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): October 18, 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 October 18, 2012, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the third 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 third 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 October 18, 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.
October 18, 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 Third Quarter EPS Growth of 13%,
Eighth Consecutive Quarter of Double Digit EPS Growth
Third quarter results compared to the prior year:
• Earnings per share increased 13% to $1.25
•Operating margins expanded 40 basis points to 6.2%
•Net income increased 18% to $63.4 million
•Free cash flow grew 63% to $67.2 million or 106% of net income
•Net sales increased 4.8% to $1.66 billion
PITTSBURGH, October 18, 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 third quarter results.
The following are results for the three months ended September 30, 2012 compared to the three months ended September 30, 2011:
• | Net sales were $1,656.2 million for the third quarter of 2012, compared to $1,580.4 million for the third quarter of 2011, an increase of 4.8%. Acquisitions positively impacted sales by 4.0%, while one less workday negatively impacted sales by 1.6% and foreign exchange provided a 0.6% negative impact resulting in normalized organic growth of approximately 3.0%. Sequentially, sales decreased 1.0%. |
• | Gross profit of $338.8 million, or 20.5% of sales, for the third quarter of 2012 improved 50 basis points compared to $315.7 million, or 20.0% of sales, for the third quarter of 2011. |
• | Selling, general & administrative (SG&A) expenses of $225.8 million, or 13.6% of sales, for the third quarter of 2012 improved 10 basis points, compared to $216.2 million, or 13.7% of sales, for the third quarter of 2011. |
• | Operating profit was $103.1 million for the current quarter, up 12.3% from $91.8 million for the comparable 2011 quarter. Operating profit as a percentage of sales was 6.2% in 2012, up 40 basis points from 5.8% in 2011. |
• | Interest expense for the third quarter of 2012 was $12.7 million, compared to $15.1 million for the third quarter of 2011. Interest expense for the prior year quarter included the write-off of $1.8 million of deferred financing fees as a result of a new revolving credit agreement. Non-cash interest expense, which includes convertible |
debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for the third quarter of 2012 and 2011 was $1.3 million and $3.5 million, respectively.
• | The effective tax rate for the current quarter was 29.9%, compared to 29.7% for the prior year third quarter. |
• | Net income of $63.4 million for the current quarter was up 17.7% from $53.9 million for the prior year third quarter. |
• | Earnings per diluted share for the third quarter of 2012 were $1.25 per share, based on 50.8 million diluted shares, and was up 12.6% from $1.11 per share in the third quarter of 2011, based on 48.5 million diluted shares. Earnings per diluted share for the prior year third quarter, adjusted for the $1.8 million write-off of deferred financing fees as a result of a new revolving credit agreement, would have been $1.13 per diluted share. |
• | Free cash flow for the third quarter of 2012 was $67.2 million, or 106% of net income, compared to $41.2 million for the third quarter of 2011. |
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, “Our third quarter results were solid, reflecting our effective execution and ability to consistently deliver strong earnings growth in a challenging economic environment. We posted our eighth consecutive quarter of double digit EPS growth on a year-over-year basis while sales continued to grow but at a moderated pace. Driven by both gross margin expansion and operating cost leverage, operating margins expanded 40 basis points to reach 6.2%, their highest level since the economic downturn in 2008. In addition, we completed the acquisitions of Trydor Industries and Conney Safety, further expanding our portfolio of products and services. Our free cash flow generation was strong at 106% of net income, and we exited the quarter with a financial leverage ratio of 2.2 following the funding of these acquisitions. Our investments continue to pay off, demonstrating the continued effectiveness and operating leverage of our business model.”
The following results are for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011.
• | Net sales were $4,934.9 million for the first nine months of 2012, compared to $4,536.2 million for the first nine months of 2011. The 8.8% increase in sales includes a 2.9% positive impact from acquisitions and a 0.5% negative impact from foreign exchange rates, resulting in organic sales growth of approximately 6.4%. |
• | Gross profit of $994.1 million, or 20.1% of sales, for the first nine months of 2012 was up 10 basis points, compared to $908.5 million, or 20.0% of sales, for the first nine months of 2011. |
• | SG&A expenses of $685.1 million, or 13.9% of sales, for the first nine months of 2012 improved 30 basis points, compared to $644.2 million, or 14.2% of sales, for the first nine months of 2011. |
• | Operating profit was $282.6 million for the first nine months of 2012, up 17.0% from $241.4 million for the comparable 2011 period. Operating profit as a percentage of sales was 5.7% in 2012, up 40 basis points from 5.3% in 2011. |
• | Interest expense for the first nine months of 2012 was $33.1 million, compared to $41.6 million for the first nine months of 2011. Interest expense for the nine months ended September 30, 2011 included the write-off of $1.8 million of deferred financing fees as a result of a new revolving credit agreement. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for the first nine months of 2012 and 2011 was $0.8 million and $7.2 million, respectively. Non-cash interest for the nine months ended September 30, 2012 included 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 nine-month tax rate was 29.8% for 2012 compared to 29.2% for 2011. |
• | Net income of $175.3 million for the first nine months of 2012 was up 23.9% from $141.4 million for the first nine months of 2011. |
• | Earnings per diluted share for the first nine months of 2012 were up 20.8% to $3.43 per share, based on 51.1 million diluted shares, versus $2.84 per share for the first nine months of 2011, based on 49.8 million diluted shares. Earnings per diluted share for the nine months ending September 30, 2011, adjusted for the $1.8 million write-off of deferred financing fees as a result of a new revolving credit agreement, would have been $2.86 per diluted share. 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 nine months of 2012 was $170.1 million, or 97% of net income, compared to $47.8 million in the comparable prior year period. |
Mr. Engel continued, “Our long term outlook for a multi-year economic recovery is unchanged. At the same time, we remain focused on building on the positive momentum behind our One WESCO strategy, providing customers with the leading products, services, and supply chain solutions they need to meet their global MRO, OEM, and Capital Project requirements. The strength, diversity, and operating leverage of our business position us well to continue delivering solid results throughout this economic cycle.”
# # #
Teleconference Access
WESCO will conduct a teleconference to discuss the third quarter earnings as described in this News Release on Thursday, October 18, 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 | |||||||||||
September 30, | September 30, | |||||||||||
2012 | 2011 | |||||||||||
Net sales | $ | 1,656.2 | $ | 1,580.4 | ||||||||
Cost of goods sold (excluding | 1,317.4 | 79.5 | % | 1,264.7 | 80.0 | % | ||||||
depreciation and amortization below) | ||||||||||||
Selling, general and administrative expenses | 225.8 | 13.6 | % | 216.2 | 13.7 | % | ||||||
Depreciation and amortization | 9.9 | 7.7 | ||||||||||
Income from operations | 103.1 | 6.2 | % | 91.8 | 5.8 | % | ||||||
Interest expense, net | 12.7 | 15.1 | ||||||||||
Income before income taxes | 90.4 | 5.5 | % | 76.7 | 4.9 | % | ||||||
Provision for income taxes | 27.0 | 22.8 | ||||||||||
Net income attributable to WESCO International, Inc. | $ | 63.4 | 3.8 | % | $ | 53.9 | 3.4 | % | ||||
Earnings per diluted common share | $ | 1.25 | $ | 1.11 | ||||||||
Weighted average common shares outstanding and common | ||||||||||||
share equivalents used in computing earnings per diluted | ||||||||||||
share (in millions) | 50.8 | 48.5 | ||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Nine Months | Nine Months | |||||||||||
Ended | Ended | |||||||||||
September 30, | September 30, | |||||||||||
2012 | 2011 | |||||||||||
Net sales | $ | 4,934.9 | $ | 4,536.2 | ||||||||
Cost of goods sold (excluding | 3,940.8 | 79.9 | % | 3,627.7 | 80.0 | % | ||||||
depreciation and amortization below) | ||||||||||||
Selling, general and administrative expenses | 685.1 | 13.9 | % | 644.2 | 14.2 | % | ||||||
Depreciation and amortization | 26.4 | 22.9 | ||||||||||
Income from operations | 282.6 | 5.7 | % | 241.4 | 5.3 | % | ||||||
Interest expense, net | 33.1 | 41.6 | ||||||||||
Income before income taxes | 249.5 | 5.1 | % | 199.8 | 4.4 | % | ||||||
Provision for income taxes | 74.2 | 58.4 | ||||||||||
Net income attributable to WESCO International, Inc. | $ | 175.3 | 3.6 | % | $ | 141.4 | 3.1 | % | ||||
Earnings per diluted common share | $ | 3.43 | $ | 2.84 | ||||||||
Weighted average common shares outstanding and common | ||||||||||||
share equivalents used in computing earnings per diluted | ||||||||||||
share (in millions) | 51.1 | 49.8 | ||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollar amounts in millions)
(Unaudited)
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 107.6 | $ | 63.9 | ||||
Trade accounts receivable, net | 1,020.4 | 939.4 | ||||||
Inventories, net | 662.8 | 627.0 | ||||||
Other current assets | 115.1 | 107.2 | ||||||
Total current assets | 1,905.9 | 1,737.5 | ||||||
Other assets | 1,514.1 | 1,341.0 | ||||||
Total assets | $ | 3,420.0 | $ | 3,078.5 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 693.2 | $ | 642.8 | ||||
Current debt and short-term borrowings | 25.0 | 6.4 | ||||||
Other current liabilities | 191.8 | 196.7 | ||||||
Total current liabilities | 910.0 | 845.9 | ||||||
Long-term debt | 696.8 | 642.9 | ||||||
Other noncurrent liabilities | 268.7 | 243.8 | ||||||
Total liabilities | 1,875.5 | 1,732.6 | ||||||
Stockholders' Equity | ||||||||
Total stockholders' equity | 1,544.5 | 1,345.9 | ||||||
Total liabilities and stockholders' equity | $ | 3,420.0 | $ | 3,078.5 | ||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Nine Months Ended | Nine Months Ended | |||||||
September 30, 2012 | September 30, 2011 | |||||||
Operating Activities: | ||||||||
Net income | $ | 175.3 | $ | 141.4 | ||||
Add back (deduct): | ||||||||
Depreciation and amortization | 26.4 | 22.9 | ||||||
Deferred income taxes | 21.9 | 7.7 | ||||||
Change in Trade and other receivables, net | (64.0 | ) | (154.7 | ) | ||||
Change in Inventories, net | (16.0 | ) | (44.2 | ) | ||||
Change in Accounts Payable | 38.5 | 110.6 | ||||||
Other | 7.5 | (11.9 | ) | |||||
Net cash provided by operating activities | 189.6 | 71.8 | ||||||
Investing Activities: | ||||||||
Capital expenditures | (19.5 | ) | (24.0 | ) | ||||
Acquisition payments | (201.1 | ) | (8.2 | ) | ||||
Other | 0.1 | 0.1 | ||||||
Net cash used by investing activities | (220.5 | ) | (32.1 | ) | ||||
Financing Activities: | ||||||||
Debt proceeds (repayments) | 66.8 | (1.0 | ) | |||||
Equity activity, net | (2.5 | ) | (2.6 | ) | ||||
Other | 10.1 | 8.8 | ||||||
Net cash provided by financing activities | 74.4 | 5.2 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 0.2 | (4.5 | ) | |||||
Net change in cash and cash equivalents | 43.7 | 40.4 | ||||||
Cash and cash equivalents at the beginning of the period | 63.9 | 53.6 | ||||||
Cash and cash equivalents at the end of the period | $ | 107.6 | $ | 94.0 | ||||
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 | |||||||
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
Financial Leverage: | ||||||||
Income from operations | $ | 374,102 | $ | 332,979 | ||||
Depreciation and amortization | 35,176 | 31,607 | ||||||
EBITDA | $ | 409,278 | $ | 364,586 | ||||
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
Short-term debt | $ | 22,848 | $ | — | ||||
Current debt | 2,137 | 6,411 | ||||||
Long-term debt | 696,758 | 642,922 | ||||||
Debt discount related to convertible debentures (1) | 173,685 | 175,908 | ||||||
Total debt including debt discount | $ | 895,428 | $ | 825,241 | ||||
Financial leverage ratio | 2.2 | 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 | Nine Months | Nine Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
Free Cash Flow: | 2012 | 2011 | 2012 | 2011 | ||||||||||||
(dollar amounts in millions) | ||||||||||||||||
Cash flow provided by operations | $ | 74.4 | $ | 49.3 | $ | 189.6 | $ | 71.8 | ||||||||
Less: Capital expenditures | (7.2 | ) | (8.1 | ) | (19.5 | ) | (24.0 | ) | ||||||||
Free Cash flow | $ | 67.2 | $ | 41.2 | $ | 170.1 | $ | 47.8 | ||||||||
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: | September 30, | September 30, | ||||||
2012 | 2011 | |||||||
Net Sales | $ | 1,656.2 | $ | 1,580.4 | ||||
Cost of goods sold (excluding depreciation and amortization) | 1,317.4 | 1,264.7 | ||||||
Gross profit | $ | 338.8 | $ | 315.7 | ||||
Gross margin | 20.5 | % | 20.0 | % | ||||
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
Gross Profit: | September 30, | September 30, | ||||||
2012 | 2011 | |||||||
Net Sales | $ | 4,934.9 | $ | 4,536.2 | ||||
Cost of goods sold (excluding depreciation and amortization) | 3,940.8 | 3,627.7 | ||||||
Gross profit | $ | 994.1 | $ | 908.5 | ||||
Gross margin | 20.1 | % | 20.0 | % | ||||
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 | Nine Months | ||||||
Ended | Ended | ||||||
Normalized Organic Sales Growth: | September 30, | September 30, | |||||
2012 | 2012 | ||||||
Change in net sales | 4.8 | % | 8.8 | % | |||
Impact from acquisitions | 4.0 | % | 2.9 | % | |||
Impact from foreign exchange rates | (0.6 | )% | (0.5 | )% | |||
Impact from number of workdays | (1.6 | )% | — | % | |||
Normalized organic sales growth | 3.0 | % | 6.4 | % | |||
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 Third Quarter 2012 October 18, 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 Third Quarter 2012 Results Category Q3 2012 Outlook Provided Q3 2012 Performance Sales Growth Total sales growth expected to be 9% to 11% including acquisitions of approximately 4%. Total sales growth of 4.8%; normalized organic sales growth of 3.0%. Acquisition sales had a positive impact of 4.0%. Exchange rate had a negative impact of 0.6%. One less workday in the quarter negatively impacted sales by 1.6%. Gross Margin Gross margin expected to be at or above 20.0%. Gross margin of 20.5%. Operating Margin Operating margin expected to be at or above 6%. Operating margin of 6.2%. Effective Tax Rate Effective tax rate expected to be approximately 30% to 32%. Effective tax rate of 29.9%.
4 Organic Sales Versus Prior Year Notes: (a) Q4 2011 had one less workday versus Q4 2010. (b) FY 2011 had one less workday versus FY 2010. (c) Q1 2012 had one more workday versus Q1 2011 and Q1 2010. (d) Q3 2012 had one less workday versus Q3 2011. ------------------------2010-------------------- ---------------------2011------------------------ ------------2012------------ Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4(a) Full Year(b) Q1(c) Q2 Q3(d) 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% 4.8% 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% 0.6% Acquisitions 0 0 (0.7%) (1.1%) (0.4%) (7.0%) (7.4%) (6.9%) (6.2%) (6.8%) (2.6%) (2.2%) (4.0%) 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% 1.4% Workday Impact - - - - - - - - (1.6%) (0.4%) 1.6% - (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% 3.0% 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% 0.5%
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 Nine Months Ended September 30, 2012 43% 32% 12% 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: Markets & Customers and Products & Services percentages reported on consolidated basis.
7 22.3% 21.6% 18.4% 14.8% 12.0% 16.7% 11.8% 7.7% 0.8% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Q3 2012 (14.6%) (4.6%) 6.1% 13.2% 21.7% 9.8% 23.9% 11.7% 4.3% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Q3 2012 6.9% 21.2% 12.7% 10.9% 12.5% 13.7% 4.7% 3.8% 0.0% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Q3 2012 11.6% 17.7% 3.4% 7.5% 10.1% 8.1% 5.4% 14.3% 0.0% FY 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 FY 2011 Q1 2012 Q2 2012 Q3 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 Notes: 1. All sales growth rates exclude acquisitions 2. All end market percentages are reported on a consolidated basis 3. The prior period end market amounts noted above may contain reclassifications to conform to current period presentation 43% Industrial • Global Accounts • Integrated Supply •OEM •General Industrial CIG 12% Utility • Investor Owned •Public Power •Utility Contractors •Commercial • Institutional •Government 13% Construction •Non-Residential •Residential 32%
8 x 2012 Q3 End Market Comments End Market Q3 2012 vs. Q3 2011 Q3 2012 vs. Q2 2012 Comments WESCO Core 0.8% (2.7%) • Q3 organic sales per workday growth of 3.0% versus prior year • All four end market categories grew in Q3 versus prior year on sales per workday basis • Eight consecutive quarters of double digit EPS growth Industrial 0.8% (4.3%) • Eleventh consecutive quarter of year-over-year organic sales growth • Channel inventory levels appear to be in balance with current demand overall, however inventory reductions are occurring at some customers • Strong bidding activity continues with notable customer trends including outsourcing, capital spending, and high expectations for supply chain process improvements • Global Accounts and Integrated Supply opportunity pipeline at $2.3+ billion Construction 0.0% (3.0%) • Tenth consecutive quarter of normalized year-over-year organic sales growth • Backlog up approximately 2% versus year end 2011 and down approximately 3% sequentially • US non-residential market remains weak and continues in a bottoming process • Canadian construction market continues to grow at moderate rate Utility 4.3% 5.7% • Sixth consecutive quarter of year-over-year organic sales growth • Increased bidding activity levels for transmission, substation, and IOU and public power MRO alliance agreements • Distribution grid spending driven by system maintenance, reliability projects and storm restoration • Increase in housing starts a positive factor going forward Commercial, Institutional, Government (CIG) 0.0% (4.2%) • Tenth consecutive quarter of normalized year-over-year organic sales growth • Government spending weaker than anticipated due to budget constraints causing delayed projects and lower IT spending • Bidding activity remains active in the commercial and institutional markets Year-over-year and sequential quarterly sales comparisons excluding acquisitions . Note: Q3 versus prior year excludes Brews Supply, RS Electronics, Trydor and Conney results. Q3 sequential results exclude Trydor and Conney results.
9 Core Sales Reconciliation of Non-GAAP Financial Measures Unaudited Notes: 1. Q3 2012 compared to prior year excludes Brews Supply, RS Electronics, Trydor, and Conney results. 2. Q3 2012 sequential excludes Trydor and Conney results. 3. The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. (dollar amounts in millions) Full Year 2011 vs. 2010 Q3 2012 vs. Q3 2011 Q3 2012 vs. Q2 2012 Q3 Q3 Q3 Q2 2011 2010 % Growth 2012 2011 % Growth 2012 2012 % Growth Industrial Core $ 2,632 $ 2,256 16.7 % $ 666 $ 661 0.8 % $ 696 $ 727 (4.3 %) Construction Core 2,097 1,845 13.7 % 528 528 0.0 % 529 545 (3.0 %) Utility Core 683 622 9.8 % 199 190 4.3 % 202 191 5.7 % CIG Core 388 359 8.1 % 206 206 0.0 % 206 216 (4.2 %) Total Core Gross Sales $ 5,800 $ 5,082 14.1 % $ 1,599 $ 1,585 0.8 % $ 1,633 $ 1,679 (2.7 %) Total Gross Sales from Acquisitions 347 - - 63 - - 29 - - Total Gross Sales $ 6,147 $ 5,082 21.0 % $ 1,662 $ 1,585 4.9 % $ 1,662 $ 1,679 (1.0 %) Gross Sales Reductions/Discounts (21) (18) (6) (5) - (6) (6) - Total Net Sales $ 6,126 $ 5,064 21.0 % $ 1,656 $ 1,580 4.8 % $ 1,656 $ 1,673 (1.0 %)
10 Key Financial Metrics 12/31/2011 9/30/2012 Liquidity (1) $511 million $489 million Full Year 2011 and September YTD 2012 Free Cash Flow (2) $134 million $170 million Financial Leverage (Total Par Value Debt Divided by Reported TTM EBITDA) 2.3 X 2.2 X ($Millions) Outstanding at December 31, 2011 Outstanding at September 30, 2012 Debt Maturity Schedule AR Securitization (V) $250 $302 2014 Inventory Revolver (V) $37 $36 2016 Real Estate Mortgage (F) $37 $36 2013 2017 Bonds (F) $150 $150 2017 2029 Convertible Bonds (F) $345 $345 2029 (No Put) Other (V) $6 $26 N/A Total Debt $825 $895 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 Q3 12 Quarterly Financial Leverage Target Leverage 2.0x – 3.5x 2.2x
12 8.1% 9.2% 11.9% 12.6% 2009 2010 2011 Q3 2012 ROIC Long term goal ≥ 15% ROIC is calculated by dividing tax affected income from operations plus equity income by average par debt and stockholders’ equity, less any debt discount.
13 Convertible Debt and Non-Cash Interest as of September 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 $ 344,930 $ (173,685) $ 171,245 Non-Cash Interest Expense ($ millions) 2010 2011 YTD 2012 Convertible Debt $4.3 $2.5 $2.2 Amortization of Deferred Financing Fees $2.6 $4.4 $1.9 FIN 48 $5.0 $1.9 ($3.3) Total $11.9 $8.8 $0.8
14 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 0.32 44.48 $40.00 3.33 0.60 47.63 $50.00 5.05 0.89 49.65 Q3 2012 Average $58.33 6.04 1.03 50.77 $60.00 6.20 1.06 50.96 $75.00 7.35 1.41 52.47 $100.00 8.50 1.76 53.97 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 43.71 million shares
15 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 2013 63 64 64 63 254
16 Q4 2012 Outlook Category Q4 2012 Expectations Sales Growth Total sales growth expected to be 2 to 4% including acquisitions of approximately 2 to 3% Gross Margin Gross margin expected to be at or above 20.2% Operating Margin Operating margin expected to be at or above 5.6% Effective Tax Rate Effective tax rate expected to be approximately 30% to 32% Note: The Outlook above includes only acquisitions completed through the end of Q3 2012.