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 20, 2011
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Commission file number 001-14989
| Delaware | 25-1723342 | |
| (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 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 20, 2011, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter of 2011. 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 2011 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 20, 2011.
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 20, 2011 | WESCO International, Inc. | |||||||
| (Date) |
||||||||
| /s/ Richard P. Heyse | ||||||||
| Richard P. Heyse | ||||||||
| Vice President and Chief Financial Officer | ||||||||
Exhibit 99.1
|
|
NEWS RELEASE
| |
|
WESCO International, Inc. / Suite 700, 225 West Station Square Drive / Pittsburgh, PA 15219 |
WESCO International, Inc. Reports
Third Quarter 2011 Results
Third quarter results compared to the prior year:
| • | Diluted EPS of $1.11 per share, up 50% from $0.74 per share |
| • | Net Income of $53.9 million, up 60% from $33.7 million |
| • | Operating margin of 5.8%, up 120 basis points from 4.6% |
| • | Consolidated sales of $1.58 billion increased 19% from $1.32 billion |
PITTSBURGH, October 20, 2011/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 2011 third quarter financial results.
The following results are for the three months ended September 30, 2011 compared to the three months ended September 30, 2010:
| • | Consolidated net sales were $1,580.4 million for the third quarter of 2011, compared to $1,324.6 million for the third quarter of 2010. The 19.3% increase in sales includes positive impacts of approximately 6.9% from acquisitions and 1.1% from foreign exchange rates, resulting in organic sales growth of approximately 11.3%. Sequential sales increased 3.7%, and includes a positive impact of approximately 0.1% from acquisitions and a negative impact of approximately 0.1% from foreign exchange. |
| • | Gross profit of $315.7 million, or 20.0% of sales, for the third quarter of 2011 was up 50 basis points, compared to $257.8 million, or 19.5% of sales, for the third quarter of 2010. |
| • | Selling, general & administrative (SG&A) expenses of $216.2 million, or 13.7% of sales, for the third quarter of 2011 improved 70 basis points, compared to $190.6 million, or 14.4% of sales, for the third quarter of 2010. |
| • | Operating profit was $91.8 million for the current quarter, up 49.8% from $61.2 million for the comparable 2010 quarter. Operating profit as a percentage of sales was 5.8% in 2011, up 120 basis points from 4.6% in 2010. |
| • | Total interest expense for the third quarter of 2011 was $15.1 million, compared to $13.7 million for the third quarter of 2010. Interest expense for the current 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 2011 and 2010 was $3.5 million and $2.1 million, respectively. |
| • | The effective tax rate for the current quarter was 29.7%, compared to 29.1% for the prior year quarter. |
| • | Net income of $53.9 million for the current quarter was up 60.1% from $33.7 million for the prior year quarter. |
| • | Earnings per diluted share for the third quarter of 2011 was $1.11 per share, based on 48.5 million diluted shares, and was up 50.0% from $0.74 per share in the third quarter of 2010, based on 45.5 million diluted shares. Earnings per diluted share for the 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. The acquisitions of TVC Communications in December 2010 and RECO in March 2011 had a favorable impact of approximately $0.10 per diluted share on third quarter results. |
| • | Free cash flow for the third quarter of 2011 was $41.2 million, compared to $2.6 million for the third quarter of 2010. |
Mr. John J. Engel, WESCO’s Chairman and Chief Executive Officer, stated, “Our third quarter results reflect our effective execution and consistent ability to deliver strong earnings growth in a challenging economic environment. We have now posted five consecutive quarters of double digit organic sales and backlog growth. Operating margins improved 120 basis points to 5.8% in the third quarter, driven by a balanced contribution of gross margin expansion and operating cost leverage. We also completed the acquisition of Brews Supply on October 3, our fourth acquisition since June of last year. These acquisitions are exceeding our expectations and have expanded our portfolio of value creation solutions and strengthened our business. Our investments are paying off with our growth strategy driving improvements in our market position and increased profitability of our business.”
The following results are for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010:
| • | Consolidated net sales were $4,536.2 million for the first nine months of 2011, compared to $3,732.3 million for the first nine months of 2010. The 21.5% increase in sales includes positive impacts of approximately 7.1% from acquisitions and 1.1% from foreign exchange rates, resulting in organic sales growth of approximately 13.3%. |
| • | Gross profit of $908.5 million, or 20.0% of sales, for the first nine months of 2011 was up 50 basis points, compared to $728.2 million, or 19.5% of sales, for the first nine months of 2010. |
| • | SG&A expenses of $644.2 million, or 14.2% of sales, for the first nine months of 2011 improved 80 basis points, compared to $559.6 million, or 15.0% of sales, for the first nine months of 2010. |
| • | Operating profit was $241.4 million for the first nine months of 2011, up 60.1% from $150.9 million for the comparable 2010 period. Operating profit as a percentage of sales was 5.3% in 2011, up 130 basis points from 4.0% in 2010. |
| • | Total interest expense for the first nine months of 2011 was $41.6 million, compared to $41.7 million for the first nine months of 2010. 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 2011 and 2010 was $7.2 million and $6.3 million, respectively. |
| • | The effective nine-month tax rate was 29.2% for 2011 compared to 28.9% for 2010. |
| • | Net income of $141.4 million for the first nine months of 2011 was up 75.3% from $80.7 million for the first nine months of 2010. |
| • | Earnings per diluted share for the first nine months of 2011 was up 58.7% to $2.84 per share, based on 49.8 million diluted shares, versus $1.79 per share for the first nine months of 2010, based on 45.2 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 acquisitions of Potelcom in June 2010, TVC Communications in December 2010, and RECO in March 2011 had a favorable impact of approximately $0.29 per diluted share on year-to-date results. |
| • | Free cash flow for the first nine months of 2011 was $47.8 million, compared to $65.4 million in the comparable prior year period. |
Mr. Engel, continued, “The strength, diversity, and operating leverage of our business positions us well in today’s economic environment. The expansion of our business model beyond the scope of traditional distribution is creating significant value for our customers and suppliers. We enter the fourth quarter of 2011 with a record pipeline of opportunities, and continue to accelerate our One WESCO approach of partnering with suppliers in providing global supply chain solutions for our customers.”
# # #
Teleconference Access
WESCO will conduct a teleconference to discuss the third quarter earnings as described in this News Release on Thursday, October 20, 2011, 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. 2010 annual sales were approximately $5.1 billion. The Company employs approximately 7,000 people, maintains relationships with over 17,000 suppliers, and serves over 100,000 customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates seven 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, 2010, as well as the Company’s other reports filed with the Securities and Exchange Commission.
Contact: Richard Heyse, Vice President & 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 Ended September 30, 2011 |
Three Months Ended September 30, 2010 |
|||||||||||||||
| Net sales |
$ | 1,580.4 | $ | 1,324.6 | ||||||||||||
| Cost of goods sold (excluding depreciation and amortization below) |
1,264.7 | 80.0 | % | 1,066.8 | 80.5 | % | ||||||||||
| Selling, general and administrative expenses |
216.2 | 13.7 | % | 190.6 | 14.4 | % | ||||||||||
| Depreciation and amortization |
7.7 | 6.0 | ||||||||||||||
|
|
|
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|||||||||||||
| Income from operations |
91.8 | 5.8 | % | 61.2 | 4.6 | % | ||||||||||
| Interest expense, net |
15.1 | 13.7 | ||||||||||||||
| Other income |
— | — | ||||||||||||||
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|
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| Income before income taxes |
76.7 | 4.9 | % | 47.5 | 3.6 | % | ||||||||||
| Provision for income taxes |
22.8 | 13.8 | ||||||||||||||
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| Net income |
$ | 53.9 | 3.4 | % | $ | 33.7 | 2.5 | % | ||||||||
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| Earnings per diluted common share |
$ | 1.11 | $ | 0.74 | ||||||||||||
| Weighted average common shares outstanding and common share equivalents used in computing earnings per diluted share (in millions) |
48.5 | 45.5 | ||||||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
| Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2010 |
|||||||||||||||
| Net sales |
$ | 4,536.2 | $ | 3,732.3 | ||||||||||||
| Cost of goods sold (excluding depreciation and amortization below) |
3,627.7 | 80.0 | % | 3,004.1 | 80.5 | % | ||||||||||
| Selling, general and administrative expenses |
644.2 | 14.2 | % | 559.6 | 15.0 | % | ||||||||||
| Depreciation and amortization |
22.9 | 17.7 | ||||||||||||||
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|
|
|
|
|||||||||||||
| Income from operations |
241.4 | 5.3 | % | 150.9 | 4.0 | % | ||||||||||
| Interest expense, net |
41.6 | 41.7 | ||||||||||||||
| Other income |
— | (4.3 | ) | |||||||||||||
|
|
|
|
|
|||||||||||||
| Income before income taxes |
199.8 | 4.4 | % | 113.5 | 3.0 | % | ||||||||||
| Provision for income taxes |
58.4 | 32.8 | ||||||||||||||
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|
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| Net income |
$ | 141.4 | 3.1 | % | $ | 80.7 | 2.2 | % | ||||||||
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| Earnings per diluted common share |
$ | 2.84 | $ | 1.79 | ||||||||||||
| Weighted average common shares outstanding and common share equivalents used in computing earnings per diluted share (in millions) |
49.8 | 45.2 | ||||||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollar amounts in millions)
(Unaudited)
| September 30, 2011 |
December 31, 2010 |
|||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 94.0 | $ | 53.6 | ||||
| Trade accounts receivable, net |
950.4 | 792.7 | ||||||
| Inventories, net |
631.4 | 588.8 | ||||||
| Other current assets |
86.0 | 78.6 | ||||||
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| Total current assets |
1,761.8 | 1,513.7 | ||||||
| Other assets |
1,305.6 | 1,313.1 | ||||||
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| Total assets |
$ | 3,067.4 | $ | 2,826.8 | ||||
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| Liabilities and Stockholders’ Equity |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
$ | 646.6 | $ | 537.5 | ||||
| Current debt |
5.2 | 4.0 | ||||||
| Other current liabilities |
170.9 | 166.7 | ||||||
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| Total current liabilities |
822.7 | 708.2 | ||||||
| Long-term debt |
725.7 | 725.9 | ||||||
| Other noncurrent liabilities |
235.5 | 244.1 | ||||||
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| Total liabilities |
1,783.9 | 1,678.2 | ||||||
| Stockholders’ Equity |
||||||||
| Total stockholders’ equity |
1,283.5 | 1,148.6 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 3,067.4 | $ | 2,826.8 | ||||
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
| Nine Months
Ended September 30, 2011 |
Nine Months
Ended September 30, 2010 |
|||||||
| Operating Activities: |
||||||||
| Net income |
$ | 141.4 | $ | 80.7 | ||||
| Add back (deduct): |
||||||||
| Depreciation and amortization |
22.9 | 17.7 | ||||||
| Deferred income taxes |
7.7 | (4.6 | ) | |||||
| Change in Trade and other receivables, net |
(154.7 | ) | (149.6 | ) | ||||
| Change in Inventories, net |
(44.2 | ) | (40.9 | ) | ||||
| Change in Accounts Payable |
110.6 | 118.4 | ||||||
| Other |
(11.9 | ) | 53.8 | |||||
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| Net cash provided by operating activities |
71.8 | 75.5 | ||||||
| Investing Activities: |
||||||||
| Capital expenditures |
(24.0 | ) | (10.1 | ) | ||||
| Acquisition payments |
(8.2 | ) | (14.3 | ) | ||||
| Proceeds from sale of subsidiary |
— | 40.0 | ||||||
| Repayment of note receivable |
— | 15.0 | ||||||
| Other |
0.1 | 4.9 | ||||||
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| Net cash (used) provided by investing activities |
(32.1 | ) | 35.5 | |||||
| Financing Activities: |
||||||||
| Debt borrowing (repayments), net |
(1.0 | ) | (115.5 | ) | ||||
| Equity activity, net |
(2.6 | ) | 1.2 | |||||
| Other |
8.8 | (8.6 | ) | |||||
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| Net cash provided (used) by financing activities |
5.2 | (122.9 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents |
(4.5 | ) | 2.7 | |||||
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| Net change in cash and cash equivalents |
40.4 | (9.2 | ) | |||||
| Cash and cash equivalents at the beginning of the period |
53.6 | 112.3 | ||||||
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| Cash and cash equivalents at the end of the period |
$ | 94.0 | $ | 103.1 | ||||
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WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in thousands)
(Unaudited)
| Financial Leverage: | Twelve Months Ended September 30, 2011 |
Twelve Months Ended December 31, 2010 |
||||||
| Income from operations |
$ | 301,534 | $ | 210,919 | ||||
| Depreciation and amortization |
29,112 | 23,935 | ||||||
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| EBITDA(1) |
$ | 330,646 | $ | 234,854 | ||||
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| September 30, 2011 |
December 31, 2010 |
|||||||
| Current debt |
$ | 5,206 | $ | 3,988 | ||||
| Long-term debt |
725,669 | 725,893 | ||||||
| Debt discount related to convertible debentures(2) |
176,559 | 178,427 | ||||||
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| Total debt including debt discount |
$ | 907,434 | $ | 908,308 | ||||
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| Financial leverage ratio |
2.7 | 3.9 | ||||||
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).
| Free Cash Flow: (dollar amounts in millions) |
Three Months Ended September 30, 2011 |
Three Months Ended September 30, 2010 |
Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2010 |
||||||||||||
| Cash flow provided by operations |
$ | 49.3 | $ | 6.7 | $ | 71.8 | $ | 75.5 | ||||||||
| Less: Capital expenditures |
(8.1 | ) | (4.1 | ) | (24.0 | ) | (10.1 | ) | ||||||||
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| Free Cash flow |
$ | 41.2 | $ | 2.6 | $ | 47.8 | $ | 65.4 | ||||||||
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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) | EBITDA does not include proforma adjustments for recent acquisitions. |
| (2) | 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 (CONTINUED)
(dollar amounts in millions)
(Unaudited)
| Gross Profit: | Three Months Ended September 30, 2011 |
Three Months Ended September 30, 2010 |
||||||
| Net Sales |
$ | 1,580.4 | $ | 1,324.6 | ||||
| Cost of goods sold (excluding depreciation and amortization) |
1,264.7 | 1,066.8 | ||||||
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|
|||||
| Gross profit |
$ | 315.7 | $ | 257.8 | ||||
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|||||
| Gross margin |
20.0 | % | 19.5 | % | ||||
| Gross Profit: | Nine Months Ended September 30, 2011 |
Nine Months Ended September 30, 2010 |
||||||
| Net Sales |
$ | 4,536.2 | $ | 3,732.3 | ||||
| Cost of goods sold (excluding depreciation and amortization) |
3,627.7 | 3,004.1 | ||||||
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| Gross profit |
$ | 908.5 | $ | 728.2 | ||||
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| Gross margin |
20.0 | % | 19.5 | % | ||||
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.
 Supplemental Financial Data
Supplemental Financial Data
WESCO Third Quarter 2011
October 20, 2011
Exhibit 99.2 |
 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, 2010 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. |
 3
Third Quarter 2011 Results
Q3 Outlook Provided
Third Quarter 2011 Performance
Sales growth expected to be at or
above 18% year-over-year and
2.5% sequentially, assuming stable
pricing and f/x rates including
acquisitions
Sales growth of 19.3% versus prior
year; sales up 3.7% sequentially;
organic sales growth of 11.3%
versus prior year. Fifth consecutive
quarter of double-digit organic sales
growth versus prior year.
Gross margin expected to be at or
above 19.8%
Gross margin of 20%, up 50 basis
points over prior year
Operating margin expected to be at
or above 5.4%
Operating margin of 5.8%, up 120
basis points versus prior year
Tax rate expected to be
approximately 30-32%
Effective tax rate of 29.7% |
 4
Organic Sales Analysis Versus Prior Year
--------------------
2010
--------------------
2011
2011
2011
Q1
Q2
Q3
Q4
Full
Year
Q1
Q2
Q3
Consolidated Sales Growth
(2.6%)
8.6%
14.9%
17.6%
9.5%
24.6%
21.1%
19.3%
F/X
(1.8%)
(1.9%)
(0.9%)
(0.7%)
(1.3%)
(1.1%)
(1.0%)
(1.1%)
Acquisitions
0
0
(0.7%)
(1.1%)
(0.4%)
(7.0%)
(7.4%)
(6.9%)
(4.4%)
6.7%
13.3%
15.8%
7.8%
16.5%
12.7%
11.3%
1.5%
3.0%
2.5%
3.0%
2.5%
3.5%
3.0%
Organic Sales Growth
Management Estimated
Price Impact
3.5% |
 5
WESCO Portfolio –
Including Acquisitions
Lighting &
Lighting &
Controls
Controls
Controls
Controls
& Motors
& Motors
General
General
Supplies
Supplies
Data & Broadband
Data & Broadband
Communications
Communications
Wire, Cable &
Wire, Cable &
Conduit
Conduit
Utility
•
Investor Owned
•
Public Power
•
Utility Contractors
CIG
•
Commercial
•
Institutional
•
Government
Industrial
•
Global Accounts
•
Integrated Supply
•
OEM
•
General Industrial
Construction and
Contractors
•
Non-Residential
•
Residential
Distribution
Equipment
(September 2011 year-to-date, management estimates)
43%
35%
11%
11%
Markets
&
Customers
33%
18%
18%
11%
11%
9%
Products
&
Services |
 6
End Market
Q3 2011 Q3 2011
vs.
Q3 2010
vs.
Q2 2011
2011YTD
vs.
2010 YTD
Comments
WESCO Core
12.4%
3.7%
14.5%
•
Fifth consecutive quarter of year-over-year double digit organic sales
growth •
All four end markets and all six product categories were up versus prior
year •
Prepared for signs of slowing in addressable markets, but have not seen that occur
yet Industrial
14.8%
2.0%
18.1%
•
10 of 16 Global Account industry verticals grew double digits through September
YTD •
Strong bidding activity continues; Global Accounts and Integrated Supply
opportunity pipeline now $2.1+ billion
•
Macro indicators point to continued industrial expansion and future capital
expenditures Construction
10.9%
1.8%
14.3%
•
Backlog up 19% over last year and up 19% sequentially since year-end
•
US construction sales up 10% over last year
•
Non-residential construction market appears to be stabilizing; recovery
expected to begin in the next 12 to 24 months
Utility
13.2%
11.2%
6.4%
•
Sales to Investor Owned Utility, Public Power and Utility Contractor customers
were up versus prior year
•
Increases
in
utility
spending
driven
by
increasing
power
demand,
high
voltage
and
alternative power projects
•
Management estimates that emergency response sales related to hurricane Irene were
approximately $5 million, or 2.5% of utility sales in Q3.
Commercial,
Institutional,
Government
(CIG)
7.5%
8.5%
8.4%
•
Government opportunities driven by infrastructure projects, security and data
communications
•
Stimulus
programs
continue
–
Rural
Broadband
and
certain
DOE
projects
are
beneficiaries
•
$400 million government and stimulus opportunity pipeline
Third Quarter 2011 End Market Comments
Core year-over-year and sequential quarterly sales
comparisons Note: YOY excludes TVC and RECO
results. YTD excludes Potelcom, TVC and RECO results.
Brews
acquisition
closed
on
October
3
rd
. |
 7
Key Financial Metrics
12/31/2010
9/30/2011
Liquidity
(1)
$338 million
$486 million
Full
Year
and
Q3
Free
Cash
Flow
(2)
$112 million
$41 million
Financial Leverage
(Par Value Debt with
Reported EBITDA)
3.9x
2.7x
($Millions)
Outstanding at
December 31, 2010
Outstanding at
September 30, 2011
Debt
Maturity Schedule
AR Securitization
(V)
$370
$370
2013
Inventory Revolver
(V)
$0
$0
2013
Real Estate Mortgage
(F)
$39
$38
2013
2017 Bonds
(F)
$150
$150
2017
2029 Convertible Bonds
(F)
$345
$345
2029 (No Put)
Other
(F)
$5
$4
N/A
Total Debt
$909
$907
Capital Structure
V= Variable Rate Debt
F= Fixed Rate Debt
1=
Asset-backed facilities total available plus invested
cash 2= Operating cash flow less capital expenditures
|
 8
Quarterly Proforma Financial Leverage
Target Leverage
2.0x –
3.5x
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0 |
 9
Number of Work Days by Quarter
Q1
Q2
Q3
Q4
FY
2010
2011
63
63
64
64
64
64
64
63
255
254 |
 10
Convertible Debt and Non-cash Interest as of September 30, 2011
Convertible Debentures
(000s)
Maturity
Par Value
of Debt
Debt
Discount
Debt per
Balance
Sheet
2026
$
221
$
0
221
2029
$
344,965
$
(176,559)
$
168,406
Total
$
345,186
$
(176,559)
$
168,627
($ millions)
2010
2011
Convertible Debt
$3.7
$1.8
Amortization of Deferred Financing Fees
$2.0
$3.8
FIN 48
$0.6
$1.6
Total
$6.3
$7.2
Non-Cash Interest Expense (year-to-date)
GAAP vs. Non-GAAP
Debt Reconciliation
Non-Cash Interest Expense Schedule |
 11
Convertible Debt and SARs/Options EPS Dilution
Weighted Average Quarterly Share Count
Stock Price
Incremental Shares from
2029 Convertible Debt
(in millions)
Incremental Shares from
SARs/Option Awards
(in millions)
Total Diluted Share Count
(in millions)
4
$30.00
0.45
0.41
44.15
$40.00
3.33
0.74
47.36
Q3 2011 Average ($44.54)
4.21
0.98
48.50
$50.00
5.05
1.14
49.48
$60.00
6.20
1.36
50.85
$75.00
7.35
1.76
52.40
$100.00
8.50
2.14
53.93
2029 Convertible Debt Details
Conversion Price
$28.8656
Conversion Rate
34.6433
1
Underlying Shares
11,951,939
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 43.29 million shares
3 |
 12
Q4 2011 Outlook
Category
Q4 2011 Expectations
Sales Growth
Total growth expected to be at or above 14% year-over-year and down
3.5% sequentially due to seasonality and one less workday, assuming
stable pricing and foreign exchange rates
Gross Margins
Expected to be at or above 19.8%
Operating Margins
Expected to be at or above 5.2%
Effective Tax Rate
Expected
to
be
approximately
30%
-
31% |
 2011
Full Year Outlook Expected to be at least
70% to 80% of net income
Category
2011 Expectations
(Revised April 21, 2011)
2011 Expectations
(Revised July 21, 2011)
2011 Expectations
(Revised October 20, 2011)
Sales
Growth
Expected to be at or above 17%
including acquisitions; Pricing
and F/X rates assumed
consistent with Q1 levels
Expected to be at or above 19%
including acquisitions; Pricing and
F/X rates assumed consistent with
first half levels
No change
Gross
Margins
Expected to be at or above
19.7%
Expected to be at or above 19.9%
No change
Operating
Margins
Expected to be at or above 4.9%
Expected to be at or above 5.1%
Expected to be at or above 5.2%
Effective
Tax Rate
Expected to be in the range of
29% to 30% levels
Expected to be in the range of
29% to 31%
Expected to be in the range of
29% to 30%
Cash Flow
Expected to be at least 80% of
net income
No change
13 |