WESCO International, Inc. · NYSE:WCC
WESCO International — Q4 2016 Earnings Presentation
26 slides from WESCO International's earnings presentation, Jan 26, 2017
Slide 1: Q4 & Full Year 2016 Earnings Webcast Presentation
Webcast Presentation January 26, 2017 Q4 & Full Year 2016 Earnings
Slide 2: Safe Harbor Statement
2 Q4 & FY 2016 Earnings Webcast, 1/26/17 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, un
Slide 3: 2016 Highlights
3 Q4 & FY 2016 Earnings Webcast, 1/26/17 2016 Highlights …performance in-line with outlook Q4 • Reported sales were down 4% • Workday adjusted organic sales were down 4% in US and down 2% in Canada • Workday adjusted organic sales were up slightly sequentially • Free cash flow of over 160% of net in
Slide 4: Industrial End Market
4 Q4 & FY 2016 Earnings Webcast, 1/26/17 Industrial End Market • Q4 2016 Sales − Workday adjusted organic sales down 7% versus prior year (down 5% in the U.S. and down 14% in Canada in local currency) − Up 2% sequentially • Reduced demand outlook, weak commodity prices, and strong U.S. dollar weighe
Slide 5: Construction End Market
5 Q4 & FY 2016 Earnings Webcast, 1/26/17 • Q4 2016 Sales − Workday adjusted organic sales down 2% versus prior year (down 3% in U.S. and flat in Canada in local currency) − Down 1% sequentially − Growth with commercial contractors partially offset weakness with contractors serving the industrial mar
Slide 6: Utility End Market
6 Q4 & FY 2016 Earnings Webcast, 1/26/17 Utility End Market Organic Sales Growth versus Prior Year 16% Utility • Investor Owned • Public Power • Utility Contractors • Q4 2016 Sales − Workday adjusted organic sales up 3% versus prior year (up 2% in U.S. and up 5% in Canada in local currency) − Up 4%
Slide 7: CIG End Market
7 Q4 & FY 2016 Earnings Webcast, 1/26/17 CIG End Market • Q4 2016 Sales − Workday adjusted organic sales down 6% versus prior year (down 10% in US and up 17% in Canada in local currency) − Down 5% sequentially • Customer focus remains on energy efficiency (lighting, automation, metering), security a
Slide 8: Q4 2016 Results
8 Q4 & FY 2016 Earnings Webcast, 1/26/17 Q4 2016 Results Outlook Actual YOY Sales (1)% to (4)% $1.79B (3.7)% growth Gross Margin 19.4% Down 10 bps SG&A $250M, 13.9% Down 3%, Up 10 bps (Core down 5%) Operating Profit $82M Down 9% Operating Margin 4.5% to 4.8% 4.6% Down 20 bps Effective Tax Rate ~30%
Slide 9: Full Year 2016 Results
9 Q4 & FY 2016 Earnings Webcast, 1/26/17 Full Year 2016 Results Outlook Actual YOY Sales (2)% to (3)% $7.34B (2.4)% growth Gross Margin 19.7% Down 20 bps SG&A $1,049M, 14.3% Down 1%, Up 30 bps (Core down 4%) Operating Profit $332M Down 11% Operating Margin 4.5% to 4.6% 4.5% Down 50 bps Effective Tax
Slide 10: Diluted EPS Walk
10 Q4 & FY 2016 Earnings Webcast, 1/26/17 Diluted EPS Walk Q4 FY 2015 $1.03) $4.18) Core operations (0.12) (0.68) Acquisitions 0.01) 0.15) Foreign exchange impact 0.00) (0.07) Tax 0.08) 0.07) Share count (0.04) 0.15) Q3 After tax loss on debt redemption (1.70) 2016 $0.96) $2.10) Q3 Pretax loss on de
Slide 11: Cash Generation
11 Q4 & FY 2016 Earnings Webcast, 1/26/17 1.5 2 2.5 3 3.5 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 261.4 282.2 2015 2016 Cash Generation Free Cash Flow ($ Millions) See appendix for non-GAAP reconciliations. 154% of adjusted net income 125% of net income > $1B of free cash flow over last 4 years 2014 T
Slide 12: 2017 Outlook
12 Q4 & FY 2016 Earnings Webcast, 1/26/17 2017 Outlook Q1 FY Sales (3)% to flat Flat to 4% Operating Margin 3.8% to 4.1% 4.4% to 4.6% Effective Tax Rate ~ 30% ~ 30% Diluted EPS $3.60 to $4.00 Free Cash Flow >90% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate
Slide 13: Appendix: Non-GAAP Financial Measures
13 Q4 & FY 2016 Earnings Webcast, 1/26/17 Appendix NON-GAAP FINANCIAL MEASURES This earnings release includes certain non-GAAP financial measures. These financial measures include normalized organic sales growth, gross profit, financial leverage, free cash flow, adjusted net income and adjusted earn
Slide 14: WESCO Profile 2016
14 Q4 & FY 2016 Earnings Webcast, 1/26/17 WESCO Profile 2016 36% 34% 16% 14% 40% 15% 14% 12% 11% 8% Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public
Slide 15: Sales Growth
15 Q4 & FY 2016 Earnings Webcast, 1/26/17 Sales Growth 2014 2015 2016 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Change in Net Sales 0.2 5.9 7.6 6.1 5.0 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) Acquisition Impact 0.5 1.6 1.8 1.6 1.4 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 Core (0.
Slide 16: Q4 2016 Sales Growth – Geography
16 Q4 & FY 2016 Earnings Webcast, 1/26/17 Q4 2016 Sales Growth – Geography U.S. Canada International Total Change in net sales (USD) (3.0) (4.1) (10.9) (3.7) Impact from acquisitions 2.4 - - 1.8 Impact from foreign exchange rates - (0.3) (3.7) (0.3) Impact from number of workdays (1.6) (1.6) (1.6) (
Slide 17: Sales Growth-End Markets
17 Q4 & FY 2016 Earnings Webcast, 1/26/17 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q4 2016 vs. Q4 2015 Q4 2016 vs. Q3 2016 Full Year 2016 vs. 2015 Q4 Q4 Q4 Q3 2016 2015 % Growt
Slide 18: Q4 2016 Organic Sales by End Market
18 Q4 & FY 2016 Earnings Webcast, 1/26/17 Q4 2016 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth (8.7) (3.7) 0.9 (7.7) (5.5) Workday Impact (1.6) (1.6) (1.6) (1.6) (1.6) Workday Adjusted Core Growth (7.1) (2.1) 2.5 (6.1) (3.9) FX Impact (0.3) (0.2) (0.1) (0.3
Slide 19: FY 2016 Organic Sales by End Market
19 Q4 & FY 2016 Earnings Webcast, 1/26/17 FY 2016 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth (10.7) (3.4) 0.4 (2.1) (5.5) Workday Impact 0.4 0.4 0.4 0.4 0.4 Workday Adjusted Core Growth (11.1) (3.8) - (2.5) (5.9) FX Impact (0.9) (1.6) (0.5) (0.8) (1.0) Wo
Slide 20: Adjusted Tax Rate
20 Q4 & FY 2016 Earnings Webcast, 1/26/17 Adjusted Tax Rate ($ Millions) Q4 2015 FY 2015 Reported Results Adjustments (1) Adjusted Results Reported Results Adjustments (1) Adjusted Results Income before income taxes 80.1 (9.4) 70.7 303.9 (9.4) 294.5 Provision for income taxes 31.5 (11.7) 19.8 95.5 (
Slide 21: 2029 Debentures Loss Non-GAAP Reconciliation
21 Q4 & FY 2016 Earnings Webcast, 1/26/17 2029 Debentures Loss Non-GAAP Reconciliation FY 2016 Reported Results Adjustments Adjusted Results Operating profit $ 332.0 - $ 332.0 Interest 76.6 - 76.6 Loss on debt redemption 123.9 (123.9) 1 - Income before income taxes 131.5 123.9 255.4 Taxes 30.4 41.2
Slide 22: Debt Maturity Schedule and Capital Structure
22 Q4 & FY 2016 Earnings Webcast, 1/26/17 Outstanding at December 31, 2015 Outstanding at December 31, 2016 Debt Maturity Schedule AR Revolver (V) 525 380 2018 Inventory Revolver (V) 75 4 2020 2019 Term Loans (V) 175 145 2019 2021 Senior Notes (F) 500 500 2021 2024 Senior Notes (F) - 350 2024 2029 C
Slide 23: Financial Leverage
23 Q4 & FY 2016 Earnings Webcast, 1/26/17 Financial Leverage Twelve Months Ended December 31, 2016 Financial leverage ratio: Income from operations $ 332 Depreciation and amortization 67 EBITDA $ 399 December 31, 2016 Current debt and short-term borrowings $ 22 Long-term debt 1,363 Debt discount and
Slide 24: Non-Cash Interest Expense
24 Q4 & FY 2016 Earnings Webcast, 1/26/17 ($ Millions) 2014 2015 2016 Amortization of Debt Discount* 4.1 6.1 3.0 Amortization of Deferred Financing Fees 4.4 6.1 3.6 FIN 48 1.0 (8.7) 1.2 Total 9.5 3.5 7.8 Non-Cash Interest Expense * Includes convertible debt and term loan.
Slide 25: Free Cash Flow Reconciliation
25 Q4 & FY 2016 Earnings Webcast, 1/26/17 Free Cash Flow Reconciliation Q4 2015 Q4 2016 YTD 2015 YTD 2016 Cash flow provided by operations 107.1 83.0 283.1 300.2 Less: Capital expenditures (5.5) (4.8) (21.7) (18.0) Free Cash Flow 101.6 78.2 261.4 282.2 Note: Free cash flow is provided by the Company
Slide 26: Work Days
26 Q4 & FY 2016 Earnings Webcast, 1/26/17 Work Days Q1 Q2 Q3 Q4 FY 2014 63 64 64 62 253 2015 62 64 64 63 253 2016 64 64 64 62 254 2017 64 64 63 62 253