01—Abstract
Summary
Summary of the 10-K filed February 22, 2012. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. (NYSE: WCC) reported net sales of $6,125.7 milliona for 2011, up from $5,063.9 million in 2010, with sales increasing 21.0%.
The filing attributes growth to improving conditions in served markets, higher product prices and costs, favorable foreign currency (0.8% positive impact), and acquisitions (6.8% positive impact). Income from operations rose to $332.9 millionb from $210.9 million, and net income attributable to WESCO International, Inc. was $196.3 million, or $3.96 per diluted share, compared with $2.50 in 2010. Cost of goods sold fell to 79.8% of net sales from 80.3%, and SG&A fell to 14.2% of sales from 15.1%.
Cash generation and liquidity improved in 2011, with operating cash flow of $167.5 millionc and capital expenditures of $33.3 million. Total debt was $649.3 million at year-end, with $499.3 million of total available borrowing capacity. Management expects 2012 capital expenditures at levels similar to 2011 and expects excess cash to go primarily to debt reduction and acquisitions.
The company does not pay dividends and its revolving credit facility and 2017 Notes restrict dividend payments. Key risks include a pending lawsuit in Indiana state court seeking approximately $50 milliond in damages over allegedly defective products, for which no liability has been recorded.
The company also disclosed that Stephen A. Van Oss was appointed interim Chief Financial Officer on February 3, 2012, and that it completed the acquisition of RS Electronics on January 3, 2012, with approximately $60 million in annual sales.
02—Key points
Key Highlights
- Net sales rose 21.0% to $6,125.7 million in 2011, with acquisitions contributing 6.8 percentage points and favorable foreign currency contributing 0.8%.
- Income from operations increased 57.9% to $332.9 million; net income attributable to WESCO rose to $196.3 million, or $3.96 diluted EPS, versus $2.50 in 2010.
- Gross margin improved as cost of goods sold fell to 79.8% of net sales from 80.3%, and SG&A fell to 14.2% of sales from 15.1%.
- Operating cash flow was $167.5 million in 2011, and total available borrowing capacity was $499.3 million at December 31, 2011.
- Total debt was $649.3 million at year-end 2011, including $150.0 million of 7.50% Senior Subordinated Notes due 2017 and $345.0 million principal of 6.0% Convertible Senior Debentures due 2029.
- Completed acquisitions of RECO and Brews Supply in 2011 and subsequently acquired RS Electronics on January 3, 2012.
- A customer lawsuit in Indiana seeks approximately $50 million in damages; the company denies liability and has recorded no liability for the matter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Wesco International kept $0.03.
- Revenue$6.13B100.0%
- Cost of revenue−$4.89B79.8%
- Gross profit$1.24B20.2%
- Operating costs−$903.6M14.8%
- Operating income$333.0M5.4%
- Interest, other & tax−$136.7M2.2%
- Net income$196.3M3.2%
Where FY2011 revenue went
$6.13B- Cost of revenue: $4.89B, 80% of revenue
- SG&A: $872.0M, 14% of revenue
- Net income: $196.3M, 3.2% of revenue
- Other operating costs: $31.6M, 0.5% of revenue
- Interest, other & tax: $136.7M, 2.2% of revenue
Kept 3.2% as net incomeNet income $196.3M · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 22, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $6.13B$5.06B | +21.0% |
| Cost of Revenue | $4.89B$4.07B | +20.3% |
| Gross Profit | $1.24B$998.44M | +23.9% |
| SG&A Expenses | $871.98M$763.58M | +14.2% |
| Operating Income | $332.98M$210.92M | +57.9% |
| Interest Expense | $53.60M$57.56M | −6.9% |
| Net Income | $196.25M$115.48M | +69.9% |
| EPS (Basic) | $4.54$2.72 | +66.9% |
| EPS (Diluted) | $3.96$2.50 | +58.4% |
| Shares Outstanding (Basic) | 43.22M42.50M | +1.7% |
| Shares Outstanding (Diluted) | 49.62M46.11M | +7.6% |
05—Questions
Frequently Asked Questions
How did WESCO perform financially in 2011?
Net sales increased 21.0% to $6,125.7 million, and income from operations rose to $332.9 million from $210.9 million. Net income attributable to WESCO International, Inc. was $196.3 million, or $3.96 per diluted share, compared with $2.50 in 2010.
Does WESCO pay dividends?
No. The company has not paid dividends on its common stock and does not presently plan to pay them in the foreseeable future. Its revolving credit facility and the indenture governing the 2017 Notes restrict dividend payments, and earnings are expected to be reinvested in business growth, debt reduction or acquisitions.
What is the status of the Indiana lawsuit?
A customer alleges WESCO sold defective products manufactured or remanufactured by others and seeks damages of approximately $50 million. WESCO has denied liability, intends to defend itself vigorously, and recorded no liability as of December 31, 2011. Due to the uncertainty of the litigation, it cannot reasonably estimate the possible loss or range of loss.
What are WESCO's debt obligations and liquidity position?
Total debt was $649.3 million at December 31, 2011. The company had $299.3 million available under its Revolving Credit Facility and $200.0 million available under its Receivables Facility, with invested cash of $11.5 million, providing liquidity of $510.8 million. Over the next three years, approximately $293.3 million of indebtedness must be repaid, including $250.0 million related to the Receivables Facility expiration.
Who leads WESCO's finance function?
Stephen A. Van Oss was appointed Chief Financial Officer on an interim basis on February 3, 2012, while also serving as Senior Vice President and Chief Operating Officer. Timothy A. Hibbard was appointed Vice President and Corporate Controller on February 16, 2012.
06—Continue