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=============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD from ______ to ______ For the quarterly period ended JUNE 30, 2002 Commission file number 001-14989 WESCO INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 25-1723342 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) COMMERCE COURT FOUR STATION SQUARE, SUITE 700 PITTSBURGH, PENNSYLVANIA 15219 (412) 454-2200 (Address of principal executive offices) (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No . --- --- As of July 31, 2002, WESCO International, Inc. had 40,441,873 shares and 4,653,131 shares of common stock and Class B common stock outstanding, respectively. ===============================================================================

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS Page - ---------------------------------------------------------------------------------------------------------------- PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001......................................................................... 2 Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2002 and 2001 (unaudited) ........................................ 3 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 (unaudited) .............................................. 4 Notes to Condensed Consolidated Financial Statements (unaudited) ................... 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 15 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk............................. 20 PART II - OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders.................................... 21 ITEM 6. Exhibits and Reports on Form 8-K....................................................... 21 Signatures............................................................................. 22 - ---------------------------------------------------------------------------------------------------------------- 1

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30 DECEMBER 31 Dollars in thousands, except share data 2002 2001 - ----------------------------------------------------------------------------------------------------------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents ................................................. $ 24,471 $ 75,057 Trade accounts receivable, net of allowance for doubtful accounts of $11,174 and $11,816 in 2002 and 2001, respectively (NOTE 5) .................................................. 242,625 217,920 Other accounts receivable ................................................. 15,408 26,413 Inventories, net .......................................................... 365,780 380,022 Income taxes receivable ................................................... 4,196 3,643 Prepaid expenses and other current assets ................................. 7,289 6,639 Deferred income taxes ..................................................... 7,931 8,341 ---------------------------- Total current assets ................................................... 667,700 718,035 Property, buildings and equipment, net ........................................ 114,654 120,599 Goodwill ...................................................................... 311,804 311,073 Other assets .................................................................. 9,996 8,251 ---------------------------- Total assets ........................................................... $ 1,104,154 $ 1,157,958 ============================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable .......................................................... $ 379,399 $ 469,107 Accrued payroll and benefit costs ......................................... 12,761 16,480 Current portion of long-term debt ......................................... 5,530 5,530 Other current liabilities ................................................. 31,518 38,362 ---------------------------- Total current liabilities .............................................. 429,208 529,479 Long-term debt (NOTE 8) ....................................................... 485,184 446,436 Other noncurrent liabilities .................................................. 6,282 10,086 Deferred income taxes ......................................................... 26,348 27,306 ---------------------------- Total liabilities ...................................................... 947,022 1,013,307 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 20,000,000 shares authorized, no shares issued or outstanding ................................................... -- -- Common stock, $.01 par value; 210,000,000 shares authorized, 44,466,916 and 44,269,810 shares issued in 2002 and 2001, respectively ................ 445 443 Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,653,131 issued in 2002 and 2001 ................... 46 46 Additional capital ........................................................ 570,857 569,997 Retained earnings (deficit) ............................................... (380,508) (389,919) Treasury stock, at cost; 4,032,019 and 4,032,648 shares in 2002 and 2001, respectively ............................................................ (33,835) (33,852) Accumulated other comprehensive income (loss) ............................. 127 (2,064) ---------------------------- Total stockholders' equity ............................................. 157,132 144,651 ---------------------------- Total liabilities and stockholders' equity ............................. $ 1,104,154 $ 1,157,958 ============================ The accompanying notes are an integral part of the condensed consolidated financial statements. 2

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 In thousands, except share data 2002 2001 2002 2001 - --------------------------------------------------------------------------------------------------------------------- Net sales .......................................... $ 848,449 $ 944,136 $ 1,657,366 $ 1,872,193 Cost of goods sold ................................. 698,996 779,305 1,362,269 1,540,243 ------------------------------------------------------------ Gross profit .................................... 149,453 164,831 295,097 331,950 Selling, general and administrative expenses ....... 123,424 129,187 245,492 266,012 Depreciation and amortization ...................... 4,407 7,636 9,569 14,999 ------------------------------------------------------------ Income from operations .......................... 21,622 28,008 40,036 50,939 Interest expense, net .............................. 11,130 10,937 22,074 21,934 Other expense ...................................... 1,687 4,599 3,114 10,664 ------------------------------------------------------------ Income before income taxes and extraordinary item ........................................ 8,805 12,472 14,848 18,341 Provision for income taxes ......................... 3,232 4,959 4,758 7,336 ------------------------------------------------------------ Income before extraordinary item ............... 5,573 7,513 10,090 11,005 Extraordinary item, net of tax ..................... -- -- (679) -- ------------------------------------------------------------ Net income ..................................... $ 5,573 $ 7,513 $ 9,411 $ 11,005 ============================================================ Earnings per share: Basic: Income before extraordinary item ............... $ 0.12 $ 0.17 $ 0.22 $ 0.25 Extraordinary item ............................. -- -- (0.02) -- ------------------------------------------------------------ Net income ..................................... $ 0.12 $ 0.17 $ 0.20 $ 0.25 ============================================================ Diluted: Income before extraordinary item ............... $ 0.12 $ 0.16 $ 0.22 $ 0.23 Extraordinary item ............................. -- -- (0.02) -- ------------------------------------------------------------ Net income ..................................... $ 0.12 $ 0.16 $ 0.20 $ 0.23 ============================================================ 3

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) SIX MONTHS ENDED JUNE 30 In thousands 2002 2001 - ------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income ..................................................................... $ 9,411 $ 11,005 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Extraordinary item, net of tax benefits ................................... 679 -- Depreciation and amortization ............................................. 9,569 14,999 Accretion of original issue and amortization of purchase discounts ........ 1,485 557 Amortization of debt issuance costs and interest rate caps ................ 492 357 Gain on sale of property, buildings and equipment ......................... (250) (447) Deferred income taxes ..................................................... (548) 1,977 Changes in assets and liabilities, excluding the effects of acquisitions: Change in receivables facility ........................................ (55,000) -- Trade and other receivables ........................................... 41,300 39,473 Inventories ........................................................... 14,242 (4,348) Other current and noncurrent assets ................................... 393 (1,680) Accounts payable ...................................................... (89,708) 44,149 Accrued payroll and benefit costs ..................................... (3,719) (12,061) Other current and noncurrent liabilities .............................. 3,024 (1,826) ------------------------ Net cash (used for) provided by operating activities ............. (68,630) 92,155 INVESTING ACTIVITIES: Capital expenditures ........................................................... (3,376) (7,972) Proceeds from the sale of property, buildings and equipment .................... 755 534 Acquisitions ................................................................... (10,741) (52,052) ------------------------ Net cash used for investing activities ........................... (13,362) (59,490) FINANCING ACTIVITIES: Proceeds from issuance of long-term debt ....................................... 380,096 298,263 Repayments of long-term debt ................................................... (346,195) (347,415) Debt issuance costs ............................................................ (3,067) -- Proceeds from exercise of stock options ........................................ 572 299 ------------------------ Net cash provided by (used for) financing activities ............. 31,406 (48,853) ------------------------ Net change in cash and cash equivalents ................................... (50,586) (16,188) Cash and cash equivalents at the beginning of period ...................... 75,057 21,079 ------------------------ Cash and cash equivalents at the end of period ............................ $ 24,471 $ 4,891 ======================== The accompanying notes are an integral part of the condensed consolidated financial statements. 4

WESCO INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. ORGANIZATION WESCO International, Inc. and its subsidiaries (collectively, "WESCO"), headquartered in Pittsburgh, Pennsylvania, is a full-line distributor of electrical supplies and equipment and is a provider of integrated supply procurement services. WESCO currently operates over 350 branch locations and five distribution centers in the United States, Canada, Mexico, Puerto Rico, Guam, the United Kingdom, Nigeria, Singapore and Venezuela. 2. ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of WESCO and all of its subsidiaries and have been prepared in accordance with Rule 10-01 of the Securities and Exchange Commission. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in WESCO's 2001 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The unaudited condensed consolidated balance sheet as of June 30, 2002, the unaudited condensed consolidated statements of operations for the three months and six months ended June 30, 2002 and 2001, and the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2002 and 2001, in the opinion of management, have been prepared on the same basis as the audited consolidated financial statements and include all adjustments necessary for the fair presentation of the results of the interim periods. All adjustments reflected in the condensed consolidated financial statements are of a normal recurring nature. Results for the interim periods presented are not necessarily indicative of the results to be expected for the full year. Recent Accounting Pronouncements In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets." This statement addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of and supersedes SFAS No. 121. This statement retains the fundamental provisions of SFAS No. 121 for recognition and measurement of the impairment of long-lived assets to be held and used and measurement of long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. This statement was adopted by WESCO as of January 1, 2002. The adoption of this statement did not have a material impact on the results of operations or financial position of WESCO. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 prescribes amendments to existing pronouncements on accounting for early retirements of debt and modifications of capital leases to operating leases. The provisions of this statement are effective for financial statements issued on or after May 15, 2002. The Company does not believe that the adoption of this statement will have a material impact on its financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity," under which a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized at fair value when the liability is incurred. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not believe that the adoption of this statement will have a material impact on its financial statements. 5

3. GOODWILL AND INTANGIBLE ASSETS Effective January 1, 2002, WESCO adopted SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 141, all business combinations are accounted for under the purchase method. Under SFAS No. 142, goodwill is no longer amortized, but will be reduced if it is found to be impaired. Goodwill is tested for impairment annually or more frequently when events or circumstances occur indicating that goodwill might be impaired. During the six months ended June 30, 2002, WESCO completed the transitional impairment review required by SFAS No. 142. Each of WESCO's reporting units was tested for impairment by comparing the implied fair value of each reporting unit with its carrying value using discounted cash flow analyses. Considerable management judgment is necessary to estimate discounted future cash flows. Assumptions used for these estimated cash flows were based on a combination of historical results and current internal forecasts. No impairment losses were identified as a result of this review. In conformity with SFAS No. 142, the results of prior periods have not been restated. The following is a reconciliation of the impact of not amortizing goodwill in prior periods of WESCO's income before extraordinary item, net income and earnings per share for the three and six months ended June 30, 2002 and June 30, 2001. THREE MONTHS ENDED JUNE 30 Dollars in thousands, except per share amounts 2002 2001 ----------------------------------------------------------------------------------- Reported net income ................................... $ 5,573 $ 7,513 Add: Goodwill amortization, net of tax ............... -- 1,811 ----------------------- Adjusted net income ................................... $ 5,573 $ 9,324 Basic earnings per share: Reported net income ............................... $ 0.12 $ 0.17 Goodwill amortization, net of tax per basic share ................................... -- $ 0.04 ----------------------- Adjusted net income ............................... $ 0.12 $ 0.21 ======================= Diluted earnings per share: Reported net income ............................... $ 0.12 $ 0.16 Goodwill amortization, net of tax per diluted share ................................. -- 0.04 ----------------------- Adjusted net income ............................... $ 0.12 $ 0.20 ======================= SIX MONTHS ENDED JUNE 30 Dollars in thousands, except per share amounts 2002 2001 ----------------------------------------------------------------------------------- Reported net income before extraordinary item ......... $ 10,090 $ 11,005 Add: Goodwill amortization, net of tax ................ -- 3,484 ----------------------- Adjusted income before extraordinary item ............. $ 10,090 $ 14,489 Basic earnings per share: Reported income before extraordinary item ......... $ 0.22 $ 0.25 Goodwill amortization, net of tax per basic share ................................... -- 0.08 ----------------------- Adjusted income before extraordinary item ......... $ 0.22 $ 0.33 ======================= Diluted earnings per share: Reported income before extraordinary item ......... $ 0.22 $ 0.23 Goodwill amortization, net of tax per diluted share ................................. -- 0.08 ----------------------- Adjusted income before extraordinary item ......... $ 0.22 $ 0.31 ======================= 6

Dollars in thousands, except per share amounts 2002 2001 ------------------------------------------------------------------------------------ Reported net income ................................... $ 9,411 $ 11,005 Add: Goodwill amortization, net of tax ............... -- 3,484 ------------------------ Adjusted net income ................................... $ 9,411 $ 14,489 Basic earnings per share: Reported net income ............................... $ 0.20 $ 0.25 Goodwill amortization, net of tax per basic share ................................... -- 0.08 ------------------------ Adjusted net income ............................... $ 0.20 $ 0.33 ========= ========== Diluted earnings per share: Reported net income ............................... $ 0.20 $ 0.23 Goodwill amortization, net of tax per diluted share ................................. -- 0.08 ------------------------ Adjusted net income ............................... $ 0.20 $ 0.31 ========= ========== 4. EARNINGS PER SHARE The following tables set forth the details of basic and diluted earnings per share before extraordinary item: THREE MONTHS ENDED JUNE 30 Dollars in thousands, except per share amounts 2002 2001 - --------------------------------------------------------------------------------------- Net income ......................................... $ 5,573 $ 7,513 Weighted average common shares outstanding used in computing basic earnings per share .............. 45,033,911 44,872,816 Common shares issuable upon exercise of dilutive stock options .......................... 2,042,889 2,153,061 --------------------------- Weighted average common shares outstanding and common share equivalents used in computing diluted earnings per share ...................... 47,076,800 47,025,877 =========================== Earnings per share before extraordinary item: Basic ........................................... $ 0.12 $ 0.17 Diluted ......................................... $ 0.12 $ 0.16 - ---------------------------------------------------------------------------------------

SIX MONTHS ENDED JUNE 30 Dollars in thousands, except per share amounts 2002 2001 - ---------------------------------------------------------------------------------------- Net income ......................................... $ 10,090 $ 11,005 Weighted average common shares outstanding used in computing basic earnings per share ...... 44,966,322 44,839,917 Common shares issuable upon exercise of dilutive stock options .......................... 2,001,988 2,201,155 --------------------------- Weighted average common shares outstanding and common share equivalents used in computing diluted earnings per share ...................... 46,968,310 47,041,072 =========================== Earnings per share before extraordinary item: Basic ........................................... $ 0.22 $ 0.25 Diluted ......................................... $ 0.22 $ 0.23 - ---------------------------------------------------------------------------------------- 7

5. ACCOUNTS RECEIVABLE SECURITIZATION Under its accounts receivable securitization program ("Receivables Facility"), WESCO sells, on a continuous basis, to WESCO Receivables Corporation, a wholly-owned, special purpose company ("SPC"), an undivided interest in all domestic accounts receivable. The SPC sells without recourse to a third-party conduit all the eligible receivables while maintaining a subordinated interest, in the form of overcollateralization, in a portion of the receivables. WESCO has agreed to continue servicing the sold receivables for the financial institution at market rates; accordingly, no servicing asset or liability has been recorded. As of June 30, 2002 and December 31, 2001, securitized accounts receivable totaled approximately $356 million and $395 million, respectively, of which the subordinated retained interest was approximately $81 million and $65 million, respectively. Accordingly, approximately $275 million and $330 million of accounts receivable balances were removed from the consolidated balance sheets at June 30, 2002 and December 31, 2001, respectively. WESCO reduced its accounts receivable securitization program by $55 million in 2002. Costs associated with the Receivables Facility totaled $3.1 million and $10.7 million for the six months ended June 30, 2002 and June 30, 2001, respectively. These amounts are recorded as other expenses in the consolidated statements of operations and are primarily related to the discount and loss on the sale of accounts receivables, partially offset by related servicing revenue. The key economic assumptions used to measure the retained interest at the date of the securitization for securitizations completed in 2002 were a discount rate of 2% and an estimated life of 1.5 months. At June 30, 2002, an immediate adverse change in the discount rate or estimated life of 10% and 20% would result in a reduction in the fair value of the retained interest of $0.1 million and $0.3 million, respectively. These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this example, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another. 6. COMPREHENSIVE INCOME The following tables set forth comprehensive income and its components: