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): August 9, 2011
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Commission file number 001-14989
| Delaware | 25-1723345 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| 225 West Station Square Drive 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)
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 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.
On August 9, 2011 members of senior management of WESCO International, Inc. (the “Company”) will deliver a presentation at the 2011 WESCO Investor Day. The presentation will include written communication comprised of slides and will be accessible on the Company’s website via webcast. The slides from the presentation are attached hereto as Exhibit 99.1 and are being furnished in accordance with Regulation FD of the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 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.
| August 9, 2011 |
WESCO International, Inc. | |||||
| (Date) |
||||||
| /s/ Richard P. Heyse | ||||||
| Richard P. Heyse Vice President and Chief Financial Officer | ||||||
Exhibit 99.1
TAKING ACTION. DELIVERING VALUE.
WESCO Investor Day 2011
Tuesday, August 9, 2011
| Registration | ||||||
| 1:00 pm |
Introduction Dan Brailer, Vice President – Treasurer and Investor Relations |
|||||
| 1:05 pm |
Welcome and WESCO Overview John J. Engel, Chairman, President, and Chief Executive Officer |
Tab l | ||||
| 1:35 pm |
Sales, Margin, and Operations Steve Van Oss, Senior Vice President and Chief Operating Officer |
Tab 2 | ||||
| 2:05 pm |
Communications and Security David Bemoras, Group Vice President and General Manager |
Tab 3 | ||||
| 2:25 pm |
Lighting and Sustainability Andrea Hogan, Regional Vice President and General Manager |
Tab 4 | ||||
| 2:45 pm | Break | |||||
| 3:00 pm |
International Les Kebler, Group Vice President and General Manager |
Tab 5 | ||||
| 3:20 pm |
Utility Andy Bergdoll, Group Vice President and General Manager |
Tab 6 | ||||
| 3:40 pm |
Financials Richard Heyse, Vice President and Chief Financial Officer |
Tab 7 | ||||
| 4:10 pm |
Q&A and Closing Remarks John J. Engel, Chairman, President, and Chief Executive Officer |
Tab 8 | ||||
| 5:00 pm | Cocktail Reception | |||||
| 6:00 pm | Dinner | |||||
August 9, 2011
WESCO Investor Day Presenters
John Engel David Bemoras
Chairman, President, and Chief Executive Officer Group Vice President and General Manager
Mr. Engel was appointed President and Chief Executive Mr. Bemoras joined WESCO with the acquisition of Officer on September 1, 2009 and assumed the Chairman Communications Supply Corporation (CSC) in 2006. Mr. of the Board responsibilities in May 2011. Prior to this Bemoras is responsible for appointment, Mr. Engel was WESCO’s Chief Operatingbusiness, the midwest portion of Industrial/Construction Officer, responsible for overseeing branch-based and the recently acquired TVC Communications distribution operations and related headquarters and operation, which is a leading distributor of broadband field support functions. Prior to joining WESCO in July communications network infrastructure products. Mr. 2004, Mr. Engel held significant general management, Bemoras holds a BS in Marketing from Arizona State operations, and engineering roles with General Electric, University and was the owner of a Chicago-based data Allied Signal, Perkin Elmer, and Gateway. Mr. Engel holds communications distribution business prior to being a BS in Mechanical Engineering from Villanova University and an MBA from acquired by CSC in 1997. Mr. Bemoras served as Vice President Sales and the University of Rochester. Marketing for CSC from 1997 until two years after CSC in 2006.
Stephen Van Oss
Senior Vice President and Chief Operating Officer Andy Bergdoll
Vice President and General Manager Mr. Van Oss was appointed Senior Vice President and
Chief Operating Officer on September 1, 2009. He is Andy Bergdoll has served as the responsible for overseeing branch-based distribution President of Utility since December 2007. Mr. Bergdoll operations and related headquarters and field support joined WESCO as part of the Communications Supply functions. Since joining WESCO in 1997, he has served Corporation (CSC) acquisition where he was President of as Director of Acquisitions Management, Director of the Liberty Wire and Cable business. His prior experience Information Systems, and Senior Vice President and Chief includes significant management and leadership roles at Financial and Administrative Officer from 2004 through Siemens, Booz Allen & Hamilton, and General Electric. 2009. Mr. Van Oss holds a BS in Accounting from Wright Mr. Bergdoll has a BS in Mechanical Engineering from State and an MS in Marketing and Finance from Cleveland Lehigh University and an MBA from Carnegie Mellon.
State University. Prior to joining WESCO, Mr. Van Oss had public accounting, finance, and general management experience working for Reliance Electric. Andrea Hogan
Regional Vice President and General Manager
Richard Heyse
Ms. Hogan joined WESCO in 2007 as a District Manager
Vice President and Chief Financial of WESCO operations in Philadelphia. In 2010, she was Mr. Heyse joined WESCO in June 2009 as Vice President promoted to Regional Vice President, responsible for and Chief Financial Officer and has responsibility the Eastern Seaboard. The Northeast region was added for WESCO’s to and accounting functions. Mr.her responsibilities in 2011. Prior to joining WESCO,
Heyse holds a BS in Nuclear Engineering from Purdue Ms. Hogan was the Senior Vice President, Operations for University and an MS in Industrial Administration with Strategic Distribution, Inc. from 1989 through 2001. From a concentration in Accounting from Carnegie Mellon 2001 to 2007, she started, ran, and successfully sold a University. Prior to joining WESCO, Mr. Heyse was CFO retail business. Ms. Hogan has a BS in Human Resources of Innophos Holdings where he had responsibility for with a minor in Finance from Florida Atlantic University. Finance and IT. Prior to Innophos, Mr. Heyse held both domestic and international positions in Finance, IT, Supply Les Kebler Chain, and Engineering at Eastman Chemical, Koch Industries, Eaton, and Group Vice President and General Manager International Paper. Mr. Kebler joined WESCO in 2006 and is responsible for
Daniel Brailer WESCO’s
Vice President, Treasurer, Investor Relations and CorporateCanada. Prior to joining WESCO, Mr. Kebler worked at General Electric for 17 years in a variety of sales and Mr. Brailer joined WESCO in March 1999 and is marketing roles. Mr. Kebler holds a BS in Mechanical responsible for Treasury, Investor Relations, Real Estate Engineering from Michigan State University and an MBA and Corporate Affairs. From 1999 to 2004, Mr. Brailer from the University of Chicago. served as Corporate Secretary and managed the Legal Department from 2005 to 2008. Mr. Brailer holds a BS in Marketing and an MBA from West Virginia University. Prior to joining WESCO, he worked for Mellon Bank for over 17 years and held the title of Senior Vice President of the Basic Industries Group.
TAKING ACTION. DELIVERING VALUE.
Welcome and
WESCO Overview
John J. Engel
Chairman, President, and Chief Executive Officer
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 05Aug11 18:45factors 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, 2010 and any subsequent filings with the Securities Page 7 & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such.
ESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
WESCO Investor Day 2011
Agenda
• WESCO Overview
Strategic plan and progress
Business priorities
- Value creation opportunity
• Sales, Margin and Operations
Growth engines
Margin expansion
LEAN for Sales and Operations
05Aug11 18:45• Growth Engines
Four of our eight growth engines are profiled today:
Communications I International Lighting & Utility
Utility & Security Sustainability
Communications & Security
Lighting & Sustainability
- International
Strategy Growth Priorities | Results
Financials |
Financial objectives and results
LEAN for Administration
Cash generation and usage
• Q&A and Closing Remarks
| 3 |
WESCO Investor Day 2011 Engel 080911 |
TAKING ACTION. DELIVERING VALUE.
WESCO Growth Strategy
WESCO Growth Strategy
launched in Fall of 2009
• CEO succession plan
• Established eight growth engines
• Initiated One WESCO
• Increased investments
• Greater transparency
• Developed leaders and organization
Focused execution
2010 and first half 2011
results are excellent
• Positive business momentum
• Taking market share
• Investments paying off
• Acquisitions restarted
• Strong earnings growth
• Shareholder value creation
…execution is producing strong results
| 4 |
WESCO Investor Day 2011 Engel 080911 |
Engel 080911
TAKING ACTION. DELIVERING VALUE.
.
2010 and First Half 2011Results
Sales vs. Prior Year Operating Margin (EBIT%)
EPS Total Shareholder Return
(from January 1, 2010 to July 31, 2011)
reflect positive business momentum
WESCO Investor Day 2011 Engel 080911
Engel 080911
TAKING ACTION. DELIVERING VALUE.
Growth Engines
| 1 |
BUSINESS MODELS END MARKETS PRODUCT CATEGORIES |
I Expand
| 1 |
Geographies |
Global Accounts & Construction Communications
| 2 |
Customers |
Integrated Supply & Security
| 3 |
Focus Markets |
Global Accounts
Provides comprehensive
05Aug11 18:45II Enrich supply chain solutions to Government Fortune 1000 and other multi-site companies for
Products Lighting & 4 their MRO, OEM, and and Services Sustainability capital expenditure needs
| 5 |
New Markets |
Integrated Supply Utility
Provides turnkey outsourcing solutions Page 11 III Drive for MRO and OEM procurement and other Wire & Cable
| 6 |
M&A Agenda supply chain needs |
International
…improve our position in core markets while expanding through acquisitions
TAKING ACTION. DELIVERING VALUE.
Margin and Productivity Initiatives
Priorities:
Six Key Initiatives
III
Drive
Marketing
• Demand creation programs
Operational
• Brand management
Leadership
• Dedicated specialists
Excellence
Sales
• LEAN initiative for sales
Marketing and
• Sales, territory and account management
Management
• Solution selling and sales training
Sales Effectiveness
Sourcing
• Category management
• Volume leveraging
Sourcing and
Effectiveness
| 8 |
Inventory optimization
Pricing Effectiveness
Pricing
• Price increase processes
• Special pricing and rebate management
Effectiveness
•
9
Margin Kaizen events
Service Excellence
Service
• Voice of customer
• KPI deployment and goal setting
Excellence
•
e-Business
10
Talent Management
Talent
• Talent management process and programs
• WESCO University
Management
• High performance culture
LEAN is our foundation for operational excellence
| 7 |
WESCO Investor Day 2011 Engel 080911 |
TAKING ACTION. DELIVERING VALUE
One WESCO
001 Value Proposition
One WESCO Progress
• Customers: emphasizes the
1.
One WESCO “branding”
full range of WESCO products,
deployed
services, and solutions
• Suppliers: emphasizes the increase
2.
Sales rep, product specialist, and local
in sales to be gained by
branch collaboration for key customers
supporting One WESCO
3.
Combined operations in select geographies
initiatives
05Aug11 18:45 • Employees: emphasizes the benefits
4.
Specialized training conducted via
of working together as one team
WESCO University
with all efforts integrated and
5.
Extension of core capabilities across branch
focused on the customer
network (lead generation and qualification,
Why One WESCO
integrated supply)
• Improves competitiveness
6.
Incentive and commission plan
• Extends leadership position
Page 13
adjustments to promote teamwork
• Enables superior customer offering
• Strengthens supplier relationships
All translating into
• Expands employee opportunities
One WESCO customer wins
• Improves shareholder returns
integrating our multi-company heritage into one operating company
| 8 |
WESCO Investor Day 2011 Engel 080911 |
One WESCO Product and Services Portfolio
• Automation and Control
• Broadband Communications
• Data Communications
• Electrical
• Electromechanical
• Electronics
• Industrial MRO and
Consumables
• Lighting
• Network and Physical
Security
• OEM
• Solar
• Utility
• Wind
• Wire and Cable
…comprehensive supply chain solutions for our customers
9 WESCO Investor Day 2011 Engel 080911
Acquisition Strategy
Growth Framework
Acquisition Targets and Process
05Aug11 18:45
Highly fragmented industry with many
Acquisition strategy is focused on:
profitable niches
• Expanding product and service
Acquisition engine restarted in mid 2010
portfolio
Acquisition target pipeline at record level
• Targeting core and new markets
Dedicated WESCO resources in-place
• Strengthening geographic position
We are building on our track record of
• Improving overall financial metrics
35 acquisitions which added over $2B in
revenues from 1995 through mid-2011
…adds capabilities, revenues, and profits
10 WESCO Investor Day 2011 Engel 080911
Business Priorities and Financial Objectives
Business Priorities
Opportunity for Significant Value Creation
1. Take share
2. Expand margins
TODAY
TOMORROW
3. Strengthen portfolio
Market-Focused
One WESCO
4. Build high performance culture
Branches
National Accounts
Global Accounts
Long Term Financial Objectives
LEAN and
Complete
05Aug11 18:45
Integrated Supply
Supply Chain
•
Grow faster than the market and
strengthen business through acquisitions
North American
Global
Centric
• Maintain industry leading cost structur
•
Expand operating profit and margins
•
Generate strong operating cash flow
Fortune 500 company with
through the cycle
market leadership positions,
Provide superior investor returns
a balanced portfolio of businesses,
and an operational excellence culture
Targeting 20-25% annual
net income growth
… focused on shareholder value creation
11 WESCO Investor Day 2011 Engel 080911
WESCO Evolution
Current
Vision
Customers and Markets
“Expanding Blue Chip Customer Base”
“Supply Chain Solutions Company”
• End Markets
Industrial, Construction, Utility, CIG
Vertical market expansion
• Industry Leadership
North America
Undisputed #1 market positions
• Geographic Footprint
North American Base with Int’l expansion
Improved global mix
• Customer Satisfaction
Improving
Customer loyalty
Product and Service Portfolio
• Product and Service Categories
Electrical plus industrial, some services
New product and service categories
• Supplier Relationships
Strong partnerships
Supply chain partner of choice
LEAN: Continuous Improvement
Maturing and expanding
Self-initiated in all locations and groups
05Aug11 18:45
Talent and Culture
Strong and deep team
Industry leader and “employer of choice”
Extra-effort employees
One WESCO team
Marketing, Sales & Service
Competitive advantage
Competitive differentiator
IT and e-Business
Significantly enhanced
Competitive differentiator
Acquisitions
Faster pace and larger sizes
Value Creation
2011 Expectations
• Sales $6B+
Stretch Goal: double-digit sales growth
• EBIT % 5.1%+
Back to 6%, then to 8.0%+
• Free Cash Flow
Approximately 80% of net income
~ 90% net income through economic cycle
• EPS
$3.65+
Commensurate with net income growth
• Cost Structure
Low cost leadership
Maintain low cost leadership
• Capital Structure
~2.5x leverage
2.0 to 3.5x leverage
…strong company, excellent value creation opportunity
Engel 080911
TAKING ACTION. DELIVERING VALUE.
217963-001
05Aug11 18:45
Sales, Margin, and Operations
Steve Van Oss
Senior Vice President and Chief Operating Officer
Operating Priorities
Sales growth
Enhance low cost position –LEAN
• Organic
• Sales
Above market growth
• Operations
Execution of growth engines
• Supply Chain
Capacity and capability
• Administration
expansion
05Aug11 18:45 • Acquisitions
Strong cash flow through the cycle
Product and geographic
• Working capital productivity
expansion
• Capital expenditure management
Bolt on / market relevance
• Strong net income
Gross margin expansion
Page 19 • Pricing actions
• Sourcing and purchasing initiatives
• Compensation
• Culture
…focus on profitable growth
Van Oss 080911
Growth Engines – Status and Opportunities
Status
Status
• Record backlog
• Increased sales and marketing
• Adding new locations
resources
• Favorable trends in data
• Sustainability and LED technology
Communications
Lighting &
are catalysts for future growth
centers, security, and mobility
& Security
Sustainability
$0.6B sales run rate
$1B sales run rate
Marketing initiatives
Opportunities
Leverage Global
Opportunities
centered on lighting
• $19B addressable market
Accounts
• Over $10B market opportunity
and sustainability
Expand geographic
solutions
• Lighting solutions provider of
• 10-20% sales CAGR
footprint
choice
Dedicated resources
Data centers (data
• Global expansion
with lighting focused
• Continuous above market growth
plus electrical products)
branches
05Aug11 18:45
LED technology shift
Status
Status
• Record backlog
• Effectively serving public power,
• Investment in inventory, facilities,
investor-owned utilities, and
and personnel in attractive
alternative energy markets
• Returning to growth in 2011
International
Utility
Opportunities
Opportunities
Expand scope of supply
• Over $10B addressable market
Migration from National
to Global Accounts
• Support our key customers
to Investor Owned
• 5-10% sales CAGR
Expand global footprint
globally
Utilities and Public Power
• Undisputed leader
in conjunction with
• 15-25% sales CAGR outside of
Comprehensive offerings
customer opportunities
for transmission, substation
North America
and alternative energy
Invest and take share
in Canada
Growth Engines – Status and Opportunities
Status
• Leadership position
• Small share position in large
• Serve majority of Fortune 500
fragmented market
customers
• $0.4B opportunity pipeline
Global Accounts &
Government
• $2.4B+ opportunity pipeline
• Adding sales resources
Integrated Supply
• Encompasses over 1/3 of
Opportunities
Fortune 1000 focus
WESCO’s sales
One team of WESCO
government resources
• Over $15B addressable market
Sell all WESCO
products and services
Opportunities
Dedicated stimulus
• 10%+ sales CAGR
Capture new
• Expand account base globally
team remains in place
• One WESCO solutions for
customers and expand
government customers
05Aug11 18:45
with current customers
• Double-digit sales CAGR
Status
Status
• Challenged end markets
• Product category expansion
• Growing backlog (up double
• Opening new facilities
digits)
• $1B+ sales run rate
Construction
Wire & Cable
• $2B+ sales run rate
Opportunities
Opportunities
• Broaden product offerings with
Apply Global Accounts
Expand footprint and
Page 21
model to contractors
• Deeper penetration with EPCs
inventory position
local inventory
Construction project
and Contractors
Dedicated regional
• 10%+ sales CAGR
management services
• Global expansion
and local resources
LEAN application
• Continuous above market
across construction
life cycle
growth
…support above market sales growth
Marketing and Sales Initiatives
Marketing … Demand Creation
LEAN for Sales … Sales Execution
Perpetual Sales Development
• Joint Calls
• Direct Mail and Trade Shows
• Pipeline Management
• Solution Selling
Sales Management Control
Daily Rally for Sales
• Sales Call Management
• Daily Branch Team Meeting
• Sales Effectiveness Training
• New Business Opportunities
• Territory Management
• Quotation Status Review
• Sales Recruiting and
• Sales Success Stories
05Aug11 18:45
Development
Customer Sales
LEAN Processes and Systems
Page 22
Kaizen Events
• Systems and Application Training
• Prospecting
• WESNET Enhancements
• Supplier Involvement
• Error Reduction
• Recovery and Retention
• Cycle Time Reduction
• LEAN Value Creation
…focus on demand creation and consistent growth
Sales Capability and Capacity Expansion
Investing in Sales
Expanding Locations
• 3,100 sales and sales
New and Acquired
management personnel, an
2009
2010
2011E
increase of 12% over the last year
Industrial / Construction / Utility
| 4 |
10
13
• Highly productive sales force
• Capacity expansion to support
Data and BroadbandCommunications
| 7 |
36
| 4 |
above market organic sales
Total
11
46
17
growth:
Productivity
4-6%
Personnel additions
4%+
• Greenfield openings and acquired company
•
locations strengthen our position
College recruitment program
• Sales training and development
• Expansion will continue and is expected to
add to market share capture going forward
• Customer Relationship
Management software
implementation
…drives profitable growth
Components of Gross Margin
Product Margin
(selling price minus product cost)
• Transportation costs
• Customer and supplier cash discounts
• Supplier rebates
• Inventory adjustments
Gross Margin
…are each available for improvement
Gross Margin Expansion
Gross Margin % of Sales
Going forward, targeting at least
20.4%
15 to 25 bpts per year
20.0%
gross margin expansion driven by:
19.7%
19.5%
Pricing actions
Sourcing and purchasing
initiatives
Operational improvements
17.6%
10 year range
2009
2010
2011
(2000-2010)
expectation
…driven by pricing, sourcing and operational improvements
Pricing Actions
Priorities
• Pricing categorization and optimization
• Price increase management
• Customer rebate management
• Robust pricing tools and systems
Initiatives
• Customer class price points
• List and discount vs. cost plus price models
• Dynamic order suspension
• Enhanced freight recovery
• Inside sales incentive program
• Variable sales commissioning structure
• Investment in pricing talent and expertise
…focus on gross margin expansion
Sourcing and Purchasing Initiatives
Priorities
• Volume leveraging
• Maximize utilization of preferred suppliers
• Customer specific supplier price negotiations
• Category management
Branch Region Global
• Inventory optimization
• Excess and obsolete inventory reduction
• Improved fill rates and customer service metrics
Initiatives
• Category management actions
• Regional procurement optimization
• Corporate, group, and region supplier rationalization
• Expanded utilization of special pricing allowances
• Supplier rebate expansion
• Investment in sourcing talent and expertise
…focus on gross margin expansion
Operational Improvements
LEAN Applications to Operations
Warehouse
Transportation
Customer Service
• Continuous evolution since
• Focus on fleet efficiency,
• One WESCO facilities
launch in 2003
routing, demand balancing
(operational synergies)
• Focus on productivity, capacity,
and service
• Distribution center and
organization and customer service
• Systematic freight expense
branch optimization
• Hands-on application of LEAN
recovery
•
Robust service metrics
tools
• Transportation synergies via
05Aug11 18:45
Availability and fill rates
• Enterprise-wide focus via “teach
branch network integration
Voice of the Customer
and do” workshops
• Enterprise-wide deployment
• Successful completion of 400+
Kaizen events
…support sales growth and gross margin expansion
Gross Margin Improvement Pilot
Scope
Mid-Year results for 12 branches
• 12 branches
• Sales up 16%;
34% Construction
– 32% OEM
Operating profit up +200 bpts
22% Industrial
– 12% CIG/Utility
• Product margin run rate improvement
• $112M annual sales
| 3 |
branches: greater than 250 bpts |
Approach
| 4 |
branches: between 140 and 190 bpts |
• Comprehensive program
| 4 |
branches: between 10 and 100 bpts |
Pricing –improve price, protect cost
Purchasing –lower cost
| 1 |
branch: down 90 bpts |
Activity-based costing
Further Opportunities
Compensation
• Supplier rationalization
Systems and reporting
• Distribution Center and branch
Culture
optimization
• Daily measurement and ranking
• Compensation structure enhancement
• Sales desk training
• Additional talent upgrades
Challenges
• Unprecedented supplier price increases
• Margin compression in challenging end markets
• Non-residential construction competitive landscape
…initial results reflect margin expansion
Summary
• Execution of our growth engines and
increased investments in sales and
marketing have resulted in profitable
above market results
• Gross margin expansion
opportunities are expected to
translate to higher operating margins
• LEAN operational improvements
support investments in new facilities
while maintaining strong operating
profit pull through
TAKING ACTION. DELIVERING VALUE.
Communications and
Security
David Bemoras
Group Vice President and General Manager
Data and Broadband Communications
Mission Statement
Last 5 Years
To become a Global Leader in value-
• WESCO data communications sales were less than
added distribution and supply chain
$100M, approximately 2% of sales, in 2006
services specializing in communications
• Acquired Communications Supply in November 2006
and security infrastructure solutions for
• “Branch within a branch” expansion strategy added 26
enterprise and broadband
new locations through 2010
communications.
• Acquired TVC in December 2010
Communications Solutions
• 2011 first half sales run rate exceeds $1B,
approximately 18% of sales, establishing a significant
A wide range of customer applications are
position in North America
supported:
Future Direction
• Voice and data communications
Current
Future
•
Security, surveillance, and access control
80 locations
Additional locations
• Data centers
North America based
Globally enabled
• Intelligent buildings
Multiple ERP platforms
Common ERP platform
• Broadband networks
Strategic accounts
Global accounts
• Wireless communications
400 sales people
Additional sales people
• Audio and video
Branch network
Branch and distribution
• Smart grid
center network
…provides excellent growth opportunities for WESCO
Attractive Global Markets
Enterprise Networks
Broadband
Security
Headend
16%
IP Surveillance
Drop
8%
Data Centers
Tools & Test
Equipment
Customer
Access Control
Enterprise DAS
Premises
Equipment 8%
13%
Enterprise Cable
11%
Outside Plant
and Connectivity
Analog Surveillance
73%
46%
64%
Sources: BSRIA, annual reports, ABI research, ExeTechConsulting, TE Connectivity
Sources: TVC
Sources: IMS Research
$7B+ Market Opportunity (estimated)
$2.5B+ Market Opportunity (estimated)
$11B+ Market Opportunity (estimated)
•
Fragmented distribution channel
• Estimated available opportunity for
• Distribution channel becoming more
•
Estimated market CAGRs
Americas $1.2B+
important to security internet protocol (IP)
Data Centers 10%
• Canadian and Latin American distribution
manufacturers
Enterprise DAS 10%+
opportunities are expanding
• Estimated CAGR
Enterprise Cabling 5%
IP Surveillance 20%+
• Estimated CAGR of 5% in U.S.; higher
•
Bandwidth intensive applications driving
Analog Surveillance flat to slightly down
outside
demand for products and services
Access Control 5%+
Page 33 Customers
Customers
Customers
•
Contractors
• Cable TV Operators
• Security Integrators
•
Fortune 1000
• Telcos
• Contractors
•
Government
• Contractors
• Fortune 1000
•
Healthcare and
• Resellers
• Government
Education
• Healthcare and Education
Key Market Trends Favor WESCO
Key Market Trends WESCO Position
1. Video EVERYWHEREManagement expertise and domain
2. Data center capacity knowledge limitationsSupplier advocacy and preferential support
3. Cloud computing and
• Industry-leading demand creation marketing virtualizationprograms
4. Mobility and accessibility• Cost-effective global geographic expansion
5. Continuous, real-time capabilities surveillance and storage• Broad product and services offering
6. Security and cyber terrorism customer base prevention
• M&A capacity and capability
7. Globalization including •
Limited competitive landscape broadband accessibility
Extensive Communications Product Portfolio
Broadband Communications
Data Communications
Product Category & Description Products Product Category & Description Products
Signal Origination •Satellite Receivers Network Cabling & Connectivity • UTP & STP Cable
•Processors • Fiber Optic Cable
Head-end and central office equipment used •VoIP Equipment Products that are used to connect one device • Patch cords
•VOD Equipment • Connectors
to receive and process signals for to another, with the purpose of sharing data • Patch Panels
•Advertising
transmission Insertion across the network • Pre-Terminated
Systems
Plant • Cable (coax, copper, fiber) Racks, Cabinets & Cable Management • Server Cabinets
• Pole Line Hardware • 2 & 4-Post Racks
• Line Splitters & • Network Cabinets
The main delivery system used to carry the The physical containment devices used to
Nodes • Ladder Racks
signal from the point of origination to the main • Conduit hold network electronics and to manage the • Cable Trays 05Aug11 18:45line (can be aerial or underground) • MaxCell routing of network cable • Cable Organizers
Drop • Splitters Wireless & Local Area Network Equipment • Distributed Antenna
• Drop Cable Systems (DAS)
• Drop Hardware • Access Points
The point at which the signal branches from Systems used to transmit and/or convert data
• Connectors • VoIP & KVM
main line and terminates at the customer • Jumpers in the local area network Switches, PoE
premises • Network Monitoring
• Media Converters
Customer Premises Equipment • Modems • Set-Top Boxes Power & Protection • UPS
• Remotes • Installation Kits • Surge Suppressors
Products that are used to supply, protect, • Power Strips Products used to carry the signal inside the
•
Installation Supplies & Test Equipment • Hand Tools Security • IP & Analog Cameras
• Ladders • Video Software
Products used to install, test and repair all • Signal Level Meters Solutions comprised of a combination of • Access Control
• Batteries software & hardware designed to limit the • Fire/Burglar Alarm system components • Monitors
• Spectrum Analyzers
exposure of a facility or computer network to • Servers
• Test Tone Generators
access from undesired sources • Mass Notification
Strategic Plan ??Drivers of Growth
Security Everywhere Specification Selling Team Solutions and International
Core offering in all • Win the “race” to the end • Low-cost market • Global Accounts Focus WESCO locations user penetration • Viable “alternative” for Global footprint • Increase supplier • Service excellence U.S. based global One WESCO advocacy • Increase customer customers
• Increase margins touches • Leverage supplier
• Business Development • Margin improvement partnerships teams
Outside Plant Service Product Line Acquisition Solutions Excellence Expansion Strategy
Leverage TVC portfolio • Distribution Centers • Address growth trends • Product line expansion Maxcell growth • LEAN culture • Support solution selling • Geographic reach ONE WESCO approach • Superior customer • Leverage domain • Local market experience knowledge strengthening
• Proprietary offerings • Deepen supplier partnerships
Strategic Plan and Execution
• Offense-minded, empowering, “play to win” culture
• Specialized and dedicated resources (global accounts, government, utility, security, data centers)
• Developing and promoting proprietary value-added solutions
• Dedicated end-user, specification-driven sales teams
• Centralized lead generation and qualification team
• International expansion
• Focus on strengthening the communications ecosystem
Success Stories
Financial Services Company International Furniture Store Retailer
Data Center Consolidation IP Surveillance Solutions
Initial contact made when customer inquired Introduced Canadian-based security about WESCO data center offering integrator to FTLportal.com
Planned to consolidate 20 small data centers Customer inquired about utilizing bundled into single 25,000 sq. ft. facility approach to internet protocol (IP) surveillance
Relationship over past 8 years built credibility Required complete deployment for 3 locations with IT management staff with 90 days
Customer did not look at any other distribution Developed integrated “rack & stack” solution options due to WESCO “one-stop” shop offer, that delivered consistent results across project began in mid 2011 multiple locations
Sold the entire portfolio: grounding, PDUs, Quality of solution has opened up doors for fiber and copper, cabinets, racks, etc. more locations and product sets
Summary
Market trends favorable for strong communications
• Integration of acquired businesses with single go-to-market strategy
• Data communications portfolio access for all WESCO branches 05Aug11 18:45• LEAN practices that drive internal and external value
• Acceleration of international growth by providing the viable alternative
• Expansion of value-added product lines, services and marketing programs to support customer needs Page 39 and total solution delivery
Lighting and Sustainability
Andrea Hogan
Regional Vice President and General Manager
Lighting Overview
• The U.S. Department of Energy reports that lighting represents 30% to 50% of the energy used in most commercial and industrial facilities
• 80% of the existing commercial buildings in the U.S. have lighting systems that are 20 years old or older
• Significant opportunity exists for cost reductions using new technologies
• Innovation in lighting and lighting controls significantly
reduces energy consumption and CO2 emissions
Lighting Market Trends and Drivers
Sustainability Legislation and
Product Innovation Requirements Emphasis Rising Energy Costs
LEED • Federal, state, local, • Energy efficient • Reduction in energy Green building and utility programs to product options: Linear usage and maintenance strategies and codes promote lighting Florescent, Induction, costs upgrades LED • Energy management Reduction in energy consumption of • Rising energy costs • Total light management services building systems • Environmental safety controls solutions • Full turnkey capabilities and compliance • Longer product life and • Supply chain optimization CO2 reduction reduced maintenance efforts, corporate • Building and lighting • Limited capital budgets carbon footprint code compliance costs reduction initiatives • Global manufacturers • Quick ROI pay back
• Legal restrictions on
Corporate social the manufacture of entering market (LG, responsibility non-energy efficient Toshiba, Panasonic) products
Solid State Lighting Technology is Here to Stay
LED Forecast
LED Transformation Drivers
•
LED spend estimated to reach $100B annually
• Superior energy savings
worldwide by 2015 with following global mix
• Long life and reliability
-
North America 40%
• Quality of light experience
-
Europe 33%
• Expanding ability to meet application
-
China 21%
requirements
-
Japan & Row 6%
• Attractive ROI for certain applications
•
Estimated that by 2015 LED lighting
05Aug11 18:45
applications will account for 50% of the total
lighting industry.
Leading Manufacturers
Traditional
New Players
Acuity
Cree
Page 43
Cooper Lighting
LG
GE Lighting
Panasonic
Hubbell Lighting
Samsung
Osram
Sharp
Philips
Toshiba
Key Drivers of WESCO Lighting Growth
Opportunity to
Industrial
OEM
Utility
expand lighting
• Global accounts
• One WESCO
• Street lighting
portfolio
• Upgrades and retrofits
• Integrated supply
• Outdoor lighting
• ESCOs
specialists
• Daily upselling
Goal of consistent
• Relampingopportunities
double-digit
sales growth
Construction
Institutional & Government
05Aug11 18:45
• Stimulus/ARRA
• Institutional
$550M+ first half
• EPCs
• Stimulus/ARRA
annualized sales
• Design build
• Global account penetration
run rate (~10% of
• Green construction
• Healthcare
• National homebuilders
• Education
WESCO portfolio)
• ESCOs
Key actions to capture new construction and retrofit opportunities
WESCO lighting
Open additional WESCO
WESCO lighting
Global Accounts
“centers of
Lighting solution centers in
solutions team
penetration
excellence”
selected areas
…impact all end markets and customer groups
Marketing Programs
Marketing Programs
Global Account, First Tier Automotive
• Specialized lighting
Lighting Audits Pay Off
catalog and market
segment brochures
• Supplier promotions and
incentives; renovation
sales blitz campaigns
• “In the Spotlight” monthly
•
WESCO worked with Global Account
lighting newsletter
ESCO Partner
•
3.5M ft2 and50,000 fixtures to be
upgraded
Strategic Lead Acceleration Program (SLAP)
•
WESCO drove lamp and fixture
• Government
• 850 companies
product specification
• Education
received kits
•
WESCO and ESCO performed
• 330 meetings
extensive lighting audits to develop
• Property Management
ROI analysis
scheduled
• Construction
•
Lighting upgrade project has attractive
• 10 agreements
financial payback, cost savings, and
• Hospitality and Retail
signed for $90M
energy demand reduction
over 3 years
WESCO Lighting Solutions Centers
Boston, home of first center,
Facility available for:
opened May 2011
• Customer meetings and training
• The WESCO Lighting
• Trade Associations
Solution Center provides a
• New Global Accounts roll-out meetings
“hands on” experience
• Supplier meetings and training
• Application vignettes are
•
Employee training
featured, allowing customers
the opportunity to
• Featuring additional One WESCO products,
(i.e. datacom, power distribution, security, etc.
experience lighting in an
environment that mirrors
their own facilities
• Additional features include a
training area, lamp and
ballast room, and other
technical and training tools
First of its kind in distribution!
Featured Application Areas at the Lighting Solution Center in Boston
Classroom / Office Hospital Lighting demos Retail
Summary
• Lighting is a very large addressable market with attractive growth characteristics
• Energy efficiency, sustainability, legislation, product innovation, and new technologies are catalysts for future growth
• WESCO marketing and sales initiatives are focused on providing complete and sustainable lighting solutions
International
Les Kebler
Group Vice President and General Manager
International
1. Focus on large, growing
WESCO Offering
international areas
Comprehensive portfolio of products
2. Global accounts
and services
3. Global sourcing
• Electrical (all standards)
International
4. In-country business
• Maintenance, repair and operating supplies
development
All geographies
• OEM direct materials and value added
outside U.S. and
5. Globally enabled product
assemblies
Canada
and service platforms
• Capital project material management
• Communications and security
• Integrated Supply
WESCO International Opportunities
Customer Value Proposition
Industrial &
Direct
Global
• Decades of experience; Westinghouse legacy
Electrical
+
Material
+
Capital
MRO
• Fully integrated operations
(OEM)
Projects
• Broad geographic coverage
• Flexible business model
• Global supply chain services
• Partnership with world class manufacturers
• Industry leading Global Accounts program
…investing in our international customers
| 2 |
WESCO Investor Day 2011
International 080911
Positioning to Capture Global Growth
Global Trends
Global Opportunities
WESCO Positioning
• Extensive investment in
• Geographic expansion
oil, gas, metals, and mining
• Vertical market focus
• Major infrastructure
• Extensive multi-country
development underway in
project experience
numerous countries
Emerging Market Growth
• Global sourcing capability
• Customers and suppliers
seeking global partners
• Customer and supplier
partnerships
• Connectivity and
secure networks and global
• Extensive communications,
data center build-outs
security, and broadband
continuing
offerings
Investment in Infrastructure
• In-country resources
• Supply chain integrity
• Low-cost country sourcing
Globalization
…new markets and global customers
| 3 |
WESCO Investor Day 2011
International 080911
WESCO’s International Profile
WESCO’s commercial presence
$300M estimated
outside the U.S. and Canada includes:
2011 sales outside
U.S. and Canada
• Angola
• Czech Republic
• Saudi Arabia
• Australia
• England
• Scotland
• Brazil
• Mexico
• Singapore
• China
• Nigeria
• United Arab
• Chile
• Poland
Emirates
…expanding with customers in growing regions
New and Expanded International Locations
Mexico
Singapore
United Kingdom
Australia
United Arab Emirates
China
Over the last four years
WESCO Investor Day 2011
International 080911
Strengthening Our Globally Enabled Platforms
• Ability to provide a wide
• Expanding internationally
range of MRO material and
• Region/local technical
OEM solutions
expertise and inventory
• Fortune 1000 customer base
• Dedicated data center team
Global Accounts
Communications
and Integrated
• Increasing customer needs
and
•
Single destination for a wide
Supply
for international location
Security
array of data communications,
support
security, and broadband
• High touch business model
solutions
• EPC Centers of Excellence
• Integrated U.S. Government
• Proprietary project
sales team
management software (RPM)
• Expanding programs into
• Extensive experience
EMEA and Asia Pacific
Global
Government
Construction
executing challenging global
• Providing support to U.S.
Projects
projects
Government contractors
• Global sourcing
globally
• Sharing best practices
…leveraging a unique WESCO value proposition
WESCO Investor Day 2011
International 080911
TAKING ACTION. DELIVERING VALUE.
Success Stories
Engineering, Procurement, & Construction (EPC):
Capital Project Management
• Multi-billion dollar refinery expansion
• Sourcing from five countries
• Application of proprietary project
management software
• JIT inventory management
• WESCO personnel on site in Asia
• Approximately 20% cost savings
Multi-National Manufacturing Company:
Global Accounts
• Providing electrical and non-electrical
MRO materials
• Procurement services
• Supporting 10 locations in the U.S.,
Europe, Africa, Asia, and China
• Participating in large global projects
leveraging WESCO proprietary software
| 7 |
WESCO Investor Day 2011 International 080911 |
TAKING ACTION. DELIVERING VALUE.
| 8 |
WESCO Investor Day 2011 International 080911 |
Summary
• WESCO is investing in international,
focused on large, growing regions
• Global trends support our growth objectives
• Executing an integrated operating model
with globally-enabled product and service
platforms
• Serving customers and suppliers who are
increasingly seeking well capitalized, large
global supply chain partners
217963-001 05Aug11 18:45 Page 56
TAKING ACTION. DELIVERING VALUE.
Utility
Andy Bergdoll
Group Vice President and General Manager
TAKING ACTION. DELIVERING VALUE.
Utility Market Overview
Generation Transmission Substation Distribution
Utility Power Chain Segments
Utility Customers
• 3,000 Public power utilities (municipals and cooperatives)
• 100 Investor owned utilities (IOUs)
• 700 Generation plant sites
• 60 Utility contractors
Customer Challenges
• Increased reliability expectations
• Increased cost pressures
• Public policy uncertainty
• Shift in work and spend profile to projects
• Resource turnover and staffing constraints
Customer Opportunities
• Unprecedented supply chain flexibility
• Generation MRO sourcing
• Transmission investment
• Smart grid investment
• Renewables investment
Total annual spend: $80B to $100B (U.S.)
WESCO addressable spend: $8B to $12B
WESCO run rate: $600M to $700M
| 2 |
WESCO Investor Day 2011Utility 080911 |
TAKING ACTION. DELIVERING VALUE.
WESCO Investor Day 2011
Utility Power Chain:
Generation and Transmission
Overview • $40B to $50B annual spend in U.S.
• >1.0M MW capacity ~700 major sites
? Coal / oil ~50%
? Gas ~25%
? Nuclear ~20%
? Renewables ~5%
• Owned by IOUs (70%), non-utility entities, public power
• $15B to $20B annual spend in U.S.
• National high voltage network – 365k miles
• Complex system – 69kv to 765kv – Nine
independent system operators
• Owned by IOUs (80%), transmission
companies, public power, and government
Market
Trends
• Carbon / EPA driven upgrade projects
• Pending coal retirements
• State renewable portfolio standards
• Operating cost pressures
• Projects driven by capacity constraints,
reliability, and renewables integration
• Right of way and cost allocation issues
• $72B major project pipeline – favorable ROI
WESCO
Position
• Plant level supply of core electrical products
• Corporate level industrial and electrical MRO alliances
• Outage support services, including nuclear
• Construction project services
• Hardware scope in IOU alliances
• Major project bid support and material
packaging for utility contractors
• Project and logistics service provider
WESCO
Opportunity
• $2B to $3B addressable spend
• Materials supply on coal plant upgrade projects
• Materials supply and project services for new Gas plant,
Wind, and Solar construction projects
• Integrated supply programs for MRO materials
• $1B to $2B addressable spend
• Utility contractor national account program
• Alliance account scope expansion
• Project materials management and logistics
services expansion
Generation Transmission
Utility Power:
Substation and Distribution
Overview • $3B to $5B annual spend in U.S.
• Decentralized infrastructure
? 450K high voltage stations (transmission)
? 1M medium voltage stations (distribution)
• Owned by IOU(85%) and public power
• $25B to $30B annual spend
• Metered system – overhead and underground
? 120 IOUs (122M meters)
? 1,000 CoOps (18M meters)
? 2,000 Muni’s (22M meters)
Market Trends • Spend driven by aging infrastructure
? 70% power transformers >25 years
? 60% circuit breakers >25 years
• Investment in reliability, efficiency, security,
and automation projects (smart grid focus)
• Spend driven by maintenance and storms; grid
expansion spending remains low
• Advanced meters, automation (smart grid focus)
• Increase in demand for supply chain services
WESCO Position • Hardware supply to utilities
• Materials and packaging services for utility
contractors for system and renewables
• Manufacturer’s rep to suppliers
• One WESCO – communications plus security
products
• Leading national distributor to public power
• Leader in alliance and integrated supply programs
• Core supplier partnerships across all categories
• One WESCO service models, branch
infrastructure, product category expertise
WESCO
Opportunity
• $1B to $2B addressable spend
• Core product share growth
• Product scope expansion driven by automation
and security projects
• Project materials management and logistics
services expansion
• $4B to $6B addressable spend
• Core product share growth
• Product and service scope expansion
• Distribution automation project support
• Supply chain services and integrated supply
Smart Grid Evolution
Market Adoption
…provides substantial opportunities for WESCO
Advanced Metering
Infrastructure
Source: Utilimetrics
217963-001 05Aug11 18:45 Page 61
TAKING ACTION. DELIVERING VALUE.
| 5 |
WESCO Investor Day 2011 |
Renewables Opportunities:
Wind and Solar
Market Opportunity in U.S.
• Renewable energy demand driven by state
renewable portfolio standards – up to 30% by 2020
? U.S. wind capacity is projected to grow 50%
from 40K MW to 60K MW by 2020
? U.S. solar capacity (utility scale) is projected to
grow from 1K MW to 10K MW by 2020
? $2B to $5B addressable spend over next
decade
• 6-10K MW of new commercial/residential installs
projected over the next decade – $10B to $20B
WESCO addressable spend
Market Trends
• Strong Project pipeline (20K MW wind and 25K
MW solar)
• Transmission constraints, dispatch characteristics,
low natural gas prices and siting issues impact
renewables project development
• Wind development still active: 5K MW wind
installed in 2010 versus 10K MW in 2009
• Solar development remains strong – 350 MW of
new capacity in 2010, 1K MW under construction
in 2011
| 6 |
WESCO Investor Day 2011 |
Industry Participants
• Utilities – power purchase agreements or direct
ownership
• Developers and system owners
• Utility contractors – balance of plant procurement
• Manufacturers provide turbine, solar panels, controls,
traditional utility and electrical product suppliers
• Packagers and distributors
WESCO Strategy
• Global account strategy with utility and electrical
contractors, and solar installers
• Alliance strategy with utilities and developers
• OEM relationship with manufacturers for project
packages
• MRO inventory services strategy for wind farms
• Targeted marketing campaigns, specialized sale
WESCO Utility Business Models
Generation Supply Chain
Industrial and electrical MRO, 2nd tier
distribution, direct spend
Fleet level sourcing and logistics
Outage support services
site material management
Standardization and substitution programs
Integrated supply
Power Delivery Supply Chain
• Pole line hardware, transformers, cable, lighting,
tools, safety, etc.
• Dedicated local service plus national inventory
and logistics network
• Emergency response programs
• Functional outsourcing
• Savings and continuous improvement programs
• Integrated supply
Generation Project Services
Bulk electrical material take-off services
Sourcing and logistics for electrical and MRO
Site materials management
Cable management programs
Materials requirements management
T&D Project Services
• Engineered bills of material, specification
and schedule validation
• Sub-assembly fit-up, kitting and marshaling
• Site materials management
• Materials requirements management
Operations
and
Maintenance
WESCO
Addressable
Spend
$8B to $12B
Major
Projects
| 7 |
WESCO Investor Day 2011 |
Utility 080911
TAKING ACTION. DELIVERING VALUE.
WESCO Integrated Supply Chain Services
Inventory
Management Procurement Expediting Transaction
Management
Warehouse
Operations
• Strategic Sourcing
• Category Plans
• Bid Management
• TCO Evaluation
• Product
Standardization and Rationalization
• Contract
Management
• Market Price
Indexing
• Integrated
Demand Planning
• Inventory
Optimization
• Network
Optimization
• VMI Programs
• Lobby Stock and
Job Trailers
• PO Execution
• Supplier
Performance
Management
• System
Integration
• eProcurement
Tools and
eCatalogs
• Inbound Freight
Management
• Order and
Shipment
Tracking
• Shortage Reports
• Expedited Freight
Evaluation
• Need Date
Management
• Invoice
Automation and
Processing
• Mismatch
Resolution
• Receivables
Processing
• Cash
Reconciliation
• Supplier Payment
• Metrics and
Reporting
• Warehouse
Management and
Operation
• Lean
Warehousing
• Kitting and Sub-
Assembly
• Cross-docking
• Labor Outsourcing
• Logistics
Management
• Route
Optimization
• Shipment
Consolidation
• Delivery and
Back-Haul
• Job Site
Deliveries
WESCO Service Offerings
Integrated Supply Services Applications
Core WESCO
product scope
2nd tier distribution scope
(non-core to WESCO)
Direct spend, OEM spares,
major equipment, etc.
Major projects /
contractor spend
| 8 |
WESCO Investor Day 2011 |
Utility 080911
TAKING ACTION. DELIVERING VALUE.
Recent Success Stories
Generation
Supply Chain Services
• MRO RFP issued to more than 300
suppliers (distributors and manufacturers)
• WESCO developed an alternative bid for
Integrated supply business model and was
engaged to perform a supply chain
assessment
• WESCO awarded MRO integrated supply
program with responsibility for managing
more than $100M annual spend, 50K items,
and 4K legacy suppliers
• Service model engaged 12 second tier
distributors and a centralized order
fulfillment center/cross dock to service over
50 customer sites
Transmission
Project Services
• Utility experienced material
logistics problems
• Contractor awarded project
for 100 miles of 345Kv
transmission line
• WESCO awarded $18M
material and services contract
to manage contractor and
owner furnished materials
TAKING ACTION. DELIVERING VALUE.
Summary
The Utility market is large and undergoing
significant changes which are creating
excellent growth opportunities for WESCO
• WESCO’s core competencies are closely
aligned with our customers’ investment
priorities
• WESCO has share growth opportunities in
all sectors of the utility power chain
• WESCO is the recognized utility industry
leader in integrated supply programs and
Utilities are placing an increasing value on
these services
10 WESCO Investor Day 2011
Utility 080911
TAKING ACTION. DELIVERING VALUE.
Financials
Richard Heyse
Vice President and Chief Financial Officer
TAKING ACTION. DELIVERING VALUE.
2011 First Half Results Exceeded Expectations
July sales
per workday
up 21% versus
prior year
1st Half
Sales 24.6% in Q1 versus prior year
21.1% in Q2 versus prior year
Operating Margin 4.5% in Q1
5.6% in Q2
EPS $0.74 in Q1
$1.00 in Q2
…strong sales growth and operating margin expansion
| 2 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
Productivity Gains Continue into Expansion Cycle
Last Expansion Cycle
(2003-2006) Current Recession/Recovery Cycle
(2008 – Mid 2011)
…driven by industry-leading cost structure and LEAN
| 3 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
Shareholder Value Creation
Total Shareholder Return
(from January 1, 2003 to July 31, 2011)
Over 81/2 year time period
823%
WCC S&P 500 Russell 2000 GWW FAST AXE
Total Shareholder Return
(from August 10, 2010 to August 3, 2011)
Approximately 1 year time period
…consistent and sustainable long-term shareholder returns
| 4 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
2011 Full Year Expectation
2010 Investor Day Targets
2011
Expectation
Vs.
Investor
Day Target
Sales growth 7-11%, including acquisitions 19%+ Ahead
Operating margin expansion 50-70 bpts 90 bpts+ Ahead
Net income growth 20-25% 55%+ Ahead
Leverage ratio 2.0 to 3.5, without additional acquisitions ~2.5 On Target
…ahead of 2010 Investor Day targets
| 5 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
LEAN for Administration
Background
? LEAN business and administrative process improvement
teams in place to leverage evolution of Oracle financials
and WESCO’s IT applications
? Focus is administrative and back office process
efficiency and effectiveness
Approach
? Teams are composed of experienced WESCO
operations and functional managers
? LEAN techniques are utilized in combination with
business process analysis and IT project management
LEAN for Administration
LEAN is not “in addition to,” it is “part of” the
WESCO business process and system design approach
LEAN is the “how” in all WESCO opportunities
217963-001
| 6 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
2012 Anticipated Environment
Natural resource demand
• ABI increasing
• Utility spending
• Global growth
• Low interest rates
• Rising product prices
• Share shift to larger
players
• Non-Residential
construction at bottom
• Industrial growth
rates moderate
• Residential housing
• Consumer spending
• Excess commercial
real estate
• Government deficits
• Raw material prices
increasing
…expect continued modest demand growth in 2012
217963-001 05Aug11
| 7 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
2012 Financial Outlook … An Early Look
• Sales growth (excluding price and F/X impacts) 7-11%
? Market growth (GDP plus 2-3%) 4-6%
? Share gain 1-2%
? Acquisition 2-3%
• Operating margin expansion 40-60 bpts
? Gross margin expansion plus operating
cost leverage
? Core pull-through target of 50% maintained
• Tax rate 30-32%
• Net income 25%+ growth
…continuing to invest in growth, while driving operating leverage
217963-
| 8 |
WESCO Investor Day 2011 |
Financial 080911
TAKING ACTION. DELIVERING VALUE.
2012 KPI Targets … An Early Look
2011E 2012 Target
Sales $6.0B+ $6.5B+
Operating Margin 5.1%+ 5.5%+
Net Income $180M+ $225M+
EPS – Diluted1 $3.65+ $4.40+
Leverage Ratio ~2.5 ~2.0 2
| 1 |
Utilizes diluted share count of 50 million shares in 2011 and 51.5 million shares in 2012 |
| 2 |
Includes nominal acquisitions (~2% of sales) |
…expect to exceed 25% annual net income growth target in 2012
9 WESCO Investor Day 2011
Financial 080911
2012 to 2014 Sales Targets
Balanced Growth
Utility
CIG
Construction $4.6
$5.1
$6.0+
$6.5+
7-11%
CAGR
2009 2010 2011E 2012E 2014E
Sales $B
…expect continued sales growth momentum
217963-001 05Aug11
10 WESCO Investor Day 2011
2012 to 2014 Operating Margin Targets
Pricing/Sourcing
Margin Drivers
Portfolio
Efficiency
3.9%
4.2%
5.1%+
5.5%+
40-60 bpts/yr
2009 2010 2011E 2012E 2014E
Operating Margin %
…driving for 6%+ operating margins by 2013
11 WESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
12 WESCO Investor Day 2011
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E
Capital Structure
• Current liquidity in excess of
$400M
• Access to multiple capital
markets
• Staggered maturities on debt
instruments
• Leverage ratio within target
range of 2.0x to 3.5x
• Expect to convert approximately
80% of net income into free
cash flow
…supports our strategy and future growth
Strong Capital Structure Total Debt to LTM EBITDA
Ample capacity to support growth
programs and acquisitions
12 WESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
Cash Flow Management
…expect to maintain fiscal discipline while funding growth
First Use
Support organic
growth at greater than
market rates
Second Use
Fund accretive
acquisitions to supplement
organic growth
Third Use
Reduce financial
leverage
Fourth Use
If Debt to EBITDA ratio is sustained below 2.0,
return capital to shareholders
+ +
No change from last year
13 WESCO Investor Day 2011
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Business Priorities and Financial Objectives
Business Priorities
Take share
2. Expand margins
3. Strengthen portfolio
4. Build high performance culture
Long Term Financial Objectives
Grow faster than the market and
strengthen business through acquisitions
• Maintain industry leading cost structure
• Expand operating profit and margins
• Generate strong operating cash flow
through the cycle
• Provide superior investor returns
Targeting 20-25% annual
net income growth
Opportunity for Significant Value Creation
TODAY TOMORROW
Market-Focused
Branches One WESCO
National Accounts Global Accounts
LEAN and
Integrated Supply
Complete
Supply Chain
North American
Centric Global
Fortune 500 company with
market leadership positions,
a balanced portfolio of businesses,
and an operational excellence culture
…focused on shareholder value creation
14 WESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
15 WESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
Q&A and Closing Remarks
John J. Engel
Chairman, President, and Chief Executive Officer
TAKING ACTION. DELIVERING VALUE.
Invest in WESCO
• Industry leader with low risk business profile
• Proven business model and well positioned in large, fragmented markets
• Organic sales growth faster than the market
• Operational excellence culture founded on LEAN
• Excellent margin expansion results and future potential
• Proven acquirer in a consolidating industry
• Strong free cash flow generation through economic cycle
…strong company, excellent value creation opportunity
217963-001 05Aug11 18
17 WESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
WESCO
DISTRIBUTION
18 WESCO Investor Day 2011
TAKING ACTION. DELIVERING VALUE.
WESCO Distribution, Inc.
Definitions Appendix
Financial leverage is calculated by dividing total debt, including debt discount, by the trailing twelve months earnings before interest, taxes, depreciation, and amortization (EBITDA).
Free cash flow is calculated by deducting capital expenditures from cash flow provided by operations.
Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales.
Liquidity is total availability under asset-backed facilities plus invested cash.
Total Shareholder Return (TSR) is the total return of a stock to an investor during a period of time, including capital gains and dividends, assuming reinvestment of dividends.