Pittsburgh, PA — Nov. 14, 2002 — Wesco International Inc. a provider of electrical MRO products, construction materials, and advanced integrated supply procurement outsourcing services, has released its 2002 third quarter financial results.
Sales for the third quarter of 2002 were $852.9 million, down 5.8%, or $52.6 million from the third quarter of 2001. Gross margins for the quarter were 17.2%, compared to 17.6% for the comparable 2001 quarter.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter were $23.3 million, a decrease of $8.9 million from last year’s comparable quarter. Net income increased to $9.0 million from $5.1 million in 2001. Diluted earnings per share for the third quarter of 2002, including the favourable impact of SFAS No. 142, were $0.19, compared to $0.11 in the third quarter of 2001.
Stephen A. Van Oss, vice-president and chief financial officer, stated, “The positive impact of on-going margin, expense, tax planning and working capital initiatives combined to produce a significant increase in our net income for the quarter. An after-tax gain of $5.3 million from the reversal of income tax contingency accruals was largely offset by a $3.2 million after- tax charge for non-recurring inventory reserves taken in the quarter. These reserves relate primarily to exiting certain international business and increasing reserves for potential inventory exposure to the Telecom industry.”
Also, according to Van Oss, “As we have done in the past, severance and facilities closing-related expenses are included in our current period financial results. The additional inventory reserves added in the quarter had the effect of reducing gross margin for the period even though billing margins on product sales were higher by 30 basis points.”
Van Oss added, “Debt reduction and liquidity improvements are focus areas for the Company, and we continue to make progress. Third quarter free cash flow, including the impact of our accounts receivable securitization program, was $37 million and improved by $94 million over last year driven by higher net income and a 16-day improvement in net working capital.
Total debt, net of cash, including our accounts receivable securitization, was reduced by $25 million during the quarter and liquidity improved by $38 million. Readily available liquid funding over and above current operating requirements is in excess of $100 million. Improvements in our capital structure have the Company positioned to perform well in the current economic environment as well as take advantage of any economic upturn.”
For the nine months ending September 30, 2002, sales were $2,510.3 million, a decrease of $267.4 million or 9.6% from the prior comparable period. Gross margins were 17.6% compared to 17.7% for the prior comparable period. EBITDA for the first nine months of 2002 were $73.0 million, compared to $98.1 million, a decrease of $25.1 million.
Net income before extraordinary charge was $19.1 million compared to $16.1 million in the comparable 2001 period. Diluted earnings per share, including the favorable impact of SFAS No. 142, were $0.41 before a $0.02 extraordinary charge in the first quarter of 2002, compared to $0.34 for the comparable period in 2001.
Chairman and CEO, Roy W. Haley, commented, “We have been placing a high priority on protecting and improving our base business. Since we don’t anticipate significant near-term improvement in general economic activity, this strategy of focusing on operational capabilities will continue into 2003.
“Even though we’ve pulled out of a specialty international parts supply business in the Middle East, we don’t currently expect to exit other markets or close additional branches. In contrast, as previously reported, we have opened several new branches to support new customer activity.
“Additionally, we are increasing local market and national scope marketing activities, delivering new sales training programs to our sales organization, and introducing new products through trade show programs and specialty catalogues. We continue to be selected as a preferred supplier by large companies conducting highly competitive bids and auctions, and these successes give us confidence that we are gaining market share and positioning ourselves for long term growth.”