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Wesco International Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed March 15, 2004
Period End
December 31, 2003
Security
WCC
In the record · 2016–202610-K1210-Q338-K143

WCC filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 143 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Mar ’18Mar ’18
  2. Deal closed8-K · Jun ’20Jun ’20
  3. Material agreement8-K · Mar ’22Mar ’22
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 15, 2004. Cited figures are marked; the original filing is the authoritative source.

WESCO International, Inc. reported net sales of $3.29 billiona for 2003, down approximately $39 million, or 1.2%, from 2002.

The company describes itself as the second largest distributor in the estimated $74 billionb U.S. electrical distribution industry and the largest provider of integrated supply services. Income from operations rose 12.3% to $86.1 million, driven by an 80 basis point improvement in gross margin to 18.6%, while lower receivables facility fees and lower debt reduced financing costs. Net income was $30.0 million, or $0.65 per diluted share, compared with $23.1 million, or $0.49 per diluted share, in 2002.

The effective tax rate was 23.2%, versus 11.0% in 2002. The balance sheet remained highly leveraged. Total debt was $422.2 millionc at December 31, 2003, against stockholders' equity of $167.7 million.

Operating cash flow was $35.8 milliond, which included a $68.0 million outflow from a reduction in the Receivables Facility. The company repurchased 4.3 million Class B common shares for $27.3 million in December 2003 and redeemed employee stock options for a $20.1 million cash payment made in January 2004. Management accrued an $80 million liability for the Bruckner acquisition earnout, which is largely payable in 2004.

The company has paid no dividends and expects to retain earnings for growth or debt reduction. Cypress and its affiliates hold approximately 48% of the common stock and can exert significant influence over the company. Management's 2004 outlook calls for improved operating performance from margin expansion and cost containment if the forecast economic recovery occurs, with capital expenditures expected to rise by approximately $7 million.

The filing also discloses that the Audit Committee engaged independent counsel to review cash management and expense reimbursement practices at one branch, representing approximately 2% of sales. Management does not believe the amounts involved are material.

02—Key points

Key Highlights

  1. Net sales were $3,286.8 million in 2003, down 1.2% from $3,325.8 million in 2002.
  2. Income from operations increased 12.3% to $86.1 million, supported by gross margin improving 80 basis points to 18.6%.
  3. Net income was $30.0 million, or $0.65 per diluted share, versus $23.1 million, or $0.49 per diluted share, in 2002.
  4. Total debt was $422.2 million and stockholders' equity was $167.7 million at December 31, 2003.
  5. Operating cash flow was $35.8 million, including a $68.0 million outflow from the reduced Receivables Facility.
  6. An $80 million Bruckner earnout liability was accrued, with $31.3 million of acquisition earnout payments shown as due in 2004.
  7. Ten largest suppliers accounted for approximately 32% of purchases, with Eaton Corporation at approximately 13%; Cypress and affiliates own approximately 48% of common stock.

03—Questions

Frequently Asked Questions

  1. How did WESCO perform financially in 2003?

    Net sales declined 1.2% to $3.29 billion, but income from operations rose 12.3% to $86.1 million on better gross margins. Net income increased to $30.0 million, or $0.65 per diluted share, from $23.1 million, or $0.49 per diluted share, in 2002.

  2. How leveraged is the company, and what drove changes in its debt?

    Total debt was $422.2 million at year-end 2003, against stockholders' equity of $167.7 million. The company completed a $51 million mortgage financing facility in February 2003 and repurchased $21.2 million of senior subordinated notes during the year. Its $300 million Receivables Facility, of which $165 million has a 364-day term, is off balance sheet, and the $100 million of fixed-rate notes swapped to variable rates exposes it to interest rate increases.

  3. What capital returns or dividends has WESCO provided to shareholders?

    WESCO has paid no dividends and does not plan to pay them in the foreseeable future, and its credit agreements restrict dividends. In November 2003 it repurchased 4.3 million Class B shares from an institutional holder for $27.3 million, and in December 2003 it redeemed employee stock options for a $20.1 million cash payment made in January 2004.

  4. What major risks does the filing identify?

    The filing cites high leverage and restrictive debt covenants, sensitivity to downturns in construction and industrial activity, competition that could pressure prices, dependence on key suppliers (ten largest accounted for approximately 32% of purchases), reliance on information systems, and significant influence by Cypress and its affiliates, which own approximately 48% of the common stock.

04—Continue

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