01—Abstract
Summary
Summary of the 10-K filed February 22, 2016. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported net sales of $7,518.5 milliona for 2015, a decrease of 4.7% from $7,889.6 million in 2014.
Normalized organic sales decreased 3.3%, foreign exchange rates negatively impacted sales by 3.4%, and acquisitions contributed a positive 2.0%. Income from operations fell to $373.7 millionb from $466.2 million, and net income attributable to WESCO International, Inc. was $210.7 million, a decrease of 23.6%. Diluted earnings per share were $4.18, compared with $5.18 in 2014.
Management attributed the results primarily to continued weakness in commodity-driven end markets and unfavorable currency changes, partially offset by cost reduction actions. Cash flow from operations was $283.1 millionc in 2015, and free cash flow was $261.4 million. Total debt including debt discount was $1,665.4 million at December 31, 2015, and the financial leverage ratio based on total debt rose to 3.8 from 3.0.
Stockholders' equity declined to $1.8 billiond, reflecting a $225.8 million foreign currency translation loss and $150.0 million of share repurchases under the program announced in December 2014. The company completed the Hill Country and Needham Electric acquisitions in 2015 and states that it has no plans to pay dividends. The company also disclosed an approximately $1,773.6 million combined goodwill and indefinite-lived intangible balance and noted that one reporting unit with $186.7 million of goodwill had a fair value approximately 5% above its carrying value.
The filing reports that a New York County District Attorney investigation is ongoing, and that the company cannot reasonably estimate a range of exposure. Management expects 2016 capital expenditures to be at levels similar to 2015.
02—Key points
Key Highlights
- Net sales declined 4.7% to $7,518.5 million in 2015, with normalized organic sales down 3.3% and foreign exchange reducing sales by 3.4%.
- Income from operations fell to $373.7 million from $466.2 million, and operating margin was 5.0% versus 5.9% in 2014.
- Net income attributable to WESCO International, Inc. was $210.7 million, down 23.6%; diluted EPS was $4.18 versus $5.18.
- Operating cash flow of $283.1 million and free cash flow of $261.4 million, up from $251.2 million and $230.7 million in 2014.
- Total debt including debt discount was $1,665.4 million, and the financial leverage ratio on total debt rose to 3.8 from 3.0.
- Company repurchased $150.0 million of common stock under its $300 million authorization and has no current plans to pay dividends.
- Goodwill and indefinite-lived intangibles totaled $1,773.6 million; one reporting unit with $186.7 million of goodwill had fair value about 5% above carrying value.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Wesco International kept $0.03.
- Revenue$7.52B100.0%
- Cost of revenue−$6.02B80.1%
- Gross profit$1.49B19.9%
- Operating costs−$1.12B14.9%
- Operating income$373.7M5.0%
- Interest, other & tax−$163.1M2.2%
- Net income$210.7M2.8%
Where FY2015 revenue went
$7.52B- Cost of revenue: $6.02B, 80% of revenue
- SG&A: $1.05B, 14% of revenue
- Net income: $210.7M, 2.8% of revenue
- Other operating costs: $65.0M, 0.9% of revenue
- Interest, other & tax: $163.1M, 2.2% of revenue
Kept 2.8% as net incomeNet income $210.7M · 2.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 22, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $7.52B$7.89B | −4.7% |
| Cost of Revenue | $6.02B$6.28B | −4.0% |
| Gross Profit | $1.49B$1.61B | −7.3% |
| SG&A Expenses | $1.05B$1.08B | −2.0% |
| Operating Income | $373.74M$466.22M | −19.8% |
| Net Income | $210.69M$275.91M | −23.6% |
| EPS (Basic) | $4.85$6.21 | −21.9% |
| EPS (Diluted) | $4.18$5.18 | −19.3% |
| Shares Outstanding (Basic) | 43.43M44.44M | −2.3% |
| Shares Outstanding (Diluted) | 50.37M53.26M | −5.4% |
05—Questions
Frequently Asked Questions
What drove the decline in WESCO's 2015 results?
Management attributed the results primarily to continued weakness in commodity-driven end markets and the unfavorable impact of changes in foreign currencies, partially offset by cost reduction actions. Lower sales, lower supplier volume rebates and business mix reduced operating income.
How is WESCO's debt position described in the filing?
Total debt including debt discount was $1,665.4 million at December 31, 2015, with the financial leverage ratio on total debt at 3.8 versus 3.0 a year earlier. Total debt includes the 5.375% Senior Notes due 2021, the 6.0% Convertible Senior Debentures due 2029, the term loans, and the Receivables Facility, which had $525.0 million outstanding. The Revolving Credit Facility had $438.7 million of available borrowing capacity at year-end.
Does WESCO pay dividends or repurchase shares?
WESCO has not paid dividends on its common stock and does not currently plan to pay them, with earnings expected to be reinvested in growth, debt reduction, acquisitions and share repurchases. Under the December 2014 authorization of up to $300 million through December 31, 2017, the company had repurchased 2,468,576 shares for $150.0 million as of year-end 2015.
What acquisitions did WESCO complete and what risks are disclosed?
In 2015 WESCO acquired Hill Country Electric Supply and Needham Electric Supply, paying $151.6 million net of cash acquired. The filing notes that a New York County District Attorney's investigation into minority and disadvantaged business contracting practices involves the company, and that the company cannot predict its outcome or reasonably estimate potential exposure.
06—Continue