Wesco International, Inc. · NYSE:WCC
Wesco International — Q3 2014 Earnings Presentation
22 slides from Wesco International's earnings presentation, Oct 23, 2014
Slide 1: Q3 2014 Earnings Webcast Presentation
Webcast Presentation October 23, 2014 Q3 2014 Earnings
Slide 2: Safe Harbor Statement
2 Q3 2014 Earnings Webcast 10/23/2014 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, uncer
Slide 3: Q3 2014 Highlights
3 Q3 2014 Earnings Webcast 10/23/2014 • Sales of $2.08 billion, a record, up 8% YOY − 6.7 points organic growth − (0.9) points negative impact from foreign exchange − 1.8 points from acquisitions • Gross margin 20.3%, down 20 bps YOY, driven by business mix • SG&A 13.1% of sales, down 10 bps YOY − C
Slide 4: Industrial End Market
4 Q3 2014 Earnings Webcast 10/23/2014 (5.4%) (2.7%) 2.1% 5.0% 7.0% Industrial End Market • Q3 2014 Sales − Up 7.0% versus prior year, and highest growth rate since 1st half 2012 − Up 0.7% sequential • Three consecutive quarters of accelerating growth. • Global Accounts and Integrated Supply annualiz
Slide 5: Construction End Market
5 Q3 2014 Earnings Webcast 10/23/2014 • Q3 2014 Sales − Up 3.8% versus prior year, and highest growth rate since 1st half of 2012 − Up 8.1% sequential • Two consecutive quarters of accelerating growth. • Backlog slightly declined sequentially in the quarter but is flat versus prior year end. • Non-r
Slide 6: Utility End Market
6 Q3 2014 Earnings Webcast 10/23/2014 Utility End Market Core Sales Growth versus Prior Year 14% Utility • Investor Owned • Public Power • Utility Contractors • Q3 2014 Sales − Up 10.6% versus prior year − Up 3.2% sequential • Fourteenth consecutive quarter of year- over-year sales growth. • Scope e
Slide 7: CIG End Market
7 Q3 2014 Earnings Webcast 10/23/2014 (8.5%) (4.3%) 5.1% 4.9% 3.3% 5.2% 2.3% CIG End Market • Q3 2014 Sales − Up 2.3% versus prior year − Up 1.7% sequential • Fifth consecutive quarter of sales growth. • Bidding levels remain active in commercial, institutional, and government markets. • Focus remai
Slide 8: 2014 Acquisitions
8 Q3 2014 Earnings Webcast 10/23/2014 Acquisition Year Estimated Annual Sales at Closing Estimated 1st Year Accretion at Closing Potelcom 2010 $25M TVC Communications 2010 $300M $0.30 RECO 2011 $25M Brews 2011 $50M $0.04 RS Electronics 2012 $60M $0.04 Trydor Industries 2012 $35M $0.05 Conney Safety
Slide 9: Q3 2014 Results versus Outlook
9 Q3 2014 Earnings Webcast 10/23/2014 Q3 2014 Results Outlook Actual Sales 5% to 7% growth 7.6% growth 6.7% organic growth Gross Margin ~ 20.6% 20.3% Operating Margin 6.3% to 6.5% 6.4% Effective Tax Rate ~ 28% 28.1% 180 bps 7.6% Growth 6.7% Organic Growth (1.8%) Growth 4.6% Growth 8.1% Growth 90 bps
Slide 10: EPS Walk
10 Q3 2014 Earnings Webcast 10/23/2014 EPS Walk Q3 2013 $1.42 Organic growth ~ 0.15 Acquisitions 0.02 Foreign Exchange Impact (0.02) Share count (0.02) Tax rate (0.03) Q3 2014 $1.52
Slide 11: Cash Generation and Leverage
11 Q3 2014 Earnings Webcast 10/23/2014 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 72.3 84.8 Q3 2013 Q3 2014 Cash Generation Free Cash Flow (1) ($ Millions) (1) Reconciliation of these non-GAAP financial measures is included in the Appendix to this webcast presentation. 105% of net inco
Slide 12: Outlook
12 Q3 2014 Earnings Webcast 10/23/2014 Outlook Q4 FY Sales 5% to 8% growth ~ 5% growth Gross Margin 20.4% to 20.6% ~ 20.5% Operating Margin 6.4% to 6.6% ~ 6.0% Effective Tax Rate ~ 28% ~ 28% EPS $5.25 to $5.35 Free Cash Flow ~ 80% of net income Note: Excludes unannounced acquisitions.
Slide 13: Appendix
13 Q3 2014 Earnings Webcast 10/23/2014 Appendix
Slide 14: Adjusted Results Q3 2013
14 Q3 2014 Earnings Webcast 10/23/2014 Adjusted Results Q3 2013 Q3 2013 YTD Reported Results Non-recurring Item Adjusted Results Reported Results Non-recurring Items Adjusted Results Net Sales 1,931.3 - 1,931.3 5,633.3 - 5,633.3 Gross Profit 395.7 - 395.7 1,169.3 - 1,169.3 Gross margin 20.5% 20.5% 2
Slide 15: WESCO Profile 2014
15 Q3 2014 Earnings Webcast 10/23/2014 WESCO Profile 2014 42% 31% 14% 13% 40% 13% 16% 12% 10% 9% Controls & Motors Lighting & Controls General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Note: Markets & Customers and Products & Services percentages reported
Slide 16: Sales Growth
16 Q3 2014 Earnings Webcast 10/23/2014 Sales Growth 2012 2013 2014 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 YTD Consolidated 12.2 9.7 4.8 3.5 7.4 12.6 13.2 16.6 14.3 14.2 0.2 5.9 7.6 4.6 Acquisition Impact 2.6 2.2 4.0 4.3 3.3 16.0 14.6 14.1 13.8 14.6 0.5 1.6 1.8 1.3 Core 9.6 7.5 0.8 (0.8) 4.1 (3.4) (1
Slide 17: Debt Maturity Schedule and Capital Structure
17 Q3 2014 Earnings Webcast 10/23/2014 Outstanding at December 31, 2013 Outstanding at September 30, 2014 Debt Maturity Schedule AR Revolver (V) 454 500 2016 Inventory Revolver (V) 23 21 2016 Senior Notes (F) 500 500 2021 2019 Term Loans (V) 300 275 2019 2029 Convertible Bonds (F) 345 345 2029 (No P
Slide 18: Reconciliation of Non-GAAP Financial Measures
18 Q3 2014 Earnings Webcast 10/23/2014 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. Reconciliation of Non-GAAP Financial Measures ($ Millions) Sales Q3 2014 vs. Q3 2013 Q3 2014 vs. Q2 2014 Q30 Q30 Q30 Q20 2014 2013 %00
Slide 19: Convertible Debt and Non-Cash Interest
19 Q3 2014 Earnings Webcast 10/23/2014 ($ Millions) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 344.9 (168.2) 176.7 Convertible Debt At September 30, 2014 Non-Cash Interest Expense ($ Millions) 2012 2013 YTD Q3 2014 Convertible Debt 2.3 4.3 3.0 Amortization of Deferred Finan
Slide 20: EPS Dilution
20 Q3 2014 Earnings Webcast 10/23/2014 EPS Dilution Weighted Average Quarterly Share Count Stock Price Incremental Shares from 2029 Convertible Debt (in millions)3 Incremental Shares from Equity Awards (in millions) Total Diluted Share Count (in millions)4 $60.00 6.20 0.67 51.35 $70.00 7.02 0.86 52.
Slide 21: Work Days
21 Q3 2014 Earnings Webcast 10/23/2014 Work Days Q1 Q2 Q3 Q4 FY 2012 64 64 63 63 254 2013 63 64 64 63 254 2014 63 64 64 62 253 2015 62 64 64 63 253
Slide 22: Free Cash Flow Reconciliation
22 Q3 2014 Earnings Webcast 10/23/2014 Free Cash Flow Reconciliation ($ Millions) Q3 2013 Q3 2014 Q3 YTD 2013 Q3 YTD 2014 Cash flow provided by operations 59.9 89.0 179.7 139.8 Less: Capital expenditures (8.7) (4.2) (20.5) (16.0) Add: Non-recurring EECOL pension contribution 21.1 - 21.1 - Free Cash