01—Abstract
Summary
Summary of the 10-K filed March 1, 2013. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported 2012 net sales of $6,579.3 milliona, up 7.4% from $6,125.7 million in 2011, with acquisitions contributing 3.3% of the increase and foreign exchange reducing sales by 0.3%.
Income from operations was $332.9 millionb, flat with 2011, as a $36 million fourth-quarter charge tied to the ArcelorMittal jury verdict offset growth. Net income attributable to WESCO International, Inc. rose to $201.8 million from $196.3 million, and diluted earnings per share were $3.95 versus $3.96 in 2011. Net sales grew across North America and internationally, with the United States representing 79% of 2012 sales.
The company's balance sheet expanded significantly due to acquisitions, most notably EECOL Electric Corporation, acquired on December 14, 2012 for approximately $1.1 billionc at closing. Total assets rose to $4,629.6 million from $3,078.5 million, and total debt increased to $1,735.2 million from $649.3 million, funded largely by a new $850.0 million term loan facility due 2019 and borrowings under the revolving credit facility. Cash flow from operations was $288.2 million, compared with $167.5 million in 2011, and total available borrowing capacity at year-end was $299.0 million.
The company stated it does not presently plan to pay dividends. The filing also discloses a lawsuit by ArcelorMittal Indiana Harbor, Inc. in which a jury awarded approximately $36 milliond against WESCO Distribution, Inc. on February 14, 2013.
WESCO disputes the outcome, intends to appeal, and has submitted the claims to its insurance carriers. The company's largest supplier accounted for approximately 12% of 2012 purchases, and its ten largest suppliers accounted for approximately 31%.
02—Key points
Key Highlights
- Net sales rose 7.4% to $6,579.3 million in 2012, with acquisitions contributing 3.3 percentage points and organic sales growth of 4.4%.
- Income from operations was flat at $332.9 million, including a $36 million fourth-quarter charge related to the ArcelorMittal jury verdict.
- Diluted EPS was $3.95 in 2012 versus $3.96 in 2011; net income attributable to WESCO rose to $201.8 million from $196.3 million.
- Total debt increased to $1,735.2 million from $649.3 million, driven by the December 2012 term loan and revolver borrowings used to fund the EECOL acquisition.
- Completed four acquisitions in 2012 (RS Electronics, Trydor, Conney Safety Products and EECOL), with EECOL acquired for approximately $1.1 billion at closing.
- Operating cash flow increased to $288.2 million from $167.5 million in 2011.
- A February 2013 jury verdict awarded ArcelorMittal Indiana Harbor approximately $36 million in damages against a subsidiary; the company disputes the outcome and plans to appeal.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Wesco International kept $0.03.
- Revenue$6.58B100.0%
- Cost of revenue−$5.25B79.8%
- Gross profit$1.33B20.2%
- Operating costs−$998.6M15.2%
- Operating income$332.9M5.1%
- Interest, other & tax−$131.1M2.0%
- Net income$201.8M3.1%
Where FY2012 revenue went
$6.58B- Cost of revenue: $5.25B, 80% of revenue
- SG&A: $961.0M, 15% of revenue
- Net income: $201.8M, 3.1% of revenue
- Other operating costs: $37.6M, 0.6% of revenue
- Interest, other & tax: $131.1M, 2.0% of revenue
Kept 3.1% as net incomeNet income $201.8M · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 1, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $6.58B$6.13B | +7.4% |
| Cost of Revenue | $5.25B$4.89B | +7.3% |
| Gross Profit | $1.33B$1.24B | +7.7% |
| SG&A Expenses | $961.01M$871.98M | +10.2% |
| Operating Income | $332.87M$332.98M | 0.0% |
| Interest Expense | $47.76M$53.60M | −10.9% |
| Net Income | $201.78M$196.25M | +2.8% |
| EPS (Basic) | $4.62$4.54 | +1.8% |
| EPS (Diluted) | $3.95$3.96 | −0.3% |
| Shares Outstanding (Basic) | 43.68M43.22M | +1.1% |
| Shares Outstanding (Diluted) | 51.13M49.62M | +3.0% |
05—Questions
Frequently Asked Questions
What drove the increase in WESCO's 2012 sales?
Net sales increased 7.4% to $6,579.3 million. The filing attributes the increase to growth initiatives and recent acquisitions, which contributed 3.3 percentage points, partly offset by a 0.3% negative foreign exchange impact. Management estimated the price impact on net sales at approximately 1.0%.
Why was operating income flat despite higher sales?
Income from operations was $332.9 million, essentially unchanged from 2011. SG&A expenses rose $89.0 million, or 10.2%, including a $36 million fourth-quarter charge related to the ArcelorMittal jury verdict, while the cost of goods sold remained at 79.8% of net sales.
How did the EECOL acquisition affect WESCO's finances?
WESCO acquired EECOL Electric Corporation on December 14, 2012 for approximately $1.1 billion at closing, funded by $851 million of new term loans and $264 million under the Revolving Credit Facility. Total assets increased to $4,629.6 million from $3,078.5 million, and goodwill rose to $1,777.8 million.
What is the status of the ArcelorMittal lawsuit?
On February 14, 2013, a jury returned a verdict in favor of ArcelorMittal Indiana Harbor and awarded approximately $36 million, against the approximately $50 million sought. Judgment was entered that day. WESCO disputes the outcome, intends to appeal, and has submitted the claims to its insurance carriers. The judgment amount may change after post-trial proceedings.
Does WESCO pay dividends, and what is its liquidity position?
WESCO has not paid dividends on its common stock and does not presently plan to pay them, with earnings expected to be reinvested in growth, debt reduction or acquisitions. As of December 31, 2012, total available borrowing capacity was $299.0 million, and cash and cash equivalents were $86.1 million.
06—Continue