UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 19, 2012
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Commission file number 001-14989
Delaware (State or other jurisdiction of incorporation or organization) | 25-1723342 (I.R.S. Employer Identification No.) | |
225 West Station Square Drive Suite 700 Pittsburgh, Pennsylvania (Address of principal executive offices) | (412) 454-2200 (Registrant's telephone number, including area code) | |
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
On July 19, 2012, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2012. A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure
The information in this Item 7.01 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
A slide presentation to be used by senior management of the Company in connection with its discussions with investors regarding the Company's financial results for the first quarter of 2012 is included in Exhibit 99.2 to this report and is being furnished in accordance with Regulation FD of the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release dated July 19, 2012.
99.2 Slide presentation for investors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
July 19, 2012 | WESCO INTERNATIONAL, INC. | |||
(Date) | ||||
/s/ Kenneth S. Parks | ||||
Kenneth S. Parks | ||||
Vice President and Chief Financial Officer | ||||
 | NEWS RELEASE |
WESCO International, Inc. / Suite 700, 225 West Station Square Drive / Pittsburgh, PA 15219 | |
WESCO International, Inc. Reports Second Quarter EPS Growth of 15%;
Seventh Consecutive Quarter of Double Digit EPS Growth
Second quarter results compared to the prior year:
• Earnings per diluted share of $1.15 increased 15%
•Net income of $58.9 million increased 17%
•Operating margins improved to 5.7%
•Consolidated sales of $1.67 billion increased 9.7%
PITTSBURGH, July 19, 2012/PRNewswire/ -- WESCO International, Inc. (NYSE: WCC), a leading provider of electrical, industrial, and communications MRO and OEM products, construction materials, and advanced supply chain management and logistics services, today announced its 2012 second quarter results.
The following are results for the three months ended June 30, 2012 compared to the three months ended June 30, 2011:
• | Consolidated net sales were $1,672.7 million for the second quarter of 2012, compared to $1,524.5 million for the second quarter of 2011. The 9.7% increase in sales includes a 2.2% positive impact from acquisitions and a 0.7% negative impact from foreign exchange rates, resulting in organic sales growth of approximately 8.2%. Sequentially, sales increased 4.2%. |
• | Gross profit was $335.6 million, or 20.1% of sales, for the second quarter of 2012 compared to $306.8 million, or 20.1% of sales, for the second quarter of 2011. |
• | Selling, general & administrative (SG&A) expenses of $231.2 million, or 13.8% of sales, for the second quarter of 2012 improved 30 basis points, compared to $214.2 million, or 14.1% of sales, for the second quarter of 2011. |
• | Operating profit was $96.0 million for the current quarter, up 13.0% from $85.0 million for the comparable 2011 quarter. Operating profit as a percentage of sales was 5.7% in 2012, up 10 basis points from 5.6% in 2011. |
• | Total interest expense for the second quarter of 2012 was $11.5 million, compared to $13.9 million for the second quarter of 2011. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for the second quarter of 2012 and 2011 was $1.4 million and $2.4 million, respectively. |
• | The effective tax rate for the current quarter was 30.3%, compared to 29.4% for the prior year second quarter. |
• | Net income of $58.9 million for the current quarter was up 17.3% from $50.2 million for the prior year second quarter. |
• | Earnings per diluted share for the second quarter of 2012 were $1.15 per share, based on 51.1 million diluted shares, and was up 15.0% from $1.00 per share in the second quarter of 2011, based on 50.3 million diluted shares. |
• | Free cash flow for the second quarter of 2012 was $49.1 million, or 83% of net income, compared to a use of $19.6 million for the second quarter of 2011. |
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, “Our second quarter results reflect the continued execution of our growth strategy and our ability to deliver solid sales and earnings growth in a challenging economic environment. We generated positive momentum and increased sales to customers in each of our Industrial, Construction, Utility and CIG end markets resulting in overall sales growth of 9.7%. Operating margins improved to 5.7%, and earnings per diluted share increased 15%, demonstrating the effective operating leverage of our business model. Free cash flow exceeded 90% of net income in the first half of 2012, and we exited the second quarter with financial leverage below 2.0 and record liquidity.”
"Additionally, we are very pleased to have completed the acquisitions of Trydor Industries and Conney Safety Products earlier this month. These two transactions are expected to be accretive to earnings by at least $0.15 per diluted share on a combined basis over the next year."
The following results are for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.
• | Consolidated net sales were $3,278.7 million for the first six months of 2012, compared to $2,955.8 million for the first six months of 2011, an increase of 10.9%. Acquisitions positively impacted consolidated sales by 2.4%, while one additional workday positively impacted sales by 0.8% and foreign exchange provided a 0.5% negative impact resulting in a normalized organic growth rate of approximately 8.2%. |
• | Gross profit of $655.4 million, or 20.0% of sales, for the first six months of 2012 was down 10 basis points, compared to $592.9 million, or 20.1% of sales, for the first six months of 2011. |
• | SG&A expenses of $459.3 million, or 14.0% of sales, for the first six months of 2012 improved 50 basis points, compared to $428.0 million, or 14.5% of sales, for the first six months of 2011. |
• | Operating profit was $179.6 million for the first six months of 2012, up 19.9% from $149.7 million for the comparable 2011 period. Operating profit as a percentage of sales was 5.5% in 2012, up 40 basis points from 5.1% in 2011. |
• | Total interest expense for the first six months of 2012 was $20.4 million, compared to $26.5 million for the first six months of 2011. Cash interest expense was $20.9 million for the first six months of 2012. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, amounted to $0.5 million of income as a result of a favorable adjustment of $3.2 million of previously recorded interest related to uncertain tax positions. This adjustment was a result of a favorable Internal Revenue Service appeals settlement in the first quarter of 2012 related to the years 2000 to 2006. |
• | The effective six-month tax rate was 29.7% for 2012 compared to 29.0% for 2011. |
• | Net income of $111.9 million for the first six months of 2012 was up 27.8% from $87.5 million for the first six months of 2011. |
• | Earnings per diluted share for the first six months of 2012 were up 25.3% to $2.18 per share, based on 51.2 million diluted shares, versus $1.74 per share for the first six months of 2011, based on 50.4 million diluted |
shares. The adjustment of previously recorded interest related to uncertain tax positions in the first quarter of 2012 positively impacted year-to-date 2012 earnings per diluted share by approximately $0.04.
• | Free cash flow for the six months of 2012 was $102.9 million, or 92% of net income, compared to $6.6 million in the comparable prior year period. |
Mr. Engel continued, "Our long term outlook remains unchanged as we expect the economy to continue to recover slowly over the next several years. We are continuing to invest in our eight growth engines and our six operational excellence initiatives, and we remain focused on executing our One WESCO strategy of providing customers with the leading products, services and supply chain solutions they need to meet their MRO, OEM, and Capital Project requirements around the world.”
# # #
Teleconference Access
WESCO will conduct a teleconference to discuss the first quarter earnings as described in this News Release on Thursday, July 19, 2012, at 11:00 a.m. E.D.T. The conference call will be broadcast live over the Internet and can be accessed from the Company's website at http://www.wesco.com. The conference call will be archived on this Internet site for seven days.
# # #
WESCO International, Inc. (NYSE: WCC), a publicly traded Fortune 500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating (“MRO”) and original equipment manufacturers (“OEM”) product, construction materials, and advanced supply chain management and logistic services. 2011 annual sales were approximately $6.1 billion. The Company employs approximately 7,500 people, maintains relationships with over 18,000 suppliers, and serves over 65,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates eight fully automated distribution centers and approximately 400 full-service branches in North America and international markets, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.
# # #
The matters discussed herein may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Certain of these risks are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as well as the Company's other reports filed with the Securities and Exchange Commission.
Contact: Kenneth S. Parks, Vice President and Chief Financial Officer
WESCO International, Inc. (412) 454-2392, Fax: (412) 222-7566
http://www.wesco.com
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months | Three Months | |||||||||||
Ended | Ended | |||||||||||
June 30, | June 30, | |||||||||||
2012 | 2011 | |||||||||||
Net sales | $ | 1,672.7 | $ | 1,524.5 | ||||||||
Cost of goods sold (excluding | 1,337.1 | 79.9 | % | 1,217.7 | 79.9 | % | ||||||
depreciation and amortization below) | ||||||||||||
Selling, general and administrative expenses | 231.2 | 13.8 | % | 214.2 | 14.1 | % | ||||||
Depreciation and amortization | 8.4 | 7.6 | ||||||||||
Income from operations | 96.0 | 5.7 | % | 85.0 | 5.6 | % | ||||||
Interest expense, net | 11.5 | 13.9 | ||||||||||
Income before income taxes | 84.5 | 5.1 | % | 71.1 | 4.7 | % | ||||||
Provision for income taxes | 25.6 | 20.9 | ||||||||||
Net income attributable to WESCO International, Inc. | $ | 58.9 | 3.5 | % | $ | 50.2 | 3.3 | % | ||||
Earnings per diluted common share | $ | 1.15 | $ | 1.00 | ||||||||
Weighted average common shares outstanding and common | ||||||||||||
share equivalents used in computing earnings per diluted | ||||||||||||
share (in millions) | 51.1 | 50.3 | ||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Six Months | Six Months | |||||||||||
Ended | Ended | |||||||||||
June 30, | June 30, | |||||||||||
2012 | 2011 | |||||||||||
Net sales | $ | 3,278.7 | $ | 2,955.8 | ||||||||
Cost of goods sold (excluding | 2,623.3 | 80.0 | % | 2,362.9 | 79.9 | % | ||||||
depreciation and amortization below) | ||||||||||||
Selling, general and administrative expenses | 459.3 | 14.0 | % | 428.0 | 14.5 | % | ||||||
Depreciation and amortization | 16.5 | 15.2 | ||||||||||
Income from operations | 179.6 | 5.5 | % | 149.7 | 5.1 | % | ||||||
Interest expense, net | 20.4 | 26.5 | ||||||||||
Income before income taxes | 159.2 | 4.9 | % | 123.2 | 4.2 | % | ||||||
Provision for income taxes | 47.3 | 35.7 | ||||||||||
Net income attributable to WESCO International, Inc. | $ | 111.9 | 3.4 | % | $ | 87.5 | 3.0 | % | ||||
Earnings per diluted common share | $ | 2.18 | $ | 1.74 | ||||||||
Weighted average common shares outstanding and common | ||||||||||||
share equivalents used in computing earnings per diluted | ||||||||||||
share (in millions) | 51.2 | 50.4 | ||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollar amounts in millions)
(Unaudited)
June 30, | December 31, | |||||||
2012 | 2011 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 72.2 | $ | 63.9 | ||||
Trade accounts receivable, net | 1,014.0 | 939.4 | ||||||
Inventories, net | 651.8 | 627.0 | ||||||
Other current assets | 98.2 | 107.2 | ||||||
Total current assets | 1,836.2 | 1,737.5 | ||||||
Other assets | 1,350.5 | 1,341.0 | ||||||
Total assets | $ | 3,186.7 | $ | 3,078.5 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 707.1 | $ | 642.8 | ||||
Current debt and short-term borrowings | 21.4 | 6.4 | ||||||
Other current liabilities | 166.0 | 196.7 | ||||||
Total current liabilities | 894.5 | 845.9 | ||||||
Long-term debt | 562.7 | 642.9 | ||||||
Other noncurrent liabilities | 261.0 | 243.8 | ||||||
Total liabilities | 1,718.2 | 1,732.6 | ||||||
Stockholders' Equity | ||||||||
Total stockholders' equity | 1,468.5 | 1,345.9 | ||||||
Total liabilities and stockholders' equity | $ | 3,186.7 | $ | 3,078.5 | ||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Six Months Ended | Six Months Ended | |||||||
June 30, 2012 | June 30, 2011 | |||||||
Operating Activities: | ||||||||
Net income | $ | 111.9 | $ | 87.5 | ||||
Add back (deduct): | ||||||||
Depreciation and amortization | 16.5 | 15.2 | ||||||
Deferred income taxes | 14.0 | 10.4 | ||||||
Change in Trade and other receivables, net | (59.1 | ) | (106.5 | ) | ||||
Change in Inventories, net | (17.4 | ) | (40.8 | ) | ||||
Change in Accounts Payable | 61.2 | 80.9 | ||||||
Other | (11.9 | ) | (24.2 | ) | ||||
Net cash provided by operating activities | 115.2 | 22.5 | ||||||
Investing Activities: | ||||||||
Capital expenditures | (12.3 | ) | (15.9 | ) | ||||
Acquisition payments | (22.0 | ) | (8.3 | ) | ||||
Other | — | 0.1 | ||||||
Net cash used by investing activities | (34.3 | ) | (24.1 | ) | ||||
Financing Activities: | ||||||||
Debt repayments, net | (67.6 | ) | 27.0 | |||||
Equity activity, net | (1.4 | ) | (2.4 | ) | ||||
Other | (3.7 | ) | 0.1 | |||||
Net cash (used) provided by financing activities | (72.7 | ) | 24.7 | |||||
Effect of exchange rate changes on cash and cash equivalents | 0.1 | 1.9 | ||||||
Net change in cash and cash equivalents | 8.3 | 25.0 | ||||||
Cash and cash equivalents at the beginning of the period | 63.9 | 53.6 | ||||||
Cash and cash equivalents at the end of the period | $ | 72.2 | $ | 78.6 | ||||
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial measures. These financial measures include financial leverage, free cash flow, gross profit and organic sales growth. The Company believes that these non-GAAP measures are useful to investors in order to provide a better understanding of the Company's capital structure position, liquidity, and organic growth trends on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude transactions of an unusual nature, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands)
(Unaudited)
Twelve Months | Twelve Months | |||||||
Ended | Ended | |||||||
June 30, | December 31, | |||||||
2012 | 2011 | |||||||
Financial Leverage: | ||||||||
Income from operations | $ | 362,822 | $ | 332,979 | ||||
Depreciation and amortization | 32,941 | 31,607 | ||||||
EBITDA | $ | 395,763 | $ | 364,586 | ||||
June 30, | December 31, | |||||||
2012 | 2011 | |||||||
Short-term debt | $ | 19,409 | $ | — | ||||
Current debt | 2,037 | 6,411 | ||||||
Long-term debt | 562,750 | 642,922 | ||||||
Debt discount related to convertible debentures (1) | 174,485 | 175,908 | ||||||
Total debt including debt discount | $ | 758,681 | $ | 825,241 | ||||
Financial leverage ratio | 1.9 | 2.3 | ||||||
Note: Financial leverage is provided by the Company as an indicator of capital structure position. Financial leverage is calculated by dividing total debt, including debt discount, by the trailing twelve months earnings before interest, taxes, depreciation and amortization (EBITDA).
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
Free Cash Flow: | 2012 | 2011 | 2012 | 2011 | ||||||||||||
(dollar amounts in millions) | ||||||||||||||||
Cash flow provided by operations | $ | 56.9 | $ | (9.3 | ) | $ | 115.2 | $ | 22.5 | |||||||
Less: Capital expenditures | (7.8 | ) | (10.3 | ) | (12.3 | ) | (15.9 | ) | ||||||||
Free Cash flow | $ | 49.1 | $ | (19.6 | ) | $ | 102.9 | $ | 6.6 | |||||||
Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating flow to determine free cash flow. Free cash flow is available to provide a source of funds for any of the Company's financing needs.
(1)The convertible debentures are presented in the consolidated balance sheets in long-term debt net of the unamortized discount.
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions)
(Unaudited)
Three Months | Three Months | |||||||
Ended | Ended | |||||||
Gross Profit: | June 30, | June 30, | ||||||
2012 | 2011 | |||||||
Net Sales | $ | 1,672.7 | $ | 1,524.5 | ||||
Cost of goods sold (excluding depreciation and amortization) | 1,337.1 | 1,217.7 | ||||||
Gross profit | $ | 335.6 | $ | 306.8 | ||||
Gross margin | 20.1 | % | 20.1 | % | ||||
Six Months | Six Months | |||||||
Ended | Ended | |||||||
Gross Profit: | June 30, | June 30, | ||||||
2012 | 2011 | |||||||
Net Sales | $ | 3,278.7 | $ | 2,955.8 | ||||
Cost of goods sold (excluding depreciation and amortization) | 2,623.3 | 2,362.9 | ||||||
Gross profit | $ | 655.4 | $ | 592.9 | ||||
Gross margin | 20.0 | % | 20.1 | % | ||||
Note: Gross profit is provided by the Company as an additional financial measure. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. This amount represents a commonly used financial measure within the distribution industry. Gross margin is calculated by dividing gross profit by net sales.
Three Months | Six Months | ||||||
Ended | Ended | ||||||
Normalized Organic Sales Growth: | June 30, | June 30, | |||||
2012 | 2012 | ||||||
Change in net sales | 9.7 | % | 10.9 | % | |||
Impact from acquisitions | 2.2 | % | 2.4 | % | |||
Impact from foreign exchange rates | (0.7 | )% | (0.5 | )% | |||
Impact from number of workdays | — | % | 0.8 | % | |||
Normalized organic sales growth | 8.2 | % | 8.2 | % | |||
Note: Organic sales growth is provided by the Company as an additional financial measure to provide a better understanding of the Company's sales growth trends. Organic sales growth is calculated by deducting the percentage impact on net sales from acquisitions, foreign exchange rates and number of workdays from the overall percentage change in consolidated net sales.
Supplemental Financial Data WESCO Second Quarter 2012 July 19, 2012
2 Safe Harbor Statement Note: All statements made herein that are not historical facts should be considered as “forward- looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, debt level, changes in general economic conditions, fluctuations in interest rates, increases in raw materials and labor costs, levels of competition and other factors described in detail in Form 10-K for WESCO International, Inc. for the year ended December 31, 2011 and any subsequent filings with the Securities & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. 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, www.wesco.com.
3 Second Quarter 2012 Results Category Q2 2012 Outlook Provided Q2 2012 Performance Sales Growth Total sales growth, including price and FX rates, expected to be 10% to 12%. Total sales growth of 9.7%; organic sales growth of 8.2%. Acquisition sales had positive impact of 2.2%. Exchange rate had negative impact of 0.7%. Gross Margin Gross margin expected to be at or above 20.0%. Gross margin of 20.1%. Operating Margin Operating margin expected to be approximately 6%. Operating margin of 5.7% Effective Tax Rate Effective tax rate expected to be approximately 30% to 32%. Effective tax rate of 30.3%
4 Organic Sales Versus Prior Year * Q4 2011 had one less workday versus Q4 2010. ** FY 2011 had one less workday versus FY 2010. *** Q1 2012 had one more workday versus Q1 2011 and Q1 2010. ------------------------2010------------------------ ------------------------2011------------------------ -----2012----- Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4* Full Year** Q1*** Q2 Consolidated Sales Growth (2.6%) 8.6% 14.9% 17.6% 9.5% 24.6% 21.1% 19.3% 19.4% 21.0% 12.2% 9.7% F/X (1.8%) (1.9%) (0.9%) (0.7%) (1.3%) (1.1%) (1.0%) (1.1%) 0% (0.8%) 0.2% 0.7% Acquisitions 0 0 (0.7%) (1.1%) (0.4%) (7.0%) (7.4%) (6.9%) (6.2%) (6.8%) (2.6%) (2.2%) Organic Sales Growth (4.4%) 6.7% 13.3% 15.8% 7.8% 16.5% 12.7% 11.3% 13.2% 13.4% 9.8% 8.2% Workday Impact - - - - - - - - (1.6%) (0.4%) 1.6% - Organic Sales Per Workday (4.4%) 6.7% 13.3% 15.8% 7.8% 16.5% 12.7% 11.3% 14.8% 13.8% 8.2% 8.2% Management Estimated Price Impact 1.5% 3.0% 2.5% 3.0% 2.5% 3.5% 3.0% 3.5% 2.0% 3.0% 1.5% 1.0%
5 Recent Acquisitions’ Estimated End Market Mix Acquisition Date Acquired Approximate Sales at Acquisition date (TTM Millions) Industrial Construction Utility CIG Potelcom June 2010 $25 40% - 60% - TVC December 2010 $300 - 10% - 90% Reco March 2011 $25 100% - - - Brews Supply October 2011 $50 75% 5% 20% - RS Electronics January 2012 $60 100% - - - Trydor July 2012 $35 10% - 90% - Conney July 2012 $85 45% 5% 10% 40% TOTAL $580 End Market Definitions INDUSTRIAL: Sales to industrial customers. CONSTRUCTION: Sales to contractors excluding utility contractors. UTILITY: Sales to utilities and utility contractors. CIG: Sales to schools, hospitals, property management firms, retailers, and governmental agencies.
6 End Markets and Product Categories Six Months Ended June 30, 2012 44% 32% 11% 13% Markets & Customers 35% 15% 18% 13% 9% 10% Products & Services Controls & Motors Lighting & Controls General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Utility • Investor Owned • Public Power • Utility Contractors CIG • Commercial • Institutional • Government Industrial • Global Accounts • Integrated Supply • OEM • General Industrial Construction • Non-Residential • Residential Note: End market percentages reported on consolidated basis.
7 22.3% 21.6% 18.4% 14.8% 12.0% 16.7% 11.8% 7.7% 0% 5% 10% 15% 20% 25% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 (14.6%) (4.6%) 6.1% 13.2% 21.7% 9.8% 23.9% 11.7% (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 6.9% 21.2% 12.7% 10.9% 12.5% 13.7% 4.7% 3.8% 0% 5% 10% 15% 20% 25% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 11.6% 17.7% 3.4% 7.5% 10.1% 8.1% 5.4% 14.3% 0% 5% 10% 15% 20% 25% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Construction CIG Utility Industrial WESCO End Market Momentum Sales vs. Prior Year Sales vs. Prior Year Sales vs. Prior Year Sales vs. Prior Year • All sales growth rates exclude acquisitions • All end market percentages include acquisitions for first half of 2012 …growth in all end markets 44% Industrial • Global Accounts • Integrated Supply •OEM •General Industrial CIG 11% Utility • Investor Owned •Public Power •Utility Contractors •Commercial • Institutional •Government 13% Construction •Non-Residential •Residential 32%
8 x End Market Q2 2012 vs. Q2 2011 Q2 2012 vs. Q1 2012 Comments WESCO Core 7.5% 4.2% • Organic sales per work day growth of 8.2% for Q1 and Q2 versus prior year • All four end market categories grew in Q2 sequentially and versus prior year • Seven consecutive quarters of EPS growth of 15+% Industrial 7.7% 0.7% • Tenth consecutive quarter of year-over-year organic sales growth • Channel inventory levels appear to be in balance with current demand • Strong bidding activity continues with notable customer trends including outsourcing, increased capital spending, and high expectations for supply chain process improvements • Global Accounts and Integrated Supply opportunity pipeline at $2.2+ billion Construction 3.8% 8.5% • Ninth consecutive quarter of year-over-year organic sales growth • Backlog up approximately 5% versus year end 2011 and down approximately 2% sequentially • Non-residential market remains weak and continues in a bottoming process • Increased bidding activity noted, particularly for upgrades, renovations, and energy efficiency Utility 11.7% 3.3% • Fourth consecutive quarter of year-over-year double digit organic sales growth • Increased bidding activity levels for transmission, substation, and IOU and public power MRO alliance agreements • Distribution grid spending is expected to grow in the low single digits range in 2012 driven by system maintenance, reliability projects and storm restoration Commercial, Institutional, Government (CIG) 14.3% 6.4% • Government project spending continues to be scrutinized but bidding activity continues • Government opportunities driven by infrastructure projects, security and communications • Bidding activity remains active in the commercial and institutional markets 2012 Q2 End Market Comments Year-over-year and sequential quarterly sales comparisons excluding acquisitions . Note: Q2 versus prior year excludes Brews Supply and RS Electronics results. No acquisition adjustments for Q2 sequential.
9 Core Sales Reconciliation of Non-GAAP Financial Measures Unaudited Note: Q2 versus prior year excludes Brews Supply and RS Electronics results. No acquisition adjustments for Q2 sequential. (dollar amounts in millions) Full Year 2011 vs 2010 Q2 2012 vs. Q2 2011 Q2 2012 vs. Q1 2012 Q2 Q2 Q2 Q1 2011 2010 % Growth 2012 2011 % Growth 2012 2012 % Growth Industrial Core $ 2,632 $ 2,256 16.7 % $ 696 $ 646 7.7 % $ 724 $ 719 0.7 % Construction Core 2,097 1,845 13.7 % 554 535 3.8 % 556 512 8.5 % Utility Core 683 622 9.8 % 183 163 11.7 % 186 180 3.3 % CIG Core 388 359 8.1 % 213 186 14.3 % 213 200 6.4 % Total Core Gross Sales $ 5,800 $ 5,082 14.1 % $ 1,646 $ 1,530 7.5 % $ 1,679 $ 1,611 4.2 % Total Gross Sales from Acquisitions 347 - - 33 - - - - - Total Gross Sales $ 6,174 $ 5,082 21.0 % $ 1,679 $ 1,530 9.7 % $ 1,679 $ 1,611 4.2 % Gross Sales Reductions/Discounts (21) (18) (6) (5) - (6) (5) - Total Net Sales $ 6,126 $ 5,064 21.0 % $ 1,673 $ 1,525 9.7 % $ 1,673 $ 1,606 4.2 %
10 Key Financial Metrics 12/31/2011 6/30/2012 Liquidity (1) $511 million $642 million Full Year 2011 and June YTD 2012 Free Cash Flow (2) $134 million $103 million Financial Leverage (Total Par Value Debt Divided by Reported TTM EBITDA) 2.3x 1.9x ($Millions) Outstanding at December 31, 2011 Outstanding at June 30, 2012 Debt Maturity Schedule AR Securitization (V) $250 $205 2014 Inventory Revolver (V) $37 $0 2016 Real Estate Mortgage (F) $37 $37 2013 2017 Bonds (F) $150 $150 2017 2029 Convertible Bonds (F) $345 $345 2029 (No Put) Other (V) $6 $22 N/A Total Debt $825 $759 Capital Structure V = Variable Rate Debt F = Fixed Rate Debt 1 = Asset-backed credit facilities total available plus invested cash 2 = Operating cash flow less capital expenditures
11 1.5 2 2.5 3 3.5 4 4.5 5 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Quarterly Financial Leverage Target Leverage 2.0x – 3.5x 1.9x Second lowest quarterly leverage since WESCO became a public company in 1999.
12 Convertible Debt and Non-cash Interest as of June 30, 2012 GAAP vs. Non-GAAP Debt Reconciliation Non-Cash Interest Expense Schedule Convertible Debentures (000s) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 $ 344,936 $ (174,485) $ 170,451 Non-Cash Interest Expense ($ millions) 2010 2011 YTD 2012 Convertible Debt $4.3 $2.5 $1.4 Amortization of Deferred Financing Fees $2.6 $4.4 $1.2 FIN 48 $5.0 $1.9 ($3.1) Total $11.9 $8.8 ($0.5)
13 Convertible Debt and SARs/Options EPS Dilution Weighted Average Quarterly Share Count Stock Price Incremental Shares from 2029 Convertible Debt (in millions)3 Incremental Shares from SARs/Option Awards (in millions) Total Diluted Share Count (in millions)4 $30.00 0.45 0.46 44.52 $40.00 3.33 0.74 47.67 $50.00 5.05 1.04 49.70 $60.00 6.20 1.14 50.95 Q2 2012 Average ($60.73) 6.27 1.20 51.08 $75.00 7.35 1.56 52.52 $100.00 8.50 1.91 54.02 2029 Convertible Debt Details Conversion Price $28.8656 Conversion Rate 34.6433 1 Underlying Shares 11,949,721 2 Footnotes: 2029 Convertible Debenture 1 1000/28.8656 2 $345 million/28.8656 3 (Underlying Shares x Avg. Quarterly. Stock Price) minus $345 million Avg. Quarterly Stock Price 4 Basic Share Count of 43.61 million shares
14 Number of Work Days by Quarter Q1 Q2 Q3 Q4 FY 2010 63 64 64 64 255 2011 63 64 64 63 254 2012 64 64 63 63 254
15 Q3 2012 Outlook Category Q3 2012 Expectations Sales Growth Total sales growth expected to be 9% to 11% including acquisitions of approximately 4% Gross Margin Gross margin expected to be at or above 20% Operating Margin Operating margin expected to be at or above 6% Effective Tax Rate Effective tax rate expected to be approximately 30% to 32%