WESCO International(WCC) - 2019 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes Condensed Consolidated Financial Statements Total assets increased to $5.1 billion, net income reached $105.8 million, and operating cash flow shifted to a net use of $8.8 million Condensed Consolidated Balance Sheet Highlights (As of June 30, 2019 vs. Dec 31, 2018) | Account | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $5,067,936 | $4,605,036 | +10.1% | | Total Current Assets | $2,584,864 | $2,385,640 | +8.3% | | Goodwill | $1,752,800 | $1,722,603 | +1.7% | | Total Liabilities | $2,933,113 | $2,475,310 | +18.5% | | Long-Term Debt, net | $1,399,486 | $1,167,311 | +19.9% | | Total Stockholders' Equity | $2,134,823 | $2,129,726 | +0.2% | Condensed Consolidated Statement of Income Highlights (in thousands, except EPS) | Metric | Q2 2019 | Q2 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,150,088 | $2,103,994 | $4,111,355 | $4,097,909 | | Income from Operations | $97,950 | $91,183 | $168,675 | $164,423 | | Net Income Attributable to WESCO | $63,464 | $57,940 | $105,832 | $102,361 | | Diluted EPS | $1.45 | $1.22 | $2.37 | $2.15 | Condensed Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity ($ thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(8,775) | $86,821 | | Net cash used in investing activities | $(50,299) | $(25,068) | | Net cash provided by (used in) financing activities | $50,015 | $(63,749) | | Net change in cash and cash equivalents | $(9,125) | $(7,013) | Notes to Condensed Consolidated Financial Statements Details key accounting policies, including lease standard adoption, revenue by market, the Sylvania Lighting Services acquisition, and stock repurchase activities - Effective January 1, 2019, the company adopted the new lease accounting standard (Topic 842), recognizing right-of-use assets of approximately $240 million and lease liabilities of approximately $245 million[26] Revenue by End Market (Six Months Ended June 30, in thousands) | End Market | 2019 | 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Industrial | $1,498,825 | $1,519,723 | -1.4% | | Construction | $1,337,483 | $1,321,551 | +1.2% | | Utility | $655,213 | $652,506 | +0.4% | | Commercial, Institutional and Government | $619,834 | $604,129 | +2.6% | | Total | $4,111,355 | $4,097,909 | +0.3% | - On March 5, 2019, WESCO acquired Sylvania Lighting Services Corp. (SLS), a provider of energy-efficient lighting solutions with annual sales of approximately $100 million, resulting in goodwill of $5.9 million[46] - On May 7, 2019, the company entered into a $150.0 million accelerated stock repurchase (ASR) agreement, receiving an initial 2,394,816 shares[60] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 and H1 2019 financial results, highlighting sales growth, margin improvements, the SLS acquisition, and share repurchase activity Results of Operations Q2 2019 net sales rose 2.2% to $2.2 billion, with income from operations up 7.4% and diluted EPS at $1.45 Q2 2019 vs. Q2 2018 Performance | Metric | Q2 2019 | Q2 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $2.2B | $2.1B | +2.2% | | Organic Sales Growth | 1.9% | N/A | N/A | | Income from Operations | $98.0M | $91.2M | +7.4% | | Net Income Attributable to WESCO | $63.5M | $57.9M | +9.7% | | Diluted EPS | $1.45 | $1.22 | +18.9% | H1 2019 vs. H1 2018 Performance | Metric | H1 2019 | H1 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $4.1B | $4.1B | +0.3% | | Organic Sales Growth | 1.5% | N/A | N/A | | Income from Operations | $168.7M | $164.4M | +2.6% | | Net Income Attributable to WESCO | $105.8M | $102.4M | +3.3% | | Diluted EPS | $2.37 | $2.15 | +10.2% | Liquidity and Capital Resources Strong liquidity of $586.7 million maintained, but financial leverage increased to 3.4, and operating cash flow shifted to a net use of $8.8 million - Total liquidity as of June 30, 2019, was $586.7 million, comprising $504.8 million from the Revolving Credit Facility, $55.0 million from the Receivables Facility, and $26.9 million in cash[121] Financial Leverage Ratio | Metric | June 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Debt ($M) | $1,434.9 | $1,233.1 | | EBITDA (TTM, $M) | $418.4 | $415.5 | | Financial Leverage Ratio | 3.4 | 3.0 | - Net cash used in operating activities for H1 2019 was $8.8 million, a decline from $86.8 million generated in H1 2018, mainly due to increased working capital needs[129] - Key financing activities in H1 2019 included the repurchase of $152.7 million of common stock and net borrowings to fund operations and the SLS acquisition[134] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposures were reported for the quarter ended June 30, 2019 - No material changes to market risk exposures were reported for the quarter ended June 30, 2019[142] Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective, with modifications for the new lease accounting standard - Management concluded that disclosure controls and procedures and internal control over financial reporting were effective as of the end of the period[143] - Internal controls were modified to accommodate the new lease accounting standard (ASU 2016-02) adopted on January 1, 2019[144] PART II—OTHER INFORMATION Legal Proceedings Management does not expect pending legal proceedings to have a material adverse effect on the company's financial condition or liquidity - Management does not expect pending legal proceedings to have a material adverse effect on the company's financial condition or liquidity[147] Risk Factors No material changes to risk factors were reported since the last annual report for the fiscal year ended December 31, 2018 - No material changes to risk factors were reported since the last annual report for the fiscal year ended December 31, 2018[148] Issuer Purchases of Equity Securities During Q2 2019, the company repurchased 2,397,864 shares at an average price of $53.24, with $125.0 million remaining for future repurchases Issuer Purchases of Common Stock (Q2 2019) | Period | Total Shares Purchased | Average Price Paid Per Share | Value of Shares Remaining for Purchase ($M) | | :--- | :--- | :--- | :--- | | April 2019 | 939 | $55.97 | $275.0 | | May 2019 | 2,395,036 | $53.24 | $125.0 | | June 2019 | 1,889 | $49.67 | $125.0 | | Total Q2 | 2,397,864 | $53.24 | $125.0 | - The company's share repurchase authorization was increased from $300 million to $400 million on October 31, 2018, with the program running through December 31, 2020[150] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The filing includes required certifications from the Chief Executive Officer and Chief Financial Officer, as well as XBRL Instance Documents[152][154]