01—Abstract
Summary
Summary of the 10-K filed February 24, 2015. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported net sales of $7,889.6 milliona for 2014, up 5.0% from $7,513.3 million in 2013.
Organic sales grew 5.6%, acquisitions contributed 1.4%, and foreign exchange and number of workdays reduced sales by 1.6% and 0.4%, respectively. Income from operations was $466.2 millionb, compared with $481.0 million in 2013, and net income attributable to WESCO International, Inc. was $275.9 million, or $5.18 diluted earnings per share, versus $5.25 in 2013. Management described 2014 as a year in which the company re-established organic sales growth, integrated three acquisitions (LaPrairie, Hazmasters and Hi-Line), and increased profitability.
The company's adjusted results for 2013 excluded a $36.1 millionc ArcelorMittal litigation recovery recorded in SG&A. The balance sheet carried total debt of $1,415.6 million (or $1,585.9 million including debt discount) at December 31, 2014, with a financial leverage ratio of 3.0 times on total debt, down from 3.2 times. Total liquidity was $637.7 million, and cash and cash equivalents were $128.3 million, of which $107.1 million was held by foreign subsidiaries.
Operating cash flow was $251.2 milliond and free cash flow was $230.7 million, compared with $308.4 million in 2013. The company's Board approved a repurchase of up to $300 million of common stock through December 31, 2017, and no shares had been repurchased under that authorization as of year-end. WESCO does not pay dividends and states that earnings will be reinvested in business growth, debt reduction, acquisitions and share repurchases.
The principal ongoing legal matter is the ArcelorMittal Indiana Harbor lawsuit, where the Indiana Court of Appeals on November 10, 2014 reversed the prejudgment interest award but otherwise affirmed the underlying judgment, and a petition for further review is pending before the Indiana Supreme Court. The company also disclosed a Delaware unclaimed property audit and a New York County District Attorney investigation involving minority and disadvantaged business contracting, for which it could not estimate a range of exposure.
02—Key points
Key Highlights
- Net sales rose 5.0% to $7,889.6 million in 2014, with organic growth of 5.6% and acquisitions adding 1.4%.
- Diluted EPS was $5.18 in 2014 versus $5.25 in 2013; 2013 results were adjusted for a $36.1 million ArcelorMittal litigation recovery.
- Income from operations was $466.2 million in 2014, compared with $481.0 million in 2013.
- Total liquidity of $637.7 million at December 31, 2014, including $497.5 million of available revolver capacity.
- Financial leverage ratio on total debt improved to 3.0 times from 3.2 times.
- Free cash flow was $230.7 million in 2014, down from $308.4 million in 2013.
- A $300 million share repurchase authorization was approved in December 2014, with no shares purchased as of year-end; no dividends are paid.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Wesco International kept $0.03.
- Revenue$7.89B100.0%
- Cost of revenue−$6.28B79.6%
- Gross profit$1.61B20.4%
- Operating costs−$1.14B14.5%
- Operating income$466.2M5.9%
- Interest, other & tax−$190.3M2.4%
- Net income$275.9M3.5%
Where FY2014 revenue went
$7.89B- Cost of revenue: $6.28B, 80% of revenue
- SG&A: $1.08B, 14% of revenue
- Net income: $275.9M, 3.5% of revenue
- Other operating costs: $68.0M, 0.9% of revenue
- Interest, other & tax: $190.3M, 2.4% of revenue
Kept 3.5% as net incomeNet income $275.9M · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 24, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $7.89B$7.51B | +5.0% |
| Cost of Revenue | $6.28B$5.97B | +5.2% |
| Gross Profit | $1.61B$1.55B | +4.2% |
| SG&A Expenses | $1.08B$996.81M | +8.0% |
| Operating Income | $466.22M$481.00M | −3.1% |
| Interest Expense | $82.06M$85.61M | −4.1% |
| Net Income | $275.91M$276.43M | −0.2% |
| EPS (Basic) | $6.21$6.26 | −0.8% |
| EPS (Diluted) | $5.18$5.25 | −1.3% |
| Shares Outstanding (Basic) | 44.44M44.15M | +0.7% |
| Shares Outstanding (Diluted) | 53.26M52.65M | +1.2% |
05—Questions
Frequently Asked Questions
How did WESCO perform in 2014 compared with 2013?
Net sales increased 5.0% to $7,889.6 million, and net income attributable to WESCO International, Inc. was $275.9 million, compared with $276.4 million in 2013. Operating income declined to $466.2 million from $481.0 million, but the 2013 figure included a $36.1 million litigation recovery.
What drove the change in sales?
Organic sales growth of 5.6% and acquisitions contributing 1.4% were partly offset by foreign exchange rates (-1.6%) and number of workdays (-0.4%). Management estimated a price impact of approximately 0.5%.
How strong is the company's balance sheet and liquidity?
Total debt including debt discount was $1,585.9 million, and the financial leverage ratio was 3.0 times based on total debt, down from 3.2 times. Liquidity was $637.7 million, and the company stated it was in compliance with all debt covenants at December 31, 2014.
What is the status of the ArcelorMittal litigation?
A jury verdict of approximately $36.1 million was entered against the company in 2013. In November 2014, the Indiana Court of Appeals reversed the prejudgment interest award of $3.9 million but otherwise affirmed the judgment. A petition for further review is pending before the Indiana Supreme Court, and the company recorded a $9.5 million liability and an offsetting receivable for accrued interest.
Does WESCO return capital to shareholders?
WESCO does not pay dividends and does not currently plan to, though it evaluates the possibility from time to time. The Board approved a repurchase of up to $300 million of common stock through December 31, 2017, but no shares had been repurchased under that program as of December 31, 2014.
06—Continue