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 Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 2015
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation) | 001-14989 (Commission File Number) | 25-1723342 (IRS Employer Identification No.) | ||
225 West Station Square Drive Suite 700 Pittsburgh, Pennsylvania (Address of principal executive offices) | 15219 (Zip Code) | |||
(412) 454-2200
(Registrant's telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01. | Regulation FD Disclosure. |
The information in this Item 7.01 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 Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
On December 15, 2015, WESCO International, Inc. (the "Company") issued a Press Release reaffirming its 2015 outlook and providing its 2016 outlook. A copy of the Press Release is attached hereto as Exhibit 99.1.
On December 15, 2015, members of senior management of the Company will deliver a presentation on its outlook for 2016. The presentation will include written communication comprised of slides and will be accessible on the Company's website via webcast. The slides from the presentation are attached hereto as Exhibit 99.2.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
99.1 | Press Release issued by WESCO International, Inc., dated December 15, 2015. |
99.2 | Slide presentation for investors. |
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.
WESCO International, Inc. | ||
(Registrant) | ||
December 15, 2015 | By: | /s/ Kenneth S. Parks |
(Date) | Kenneth S. Parks | |
Senior Vice President and Chief Financial Officer | ||
 | News Release |
WESCO International, Inc. / Suite 700, 225 West Station Square Drive / Pittsburgh, PA 15219 | |
WESCO International, Inc. Reaffirms 2015 Outlook and
Provides 2016 Outlook
Highlights:
• | Sales and EPS outlook reaffirmed for 2015 |
• | 2016 outlook |
• | Sales estimated in the range of flat to down 5% |
• | EPS estimated in the range of $3.75 to $4.20 |
• | Free cash flow estimated to be at least 90% of net income |
PITTSBURGH, (December 15, 2015) /PRNewswire/ -- WESCO International, Inc. (NYSE: WCC) reaffirms its 2015 sales and EPS outlook and provides its 2016 financial outlook.
John J. Engel, WESCO’s Chairman, President and CEO commented, “Our fourth quarter results to date are in line with the expectations we outlined in our third quarter earnings call. We reaffirm our full year outlook of 4% to 5% sales decline, $4.15 to $4.30 earnings per diluted share, and free cash flow generation of approximately 100% of net income.”
Mr. Engel continued, “We expect reduced demand in commodity-driven end markets and foreign exchange headwinds to continue throughout next year. As a result, we expect sales in the range of flat to down 5%, EPS of $3.75 to $4.20 per diluted share, and free cash flow generation of at least 90% of net income in 2016.
We remain clearly focused on executing our One WESCO strategy to deliver above-market sales growth, improve profitability, generate strong cash flow, and increase shareholder value. Our acquisition pipeline remains robust, and we see excellent ongoing opportunities to strengthen our electrical core and broaden our portfolio of products and services. The free cash flow generation capability of our business supports continued investment in our One WESCO growth initiatives, including acquisitions, while providing a return of capital to shareholders.”
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WESCO will discuss its 2016 outlook during its investor conference call today starting at 11 a.m. ET. The Company has produced an accompanying presentation for today’s call that can be accessed on the company's Investor Website (http://wesco.investorroom.com).
The call will be available via the conference dial-in below, as well as a live audio webcast that can be accessed by clicking on the microphone icon on WESCO's home page at www.wesco.com.
To participate, please dial 1-877-443-5356 (Domestic), 1-855-669-9657 (Canada) or 1-412-902-6614 (International) a few minutes before the 11:00 a.m. ET start. Please mention to the operator that you are dialing in for the WESCO conference call. The live webcast of the investor call as well as related presentation materials will be available through the "Investor Relations" section of the company's Investor Website (http://wesco.investorroom.com).
Investors can access a replay of the conference call from 1:00 p.m. ET on December 15, 2015, through 11:59 p.m. ET on December 22, 2015, by dialing 1-877-344-7529 (Domestic), 1-855-669-9658 (Canada), or 1-412-317-0088 (International) using the confirmation code 10076936.
About WESCO
WESCO International, Inc. (NYSE: WCC), a publicly traded Fortune 500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating (“MRO”) and original equipment manufacturers (“OEM”) product, construction materials, and advanced supply chain management and logistic services. 2014 annual sales were approximately $7.9 billion. The Company employs approximately 9,400 people, maintains relationships with over 25,000 suppliers, and serves over 75,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates nine fully automated distribution centers and approximately 500 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, 2014, as well as the Company's other reports filed with the Securities and Exchange Commission.
Cautions about Forward-Looking Statements
This press release contains "forward looking" statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the Company's stock repurchase program. All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to: adverse economic conditions; increase in competition; debt levels, terms, financial market conditions or interest rate fluctuations; risks related to acquisitions, including the integration of acquired businesses; disruptions in operations or information technology systems; expansion of business activities; litigation, contingencies or claims; product, commodity, labor or other cost fluctuations; exchange rate fluctuations; the timing and amount of common stock repurchases, if any; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2014 and any subsequent filings with the Securities & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. The accompanying presentation includes a discussion of certain non-GAAP financial measures. Information required by Regulation G of the Exchange Act with respect to such non-GAAP financial measures can be obtained via WESCO’s website, www.wesco.com.
Contact
Mary Ann Bell, Vice President, Investor Relations
WESCO International, Inc. (412) 454-4220
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2015 Financial Update and 2016 Outlook December 15, 2015
2 2016 Outlook Call 12/15/15 Safe Harbor Statement Note: All statements made herein that are not historical facts should be considered as “forward- looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to: adverse economic conditions; increase in competition; debt levels, terms, financial market conditions or interest rate fluctuations; risks related to acquisitions, including the integration of acquired businesses; disruptions in operations or information technology systems; expansion of business activities; litigation, contingencies or claims; product, labor or other cost fluctuations; exchange rate fluctuations; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2014 and any subsequent filings with the Securities & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. The following presentation includes a discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be found in the appendix and obtained via WESCO’s website, www.wesco.com.
3 2016 Outlook Call 12/15/15
4 2016 Outlook Call 12/15/15 2015 Outlook • FY 2015 sales decline of approximately 4% to 5% ‒ Includes Q4 sales decline of 5% to 8% ‒ Q4 results to date in line with outlook • FY 2015 EPS of $4.15 to $4.30 • Free cash flow equal to at least 100% of net income …challenging year, driven by industrial, Canada & foreign exchange
5 2016 Outlook Call 12/15/15 2016 Priorities • Increase market share ‒ One WESCO sales growth initiatives ‒ Acquisitions • Sustain margins ‒ Organizational streamlining ‒ Lean operational excellence initiatives ‒ Pricing and sourcing initiatives ‒ Supplier and product rationalization ‒ Branch network optimization efforts • Maintain our strong cash generation and solid capital structure; manage leverage within the targeted range …outperform the market while maintaining cost discipline
6 2016 Outlook Call 12/15/15 Industrial End Market Improving Flat Declining 5.0% (4.1)% (10.2)% (14.2)% Core Sales Growth versus Prior Year 42% Key Market Indicators U.S. Industrial Production ISM Purchasing Managers’ Index Capacity Utilization Canadian Industrial Production • Global Accounts • Integrated Supply • OEM • General Industrial 2016 end market outlook: HSD to MSD sales decrease WESCO Industrial Sales 40% YTD Q3 2015 (10.1)% FY 2014 Q1 2015 Q2 2015 Q3 2015
7 2016 Outlook Call 12/15/15 Construction End Market Improving Flat Declining Core Sales Growth versus Prior Year 42% Key Market Indicators Architectural Billings Index Capital goods orders growth Construction starts and put in place Canadian non-residential construction • Non-residential ‒ Commercial ‒ Industrial ‒ Non-building 1.5% 3.9% (7.7%) (10.5%) WESCO Construction Sales 32% YTD Q3 2015 (6.0)% FY 2014 Q1 2015 Q2 2015 Q3 2015 2016 end market outlook: LSD sales decrease to LSD sales increase
8 2016 Outlook Call 12/15/15 6.6% 6.5% 5.7% 1.7% FY 2014 Q1 2015 Q2 2015 Q3 2015 Utility End Market Improving Flat Declining Core Sales Growth versus Prior Year 42% Key Market Indicators Distribution grid maintenance and upgrades Generation MRO, upgrades, expansions Transmission line infrastructure build-out Residential and non-residential construction starts • Investor Owned • Public Power • Utility Contractors WESCO Utility Sales 15% YTD Q3 2015 4.1% 2016 end market outlook: Flat to LSD sales increase
9 2016 Outlook Call 12/15/15 4.5% 4.3% (0.5)% (3.0)% CIG End Market Improving Flat Declining Core Sales Growth versus Prior Year 42% Key Market Indicators Government spending Communications and security upgrades Education, healthcare, and financial • Commercial • Institutional • Government WESCO CIG Sales 13% YTD Q3 2015 (0.4)% FY 2014 Q1 2015 Q2 2015 Q3 2015 2016 end market outlook: Flat to LSD sales increase
10 2016 Outlook Call 12/15/15 2016 Sales Outlook Sales Outlook End Market: Range Industrial (HSD) to (MSD) Construction (LSD) to LSD Utility Flat to LSD CIG Flat to LSD End Market Sales Growth (4)% to (1)% Market Outperformance 0 to +1% Foreign Exchange (3)% to (2)% Carryover impact of 2015 Acquisitions 2% Consolidated WESCO (5)% to Flat …expecting modest improvement in the second half of 2016 Note: Excludes unannounced acquisitions.
11 2016 Outlook Call 12/15/15 2016 Sales Outlook by Geography U.S. Canada International Flat to low-single-digit growth, including carryover impact of 2015 acquisitions High-single-digit to mid-teens decline, including foreign currency translation Mid-single-digit decline, including foreign currency translation Sales Outlook Note: Excludes unannounced acquisitions. …expecting modest US growth & continuing headwinds in other geographies
12 2016 Outlook Call 12/15/15 2016 Margin Outlook …expecting to sustain current margin levels Operating Margin 4.7% 5.4% 5.6% ~6.0% 6.2% 2010 2011 2012 2013E 2014E 6.4% Operating margin expansion 20-40 bpts • Gross margin expansion • Cost controls • Accretive Acquisitions Operating Margin 4.2% 5.4% 5.7% 5.9% 5.9% Approx. 5.0% 4.8% 2010 2011 2012 2013 2014 2015E 2016E Headwinds Strategies to Mitigate ‒ Continued pressure on pricing and mix ‒ Restoring commissions and incentives ‒ Wage and benefit inflation + Restructuring cost savings + Cost saving contingency planning + Pricing analytics, tools and tactics + Procurement strategies and systems 5.0% Reconciliation of these non-GAAP financial measures is included in the Appendix to this presentation.
13 2016 Outlook Call 12/15/15 Cash Generation Free Cash Flow ($M) Net Income ($M) ~$800M of Free Cash Flow Reconciliation of these non-GAAP financial measures is included in the Appendix to this presentation. 265 308 230 267 224 264 276 237 2012 2013 2014 2015 TTM Free Cash Flow ($M) Net Income ($M) Leverage (Total Par Debt to TTM EBITDA) > $1B of free cash flow over last 4 years 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 Target Leverage 2.0x – 3.5x 3.5X 2015 …consistently strong free cash flow
14 2016 Outlook Call 12/15/15 Effective Capital Allocation …maintaining fiscal discipline while funding growth Cash Deployment • Support organic growth • Fund accretive acquisitions • Manage financial leverage • Share repurchase • Dividends
15 2016 Outlook Call 12/15/15 2.50 3.96 4.38 5.02 5.18 4.15 3.75 2010 2011 2012 2013 2014 2015E2016E 2016 Financial Outlook Operating Margin 4.7% 5.4% 5.6% ~6.0% 6.2% 2010 2011 2012 2013E 2014E Sales 5.1 6.1 6.6 7.5 7.9 7.3 ~7.0 2010 2011 2012 2013 2014 2015E2016E Diluted EPS ($B) ~7.5 6.4% 4.30 Sales Flat to (5)% Operating margin expansion 20-40 bpts • Gross margin expansion • Cost controls • Accretive Acquisitions Free Cash Flow At least 90% of net income ($) 7.5 Effective tax rate ~30% Operating margin 4.8% to 5.0% Diluted shares outstanding ~49M 4.20 Reconciliation of these non-GAAP financial measures is included in the Appendix to this presentation.
16 2016 Outlook Call 12/15/15
17 2016 Outlook Call 12/15/15 Appendix
18 2016 Outlook Call 12/15/15 WESCO International, Inc. Definitions Appendix • Financial leverage ratio is calculated by dividing total debt, including debt discount, by adjusted EBITDA. Adjusted EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation, and amortization excluding the ArcelorMittal litigation recovery. • Free cash flow is calculated by deducting capital expenditures from, and adding non-recurring pension contribution to, cash flow provided by operations. • Sales change abbreviations include: − HSD – High-single-digits − MSD – Mid-single-digits − LSD – Low-single-digits
19 2016 Outlook Call 12/15/15 NON-GAAP Financial Measures This presentation includes certain non-GAAP financial measures. These financial measures include adjusted EBIT, adjusted net income, adjusted diluted EPS, financial leverage ratio, free cash flow, and liquidity. The Company believes that these non- GAAP measures are useful to investors in order to provide a better understanding of the Company's capital structure position and liquidity on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude transactions of an unusual nature, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.
20 2016 Outlook Call 12/15/15 FY 2012 FY 2013 FY 2014 2015 TTM (Dollars in millions, except for EPS) Adjusted Income from operations (Adjusted (EBIT): Income from operations (EBIT) 333 481 ArcelorMittal litigation charge (recovery) included in SG&A 36 (36) Adjusted income from operations (Adjusted EBIT) 369 445 Percent of adjusted sales 5.7% 5.9% Adjusted net income attributable to WESCO International, Inc.: Net income attributable to WESCO International, Inc. 202 276 276 237 ArcelorMittal litigation charge (recovery) 22 (22) - - Loss on sale of Argentina business - 2 - - Loss on debt extinguishment - 13 - - Tax effect of certain non-recurring items - (5) - - Adjusted net income attributable to WESCO International, Inc. 224 264 276 237 Adjusted Diluted EPS: Diluted share count 51.1 52.7 53.3 n/a Adjusted diluted EPS $4.38 $5.02 $5.18 n/a Free Cash Flow: Cash provided by operations 288 315 251 287 Less: capital expenditures (23) (28) (21) (20) Add: non-recurring pension contribution - 21 - - Free cash flow 265 308 230 267 Free cash flow as a % of adjusted net income 118% 117% 84% 113% Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund the Company's financing needs. During the quarter ended September 30, 2013, a non-recurring contribution was made to fund the Canadian EECOL pension plan. This contribution was required pursuant to the terms of the share purchase agreement by which the Company acquired EECOL in 2012. EECOL sellers fully funded this contribution by way of a direct reduction in the purchase price at the date of acquisition. U.S. GAAP requires the contribution to be shown as a reduction of operating cash flow, however, it is added back to accurately reflect free cash flow. Other Non-GAAP Reconciliations
21 2016 Outlook Call 12/15/15 Financial Leverage Twelve Months Ended September 30, 2015 Financial leverage ratio: Income from operations $ 408 Depreciation and amortization 65 EBITDA $ 473 September 30, 2015 Current debt and short-term borrowings $ 46 Long-term debt 1,455 Debt discount related to convertible debentures and term loan (1) 166 Total debt including debt discount $ 1,667 Financial leverage ratio 3.5X (1)The convertible debentures and term loan are presented in the condensed consolidated balance sheets in long-term debt net of the unamortized discount. ($ Millions)