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): April 24, 2014
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Commission file number 001-14989
Delaware (State or other jurisdiction of incorporation or organization) | 25-1723342 (I.R.S. Employer Identification No.) | |
225 West Station Square Drive Suite 700 Pittsburgh, Pennsylvania (Address of principal executive offices) | (412) 454-2200 (Registrant's telephone number, including area code) | |
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
The information in this Item 2.02 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
On April 24, 2014, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2014. A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure
The information in this Item 7.01 is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
A slide presentation to be used by senior management of the Company in connection with its discussions with investors regarding the Company's financial results for the first quarter of 2014 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 April 24, 2014
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.
April 24, 2014 | WESCO INTERNATIONAL, INC. | |||
(Date) | ||||
/s/ Kenneth S. Parks | ||||
Kenneth S. Parks | ||||
Senior Vice President and Chief Financial Officer | ||||
 | NEWS RELEASE |
WESCO International, Inc. / Suite 700, 225 West Station Square Drive / Pittsburgh, PA 15219 | |
WESCO International, Inc. Reports First Quarter 2014 Results
First quarter highlights:
•Consolidated sales of $1.8 billion, up 1.6% organically despite weather impacts
•Operating profit of $93 million and earnings per diluted share of $0.97
•Free cash flow of $42 million or 80% of net income
•Financial leverage ratio of 3.3, following the completion of two accretive acquisitions
PITTSBURGH, April 24, 2014/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, announces its 2014 first quarter results.
The following are results for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. A reconciliation of adjusted results is provided in the Non-GAAP Financial Measures section of this release.
• | Net sales were $1,810.8 million for the first quarter of 2014, compared to $1,808.1 million for the first quarter of 2013, an increase of 0.2%. Organic sales increased 1.6%, acquisitions positively impacted sales by 0.5%, and foreign exchange negatively impacted sales by 1.9%. Sequentially, sales decreased 3.7%, and organic sales decreased 3.1%. |
• | Gross profit was $374.8 million, or 20.7% of sales, for the first quarter of 2014, compared to $381.1 million, or 21.1% of sales, for the first quarter of 2013. |
• | Selling, general & administrative (SG&A) expenses were $265.5 million, or 14.7% of sales, for the first quarter of 2014, compared to $227.5 million, or 12.6% of sales, for the first quarter of 2013. First quarter 2014 SG&A expenses increased 10 basis points from first quarter 2013 adjusted SG&A expenses of $263.6 million, or 14.6% of sales. |
• | Operating profit was $93.0 million for the current quarter, compared to $136.9 million for the first quarter of 2013. Operating profit as a percentage of sales was 5.1% and 7.6% in 2014 and 2013, respectively. First quarter 2014 operating profit decreased 50 basis points from first quarter 2013 adjusted operating profit of $100.8 million, or 5.6% of sales. |
• | Interest expense for the first quarter of 2014 was $20.7 million, compared to $21.9 million for the first quarter of 2013. 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 quarter of 2014 and 2013 was $2.5 million and $2.3 million, respectively. |
• | The effective tax rate for the current quarter was 28.2%, compared to 26.9% for the prior year first quarter. |
• | Net income attributable to WESCO International, Inc. of $51.9 million for the current quarter was down 38% from $84.0 million for the prior year quarter. First quarter 2014 net income attributable to WESCO International, Inc. decreased 11.3% from prior year adjusted net income attributable to WESCO International, Inc of $58.5 million. |
• | Earnings per diluted share for the first quarter of 2014 were $0.97 per share, based on 53.4 million diluted shares, compared to $1.60 per share in the first quarter of 2013, based on 52.4 million diluted shares. Earnings per diluted share in the first quarter of 2014 decreased 13.4% from adjusted earnings per diluted share of $1.12 in the corresponding prior year period. |
• | Free cash flow for the first quarter of 2014 was $41.7 million, or 80% of net income, compared to $74.4 million for the first quarter of 2013. |
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, “Our first quarter results reflect an improving U.S. economy largely offset by the impacts of severe winter weather conditions in both the U.S and Canada. Sales in the U.S. were up approximately 3% with mid-single digit organic sales growth in all of our end markets, except construction, where sales declined primarily due to weather related project delays. Sales in Canada declined approximately 4% organically versus last year. While we face near-term foreign exchange headwinds in Canada, we continue to view that market favorably. After a slow start in January, sales momentum improved through the quarter and has further accelerated in April. We expect business conditions to improve this year with a strengthening recovery in non-residential construction. Our full year outlook remains unchanged at 3% to 6% sales growth and $5.30 to $5.70 earnings per diluted share.”
Mr. Engel continued, “This low growth economic environment provides an excellent opportunity for WESCO to further strengthen our position as an industry leader, and expand our customer and supplier relationships for long-term growth. We continue to invest in our growth engines and maintain a view that scale matters in distribution. The acquisitions of LaPrairie and Hazmasters were excellent additions to our Canadian business in the first quarter. As a result of solid free cash flow generation, financial leverage remained within our targeted range, including the impact of these two acquisitions. Our acquisition pipeline remains robust, and we see continuing opportunities to strengthen our electrical core while broadening our portfolio of products and services.”
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the first quarter earnings as described in this News Release on Thursday, April 24, 2014, at 11:00 a.m. E.T. The call will be broadcast live over the Internet and can be accessed from the Company's website at http://www.wesco.com. The call will be archived on this Internet site for seven days.
WESCO International, Inc. (NYSE: WCC), a publicly traded Fortune 500 company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturers (OEM) products, construction materials, and advanced supply chain management and logistic services. 2013 annual sales were approximately $7.5 billion. The company employs approximately 9,200 people, maintains relationships with over 25,000 suppliers, and serves over 75,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates nine fully automated distribution centers and approximately 475 full-service branches in North America and around the world, 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, 2013, as well as the Company's other reports filed with the Securities and Exchange Commission.
Contact: Kenneth S. Parks, Senior Vice President and Chief Financial Officer
WESCO International, Inc. (412) 454-2392, Fax: (412) 222-7566
http://www.wesco.com
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months Ended | Three Months Ended | ||||||||||
March 31, 2014 | March 31, 2013 | ||||||||||
Net sales | $ | 1,810.8 | $ | 1,808.1 | |||||||
Cost of goods sold (excluding | 1,436.0 | 79.3 | % | 1,427.0 | 78.9 | % | |||||
depreciation and amortization below) | |||||||||||
Selling, general and administrative expenses | 265.5 | 14.7 | % | 227.5 | 12.6 | % | |||||
Depreciation and amortization | 16.3 | 16.7 | |||||||||
Income from operations | 93.0 | 5.1 | % | 136.9 | 7.6 | % | |||||
Interest expense, net | 20.7 | 21.9 | |||||||||
Loss on sale of Argentina business | — | — | |||||||||
Income before income taxes | 72.3 | 4.0 | % | 115.0 | 6.4 | % | |||||
Provision for income taxes | 20.4 | 30.9 | |||||||||
Net income | 51.9 | 2.9 | % | 84.1 | 4.7 | % | |||||
Less: Net income attributable to noncontrolling interest | — | 0.1 | |||||||||
Net income attributable to WESCO International, Inc. | $ | 51.9 | 2.9 | % | $ | 84.0 | 4.6 | % | |||
Earnings per diluted common share | $ | 0.97 | $ | 1.60 | |||||||
Weighted average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 53.4 | 52.4 | |||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollar amounts in millions)
(Unaudited)
March 31, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 96.4 | $ | 123.7 | |||
Trade accounts receivable, net | 1,105.3 | 1,045.1 | |||||
Inventories, net | 811.1 | 787.3 | |||||
Current deferred income taxes | 41.9 | 44.7 | |||||
Other current assets | 193.8 | 197.7 | |||||
Total current assets | 2,248.5 | 2,198.5 | |||||
Other assets | 2,440.3 | 2,419.8 | |||||
Total assets | $ | 4,688.8 | $ | 4,618.3 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 781.8 | $ | 735.1 | |||
Current debt and short-term borrowings | 45.2 | 40.1 | |||||
Other current liabilities | 247.8 | 268.6 | |||||
Total current liabilities | 1,074.8 | 1,043.8 | |||||
Long-term debt | 1,457.6 | 1,447.6 | |||||
Other noncurrent liabilities | 382.8 | 362.2 | |||||
Total liabilities | 2,915.2 | 2,853.6 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 1,773.6 | 1,764.7 | |||||
Total liabilities and stockholders' equity | $ | 4,688.8 | $ | 4,618.3 | |||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Three Months Ended | Three Months Ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Operating Activities: | |||||||
Net income | $ | 51.9 | $ | 84.1 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 16.4 | 16.7 | |||||
Deferred income taxes | 7.9 | 20.1 | |||||
Change in Trade Receivables, net | (55.3 | ) | (61.8 | ) | |||
Change in Inventories, net | (17.4 | ) | (2.4 | ) | |||
Change in Accounts Payable | 43.6 | 41.8 | |||||
Other | (0.4 | ) | (18.1 | ) | |||
Net cash provided by operating activities | 46.7 | 80.4 | |||||
Investing Activities: | |||||||
Capital expenditures | (5.0 | ) | (6.0 | ) | |||
Acquisition payments | (91.2 | ) | — | ||||
Other | — | 4.9 | |||||
Net cash used by investing activities | (96.2 | ) | (1.1 | ) | |||
Financing Activities: | |||||||
Debt repayments | 19.7 | (52.1 | ) | ||||
Equity activity, net | (0.3 | ) | (0.7 | ) | |||
Other | 4.2 | 3.8 | |||||
Net cash used by financing activities | 23.6 | (49.0 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (1.4 | ) | 0.4 | ||||
Net change in cash and cash equivalents | (27.3 | ) | 30.7 | ||||
Cash and cash equivalents at the beginning of the period | 123.7 | 86.1 | |||||
Cash and cash equivalents at the end of the period | $ | 96.4 | $ | 116.8 | |||
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial measures. These financial measures include financial leverage, free cash flow, gross profit, organic sales growth, adjusted net income, adjusted income from operations, and adjusted earnings per diluted share. The Company believes that these non-GAAP measures are useful to investors in order to provide a better understanding of the Company's capital structure position, liquidity, and organic growth trends on a comparable basis. Additionally, certain non-GAAP measures either focus on or exclude transactions impacting comparability of results, allowing investors to more easily compare the Company's financial performance from period to period. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended | |||||
Normalized Organic Sales Growth: | March 31, 2014 | March 31, 2013 | |||
Change in net sales | 0.2 | % | 12.6 | % | |
Impact from acquisitions | 0.5 | % | 16.0 | % | |
Impact from foreign exchange rates | (1.9 | )% | — | % | |
Impact from number of workdays | — | % | (1.6 | )% | |
Normalized organic sales growth | 1.6 | % | (1.8 | )% | |
Note: Organic sales growth is provided by the Company as an additional financial measure to provide a better understanding of the Company's sales growth trends. Organic sales growth is calculated by deducting the percentage impact on net sales from acquisitions, foreign exchange rates and number of workdays from the overall percentage change in consolidated net sales.
Three Months Ended | |||||||
Gross Profit: | March 31, 2014 | March 31, 2013 | |||||
(dollar amounts in millions) | |||||||
Net Sales | $ | 1,810.8 | $ | 1,808.1 | |||
Cost of goods sold (excluding depreciation and amortization) | 1,436.0 | 1,427.0 | |||||
Gross profit | $ | 374.8 | $ | 381.1 | |||
Gross margin | 20.7 | % | 21.1 | % | |||
Note: Gross profit is provided by the Company as an additional financial measure. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. This amount represents a commonly used financial measure within the distribution industry. Gross margin is calculated by dividing gross profit by net sales.
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended | |||||||
Adjusted Selling, General and Administrative Expenses: | March 31, 2014 | March 31, 2013 | |||||
(amounts in millions except for diluted EPS) | |||||||
Selling, general and administrative expenses | $ | 265.5 | $ | 227.5 | |||
ArcelorMittal litigation recovery included in SG&A | — | 36.1 | |||||
Adjusted selling, general and administrative expenses | $ | 265.5 | $ | 263.6 | |||
Percent of sales | 14.7 | % | 14.6 | % | |||
Adjusted Income from Operations: | |||||||
Income from operations | $ | 93.0 | $ | 136.9 | |||
ArcelorMittal litigation recovery included in SG&A | — | (36.1 | ) | ||||
Adjusted income from operations | $ | 93.0 | $ | 100.8 | |||
Percent of sales | 5.1 | % | 5.6 | % | |||
Adjusted Net Income Attributable to WESCO International, Inc.: | |||||||
Income before income taxes | $ | 72.3 | $ | 115.0 | |||
ArcelorMittal litigation recovery included in SG&A | — | (36.1 | ) | ||||
Adjusted income before income taxes | 72.3 | 78.9 | |||||
Adjusted provision for income taxes | 20.4 | 20.3 | |||||
Adjusted net income | 51.9 | 58.6 | |||||
Less: Net income attributable to noncontrolling interest | — | 0.1 | |||||
Adjusted net income attributable to WESCO International, Inc. | $ | 51.9 | $ | 58.5 | |||
Adjusted Diluted EPS: | |||||||
Diluted share count | 53.4 | 52.4 | |||||
Adjusted Diluted EPS | $ | 0.97 | $ | 1.12 | |||
Note: Adjusted SG&A, income from operations, net income attributable to WESCO International, Inc., and earnings per share are provided by the Company as additional financial measures which allow investors to compare the Company's performance from period to period by adjusting for transactions management views as impacting the comparability of results. Adjusted diluted EPS is calculated by dividing adjusted net income attributable to WESCO International, Inc. by weighted average common shares outstanding and common share equivalents.
Twelve Months Ended | |||||||
Financial Leverage: | March 31, 2014 | December 31, 2013 | |||||
(dollar amounts in millions) | |||||||
Income from operations | $ | 437.1 | $ | 481.0 | |||
ArcelorMittal litigation recovery | — | (36.1 | ) | ||||
Depreciation and amortization | 67.3 | 67.6 | |||||
Adjusted EBITDA | $ | 504.4 | $ | 512.5 | |||
March 31, 2014 | December 31, 2013 | ||||||
Current debt | $ | 45.2 | $ | 40.1 | |||
Long-term debt | 1,457.6 | 1,447.6 | |||||
Debt discount related to convertible debentures and term loan(1) | 173.6 | 174.7 | |||||
Total debt including debt discount | 1,676.4 | 1,662.4 | |||||
Less: Cash and cash equivalents | 96.4 | 123.7 | |||||
Total debt including debt discount, net of cash | $ | 1,580.0 | $ | 1,538.7 | |||
Financial leverage ratio based on total debt | 3.3 | 3.2 | |||||
Financial leverage ratio based on total debt, net of cash | 3.1 | 3.0 | |||||
Note: Financial leverage is a non-GAAP financial measure provided by the Company as an indicator of capital structure position. Financial leverage ratio based on total debt is calculated by dividing total debt, including debt discount, by Adjusted EBITDA. Financial leverage ratio based on total debt, net of cash, is calculated by dividing total debt, including debt discount, net of cash, by Adjusted EBITDA. Adjusted EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization, excluding the ArcelorMittal litigation recovery. Financial leverage ratio based on total net debt is calculated by dividing total debt, including debt discount less cash and cash equivalents, by Adjusted EBITDA.
(1)The convertible debentures and term loan are presented in the consolidated balance sheets in long-term debt net of the unamortized discount.
Three Months Ended | |||||||
Free Cash Flow: | March 31, 2014 | March 31, 2013 | |||||
(dollar amounts in millions) | |||||||
Cash flow provided by operations | $ | 46.7 | $ | 80.4 | |||
Less: Capital expenditures | (5.0 | ) | (6.0 | ) | |||
Free cash flow | $ | 41.7 | $ | 74.4 | |||
Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash 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.
Webcast Presentation April 24, 2014 Q1 2014 Earnings
2 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 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: adverse economic conditions; increase in competition; debt levels, terms, financial market conditions or interest rate fluctuations; risks related to acquisitions, including the integration of EECOL; disruptions in operations or information technology systems; expansion of business activities; litigation, contingencies or claims; product, labor or other cost fluctuations; exchange rate fluctuations; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2013 and any subsequent filings with the Securities & Exchange Commission. Any numerical or other representations in this presentation do not represent guidance by management and should not be construed as such. The following presentation includes a discussion of certain non-GAAP financial measures. Information required by Regulation G with respect to such non-GAAP financial measures can be obtained via WESCO’s website, www.wesco.com.
3 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Financial results throughout this presentation reference non-GAAP adjusted results. See Appendix for reconciliation. 2014 Q1 Highlights • Sales of $1.81 billion, up 0.2% YOY − 1.6 points organic growth, despite weather impacts − (1.9) points negative impact from foreign exchange − 0.5 points from acquisitions − April MTD sales significantly stronger than first quarter • Gross margin 20.7%, down 40 bps YOY, driven by business mix • SG&A 14.7% of sales, up 10 bps YOY − Core SG&A flat YOY • Operating margin 5.1%, down 50 bps YOY • Net income of $51.9 million, down 11% YOY • EPS of $0.97, down 13% YOY • Free cash flow of $42 million, 80% of net income • Financial leverage at 3.3X after completion of LaPrairie and Hazmasters acquisitions • Implemented organization changes to accelerate One WESCO strategy
4 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 (5.4%) (2.7%) 2.1% Industrial End Market • Q1 2014 Sales − Up 2.1% versus prior year − Up 1.7% sequential • Global Accounts and Integrated Supply opportunity pipeline over $2.5 billion. • Channel inventory levels appear to be largely in balance with demand. • Bidding activity levels remain robust and industrial market leading indicators (PMI, IP, CU) are generally positive. • Customer trends include higher expectations for supply chain process improvements, cost savings, and supplier consolidation. Industrial Core Sales Growth versus Prior Year 43% Industrial • Global Accounts • Integrated Supply •OEM •General Industrial Note: Excludes acquisitions during the first year of ownership. (3.2%) Q2 2013 Q3 2013 Q1 2013 Q1 2014 Q4 2013 0.2% 2013 (2.6%) Renewed a multi-year integrated supply agreement with a global diversified company to provide a wide range of supply chain procurement and inventory management services to manufacturing facilities in over 10 countries. 2013 (2.6%)
5 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Construction •Non-Residential •Residential 31% Core Sales Growth versus Prior Year Construction End Market • Q1 2014 Sales − Negatively impacted by winter weather − Down 5.9% versus prior year − Down 13.2% sequential • Overall backlog is flat versus prior year end and up 6% in U.S. • Non-residential construction market leading indicators (ABI, lending standards, residential construction recovery) are generally positive. • Energy and shale gas projects expected to be positive catalysts over mid to long term in North America. Construction Note: Excludes acquisitions during the first year of ownership. Q2 2013 Q3 2013 Q1 2013 Q1 2014 (6.6%) (5.8%) Q4 2013 1.1% (0.3%) Awarded a contract for a full lighting package of fixtures, lamps (primarily LED) and controls for a large Canadian government office building. 2013 (2.5%) (5.9%)
6 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Utility End Market Core Sales Growth versus Prior Year 13% Utility • Investor Owned •Public Power •Utility Contractors • Q1 2014 Sales − Up 1.5% versus prior year − Down 3.8% sequential • Twelfth consecutive quarter of year-over- year organic sales growth. • Normal operations and maintenance spending levels impacted by weather in Q1. • Scope expansion and value creation with IOU, public power and generation customers providing utility sales growth. • Strong interest for WESCO Integrated Supply across all utility customer groups. Utility Note: Excludes acquisitions during the first year of ownership. 17.5% 22.5% 11.1% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Renewed a multi-year agreement to provide transmission and distribution supplies and procurement services for an investor owned utility. This relationship has expanded beyond operations and maintenance materials distribution to include system improvement and capital projects. 11.1% 2013 13.4% 1.5%
7 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 (8.5%) (4.3%) 5.1% 4.9% 3.3% CIG End Market • Q1 2014 Sales − Up 3.3% versus prior year − Down 1.0% sequential • Bidding levels remain active in commercial and institutional markets. • Federal government spending levels have stabilized; projects are advancing through the approval process. • Opportunities exist to support data center construction and retrofits and cloud technology projects. • Government opportunity pipeline remains healthy at over $500 million. Government Core Sales Growth versus Prior Year CIG •Commercial • Institutional •Government 13% Note: Excludes acquisitions during the first year of ownership. Q2 2013 Q3 2013 Q1 2013 Q1 2014 Q4 2013 Awarded a broadband communications agreement with a large South American mobile telecommunications provider. 2013 (1.0%)
8 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Acquisition Year Estimated Annual Sales at Closing Estimated 1st Year Accretion at Closing Potelcom 2010 $25M TVC Communications 2010 $300M $0.30 RECO 2011 $25M Brews 2011 $50M $0.04 RS Electronics 2012 $60M $0.04 Trydor Industries 2012 $35M $0.05 Conney Safety 2012 $85M $0.10 EECOL 2012 $925M $1.00 LaPrairie 2014 $30M $0.03 Hazmasters 2014 $80M $0.05 Total $1.6B $1.61 Acquisitions 37% 29% 12% 22% Acquired Sales by End Market since 2010 CIG Industrial Utility Construction 2014 Acquisitions
9 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Q1 2014 Results Outlook Actual Sales Flat to 3% growth (including LaPrairie) Growth of 0.2% 1.6% organic sales Gross Margin 20.8% to 21.0% 20.7% Operating Margin 5.3% to 5.5% 5.1% Effective Tax Rate 26% to 28% 28.2% Q1 2013 XXXX XXXX Q1 2014 0.97 (0.05) 1.12 0.25 ( $ ) 0.2% Growth 60 bps 220 bps (120) bps $1.81B 50 bps $1.81B (190) bps 3.2% 10.4% -12.0% 0.2% Q1 2013 U.S. Rest of World Canada (C$) FX Acquisitions Q1 2014 1.6% Organic Growth 3.2% Growth 10.4% Growth 4.3% Decline 0.2% Growth
10 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 EPS Walk Q1 2013 $1.12 Canada, including FX impacts ~ (0.16) Share count (0.02) Acquisitions 0.01 Other ~ 0.02 Q1 2014 $0.97
11 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 74.4 41.7 Q1 2013 Q1 2014 Cash Generation Free Cash Flow (1) ($ Millions) (1) Reconciliation of these non-GAAP financial measures is included in the Appendix to this webcast presentation. 80% of net income 127% of net income >$1B of free cash flow over last 5 years 2012 2013 2014 Target Leverage 2.0x – 3.5x 3.3X Leverage (Total Par Debt to TTM EBITDA)
12 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Outlook Q2 FY (unchanged) Sales 5% to 8% growth 3% to 6% growth Gross Margin 20.6% to 20.8% ~ 20.9% Operating Margin 5.7% to 6.1% 6.1% to 6.3% Effective Tax Rate ~ 28% 26% to 28% EPS $5.30 to $5.70 Free Cash Flow ~ 80% of net income Note: Excludes unannounced acquisitions.
13 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Appendix
14 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Adjusted Results Q1 2013 Reported Results Non-recurring items Adjusted Results Net Sales 1,808.1 1,808.1 Gross Profit 381.1 381.1 Gross margin 21.1% 21.1% SG&A 227.5 36.11 263.6 SG&A rate 12.6% 14.6% Operating profit 136.9 (36.1) 100.8 Operating margin 7.6% 5.6% Interest 21.9 21.9 Taxes 30.9 (10.6) 20.3 Effective tax rate 26.9% 25.7% Net income attributable to WESCO International, Inc. 84.0 (25.5) 58.5 Average Diluted Shares Outstanding 52.4 52.4 Fully diluted EPS 1.60 1.12 1 ArcelorMittal insurance recovery.
15 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 WESCO Profile 2014 43% 31% 13% 13% 39% 14% 16% 12% 10% 9% Controls & Motors Lighting & Controls General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. 70% 25% 5% Geography ROW Canada U.S. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Utility Contractors Commercial | Institutional | Government Global Accounts | Integrated Supply OEM | General Industrial Non-Residential | Contractors Sales 1994 $1.5B at LBO 2003 $3.3B 2012 $6.6B …portfolio diversified and strengthened over last decade
16 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Sales Growth 2012 2013 2014 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Q1 Organic Sales Growth (%) 9.8 8.2 1.4 (1.3) 4.4 (3.4) (1.2) 3.2 1.5 0.0 1.6 Acquisitions (%) 2.6 2.2 4.0 4.3 3.3 16.0 14.6 14.1 13.8 14.6 0.5 FX (%) (0.2) (0.7) (0.6) 0.5 (0.3) 0.0 (0.2) (0.7) (1.0) (0.4) (1.9) Consolidated Sales Growth (%) 12.2 9.7 4.8 3.5 7.4 12.6 13.2 16.6 14.3 14.2 0.2 Workdays 64 64 63 63 254 63 64 64 63 254 63 Organic Growth Impact (%) 1.6 - (1.6) - - (1.6) - 1.6 - - - Normalized Organic Growth (%) 8.2 8.2 3.0 (1.3) 4.4 (1.8) (1.2) 1.6 1.5 0.0 1.6 Estimated Price Impact (%) 1.5 1.0 0.5 1.0 1.0 1.0 0.0 0.0 0.0 0.2 0.5
17 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Outstanding at December 31, 2013 Outstanding at March 31, 2014 Debt Maturity Schedule AR Revolver (V) 454 445 2016 Inventory Revolver (V) 23 50 2016 Senior Notes (F) 500 500 2021 2019 Term Loans (V) 300 289 2019 2029 Convertible Bonds (F) 345 345 2029 (No Put) Other (V) 40 47 N/A Total Par Debt 1,662 1,676 Capital Structure Key Financial Metrics Q1 2013 YE 2013 Q1 2014 Cash 117 124 96 Capital Expenditures 6 28 5 Free Cash Flow 74 308 42 Liquidity (1) 374 606 524 ($ Millions) V = Variable Rate Debt 1 = Asset-backed credit facilities total availability plus invested cash. F = Fixed Rate Debt
18 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. Reconciliation of Non-GAAP Financial Measures ($ Millions) Sales Q1 2014 vs. Q1 2013 Q1 2014 vs. Q4 2013 Q10 Q10 Q10 Q40 2014 2013 %00 Growth 2014 2013 %00 Growth Industrial Core 803 786 2.1% 803 789 1.7% Construction Core 524 558 (5.9)% 524 604 (13.2)% Utility Core 246 242 1.5% 246 256 (3.8)% CIG Core 236 228 3.3% 236 238 (1.0)% Total Core Gross Sales 1,809 1,814 (0.3)% 1,809 1,887 (4.1)% Total Gross Sales from Acquisitions 8 - -00 8 - -00 Total Gross Sales 1,817 1,814 0.2% 1,817 1,887 (3.7)% Gross Sales Reductions/Discounts (6) (6) -00 (6) (7) -00 Total Net Sales 1,811 1,808 0.2% 1,811 1,880 (3.7)%
19 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 ($ Millions) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 344.9 (169.9) 175.0 Convertible Debt At March 31, 2014 Non-Cash Interest Expense ($ Millions) 2012 2013 Q1 2014 Convertible Debt 2.3 4.3 1.0 Amortization of Deferred Financing Fees 2.6 4.9 1.1 FIN 48 (3.4) 1.0 0.4 Total 1.5 10.2 2.5 Convertible Debt and Non-Cash Interest
20 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 EPS Dilution Weighted Average Quarterly Share Count Stock Price Incremental Shares from 2029 Convertible Debt (in millions)3 Incremental Shares from Equity Awards (in millions) Total Diluted Share Count (in millions)4 $60.00 6.20 0.72 51.27 $70.00 7.02 0.92 52.29 $80.00 7.64 1.04 53.03 Q1 2014 Average $85.74 7.93 1.09 53.37 $90.00 8.12 1.14 53.61 $100.00 8.50 1.23 54.08 $110.00 8.81 1.31 54.47 2029 Convertible Debt Details Conversion Price $28.8656 Conversion Rate 34.6433 1 Underlying Shares 11,948,513 2 Footnotes: 2029 Convertible Debenture 1 1000/28.8656 2 $345 million/28.8656 3 (Underlying Shares x Avg. Quarterly. Stock Price) minus $345 million Avg. Quarterly Stock Price 4 Basic Share Count of 44.35 million shares
21 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Work Days Q1 Q2 Q3 Q4 FY 2012 64 64 63 63 254 2013 63 64 64 63 254 2014 63 64 64 62 253
22 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q1 2014 Earnings Webcast 4/24/2014 Free Cash Flow Reconciliation Q1 2013 Q1 2014 Cash flow provided by operations 80.4 46.7 Less: Capital expenditures (6.0) (5.0) Free Cash Flow 74.4 41.7 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to provide a source of funds for any of the Company's financing needs. ($ Millions)