Pittsburgh, PA - WESCO International, Inc., a leading provider of electrical, industrial, and communications MRO and OEM products, construction materials, and advanced supply chain management and logistics services, today announced its 2013 first quarter results.
The following are results for the three months ended March 31, 2013 compared to the three months ended March 31, 2012:
Net sales were $1,808.1 million for the first quarter of 2013, compared to $1,606.0 million for the first quarter of 2012, an increase of 12.6%. Acquisitions positively impacted sales by 16.0% and organic sales declined 3.4%. Adjusting for the impact of one less workday in the quarter, normalized organic sales declined approximately 1.8%. Sequentially, sales increased 10.0%, and organic sales decreased 2.1%.
Gross profit of $381.1 million, or 21.1% of sales, for the first quarter of 2013 improved 120 basis points compared to $319.7 million, or 19.9% of sales, for the first quarter of 2012.
Selling, general & administrative (SG&A) expenses of $227.5 million, or 12.6% of sales, for the first quarter of 2013 decreased 160 basis points, compared to $228.1 million, or 14.2% of sales, for the first quarter of 2012. First quarter 2013 SG&A expenses 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 $263.6 million, or 14.6% of sales. The increase in SG&A expenses was the result of acquisitions, primarily EECOL.
Operating profit was $136.9 million for the current quarter, up 64.0% from $83.5 million for the comparable 2012 quarter. Operating profit as a percentage of sales was 7.6% in 2013, up 240 basis points from 5.2% in 2012. Excluding the favorable impact resulting from the recognition of insurance coverage on a litigation matter, operating profit was $100.8 million, or 5.6% of sales, up 20.7% and 40 basis points, respectively, from the prior year quarter.
Interest expense for the first quarter of 2013 was $21.9 million, compared to $9.0 million for the first quarter of 2012. Interest expense increased for the quarter 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 quarter of 2013 was $2.3 million compared to $1.9 million of income in the first quarter of 2012. The first quarter of 2012 was impacted by a favorable adjustment of $3.2 million of previously recorded interest related to uncertain tax positions. This adjustment was the result of a favorable Internal Revenue Service appeals settlement in the first quarter of 2012 related to the years 2000 to 2006.
The effective tax rate for the current quarter was 26.9%, compared to 29.0% for the prior year first quarter.
Net income of $84.1 million for the current quarter was up 59.0% from $52.9 million for the prior year quarter. Excluding the favorable impact of non-recurring items in both years, first quarter 2013 adjusted net income was $58.6 million, compared to $50.9 million in the prior quarter, an increase of 15.1%.
Earnings per diluted share for the first quarter of 2013 were $1.60 per share, based on 52.4 million diluted shares, and were up 55.3% from $1.03 per share in the first quarter of 2012, based on 51.3 million diluted shares. Excluding the favorable impact of non-recurring items in both years, adjusted earnings per diluted share in first quarter 2013 were $1.12, compared to $0.99 in the prior year quarter and increased 13.1%.
Free cash flow for the first quarter of 2013 was $74.4 million, or 88% of net income, compared to $53.8 million for the first quarter of 2012. Excluding the favorable impact of non-recurring items, first quarter of 2013 free cash flow was 127% of adjusted net income.
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "Our first quarter results reflect solid execution in a challenging economic environment and, as expected, a continuation of the market trends experienced in the second half of last year. Although organic sales declined 3% in the quarter and were softer than expected, we continued to see the positive impact of our One WESCO sales, productivity and LEAN initiatives on our business. Overall sales and gross margins achieved record levels, and adjusted operating margins expanded 40 basis points to 5.6%, while backlog grew approximately 7% versus year end 2012. In addition, we were pleased with the performance and effective integration of our recent acquisitions, including EECOL where strong first quarter results support our full year EPS accretion expectations."
Mr. Engel continued, "Free cash flow generation exceeded adjusted net income in the quarter and was directed to debt reduction, improving our financial leverage ahead of schedule, to just above the upper end of our targeted range on a proforma basis. Our acquisition pipeline continues to be actively managed, and we see excellent opportunities to further expand and strengthen our portfolio in 2013. We remain focused on investing in our people while driving execution of our eight growth engines and six operational excellence initiatives, and continue to expect stronger sales growth in the second half of this year"
Mr. Engel continued, "As consolidation and outsourcing accelerates in our industry, our addressable markets remain large and very fragmented. Demand is increasing for our One WESCO value proposition of providing our customers with supply chain integrity and a one-stop-shop for the solutions they need for their MRO, OEM and Capital Project requirements. As a result of the actions that we have taken over the last several years, our global business is stronger, more diverse, and well positioned for continued value creation."