WESCO International, Inc., a leading provider of electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturer (OEM) products, construction materials, and advanced supply chain management and logistics services, announces its results for the first quarter of 2019.
"We started out 2019 with sales and margin within our outlook range for the first quarter," says John J. Engel, WESCO's chairman, president, and CEO. "Gross margin, which expanded both sequentially and year-over-year, reached its highest level since early 2017. Our sales growth rebounded nicely in March and has continued into April after a slow start in January and February. Backlog grew sequentially in the quarter, consistent with normal seasonality, and provides a positive set-up for the balance of the year. Operating margin was driven by our gross margin improvement initiatives coupled with our continued effective operating cost management and controls. We also completed the acquisition of SLS in March and look forward to accelerating our results in the lighting marketplace. Our end markets are expected to remain healthy this year and provide excellent profitable growth opportunities for WESCO."
The following are results for the three months ended March 31, 2019 compared to the three months ended March 31, 2018:
- Net sales were $2.0 billion for the first quarter of 2019 and 2018. Organic sales for the first quarter of 2019 grew by 1.0 percent as the number of workdays and foreign exchange rates negatively impacted net sales by 1.6 percent and 1.3 percent, respectively, while acquisitions positively impacted net sales by 0.3 percent.
- Cost of goods sold for the first quarter of 2019 and 2018 was $1.6 billion, and gross profit was $382.5 million and $379.9 million, respectively. As a percentage of net sales, gross profit was 19.5 percent and 19.1% for the first quarter of 2019 and 2018, respectively.
- Selling, general and administrative ("SG&A") expenses were $296.6 million, or 15.1 percent of net sales, for the first quarter of 2019 compared to $290.8 million, or 14.6 percent of net sales, for the first quarter of 2018.
- Operating profit was $70.7 million for the first quarter of 2019, compared to $73.2 million for the first quarter of 2018. Operating profit as a percentage of net sales was 3.6 percent for the current quarter, compared to 3.7% for the first quarter of the prior year.
- Net interest and other for the first quarter of 2019 was $17.1 million, compared to $19.8 million for the first quarter of 2018.
- The effective tax rate for the first quarter of 2019 was 21.7 percent, compared to 19.6 percent for the first quarter of 2018. The higher effective tax rate in the current quarter is primarily due to the full application of the international provisions of U.S. tax reform.
- Net income attributable to WESCO International, Inc. was $42.4 million and $44.4 million for the first quarter of 2019 and 2018, respectively.
- Earnings per diluted share for the first quarter of 2019 and 2018 was $0.93, based on 45.5 million and 47.6 million diluted shares, respectively.
- Operating cash flow for the first quarter of 2019 was $28.9 million, compared to $53.0 million for the first quarter of 2018. Free cash flow for the first quarter of 2019 was $18.1 million, or 43 percent of net income, compared to $45.3 million, or 105 percent of net income, for the first quarter of 2018.
"We maintain our full year 2019 outlook for sales growth of 3 percent to 6 percent, as the benefit of the SLS acquisition is offset by additional foreign currency headwinds," says Engel. "We reaffirm our full year outlook for operating margin of 4.3% to 4.7%, EPS of $5.10 to $5.70 per diluted share, and free cash flow generation of at least 90% of net income. Our focus is on executing our 2019 plan priorities of sales growth, margin improvement, investments in our people and processes, and maintaining our cost and cash management discipline. We also expect to complete additional share repurchases of at least $75 million during the second quarter. Customers continue to seek improvement in their operations and supply chains in an increasingly complex and rapidly changing world. Our talented team of associates and our robust portfolio of products and value-added services differentiate WESCO by providing our customers with complete solutions for their MRO, OEM and capital project needs."