WESCO International, Inc. Reports Third Quarter 2010 Results

PITTSBURGH, Oct. 21 /PRNewswire-FirstCall/ -- WESCO International, Inc. (NYSE: WCC), a leading provider of electrical and industrial MRO products, construction materials, and advanced integrated supply procurement outsourcing services, today announced its third quarter financial results.

(Logo: http://photos.prnewswire.com/prnh/20030508/WCCLOGO )

(Logo: http://www.newscom.com/cgi-bin/prnh/20030508/WCCLOGO )

The following are results for the three months ended September 30, 2010 compared to the three months ended September 30, 2009:

• Consolidated net sales were $1,324.6 million for the third quarter of 2010, compared to $1,152.4 million for the third quarter of 2009, an increase of 14.9%.  Third quarter 2010 consolidated net sales included a 0.9% positive impact from foreign exchange rates.  Third quarter 2010 sales increased 5.2% compared to the second quarter 2010, which included a 0.2% negative impact from foreign exchange.
• Gross profit was $257.8 million, or 19.5% of sales, for the third quarter of 2010, compared to $220.9 million, or 19.2% of sales, for the third quarter of 2009.  
• Sales, general & administrative (SG&A) expenses were $190.6 million, or 14.4% of sales, for the current quarter, compared to $168.3 million, or 14.6% of sales, for the third quarter of 2009.  WESCO's third quarter 2009 SG&A expenses included a net favorable impact of approximately $7.0 million related to temporary cost and discretionary benefit reductions.
• Operating profit was $61.2 million, or 4.6% of sales, for the current quarter, compared to $46.2 million, or 4.0% 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 120 basis points.  
• Total interest expense for the third quarter of 2010 was $13.7 million, compared to $13.6 million for the third quarter of 2009.  Interest expense in the current quarter was comprised of $12.5 million of cash interest expense and $1.2 million of non-cash interest expense.  Interest expense in the comparable prior year quarter was comprised of $10.7 million of cash interest expense and $2.9 million of non-cash interest expense.  
• The effective tax rate for the current quarter was 29.1%, compared to 15.8% for the prior year quarter. Without the impact of 2009's convertible debenture exchange, the effective tax rate for the third quarter of 2009 would have been 20.3%.
• Net income for both the current quarter and the prior year comparable quarter was approximately $33.7 million.  The pre-tax gain on 2009's convertible debenture exchange net of related tax effects had a $6.6 million favorable impact on net income in the third quarter of 2009.
• Diluted earnings per share for the third quarter of 2010 was $0.74 per share, based on 45.5 million shares outstanding, versus $0.79 per share in the third quarter of 2009, based on 42.8 million shares outstanding.  The pre-tax gain on 2009's convertible debenture exchange net of related tax effects had a $0.16 per share favorable impact in the third quarter of 2009.  Temporary cost and discretionary benefit reductions in the third quarter of 2009 contributed $0.13 to reported EPS.
• Free cash flow for the third quarter of 2010 was $2.6 million, compared to free cash flow of $81.9 million for the third quarter of 2009.  

Mr. John J. Engel, WESCO's Chief Executive Officer, stated, "Our sales and operating margin results improved significantly in the third quarter, and we have positive momentum across our business.  Execution of our growth initiatives yielded double digit sales growth in the industrial and construction end markets and the data communications product category, and our backlog continued to grow.  We delivered strong operating margin expansion this year, increasing from 3.3% in the first quarter to 4.1% in the second quarter and 4.6% in the third quarter, demonstrating the operating leverage in our business model.  We continue to see excellent opportunities to strengthen our portfolio, invest in our growth initiatives and improve our market position through the recovery phase of this cycle."

The following results are for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009:

• Consolidated net sales were $3,732.3 million for the first nine months of 2010, compared to $3,491.2 million for the first nine months of 2009, an increase of 6.9%.  Consolidated net sales for the first nine months of 2010 included a 1.5% positive impact from foreign exchange rates.
• Gross profit was $728.2 million, or 19.5% of sales, for the first nine months of 2010, compared to $682.9 million, or 19.6% of sales, for the first nine months of 2009.
• SG&A expenses were $559.6 million, or 15.0% of sales, for the first nine months of 2010, compared to $525.7 million, or 15.1% of sales, for the first nine months of 2009.  WESCO's SG&A expenses for the first nine months of 2009 included a net favorable impact of approximately $19.0 million related to temporary cost and discretionary benefit reductions.
• Operating profit was $150.9 million, or 4.0% of sales, for the nine months ended September 30, 2010, compared to $137.3 million, or 3.9% of sales, for the nine months ended September 30, 2009.  After adjusting for the 2009 impact of the temporary cost and discretionary benefit reductions, operating margins improved by approximately 60 basis points.
• Total interest expense for the nine months ended September 30, 2010 was $41.7 million, compared to $39.9 million for the nine months ended September 30, 2009.  Interest expense for the first nine months of 2010 was comprised of $38.0 million cash interest expense and $3.7 million non-cash interest expense.  Interest expense for the first nine months of 2009 was comprised of $29.3 million cash interest expense and $10.6 million non-cash interest expense.  
• The effective nine month tax rate was 28.9% for 2010 compared to 22.5% for 2009.  Without the impact of 2009's convertible debenture exchange, the 2009 year to date effective tax rate would have been 24.1%.
• Net income for the first nine months of 2010 was $80.7 million, compared to $83.4 million for the first nine months of 2009.  The pre-tax gain on 2009's convertible debenture exchange net of related tax effects had a $6.6 million favorable impact on net income in the first nine months of 2009.
• Diluted earnings per share for the first nine months of 2010 was $1.79 per share, based on 45.2 million shares outstanding, versus $1.95 per share for the first nine months of 2009, based on 42.6 million shares outstanding.  The pre-tax gain on 2009's convertible debenture exchange net of related tax effects had a $0.16 per share favorable impact in the first nine months of 2009.
• Free cash flow for the first nine months of 2010 was $65.4 million, compared to $280.4 million in the comparable prior year period.

Mr. Engel continued, "The market remains highly competitive with an excellent opportunity for share gain and value creation by strong, well capitalized and innovative companies like WESCO.  We are continuing to invest in our business and our people and remain focused on providing superior customer service, maintaining our efficient cost structure, strengthening our organization and producing improved shareholder returns.  The WESCO team is stepping up to meet the increased demands of our customers, and I would like to thank all our employees for their extra effort and commitment in working together to actively sell and support our entire portfolio of products and services to all customer groups."

Teleconference

WESCO will conduct a teleconference to discuss the third quarter earnings as described in this News Release on Thursday, October 21, 2010, at 11:00 a.m. E.D.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) 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.  2009 annual sales were approximately $4.6 billion.  The Company employs approximately 6,100 people, maintains relationships with over 17,000 suppliers, and serves over 100,000 customers worldwide.  Major markets include commercial and industrial firms, contractors, government agencies, educational institutions, telecommunications businesses and utilities.  WESCO operates seven fully automated distribution centers and approximately 380 full-service branches in North America and select 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, 2009, as well as the Company's other reports filed with the Securities and Exchange Commission.

SOURCE WESCO International, Inc.