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 EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 23, 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 (IRS Employer Identification No.) | |
225 West Station Square Drive Suite 700 Pittsburgh, Pennsylvania (Address of principal executive offices) | 15219 (Zip Code) | |
(412) 454-2200
(Registrant's telephone number, including area code)
Not applicable.
(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 23, 2015, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2015. 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 2015 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 dated April 23, 2015
99.2 Slide presentation for investors
SIGNATURES
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.
WESCO International, Inc. | ||
(Registrant) | ||
April 23, 2015 | By: | /s/ Kenneth S. Parks |
(Date) | 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 2015 Results
First quarter highlights:
•Sales of $1.8 billion, up 3.2% organically
•Operating profit of $87.2 million
•Earnings per diluted share of $0.90
•Free cash flow of $85.1 million or 181% of net income; financial leverage improved to 2.9x
PITTSBURGH, April 23, 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, announces its 2015 first quarter results.
The following are results for the three months ended March 31, 2015 compared to the three months ended March 31, 2014:
• | Net sales were $1,816.3 million for the first quarter of 2015, compared to $1,810.8 million for the first quarter of 2014, an increase of 0.3%. Organic sales increased 3.2%, acquisitions positively impacted sales by 1.2%, and foreign exchange rates and number of workdays negatively impacted sales by 2.5% and 1.6%, respectively. |
• | Gross profit was $367.7 million, or 20.2% of sales, for the first quarter of 2015, compared to $374.8 million, or 20.7% of sales, for the first quarter of 2014. |
• | Selling, general and administrative ("SG&A") expenses were $264.6 million, or 14.6% of sales, for the first quarter of 2015, compared to $265.5 million, or 14.7% of sales, for the first quarter of 2014. |
• | Operating profit was $87.2 million for the current quarter, compared to $93.0 million for the first quarter of 2014. Operating profit as a percentage of sales was 4.8% in 2015, compared to 5.1% in 2014. |
• | Interest expense for the first quarter of 2015 was $20.9 million, compared to $20.7 million for the first quarter of 2014. Non-cash interest expense, which includes convertible debt interest, interest related to uncertain tax positions, amortization of deferred financing fees and accrued interest, for the first quarter of 2015 and 2014 was $5.4 million and $4.1 million, respectively. |
• | The effective tax rate for the current quarter was 29.4%, compared to 28.2% for the prior year first quarter. |
• | Net income attributable to WESCO International, Inc. of $47.0 million for the current quarter was down 9.4% from $51.9 million for the prior year quarter. |
• | Earnings per diluted share for the first quarter of 2015 was $0.90 per share, based on 52.2 million diluted shares, compared to $0.97 per share in the first quarter of 2014, based on 53.4 million diluted shares. |
• | Free cash flow for the first quarter of 2015 was $85.1 million, or 181% of net income, compared to $41.7 million, or 80% of net income for the first quarter of 2014. |
Mr. John J. Engel, WESCO’s Chairman and Chief Executive Officer, stated, “We had a challenging start to the year where reduced demand in the industrial market, winter weather impacts, and foreign exchange headwinds weighed heavily on our results in the first quarter. While organic sales per workday grew 3%, sales momentum decelerated through the quarter. Gross margin was down versus prior year but was flat sequentially. Effective cost controls partially mitigated the impact on operating profit and as a result EPS was down versus prior year. Free cash flow generation was particularly strong in the quarter enabling us to further improve our financial
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leverage and repurchase approximately 300,000 shares of stock. Our capital structure is in good shape and our acquisition pipeline remains robust with opportunities to strengthen our electrical core and further expand our portfolio of products and services this year. Based upon our first quarter results, we are revising our full year outlook to (3)% to 3% sales growth and $5.00 to $5.40 earnings per diluted share from our previous outlook of 0% to 3% sales growth and $5.20 to $5.60 earnings per diluted share.”
Mr. Engel continued, “We expect reduced demand in commodity-driven industrial end markets and foreign exchange headwinds to continue throughout this year. As a result, we are taking additional actions to accelerate our One WESCO sales initiatives and simplify and streamline our business. These additional mitigating actions include consolidating a series of branches and reducing structural costs while adding to our salesforce to address underserved territories and customer accounts. Our One WESCO strategy continues to drive our long term value proposition, particularly for customers looking to reduce their supply chain costs.”
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 23, 2015, 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 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 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 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, 2014, 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
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months Ended | |||||||||||
March 31, 2015 | March 31, 2014 | ||||||||||
Net sales | $ | 1,816.3 | $ | 1,810.8 | |||||||
Cost of goods sold (excluding | 1,448.6 | 79.8 | % | 1,436.0 | 79.3 | % | |||||
depreciation and amortization below) | |||||||||||
Selling, general and administrative expenses | 264.6 | 14.6 | % | 265.5 | 14.7 | % | |||||
Depreciation and amortization | 15.9 | 16.3 | |||||||||
Income from operations | 87.2 | 4.8 | % | 93.0 | 5.1 | % | |||||
Interest expense, net | 20.9 | 20.7 | |||||||||
Income before income taxes | 66.3 | 3.7 | % | 72.3 | 4.0 | % | |||||
Provision for income taxes | 19.5 | 20.4 | |||||||||
Net income | 46.8 | 2.6 | % | 51.9 | 2.9 | % | |||||
Net loss attributable to noncontrolling interests | (0.2 | ) | — | ||||||||
Net income attributable to WESCO International, Inc. | $ | 47.0 | 2.6 | % | $ | 51.9 | 2.9 | % | |||
Earnings per diluted common share | $ | 0.90 | $ | 0.97 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 52.2 | 53.4 | |||||||||
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
March 31, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 154.4 | $ | 128.3 | |||
Trade accounts receivable, net | 1,082.2 | 1,117.4 | |||||
Inventories, net | 814.4 | 819.5 | |||||
Current deferred income taxes | 36.5 | 35.9 | |||||
Other current assets | 226.0 | 249.2 | |||||
Total current assets | 2,313.5 | 2,350.3 | |||||
Other assets | 2,298.9 | 2,404.0 | |||||
Total assets | $ | 4,612.4 | $ | 4,754.3 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 771.9 | $ | 765.1 | |||
Current debt and short-term borrowings | 51.9 | 49.1 | |||||
Other current liabilities | 215.3 | 249.6 | |||||
Total current liabilities | 1,039.1 | 1,063.8 | |||||
Long-term debt | 1,336.9 | 1,366.4 | |||||
Other noncurrent liabilities | 399.1 | 396.0 | |||||
Total liabilities | 2,775.1 | 2,826.2 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 1,837.3 | 1,928.1 | |||||
Total liabilities and stockholders' equity | $ | 4,612.4 | $ | 4,754.3 | |||
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Three Months Ended | |||||||
March 31, 2015 | March 31, 2014 | ||||||
Operating Activities: | |||||||
Net income | $ | 46.8 | $ | 51.9 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 15.9 | 16.4 | |||||
Deferred income taxes | 7.9 | 7.9 | |||||
Change in trade receivables, net | 9.7 | (55.3 | ) | ||||
Change in inventories, net | (13.2 | ) | (17.4 | ) | |||
Change in accounts payable | 20.6 | 43.6 | |||||
Other | 2.4 | (0.4 | ) | ||||
Net cash provided by operating activities | 90.1 | 46.7 | |||||
Investing Activities: | |||||||
Capital expenditures | (5.0 | ) | (5.0 | ) | |||
Acquisition payments | — | (91.2 | ) | ||||
Other | 0.8 | — | |||||
Net cash used in investing activities | (4.2 | ) | (96.2 | ) | |||
Financing Activities: | |||||||
Debt borrowings (repayments), net | (19.4 | ) | 19.7 | ||||
Equity activity, net | (27.7 | ) | (0.3 | ) | |||
Other | (6.7 | ) | 4.2 | ||||
Net cash provided by (used in) financing activities | (53.8 | ) | 23.6 | ||||
Effect of exchange rate changes on cash and cash equivalents | (6.0 | ) | (1.4 | ) | |||
Net change in cash and cash equivalents | 26.1 | (27.3 | ) | ||||
Cash and cash equivalents at the beginning of the period | 128.3 | 123.7 | |||||
Cash and cash equivalents at the end of the period | $ | 154.4 | $ | 96.4 | |||
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NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial measures. These financial measures include normalized organic sales growth, gross profit, financial leverage and free cash flow. The Company believes that these non-GAAP measures are useful to investors in order to provide a better understanding of the Company's organic growth trends, capital structure position and liquidity on a comparable basis. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.
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WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions, except sales growth data)
(Unaudited)
Three Months Ended | |||||
Normalized Organic Sales Growth: | March 31, 2015 | March 31, 2014 | |||
Change in net sales | 0.3 | % | 0.2 | % | |
Impact from acquisitions | 1.2 | % | 0.5 | % | |
Impact from foreign exchange rates | (2.5 | )% | (1.9 | )% | |
Impact from number of workdays | (1.6 | )% | — | % | |
Normalized organic sales growth | 3.2 | % | 1.6 | % | |
Note: Normalized 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. Normalized organic sales growth is calculated by deducting the percentage impact 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, 2015 | March 31, 2014 | |||||
Net Sales | $ | 1,816.3 | $ | 1,810.8 | |||
Cost of goods sold (excluding depreciation and amortization) | 1,448.6 | 1,436.0 | |||||
Gross profit | $ | 367.7 | $ | 374.8 | |||
Gross margin | 20.2 | % | 20.7 | % | |||
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.
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WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions)
(Unaudited)
Twelve Months Ended | |||||||
Financial Leverage: | March 31, 2015 | December 31, 2014 | |||||
Income from operations | $ | 460.4 | $ | 466.2 | |||
Depreciation and amortization | 67.6 | 68.0 | |||||
EBITDA | $ | 528.0 | $ | 534.2 | |||
March 31, 2015 | December 31, 2014 | ||||||
Current debt and short-term borrowings | $ | 51.9 | $ | 49.1 | |||
Long-term debt | 1,336.9 | 1,366.4 | |||||
Debt discount related to convertible debentures and term loan(1) | 168.5 | 170.4 | |||||
Total debt including debt discount | 1,557.3 | 1,585.9 | |||||
Financial leverage ratio | 2.9 | 3.0 | |||||
(1) | The convertible debentures and term loan are presented in the condensed consolidated balance sheets in long-term debt, net of the unamortized discount. |
Note: Financial leverage is a non-GAAP financial measure provided by the Company to illustrate its capital structure position. Financial leverage ratio is calculated by dividing total debt, including debt discount, by EBITDA. EBITDA is defined as the trailing twelve months earnings before interest, taxes, depreciation and amortization.
Three Months Ended | |||||||
Free Cash Flow: | March 31, 2015 | March 31, 2014 | |||||
Cash flow provided by operations | $ | 90.1 | $ | 46.7 | |||
Less: Capital expenditures | (5.0 | ) | (5.0 | ) | |||
Free cash flow | $ | 85.1 | $ | 41.7 | |||
Percent of net income attributable to | |||||||
WESCO International, Inc. | 181.1 | % | 80.3 | % | |||
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 fund the Company's financing needs.
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Webcast Presentation April 23, 2015 Q1 2015 Earnings
2 Q1 2015 Earnings Webcast, 04/23/2015 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, 2014 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 found in the appendix and obtained via WESCO’s website, www.wesco.com.
3 Q1 2015 Earnings Webcast, 04/23/2015 (1.8) (1.2) 1.6 1.5 1.6 6.0 6.7 8.1 3.2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 Q1 2015 Highlights Organic Growth (%) …A challenging start to the year, driven by industrial and foreign exchange • U.S. and Canada sales each up 4% organic workday adjusted • Oil and gas sales down approximately 10% • April sales tracking March • Cost controls partially mitigated margin decline; additional cost reduction actions launched • Strong free cash flow improved financial leverage • Approximately 300,000 shares repurchased • Robust acquisition pipeline Jan 10% Feb Flat Mar (2%) Note: Workday adjusted; see appendix for non-GAAP reconciliations.
4 Q1 2015 Earnings Webcast, 04/23/2015 2.1% 5.0% 7.0% 5.8% (4.1%) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Industrial End Market • Q1 2015 Sales − Down 5.7% versus prior year, and down 4.1% workday adjusted − Down 8.0% sequentially − Weather, logistics, U.S. dollar and oil prices are weighing on manufacturing sector • 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 reductions, and supplier consolidation. Industrial Core Sales Growth versus Prior Year 41% Industrial • Global Accounts • Integrated Supply • OEM • General Industrial Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 2014 5.0% Awarded contract to supply electrical gear, lighting, and MRO materials for the upgrade and expansion of a large food processing plant. Opportunities exist for additional plant expansions at this global accounts customer. Q2 2014 Q1 2014 Q3 2014 Q4 2014 Q1 2015
5 Q1 2015 Earnings Webcast, 04/23/2015 • Q1 2015 Sales − Up 2.3% versus prior year, and up 3.9% workday adjusted − Down 14.3% sequentially • U.S. and Canada construction sales each up approximately 8% organic workday adjusted • Backlog increased 5% sequentially in the quarter and was flat versus prior year. • 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 32% Core Sales Growth versus Prior Year Construction End Market Construction Note: Excludes acquisitions during the first year of ownership. Workday adjusted. Q2 2014 Q1 2014 2.3% 3.8% Awarded a contract to provide upgraded electrical gear and controls for several municipal water treatment facilities in Canada. (5.9%) Q3 2014 Q4 2014 5.2% Q1 2015 3.9% 2014 1.5%
6 Q1 2015 Earnings Webcast, 04/23/2015 Utility End Market Core Sales Growth versus Prior Year 14% Utility • Investor Owned • Public Power • Utility Contractors • Q1 2015 Sales − Up 4.9% versus prior year, and up 6.5% workday adjusted − Down 5.0% sequentially • Sixteenth 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. • Increased capital spending is underway and planned for certain investor owned utilities. • Continued interest for Integrated Supply solution offerings. Utility Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 1.5% 6.1% 10.6% 7.9% 6.5% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Awarded a multi-year contract to provide supply chain management, logistics, and inventory handling services for a high-voltage transmission project with an Investor Owned Utility customer. 2014 6.6%
7 Q1 2015 Earnings Webcast, 04/23/2015 CIG End Market • Q1 2015 Sales − Up 2.7% versus prior year, and up 4.3% workday adjusted − Down 3.4% sequentially • 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. Awarded a multi-year contract with a large national wireless carrier in Canada to provide data communication products for system conversion upgrade. Additional MRO products sales are expected as the project rolls out. 3.3% 5.2% 2.3% 7.4% 4.3% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 2014 4.5%
8 Q1 2015 Earnings Webcast, 04/23/2015 Q1 2015 Results Outlook Actual YOY Sales 5% to 7% growth $1.82B 0.3% growth 3.2% organic workday adjusted Gross Margin 20.2% Down 50 bps (flat sequentially) SG&A 14.6% Down 10 bps Operating Profit $87M Down 6% Operating Margin 5.0% to 5.2% 4.8% Down 30 bps Effective Tax Rate 29% to 30% 29.4% Up 1.2% 120 bps 0.3% Growth (4.0)% Growth 4.1% Growth 4.0% Growth 250 bps 60 bps 100 bps 280 bps $1.82B $1.81B Q1 2015 Sales Acquisitions Foreign Exchange Rest of World Canada U.S. Q1 2014 Sales 160 bps Workday Impact 3.2% Organic Growth
9 Q1 2015 Earnings Webcast, 04/23/2015 EPS Walk Q1 2014 $0.97 Core Operations ~0.00 Foreign Exchange Impact (0.07) Share count 0.02 Tax rate (0.02) Q1 2015 $0.90
10 Q1 2015 Earnings Webcast, 04/23/2015 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 41.7 85.1 Q1 2014 Q1 2015 Cash Generation Free Cash Flow ($ Millions) See appendix for non-GAAP reconciliations. 181% of net income 80% of net income ~ $1B of free cash flow over last 5 years 2013 2014 Target Leverage 2.0x – 3.5x 2.9X Leverage (Total Par Debt to TTM EBITDA) 2015
11 Q1 2015 Earnings Webcast, 04/23/2015 2015 Outlook Q2 FY Sales (3)% growth to flat (3)% to 3% growth Operating Margin 5.3% to 5.5% 5.8% to 5.9% Effective Tax Rate 29% to 30% ~ 29% EPS $5.00 to $5.40 Free Cash Flow ~ 80% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.79.
12 Q1 2015 Earnings Webcast, 04/23/2015 Appendix
13 Q1 2015 Earnings Webcast, 04/23/2015 WESCO Profile 2015 41% 32% 14% 13% 40% 14% 16% 11% 10% 9% Controls & Motors Lighting & Controls General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Utility Contractors Commercial | Institutional | Government Global Accounts | Integrated Supply OEM | General Industrial Non-Residential | Contractors
14 Q1 2015 Earnings Webcast, 04/23/2015 Sales Growth 2013 2014 2015 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Consolidated 12.6 13.2 16.6 14.3 14.2 0.2 5.9 7.6 6.1 5.0 0.3 Acquisition Impact 16.0 14.6 14.1 13.8 14.6 0.5 1.6 1.8 1.6 1.4 1.2 Core (3.4) (1.4) 2.5 0.5 (0.4) (0.3) 4.3 5.8 4.5 3.6 (0.9) FX Impact 0.0 (0.2) (0.7) (1.0) (0.4) (1.9) (1.7) (0.9) (2.0) (1.6) (2.5) Organic (3.4) (1.2) 3.2 1.5 0.0 1.6 6.0 6.7 6.5 5.2 1.6 WD Impact (1.6) 1.6 (1.6) (0.4) (1.6) Normalized Organic (1.8) (1.2) 1.6 1.5 0.0 1.6 6.0 6.7 8.1 5.6 3.2 Estimated Price Impact 1.0 0.0 0.0 0.0 0.2 0.5 0.5 0.5 0.5 0.5 0.0 (%)
15 Q1 2015 Earnings Webcast, 04/23/2015 Sales Growth – Geography U.S. Canada International Total Change in net sales 3.1 (5.4) (11.2) 0.3 Impact from acquisitions 0.7 2.9 - 1.2 Impact from foreign exchange rates - (10.8) (5.6) (2.5) Impact from number of workdays (1.6) (1.6) (1.6) (1.6) Normalized organic sales growth 4.0 4.1 (4.0) 3.2 (%)
16 Q1 2015 Earnings Webcast, 04/23/2015 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth – End Markets Q1 2015 vs. Q1 2014 Q1 2015 vs. Q4 2014 Q10 Q10 Q10 Q40 2015 2014 %00 Growth 2015 2014 %00 Growth Industrial Core 757 804 (5.7)% 760 826 (8.0)% Construction Core 540 527 2.3% 547 639 (14.3)% Utility Core 262 250 4.9% 272 286 (5.0)% CIG Core 242 236 2.7% 243 251 (3.4)% Total Core Gross Sales 1,801 1,817 (0.8)% 1,822 2,002 (9.0)% Total Gross Sales from Acquisitions 21 - - - - - Total Gross Sales 1,822 1,817 0.3% 1,822 2,002 (9.0)% Gross Sales Reductions/Discounts (6) (6) - (6) (7) - Total Net Sales 1,816 1,811 0.3% 1,816 1,995 (9.0)%
17 Q1 2015 Earnings Webcast, 04/23/2015 Outstanding at December 31, 2014 Outstanding at March 31, 2015 Debt Maturity Schedule AR Revolver (V) 430 423 2016 Inventory Revolver (V) 8 11 2016 Senior Notes (F) 500 500 2021 2019 Term Loans (V) 252 226 2019 2029 Convertible Bonds (F) 345 345 2029 (1) Other (V) 51 52 N/A Total Par Debt 1,586 1,557 Capital Structure Key Financial Metrics Q1 2014 YE 2014 Q1 2015 Cash 96 128 154 Capital Expenditures 5 21 5 Free Cash Flow 42 231 85 Liquidity (2) 524 638 625 ($ Millions) V = Variable Rate Debt 1 = No put; first callable date September 2016. F = Fixed Rate Debt 2 = Asset-backed credit facilities total availability plus invested cash.
18 Q1 2015 Earnings Webcast, 04/23/2015 Financial Leverage Twelve Months Ended March 31, 2015 Financial leverage ratio: Income from operations $ 460 Depreciation and amortization 68 EBITDA $ 528 March 31, 2015 Current debt and short-term borrowings $ 52 Long-term debt 1,337 Debt discount related to convertible debentures (1) 168 Total debt including debt discount $ 1,557 Financial leverage ratio 2.9X (1)The convertible debentures and term loan are presented in the condensed consolidated balance sheets in long-term debt net of the unamortized discount. ($ Millions)
19 Q1 2015 Earnings Webcast, 04/23/2015 ($ Millions) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 344.9 (166.3) 178.6 Convertible Debt At March 31, 2015 Non-Cash Interest Expense ($ Millions) 2013 2014 Q1 2015 Convertible Debt 4.3 4.1 1.7 Amortization of Deferred Financing Fees 4.9 4.4 1.8 FIN 48 0.6 1.0 0.3 Accrued Interest in Excess of Paid 0.4 0.0 1.6 Total 10.2 9.5 5.4 Convertible Debt and Non-Cash Interest
20 Q1 2015 Earnings Webcast, 04/23/2015 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 0.55 50.00 $60.00 6.20 0.64 51.24 Q1 2015 Average $69.23 6.97 0.82 52.20 $70.00 7.02 0.83 52.26 $80.00 7.64 0.95 52.99 $90.00 8.12 1.04 53.56 $100.00 8.50 1.13 54.03 2029 Convertible Debt Details Conversion Price $28.8656 Conversion Rate 34.6433 1 Underlying Shares 11,948,087 2 Footnotes: 2029 Convertible Debenture 1 1000/28.8656 2 $344.9 million/28.8656 3 (Underlying Shares x Avg. Quarterly. Stock Price) minus $344.9 million Avg. Quarterly Stock Price 4 Basic Share Count of 44.41 million shares
21 Q1 2015 Earnings Webcast, 04/23/2015 Work Days Q1 Q2 Q3 Q4 FY 2014 63 64 64 62 253 2015 62 64 64 63 253
22 Q1 2015 Earnings Webcast, 04/23/2015 Free Cash Flow Reconciliation Q1 2014 Q1 2015 Cash flow provided by operations 46.7 90.1 Less: Capital expenditures (5.0) (5.0) Free Cash Flow 41.7 85.1 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund the Company's financing needs. ($ Millions)