01—Abstract
Summary
Summary of the 10-K filed February 21, 2023. Cited figures are marked; the original filing is the authoritative source.
WESCO International, Inc. reported net sales of $21.4 billiona for 2022, up 17.6% from $18.2 billion in 2021, with organic sales growth of 18.2%.
The company attributed the increase mainly to price inflation, volume growth, secular demand trends and its cross-sell program. Cost of goods sold fell to 78.2% of net sales from 79.2%, and income from operations rose to $1.4 billionb, or 6.7% of net sales, from $801.9 million in 2021. Net income was $862.1 million, and diluted earnings per share were $15.33 versus $7.84.
Adjusted diluted earnings per share, which excludes merger-related and integration costs and other items, were $16.42c, up 64.5% year over year. Cash generation was weak in 2022. Operating cash flow was only $11.0 million, as inventories increased $817.0 million and trade accounts receivable increased $690.6 million, partly offset by a $552.9 million increase in accounts payable.
Capital expenditures were $99.4 milliond, and the company acquired Rahi Systems Holdings, Inc. for $255.4 million before cash acquired of $68.6 million. Total debt was $5.5 billion at December 31, 2022, with a financial leverage ratio of 2.9, down from 3.9 a year earlier. Available liquidity was $1.0 billion, and the company expects to repay or refinance approximately $3.1 billion of debt over the next three years.
WESCO has not paid common stock dividends to date but expects to begin a quarterly cash dividend in the first quarter of 2023, subject to board approval. The board authorized up to $1 billion in share repurchases in May 2022, and the company repurchased $11.1 million of common stock during 2022. The filing also notes ongoing supply chain constraints and inflationary pressures that may extend into 2023, and a $1.0 billion-plus debt load that limits financial flexibility.
02—Key points
Key Highlights
- Net sales rose 17.6% to $21.4 billion in 2022, with organic sales growth of 18.2%, driven by price inflation, volume growth and cross-selling.
- Income from operations increased to $1.4 billion (6.7% of net sales) from $801.9 million in 2021; adjusted income from operations was $1.5 billion.
- Diluted EPS was $15.33 versus $7.84 in 2021; adjusted diluted EPS was $16.42, up 64.5%.
- Operating cash flow was only $11.0 million, reflecting an $817.0 million increase in inventories and a $690.6 million increase in trade receivables.
- Total debt was $5.5 billion at year-end, with a financial leverage ratio of 2.9 (3.9 in 2021) and $1.0 billion of liquidity.
- The company expects to begin a quarterly common dividend in Q1 2023 and holds a $1 billion share repurchase authorization.
- Acquired Rahi Systems Holdings, Inc. on November 1, 2022, a provider of global hyperscale data center solutions, for $255.4 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Wesco International kept $0.04.
- Revenue$21.42B100.0%
- Cost of revenue−$16.76B78.2%
- Gross profit$4.66B21.8%
- Operating costs−$3.22B15.0%
- Operating income$1.44B6.7%
- Interest, other & tax−$577.6M2.7%
- Net income$860.5M4.0%
Where FY2022 revenue went
$21.42B- Cost of revenue: $16.76B, 78% of revenue
- SG&A: $3.04B, 14% of revenue
- Net income: $860.5M, 4.0% of revenue
- Other operating costs: $179.0M, 0.8% of revenue
- Interest, other & tax: $577.6M, 2.7% of revenue
Kept 4.0% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 21, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $21.42B$18.22B | +17.6% |
| Cost of Revenue | $16.76B$14.43B | +16.2% |
| Gross Profit | $4.66B$3.79B | +22.9% |
| SG&A Expenses | $3.04B$2.79B | +9.0% |
| Operating Income | $1.44B$801.90M | +79.3% |
| Net Income | $860.50M$465.40M | +84.9% |
| EPS (Basic) | $15.83$8.11 | +95.2% |
| EPS (Diluted) | $15.33$7.84 | +95.5% |
| Shares Outstanding (Basic) | 50.70M50.30M | +0.8% |
| Shares Outstanding (Diluted) | 52.40M52.00M | +0.8% |
05—Questions
Frequently Asked Questions
How did WESCO's sales and profitability change in 2022?
Net sales increased 17.6% to $21.4 billion, and organic growth was 18.2%. Cost of goods sold improved to 78.2% of net sales from 79.2%. Income from operations rose to $1.4 billion from $801.9 million, and net income was $862.1 million versus $466.4 million in 2021.
Why was operating cash flow so low despite higher net income?
Operating cash flow was $11.0 million. The filing attributes this mainly to an $817.0 million increase in inventories to address supply chain challenges and support sales backlog, and a $690.6 million increase in trade accounts receivable from significant sales growth. These were partly offset by a $552.9 million increase in accounts payable.
What is WESCO's debt position and how will it be managed?
Total debt was $5.5 billion at December 31, 2022, and the financial leverage ratio was 2.9. Approximately $3.1 billion of debt must be repaid or refinanced over the next three years. The company had $1.0 billion of liquidity, and it expects to use its Revolving Credit Facility to redeem the $58.6 million of 5.50% Anixter Senior Notes due March 1, 2023.
Will WESCO pay dividends and repurchase shares?
WESCO has not paid common dividends to date but expects to begin a quarterly cash dividend in the first quarter of 2023, subject to board approval. Its board authorized up to $1 billion of share repurchases in May 2022, and the company repurchased $11.1 million of common stock in 2022. Debt agreements limit dividends and repurchases, and the company says it was in compliance with those conditions in 2022.
06—Continue