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): January 29, 2015
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 January 29, 2015, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter of 2014 and for the year ended December 31, 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 fourth quarter of 2014 and for the year ended December 31, 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
The following are furnished as exhibits to this report.
99.1 Press Release issued by WESCO International, Inc., dated January 29, 2015
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.
January 29, 2015 | 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 Fourth Quarter 2014 Results;
Achieves Record Annual Sales, Operating Profit and EPS
Fourth quarter results compared to the prior year:
• | Consolidated sales of $2.0 billion, organic growth of 8.1% |
• | Operating profit of $124.2 million, up 12.3% |
• | Earnings per share of $1.40, up 11.1% |
• | Free cash flow of $106.8 million, or 144% of net income |
Full year results compared to the prior year:
• | Record consolidated sales of $7.9 billion, organic growth of 5.6% |
• | Record operating profit of $466.2 million, up 4.8% |
• | Record earnings per share of $5.18, up 3.2% |
• | Free cash flow of $230.6 million, or 84% of net income |
PITTSBURGH, January 29, 2015 /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 2014 fourth quarter results.
The following are results for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. A reconciliation of adjusted results is provided in the Non-GAAP Financial Measures section of this release.
• | Net sales were $1,995.5 million for the fourth quarter of 2014, compared to $1,880.1 million for the fourth quarter of 2013, an increase of 6.1%. Organic sales increased 8.1%, acquisitions positively impacted sales by 1.6%, and foreign exchange and number of workdays negatively impacted sales by 2.0% and 1.6%, respectively. Adjusting for the workday impact in the quarter, organic sales were flat sequentially. |
• | Gross profit was $402.2 million, or 20.2% of sales, for the fourth quarter of 2014, compared to $376.2 million, or 20.0% of sales, for the fourth quarter of 2013. |
• | Selling, general & administrative (SG&A) expenses were $260.9 million, or 13.1% of sales, for the fourth quarter of 2014, compared to $248.6 million, or 13.2% of sales, for the fourth quarter of 2013. |
• | Operating profit was $124.2 million for the current quarter, up 12.3% from $110.6 million for the comparable 2013 quarter. Operating profit as a percentage of sales was 6.2% and 5.9% in 2014 and 2013, respectively. |
• | Interest expense for the fourth quarter of 2014 was $20.2 million, compared to $20.6 million for the fourth 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 fourth quarter of 2014 and 2013 was $2.4 million and $3.5 million, respectively. |
• | The effective tax rate for the current quarter was 28.8%, compared to 24.5% for the prior year fourth quarter. As adjusted, the effective tax rate for the prior year fourth quarter was 25.5%. |
• | Net income attributable to WESCO International, Inc. of $74.5 million for the current quarter was up 28.4% from $58.0 million for the prior year quarter. Compared to adjusted net income attributable to WESCO International, Inc. of $67.0 million for the fourth quarter of 2013, the current quarter was up 11.2%. |
• | Earnings per diluted share for the fourth quarter of 2014 were $1.40 per share, based on 53.0 million diluted shares, compared to adjusted earnings per diluted share of $1.26 in the fourth quarter of 2013, based on 53.2 million diluted shares. |
• | Free cash flow for the fourth quarter of 2014 was $106.8 million, or 144% of net income, compared to $128.1 million for the fourth quarter of 2013. Free cash flow was 191% of adjusted net income for the fourth quarter of 2013. |
Mr. John J. Engel, WESCO’s Chairman and Chief Executive Officer, stated, “Our fourth quarter sales grew 8%, our highest quarterly organic growth rate since the second quarter of 2012, reflecting growth in all four of our end markets and in all three of our geographic regions. Organic sales accelerated through the quarter with October up 5%, November up 8%, and December up 12%. Sales in the U.S. were up 10%, sales in Canada were up 4%, and sales for the rest of the world were up 2%. Gross margin increased 20 basis points over last year but was below our expectations driven by strong direct ship sales, particularly in December. Effective cost controls and operating cost leverage expanded operating margin to 6.2%, up 30 basis points from last year. Earnings per diluted share grew to $1.40, up 11% versus prior year. Free cash flow generation was also strong in the quarter and our financial leverage remains well within our targeted range.”
Mr. Engel continued, “On a full year basis, we posted record sales, profitability, and earnings per share. Our One WESCO initiatives are gaining traction and, combined with the reorganization we implemented at the beginning of 2014, helped drive organic sales growth of over 5% and earnings per share of $5.18, despite a challenging start to last year. Operating margins were flat on a year-over-year basis and below our outlook. Expanding operating margins is a top priority in 2015 as we continue to drive our One WESCO sales, productivity, and lean initiatives. Our acquisition pipeline remains robust, and we see excellent opportunities to strengthen our electrical core and further expand our portfolio of products and services this year. As we outlined in our investor outlook call in December, we expect sales growth of 3% to 6% and EPS of $5.50 to $5.90 per diluted share in 2015."
The following results are for the year ended December 31, 2014 compared to the year ended December 31, 2013. A reconciliation of adjusted results is provided in the Non-GAAP Financial Measures section of this release.
• | Net sales were $7,889.6 million for 2014, compared to $7,513.3 million for 2013, an increase of 5.0%. Organic sales increased 5.6%, acquisitions positively impacted sales by 1.4%, and foreign exchange and number of workdays negatively impacted sales by 1.6% and 0.4%, respectively. |
• | Gross profit of $1,611.0 million, or 20.4% of sales, for 2014 increased $65.6 million from $1,545.4 million, or 20.6% of sales, for 2013. |
• | SG&A expenses for 2014 were $1,076.8 million, or 13.6% of sales, compared to adjusted SG&A expenses of $1,032.9 million, or 13.7% of sales, for 2013. |
• | Operating profit was $466.2 million for 2014, up 4.8% from adjusted operating profit of $444.9 million for 2013. Operating profit as a percentage of sales was 5.9% in 2014, comparable with 5.9% in 2013, as adjusted. |
• | Interest expense for 2014 was $82.1 million, compared to $85.6 million for 2013. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, and the amortization of deferred financing fees, for 2014 and 2013 was $9.5 million and $10.2 million, respectively. |
• | The effective tax rate was 28.3% for 2014 compared to 26.4% for 2013, as adjusted. |
• | Net income attributable to WESCO International, Inc. of $275.9 million for 2014 was up 4.4% from $264.2 million for 2013, as adjusted. |
• | Earnings per diluted share for 2014 were $5.18 per share, based on 53.3 million diluted shares, compared to adjusted earnings per diluted share of $5.02 per share for 2013, based on 52.7 million diluted shares. |
• | Free cash flow for 2014 was $230.6 million, or 84% of net income, compared to $308.4 million in 2013. Free cash flow was 117% of adjusted net income for 2013. |
Mr. Engel added, "I am very proud of the sales results and extra effort delivered by all our associates working together as a One WESCO team serving our customers. We have significantly strengthened our business over the past year and enhanced our position in the global marketplace. Our One WESCO value proposition and strategy provides significant long-term growth and value creation opportunities for our customers, our suppliers, and our shareholders.”
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the fourth quarter earnings as described in this News Release on Thursday, January 29, 2015, at 11:00 a.m. E.S.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 replay will be available on the WESCO website through 9:00 A.M., February 5, 2015.
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. 2014 annual sales were approximately $7.9 billion. The Company employs approximately 9,400 people, maintains relationships with over 18,000 suppliers, and serves over 65,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates nine fully automated distribution centers and approximately 485 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, 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 | ||||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||||
Net sales | $ | 1,995.5 | $ | 1,880.1 | |||||||||
Cost of goods sold (excluding | 1,593.3 | 79.8 | % | 1,503.9 | 80.0 | % | |||||||
depreciation and amortization below) | |||||||||||||
Selling, general and administrative expenses | 260.9 | 13.1 | % | 248.6 | 13.2 | % | |||||||
Depreciation and amortization | 17.1 | 17.0 | |||||||||||
Income from operations | 124.2 | 6.2 | % | 110.6 | 5.9 | % | |||||||
Interest expense, net | 20.2 | 20.6 | |||||||||||
Loss on debt extinguishment | — | 13.2 | |||||||||||
Income before income taxes | 104.0 | 5.2 | % | 76.8 | 4.1 | % | |||||||
Provision for income taxes | 29.9 | 18.8 | |||||||||||
Net income | 74.1 | 3.7 | % | 58.0 | 3.1 | % | |||||||
Less: Net loss attributable to noncontrolling interest | (0.4 | ) | — | ||||||||||
Net income attributable to WESCO International, Inc. | $ | 74.5 | 3.7 | % | $ | 58.0 | 3.1 | % | |||||
Earnings per diluted common share | $ | 1.40 | $ | 1.09 | |||||||||
Weighted average common shares outstanding and common share equivalents used in computing earnings per diluted share (in millions) | 53.0 | 53.2 | |||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Twelve Months Ended | Twelve Months Ended | ||||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||||
Net sales | $ | 7,889.6 | $ | 7,513.3 | |||||||||
Cost of goods sold (excluding | 6,278.6 | 79.6 | % | 5,967.9 | 79.4 | % | |||||||
depreciation and amortization below) | |||||||||||||
Selling, general and administrative expenses | 1,076.8 | 13.6 | % | 996.8 | 13.3 | % | |||||||
Depreciation and amortization | 68.0 | 67.6 | |||||||||||
Income from operations | 466.2 | 5.9 | % | 481.0 | 6.4 | % | |||||||
Interest expense, net | 82.1 | 85.6 | |||||||||||
Loss on debt extinguishment | — | 13.2 | |||||||||||
Loss on sale of Argentina business | — | 2.3 | |||||||||||
Income before income taxes | 384.1 | 4.9 | % | 379.9 | 5.1 | % | |||||||
Provision for income taxes | 108.7 | 103.4 | |||||||||||
Net income | 275.4 | 3.5 | % | 276.5 | 3.7 | % | |||||||
Less: Net income (loss) attributable to noncontrolling interest | (0.5 | ) | 0.1 | ||||||||||
Net income attributable to WESCO International, Inc. | $ | 275.9 | 3.5 | % | $ | 276.4 | 3.7 | % | |||||
Earnings per diluted common share | $ | 5.18 | $ | 5.25 | |||||||||
Weighted average common shares outstanding and common share equivalents used in computing earnings per diluted share (in millions) | 53.3 | 52.7 | |||||||||||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(dollar amounts in millions)
(Unaudited)
December 31, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 128.3 | $ | 123.7 | |||
Trade accounts receivable, net | 1,117.4 | 1,045.1 | |||||
Inventories, net | 819.5 | 787.3 | |||||
Current deferred income taxes | 35.9 | 44.7 | |||||
Other current assets | 249.2 | 204.8 | |||||
Total current assets | 2,350.3 | 2,205.6 | |||||
Other assets | 2,404.0 | 2,443.3 | |||||
Total assets | $ | 4,754.3 | $ | 4,648.9 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 765.1 | $ | 735.1 | |||
Current debt and short-term borrowings | 49.1 | 40.1 | |||||
Other current liabilities | 249.6 | 276.5 | |||||
Total current liabilities | 1,063.8 | 1,051.7 | |||||
Long-term debt | 1,366.4 | 1,447.6 | |||||
Other noncurrent liabilities | 396.0 | 384.8 | |||||
Total liabilities | 2,826.2 | 2,884.1 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 1,928.1 | 1,764.8 | |||||
Total liabilities and stockholders' equity | $ | 4,754.3 | $ | 4,648.9 | |||
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Twelve Months Ended | Twelve Months Ended | ||||||
December 31, 2014 | December 31, 2013 | ||||||
Operating Activities: | |||||||
Net income | $ | 275.4 | $ | 276.5 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 68.0 | 67.6 | |||||
Deferred income taxes | (0.5 | ) | 20.6 | ||||
Change in trade receivables, net | (89.0 | ) | (30.5 | ) | |||
Change in inventories, net | (36.8 | ) | (9.3 | ) | |||
Change in accounts payable | 37.6 | 37.8 | |||||
Other | (3.6 | ) | (47.6 | ) | |||
Net cash provided by operating activities | 251.1 | 315.1 | |||||
Investing Activities: | |||||||
Capital expenditures | (20.5 | ) | (27.8 | ) | |||
Acquisition payments | (138.6 | ) | — | ||||
Other | 15.0 | 9.6 | |||||
Net cash used in investing activities | (144.1 | ) | (18.2 | ) | |||
Financing Activities: | |||||||
Debt repayments, net of proceeds | (63.7 | ) | (239.1 | ) | |||
Equity activity, net | (0.7 | ) | (4.2 | ) | |||
Other | (31.2 | ) | (14.2 | ) | |||
Net cash used in financing activities | (95.6 | ) | (257.5 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (6.8 | ) | (1.8 | ) | |||
Net change in cash and cash equivalents | 4.6 | 37.6 | |||||
Cash and cash equivalents at the beginning of the period | 123.7 | 86.1 | |||||
Cash and cash equivalents at the end of the period | $ | 128.3 | $ | 123.7 | |||
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 | Twelve Months Ended | ||||
Normalized Organic Sales Growth - Year-Over-Year: | December 31, 2014 | December 31, 2014 | |||
Change in net sales | 6.1 | % | 5.0 | % | |
Impact from acquisitions | 1.6 | % | 1.4 | % | |
Impact from foreign exchange rates | (2.0 | )% | (1.6 | )% | |
Impact from number of workdays | (1.6 | )% | (0.4 | )% | |
Normalized organic sales growth | 8.1 | % | 5.6 | % | |
Three Months Ended | ||
Normalized Organic Sales Growth - Sequential: | December 31, 2014 | |
Change in net sales | (4.0 | )% |
Impact from acquisitions | — | % |
Impact from foreign exchange rates | (0.9 | )% |
Impact from number of workdays | (3.1 | )% |
Normalized organic sales growth | — | % |
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 | Twelve Months Ended | ||||||||||||||
Gross Profit: | December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||
(dollar amounts in millions) | |||||||||||||||
Net sales | $ | 1,995.5 | $ | 1,880.1 | $ | 7,889.6 | $ | 7,513.3 | |||||||
Cost of goods sold (excluding depreciation and amortization) | 1,593.3 | 1,503.9 | 6,278.6 | 5,967.9 | |||||||||||
Gross profit | $ | 402.2 | $ | 376.2 | $ | 1,611.0 | $ | 1,545.4 | |||||||
Gross margin | 20.2 | % | 20.0 | % | 20.4 | % | 20.6 | % | |||||||
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 | Twelve Months Ended | ||||||||||||||
Adjusted Selling, General and Administrative Expenses: | December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||
(amounts in millions except for diluted EPS) | |||||||||||||||
Selling, general and administrative expenses | $ | 260.9 | $ | 248.6 | $ | 1,076.8 | $ | 996.8 | |||||||
ArcelorMittal litigation recovery included in SG&A | — | — | — | 36.1 | |||||||||||
Adjusted selling, general and administrative expenses | $ | 260.9 | $ | 248.6 | $ | 1,076.8 | $ | 1,032.9 | |||||||
Percent of sales | 13.1 | % | 13.2 | % | 13.6 | % | 13.7 | % | |||||||
Adjusted Income from Operations: | |||||||||||||||
Income from operations | $ | 124.2 | $ | 110.6 | $ | 466.2 | $ | 481.0 | |||||||
ArcelorMittal litigation recovery included in SG&A | — | — | — | (36.1 | ) | ||||||||||
Adjusted income from operations | $ | 124.2 | $ | 110.6 | $ | 466.2 | $ | 444.9 | |||||||
Percent of sales | 6.2 | % | 5.9 | % | 5.9 | % | 5.9 | % | |||||||
Adjusted Net Income Attributable to WESCO International, Inc.: | |||||||||||||||
Income before income taxes | $ | 104.0 | $ | 76.8 | $ | 384.1 | $ | 379.9 | |||||||
ArcelorMittal litigation recovery included in SG&A | — | — | — | (36.1 | ) | ||||||||||
Loss on debt extinguishment | — | 13.2 | — | 13.2 | |||||||||||
Loss on sale of Argentina business | — | — | — | 2.3 | |||||||||||
Adjusted income before income taxes | 104.0 | 90.0 | 384.1 | 359.3 | |||||||||||
Adjusted provision for income taxes | 29.9 | 23.0 | 108.7 | 95.0 | |||||||||||
Adjusted net income | 74.1 | 67.0 | 275.4 | 264.3 | |||||||||||
Less: Net income (loss) attributable to noncontrolling interest | (0.4 | ) | — | (0.5 | ) | 0.1 | |||||||||
Adjusted net income attributable to WESCO International, Inc. | $ | 74.5 | $ | 67.0 | $ | 275.9 | $ | 264.2 | |||||||
Adjusted Diluted EPS: | |||||||||||||||
Diluted share count | 53.0 | 53.2 | 53.3 | 52.7 | |||||||||||
Adjusted diluted EPS | $ | 1.40 | $ | 1.26 | $ | 5.18 | $ | 5.02 | |||||||
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.
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Twelve Months Ended | |||||||
Financial Leverage: | December 31, 2014 | December 31, 2013 | |||||
(dollar amounts in millions) | |||||||
Income from operations | $ | 466.2 | $ | 481.0 | |||
Adjust for ArcelorMittal litigation recovery | — | (36.1 | ) | ||||
Depreciation and amortization | 68.0 | 67.6 | |||||
Adjusted EBITDA | $ | 534.2 | $ | 512.5 | |||
December 31, 2014 | December 31, 2013 | ||||||
Current debt | $ | 49.1 | $ | 40.1 | |||
Long-term debt | 1,366.4 | 1,447.6 | |||||
Debt discount related to convertible debentures and term loan (1) | 170.4 | 174.7 | |||||
Total debt including debt discount | $ | 1,585.9 | $ | 1,662.4 | |||
Financial leverage ratio | 3.0 | 3.2 | |||||
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 Adjusted EBITDA. Adjusted EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization, excluding the ArcelorMittal litigation charge.
(1) The convertible debentures and term loan are presented on the consolidated balance sheets in long-term debt, net of the unamortized discount.
Three Months Ended | Twelve Months Ended | ||||||||||||||
Free Cash Flow: | December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||
(dollar amounts in millions) | |||||||||||||||
Cash flow provided by operations | $ | 111.3 | $ | 135.4 | $ | 251.1 | $ | 315.1 | |||||||
Less: Capital expenditures | (4.5 | ) | (7.3 | ) | (20.5 | ) | (27.8 | ) | |||||||
Add: Non-recurring pension contribution | — | — | — | 21.1 | |||||||||||
Free cash flow | $ | 106.8 | $ | 128.1 | $ | 230.6 | $ | 308.4 | |||||||
Note: The table above reconciles cash flow provided by operations to free cash flow. 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. During the quarter ended September 30, 2013, a non-recurring contribution was made to fund the Canadian EECOL pension plan. This contribution was required pursuant to the terms of the share purchase agreement by which the Company acquired EECOL in 2012. EECOL sellers fully funded this contribution by way of a direct reduction in the purchase price at the date of acquisition. GAAP requires the contribution to be shown as a reduction of operating cash flow, however, it is added back to accurately reflect free cash flow.
Webcast Presentation January 29, 2015 Q4 & Year End 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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 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 acquired businesses; 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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 (1.8) (1.2) 1.6 1.5 1.6 6.0 6.7 8.1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2014 Highlights Organic Growth (%) …momentum building across end markets Q4 • Organic growth in all end markets and geographic regions • Strong free cash flow improved financial leverage Full Year • Record sales, profitability and EPS • Operating margin flat YOY and below our outlook, a top priority for 2015 • Acquisitions on track and robust pipeline Oct 5% Nov 8% Dec 12% Note: Workday adjusted
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 (2.6%) 2.1% 5.8% Industrial End Market • Q4 2014 Sales − Up 4.2% versus prior year, and up 5.8% workday adjusted − Down 2.4% sequentially and up 0.7% workday adjusted • Grew sales each quarter in 2014. • Global Accounts and Integrated Supply annualized sales run rate over $2.0 billion. • Channel inventory levels appear to be largely in balance with demand. • Bidding activity levels remain robust and industrial market leading indicators 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 42% Industrial • Global Accounts • Integrated Supply •OEM •General Industrial Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 7.0% FY 2013 Q3 2014 Q2 2014 Q1 2014 2014 5.0% Awarded a new multi-year contract for an international water treatment project for electrical materials and complete global supply chain material management services. 2013 (2.6%) 5.0% Q4 2014
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 • Q4 2014 Sales − Up 3.6% versus prior year, and up 5.2% workday adjusted − Down 6.0% sequentially and down 2.9% workday adjusted • U.S. construction sales up over 10% in Q4. • Backlog declined 6% sequentially in the quarter and versus prior year end driven by Canada. • Non-residential construction market leading indicators are generally positive despite expected cutbacks in oil and gas spending. • Non-residential construction market still well below its prior peak in 2008. Construction •Non- Residential •Residential 31% Core Sales Growth versus Prior Year Construction End Market Construction Note: Excludes acquisitions during the first year of ownership. Workday adjusted. FY 2013 Q2 2014 (2.5%) Q1 2014 2.3% 3.8% Awarded a contract for electrical equipment for a public power utility natural gas power plant with additional bidding opportunities expected in other regions. (5.9%) Q3 2014 Q4 2014 2014 1.5% 5.2%
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Utility End Market Core Sales Growth versus Prior Year 14% Utility • Investor Owned •Public Power •Utility Contractors • Q4 2014 Sales − Up 6.3% versus prior year and up 7.9% workday adjusted − Down 2.0% sequentially and up 1.1% workday adjusted • Fifteenth consecutive quarter of year-over- year sales growth. • Scope expansion and value creation with IOU, public power, and generation customers providing utility sales growth. • Housing market expected to be positive catalyst for future distribution grid spending. • Continued interest for WESCO Integrated Supply solution offerings. Utility Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 13.4% 1.5% 6.1% 10.6% 7.9% FY 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Awarded a multi-year integrated supply contract with a large utility providing generation, transmission, substation & distribution products and services. 2014 6.6%
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 5.2% 2.3% 7.4% CIG End Market • Q4 2014 Sales − Up 5.8% versus prior year, and up 7.4% workday adjusted − Down 5.7% sequentially and down 2.6% workday adjusted • Sixth consecutive quarter of sales growth. • Bidding levels remain active in commercial, institutional, and government markets. • Focus remains on energy efficiency (lighting, automation, metering) and security. • Opportunities exist to support data center construction and retrofits and cloud technology projects. Government Core Sales Growth versus Prior Year CIG •Commercial • Institutional •Government 13% Note: Excludes acquisitions during the first year of ownership. Workday adjusted. FY 2013 Q2 2014 Q1 2014 Q3 2014 Renewed a multi-year One WESCO cooperative contract providing electrical, data communications, and security products to higher educational institutions. Q4 2014 2014 4.5% 3.3% (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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 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 Hi-Line 2014 $30M $0.03 Total $1.6B $1.64 Acquisitions 37% 28% 13% 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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Q4 2014 Results Q3 2013 160 bps 6.1% Growth 2.2% Growth 4.2% Growth 10.2% Growth 200 bps 10 bps 100 bps 700 bps $2.00B $1.88B Q4 2014 Sales Acquisitions Foreign Exchange Rest of World Canada U.S. Q4 2013 Sales 160 bps Workday Impact 8.1% Organic Growth Outlook Actual YOY Sales 5% to 8% growth $2.00B (Q4 record) 6.1% growth 8.1% organic workday adjusted Gross Margin 20.4% to 20.6% 20.2% Up 20 bps SG&A 13.1% Down 10 bps Operating Profit $124M (Q4 record) Up 12% Operating Margin 6.4% to 6.6% 6.2% Up 30 bps Effective Tax Rate ~ 28% 28.8% Financial results reference non-GAAP adjusted results. See Appendix for reconciliation.
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Full Year 2014 Results Outlook Actual Sales ~5.0% growth 5.0% growth 5.6% organic growth workday adjusted Gross Margin ~20.5% 20.4% Operating Margin ~6.0% 5.9% Effective Tax Rate ~ 28% 28.3% Q3 2013 140 bps 5.0% Growth 5.8% Growth 2.9% Growth 6.7% Growth 160 bps 30 bps 60 bps 470 bps $7.89B $7.51B FY 2014 Sales Acquisitions Foreign Exchange Rest of World Canada U.S. FY 2013 Sales 40 bps Workday Impact 5.6% Organic Growth $7.89B Outlook Actual YOY Sales ~ 5% growth $7.89B (record) 5.0% growth 5.6% organic workday adjusted Gross Margin ~ 20.5% 20.4% Down 20 bps SG&A 13.6% Down 10 bps Operating Profit $466M (record) Up 5% Operating Margin ~ 6.0% 5.9% Flat Effective Tax Rate ~ 28% 28.3% Financial results reference non-GAAP adjusted results. See Appendix for reconciliation.
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 EPS Walk Q4 FY 2013 $1.26 $5.02 Organic growth ~0.22 ~0.42 Acquisitions 0.01 0.07 Foreign Exchange Impact (0.04) (0.14) Share count 0.01 (0.06) Tax rate (0.06) (0.13) 2014 $1.40 $5.18 Financial results reference non-GAAP adjusted results. See Appendix for reconciliation.
12 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q4 & YE 2014 Earnings Webcast, 1/29/2015 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 128.1 106.8 Q4 2013 Q4 2014 Cash Generation Free Cash Flow (1) ($ Millions) (1) Reconciliation of these non-GAAP financial measures is included in the Appendix to this webcast presentation. 144% of net income 191% of adjusted net income ~ $1B of free cash flow over last 5 years 2012 2013 2014 Target Leverage 2.0x – 3.5x 3.0X Leverage (Total Par Debt to TTM EBITDA)
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 2015 Outlook Q1 FY Sales 5% to 7% growth 3% to 6% growth Operating Margin 5.0% to 5.2% 6.1% to 6.3% Effective Tax Rate 29% to 30% ~ 29% EPS $5.50 to $5.90 Free Cash Flow ~ 80% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.87.
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Appendix
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Adjusted Results Q4 2013 Full Year 2013 Reported Results Non-recurring items Adjusted Results Reported Results Non-recurring items Adjusted Results Net Sales 1,880.1 - 1,880.1 7,513.3 - 7,513.3 Gross Profit 376.2 - 376.2 1,545.4 - 1,545.4 Gross margin 20.0% 20.0% 20.6% 20.6% SG&A 248.6 - 248.6 996.8 36.11 1,032.9 SG&A rate 13.2% 13.2% 13.3% 13.7% Operating profit 110.6 - 110.6 481.0 (36.1) 444.9 Operating margin 5.9% 5.9% 6.4% 5.9% Interest 20.6 - 20.6 85.6 - 85.6 Loss on debt extinguishment 13.2 (13.2) - 13.2 (13.2) - Loss on sale of Argentina business 2.3 (2.3) - Taxes 18.8 4.2 23.0 103.4 (8.4) 95.0 Effective tax rate 24.4% 25.5% 27.2% 26.4% Net income attributable to WESCO International, Inc. 58.0 9.0 67.0 276.4 (12.2) 264.2 Average Diluted Shares Outstanding 53.2 53.2 52.7 52.7 Fully diluted EPS 1.09 1.26 5.25 5.02 Full Year 2013 Reported Results Non-recurring items Adjusted Results Net Sales 7,513.3 - 7,513.3 Gross Profit 1.545.4 - 1,545.4 Gross margin 20.6% 20.6% SG&A 996.8 36.12 1,032.9 SG&A rate 13.3% 13.7% Operating profit 481.0 (36.1) 444.9 Operating margin 6.4% 5.9% Interest 85.6 - 85.6 Loss on debt extinguishment 13.2 (13.2) - Loss on sale of Argentina business 2.3 (2.3) - Taxes 103.4 (8.4) 95.0 Effective tax rate 27.2% 26.4% Net income attributable to WESCO International, Inc. 276.4 (12.2) 264.2 Average Diluted Shares Outstanding 52.7 52.7 Fully diluted EPS 5.25 5.02 1 ArcelorMittal insurance recovery.
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 WESCO Profile 2014 42% 31% 14% 13% 40% 14% 16% 11% 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 $6.6B …portfolio diversified and strengthened over last decade
17 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Sales Growth 2012 2013 2014 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Consolidated 12.2 9.7 4.8 3.5 7.4 12.6 13.2 16.6 14.3 14.2 0.2 5.9 7.6 6.1 5.0 Acquisition Impact 2.6 2.2 4.0 4.3 3.3 16.0 14.6 14.1 13.8 14.6 0.5 1.6 1.8 1.6 1.4 Core 9.6 7.5 0.8 (0.8) 4.1 (3.4) (1.4) 2.5 0.5 (0.4) (0.3) 4.3 5.8 4.5 3.6 FX Impact (0.2) (0.7) (0.6) 0.5 (0.3) 0.0 (0.2) (0.7) (1.0) (0.4) (1.9) (1.7) (0.9) (2.0) (1.6) Organic 9.8 8.2 1.4 (1.3) 4.4 (3.4) (1.2) 3.2 1.5 0.0 1.6 6.0 6.7 6.5 5.2 WD Impact 1.6 (1.6) (1.6) 1.6 (1.6) (0.4) Normalized Organic 8.2 8.2 3.0 (1.3) 4.4 (1.8) (1.2) 1.6 1.5 0.0 1.6 6.0 6.7 8.1 5.6 Estimated Price Impact 1.5 1.0 0.5 1.0 1.0 1.0 0.0 0.0 0.0 0.2 0.5 0.5 0.5 0.5 0.5
18 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Outstanding at December 31, 2013 Outstanding at December 31, 2014 Debt Maturity Schedule AR Revolver (V) 454 430 2016 Inventory Revolver (V) 23 8 2016 Senior Notes (F) 500 500 2021 2019 Term Loans (V) 300 252 2019 2029 Convertible Bonds (F) 345 345 2029 (No Put) Other (V) 40 51 N/A Total Par Debt 1,662 1,586 Capital Structure Key Financial Metrics YE 2013 YE 2014 Cash 124 128 Capital Expenditures 28 21 Free Cash Flow 308 231 Liquidity (1) 606 638 ($ Millions) V = Variable Rate Debt 1 = Asset-backed credit facilities total availability plus invested cash. F = Fixed Rate Debt
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 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) Unaudited Sales Full Year 2014 vs. 2013 Q4 2014 vs. Q4 2013 Q4 2014 vs. Q3 2014 Q4 Q4 Q4 Q3 2014 2013 % Growth 2014 2013 % Growth 2014 2014 % Growth Industrial Core 3,304 3,160 4.6 % 822 790 4.2 % 826 846 (2.4)% Construction Core 2,432 2,404 1.1 % 627 605 3.6 % 639 680 (6.0)% Utility Core 1,065 1,003 6.2 % 272 256 6.3 % 286 292 (2.0)% CIG Core 1,013 973 4.1 % 250 236 5.8 % 251 267 (5.7)% Total Core Gross Sales 7,814 7,540 3.6 % 1,971 1,887 4.5 % 2,002 2,085 (4.0)% Total Gross Sales from Acquisitions 103 - - 31 - - - - -00 Total Gross Sales 7,917 7,540 5.0 % 2,002 1,887 6.1 % 2,002 2,085 (4.0)% Gross Sales Reductions/Discounts (27) (27) - (6) (7) - (6) (7) -00 Total Net Sales 7,890 7,513 5.0 % 1,996 1,880 6.1 % 1,996 2,078 (4.0)%
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 ($ Millions) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 344.9 (167.3) 177.6 Convertible Debt At December 31, 2014 Non-Cash Interest Expense ($ Millions) 2012 2013 2014 Convertible Debt 2.3 4.3 4.1 Amortization of Deferred Financing Fees 2.6 4.9 4.4 FIN 48 (3.4) 1.0 1.0 Total 1.5 10.2 9.5 Convertible Debt and Non-Cash Interest
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. Q4 & YE 2014 Earnings Webcast, 1/29/2015 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 $50.00 5.05 0.58 50.12 $60.00 6.20 0.67 51.36 $70.00 7.02 0.86 52.37 Q4 2014 Average $78.70 7.57 0.95 53.01 $80.00 7.64 0.96 53.09 $90.00 8.12 1.06 53.67 $100.00 8.50 1.13 54.12 2029 Convertible Debt Details Conversion Price $28.8656 Conversion Rate 34.6433 1 Underlying Shares 11,948,301 2 Footnotes: 2029 Convertible Debenture 1 1000/28.8656 2 $345 million/28.8656 3 (Underlying Shares x Avg. Quarterly. Stock Price) minus $345 million Avg. Quarterly Stock Price 4 Basic Share Count of 44.49 million shares
22 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Work Days Q1 Q2 Q3 Q4 FY 2012 64 64 63 63 254 2013 63 64 64 63 254 2014 63 64 64 62 253 2015 62 64 64 63 253
23 The information contained herein is confidential in nature and considered proprietary to WESCO Distribution, Inc. It is intended for the exclusive use of the employees, contractors and agents of client companies. We request that no oral or written disclosure of such information be made without the prior written approval by WESCO Distribution, Inc. Q4 & YE 2014 Earnings Webcast, 1/29/2015 Free Cash Flow Reconciliation ($ Millions) Q4 2013 Q4 2014 2013 2014 Cash flow provided by operations 135.4 111.3 315.1 251.1 Less: Capital expenditures (7.3) (4.5) (27.8) (20.5) Add: Non-recurring EECOL pension contribution - - 21.1 - Free Cash Flow 128.1 106.8 308.4 230.6 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. During the quarter ended September 30, 2013, a non- recurring contribution was made to fund the Canadian EECOL pension plan. This contribution was required pursuant to the terms of the share purchase agreement by which the Company acquired EECOL in 2012. EECOL sellers fully funded this contribution by way of a direct reduction in the purchase price at the date of acquisition. U.S. GAAP requires the contribution to be shown as a reduction of operating cash flow, however, it is added back to accurately reflect free cash flow.