WESCO International, Inc. Reports Second Quarter 2010 Results
-- Consolidated sales of $1.26 billion increased 9.6% sequentially and 8.6% over last year's comparable quarter
-- Construction end market sales increased 17% sequentially and 4% over last year's comparable quarter
-- Operating margins improved to 4.1%, up 80 basis points from the first quarter 2010
-- Financial liquidity at an all time record and debt reduced by $115 million year-to-date

PITTSBURGH, July 22 /PRNewswire-FirstCall/ -- WESCO International, Inc. (NYSE: WCC),  a leading provider of electrical and industrial MRO products, construction materials, and advanced integrated supply procurement outsourcing services, today announced its second quarter 2010 financial results.

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The following are results for the three months ended June 30, 2010 compared to the three months ended June 30, 2009:

  • Consolidated net sales were $1,259.1 million for the second quarter of 2010, compared to $1,159.2 million for the second quarter of 2009, an increase of 8.6%.  Second quarter 2010 consolidated net sales included a 1.9% positive impact from foreign exchange rates.  Second quarter sales increased 9.6% compared to the first quarter 2010 and included a 0.4% positive impact from foreign exchange.
  • Gross profit was $242.9 million, or 19.3% of sales, for the second quarter of 2010, compared to $223.9 million, or 19.3% of sales, for 2009.  The relative sequential strength of construction end market sales had a negative mix impact on second quarter gross margins when compared to the first quarter's result of 19.8%.  
  • Sales, general & administrative (SG&A) expenses were $186.0 million, or 14.8% of sales for the current quarter, compared to $169.9 million, or 14.7% of sales for 2009. WESCO's second quarter 2009 SG&A expenses included a net favorable impact of approximately $10 million in temporary cost and discretionary benefit reductions.
  • Operating profit was $51.3 million, or 4.1% of sales, for the current quarter, compared to $47.6 million, or 4.1% of sales for the comparable 2009 quarter.  After adjusting for the 2009 impact of the temporary cost and discretionary benefit reductions, operating margins improved by approximately 80 basis points.  
  • Total interest expense for the second quarter of 2010 was $14.4 million compared to $13.8 million for the second quarter 2009.  Interest expense in the current quarter was comprised of $13.1 million of cash interest expense and $1.3 million of non-cash interest expense.  Interest expense in the prior year quarter was comprised of $10.0 million of cash interest and $3.8 million of non-cash interest.  
  • Effective tax rate for the current quarter was 28.2% compared to 24.2% for the prior year quarter.
  • Net income for the current quarter was $27.8 million compared to $26.4 million for the prior year quarter and $19.2 million for the first quarter 2010.
  • Diluted earnings per share for the second quarter of 2010 was $0.60 per share, based on 46.0 million shares outstanding versus $0.62 per share in the second quarter of 2009, based on 42.7 million shares outstanding, and first quarter's $0.44 per share based on 43.7 million shares outstanding.
  • Free cash flow for the second quarter was a use of $3.7 million to support sales growth in the second quarter.


John J. Engel, WESCO's Chief Executive Officer, stated, "We are pleased with our sales and operating margin results and the improving momentum across our business.  All four of our major end markets and all six of our major product categories experienced positive sequential sales growth during the quarter. The last time we saw all our end markets and product categories grow sequentially was the second quarter of 2008, and the third quarter of 2004, respectively.  The recent acquisition of Potelcom in the quarter is consistent with our strategy of increasing sales in key industry segments and geographic regions.  We see excellent opportunities to strengthen our portfolio, invest in our growth initiatives, and improve our market position as we expand our business through the recovery phase of this economic cycle."  

The following results are for the six months ended June 30, 2010 compared to the six months ended June 30, 2009:

  • Consolidated net sales were $2,407.7 million for the first six months of 2010 compared to $2,338.8 million for the first six months of 2009, an increase of 2.9%.  Consolidated net sales included a 1.9% positive impact from foreign exchange rates.
  • Gross profit was $470.3 million, or 19.5% of sales, for the first six months of 2010, compared to $462.0 million, or 19.8% of sales, for the first six months of 2009.
  • SG&A expenses were $369.0 million, or 15.3% of sales, for the first six months of 2010, compared to $357.3 million, or 15.3% of sales for the first six months of 2009.  
  • Operating profit was $89.6 million, or 3.7% of sales, for the six months ended June 30, 2010, compared to $91.2 million, or 3.9% of sales for the six months ended June 30, 2009.
  • Total interest expense for the six months ended June 30, 2010 was $27.9 million compared to $26.4 million for the six months ended June 30, 2009.  Interest expense in the first half of 2010 was comprised of $25.3 million cash interest expense and $2.6 million non-cash interest expense.  Interest expense in the first half of 2009 was comprised of $18.7 million cash interest expense and $7.7 million non-cash interest expense.  
  • Effective six month tax rate was 28.8% for 2010 compared to 26.4% for 2009.  
  • Net income for the first six months of 2010 was $47.0 million compared to $49.7 million for the first six months of 2009.
  • Diluted earnings per share for the first six months of 2010 was $1.04 per share, based on 45.0 million shares outstanding versus $1.17 per share for the first six months of 2009, based on 42.6 million shares outstanding.
  • Free cash flow for the first six months of 2010 was $62.8 million, compared to $198.5 million in the comparable prior year period.


Mr. Engel continued, "The market remains highly competitive and our customers' needs for supply chain efficiency and effectiveness are greater than ever.  I am very proud of the 'extra effort' of our WESCO employees and their commitment to understanding our customers' needs.  We are responding with solutions which utilize our entire portfolio of products and services while extending beyond the traditional distributor relationship."

Teleconference

WESCO will conduct a teleconference to discuss the second quarter earnings as described in this News Release on Thursday, July 22, 2010, at 11:00 a.m. E.D.T.  The conference call will be broadcast live over the Internet and can be accessed from the Company's website at http://www.wesco.com.  The conference call will be archived on this Internet site for seven days.

WESCO International, Inc. (NYSE: WCC) is a publicly traded Fortune 500 holding company, headquartered in Pittsburgh, Pennsylvania, whose primary operating entity is WESCO Distribution, Inc.  WESCO Distribution is a leading distributor of electrical construction products and electrical and industrial maintenance, repair and operating (MRO) supplies, and is the nation's largest provider of integrated supply services.  2009 annual sales were approximately $4.6 billion.  The Company employs approximately 6,100 people, maintains relationships with over 17,000 suppliers, and serves over 100,000 customers worldwide.  Major markets include commercial and industrial firms, contractors, government agencies, educational institutions, telecommunications businesses and utilities.  WESCO operates seven fully automated distribution centers and approximately 380 full-service branches in North America and select international markets, providing a local presence for area 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, 2009, as well as the Company's other reports filed with the Securities and Exchange Commission.

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WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollar amounts in millions, except per share amounts)

(Unaudited)















Three Months
Ended


Three Months
Ended




June 30,
2010


June 30,
2009


Net sales


$ 1,259.1


$ 1,159.2


Cost of goods sold (excluding
depreciation and amortization below)


1,016.2

80.7%

935.3

80.7%

Selling, general and administrative expenses


186.0

14.8%

169.9

14.7%

Depreciation and amortization


5.6


6.4


Income from operations


51.3

4.1%

47.6

4.1%

Interest expense, net


14.4


13.8


Other income


(1.8)


(1.1)


Income before income taxes


38.7

3.1%

34.9

3.0%

Provision for income taxes

10.9


8.5


Net income


$ 27.8

2.2%

$ 26.4

2.3%







Diluted earnings per common share


$ 0.60


$ 0.62


Weighted average common shares outstanding and common
share equivalents used in computing diluted earnings per
share (in millions)


46.0


42.7





WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollar amounts in millions, except per share amounts)

(Unaudited)















Six Months
Ended


Six Months
Ended




June 30,
2010


June 30,
2009


Net sales


$ 2,407.7


$2,338.8


Cost of goods sold (excluding
depreciation and amortization below)


1,937.4

80.5%

1,876.8

80.2%

Selling, general and administrative expenses


369.0

15.3%

357.3

15.3%

Depreciation and amortization


11.7


13.5


Income from operations


89.6

3.7%

91.2

3.9%

Interest expense, net


27.9


26.4


Other income


(4.3)


(2.7)


Income before income taxes


66.0

2.7%

67.5

2.9%

Provision for income taxes

19.0


17.8


Net income


$ 47.0

2.0%

$ 49.7

2.1%







Diluted earnings per common share


$ 1.04


$1.17


Weighted average common shares outstanding and common
share equivalents used in computing diluted earnings per
share (in millions)


45.0


42.6





WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(dollar amounts in millions)

(Unaudited)








Assets


June 30,
2010


December 31,
2009

Current Assets






Cash and cash equivalents


$ 95.8


$ 112.3


Trade accounts receivable


731.3


635.8


Inventories, net


531.5


507.2


Other current assets


45.9


75.7


  Total current assets


1,404.5


1,331.0

Other assets


1,116.8


1,163.2


  Total assets


$ 2,521.3


$ 2,494.2








Liabilities and Stockholders' Equity





Current Liabilities






Accounts payable


$ 540.7


$ 453.1


Current debt


96.0


94.0


Other current liabilities


130.4


133.7


  Total current liabilities


767.1


680.8







Long-term debt


483.8


597.9

Other noncurrent liabilities


219.1


219.2


  Total liabilities


1,470.0


1,497.9







Stockholders' Equity






  Total stockholders' equity


1,051.3


996.3


  Total liabilities and stockholders' equity

$2,521.3


$ 2,494.2










WESCO INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(dollar amounts in millions)

(Unaudited)










Six Months
Ended  June 30,
2010


Six Months
Ended June 30,
2009

Operating Activities:






Net income


$ 47.0


$ 49.7


   Add back (deduct):






  Depreciation and amortization


11.7


13.5


  Deferred income taxes


(3.8)


5.4


  Change in Trade and other receivables, net


(80.2)


132.9


  Change in Inventories, net


(21.8)


92.0


  Change in Accounts Payable


85.8


(72.6)


  Other


30.1


(16.2)


        Net cash provided by operating activities


68.8


204.7







Investing Activities:






Capital expenditures


(6.0)


(6.2)


Acquisition payments


(14.3)


(0.1)


Proceeds from sale of subsidiary


40.0


-


Repayment of note receivable


15.0


-


Other


4.2


1.1


       Net cash provided (used) by investing activities


38.9


(5.2)







Financing Activities:






Debt borrowings (repayments), net


(114.8)


(174.9)


Equity activity, net


1.1


0.5


Other


(10.2)


(11.1)


      Net cash used by financing activities

(123.9)


(185.5)








Effect of exchange rate changes on cash and cash equivalents


(0.3)


3.0








Net change in cash and cash equivalents


(16.5)


17.0


Cash and cash equivalents at the beginning of the period


112.3


86.3


Cash and cash equivalents at the end of the period


$ 95.8


$103.3










WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(dollar amounts in thousands)

(Unaudited)







Financial Leverage:


Twelve Months Ended
June 30,
2010


Twelve Months  Ended
December 31,
2009


     Income from operations


$ 178,402


$179,952


Depreciation and amortization


24,250


26,045


EBITDA


$ 202,652


$ 205,997










June 30,
2010


December 31,
2009


Current debt


$ 95,975


$ 93,977


Long-term debt


483,812


597,869


Debt discount related to convertible debentures(1)


180,131


182,689


Total debt including debt discount


$ 759,918


$ 874,535


Financial leverage ratio


3.7


4.2


Note:   Financial leverage is provided by the Company as an indicator of capital structure position.  Financial
leverage is calculated by dividing total debt, including debt discount, by the trailing twelve months earnings
before interest, taxes, depreciation and amortization (EBITDA).  




Free Cash Flow:

(dollar amounts in millions)


Three Months
Ended
June 30,
2010


Six Months
Ended
June 30,
2010


Six Months
Ended
June 30,
2009


Cash flow  provided by operations


$ 0.1


$ 68.8


$ 204.7


Less:  Capital expenditures


(3.8)


(6.0)


(6.2)


Free cash flow


$ (3.7)


$ 62.8


$ 198.5


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 provide a source
of funds for any of the Company's financing needs.

(1) The convertible debentures are presented in the consolidated balance sheets in long-term debt net
of the unamortized discount.




WESCO INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)

(dollar amounts in millions)

(Unaudited)


Gross Profit:


Three Months
Ended
June 30,
2010


Three Months
Ended
June 30,
2009


Net sales


$ 1,259.1


$ 1,159.2


Cost of goods sold (excluding depreciation and amortization)


1,016.2


935.3


Gross profit


$ 242.9


$ 223.9


Gross margin


19.3%


19.3%



Gross Profit:


Six Months Ended
June 30,
2010


Six Months Ended
June 30,
2009


Net sales


$ 2,407.7


$ 2,338.8


Cost of goods sold (excluding depreciation and amortization)


1,937.4


1,876.8


Gross profit


$ 470.3


$ 462.0


Gross margin


19.5%


19.8%



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.




SOURCE WESCO International, Inc.