WESCO International(WCC) - 2022 Q2 - Quarterly Report

PART I Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2022, show significant growth in revenue and profitability, with total assets increasing to $13.86 billion and net income rising to $221.1 million for the second quarter Condensed Consolidated Balance Sheets As of June 30, 2022, total assets were $13.86 billion, an increase from $12.62 billion at December 31, 2021, driven by higher trade accounts receivable and inventories, while total liabilities increased to $9.75 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $236,792 | $212,583 | | Trade accounts receivable, net | $3,635,840 | $2,957,613 | | Inventories | $3,165,828 | $2,666,219 | | Total current assets | $7,606,475 | $6,350,111 | | Total assets | $13,863,266 | $12,617,699 | | Liabilities & Equity | | | | Accounts payable | $2,652,306 | $2,140,251 | | Long-term debt, net | $5,039,857 | $4,701,542 | | Total liabilities | $9,751,959 | $8,841,488 | | Total stockholders' equity | $4,111,307 | $3,776,211 | Condensed Consolidated Statements of Income and Comprehensive Income The company reported strong year-over-year growth in both the second quarter and first half of 2022, with net sales increasing to $5.48 billion for Q2 and $10.42 billion for the six months Key Performance Indicators (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $5,483,525 | $4,595,790 | $10,415,706 | $8,637,267 | | Income from operations | $370,709 | $218,872 | $654,738 | $352,123 | | Net income attributable to common stockholders | $206,354 | $104,843 | $373,245 | $149,669 | | Diluted EPS | $3.95 | $2.02 | $7.15 | $2.89 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash used in operating activities was $304.5 million, primarily due to investments in working capital, while financing activities provided $340.5 million - Net cash used in operating activities was $304.5 million for the first six months of 2022, compared to net cash provided of $102.8 million in the prior year period[18] - The primary use of operating cash was for working capital, with significant increases in inventories ($530.8 million) and trade accounts receivable ($716.8 million) to support sales growth[18] - Financing activities provided $340.5 million in cash, largely from net proceeds from debt issuance ($1.7463 billion) exceeding repayments ($1.3540 billion)[18] Notes to Condensed Consolidated Financial Statements The notes provide detailed information on the company's accounting policies and financial results, highlighting strong growth across all business segments and amendments to debt facilities Net Sales by Segment (Six Months Ended June 30, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Electrical & Electronic Solutions (EES) | $4,420,112 | $3,643,824 | | Communications & Security Solutions (CSS) | $3,036,172 | $2,711,735 | | Utility & Broadband Solutions (UBS) | $2,959,422 | $2,281,708 | | Total | $10,415,706 | $8,637,267 | Adjusted EBITDA by Segment (Six Months Ended June 30, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Electrical & Electronic Solutions (EES) | $427,865 | $279,981 | | Communications & Security Solutions (CSS) | $273,081 | $221,820 | | Utility & Broadband Solutions (UBS) | $305,395 | $184,355 | | Corporate | $(197,759) | $(160,363) | | Total | $808,582 | $525,793 | - In March 2022, the company amended its Receivables Facility, increasing the purchase limit to $1.4 billion and extending the maturity to March 2025. The Revolving Credit Facility was also amended, increasing commitments to $1.35 billion and extending maturity to March 2027[56][58][59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong financial performance in the first half of 2022 to double-digit sales growth, margin expansion, and integration cost synergies, with net sales growing 20.6% to $10.4 billion Results of Operations For Q2 2022, net sales increased 19.3% to $5.5 billion, with all segments showing strong organic growth and gross margin improving by 70 basis points year-over-year Q2 2022 Organic Sales Growth vs. Q2 2021 | Segment | Reported Growth | Organic Sales Growth | | :--- | :--- | :--- | | EES | 21.2% | 23.1% | | CSS | 9.6% | 11.5% | | UBS | 28.0% | 28.6% | | Total | 19.3% | 20.9% | - For Q2 2022, cost of goods sold as a percentage of net sales decreased by 70 basis points to 78.3%, reflecting value-driven pricing, gross margin programs, and a benefit from inflation due to average cost inventory accounting[130] Adjusted EPS Reconciliation | Period | Adjusted EPS | | :--- | :--- | | Q2 2022 | $4.19 | | Q2 2021 | $2.64 | | Six Months 2022 | $7.82 | | Six Months 2021 | $4.06 | Liquidity and Capital Resources As of June 30, 2022, the company had total liquidity of $571.4 million, with the financial leverage ratio improving to 3.4x from 3.9x at year-end 2021, despite operating cash flow being a use of $304.5 million - Total liquidity was $571.4 million as of June 30, 2022, comprising $117.3 million in cash, $429.1 million available under the Revolving Credit Facility, and $25.0 million under the Receivables Facility[187][189] Financial Leverage Ratio | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total debt, net of cash | $4,937.2 M | $4,568.1 M | | Adjusted EBITDA (TTM) | $1,458.4 M | $1,175.7 M | | Financial leverage ratio | 3.4x | 3.9x | - Subsequent to the quarter end, on August 2, 2022, the company further increased the purchase limit on its Receivables Facility to $1.525 billion and the commitments on its Revolving Credit Facility to $1.525 billion[94] Quantitative and Qualitative Disclosures About Market Risk The company states there have been no material changes to the market risks disclosed in its 2021 Annual Report on Form 10-K - There were no material changes to market risk disclosures from the fiscal year ended December 31, 2021[217] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2022 - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2022[218] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[219] PART II—OTHER INFORMATION Legal Proceedings The company is involved in various lawsuits and claims related to its business, but management does not believe the ultimate outcome will have a material adverse effect on financial condition or liquidity - Management believes that the outcome of pending lawsuits and claims is unlikely to have a material adverse effect on the company's financial condition or liquidity[222] Risk Factors Russia's invasion of Ukraine and the international response have heightened previously disclosed risks related to political instability, sanctions, cybersecurity, economic instability, supply chain challenges, and inflation - Risks related to political instability, trade sanctions, cybersecurity, economic instability, and supply chain challenges have been heightened by Russia's invasion of Ukraine[223] - The company's business and operations have not been materially adversely affected to date, but the future impact of the conflict is uncertain[223] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2022, the company repurchased 3,209 shares of common stock at a weighted-average price of $131.61 per share to satisfy tax withholding obligations related to stock-based compensation Issuer Purchases of Common Stock (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2022 | 2,132 | $128.03 | | May 2022 | 870 | $140.22 | | June 2022 | 207 | $132.29 | | Total | 3,209 | $131.61 | - The repurchased shares were surrendered by stock-based compensation plan participants to satisfy tax withholding obligations[224] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as XBRL data files - Exhibits filed include CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350 of the Sarbanes-Oxley Act[225] - Interactive Data Files (XBRL documents) were also submitted as part of the filing[227][228][229] Signatures