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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): FEBRUARY 12, 2004
WESCO INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission file number 001-14989
DELAWARE 25-1723342
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or
organization)
225 WEST STATION SQUARE DRIVE
SUITE 700
PITTSBURGH, PENNSYLVANIA 15219 (412) 454-2200
(Address of principal executive offices) (Registrant's telephone number,
including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The information in this Current Report is being furnished and shall not
be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of that section.
The information in this Current Report shall not be incorporated by reference
into any registration statement or other document pursuant to the Securities Act
of 1933, as amended.
On February 12, 2004, WESCO issued a press release announcing its
earnings for the fourth quarter of 2003. A copy of the press release is attached
hereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
February 12, 2004 WESCO International, Inc.
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(Date)
/s/ Stephen A. Van Oss
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Stephen A. Van Oss
Vice President, Chief Financial Officer
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NEWS RELEASE
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WESCO International, Inc. / Suite 700, 225 West Station Square Drive /
Pittsburgh, PA 15219
NET INCOME DOUBLES ON 4% SALES INCREASE
OPERATING PROFIT INCREASES 35%
CASH GENERATION CONTINUES
Contact: Stephen A. Van Oss, Chief Financial Officer
WESCO International, Inc. (412) 454-2271, Fax: (412) 454-2477
http://www.wescodist.com
Pittsburgh, PA, February 12, 2004 - WESCO International, Inc. [NYSE:WCC], a
leading provider of electrical MRO products, construction materials, and
advanced integrated supply procurement outsourcing services, today announced its
2003 fourth quarter financial results.
Stephen A. Van Oss, Vice President and Chief Financial Officer, stated, "Our
fourth quarter results reflect the Company's continued attention to margin
improvement, cost control and working capital productivity, and our results
demonstrate the power of the leverage inherent in our business model. A 50 basis
point improvement in gross margin percentage and a 30 basis point reduction in
our SG&A expenses combined with the 4.2% increase in sales to double our net
income. We are particularly pleased with the sales growth, which was generated
in most of our end markets."
Net sales for the fourth quarter of 2003 were $850.1 million versus $815.5
million in 2002, an increase of 4.2%. Gross margins for the quarter improved to
18.8% versus 18.3% for the comparable quarter in 2002. Operating income for the
current quarter totaled $24.7 million versus $18.3 million in last year's
comparable quarter. Depreciation and amortization included in operating income
was $7.2 million in 2003's fourth quarter versus $5.2 million in 2002. Net
income in 2003's fourth quarter was $9.4 million versus $4.7 million in the
comparable 2002 quarter. Earnings per share in the current quarter were $0.21
per share versus $0.10 per share in 2002.
Mr. Van Oss continued, "Cash flow for the quarter was strong. Total indebtedness
(including our accounts receivable securitization program) net of cash,
increased $12 million. The modest increase was due to working capital needs
associated with the sales growth and the funding of our previously announced
repurchase of 4.3 million shares of common stock. For the year, total
indebtedness, net of cash, has been reduced by $69 million. Our available
borrowing capacity continues to be ample and increased to approximately $197
million at year-end."
The Company's Audit Committee, immediately following a review of a recent
internal audit report, has engaged independent counsel to assess and make
findings and recommendations with respect to one large branch operation and
report back to the Committee promptly. The matters to be investigated relate
primarily to cash management and undocumented expense reimbursement practices at
this branch which did not follow corporate policies and procedures. Management
and the Audit Committee do not believe the amounts involved were material. Based
on the internal audit report, the amounts involved have been accounted for in
the financial statements
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for the periods involved. Management promptly implemented those remedial actions
recommended by the internal auditors, and independent counsel will consider
whether additional actions are necessary.
For fiscal 2003, net sales were $3,286.8 million versus $3,325.8 million in last
year's comparable period, a 1.2% decline. Gross margins in 2003 were 18.6%
versus 17.8% last year and operating income totaled $86.1 million versus $76.6
million last year. Depreciation and amortization included in operating income
was $22.5 million versus $19.8 million last year. Net income for the 2003 was
$30.0 million versus $23.1 million last year, while diluted earnings per share
were $0.65 per share in 2003 versus $0.49 per share in 2002.
WESCO's Chairman and Chief Executive Officer, Roy W. Haley, commented, "WESCO
entered 2003 with commitment and determination to work through a challenging
economic downturn. During the past year, WESCO has benefited from the focus and
attention we've placed on margin enhancement, cost control and productivity
initiatives. Continued improvements in the Company's capital structure have
strengthened our ability to generate profits in a no-growth environment and to
achieve significant earnings growth with nominal top line improvement. Over the
past year, WESCO has invested in targeted marketing programs that have
positioned us to expand existing customer relationships and to develop new,
profitable customers. Additionally, the continued rollout of LEAN initiatives
across branch operations is having a positive impact on productivity and process
improvements."
Mr. Haley continued, "The last three years have been difficult but constructive
ones for WESCO. The Company has successfully weathered the economic downturn
that has been unlike any seen by the electrical distribution industry in several
decades. The Company's strategic platform combining National Accounts,
Integrated Supply and a North American footprint of local branch operations has
been very effective and continues to be sound. The Company will continue to be
responsive to the needs of our customers, our shareholders, and our employees.
We enter 2004 with confidence that WESCO will continue to be a growing and
profitable player in the industry."
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Teleconference
WESCO will conduct a teleconference to discuss the 2003 fourth quarter earnings
as described in this News Release on February 12, 2004, at 11:00 a.m. E.S.T. The
conference call will be broadcast live over the Internet and can be accessed at
(http://www.shareholder.com/wesco/medialist.cfm) or from the Company's home page
at (http://www.wescodist.com). The conference call will be archived on this
Internet site for seven days.
# # #
WESCO International, Inc. [NYSE: WCC] is a publicly traded Fortune 500 holding
company, headquartered in Pittsburgh, Pennsylvania, whose primary operating
entity is WESCO Distribution, Inc. WESCO Distribution is a leading distributor
of electrical construction products and electrical and industrial maintenance,
repair and operating (MRO) supplies, and is the nation's largest provider of
integrated supply services with 2003 annual product sales of approximately $3.3
billion. The Company employs approximately 5,200 people, maintains relationships
with 24,000 suppliers, and serves more than 100,000 customers worldwide. Major
markets include commercial and industrial firms, contractors, government
agencies, educational
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institutions, telecommunications businesses and utilities. WESCO operates five
fully automated distribution centers and approximately 350 full-service branches
in North America and selected international markets, providing a local presence
for area customers and a global network to serve multi-location businesses and
multi-national corporations.
# # #
The matters discussed herein may contain forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from expectations. Certain of these risks are set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, as well as the Company's other reports filed with the Securities and
Exchange Commission
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share amounts)
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
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Net sales $850.1 $815.5
Cost of sales 690.0 666.3
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Gross Profit 160.1 18.8% 149.2 18.3%
Selling, general & admin. expenses 128.2 15.1% 125.7 15.4%
Depreciation & amortization 7.2 5.2
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Income from operations 24.7 2.9% 18.3 2.2%
Interest expense, net 10.3 10.2
Other expense 1.0 1.7
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Income before income taxes 13.4 1.6% 6.4 0.8%
Provision (benefit) for income taxes 4.0 1.7
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Net income $ 9.4 1.1% $ 4.7 0.6%
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Diluted earnings per common share:
Net Income $ 0.21 $ 0.10
Weighted Average Shares Outstanding 45.4 46.5
TWELVE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
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Net sales $3,286.8 $3,325.8
Cost of sales 2,676.7 2,735.0
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Gross Profit 610.1 18.6% 590.8 17.8%
Selling, general & admin. expenses 501.5 15.3% 494.4 14.9%
Depreciation & amortization 22.5 19.8
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Income from operations 86.1 2.6% 76.6 2.3%
Interest expense, net 42.3 43.0
Loss on debt extinguishment 0.2 1.1
Other expense 4.5 6.6
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Income before income taxes 39.1 1.2% 25.9 0.8%
Provision for income taxes 9.1 2.8
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Net income $ 30.0 0.9% $ 23.1 0.7%
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Diluted earnings per common share:
Net Income $0.65 $0.49
Weighted Average Shares Outstanding 46.3 46.8
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions, except per share amounts)
(unaudited)
ASSETS DECEMBER 31, 2003 DECEMBER 31, 2002
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CURRENT ASSETS
Cash and cash equivalents $ 27.5 $ 22.6
Trade accounts receivable 266.6 182.2
Inventories, net 321.0 340.4
Prepaid expenses and other current assets 41.2 36.2
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Total current assets 656.3 581.4
Total other assets 500.5 438.1
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Total assets $1,156.8 $1,019.5
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 366.4 $ 346.5
Other current liabilities 112.0 56.3
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Total current liabilities 478.4 402.8
Long-term debt (See Note) 420.0 412.2
Other non-current liabilities 90.7 35.2
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Total liabilities 989.1 850.2
STOCKHOLDERS' EQUITY:
Total stockholders' equity 167.7 169.3
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Total liabilities and stockholders' equity $1,156.8 $1,019.5
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Note: Trade accounts receivable and long-term debt have each been reduced by
$225 million and $293 million as of December 31, 2003 and December 31, 2002,
respectively, in accordance with WESCO's accounting for its accounts receivable
securitization facility. In addition, the carrying value of long-term debt
increased a net $2.7 million during the twelve months ended December 31, 2003 as
a result of the change in fair value of the Company's interest rate derivative
instruments and as a result of non-cash amortization of discounts associated
with the Company's Senior Notes.
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WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURERS
(dollar amounts in millions)
(unaudited)
DECEMBER 31, 2003 DECEMBER 31, 2002
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Total debt $422.2 $418.0
Plus: A/R Securitization 225.0 293.0
Less: Cash and cash equivalents (27.5) (22.6)
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Total indebtedness (including A/R
Securitization Program), net of cash
(See Note) $619.7 $688.4
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Note: Total indebtedness (including A/R Securitization Program), net of cash is
provided by the Company as additional measure of the Company's leverage.
Generally accepted accounting principles require that this financing facility be
presented off-balance sheet. As management internally evaluates the A/R
Securitization Facility as an additional form of indebtedness, management
believes it is helpful to provide the readers of its financial statements an
evaluation of its total indebtedness from all sources of financing. Cash and
cash equivalents are deducted from this total to determine total indebtedness
(including A/R Securitization Program), net of cash. This amount represents the
Company's net obligation due under all of its financing facilities.
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