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 28, 2016
WESCO International, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation) | 001-14989 (Commission File Number) | 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 28, 2016, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2016. 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 2016 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 28, 2016
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 28, 2016 | By: | /s/ Kenneth S. Parks |
(Date) | Kenneth S. Parks | |
Senior Vice President and Chief Financial Officer | ||
Exhibit 99.1
 | NEWS RELEASE |
WESCO International, Inc. / Suite 700, 225 West Station Square Drive / Pittsburgh, PA 15219 | |
WESCO International, Inc. Reports First Quarter 2016 Results
First quarter highlights:
•Consolidated sales of $1.8 billion
•Operating profit of $69.5 million
•Earnings per diluted share of $0.77
• | Free cash flow of $75.0 million, or 217% of net income |
PITTSBURGH, April 28, 2016/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 results for the first quarter of 2016.
Mr. John J. Engel, WESCO’s Chairman, President and CEO, commented, “In line with our expectations, our first quarter sales declined 2%, reflecting continued weakness in commodity-driven end markets and foreign exchange headwinds. Organic sales were down 7%, with the U.S. and Canada down 6% and 11%, respectively. While the top line remains pressured overall, the benefits of ongoing cost reduction and organizational streamlining actions partially mitigated the impact of lower sales on earnings per share. Free cash flow remained strong and exceeded 200% of net income, allowing us to maintain our leverage ratio at 3.8 times EBITDA, in line with our expectations following the completion of our acquisition of Atlanta Electrical Distributors during the first quarter. With continued strong cash generation, we expect to reduce our leverage ratio back within our target range in the near term. Based upon our first quarter results, we reaffirm our full year expectations of sales in the range of flat to down 5%, EPS of $3.75 to $4.20 per diluted share, and free cash flow generation of at least 90% of net income.”
The following are results for the three months ended March 31, 2016 compared to the three months ended March 31, 2015:
• | Net sales were $1,776.0 million for the first quarter of 2016, compared to $1,816.3 million for the first quarter of 2015, a decrease of 2.2%. Normalized organic sales decreased 6.7%; foreign exchange rates negatively impacted sales by 2.6%, and were partially offset by the positive impacts from acquisitions and number of workdays of 3.9% and 3.2%, respectively. |
• | Gross profit was $355.2 million, or 20.0% of net sales, for the first quarter of 2016, compared to $367.7 million, or 20.2% of net sales, for the first quarter of 2015. |
• | Selling, general and administrative ("SG&A") expenses were $269.3 million, or 15.2% of net sales for the first quarter of 2016, compared to $264.6 million, or 14.6% of net sales, for the first quarter of 2015. |
• | Operating profit was $69.5 million for the current quarter, compared to $87.2 million for the first quarter of 2015. Operating profit as a percentage of net sales was 3.9% for the first quarter of 2016, compared to 4.8% for the first quarter 2015. |
• | Interest expense for the first quarter of 2016 was $18.8 million, compared to $20.9 million for the first quarter of 2015. Non-cash interest expense for the first quarter of 2016 and 2015, which includes amortization of debt discounts and deferred financing fees, interest related to uncertain tax positions, and accrued interest, was $3.7 million and $5.4 million, respectively. |
• | The effective tax rate for the current quarter was 31.9%, compared to 29.4% for the prior year first quarter. The Company recognized a discrete item in the first quarter of 2016 related to the settlement of an outstanding tax matter, which increased the effective tax rate by 3.4 percentage points. |
1
Exhibit 99.1
• | Net income attributable to WESCO International, Inc. of $36.0 million for the current quarter was down 23.4% from $47.0 million for the prior year quarter. |
• | Earnings per diluted share for the first quarter of 2016 was $0.77 per share, based on 46.8 million diluted shares, compared to $0.90 per share in the first quarter of 2015, based on 52.2 million diluted shares. |
• | Free cash flow for the first quarter of 2016 was $75.0 million, or 217% of net income, compared to $85.1 million, or 182% of net income for the first quarter of 2015. |
Mr. Engel continued, “We remain focused on executing our One WESCO strategy to deliver above-market sales growth, improve profitability, generate strong cash flow, and increase shareholder value. Our value proposition provides customers with the comprehensive product and service solutions they need to meet their MRO, OEM, and capital project management requirements. The free cash flow generation capability of our business supports continued investment in our growth initiatives, including acquisitions, where our pipeline remains robust and we see excellent ongoing opportunities to strengthen our electrical core and broaden 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 28, 2016, 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. 2015 annual sales were approximately $7.5 billion. The Company employs approximately 9,300 people, maintains relationships with over 25,000 suppliers, and serves over 80,000 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 500 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, 2015, as well as the Company's other reports filed with the Securities and Exchange Commission.
Contact: Mary Ann Bell, Vice President, Investor Relations
WESCO International, Inc. (412) 454-4220, Fax: (412) 222-7409
http://www.wesco.com
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Exhibit 99.1
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months Ended | |||||||||||
March 31, 2016 | March 31, 2015 | ||||||||||
Net sales | $ | 1,776.0 | $ | 1,816.3 | |||||||
Cost of goods sold (excluding | 1,420.8 | 80.0 | % | 1,448.6 | 79.8 | % | |||||
depreciation and amortization below) | |||||||||||
Selling, general and administrative expenses | 269.3 | 15.2 | % | 264.6 | 14.6 | % | |||||
Depreciation and amortization | 16.4 | 15.9 | |||||||||
Income from operations | 69.5 | 3.9 | % | 87.2 | 4.8 | % | |||||
Interest expense, net | 18.8 | 20.9 | |||||||||
Income before income taxes | 50.7 | 2.9 | % | 66.3 | 3.7 | % | |||||
Provision for income taxes | 16.2 | 19.5 | |||||||||
Net income | 34.5 | 1.9 | % | 46.8 | 2.6 | % | |||||
Net loss attributable to noncontrolling interests | (1.5 | ) | (0.2 | ) | |||||||
Net income attributable to WESCO International, Inc. | $ | 36.0 | 2.0 | % | $ | 47.0 | 2.6 | % | |||
Earnings per diluted common share | $ | 0.77 | $ | 0.90 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 46.8 | 52.2 | |||||||||
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Exhibit 99.1
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
March 31, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 147.8 | $ | 160.3 | |||
Trade accounts receivable, net | 1,091.5 | 1,075.3 | |||||
Inventories, net | 844.1 | 810.1 | |||||
Current deferred income taxes (1) | — | 8.5 | |||||
Other current assets | 191.0 | 203.4 | |||||
Total current assets | 2,274.4 | 2,257.6 | |||||
Other assets (2) | 2,416.4 | 2,312.2 | |||||
Total assets | $ | 4,690.8 | $ | 4,569.8 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 734.9 | $ | 715.5 | |||
Current debt and short-term borrowings | 49.5 | 44.3 | |||||
Other current liabilities | 198.9 | 188.0 | |||||
Total current liabilities | 983.3 | 947.8 | |||||
Long-term debt (2) | 1,391.2 | 1,439.1 | |||||
Other noncurrent liabilities | 422.8 | 409.0 | |||||
Total liabilities | 2,797.3 | 2,795.9 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 1,893.5 | 1,773.9 | |||||
Total liabilities and stockholders' equity | $ | 4,690.8 | $ | 4,569.8 | |||
(1) | The Company early adopted Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, on a prospective basis during the first quarter of 2016. This guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. |
(2) | The Company adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, and ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, on a retrospective basis during the first quarter of 2016. These ASUs simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. As a result of adopting this guidance, the Company reclassified approximately $17.7 million of deferred financing fees from other noncurrent assets to long-term debt in the balance sheet as of December 31, 2015. |
4
Exhibit 99.1
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Three Months Ended | |||||||
March 31, 2016 | March 31, 2015 | ||||||
Operating Activities: | |||||||
Net income | $ | 34.5 | $ | 46.8 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 16.4 | 15.9 | |||||
Deferred income taxes | 6.5 | 7.9 | |||||
Change in trade receivables, net | 10.6 | 9.7 | |||||
Change in inventories | (17.5 | ) | (13.2 | ) | |||
Change in accounts payable | 3.2 | 20.6 | |||||
Other | 24.9 | 2.4 | |||||
Net cash provided by operating activities | 78.6 | 90.1 | |||||
Investing Activities: | |||||||
Capital expenditures | (3.6 | ) | (5.0 | ) | |||
Acquisition payments | (50.3 | ) | — | ||||
Other | (8.2 | ) | 0.8 | ||||
Net cash used in investing activities | (62.1 | ) | (4.2 | ) | |||
Financing Activities: | |||||||
Debt borrowings, net of repayments | (46.3 | ) | (19.4 | ) | |||
Equity activity, net | (0.5 | ) | (27.7 | ) | |||
Other | 12.0 | (6.7 | ) | ||||
Net cash used in financing activities | (34.8 | ) | (53.8 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 5.8 | (6.0 | ) | ||||
Net change in cash and cash equivalents | (12.5 | ) | 26.1 | ||||
Cash and cash equivalents at the beginning of the period | 160.3 | 128.3 | |||||
Cash and cash equivalents at the end of the period | $ | 147.8 | $ | 154.4 | |||
5
Exhibit 99.1
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.
6
Exhibit 99.1
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 - Year-Over-Year: | March 31, 2016 | March 31, 2015 | |||
Change in net sales | (2.2 | )% | 0.3 | % | |
Impact from acquisitions | 3.9 | % | 1.2 | % | |
Impact from foreign exchange rates | (2.6 | )% | (2.5 | )% | |
Impact from number of workdays | 3.2 | % | (1.6 | )% | |
Normalized organic sales growth | (6.7 | )% | 3.2 | % | |
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, 2016 | March 31, 2015 | |||||
Net sales | $ | 1,776.0 | $ | 1,816.3 | |||
Cost of goods sold (excluding depreciation and amortization) | 1,420.8 | 1,448.6 | |||||
Gross profit | $ | 355.2 | $ | 367.7 | |||
Gross margin | 20.0 | % | 20.2 | % | |||
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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Exhibit 99.1
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions)
(Unaudited)
Twelve Months Ended | |||||||
Financial Leverage: | March 31, 2016 | December 31, 2015 | |||||
Income from operations | $ | 356.1 | $ | 373.7 | |||
Depreciation and amortization | 65.4 | 65.0 | |||||
EBITDA | $ | 421.5 | $ | 438.7 | |||
March 31, 2016 | December 31, 2015 | ||||||
Current debt and short-term borrowings | $ | 49.5 | $ | 44.3 | |||
Long-term debt | 1,391.2 | 1,439.1 | |||||
Debt discount and deferred financing fees(1) | 180.2 | 182.0 | |||||
Total debt | 1,620.9 | 1,665.4 | |||||
Financial leverage ratio | 3.8 | 3.8 | |||||
(1) | Long-term debt is presented in the condensed consolidated balance sheets net of deferred financing fees and debt discount related to the convertible debentures and term loan. |
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, 2016 | March 31, 2015 | |||||
Cash flow provided by operations | $ | 78.6 | $ | 90.1 | |||
Less: Capital expenditures | (3.6 | ) | (5.0 | ) | |||
Free cash flow | $ | 75.0 | $ | 85.1 | |||
Percent of net income | 217 | % | 182 | % | |||
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 28, 2016 Q1 2016 Earnings
2 Q1 2016 Earnings Webcast, 4/28/16 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; disruptions in operations or information technology systems; product, labor or other cost fluctuations; supply chain disruptions or loss of key suppliers; expansion of business activities; exchange rate fluctuations; tax law changes or challenges to tax matters; increase in competition; risks related to acquisitions, including the integration of acquired businesses; litigation, disputes, contingencies or claims; legal or regulatory matters; debt levels, terms, financial market conditions or interest rate fluctuations; goodwill or intangible asset impairment; common stock dilution; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2015 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 2016 Earnings Webcast, 4/28/16 Q1 2016 Highlights …performance in line with outlook • Reported sales were down 2% • Workday adjusted organic sales were down 6% in the US and down 11% in Canada • Adjusting for Easter holiday, March organic sales were down 5% • Oil & gas sales down ~25% • April organic sales down low- single digits month-to-date • Strong free cash flow of over 200% of net income • Cost controls partially mitigated sales decline • Completed AED acquisition 1.6 6.0 6.7 8.1 3.2 (3.0) (5.3) (7.6) (6.7) Organic Growth (%) Jan (7)% Feb (6)% Mar (7)% Note: Workday adjusted; see appendix for non-GAAP reconciliations. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 Q1 2016
4 Q1 2016 Earnings Webcast, 4/28/16 Industrial End Market • Q1 2016 Sales − Workday adjusted organic sales down 14% versus prior year (down 14% in the U.S. and down 21% in Canada in local currency) − Down 7% sequentially − Sales declines driven by oil and gas, metals and mining, and OEM customers • Manufacturing headwinds remain strong with reduced demand outlook, weak commodity prices and strong U.S. dollar weighing on manufacturing sector causing deferred project and maintenance spending. • Global Account and Integrated Supply bidding activity levels remain strong. • Customer trends include high expectations for supply chain process improvements, cost reductions, and supplier consolidation. Core Sales Growth versus Prior Year 38% Industrial • Global Accounts • Integrated Supply • OEM • General Industrial Awarded a multi-year contract to supply MRO material across multiple plants for a global consumer products manufacturer. (4.1%) (10.2%) (14.2%) (16.7%) (15.8%) Note: Excludes acquisitions during the first year of ownership. Workday adjusted. Q3 2015 Q2 2015 Q1 2015 2015 (11.3%) Q4 2015 Q1 2016 Organic Growth (13.7)%
5 Q1 2016 Earnings Webcast, 4/28/16 • Q1 2016 Sales − Workday adjusted organic sales down 4% versus prior year (down 4% in U.S. and down 6% in Canada in local currency) − Down 9% sequentially − Sales declines driven by weakness with contractors serving industrial market partially offset by growth with commercial construction contractors • Core backlog declined 4% versus prior year, but is up 7% from year-end • Outside of oil and gas, metals and mining, expecting modest uptrend in U.S. non-residential construction (commercial, educational, and healthcare). • 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 Awarded a contract to supply and install switchgear, lighting and electrical bulk material for a new medical center in South America. 3.9% (7.7%) (10.5%) (12.5%) (7.9%) Note: Excludes acquisitions during the first year of ownership. Workday adjusted. Q2 2015 Q1 2015 Q3 2015 Q4 2015 2015 (7.3%) Q1 2016 Organic Growth (3.6)%
6 Q1 2016 Earnings Webcast, 4/28/16 Utility End Market Core Sales Growth versus Prior Year 16% Utility • Investor Owned • Public Power • Utility Contractors • Q1 2016 Sales − Workday adjusted organic sales up 1% versus prior year (up 1% in U.S. and down 5% in Canada in local currency) − Down 6% sequentially • Five consecutive years of year-over-year sales growth. • Scope expansion and value creation with IOU, public power, and generation customers providing utility sales growth. • Continued interest for Integrated Supply solution offerings. • Secular improvement in housing market, renewables growth, and consolidation trend within Utility sector expected to be positive catalyst for future spending. Awarded a contract to provide high voltage equipment, steel structures and other miscellaneous materials for a wind farm substation being constructed for a large energy developer. Note: Excludes acquisitions during the first year of ownership. Workday adjusted. 6.5% 5.7% 1.7% 0.1% (0.6)% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 2015 3.4% Organic Growth 0.6%
7 Q1 2016 Earnings Webcast, 4/28/16 CIG End Market • Q1 2016 Sales − Workday adjusted organic sales flat versus prior year (up 2% in US and down 10% in Canada in local currency) − Down 2% sequentially • Growth in communications and security category continues and bidding activity levels remain high. • Customer focus remains on energy efficiency (lighting, automation, metering) and security. • Opportunities exist to support data center construction and retrofits and cloud technology projects. Core Sales Growth versus Prior Year CIG • Commercial • Institutional • Government 14% Awarded a contract with a large national telecommunications provider to supply infrastructure materials to multiple U.S. locations in support of their fiber optic network build-out. 4.3% (0.5%) (3.0%) (3.5%) (1.6%) Note: Excludes acquisitions during the first year of ownership. Workday adjusted. Q2 2015 Q1 2015 Q3 2015 Q4 2015 2015 (0.8%) Q1 2016 Organic Growth 0.4%
8 Q1 2016 Earnings Webcast, 4/28/16 Q1 2016 Results Outlook Actual YOY Sales (4)% to (1)% $1.78B (2.2)% growth Gross Margin 20.0% Down 20 bps SG&A $269M, 15.2% Up 2%, up 60 bps; core down 2% Operating Profit $70M Down 20% Operating Margin 3.8% to 4.1% 3.9% Down 90 bps Effective Tax Rate ~30% 31.9% Up 250 bps 390 bps (6.3)% Growth 240 bps 460 bps $1.78B $1.82B Q1 2016 Sales Acquisitions Foreign Exchange Rest of World Canada U.S. Q1 2015 Sales 260 bps 30 bps (11.2)% Growth 6.6% Growth (6.7)% Organic Growth (2.2)% Growth 320 bps Workday Impact
9 Q1 2016 Earnings Webcast, 4/28/16 EPS Walk Q1 2015 $0.90) Core Operations (0.13) Acquisitions 0.04) Foreign Exchange Impact (0.09) Tax (0.03) Share Count 0.08) 2016 $0.77)
10 Q1 2016 Earnings Webcast, 4/28/16 1.5 2 2.5 3 3.5 4 4.5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 85.1 75.0 Q1 2015 Q1 2016 Cash Generation Free Cash Flow ($ Millions) See appendix for non-GAAP reconciliations. 217% of net income 182% of net income > $1B of free cash flow over last 4 years 2014 Target Leverage 2.0x – 3.5x 3.8X Leverage (Total Par Debt to TTM EBITDA) 2015 2016
11 Q1 2016 Earnings Webcast, 4/28/16 2016 Outlook Q2 FY Sales (3)% to (1)% Flat to (5)% Operating Margin 4.5% to 4.9% 4.8% to 5.0% Effective Tax Rate ~30% ~ 30% EPS $3.75 to $4.20 Free Cash Flow >90% of net income Notes: Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.77 in Q2.
12 Q1 2016 Earnings Webcast, 4/28/16 Appendix
13 Q1 2016 Earnings Webcast, 4/28/16 WESCO Profile 2016 38% 32% 16% 14% 40% 15% 15% 11% 11% 8% Controls & Motors Lighting & Controls General Supplies Data & Broadband Communications Wire, Cable & Conduit Distribution Equipment Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis. Products & Services Markets & Customers Utility CIG Industrial Construction Investor Owned | Public Power Utility Contractors Commercial | Institutional | Government Global Accounts | Integrated Supply OEM | General Industrial Non-Residential | Contractors
14 Q1 2016 Earnings Webcast, 4/28/16 Sales Growth 2014 2015 2016 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Consolidated 0.2 5.9 7.6 6.1 5.0 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) Acquisition Impact 0.5 1.6 1.8 1.6 1.4 1.2 1.6 2.0 3.0 2.0 3.9 Core (0.3) 4.3 5.8 4.5 3.6 (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) FX Impact (1.9) (1.7) (0.9) (2.0) (1.6) (2.5) (3.0) (4.1) (3.7) (3.4) (2.6) Organic 1.6 6.0 6.7 6.5 5.2 1.6 (3.0) (5.3) (6.0) (3.3) (3.5) WD Impact (1.6) (0.4) (1.6) 1.6 3.2 Normalized Organic 1.6 6.0 6.7 8.1 5.6 3.2 (3.0) (5.3) (7.6) (3.3) (6.7) Estimated Price Impact 0.5 0.5 0.5 0.5 0.5 0.0 0.0 0.0 0.0 0.0 0.0 (%)
15 Q1 2016 Earnings Webcast, 4/28/16 Q1 2016 Sales Growth – Geography U.S. Canada International Total Change in net sales 2.1 (18.0) 2.2 (2.2) Impact from acquisitions 5.2 - - 3.9 Impact from foreign exchange rates - (10.0) (7.6) (2.6) Impact from number of workdays 3.2 3.2 3.2 3.2 Normalized organic sales growth (6.3) (11.2) 6.6 (6.7) (%)
16 Q1 2016 Earnings Webcast, 4/28/16 Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation. ($ Millions) Sales Growth-End Markets Q1 2016 vs. Q1 2015 Q1 2016 vs. Q4 2015 Q1 Q1 Q1 Q4 2016 2015 % Growth 2016 2015 % Growth Industrial Core 664 760 (12.6) % 669 706 (5.3)% Construction Core 522 547 (4.7) % 555 601 (7.7)% Utility Core 279 272 2.6 % 279 291 (4.1)% CIG Core 247 243 1.6 % 249 249 - % Total Core Gross Sales 1,712 1,822 6.1 % 1,752 1,847 (5.1)% Total Gross Sales from Acquisitions 70 - - 30 22 -00 Total Gross Sales 1,782 1,822 (2.2) % 1,782 1,869 (4.6)% Gross Sales Reductions/Discounts (6) (6) - (6) (7) -00 Total Net Sales 1,776 1,816 (2.2) % 1,776 1,862 (4.6)%
17 Q1 2016 Earnings Webcast, 4/28/16 Q1 2016 Organic Sales by End Market Industrial Construction Utility CIG WESCO Core Sales Growth (12.6) (4.7) 2.6 1.6 (6.1) Workday Impact 3.2 3.2 3.2 3.2 3.2 Workday Adjusted Core Growth (15.8) (7.9) (0.6) (1.6) (9.3) FX Impact (2.1) (4.3) (1.2) (2.0) (2.6) Workday Adjusted Organic Growth (13.7) (3.6) 0.6 0.4 (6.7) (%)
18 Q1 2016 Earnings Webcast, 4/28/16 Outstanding at December 31, 2015 Outstanding at March 31, 2016 Debt Maturity Schedule AR Revolver (V) 525 495 2018 Inventory Revolver (V) 75 55 2020 Senior Notes (F) 500 500 2021 2019 Term Loans (V) 175 175 2019 2029 Convertible Bonds (F) 345 345 2029 (1) Other (V) 45 51 N/A Total Par Debt 1,665 1,621 Capital Structure Key Financial Metrics Q1 2015 YE 2015 Q1 2016 Cash 154 160 148 Capital Expenditures 5 22 4 Free Cash Flow 85 261 75 Liquidity (2) 625 546 525 ($ Millions) V = Variable Rate Debt 1 = No put; first callable date September 2016. F = Fixed Rate Debt 2 = Total availability under asset-backed credit facilities plus invested cash.
19 Q1 2016 Earnings Webcast, 4/28/16 Financial Leverage Twelve Months Ended March 31, 2016 Financial leverage ratio: Income from operations $ 356 Depreciation and amortization 65 EBITDA $ 421 March 31, 2016 Current debt and short-term borrowings $ 50 Long-term debt 1,391 Debt discount and deferred financing (1) 180 Total debt $ 1,621 Less: cash and cash equivalents $ 148 Total debt, net of cash $ 1,473 Financial leverage ratio 3.8X Financial leverage ratio, net of cash 3.5X (1)Long-term debt is presented in the condensed consolidated balance sheets net of deferred financing fees and discount related to the convertible debentures and term loan. ($ Millions)
20 Q1 2016 Earnings Webcast, 4/28/16 ($ Millions) Maturity Par Value of Debt Debt Discount Debt per Balance Sheet 2029 344.9 (162.3) 182.6 Convertible Debt At March 31, 2016 Non-Cash Interest Expense ($ Millions) 2014 2015 Q1 2016 Convertible Debt 4.1 6.1 1.2 Amortization of Deferred Financing Fees 4.4 6.1 0.8 FIN 48 1.0 (8.7) 0.1 Accrued Interest (1.4) - 1.6 Total 8.1 3.5 3.7 Convertible Debt and Non-Cash Interest
21 Q1 2016 Earnings Webcast, 4/28/16 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 $20.00 - 0.10 42.31 $30.00 0.45 0.18 42.85 $40.00 3.33 0.33 45.86 Q1 2016 Average $44.45 4.19 0.41 46.81 $50.00 5.05 0.47 47.73 $60.00 6.20 0.57 48.98 $70.00 7.02 0.80 50.03 2029 Convertible Debt Details Conversion Price $28.8656 Conversion Rate 34.6433 1 Underlying Shares 11,947,533 2 Footnotes: 2029 Convertible Debenture 1 1000/28.8656 2 $344.9 million/1,000 x 34.6433 3 (Underlying Shares x Avg. Quarterly Stock Price) minus $344.9 million Avg. Quarterly Stock Price 4 Basic Share Count of 42.2 million shares
22 Q1 2016 Earnings Webcast, 4/28/16 Free Cash Flow Reconciliation Q1 2015 Q1 2016 Cash flow provided by operations 90.1 78.6 Less: Capital expenditures (5.0) (3.6) Free Cash Flow 85.1 75.0 Note: Free cash flow is provided by the Company as an additional liquidity measure. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund the Company's financing needs. ($ Millions)
23 Q1 2016 Earnings Webcast, 4/28/16 Work Days Q1 Q2 Q3 Q4 FY 2014 63 64 64 62 253 2015 62 64 64 63 253 2016 64 64 64 62 254