
66.9 |
65.0 |
|||||
Deferred income taxes |
(45.2) |
42.9 |
|||||
Change in trade receivables, net |
56.8 |
40.1 |
|||||
Change in inventories |
(1.6) |
2.4 |
|||||
Change in accounts payable |
(40.6) |
(55.9) |
|||||
Other (1) |
162.8 |
(19.8) |
|||||
Net cash provided by operating activities |
300.2 |
283.1 |
|||||
Investing Activities: |
|||||||
Capital expenditures |
(18.0) |
(21.7) |
|||||
Acquisition payments |
(50.9) |
(151.6) |
|||||
Other |
(1.6) |
3.0 |
|||||
Net cash used in investing activities |
(70.5) |
(170.3) |
|||||
Financing Activities: |
|||||||
Debt (repayments) borrowings, net |
(262.5) |
91.8 |
|||||
Equity activity, net |
(2.9) |
(154.2) |
|||||
Other |
(10.8) |
(5.4) |
|||||
Net cash used in financing activities |
(276.2) |
(67.8) |
|||||
Effect of exchange rate changes on cash and cash equivalents |
(3.7) |
(13.0) |
|||||
Net change in cash and cash equivalents |
(50.2) |
32.0 |
|||||
Cash and cash equivalents at the beginning of the period |
160.3 |
128.3 |
|||||
Cash and cash equivalents at the end of the period |
$ |
110.1 |
$ |
160.3 |
|||
(1) Other operating cash flow activities for the year ended December 31, 2016 includes a $123.9 million loss on redemption of the Company's 6.0% Convertible Senior Debentures due 2029. |
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial measures. These financial measures include normalized organic sales change, gross profit, financial leverage, free cash flow, adjusted net income and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors in order to provide a better understanding of the Company's organic sales trends, capital structure position and liquidity on a comparable basis. Additionally, certain of the aforementioned non-GAAP measures either focus on or exclude transactions impacting comparability of results, allowing investors to more easily compare the Company's financial performance from period to period. 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 normalized organic sales data) | |||||
(Unaudited) | |||||
Three Months |
Twelve Months | ||||
Normalized Organic Sales Change - Year-Over-Year: |
December 31, |
December 31, | |||
Change in net sales |
(3.7)% |
(2.4)% | |||
Impact from acquisitions |
1.8 % |
3.1 % | |||
Impact from foreign exchange rates |
(0.3)% |
(1.0)% | |||
Impact from number of workdays |
(1.6)% |
0.4 % | |||
Normalized organic sales change |
(3.6)% |
(4.9)% |
Three Months | ||
Normalized Organic Sales Change - Sequential: |
December 31, | |
Change in net sales |
(3.3)% | |
Impact from acquisitions |
- % | |
Impact from foreign exchange rates |
(0.5)% | |
Impact from number of workdays |
(3.1)% | |
Normalized organic sales change |
0.3 % | |
Note: Normalized organic sales change is provided by the Company as an additional financial measure to provide a better understanding of the Company's organic sales trends. Normalized organic sales change 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 |
Twelve Months Ended | ||||||||||||||
Gross Profit: |
December 31, |
December 31, |
December 31, |
December 31, | |||||||||||
Net sales |
$ |
1,793.3 |
$ |
1,861.5 |
$ |
7,336.0 |
$ |
7,518.5 |
|||||||
Cost of goods sold (excluding depreciation and |
1,444.7 |
1,498.0 |
5,887.8 |
6,024.8 |
|||||||||||
Gross profit |
$ |
348.6 |
$ |
363.5 |
$ |
1,448.2 |
$ |
1,493.7 |
|||||||
Gross margin |
19.4 |
% |
19.5 |
% |
19.7 |
% |
19.9 |
% | |||||||
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, | |||||
Income from operations |
$ |
332.0 |
$ |
373.7 |
|||
Depreciation and amortization |
66.9 |
65.0 |
|||||
EBITDA |
$ |
398.9 |
$ |
438.7 |
|||
December 31, |
December 31, | ||||||
Current debt and short-term borrowings |
$ |
22.1 |
$ |
44.3 |
|||
Long-term debt |
1,363.1 |
1,439.1 |
|||||
Debt discount and deferred financing fees(1) |
17.3 |
182.0 |
|||||
Total debt |
$ |
1,402.5 |
$ |
1,665.4 |
|||
Financial leverage ratio |
3.5 |
3.8 |
|||||
(1) Long-term debt is presented in the condensed consolidated balance sheets net of deferred financing fees and debt discount related to the convertible debentures and term loan. | |||||||
Note: Financial leverage is a non-GAAP 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 |
Twelve Months Ended | ||||||||||||||
Free Cash Flow: |
December 31, |
December 31, |
December 31, |
December 31, | |||||||||||
Cash flow provided by operations |
$ |
83.0 |
$ |
107.1 |
$ |
300.2 |
$ |
283.1 |
|||||||
Less: Capital expenditures |
(4.8) |
(5.5) |
(18.0) |
(21.7) |
|||||||||||
Free cash flow |
$ |
78.2 |
$ |
101.6 |
$ |
282.2 |
$ |
261.4 |
|||||||
Percent of adjusted net income (1) |
164% |
209% |
154% |
125% |
|||||||||||
(1) See the following page for a reconciliation of adjusted net income. | |||||||||||||||
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 other investing and financing activities. |
WESCO INTERNATIONAL, INC. | |||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||
(dollar amounts in millions, except per share amounts) | |||||||
(Unaudited) | |||||||
Twelve Months Ended | |||||||
Adjusted Income Before Income Taxes: |
December 31, |
December 31, | |||||
Income before income taxes |
$ |
131.5 |
$ |
303.9 |
|||
Loss on debt redemption |
123.9 |
- |
|||||
Adjusted income before income taxes |
$ |
255.4 |
$ |
303.9 |
|||
Twelve Months Ended | |||||||
Adjusted Tax Provision: |
December 31, |
December 31, | |||||
Provision for income taxes |
$ |
30.4 |
$ |
95.5 |
|||
Income tax benefit from loss on debt redemption (1) |
41.2 |
- |
|||||
Adjusted provision for income taxes |
$ |
71.6 |
$ |
95.5 |
|||
Twelve Months Ended | |||||||
Adjusted Net Income Attributable to WESCO |
December 31, |
December 31, | |||||
Adjusted income before income taxes |
$ |
255.4 |
$ |
303.9 |
|||
Adjusted provision for income taxes |
71.6 |
95.5 |
|||||
Adjusted net income |
183.8 |
208.4 |
|||||
Net loss attributable to noncontrolling interests |
(0.5) |
(2.3) |
|||||
Adjusted net income attributable to WESCO |
|||||||
International, Inc. |
$ |
184.3 |
$ |
210.7 |
Twelve Months | |||
Adjusted Earnings Per Diluted Share: |
December 31, | ||
Diluted earnings per common share |
$ |
2.10 |
|
Loss on debt redemption (2) |
2.54 |
||
Tax effect of loss on debt redemption (2) |
(0.84) |
||
Adjusted diluted earnings per common share |
$ |
3.80 |
|
(1) Represents the third quarter of 2016 income tax benefit related to the loss on debt redemption. | |||
(2) The loss on debt redemption and related income tax benefit are based on the third quarter of | |||
Note: Adjusted net income attributable to WESCO International, Inc. is defined as income before income taxes plus the third quarter loss on debt redemption, less the provision for income taxes excluding the third quarter benefit of such loss. Adjusted earnings per diluted share is computed by adding the loss per diluted share on debt redemption and deducting the related income tax benefit per diluted share recognized in the third quarter of 2016. The Company believes that these non-GAAP financial measures are useful to investors' overall understanding of the Company's current financial performance and provides a consistent measure for assessing the current and historical financial results. |
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SOURCEWESCO International, Inc.