WESCO International, Inc. Reports First Quarter 2018 Results
WESCO International, Inc. Reports First Quarter 2018 Results
First quarter highlights:
- Consolidated net sales of $2.0 billion, up 12% versus prior year
- Operating profit of $73.2 million, up 10% versus prior year
- Earnings per diluted share of $0.93, up 22% versus prior year
- Operating cash flow of $53.0 million; free cash flow of $45.3 million, or 105% of net income
PITTSBURGH, April 26, 2018 /PRNewswire/ -- WESCO International, Inc. (NYSE: WCC), 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 logistics services, announces its results for the first quarter of 2018.
Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "We are seeing continued positive and broad-based momentum in our business. Sales grew 11% organically, our highest growth rate in seven years, with all end markets and geographies contributing. Sales growth was consistently strong throughout the quarter and backlog expanded to another all-time record level. Operating profit and EPS both grew on a double digit percentage basis versus prior year, reflecting the positive pull through and operating leverage of our business. Free cash flow generation was also strong, exceeding 100% of net income."
The following are results for the three months ended March 31, 2018 compared to the three months ended March 31, 2017:
-- Net sales were $2.0 billion for the first quarter of 2018, compared to
$1.8 billion for the first quarter of 2017, an increase of 12.5%.
Organic sales for the first quarter of 2018 grew by 10.9% and foreign
exchange rates positively impacted net sales by 1.6%.
-- Cost of goods sold for the first quarter of 2018 was $1.6 billion and
gross profit was $379.9 million, compared to cost of goods sold and
gross profit of $1.4 billion and $350.0 million, respectively, for the
first quarter of 2017. As a percentage of net sales, gross profit was
19.1% and 19.7% for the first quarter of 2018 and 2017, respectively.
Over half of the decline in gross profit as a percentage of net sales
versus the prior year was due to growth in International projects and a
reclassification of certain labor costs from selling, general and
administrative expenses.
-- Selling, general and administrative expenses were $290.8 million, or
14.6% of net sales, for the first quarter of 2018, compared to $267.4
million, or 15.1% of net sales, for the first quarter of 2017.
-- Operating profit was $73.2 million for the first quarter of 2018,
compared to $66.6 million for the first quarter of 2017, an increase of
9.9%. Operating profit as a percentage of net sales was 3.7% for the
current quarter, compared to 3.8% for the first quarter of the prior
year.
-- Net interest and other for the first quarter of 2018 was $19.8 million,
compared to $16.2 million for the first quarter of 2017. For the three
months ended March 31, 2018, net interest and other includes a foreign
exchange loss of $3.0 million from the remeasurement of a financial
instrument.
-- The effective tax rate for the first quarter of 2018 was 19.6%, compared
to 25.0% for the first quarter of 2017. The lower effective tax rate in
the current quarter is primarily due to the Tax Cuts and Jobs Act of
2017, which permanently reduced the U.S. federal statutory income tax
rate from 35% to 21%, effective January 1, 2018.
-- Net income attributable to WESCO International, Inc. was $44.4 million
and $37.7 million for the first quarter of 2018 and 2017, respectively.
-- Earnings per diluted share for the first quarter of 2018 was $0.93,
based on 47.6 million diluted shares, compared to $0.76 for the first
quarter of 2017, based on 49.4 million diluted shares. Earnings per
diluted share for the first quarter of 2018 increased 22.4% as compared
to the first quarter of 2017.
-- Operating cash flow for the first quarter of 2018 was $53.0 million,
compared to $47.6 million for the first quarter of 2017. Free cash flow
for the first quarter of 2018 was $45.3 million, or 105% of net income,
compared to $43.1 million, or 114% of net income, for the first quarter
of 2017.
Mr. Engel continued, "After returning to above-market sales growth in the second half of last year, our top priority was to return to profitable growth in 2018, and we are off to a good start in the first quarter. Sales growth momentum has continued in April, and we expect the favorable economic conditions and the positive growth in our end markets to continue this year. Our plan includes continued above-market performance, execution of our profitable growth initiatives, investments in our people and processes, and maintaining our cost and cash management discipline. Based on our first quarter results, we have increased our full year expectations for sales growth to be in the range of 5% to 8%, and EPS to be in the range of $4.50 to $5.00 per diluted share, while reaffirming our expectation for free cash flow generation of at least 90% of net income."
Mr. Engel added, "Our customers and suppliers look to WESCO to provide leading supply chain solutions, supported by our broad portfolio of products, value-added services and global footprint. I am confident in our team's ability to provide outstanding customer service and deliver value to our customers' operations and supply chains in 2018 and beyond."
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the first quarter of 2018 earnings as described in this News Release on Thursday, April 26, 2018, at 10:00 a.m. E.T. The call will be broadcast live over the internet and can be accessed from the Investor Relations page of the Company's website at www.wesco.investorroom.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. 2017 annual sales were approximately $7.7 billion. The company employs approximately 9,100 people, maintains relationships with over 26,000 suppliers, and serves approximately 70,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates 10 fully automated distribution centers and approximately 500 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, 2017, 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
March 31, March 31,
2018 2017
---- ----
Net sales $1,993.9 $1,772.6
Cost of goods sold (excluding 1,614.0 80.9% 1,422.6 80.3%
depreciation and amortization)
Selling, general and administrative expenses (1) 290.8 14.6% 267.4 15.1%
Depreciation and amortization 15.9 16.0
---- ----
Income from operations 73.2 3.7% 66.6 3.8%
Net interest and other (1) 19.8 16.2
---- ----
Income before income taxes 53.4 2.7% 50.4 2.8%
Provision for income taxes 10.5 12.6
---- ----
Net income 42.9 2.2% 37.8 2.1%
Net (loss) income attributable to noncontrolling interests (1.5) 0.1
---- ---
Net income attributable to WESCO International, Inc. $44.4 2.2% $37.7 2.1%
===== =====
Earnings per diluted common share $0.93 $0.76
Weighted-average common shares outstanding and common
share equivalents used in computing earnings per diluted
share (in millions) 47.6 49.4
(1) The Company adopted Accounting Standards
Update (ASU) 2017-07, Compensation-
Retirement Benefits (Topic 715):
Improving the Presentation of Net
Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost, on a
retrospective basis during the first
quarter of 2018. This ASU requires the
disaggregation of service cost from the
other components of net periodic benefit
cost. For the three months ended March
31, 2018 and 2017, the non-service cost
components of net periodic benefit cost
aggregated to a benefit of $0.5 million
and are included in net interest and
other.
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
March 31, December 31,
2018 2017
---- ----
Assets
Current Assets
Cash and
cash
equivalents $123.9 $118.0
Trade
accounts
receivable,
net 1,205.0 1,170.1
Inventories 949.5 956.1
Other
current
assets 140.3 164.7
----- -----
Total
current
assets 2,418.7 2,408.9
Other
assets 2,294.6 2,326.6
Total
assets $4,713.3 $4,735.5
======== ========
Liabilities and
Stockholders' Equity
Current Liabilities
Accounts
payable $805.4 $799.5
Short-
term
borrowings
and
current
debt 42.9 35.3
Other
current
liabilities 173.3 206.2
----- -----
Total
current
liabilities 1,021.6 1,041.0
Long-
term
debt,
net 1,292.1 1,313.3
Other
noncurrent
liabilities 266.7 265.1
----- -----
Total
liabilities 2,580.4 2,619.4
Stockholders' Equity
Total
stockholders'
equity 2,132.9 2,116.1
------- -------
Total
liabilities
and
stockholders'
equity $4,713.3 $4,735.5
======== ========
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Three Months Ended
March 31, March 31,
2018 2017
---- ----
Operating Activities:
Net income $42.9 $37.8
Add back (deduct):
Depreciation and
amortization 15.9 16.0
Deferred income
taxes 2.7 2.3
Change in trade
receivables, net (37.5) (22.1)
Change in
inventories 3.0 (26.4)
Change in
accounts payable 8.1 26.1
Other 17.9 13.9
---- ----
Net cash provided
by operating
activities 53.0 47.6
Investing Activities:
Capital
expenditures (7.7) (4.5)
Other (8.7) -
---- ---
Net cash used in
investing
activities (16.4) (4.5)
Financing Activities:
Debt repayments,
net (16.6) (48.2)
Equity activity,
net (1.7) (6.5)
Other (10.6) 4.0
----- ---
Net cash used in
financing
activities (28.9) (50.7)
Effect of
exchange rate
changes on cash
and cash
equivalents (1.8) 0.5
---- ---
Net change in
cash and cash
equivalents 5.9 (7.1)
Cash and cash
equivalents at
the beginning of
the period 118.0 110.1
-----
Cash and cash
equivalents at
the end of the
period $123.9 $103.0
====== ======
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, financial leverage, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and the use of debt and liquidity on a comparable basis. 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 organic sales data)
(Unaudited)
Three
Months
Ended
-----
Organic Sales Growth: March 31,
2018
----
Change in net sales 12.5%
Impact from acquisitions - %
Impact from foreign exchange
rates 1.6%
Impact from number of workdays - %
--- ---
Organic sales growth 10.9%
====
Note: Organic sales growth is a
measure of sales performance.
Organic sales growth 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
Gross Profit: March 31, March 31,
2018 2017
---- ----
Net sales $1,993.9 $1,772.6
Cost of goods sold
(excluding depreciation and
amortization) 1,614.0 1,422.6
------- -------
Gross profit $379.9 $350.0
====== ======
Gross margin 19.1% 19.7%
Note: Gross profit is a
financial measure commonly used
within the distribution
industry. Gross profit is
calculated by deducting cost of
goods sold, excluding
depreciation and amortization,
from net sales. 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: March 31, December 31,
2018 2017
---- ----
Income from
operations
(1) $325.6 $319.2
Depreciation
and
amortization 63.9 64.0
---- ----
EBITDA $389.5 $383.2
====== ======
March 31, December 31,
2018 2017
Short-term
borrowings
and current
debt $42.9 $35.3
Long-term
debt 1,292.1 1,313.3
Debt
discount
and debt
issuance
costs (2) 13.2 14.2
---- ----
Total debt $1,348.2 $1,362.8
======== ========
Financial
leverage
ratio 3.5 3.6
(1) Due to the adoption of ASU 2017-07
on a retrospective basis in the
first quarter of 2018, the Company
classified the non-service cost
components of net periodic benefit
cost as part of net interest and
other for the twelve months ended
March 31, 2018 and December 31,
2017. These components aggregated
to a benefit of $1.9 million and
$1.8 million, respectively.
(2) Long-term debt is presented in the
condensed consolidated balance
sheets net of debt discount and
debt issuance costs.
Note: Financial leverage measures the use of
debt. Financial leverage ratio is calculated by
dividing total debt, including debt discount
and debt issuance costs, by EBITDA. EBITDA is
defined as the trailing twelve months earnings
before interest, taxes, depreciation and
amortization.
Three Months Ended
Free Cash Flow: March 31, 2018 March 31, 2017
-------------- --------------
Cash flow provided
by operations $53.0 $47.6
Less: Capital
expenditures (7.7) (4.5)
---- ----
Free cash flow $45.3 $43.1
===== =====
Percentage of net
income 105% 114%
Note: Free cash flow is a
measure of liquidity. Capital
expenditures are deducted from
operating cash flow to
determine free cash flow. Free
cash flow is available to fund
investing and financing
activities.
CONTACT: Mary Ann Bell, Vice President, Investor Relations, WESCO International, Inc. (412) 454-4220, Fax: (412) 222-7409
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SOURCE WESCO International, Inc.
