WESCO International, Inc. (
Q4 2011 Earnings Call
January 26, 2012 11:00 am ET
Dan Brailer - VP, IR
John Engel - Chairman, President & CEO
Richard Heyse - VP & CFO
David Manthey – Robert W. Baird
Deane Dray - Citi Investment Research
Adam Uhlman - Cleveland Research
Ajay Kejriwal - FBR Capital Markets
Steve Tusa - JPMorgan
Matt McCall - BB&T Capital Markets
Matt Duncan - Stephens
Josh Pokrzywinski - MKM Partners
Brandon Verblow - UBS
Christopher Glynn - Oppenheimer
Ryan Merkel - William Blair
Anthony Kure – KeyBanc
Noelle Dilts - Stifel Nicolaus
Hamzah Mazari - Credit Suisse
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Good morning, and welcome to the WESCO Fourth Quarter and Full Year 2011 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.
I would now like to turn the conference over to Dan Brailer, Vice President of Investor Relations. Please go ahead.
Thank you, Denise. Good morning, ladies and gentlemen. Thank you for joining us for WESCO International’s conference call to review our second quarter financial results. Participating in the earnings conference call this morning are the following officers: Mr. John Engel, Chairman, President and Chief Executive Officer; and Mr. Richard Heyse, Vice President and Chief Financial Officer.
Means to access this conference call via webcast was disclosed in the press release and was posted on our corporate website. Replay for this conference call will be archived and available for seven days.
A supplemental financial presentation has been produced, which provides a summary of certain financial and end market information to be reviewed in today’s commentary by management. We have posted this presentation on our corporate website and filed it with the Securities and Exchange Commission.
This conference call may include forward-looking statements and, therefore, actual results may differ materially from expectations. For additional information on WESCO International, please refer to the company’s SEC filings, including the risk factors described therein. The following presentation may also include a discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be obtained via WESCO’s website.
I would now like to turn the conference call over to John Engel.
Thank you, Dan, and good morning everyone. Our fourth quarter results are strong and close out an excellent year. Organic sales net of acquisitions and foreign exchange grew 15% in the fourth quarter marking the sixth consecutive quarter of double-digit organic sales growth. Notably organic sales to customers in each of our industrial, construction, utility and CIG end markets grew double digits versus prior year.
Construction sales in the United States were also up double-digits and grew 16% despite continuing weak construct end market. Sales of our communication products grew approximately 8% quarter versus prior year.
For the full year, we delivered record sales of over $6.1 billion, which were up 21% driven by organic sales growth of 14% plus contributions from our telecom, TVC, RECO and Brews acquisition. In addition, we delivered double digit organic sales growth results for the full year in each of our three largest end markets: industrial, construction and utility.
Our first quarter 2012 is off to a solid start with double digit organic sales growth continuing in January.
Consistent execution of our sales growth and margin improvement initiatives have translated in a strong financial results. For 2011, operating margins were 5.4% and EPS was $3.96, up 120 basis points and 58% respectively versus prior year.
The operating margin expansion was driven by a balanced contribution of gross margin expansion and operating cost leverage. Gross margins were at or above 20% in all four quarters of 2011 highlighting a continued effectiveness of our sales and marketing programs and a positive impact of our margin improvement initiative.
These results achieve the targets we outlined in our Investor Day in August of last year. Our investments are clearly paying off. Effective execution of our growth strategy continues and we are pleased with the positive momentum and improved profitability of our business in 2011.
I am very proud of the extra effort and results delivered by our One WESCO team of associates around the world and I would like to thank them for their dedication and commitment in serving our customers.
On January 4th, we completed the acquisition of RS Electronics, our fifth acquisition over the last 18 months. These five acquired companies had annualized sales of approximately $450 million as of their respective closing dates. With liquidity increasing to over $500 million and leverage dropping 2.3 to start the year, we have the capacity and financial flexibility to continue to fund our strategy of above-market organic growth plus accretive acquisitions. Our acquisition pipeline remains robust and we see excellent opportunity for acquisitions to further strengthen our portfolio.
In summary, we enter 2012 with a stronger and more diverse business with respect to customers in end markets, products and suppliers and geography. The strength, diversity and operating leverage of our enterprise position us well in our global markets. We are continuing to invest in our eight growth engines and our six margin and productivity initiatives.
Our long term outlook remains unchanged. We expect the economy to continue to recover slowly over the next several years. Our 2012 target of 7% to 11% top-line growth, sales growth, including a 2 to 3 percentage point contribution from acquisition and 20% to 25% annual net income growth remain intact.
We are focused on building on the positive momentum across WESCO as we continue to execute our One WESCO growth strategy from 2012, and I'm very confident in our team's ability to produce excellent results again this year.