WESCO International, Inc. Reports Fourth Quarter and Full-Year 2010 Results

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PITTSBURGH, Jan. 27, 2011 /PRNewswire/ -- WESCO International, Inc. (NYSE: WCC), a leading provider of electrical, industrial, and communications MRO and OEM  products, construction materials, and advanced supply chain management and logistics services, today announced its 2010 fourth quarter and full-year financial results.

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The following are results for the quarter-ended December 31, 2010 compared to the quarter-ended December 31, 2009:

• Consolidated net sales were $1,331.6 million, compared to $1,132.7 million, an increase of 17.6%.  Fourth quarter 2010 organic sales growth was 15.8% excluding  a 1.1% positive impact from acquisitions and a 0.7% positive impact from foreign exchange rates.  Fourth quarter 2010 sales increased 0.5% sequentially.
• Gross profit was $270.3 million, or 20.3% of sales, for the fourth quarter of 2010, compared to $217.0 million, or 19.2% of sales, for the fourth quarter of 2009.  Increased sales performance in the fourth quarter resulted in additional supplier volume rebates and favorable inventory adjustments which contributed to the improvement in gross margins.
• Sales, general & administrative (SG&A) expenses were $204.1 million, or 15.3% of sales, for the current quarter, compared to $168.3 million, or 14.9% of sales, for the fourth quarter of 2009.  WESCO's fourth quarter 2009 SG&A expenses included a net favorable impact of approximately $6.0 million related to temporary cost and discretionary benefit reductions.
• Operating profit was $60.0 million, or 4.5% of sales, for the current quarter, compared to $42.6 million, or 3.8% of sales, for the comparable 2009 quarter.  After adjusting for the 2009 impact of the temporary cost and discretionary benefit reductions, operating margins improved by approximately 130 basis points.  
• Total interest expense for the fourth quarter of 2010 was $15.9 million, compared to $13.8 million for the fourth quarter of 2009.  During the fourth quarter, WESCO resolved a tax matter involving intercompany transactions with its Canadian operations dating back to 1998, which resulted in increased interest expense of $4.2 million.  Non-cash interest expense for the fourth quarter 2010 and 2009 was $0.5 million and $1.3 million, respectively.
• The effective tax rate for the current quarter was 21.1%, compared to 26.6% for the prior year quarter. The resolution of the previously mentioned tax matter, net of other international tax items, decreased fourth quarter 2010 tax expense by $2.9 million.
• Net income for the current quarter was $34.8 million compared to $21.8 million for the prior year quarter, an increase of 59.6%.  The resolution of the previously mentioned tax matter, net of other international tax items, decreased fourth quarter 2010 net income by $1.3 million.
• Diluted earnings per share for the fourth quarter of 2010 were $0.72 per share, based on 48.3 million shares outstanding, versus $0.51 per share in the fourth quarter of 2009, based on 42.9 million shares outstanding.  The resolution of the previously mentioned tax matter, net of other international tax items, negatively impacted fourth quarter 2010 EPS by $0.03.  In the prior year comparable quarter, temporary cost and discretionary benefit reductions contributed $0.10 to EPS.  
• Free cash flow for the fourth quarter of 2010 was $46.8 million, compared to a use of $1.7 million for the fourth quarter of 2009.  

Mr. John J. Engel, WESCO's Chief Executive Officer, stated, "Our fourth quarter results marked a strong close to an excellent year.  Execution of our growth strategy is on track and we are pleased with the increasing momentum in our business during 2010.  After declining 3% in the first quarter, sales grew 9% in the second quarter, 15% in the third quarter, and 18% in the fourth quarter, resulting in full-year growth of 10%.  Backlog was also up 18% versus prior year end.  We delivered strong operating margin expansion and free cash flow generation in 2010, reflecting effective operating leverage and efficient asset management.  In addition, we strengthened the portfolio with the acquisitions of Potelcom in June and TVC Communications in December.  We see excellent opportunities to continue to invest in our business and further improve our market position in 2011."

The following results are for the full-year period ended December 31, 2010 compared to the full-year period ended December 31, 2009:

• Consolidated net sales were $5,063.9 million compared to $4,624.0 million, an increase of 9.5%.  Consolidated net sales included a 1.3% positive impact from foreign exchange rates and a 0.4% positive impact from acquisitions.
• Gross profit was $998.5 million, or 19.7% of sales, compared to $899.9 million, or 19.5% of sales.
• SG&A expenses were $763.6 million, or 15.1% of sales, compared to $693.9 million, or 15.0% of sales.  WESCO's 2009 SG&A expenses included a net favorable impact of approximately $25.0 million related to temporary cost and discretionary benefit reductions.
• Operating profit was $211.0 million, or 4.2% of sales, compared to $180.0 million, or 3.9% of sales.  After adjusting for the 2009 impact of the temporary cost and discretionary benefit reductions, operating margins improved by approximately 80 basis points.
• Total interest expense was $57.6 million, compared to $53.8 million.  Non-cash interest expense for 2010 and 2009 was $4.3 million and $11.8 million, respectively.  
• The effective full-year tax rate was 26.7% compared to 23.4%.  After adjusting for the net benefit of the previously mentioned tax matter, the full year effective tax rate would have been 27.9%.  Without the impact of 2009's convertible debenture exchange completed in the third quarter, the effective 2009 full-year tax rate would have been 24.0%.
• Net income for the full-year was $115.5 million compared to $105.1 million for the prior year.  
• Diluted earnings per share were $2.50 per share, based on 46.1 million shares compared to $2.46 per share, based on 42.7 million shares.  The resolution of the previously mentioned tax matter, net of other international tax items, negatively impacted 2010 EPS by $0.03. In the prior year, the gain on 2009's convertible debenture exchange net of related tax effects had a $0.16 per share favorable impact on EPS, and the temporary cost and discretionary benefit reductions had a $0.44 per share favorable impact on EPS.
• Full-year free cash flow was $112.2 million, compared to $278.6 million in the prior year.

Mr. Engel continued, "We expect the market will remain highly competitive as a gradual global economic recovery continues in 2011.  We are focused on building on our 2010 successes as we continue to execute our strategy, accelerate our growth initiatives, and expand our geographic footprint and customer base.  I am very proud of the results delivered by all WESCO employees in 2010 and I am confident in our team's ability to produce outstanding results again in 2011."   

Teleconference

WESCO will conduct a teleconference to discuss the fourth quarter earnings as described in this News Release on Thursday, January 27, 2011, at 11:00 a.m. E.S.T.  The conference call will be broadcast live over the Internet and can be accessed from the Company's website at http://www.wesco.com.  The conference call will be archived on this Internet site for seven days.

WESCO International, Inc. (NYSE: WCC), a publicly traded Fortune 500 company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating ("MRO") and original equipment manufacturers ("OEM") products, construction materials, and advanced supply chain management and logistics services.  2010 annual sales were approximately $5.1 billion.  The Company employs approximately 6,800 people, maintains relationships with over 17,000 suppliers, and serves over 100,000 customers worldwide.  Customers include industrial and commercial businesses, contractors, governmental agencies, institutions, telecommunications providers and utilities.  WESCO operates seven fully automated distribution centers and over 400 full-service branches in North America and international markets, providing a local presence for 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, 2009, as well as the Company's other reports filed with the Securities and Exchange Commission.

http://www.wesco.com

SOURCE WESCO International, Inc.