01—Abstract
Summary
Summary of the 10-K filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported net sales of $6,110.8 milliona for 2008, up 1.8% from $6,003.5 million in 2007, with net income of $212.7 million, or $4.91 per diluted share, compared with $240.6 million and $4.99 in 2007.
The company described itself as a leading North American provider of electrical construction products and electrical and industrial MRO supplies, operating approximately 400 branches and seven distribution centers. Operating income decreased 12.3% to $345.7 millionb, primarily due to the partial divestiture of its LADD operations in January 2008, in which it sold 60% of LADD to Deutsch and retained a 40% equity interest. Management stated that activity levels in its major end markets are expected to be significantly weaker in 2009 than in 2008.
Liquidity was supported by operating cash flow of $279.9 millionc, which funded $74.8 million of share repurchases and $35.3 million of capital expenditures, and cash rose to $86.3 million at year-end. Total debt was $1,140.8 million, stockholders' equity was $732.0 million, and the company reported $382.2 million of total liquidity, including $119.4 million of available revolver capacity and $205.0 million under its Receivables Facility. Management said it expects excess cash to be directed primarily toward debt reduction, and that capital expenditures would decrease by approximately $19.0 million in 2009.
The company also disclosed that FSP APB 14-1 will reduce long-term debt by an estimated $252.5 milliond and decrease 2009 earnings per share by $0.10 to $0.12 in the year of adoption. A customer lawsuit in Indiana seeks $52 million in damages, which WESCO has denied and intends to defend.
02—Key points
Key Highlights
- Net sales rose 1.8% to $6,110.8 million in 2008, driven by higher commodity prices, acquisitions completed in the second half of 2007, favorable exchange rates, and hurricane restoration activity, partly offset by the absence of $99.6 million of LADD sales.
- Net income declined 11.6% to $212.7 million and diluted EPS fell to $4.91 from $4.99, with operating income down 12.3% to $345.7 million mainly due to the LADD divestiture.
- The LADD operations were partially divested in January 2008 through a joint venture in which Deutsch owns 60% and WESCO owns 40%, with consideration of about $75 million, including $60 million in cash.
- Operating cash flow was $279.9 million, and the company repurchased $74.8 million of common stock during 2008, with a remaining authorization of up to $400 million expiring September 30, 2009.
- Total debt was $1,140.8 million at year-end, including $295.0 million under the Receivables Facility, with the Receivables Facility maturing in May 2010 and the revolving credit facility maturing November 1, 2013.
- Management expects activity levels in its major end markets to be significantly weaker in 2009 than in 2008, and expects excess cash to be directed primarily toward debt reduction.
- Selling, general and administrative expenses rose to 13.7% of sales from 13.2%, and the company's largest supplier, Eaton Corporation, accounted for approximately 12% of purchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Wesco International kept $0.03.
- Revenue$6.11B100.0%
- Cost of revenue−$4.90B80.3%
- Gross profit$1.21B19.7%
- Operating costs−$861.0M14.1%
- Operating income$345.7M5.7%
- Interest, other & tax−$141.5M2.3%
- Net income$204.1M3.3%
Where FY2008 revenue went
$6.11B- Cost of revenue: $4.90B, 80% of revenue
- SG&A: $834.3M, 14% of revenue
- Net income: $204.1M, 3.3% of revenue
- Interest, other & tax: $141.5M, 2.3% of revenue
Kept 3.3% as net incomeNet income $204.1M · 3.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
05—Questions
Frequently Asked Questions
How did WESCO perform financially in 2008 compared with 2007?
Net sales increased 1.8% to $6,110.8 million, while net income decreased to $212.7 million from $240.6 million and diluted EPS declined to $4.91 from $4.99. Operating income fell 12.3% to $345.7 million, mainly due to the partial divestiture of the LADD operations.
What drove the decline in operating income?
The filing states that the decrease in operating income was primarily attributable to the partial divestiture of the LADD operations. Cost of goods sold as a percentage of net sales rose to 80.3% from 79.6%, and SG&A expenses rose to 13.7% of sales from 13.2%.
How strong is the company's liquidity and debt position?
At December 31, 2008, WESCO had $86.3 million of cash, $119.4 million of available revolver capacity, and $205.0 million available under its Receivables Facility, for total liquidity of $382.2 million. Total debt was $1,140.8 million against stockholders' equity of $732.0 million, and the company stated it was in compliance with all covenants.
What outlook did management provide for 2009?
Management said activity levels in its major end markets will be significantly weaker than in 2008, but believes it is well positioned to perform above market rates. It expects excess cash to go primarily to debt reduction and anticipates capital expenditures to decrease by approximately $19.0 million from the 2008 level of $35.3 million.
Are there material legal or accounting matters investors should note?
A customer in a state court in Indiana is seeking $52 million in damages, alleging that WESCO sold defective products manufactured or remanufactured by others; WESCO has denied liability. Separately, FSP APB 14-1 is expected to reduce long-term debt by about $252.5 million and decrease earnings per share by $0.10 to $0.12 in the year of adoption.
06—Continue