Delaware (State or other jurisdiction of incorporation) | 001-14989 (Commission File Number) | 25-1723342 (IRS Employer Identification No.) | ||
225 West Station Square Drive Suite 700 Pittsburgh, Pennsylvania (Address of principal executive offices) | 15219 (Zip Code) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 7.01 | Regulation FD Disclosure. |
WESCO International, Inc. | ||
(Registrant) |
July 28, 2016 | By: | /s/ Timothy A. Hibbard |
(Date) | Timothy A. Hibbard | |
Vice President, Corporate Controller and Interim Chief Financial Officer |
![]() | NEWS RELEASE |
WESCO International, Inc. / Suite 700, 225 West Station Square Drive / Pittsburgh, PA 15219 |
• | Operating cash flow of $60.0 million; free cash flow of $56.5 million |
• | Maintained financial leverage following a $350 million senior note offering |
• | Net sales were $1,911.6 million for the second quarter of 2016, compared to $1,916.7 million for the second quarter of 2015, a decrease of 0.3%. Acquisitions had a 3.7% positive impact on net sales and were partially offset by a 0.9% impact from foreign exchange rates, resulting in a 3.1% decrease in normalized organic sales. Sequentially, net sales increased 7.6% and normalized organic sales increased 4.8%. |
• | Cost of goods sold for the second quarter of 2016 was $1,532.1 million and gross profit was $379.5 million, compared to cost of goods sold and gross profit of $1,535.1 million and $381.6 million for the second quarter of 2015, respectively. As a percentage of net sales, gross profit was 19.9% for the second quarter of 2016 and 2015. |
• | Selling, general and administrative ("SG&A") expenses were $274.5 million, or 14.4% of net sales for the second quarter of 2016, compared to $275.2 million, or 14.4% of net sales, for the second quarter of 2015. |
• | Operating profit was $88.0 million for the current quarter, compared to $90.3 million for the second quarter of 2015. Operating profit as a percentage of net sales was 4.6% for the second quarter of 2016, compared to 4.7% for the second quarter of 2015. |
• | Interest expense for the second quarter of 2016 was $19.5 million, compared to $18.6 million for the second quarter of 2015. Non-cash interest expense for the second quarter of 2016 and 2015, which includes amortization of debt discounts and deferred financing fees, interest related to uncertain tax positions, and accrued interest, was $1.2 million and $1.6 million, respectively. |
• | The effective tax rate for the current quarter was 27.3%, compared to 29.3% for the prior year second quarter. The decrease in the effective tax rate in the second quarter of 2016 as compared to the prior year's comparable quarter was primarily due to the relative amounts of income earned in the United States and foreign jurisdictions, primarily Canada, and the tax rates in these jurisdictions. |
• | Net income attributable to WESCO International, Inc. was $49.8 million for the current quarter, compared to $51.8 million for the second quarter of 2015. |
• | Earnings per diluted share for the second quarter of 2016 of $1.02 per share, based on 48.6 million diluted shares, increased 2.0% from $1.00 per share for the second quarter of 2015, based on 51.9 million diluted shares. |
• | Operating cash flow for the second quarter of 2016 was $60.0 million, compared to $42.5 million for the second quarter of 2015. Free cash flow for the second quarter of 2016 of $56.5 million, or 113% of net income, increased 62% from $34.9 million, or 68% of net income for the second quarter of 2015. |
• | Net sales were $3,687.5 million for the first six months of 2016, compared to $3,733.0 million for the first six months of 2015, a decrease of approximately 1.2%. Acquisitions and workdays had positive impacts on net sales of 3.8% and 1.6%, respectively, and were partially offset by a 1.7% impact from foreign exchange rates, resulting in a 4.9% decrease in normalized organic sales growth. |
• | Cost of goods sold for the first six months of 2016 was $2,952.9 million and gross profit was $734.6 million, compared to cost of goods sold and gross profit of $2,983.7 million and $749.3 million for the first six months of 2015, respectively. As a percentage of net sales, gross profit was 19.9% and 20.1% for the first six months of 2016 and 2015, respectively. |
• | Selling, general and administrative ("SG&A") expenses were $543.8 million, or 14.7% of net sales for the first six months of 2016, compared to $539.8 million, or 14.5% of net sales, for the first six months of 2015. |
• | Operating profit was $157.5 million for the first six months of 2016, compared to $177.4 million for the first six months of 2015. Operating profit as a percentage of net sales was 4.3% for the first six months of 2016, compared to 4.8% for the first six months of 2015. |
• | Interest expense for the first six months of 2016 was $38.3 million, compared to $39.5 million for the first six months of 2015. Non-cash interest expense for the first six months of 2016 and 2015, which includes amortization of debt discounts and deferred financing fees, interest related to uncertain tax positions, and accrued interest, was $5.0 million and $7.0 million, respectively. |
• | The effective tax rate for the first six months of 2016 was 29.2%, compared to 29.4% for the first six months of 2015. |
• | Net income attributable to WESCO International, Inc. was $85.9 million for the first six months of 2016, compared to $98.7 million for the first six months of 2015. |
• | Earnings per diluted share for the first six months of 2016 was $1.79 per share, based on 47.8 million diluted shares, compared to $1.90 per share for the first six months of 2015, based on 52.1 million diluted shares. |
• | Operating cash flow for the first six months of 2016 was $138.6 million, compared to $132.6 million for the first six months of 2015. Free cash flow for the first six months of 2016 was $131.5 million, or 156% of net income, compared to $120.0 million, or 123% of net income for the first six months of 2015. |
• | Upon redemption of the 2029 Debentures, we expect to incur a non-cash, non-recurring charge, the amount of which depends on the carrying value of the 2029 Debentures and debt market conditions on the redemption date. If debt market conditions are similar to those prevailing as of June 30, 2016, we estimate that the charge would be approximately $120 million on a pre-tax basis, or an approximate $1.70 unfavorable impact to EPS. |
• | Shares underlying the 2029 Debentures would be removed from our diluted share calculation and newly issued shares resulting from the conversion would be added to our basic shares, which we estimate would result in no net change to our fully diluted share count. |
Three Months Ended | |||||||||||
June 30, 2016 | June 30, 2015 | ||||||||||
Net sales | $ | 1,911.6 | $ | 1,916.7 | |||||||
Cost of goods sold (excluding | 1,532.1 | 80.1 | % | 1,535.1 | 80.1 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 274.5 | 14.4 | % | 275.2 | 14.4 | % | |||||
Depreciation and amortization | 17.0 | 16.1 | |||||||||
Income from operations | 88.0 | 4.6 | % | 90.3 | 4.7 | % | |||||
Interest expense, net | 19.5 | 18.6 | |||||||||
Income before income taxes | 68.5 | 3.6 | % | 71.7 | 3.7 | % | |||||
Provision for income taxes | 18.6 | 21.0 | |||||||||
Net income | 49.9 | 2.6 | % | 50.7 | 2.6 | % | |||||
Net income (loss) attributable to noncontrolling interests | 0.1 | (1.1 | ) | ||||||||
Net income attributable to WESCO International, Inc. | $ | 49.8 | 2.6 | % | $ | 51.8 | 2.7 | % | |||
Earnings per diluted common share | $ | 1.02 | $ | 1.00 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 48.6 | 51.9 |
Six Months Ended | |||||||||||
June 30, 2016 | June 30, 2015 | ||||||||||
Net sales | $ | 3,687.5 | $ | 3,733.0 | |||||||
Cost of goods sold (excluding | 2,952.9 | 80.1 | % | 2,983.7 | 79.9 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 543.8 | 14.7 | % | 539.8 | 14.5 | % | |||||
Depreciation and amortization | 33.3 | 32.1 | |||||||||
Income from operations | 157.5 | 4.3 | % | 177.4 | 4.8 | % | |||||
Interest expense, net | 38.3 | 39.5 | |||||||||
Income before income taxes | 119.2 | 3.2 | % | 137.9 | 3.7 | % | |||||
Provision for income taxes | 34.8 | 40.5 | |||||||||
Net income | 84.4 | 2.3 | % | 97.4 | 2.6 | % | |||||
Net loss attributable to noncontrolling interests | (1.5 | ) | (1.3 | ) | |||||||
Net income attributable to WESCO International, Inc. | $ | 85.9 | 2.3 | % | $ | 98.7 | 2.6 | % | |||
Earnings per diluted common share | $ | 1.79 | $ | 1.90 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 47.8 | 52.1 |
June 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 160.3 | $ | 160.3 | |||
Trade accounts receivable, net | 1,118.0 | 1,075.3 | |||||
Inventories | 831.1 | 810.1 | |||||
Current deferred income taxes (1) | — | 8.5 | |||||
Other current assets | 197.3 | 203.4 | |||||
Total current assets | 2,306.7 | 2,257.6 | |||||
Other assets (2) | 2,386.0 | 2,312.2 | |||||
Total assets | $ | 4,692.7 | $ | 4,569.8 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 712.9 | $ | 715.5 | |||
Current debt and short-term borrowings | 44.7 | 44.3 | |||||
Other current liabilities | 213.3 | 188.0 | |||||
Total current liabilities | 970.9 | 947.8 | |||||
Long-term debt (2) | 1,360.7 | 1,439.1 | |||||
Other noncurrent liabilities | 418.5 | 409.0 | |||||
Total liabilities | 2,750.1 | 2,795.9 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 1,942.6 | 1,773.9 | |||||
Total liabilities and stockholders' equity | $ | 4,692.7 | $ | 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 Presentation of 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. |
Six Months Ended | |||||||
June 30, 2016 | June 30, 2015 | ||||||
Operating Activities: | |||||||
Net income | $ | 84.4 | $ | 97.4 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 33.3 | 32.1 | |||||
Deferred income taxes | 13.4 | 16.7 | |||||
Change in trade receivables, net | (17.3 | ) | (3.8 | ) | |||
Change in inventories | (4.4 | ) | (26.7 | ) | |||
Change in accounts payable | (18.8 | ) | 0.8 | ||||
Other | 48.0 | 16.1 | |||||
Net cash provided by operating activities | 138.6 | 132.6 | |||||
Investing Activities: | |||||||
Capital expenditures | (7.1 | ) | (12.6 | ) | |||
Acquisition payments | (50.9 | ) | (68.5 | ) | |||
Other | (8.2 | ) | 1.4 | ||||
Net cash used in investing activities | (66.2 | ) | (79.7 | ) | |||
Financing Activities: | |||||||
Debt (repayments) borrowings, net | (76.3 | ) | 74.4 | ||||
Equity activity, net | (0.4 | ) | (79.1 | ) | |||
Other | 0.6 | 2.7 | |||||
Net cash used in financing activities | (76.1 | ) | (2.0 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 3.7 | (4.9 | ) | ||||
Net change in cash and cash equivalents | — | 46.0 | |||||
Cash and cash equivalents at the beginning of the period | 160.3 | 128.3 | |||||
Cash and cash equivalents at the end of the period | $ | 160.3 | $ | 174.3 |
Three Months Ended | Six Months Ended | ||||
Normalized Organic Sales Growth - Year-Over-Year: | June 30, 2016 | June 30, 2016 | |||
Change in net sales | (0.3 | )% | (1.2 | )% | |
Impact from acquisitions | 3.7 | % | 3.8 | % | |
Impact from foreign exchange rates | (0.9 | )% | (1.7 | )% | |
Impact from number of workdays | — | % | 1.6 | % | |
Normalized organic sales growth | (3.1 | )% | (4.9 | )% |
Three Months Ended | ||
Normalized Organic Sales Growth - Sequential: | June 30, 2016 | |
Change in net sales | 7.6 | % |
Impact from acquisitions | 1.2 | % |
Impact from foreign exchange rates | 1.6 | % |
Impact from number of workdays | — | % |
Normalized organic sales growth | 4.8 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
Gross Profit: | June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||
Net sales | $ | 1,911.6 | $ | 1,916.7 | $ | 3,687.5 | $ | 3,733.0 | |||||||
Cost of goods sold (excluding depreciation and amortization) | 1,532.1 | 1,535.1 | 2,952.9 | 2,983.7 | |||||||||||
Gross profit | $ | 379.5 | $ | 381.6 | $ | 734.6 | $ | 749.3 | |||||||
Gross margin | 19.9 | % | 19.9 | % | 19.9 | % | 20.1 | % |
Twelve Months Ended | |||||||
Financial Leverage: | June 30, 2016 | December 31, 2015 | |||||
Income from operations | $ | 353.8 | $ | 373.7 | |||
Depreciation and amortization | 66.2 | 65.0 | |||||
EBITDA | $ | 420.0 | $ | 438.7 | |||
June 30, 2016 | December 31, 2015 | ||||||
Current debt and short-term borrowings | $ | 44.7 | $ | 44.3 | |||
Long-term debt | 1,360.7 | 1,439.1 | |||||
Debt discount and deferred financing fees(1) | 184.0 | 182.0 | |||||
Total debt | $ | 1,589.4 | $ | 1,665.4 | |||
Financial leverage ratio | 3.8 | 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. |
Three Months Ended | Six Months Ended | ||||||||||||||
Free Cash Flow: | June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||
Cash flow provided by operations | $ | 60.0 | $ | 42.5 | $ | 138.6 | $ | 132.6 | |||||||
Less: Capital expenditures | (3.5 | ) | (7.6 | ) | (7.1 | ) | (12.6 | ) | |||||||
Free cash flow | $ | 56.5 | $ | 34.9 | $ | 131.5 | $ | 120.0 | |||||||
Percent of net income | 113 | % | 68 | % | 156 | % | 123 | % |
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