Pittsburgh, PA - WESCO International, Inc., announced its 2013 second quarter results.
The following are results for the three months ended June 30, 2013 compared to the three months ended June 30, 2012:
- Net sales were $1,894.0 million for the second quarter of 2013, compared to $1,672.7 million for the second quarter of 2012, an increase of 13.2%. Acquisitions positively impacted sales by 14.6%, foreign exchange negatively impacted sales by 0.2%, and organic sales declined 1.2%.
- Gross profit of $392.6 million, or 20.7% of sales, for the second quarter of 2013 improved 60 basis points compared to $335.6 million, or 20.1% of sales, for the second quarter of 2012.
- Selling, general & administrative (SG&A) expenses of $265.5 million, or 14.0% of sales, for the second quarter of 2013 increased 20 basis points, compared to $231.2 million, or 13.8% of sales, for the second quarter of 2012. Excluding acquisitions, SG&A declined $3.2 million from the prior year quarter.
- Operating profit was $109.9 million for the current quarter, up 14.4% from $96.0 million for the comparable 2012 quarter. Operating profit as a percentage of sales was 5.8% in 2013, up 10 basis points from 5.7% in 2012.
- Interest expense for the second quarter of 2013 was $21.8 million, compared to $11.5 million for the second quarter of 2012. Interest expense increased for the quarter due to the increase in indebtedness in late 2012 associated primarily with the EECOL acquisition. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for the second quarter of 2013 and 2012 was $2.1 million and $1.4 million, respectively.
- The effective tax rate for the current quarter was 25.8%, compared to 30.3% for the prior year second quarter.
- Net income attributable to WESCO International, Inc. of $65.3 million for current quarter was up 10.9% from $58.9 million for the prior year quarter.
- Earnings per diluted share for the second quarter of 2013 were $1.25 per share, based on 52.3 million diluted shares, and were up 8.7% from $1.15 per share in the second quarter of 2012, based on 51.1 million diluted shares.
- Free cash flow for the second quarter of 2013 was $33.6 million, or 52% of net income, compared to $49.1 million for the second quarter of 2012.
John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Our second quarter results reflect continued solid execution in a challenging economic environment with end market conditions consistent with our prior expectations. While organic sales declined 1% versus prior year, business momentum improved through the quarter with June sales per workday up 2%, driven by growth in Lighting and continued strength in Utility. Our acquisitions continue to perform well and we remain on track to deliver our full year EPS accretion expectations for EECOL. Free cash flow was directed to debt reduction and our financial leverage is now at the upper end of our targeted range on a proforma basis. We are seeing the positive impact of our One WESCO sales, productivity and LEAN initiatives on our business as we continue to invest in our growth engines and manage an active acquisition pipeline. We see excellent opportunities to further expand and strengthen our portfolio in the second half of 2013 into 2014. We expect organic sales growth in the second half but less than our prior expectations, and have revised our full year outlook to approximately $5.15 to $5.35 earnings per diluted share, which equates to 18% to 22% growth over prior year, excluding the ArcelorMittal litigation impacts."
The following results are for the six months ended June 30, 2013 compared to the six months ended June 30, 2012.
Net sales were $3,702.0 million for the first six months of 2013, compared to $3,278.7 million for the first six months of 2012. The 12.9% increase in sales includes a 15.3% positive impact from acquisitions, a 2.3% negative impact from organic sales, and a negative 0.1% exchange rate impact. Adjusting for the impact of one less workday in the period, normalized organic sales declined approximately 1.5%.
Gross profit of $773.6 million, or 20.9% of sales, for the first six months of 2013 was up 90 basis points, compared to $655.4 million, or 20.0% of sales, for the first six months of 2012.
SG&A expenses of $493.0 million, or 13.3% of sales, for the first six months of 2013 decreased 70 basis points, compared to $459.3 million, or 14.0% of sales, for the first six months of 2012. SG&A expenses for the first six months of 2013 include a $36.1 million favorable impact resulting from the recognition of insurance coverage relating to a litigation-related charge recorded in the fourth quarter of 2012. Excluding the impact of this favorable item, SG&A expenses were $529.1 million, or 14.3% of sales.
Operating profit was $246.7 million for the first six months of 2013, up 37.4% from $179.6 million for the comparable 2012 period. Operating profit as a percentage of sales was 6.7% in 2013, up 120 basis points from 5.5% in 2012. Excluding the favorable impact resulting from the recognition of insurance coverage on a litigation matter, operating profit was $210.6 million, or 5.7% of sales.
Interest expense for the first six months of 2013 was $43.7 million, compared to $20.4 million for the first six months of 2012. Interest expense increased for the first six months of 2013 due to the increase in indebtedness in late 2012 associated with the EECOL acquisition. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for the first six months of 2013 and 2012 was $4.4 million of expense and $0.5 million of income, respectively. Non-cash interest for the six months ended June 30, 2012 included a favorable adjustment of $3.2 million of previously recorded interest related to uncertain tax positions. This adjustment was a result of a favorable Internal Revenue Service appeals settlement in the first quarter of 2012 related to the years 2000 to 2006.
The effective six-month tax rate was 26.4% for 2013 compared to 29.7% for 2012.
Net income attributable to WESCO International, Inc. of $149.3 million for the first six months of 2013 was up 33.5% from $111.9 million for the first six months of 2012. Excluding the favorable impacts of the recognition of insurance coverage on a litigation matter and the Internal Revenue Service appeals settlement in the first six months of 2013 and 2012, respectively, adjusted net income for the first six months of 2013 was $123.8 million, compared to $109.9 million in the first six months of 2012, an increase of 12.6%.
Earnings per diluted share for the first six months of 2013 were up 30.7% to $2.85 per share, based on 52.4 million diluted shares, versus $2.18 per share for the first six months of 2012, based on 51.2 million diluted shares. Excluding the favorable impact of non-recurring items in both years, adjusted earnings per diluted share in the first six months of 2013 were $2.36, compared to $2.15 in the corresponding prior year period.
Free cash flow for the six months of 2013 was $108.0 million, or 72% of net income, compared to $102.9 million in the comparable prior year period. Excluding the favorable impact of non-recurring items, free cash flow was 87% of adjusted net income for the first six months of 2013.
Mr. Engel continued, "As consolidation and outsourcing continues in our industry, customers are increasingly looking for a one-stop-shop to manage their supply chain needs. Our One WESCO value proposition provides customers with the comprehensive product and service solutions they need to meet their MRO, OEM and Capital Project management requirements. As a result of the investments we are making in our people, our processes, and our business, we are well positioned for continued value creation."
