WESCO International, Inc. Reports Second Quarter 2015 Results

PITTSBURGH, July 23, 2015 /PRNewswire/ -- WESCO International, Inc. 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 2015 second quarter results.

The following are results for the three months ended June 30, 2015 compared to the three months ended June 30, 2014:

• Net sales were $1,916.7 million for the second quarter of 2015, compared to $2,005.2 million for the second quarter of 2014, a decrease of 4.4%. Normalized organic sales decreased 3.0%; foreign exchange rates negatively impacted sales by 3.0% and were partially offset by a 1.6% positive impact from acquisitions. Sequentially, sales increased 5.5%, and normalized organic sales increased 1.1%.
• Gross profit was $381.6 million, or 19.9% of sales, for the second quarter of 2015, compared to $411.8 million, or 20.5% of sales, for the second quarter of 2014.
• Selling, general and administrative ("SG&A") expenses were $275.2 million, or 14.4% of sales, for the second quarter of 2015, compared to $278.7 million, or 13.9% of sales, for the second quarter of 2014.
• Operating profit was $90.3 million for the current quarter, compared to $115.9 million for the second quarter of 2014. Operating profit as a percentage of sales was 4.7% in 2015, compared to 5.8% in 2014.
• Interest expense for the second quarter of 2015 was $18.6 million, compared to $20.3 million for the second quarter of 2014. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, amortization of deferred financing fees and accrued interest, for the second quarter of 2015 and 2014 was $1.6 million and $2.2 million, respectively.
• The effective tax rate for the current quarter was 29.3%, compared to 28.0% for the prior year second quarter.
• Net income attributable to WESCO International, Inc. of $51.8 million for the current quarter was down 24.8% from $68.9 million for the prior year quarter.
• Earnings per diluted share for the second quarter of 2015 was $1.00 per share, based on 51.9 million diluted shares, compared to $1.29 per share in the second quarter of 2014, based on 53.5 million diluted shares.
• Free cash flow for the second quarter of 2015 was $34.9 million compared to a net cash outflow of $2.7 million for the second quarter of 2014.

Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Our second quarter sales declined 4% reflecting continued foreign exchange headwinds and weakness in the industrial market as well as a slow seasonal start in the non-residential construction market. For the quarter, organic sales in the U.S. were flat while organic sales in Canada declined 7%. Business mix, rebate accruals, and a continued competitive pricing environment drove gross margin lower while cost reduction actions partially mitigated the impact on earnings per share, which was lower than prior year. Free cash flow was solid and exceeds 120% of net income on a year-to-date basis. We repurchased approximately 750 thousand shares in the second quarter bringing year-to-date repurchases to approximately 1.1 million shares or $75 million of the $300 million share repurchase authorization. Based on our second quarter results and a challenging market outlook, we are revising our full year outlook for sales growth of (3)% to flat and $4.50 to $4.90 earnings per diluted share from our previous outlook of (3)% to 3% sales growth and $5.00 to $5.40 earnings per diluted share."

The following results are for the six months ended June 30, 2015 compared to the six months ended June 30, 2014:

• Net sales were $3,733.0 million for the first six months of 2015, compared to $3,816.0 million for the first six months of 2014, a decrease of 2.2%. Normalized organic sales decreased 0.1%; acquisitions positively impacted sales by 1.4%, and foreign exchange rates and number of workdays negatively impacted sales by 2.7% and 0.8%, respectively.
• Gross profit of $749.3 million, or 20.1% of sales, for the first six months of 2015 compared to $786.5 million, or 20.6% of sales, for the first six months of 2014.
• Selling, general and administrative ("SG&A") expenses were $539.8 million, or 14.5% of sales, for the first six months of 2015, compared to $544.2 million, or 14.3% of sales, for the first six months of 2014.
• Operating profit was $177.4 million for the first six months of 2015 compared to $208.7 million for the first six months of 2014. Operating profit as a percentage of sales was 4.8% in 2015 compared to 5.5% in 2014.
• Interest expense for the first six months of 2015 was $39.5 million, compared to $41.0 million for the first six months of 2014. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, amortization of deferred financing fees and accrued interest, for the first six months of 2015 and 2014 was $7.0 million and $4.7 million, respectively.
• The effective tax rate was 29.4% for the six months ended June 30, 2015, compared to 28.1% for the six months ended June 30, 2014.
• Net income attributable to WESCO International, Inc. of $98.7 million for the six months ended June 30, 2015 was down 18.2% from $120.7 million for the six months ended June 30, 2014.
• Earnings per diluted share for the first six months of 2015 was $1.90 per share, based on 52.1 million diluted shares, versus $2.26 per share for the first six months of 2014, based on 53.4 million diluted shares.
• Free cash flow for the six months ended June 30, 2015 was $120.0 million, or 122% of net income, compared to free cash flow of $39.0 million, or 32% of net income for the six months ended June 30, 2014.

Mr. Engel continued, "We expect reduced demand in commodity-driven end markets in the near term and foreign exchange headwinds to continue for the remainder of the year. Actions initiated in the second quarter to accelerate our One WESCO sales initiatives and simplify and streamline the business are expected to help improve profitability in the second half of the year. We are pleased with the acquisition of Hill Country in the second quarter, and they are off to a solid start. Our capital structure is in good shape, and we will continue to take a disciplined approach to supplement our growth strategy by strengthening our electrical core and expanding our portfolio of products and services through acquisitions. As consolidation and outsourcing accelerates in our industry, customers are looking for a one-stop-shop to manage their global supply chain needs. Our One WESCO value proposition provides customers with the comprehensive product and service solutions they need to meet their MRO, OEM and Capital Project management requirements."

Webcast and Teleconference Access

WESCO will conduct a webcast and teleconference to discuss the second quarter earnings as described in this News Release on Thursday, July 23, 2015, 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. 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") product, construction materials, and advanced supply chain management and logistic services. 2014 annual sales were approximately $7.9 billion. The Company employs approximately 9,400 people, maintains relationships with over 25,000 suppliers, and serves over 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 485 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, 2014, as well as the Company's other reports filed with the Securities and Exchange Commission.

 

 

 

 

 

 

 

 

 

 

NON-GAAP FINANCIAL MEASURES

This earnings release includes certain non-GAAP financial measures. These financial measures include normalized 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 organic growth 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.

 

 

 

 

 

 

 

 

 

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SOURCE WESCO International, Inc.