01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported net sales of $5,063.9 milliona for 2010, up 9.5% from $4,624.0 million in 2009, with income from operations of $210.9 million (up from $180.0 million) and net income of $115.5 million, or $2.50 per diluted share (compared with $2.46 in 2009).
Management attributed the improvement to improved conditions in served markets, higher product prices and costs, favorable foreign currency rates, and the acquisitions completed in 2010. Cost of goods sold was 80.3% of net sales versus 80.5% in 2009, and SG&A rose to $763.6 millionb, or 15.1% of sales. Operating cash flow fell to $127.3 million from $291.7 million in 2009, driven by working capital investment to fund growth.
The company completed two acquisitions in 2010: Potelcom Supply, Inc. and TVC Communications, L.L.C., the latter in December 2010 for a cash purchase price of approximately $251.0 millionc net of cash acquired, which expanded its communications product lines. Stockholders' equity increased to $1,148.6 million at year-end, and total debt was $729.9 million on the balance sheet ($908.3 million of consolidated indebtedness before debt discount). Total available borrowing capacity was $325.5 million at December 31, 2010, and the company stated it was in compliance with all debt covenants.
The filing also highlights ongoing exposure to a $52 milliond lawsuit in Indiana alleging the sale of defective products, for which no liability was recorded, and the company's plan to redeem its remaining 1.75% Convertible Senior Debentures due 2026 during 2011. Management expects 2011 capital expenditures to increase by approximately $10.0 million to $25.0 million.
02—Key points
Key Highlights
- Net sales rose 9.5% to $5,063.9 million in 2010 from $4,624.0 million in 2009, aided by higher prices, favorable currency rates and 2010 acquisitions.
- Income from operations increased 17.2% to $210.9 million, primarily from organic growth and improved market conditions.
- Net income was $115.5 million, or $2.50 per diluted share, versus $105.1 million, or $2.46 per diluted share, in 2009.
- Acquired TVC Communications (December 2010) and Potelcom Supply, expanding communications product offerings and international presence.
- Operating cash flow declined to $127.3 million from $291.7 million, reflecting working capital investment to support growth.
- Sold its 40% interest in the LADD joint venture in June 2010 for $40.0 million, plus $15.0 million for a promissory note.
- Faces a $52 million Indiana lawsuit alleging defective products; management denies liability and no amount was recorded.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Wesco International kept $0.02.
- Revenue$5.06B100.0%
- Cost of revenue−$4.07B80.3%
- Gross profit$998.4M19.7%
- Operating costs−$787.5M15.6%
- Operating income$210.9M4.2%
- Interest, other & tax−$95.4M1.9%
- Net income$115.5M2.3%
Where FY2010 revenue went
$5.06B- Cost of revenue: $4.07B, 80% of revenue
- SG&A: $763.6M, 15% of revenue
- Net income: $115.5M, 2.3% of revenue
- Interest, other & tax: $95.4M, 1.9% of revenue
Kept 2.3% as net incomeNet income $115.5M · 2.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $5.06B$4.62B | +9.5% |
| Cost of Revenue | $4.07B$3.72B | +9.2% |
| Gross Profit | $998.44M$899.89M | +11.0% |
| SG&A Expenses | $763.58M$693.90M | +10.0% |
| Operating Income | $210.92M$179.95M | +17.2% |
| Interest Expense | $57.56M$53.75M | +7.1% |
| Net Income | $115.48M$105.09M | +9.9% |
| EPS (Basic) | $2.72$2.49 | +9.2% |
| EPS (Diluted) | $2.50$2.46 | +1.6% |
| Shares Outstanding (Basic) | 42.50M42.28M | +0.5% |
| Shares Outstanding (Diluted) | 46.11M42.67M | +8.1% |
05—Questions
Frequently Asked Questions
How did WESCO perform financially in 2010?
Net sales grew 9.5% to $5,063.9 million, income from operations rose to $210.9 million from $180.0 million, and net income reached $115.5 million, or $2.50 per diluted share, compared with $2.46 in 2009.
What drove the 2010 sales increase?
Management cited growth initiatives, improved conditions in served markets, higher product prices due primarily to rising supplier product and commodity prices, favorable foreign currency exchange rates, and acquisitions completed in 2010.
How much debt does WESCO have and what liquidity is available?
Total debt on the balance sheet was $729.9 million at December 31, 2010, and consolidated indebtedness was $908.3 million before debt discount. Total available borrowing capacity was $325.5 million, and the company stated it was in compliance with all debt covenants.
Does WESCO pay dividends?
No. The company has not paid dividends on its common stock and does not presently plan to pay dividends in the foreseeable future; its revolving credit facility and the 2017 Notes indenture restrict dividend payments.
What are the main legal and financing risks disclosed?
A customer lawsuit in Indiana seeks $52 million alleging defective products, and the company recorded no liability for it. The filing also notes that the Receivables Facility and revolving credit facility are subject to renewal in 2013, and that the 2029 Debentures carry a 13.875% effective interest rate for accounting purposes.
06—Continue