PITTSBURGH, Jan. 31 /PRNewswire-FirstCall/-- WESCO International, Inc. (NYSE: WCC), a leading provider of electrical MRO products, construction materials, and advanced integrated supply procurement outsourcing services, today announced its 2007 fourth quarter and full-year financial results.
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Fourth Quarter Results
Consolidated net sales for the fourth quarter of 2007 were $1,489 million compared to $1,376 million in 2006, an increase of 8%. Sales, excluding the impact of Communications Supply acquired in November 2006 and the three acquisitions completed in 2007, increased 2.8%. Gross margin for the quarter was 20.3% compared to 20.9% from a year ago. The fourth quarter 2006 gross margin was 20.3% excluding the one-time favorable impact resulting from acquisition related inventory adjustments in the prior year. Operating income for the current quarter totaled $99 million versus $93 million in last year's comparable quarter. Depreciation and amortization included in operating income was $9.6 million for 2007 compared to $9.4 million in 2006. The effective tax rate for the fourth quarter of 2007 was 25.7% compared with 27.1% for the fourth quarter of 2006. The fourth quarter 2007 effective tax rate included non-recurring income tax benefits totaling $5.5 million, primarily resulting from tax incentives for US export sales, a change in foreign deferred taxes, and the timing of benefits realized from Canadian tax initiatives. Net income for this quarter was $61 million versus $58 million in the comparable 2006 quarter. Diluted earnings per share for the quarter were $1.34 per share versus $1.10 per share in 2006.
Stephen A. Van Oss, Senior Vice President and Chief Financial and Administrative Officer stated, "Our Company performed quite well during the quarter maintaining a tight focus on cost management while simultaneously making progress on our commitment to add sales capacity throughout the organization. Core sales growth at 3% was in line with our expectations. We are particularly pleased to see our operating profit pull through return to near target levels. This was achieved despite tough comparisons to last year's fourth quarter which included the favorable impact of one-time items related to last year's acquisitions and sales growth below levels generally necessary to achieve targeted operating profit pull through of 50% or more."
Mr. Van Oss continued, "We repurchased 1.1 million shares of Company stock under the new $400 million share repurchase program. Over the last 10 months, the Company has repurchased a total of 7.5 million shares. Our balance sheet is solid, with good earnings and strong free cash flow providing ample liquidity for continued share repurchases while maintaining appropriate levels of leverage."
For the year 2007, net sales increased 13% to $6,003 million compared with $5,321 million in 2006. Gross margin for the year was 20.4% in both 2007 and 2006. Operating income totaled $394 million compared with $365 million in 2006, an increase of 7.9%. Depreciation and amortization included in operating income was $37 million and $29 million for the years ended 2007 and 2006, respectively. Net income for 2007, including approximately $12 million of favorable one-time items related to income taxes and the change in accounting for our accounts receivable securitization program, was $241 million compared with $217 million last year. Diluted earnings per share in 2007 were $4.99 versus $4.14 earnings per share in 2006, an increase of 21%.
Roy W. Haley, Chairman and Chief Executive Officer, commented, "WESCO produced another year of record operating and financial results in 2007, despite sales weakness encountered early in the year. We are encouraged by the increased activity levels in the second half of 2007. The organization has worked very hard over the past several quarters to increase our sales and marketing capabilities while also expanding our capacity for growth. We believe these ongoing activities are appropriate and will yield additional profitable growth in 2008."
Mr. Haley continued, "We are very cognizant of the forecasts for a weaker economic environment for 2008. Our management is focused on matters under our operational and administrative control to drive sales growth in a difficult environment. We are pleased with the organization's efforts in 2007, and we look forward to another year of record results in 2008."
WESCO will conduct a teleconference to discuss the fourth quarter earnings as described in this News Release on Thursday, January 31, 2008 at 11:00 a.m. Eastern Time. The conference call will be broadcast live over the Internet and can be accessed from the Company's home page at http://www.wesco.com. The conference call will be archived on the Company's 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. 2007 annual sales were approximately $6.0 billion. The Company employs approximately 7,300 people, maintains relationships with over 24,000 suppliers, and serves more than 110,000 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 400 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, 2006, as well as the Company's other reports filed with the Securities and Exchange Commission.
SOURCE WESCO International, Inc.
CONTACT: Stephen A. Van Oss, Senior Vice President and Chief Financial
and Administrative Officer of WESCO International, Inc., +1-412-454-2271
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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 December 31, 2007 December 31, 2006 Net sales $1,489.2 $1,376.1 Cost of goods sold (excluding depreciation and amortization below) 1,187.3 1,088.9 Gross profit 301.9 20.3% 287.2 20.9% Selling, general and administrative expenses 193.5 13.0% 184.6 13.4% Depreciation and amortization 9.6 9.4 Income from operations 98.8 6.6% 93.2 6.8% Interest expense, net 16.6 7.5 Other expenses - 5.7 Income before income taxes 82.2 5.5% 80.0 5.8% Provision for income taxes 21.1 21.7 Net income $61.1 3.9% $58.3 4.2% Diluted earnings per common share $1.34 $1.10 Weighted average shares outstanding (in millions) 45.5 52.8 Twelve Months Ended Twelve Months Ended December 31, 2007 December 31, 2006 Net sales $6,003.4 $5,320.6 Cost of goods sold (excluding depreciation and amortization below) 4,781.3 4,234.1 Gross profit 1,222.1 20.4% 1,086.5 20.4% Selling, general and administrative expenses 791.1 13.2% 692.8 13.0% Depreciation and amortization 36.8 28.7 Income from operations 394.2 6.6% 365.0 6.9% Interest expense, net 63.2 24.6 Other expenses - 22.8 Income before income taxes 331.0 5.5% 317.6 6.0% Provision for income taxes 90.4 100.3 Net income $240.6 4.0% $217.3 4.1% Diluted earnings per common share $4.99 $4.14 Weighted average shares outstanding (in millions) 48.3 52.5 Note: As previously reported on March 1, 2007, in WESCO's Annual Report on Form 10-K, WESCO amended and restated its accounts receivable securitization facility as of December 29, 2006. Prior to the amendment and restatement, interest expense and other costs related to the Receivables Facility were recorded as other expense in the consolidated statement of income. For the year ended December 31, 2007, costs associated with the Receivables Facility totaled $28.3 million and are included within interest expense in the consolidated statement of income. WESCO INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollar amounts in millions) (Unaudited) December 31, December 31, 2007 2006 Assets Current Assets Cash and cash equivalents $72.3 $73.4 Trade accounts receivable (See Note) 844.5 830.0 Inventories, net 666.0 613.6 Other current assets 114.4 101.1 Total current assets 1,697.2 1,618.1 Other assets 1,179.4 1,205.9 Total assets $2,876.6 $2,824.0 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $626.3 $590.3 Other current liabilities (See Note) 683.1 563.4 Total current liabilities 1,309.4 1,153.7 Long-term debt 811.3 743.9 Other noncurrent liabilities 148.2 163.2 Total liabilities 2,268.9 2,060.8 Stockholders' Equity Total stockholders' equity 607.7 763.2 Total liabilities and stockholders' equity $2,876.6 $2,824.0 Note: As previously noted, WESCO amended and restated its accounts receivable securitization facility as of December 29, 2006. Historically, accounts receivable sold under the facility were removed from the consolidated balance sheet and accounted for as an off-balance sheet arrangement. Effective with the amendment, sales of accounts receivable pursuant to the facility no longer qualify for "sale treatment" under GAAP. Therefore, the consolidated balance sheets as of December 31, 2007 and 2006 reflect $480 million and $390.5 million, respectively, of additional accounts receivable and related borrowings. WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in millions) (Unaudited) December 31, December 31, 2007 2006 Total debt $1,316.3 $1,140.3 Plus: A/R Securitization - - Less: Cash and cash equivalents (72.3) (73.4) Total indebtedness (including A/R Securitization Program), net of cash (See Note) $1,244.0 $1,066.9 Note: As previously noted, WESCO amended its accounts receivable securitization facility as of December 29, 2006, which changed the accounting treatment for borrowings under the facility and accounts receivable to "on-balance sheet" from "off-balance sheet". Total indebtedness (including A/R Securitization Program), net of cash is provided by the Company as an additional measure of the Company's leverage. Cash and cash equivalents are deducted from this total to determine total indebtedness (including A/R Securitization Program), net of cash. This amount represents the Company's net obligation due under all of its financing facilities. WESCO INTERNATIONAL, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollar amounts in millions) (Unaudited) Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2007 2006 2007 2006 Cash flow provided by operations $55,069 $142,013 $262,278 $207,083 Change in A/R Securitization -- (75,500) -- 6,500 Less: Capital expenditures (4,947) (3,487) (16,118) (18,359) Free cash flow (excluding effects of A/R Securitization Program) (See Note) $50,122 $63,026 $246,160 $195,224 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. This amount represents excessive funds available to management to service all of its financing needs.