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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): OCTOBER 22, 2003
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 October 22, 2003, WESCO International, Inc. issued a press release
announcing its earnings for the third quarter of 2003. A copy of the press
release is attached hereto.
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.
October 22, 2003 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
NEWS RELEASE
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WESCO International, Inc. / Suite 700, 225 West Station Square Drive
/ Pittsburgh, PA 15219
WESCO INTERNATIONAL, INC. REPORTS
FISCAL 2003 THIRD QUARTER RESULTS -
IMPROVED OPERATING PROFITS
Contact: Stephen A. Van Oss, Chief Financial Officer
WESCO International, Inc. (412) 454-2271, Fax: (412) 454-2477
http://www.wescodist.com
Pittsburgh, PA, October 22, 2003 - 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 third quarter financial results.
Net sales for the third quarter of 2003 were $825.6 million versus
$852.9 million in 2002, a decline of 3.2%. Gross margins for the quarter
improved to 18.6% versus 17.2% for the comparable quarter in 2002. Last year's
gross margin results included a $5.2 million charge to establish inventory
reserves for specialty inventory related to customers in the telecommunication
industry and the Middle East. Operating income for the current quarter totaled
$23.9 million versus $18.3 million in last year's comparable quarter, an
improvement of 30.6%. Depreciation and amortization included in operating income
was $5.1 million in 2003's third quarter versus $5.0 million in 2002. Net income
in 2003's third quarter was $8.4 million versus $9.0 million in the comparable
2002 quarter. Included in 2003's net results is a $0.5 million non-cash charge
($0.01 per share) related to a Company-initiated amendment reducing the size of
the Company's revolving credit facility. Last year's net results included a $5.3
million net benefit ($0.11 per share) from the reversal of income tax
contingency accruals. Earnings per share in the current quarter were $0.18 per
share versus $0.19 per share in 2002.
Net sales for the nine months ended September 30, 2003 were $2,436.6
million versus $2,510.3 million in last year's comparable period, a 2.9%
decline. Gross margins in the current nine-month period were 18.5% versus 17.6%
last year and operating income totaled $61.3 million versus $58.4 million last
year. Depreciation and amortization included in operating income was $15.4
million versus $14.6 million last year. Net income for the 2003 year-to-date
period was $20.6 million versus $18.4 million last year, while diluted earnings
per share were $0.44 per share in 2003 versus $0.39 per share in 2002.
During the third quarter, the Company adopted the measurement
provisions of SFAS #123, "Accounting for Stock-Based Compensation" on a
prospective basis in accordance with SFAS #148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of SFAS #123".
Consequently, the quarter results include $0.2 million net charge to recognize a
pro rata portion of the fair value of stock options issued to employees and
directors of the Company during the third quarter ended September 30, 2003.
Stephen A. Van Oss, Vice President and Chief Financial Officer, stated,
"Our focus on margin expansion and quality of business initiatives are
delivering improved operating results. Operating income for the quarter at $23.9
million was the highest since the third quarter of 2001 on lower sales. Our cash
flow generation continues to be strong. Cash flow generated in the quarter was
utilized to reduce total indebtedness (including our accounts receivable
securitization program), net of cash, by $34.8 million to $607.3 million as of
September 30, 2003. For the year, total indebtedness, net of cash, has been
reduced by $81.1 million."
Mr. Van Oss, continued, "During the last two years, the Company has
engaged in a series of capital market transactions which have established a
balanced capital structure for WESCO that provides low-cost financing, staggered
extended maturities, operating flexibility, an appropriate blend of fixed and
variable rate debt and significant liquidity. Our latest transaction, completed
early in this quarter, was to revise and improve our annual Accounts Receivable
Securitization facility. The new $300 million facility offers very competitive
low-cost financing and includes a unique feature whereby $135 million of the
total facility is provided under a three-year term with the remaining $165
million under a one-year term. Our available borrowing capacity was
approximately $185 million as of September 30, 2003."
WESCO's Chairman and Chief Executive Officer, Roy W. Haley, commented,
"WESCO, through its 350 branches and 1,100 outside salespeople, is closely
aligned to major industrial and commercial construction market segments
throughout North America, and we are monitoring economic market conditions
closely. We are pleased to see signs of market stabilization, including certain
areas of growth. The Company is committed to its business strategy and is
optimistic about its prospects, despite the challenges presented by the
prolonged economic downturn. We continue to make steady progress in our
performance including improvements in margins, cash generation and overall
profitability. Further performance gains are expected to be realized based on
the success of our LEAN Enterprise initiatives focused on selling performance,
customer service capabilities, and cost efficiencies."
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Teleconference
WESCO will conduct a teleconference to discuss the third quarter earnings as
described in this News Release on October 22, 2003, at 11:00 a.m. E.D.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.
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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 2002 annual product sales of approximately $3.3
billion. The Company employs approximately 5,400 people, maintains relationships
with 24,000 suppliers, and serves more than 100,000 customers worldwide. Major
markets include commercial and industrial firms, contractors, government
agencies, educational institutions, telecommunications businesses and utilities.
WESCO operates five fully automated distribution centers and 350 full-service
branches in North America and selected international markets, providing a local
presence for area customers and a global network to serve multi-location
businesses and multi-national corporations.
# # #
The matters discussed herein may contain forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from expectations. Certain of these risks are set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, as well as the Company's other reports filed with the Securities and
Exchange Commission.
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share amounts)
(unaudited)
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
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Net sales $825.6 $852.9
Cost of sales 671.9 706.4
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Gross Profit 153.7 18.6% 146.5 17.2%
Selling, general & admin. expenses 124.7 15.1% 123.2 14.4%
Depreciation & amortization 5.1 5.0
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Income from operations 23.9 2.9% 18.3 2.1%
Interest expense, net 10.6 10.7
Loss on debt extinguishment 0.8 -
Other expense 0.7 1.8
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Income before income taxes 11.8 1.4% 5.8 0.7%
Provision (benefit) for income taxes 3.4 (3.2)
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Net income $ 8.4 1.0% $ 9.0 1.1%
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Diluted earnings per common share:
Net Income $ 0.18 $ 0.19
Weighted Average Shares Outstanding 46.9 46.9
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
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Net sales $2,436.6 $2,510.3
Cost of sales 1,986.6 2,068.7
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Gross Profit 450.0 18.5% 441.6 17.6%
Selling, general & admin. expenses 373.3 15.3% 368.6 14.7%
Depreciation & amortization 15.4 14.6
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Income from operations 61.3 2.5% 58.4 2.3%
Interest expense, net 31.4 32.8
Loss on debt extinguishment 0.8 1.1
Other expense 3.4 4.9
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Income before income taxes 25.7 1.1% 19.6 0.8%
Provision for income taxes 5.1 1.2
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Net income $ 20.6 0.8% $ 18.4 0.7%
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Diluted earnings per common share:
Net Income $ 0.44 $ 0.39
Weighted Average Shares Outstanding 46.7 46.9
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions, except per share amounts)
(unaudited)
ASSETS SEPTEMBER 30, 2003 DECEMBER 31, 2002
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CURRENT ASSETS
Cash and cash equivalents $ 30.3 $ 22.6
Trade accounts receivable 300.7 182.2
Inventories, net 323.6 338.8
Prepaid expenses and other current assets 28.7 33.4
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Total current assets 683.3 577.0
Total other assets 470.2 438.1
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Total assets $ 1,153.5 $ 1,015.1
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 381.4 $ 346.5
Other current liabilities 96.6 51.9
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Total current liabilities 478.0 398.4
Long-term debt (See Note) 430.5 412.2
Other non-current liabilities 49.3 35.2
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Total liabilities 957.8 845.8
STOCKHOLDERS' EQUITY:
Total stockholders' equity 195.7 169.3
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Total liabilities and stockholders' equity $ 1,153.5 $ 1,015.1
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Note: Trade accounts receivable and long-term debt have each been reduced by
$205 million and $293 million as of September 30, 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 by $2.1 million during the nine months ended September 30, 2003 as a
result of non-cash amortization of discounts associated with the Company's
Senior Notes.
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
($ in millions)
(unaudited)
SEPTEMBER 30, 2003 JUNE 30, 2003 DECEMBER 31, 2002
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Total debt $432.6 $450.3 $418.0
Plus: A/R Securitization 205.0 225.0 293.0
Less: Cash and cash equivalents (30.3) (33.2) (22.6)
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Total indebtedness (including A/R
Securitization Program), net of cash
(See Note) $607.3 $642.1 $688.4
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Note: Total indebtedness (including A/R Securitization Program), net of cash is
provided by the Company as an additional measure of the Company's indebtness.
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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