Pittsburgh, PA - WESCO International, Inc. announced its 2013 fourth quarter results.
The following are results for the three months ended December 31, 2013 compared to the three months ended December 31, 2012. A reconciliation of adjusted results is provided in the Non-GAAP Financial Measures section of this release.
Net sales were $1,880.1 million for the fourth quarter of 2013, compared to $1,644.4 million for the fourth quarter of 2012, an increase of 14.3%. Acquisitions positively impacted sales by 13.8%, organic sales increased 1.5%, and foreign exchange negatively impacted sales by 1.0%. Sequentially, sales decreased 2.7%. Adjusting for the impact of one less workday in the quarter, organic sales decreased 1.1% sequentially.
Gross profit was $376.2 million, or 20.0% of sales, for the fourth quarter of 2013, compared to $337.3 million, or 20.5% of sales, for the fourth quarter of 2012.
Selling, general & administrative (SG&A) expenses were $248.6 million, or 13.2% of sales, for the fourth quarter of 2013, compared to $275.9 million, or 16.8% of sales, for the fourth quarter of 2012. As adjusted, fourth quarter SG&A expenses were $248.6 million and $230.8 million, or 13.2% and 14.2% of sales, in 2013 and 2012 respectively, an improvement of 100 basis points. The increase in SG&A is attributable to acquisitions, partially offset by a $12.7 million decrease in core SG&A.
Operating profit was $110.6 million for the current quarter, up 120.0% from $50.3 million for the comparable 2012 quarter. Operating profit as a percentage of sales was 5.9% and 3.1% in 2013 and 2012, respectively. As adjusted, fourth quarter operating profit was $110.6 million and $88.4 million, or 5.9% and 5.5% of sales, in 2013 and 2012, respectively, an improvement of 40 basis points.
Interest expense for the fourth quarter of 2013 was $20.6 million, compared to $14.7 million for the fourth quarter of 2012. Interest expense increased for the quarter primarily due to the increase in indebtedness inDecember 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 fourth quarter of 2013 and 2012 was $3.5 million and $0.7 million, respectively.
The effective tax rate for the current quarter was 24.4%, compared to 17.5% for the prior year fourth quarter. As adjusted, the effective tax rate for the current quarter was 25.5%.
Net income attributable to WESCO International, Inc. of $58.0 million for the current quarter was up 118.9% from $26.5 million for the prior year quarter. Adjusted net income attributable to WESCO International, Inc. was $67.0 million, up 22.7% from the prior year.
Earnings per diluted share for the fourth quarter of 2013 were $1.09 per share, based on 53.2 million diluted shares, compared to $0.52 per share in the fourth quarter of 2012, based on 51.4 million diluted shares.
Adjusted earnings per diluted share in the fourth quarter of 2013 were $1.26, compared to $1.06 in the corresponding prior year period, an increase of 18.9%.
Free cash flow for the fourth quarter of 2013 was $128.1 million, or 221% of net income, compared to $95.0 million for the fourth quarter of 2012. Free cash flow was 191% of adjusted net income for the fourth quarter of 2013.
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Our fourth quarter results were consistent with the third quarter reflecting the low growth economic environment and challenging end market conditions. Organic sales increased 1.5% versus prior year driven by growth in Data Communications and Lighting, and continued strength in Utility. Our sales growth was below expectations while effective cost controls and acquisition performance resulted in an adjusted EPS of $1.26, up 19% versus prior year. Free cash flow generation was particularly strong in the quarter and our financial leverage is now well within our targeted range."
Mr. Engel continued, "On a full year basis, we posted record sales, profitability and free cash flow. Our acquisitions continue to perform well and we delivered on our full year EPS accretion expectations of $1.00 for EECOL. Adjusted EPS also reached a record level of $5.02 in 2013, marking the third year in a row of double digit EPS growth. We are encouraged with the progress of our One WESCO sales, productivity and LEAN initiatives as we invest in our growth engines and manage an active acquisition pipeline. We are on track to close the LaPrairie acquisition and see excellent opportunities to further expand and strengthen our portfolio this year. In 2014, we expect macro economic conditions to show some improvement over last year with a continued recovery in non-residential construction. As a result, we have revised our full year outlook and now expect sales growth of 3% to 6% and EPS of $5.30 to $5.70 per diluted share."
The following results are for the year ended December 31, 2013 compared to the year ended December 31, 2012. A reconciliation of adjusted results is provided in the Non-GAAP Financial Measures section of this release.
- Net sales were $7,513.3 million for 2013, compared to $6,579.3 million for 2012, an increase of 14.2%. Acquisitions positively impacted sales by 14.6%, organic sales were flat, and foreign exchange negatively impacted sales by 0.4%.
- Gross profit of $1,545.4 million, or 20.6% of sales, for 2013 was up 40 basis points, compared to $1,331.4 million, or 20.2% of sales, for 2012.
- SG&A expenses for 2013 were $996.8 million, or 13.3% of sales, compared to $961.0 million, or 14.6% of sales, for 2012. As adjusted, SG&A expenses were $1,032.9 million and $915.9 million, or 13.7% and 14.0% of sales, in 2013 and 2012, respectively, an improvement of 30 basis points. The increase in SG&A is attributable to acquisitions, partially offset by a $16.2 million decrease in core SG&A.
- Operating profit was $481.0 million for 2013, up 44.5% from $332.8 million for 2012. Operating profit as a percentage of sales was 6.4% in 2013, up from 5.1% in 2012. As adjusted, operating profit was $444.9 million and $370.9 million, or 5.9% and 5.7% of sales, in 2013 and 2012, respectively, an improvement of 20 basis points.
- Interest expense for 2013 was $85.6 million, compared to $47.7 million for 2012. Interest expense increased for 2013 primarily due to the increase in indebtedness in December 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 2013 and 2012 was $10.2 million and $1.5 million, respectively.
- The effective tax rate was 27.2% for 2013 compared to 28.3% for 2012. As adjusted, the effective tax rate for the current year was 26.4%.
- Net income attributable to WESCO International, Inc. of $276.4 million for 2013 was up 37.0% from $201.8 million for 2012. Adjusted net income attributable to WESCO International, Inc. was $264.2 million for 2013, compared to $229.9 million for 2012, an increase of 14.9%.
- Earnings per diluted share for 2013 were up 32.9% to $5.25 per share, based on 52.7 million diluted shares, versus $3.95 per share for 2012, based on 51.1 million diluted shares. Adjusted earnings per diluted share were $5.02 for 2013, compared to $4.49 for the corresponding prior year period and increased 11.8%.
- Free cash flow for 2013 was $308.4 million, or 112% of net income, compared to $265.1 million in 2012. Free cash flow was 117% of adjusted net income for 2013.
Mr. Engel continued, "As a result of executing our growth strategy over the last five years, we have strengthened our business and enhanced our position in the global marketplace. We enter 2014 a bigger, stronger, faster and more global company. Consolidation and outsourcing is continuing in our industry and customers are looking for a one-stop-shop to manage their global supply chain needs. Our One WESCO value proposition provides customers with the product and service solutions they need to meet their MRO, OEM and Capital Project management requirements. We remain sharply focused on executing our One WESCO initiatives while continuing to make investments in our people, our processes, and our business."
