WESCO International, Inc. Reports Fourth Quarter 2015 Results

PITTSBURGH, Jan. 28, 2016 /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, today announced its 2015 fourth quarter results.

Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Our fourth quarter sales declined 7%, reflecting weakness in commodity-driven end markets and continued foreign exchange headwinds. Organic sales were down 8% against a strong prior year quarter, with the U.S. and Canada down 5% and 14%, respectively. Although overall sales were down, our data communications and utility sales grew again in the quarter. We continued to tightly manage our costs and streamline our organization, and the benefits of these actions partially mitigated the impact of lower sales and business mix on earnings per share, which declined versus prior year. Free cash flow generation was very strong at more than two times net income. As anticipated, our leverage ratio ended the year slightly above our target range following the acquisition of Needham Electric Supply during the fourth quarter. With continued strong cash generation, we expect to reduce our leverage ratio back within our target range of 2.0 to 3.5 times EBITDA in the near term."

The following are results for the three months ended December 31, 2015 compared to the three months ended December 31, 2014:

• Net sales were $1,861.5 million for the fourth quarter of 2015, compared to $1,995.5 million for the fourth quarter of 2014, a decrease of 6.7%. Normalized organic sales decreased 7.6%; foreign exchange rates negatively impacted sales by 3.7% and were partially offset by the positive impacts from acquisitions and number of workdays of 3.0% and 1.6%, respectively.
   
• Gross profit was $363.5 million, or 19.5% of sales, for the fourth quarter of 2015, compared to $402.2 million, or 20.2% of sales, for the fourth quarter of 2014.
   
• Selling, general & administrative (SG&A) expenses were $256.9 million, or 13.8% of sales, for the fourth quarter of 2015, compared to $260.9 million, or 13.1% of sales, for the fourth quarter of 2014.
   
• Operating profit was $90.0 million for the current quarter, compared to $124.2 million for the fourth quarter of 2014. Operating profit as a percentage of sales was 4.8% and 6.2% in 2015 and 2014, respectively.
   
• Interest expense for the fourth quarter of 2015 was $9.9 million, compared to $20.2 million for the fourth quarter of 2014. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, the amortization of deferred financing fees and accrued interest, for the fourth quarter of 2015 and 2014 was income of $8.1 million and expense of $0.6 million, respectively. The resolution of transfer pricing matters associated with previously filed tax positions resulted in non-cash interest income of $9.4 million for the fourth quarter of 2015.
   
• The effective tax rate for the current quarter was 39.3% compared to 28.8% for the prior year fourth quarter. The resolution of the tax matter described above resulted in incremental income tax expense of $11.7 million, which combined with the effect of the interest income associated with this matter, increased the effective tax rate in the fourth quarter of 2015 by 11.3 percentage points.
   
• Net income attributable to WESCO International, Inc. of $48.4 million for the current quarter was down 35.0% from $74.5 million for the prior year quarter.
   
• Earnings per diluted share for the fourth quarter of 2015 were $1.03 per share, based on 47.2 million diluted shares, compared to earnings per diluted share of $1.40 in the fourth quarter of 2014, based on 53.0 million diluted shares.
   
• Free cash flow for the fourth quarter of 2015 was $101.6 million, or 209% of net income, compared to $106.9 million for the fourth quarter of 2014.

Mr. Engel continued, "On a full year basis, our results reflect the challenging economic and end market environment. Sales, operating margin and earnings per share declined versus prior year but were in line with the outlook we provided during our third quarter earnings call. We remain clearly focused on executing our One WESCO strategy to deliver above-market sales growth, improve profitability, generate strong cash flow, and increase shareholder value. The free cash flow generation capability of our business supports continued investment in our One WESCO growth initiatives, including acquisitions, while providing a return of capital to shareholders. We reaffirm our expectation of sales in the range of flat to down 5%, EPS of $3.75 to $4.20 per diluted share, and free cash flow generation of at least 90% of net income in 2016, as we outlined in our investor outlook call in December."

The following results are for the year ended December 31, 2015 compared to the year ended December 31, 2014:

• Net sales were $7,518.5 million for 2015, compared to $7,889.6 million for 2014, a decrease of 4.7%. Normalized organic sales decreased 3.3%; foreign exchange rates negatively impacted sales by 3.4% and were partially offset by a positive impact from acquisitions of 2.0%.
   
• Gross profit was $1,493.7 million, or 19.9% of sales, for 2015 compared to $1,611.0 million, or 20.4% of sales, for 2014.
   
• SG&A expenses for 2015 were $1,055.0 million, or 14.0% of sales, compared to SG&A expenses of $1,076.8 million, or 13.6% of sales, for 2014.
   
• Operating profit was $373.7 million for 2015, compared to $466.2 million for 2014. Operating profit as a percentage of sales was 5.0% and 5.9% in 2015 and 2014, respectively.
   
• Interest expense for 2015 was $69.8 million, compared to $82.1 million for 2014. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, the amortization of deferred financing fees and accrued interest, for 2015 and 2014 was $3.5 million and $8.1 million, respectively. The resolution of transfer pricing matters associated with previously filed tax positions resulted in non-cash interest income of $9.4 million in the fourth quarter of 2015.
   
• The effective tax rate was 31.4% for 2015 compared to 28.3% for 2014. The resolution of the tax matter described above resulted in incremental income tax expense of $11.7 million, which combined with the effect of the interest income associated with this matter, increased the effective tax rate in 2015 by 2.9 percentage points.
   
• Net income attributable to WESCO International, Inc. of $210.7 million for 2015 was down 23.6% from $275.9 million for 2014.
   
• Earnings per diluted share for 2015 were $4.18 per share, based on 50.4 million diluted shares, compared to earnings per diluted share of $5.18 per share for 2014, based on 53.3 million diluted shares.
   
• Free cash flow for 2015 was $261.4 million, or 125% of net income, compared to $230.7 million in 2014.

Mr. Engel added, "WESCO provides leading supply chain solutions for customers and suppliers supported by a broad and expanding portfolio of products and services. During this period of economic uncertainty and slow market recovery, customers and suppliers are looking for strong value-creating supply chain partners. Our efforts are centered on providing excellent 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 2016."

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 28, 2016, at 11:00 a.m. E.S.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 replay will be available on the WESCO website through 9:00 A.M., February 4, 2016.

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. 2015 annual sales were approximately $7.5 billion. The Company employs approximately 9,300 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, 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.