01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported a sharp rebound in 2021, driven mainly by the full-year contribution of its June 22, 2020 merger with Anixter International Inc. Net sales rose to $18.2 billiona from $12.3 billion, an increase of 47.8%, with all three segments growing: Electrical & Electronic Solutions (EES) by 39.1%, Communications & Security Solutions (CSS) by 72.0%, and Utility & Broadband Solutions (UBS) by 38.5%.
Income from operations increased to $801.9 millionb from $347.0 million, or 4.4% of net sales versus 2.8% a year earlier. Net income was $466.4 million compared with $100.0 million, and diluted earnings per share were $7.84 versus $1.51. Adjusted diluted earnings per share, which excludes merger-related and other items, were $9.98, up 128% year over year.
Cash generation weakened sharply in 2021 as working capital absorbed cash to support growth. Operating cash flow was $67.1 millionc compared with $543.9 million in 2020, and free cash flow was $93.5 million versus $586.1 million. Trade accounts receivable increased by $531.8 million and inventories by $530.7 million, partially offset by a $449.6 million increase in accounts payable.
Total debt was $4.8 billiond at December 31, 2021, and the financial leverage ratio was 3.9, compared with a pro forma 5.3 at December 31, 2020. The company stated that it expects to repay or refinance approximately $1.3 billion of debt over the next three years. Management highlighted ongoing risks, including supply chain shortages, delays and price increases, inflationary pressures that it expects to extend into 2022, and continuing uncertainty from the COVID-19 pandemic.
The company does not pay common dividends, and its revolving credit facility and senior note indentures limit dividends and share repurchases. It continues to pay dividends on its Series A Preferred Stock, which totaled $57.4 million in 2021.
02—Key points
Key Highlights
- Net sales were $18.2 billion in 2021, up 47.8% from $12.3 billion, reflecting the Anixter merger, double-digit growth across all segments, and pricing related to inflation that favorably impacted net sales by approximately 3%.
- Income from operations rose to $801.9 million (4.4% of net sales) from $347.0 million (2.8%); adjusted income from operations was $983.5 million, or 5.4% of net sales.
- Diluted EPS was $7.84 versus $1.51, and adjusted diluted EPS was $9.98 versus $4.37, an increase of 128%.
- Operating cash flow fell to $67.1 million from $543.9 million as receivables increased $531.8 million and inventories increased $530.7 million; free cash flow was $93.5 million versus $586.1 million.
- Total debt was $4.8 billion, the financial leverage ratio was 3.9 at year-end 2021, and available liquidity was $664.4 million, including $564.8 million of revolver availability.
- Segment net sales were EES $7.6 billion (up 39.1%), CSS $5.7 billion (up 72.0%) and UBS $4.9 billion (up 38.5%).
- Management expects supply chain challenges and inflationary pressures to extend into 2022 and plans capital expenditures of approximately $45 million for 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Wesco International kept $0.03.
- Revenue$18.22B100.0%
- Cost of revenue−$14.43B79.2%
- Gross profit$3.79B20.8%
- Operating costs−$2.99B16.4%
- Operating income$801.9M4.4%
- Interest, other & tax−$336.5M1.8%
- Net income$465.4M2.6%
Where FY2021 revenue went
$18.22B- Cost of revenue: $14.43B, 79% of revenue
- SG&A: $2.79B, 15% of revenue
- Net income: $465.4M, 2.6% of revenue
- Other operating costs: $198.6M, 1.1% of revenue
- Interest, other & tax: $336.5M, 1.8% of revenue
Kept 2.6% as net incomeNet income $465.4M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $18.22B$12.33B | +47.8% |
| Cost of Revenue | $14.43B$10.00B | +44.3% |
| Gross Profit | $3.79B$2.33B | +62.9% |
| SG&A Expenses | $2.79B$1.86B | +50.2% |
| Operating Income | $801.90M$347.04M | +131.1% |
| Net Income | $465.40M$100.56M | +362.8% |
| EPS (Basic) | $8.11$1.53 | +430.1% |
| EPS (Diluted) | $7.84$1.51 | +419.2% |
| Shares Outstanding (Basic) | 50.30M46.17M | +8.9% |
| Shares Outstanding (Diluted) | 52.00M46.63M | +11.5% |
05—Questions
Frequently Asked Questions
What drove the large increase in Wesco's 2021 results?
The increase primarily reflects the June 22, 2020 merger with Anixter, which was included for a full year in 2021 but only for the second half of 2020. Sales growth also reflected improved economic conditions and strong demand, while the company realized integration cost synergies and structural cost takeout actions.
Why did operating cash flow decline so much in 2021?
Operating cash flow was $67.1 million compared with $543.9 million in 2020, primarily because of working capital investment. Trade accounts receivable rose $531.8 million from significant sales growth and inventories rose $530.7 million to support customer demand amid supply chain challenges, partially offset by a $449.6 million increase in accounts payable.
How much debt does Wesco carry, and what are its repayment obligations?
Excluding debt discount and issuance costs, consolidated indebtedness was $4.8 billion at December 31, 2021, and the financial leverage ratio was 3.9. The company stated that it will be required to repay or refinance approximately $1.3 billion of its debt over the next three years.
Does Wesco pay dividends or repurchase shares?
The company has not paid dividends on its common stock and does not currently plan to pay common dividends, though it evaluates the possibility from time to time. Its revolving credit facility and senior note indentures limit dividends and share repurchases. Wesco did pay $57.4 million in dividends on its Series A Preferred Stock in 2021 and did not repurchase common stock in 2021 or 2020.
06—Continue