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 27, 2017
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | ||||
Emerging growth company o | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o | ||||
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 27, 2017, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2017. 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 2017 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 27, 2017
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 27, 2017 | By: | /s/ David S. Schulz |
(Date) | David S. Schulz | |
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 2017 Results
First quarter highlights:
•Consolidated net sales of $1.77 billion
•Operating profit of $67.1 million
•Earnings per diluted share of $0.76
•Operating cash flow of $47.6 million; free cash flow of $43.1 million, or 114% of net income
PITTSBURGH, April 27, 2017/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 2017.
Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "Our first quarter results were in line with our expectations and the outlook we provided in January. Our sales results reflect improving momentum in our business, driven by a return to growth in Industrial and in Canada. Operating margin was also in line with our expectations, as we continue to execute our cost management and supply chain initiatives in a still-challenging and demand-constrained pricing environment. Net income grew in the quarter, and we once again delivered strong free cash flow, enabling us to reduce our debt and further improve our financial leverage ratio. Based upon our first quarter results, we reaffirm our full-year expectations of sales in the range of flat to up 4%, EPS of $3.60 to $4.00 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, 2017 compared to the three months ended March 31, 2016:
• | Net sales were $1.77 billion for the first quarter of 2017, compared to $1.78 billion for the first quarter of 2016, a decrease of 0.2%. Acquisitions and foreign exchange rates had positive impacts on net sales of 0.9% and 0.6%, respectively, resulting in a 1.7% decrease in organic sales. |
• | Cost of goods sold for both the first quarter of 2017 and 2016 was $1.42 billion. Gross profit was $350.0 million and $355.2 million for the first quarter of 2017 and 2016, respectively. As a percentage of net sales, gross profit was 19.7% and 20.0% for the first quarter of 2017 and 2016, respectively. |
• | Selling, general, and administrative ("SG&A") expenses were $266.9 million, or 15.1% of net sales for the first quarter of 2017, compared to $269.3 million, or 15.2% of net sales, for the first quarter of 2016. |
• | Operating profit was $67.1 million for the current quarter, compared to $69.5 million for the first quarter of 2016. Operating profit as a percentage of net sales was 3.8% for the first quarter of 2017, compared to 3.9% for the first quarter of 2016. |
• | Interest expense for the first quarter of 2017 was $16.7 million, compared to $18.8 million for the first quarter of 2016. Non-cash interest expense for the first quarter of 2017 and 2016, which includes amortization of debt discounts and deferred financing fees, and interest related to uncertain tax positions, was $1.1 million and $2.1 million, respectively. |
• | The effective tax rate for the current quarter was 25.0%, compared to 31.9% for the prior year first quarter. In the current quarter, the application of Accounting Standards Update No. 2016-09 resulted in a discrete benefit from the exercise of stock-based awards, which lowered the effective tax rate by 3.1 percentage points. In the first quarter of 2016, the settlement of an outstanding tax matter increased the effective tax rate by 3.4 percentage points. |
1
• | Net income attributable to WESCO International, Inc. was $37.7 million and $36.0 million for the first quarter of 2017 and 2016, respectively. |
• | Earnings per diluted share was $0.76 for the first quarter of 2017, based on 49.4 million diluted shares, compared to earnings per diluted share of $0.77 for the first quarter of 2016, based on 46.8 million diluted shares. |
• | Operating cash flow for the first quarter of 2017 was $47.6 million, compared to $78.6 million for the first quarter of 2016. Free cash flow for the first quarter of 2017 was $43.1 million, or 114% of net income, compared to $75.0 million, or 217% of net income for the first quarter of 2016. |
Mr. Engel continued, "We remain focused on executing our strategies to deliver above-market sales growth, improve profitability, generate strong cash flow, and increase shareholder value. The free cash flow generation capability of our business supports continued investment in our One WESCO growth initiatives, including acquisitions, while providing us with the ability to return capital to our shareholders. Our efforts remain centered on providing excellent customer service and delivering value to our customers' operations and supply chains by providing comprehensive product and service solutions, which meet their capital project, MRO, and OEM needs."
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 27, 2017, 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) products, construction materials, and advanced supply chain management and logistic services. 2016 annual sales were approximately $7.3 billion. The company employs approximately 9,000 people, maintains relationships with over 25,000 suppliers, and serves approximately 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 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, 2016, 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
2
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months Ended | |||||||||||
March 31, 2017 | March 31, 2016 | ||||||||||
Net sales | $ | 1,772.6 | $ | 1,776.0 | |||||||
Cost of goods sold (excluding | 1,422.6 | 80.3 | % | 1,420.8 | 80.0 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 266.9 | 15.1 | % | 269.3 | 15.2 | % | |||||
Depreciation and amortization | 16.0 | 16.4 | |||||||||
Income from operations | 67.1 | 3.8 | % | 69.5 | 3.9 | % | |||||
Interest expense, net | 16.7 | 18.8 | |||||||||
Income before income taxes | 50.4 | 2.8 | % | 50.7 | 2.9 | % | |||||
Provision for income taxes | 12.6 | 16.2 | |||||||||
Net income | 37.8 | 2.1 | % | 34.5 | 1.9 | % | |||||
Net income (loss) attributable to noncontrolling interests | 0.1 | (1.5 | ) | ||||||||
Net income attributable to WESCO International, Inc. | $ | 37.7 | 2.1 | % | $ | 36.0 | 2.0 | % | |||
Earnings per diluted common share | $ | 0.76 | $ | 0.77 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 49.4 | 46.8 | |||||||||
3
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
March 31, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 103.0 | $ | 110.1 | |||
Trade accounts receivable, net | 1,060.6 | 1,034.4 | |||||
Inventories | 850.1 | 821.4 | |||||
Other current assets | 189.7 | 206.5 | |||||
Total current assets | 2,203.4 | 2,172.4 | |||||
Other assets | 2,307.9 | 2,318.5 | |||||
Total assets | $ | 4,511.3 | $ | 4,490.9 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 712.4 | $ | 684.7 | |||
Current debt and short-term borrowings | 29.3 | 22.1 | |||||
Other current liabilities | 178.4 | 190.0 | |||||
Total current liabilities | 920.1 | 896.8 | |||||
Long-term debt | 1,309.8 | 1,363.1 | |||||
Other noncurrent liabilities | 223.9 | 221.0 | |||||
Total liabilities | 2,453.8 | 2,480.9 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 2,057.5 | 2,010.0 | |||||
Total liabilities and stockholders' equity | $ | 4,511.3 | $ | 4,490.9 | |||
4
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Three Months Ended | |||||||
March 31, 2017 | March 31, 2016 | ||||||
Operating Activities: | |||||||
Net income | $ | 37.8 | $ | 34.5 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 16.0 | 16.4 | |||||
Deferred income taxes | 2.3 | 6.5 | |||||
Change in trade receivables, net | (22.1 | ) | 10.6 | ||||
Change in inventories | (26.4 | ) | (17.5 | ) | |||
Change in accounts payable | 26.1 | 3.2 | |||||
Other | 13.9 | 24.9 | |||||
Net cash provided by operating activities | 47.6 | 78.6 | |||||
Investing Activities: | |||||||
Capital expenditures | (4.5 | ) | (3.6 | ) | |||
Acquisition payments | — | (50.3 | ) | ||||
Other | — | (8.2 | ) | ||||
Net cash used in investing activities | (4.5 | ) | (62.1 | ) | |||
Financing Activities: | |||||||
Debt repayments, net | (48.2 | ) | (46.3 | ) | |||
Equity activity, net | (6.5 | ) | (0.5 | ) | |||
Other | 4.0 | 12.0 | |||||
Net cash used in financing activities | (50.7 | ) | (34.8 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 0.5 | 5.8 | |||||
Net change in cash and cash equivalents | (7.1 | ) | (12.5 | ) | |||
Cash and cash equivalents at the beginning of the period | 110.1 | 160.3 | |||||
Cash and cash equivalents at the end of the period | $ | 103.0 | $ | 147.8 | |||
5
NON-GAAP FINANCIAL MEASURES
This earnings release includes certain non-GAAP financial measures. These financial measures include 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 sales 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
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions, except organic sales data)
(Unaudited)
Three Months Ended | ||
Organic Sales Growth: | March 31, 2017 | |
Change in net sales | (0.2 | )% |
Impact from acquisitions | 0.9 | % |
Impact from foreign exchange rates | 0.6 | % |
Impact from number of workdays | — | % |
Organic sales growth | (1.7 | )% |
Note: Organic sales growth is an additional financial measure provided to illustrate the Company's sales trends. Organic sales growth is calculated by deducting the percentage impact from acquisitions in the first year of ownership, foreign exchange rates and number of workdays from the overall percentage change in consolidated net sales.
Three Months Ended | |||||||
Gross Profit: | March 31, 2017 | March 31, 2016 | |||||
Net sales | $ | 1,772.6 | $ | 1,776.0 | |||
Cost of goods sold (excluding depreciation | |||||||
and amortization) | 1,422.6 | 1,420.8 | |||||
Gross profit | $ | 350.0 | $ | 355.2 | |||
Gross margin | 19.7 | % | 20.0 | % | |||
Note: Gross profit, which is a commonly used financial measure within the distribution industry, is an additional financial measure provided by the Company. Gross profit is calculated by deducting cost of goods sold, excluding depreciation and amortization, from net sales. Gross margin is calculated by dividing gross profit by net sales.
7
WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions)
(Unaudited)
Twelve Months Ended | |||||||
Financial Leverage: | March 31, 2017 | December 31, 2016 | |||||
Income from operations | $ | 329.6 | $ | 332.0 | |||
Depreciation and amortization | 66.4 | 66.9 | |||||
EBITDA | $ | 396.0 | $ | 398.9 | |||
March 31, 2017 | December 31, 2016 | ||||||
Current debt and short-term borrowings | $ | 29.3 | $ | 22.1 | |||
Long-term debt | 1,309.8 | 1,363.1 | |||||
Debt discount and deferred financing fees(1) | 16.3 | 17.3 | |||||
Total debt | $ | 1,355.4 | $ | 1,402.5 | |||
Financial leverage ratio | 3.4 | 3.5 | |||||
(1) | Long-term debt is presented in the condensed consolidated balance sheets net of deferred financing fees and debt discount. |
Note: Financial leverage is a financial measure provided by the Company to illustrate its capital structure position. Financial leverage ratio is calculated by dividing total debt, including debt discount and deferred financing fees, 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, 2017 | March 31, 2016 | |||||
Cash flow provided by operations | $ | 47.6 | $ | 78.6 | |||
Less: Capital expenditures | (4.5 | ) | (3.6 | ) | |||
Free cash flow | $ | 43.1 | $ | 75.0 | |||
Percentage of net income | 114 | % | 217 | % | |||
Note: Free cash flow is as an additional liquidity measure provided by the Company. Capital expenditures are deducted from operating cash flow to determine free cash flow. Free cash flow is available to fund other investing and financing activities.
8
Webcast Presentation
April 27, 2017
Q1 2017 Earnings
2
Q1 2017 Earnings Webcast, 4/27/17
Safe Harbor Statement
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;
supply chain disruptions, changes in supplier strategy or loss of key suppliers; product or other
cost fluctuations; expansion of business activities; personnel turnover or labor cost increases;
tax law changes or challenges to tax matters; increase in competition; risks related to
acquisitions, including the integration of acquired businesses; exchange rate fluctuations; legal
or regulatory matters; litigation, disputes, contingencies or claims; debt levels, terms, financial
market conditions or interest rate fluctuations; goodwill or intangible asset impairment; stock
market, economic or political instability; and other factors described in detail in the Form 10-K for
WESCO International, Inc. for the year ended December 31, 2016 and any subsequent filings
with the Securities & Exchange Commission. 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 2017 Earnings Webcast, 4/27/17
Q1 2017 Highlights
…performance in-line with outlook
• First quarter results were in line with our
expectations and outlook
• Reported sales were flat
‒ Organic sales were down 2% in U.S.
‒ Organic sales were up 3% in Canada
• Organic sales were down 4% sequentially;
better than typical seasonality
• Improved business momentum driven by a
return to growth in the Industrial end market
and in Canada
• Free cash flow of 114% of net income
• April MTD sales down low single digits
3.2
(3.0)
(5.3)
(7.6)
(6.7)
(3.1)
(6.2)
(3.6)
(1.7)
Organic Growth
(%)
Jan (5)%
Feb (1)%
Mar Flat
Note: Organic growth excludes the impact of acquisitions in the first
year of ownership, foreign exchange rates and number of workdays.
See appendix for non-GAAP reconciliations.
Q1 Q2 Q3 Q4
2015
Q1
2016
Q2 Q3 Q4 Q1
2017
4
Q1 2017 Earnings Webcast, 4/27/17
Industrial End Market
• Q1 2017 Sales
− Organic sales up 1% versus prior year
(up 3% in U.S. and down 5% in Canada in
local currency), after eight consecutive
quarters of sales declines
− Up 2% sequentially
• Most forward looking indicators have continued to
improve
• While still cost focused, customers are becoming
more optimistic regarding 2017
• Global Account and Integrated Supply opportunity
pipeline and bidding activity levels remain strong
• Customer trends include high expectations for
supply chain process improvements, cost
reductions, and supplier consolidation
Organic Sales Growth versus Prior Year
36%
Industrial
• Global Accounts
• Integrated Supply
• OEM
• General Industrial
Awarded a new multi-year contract to provide integrated supply
services and MRO and OEM materials to a global design,
engineering and manufacturing company.
Note: See appendix for non-GAAP reconciliations.
(13.7%)
(10.1%) (10.1%)
(6.8%)
1.2%
Q3 2016 Q2 2016 Q1 2016
2016
(10.2%)
Q4 2016 Q1 2017
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Q1 2017 Earnings Webcast, 4/27/17
• Q1 2017 Sales
− Organic sales down 4% versus prior year
(down 6% in U.S. and up 3% in Canada in
local currency)
− Down 10% sequentially, in line with normal
seasonality
− Growth with commercial contractors
partially offset weakness with contractors
serving the industrial market in the U.S.
• Backlog is up 1% versus prior year and is up
11% versus December 2016 year-end
• Expecting modest uptrend in non-residential
construction in 2017
• Non-residential construction market still below its
prior peak in 2008
Construction
• Non-
Residential
• Residential
34%
Organic Sales Growth versus Prior Year
Construction End Market
Awarded business by a Canadian oil company to supply low and
high voltage electrical materials for the expansion of multiple
facilities located in the oil sands.
Note: See appendix for non-GAAP reconciliations.
(3.6%)
2.3%
(5.5%)
(1.9%)
(3.6%)
Q2 2016 Q1 2016 Q3 2016 Q4 2016
2016
(2.2%)
Q1 2017
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Q1 2017 Earnings Webcast, 4/27/17
Utility End Market
Organic Sales Growth versus Prior Year
16%
Utility
• Investor Owned
• Public Power
• Utility Contractors
• Q1 2017 Sales
− Organic sales down 5% versus prior year
(down 6% in U.S. and up 10% in Canada in
local currency)
− Down 12% sequentially
− Excluding exited contract organic sales up
6% versus prior year (up 5% in U.S.), and
down 2% sequentially
• Scope expansion and value creation with investor
owned utility, public power, and generation customers
• Continued interest in Integrated Supply solution
offerings
• Secular improvement in housing market,
renewables growth, and consolidation trend within
Utility industry expected to be positive catalysts for
future spending
Awarded a multi-year contract to provide power delivery and
generation materials and services for a series of T&D infrastructure
upgrade projects at a current IOU Customer.
Note: See appendix for non-GAAP reconciliations.
0.6% 0.6%
(1.7%)
0.1%
(4.5%)
2016
0.5%
Q3 2016 Q2 2016 Q1 2016 Q4 2016 Q1 2017
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Q1 2017 Earnings Webcast, 4/27/17
CIG End Market
• Q1 2017 Sales
− Organic sales down 2% versus prior
year (down 4% in U.S. and up 26% in
Canada in local currency)
− Up 1% sequentially
• Government sales up mid-single digits
in the U.S.
• Customer focus remains on energy efficiency
(lighting, automation, metering), security, and
FTTX (fiber-to-the-x) applications
• Continued opportunities exist to support
FTTX deployments, data center construction
and retrofits, cloud technology projects, and
cyber and physical security for critical
infrastructure protection
Organic Sales Growth versus Prior Year
CIG
• Commercial
• Institutional
• Government
14%
Renewed a contract with a large telecommunications provider to
supply products to support their infrastructure expansion.
Note: See appendix for non-GAAP reconciliations.
0.4% 0.8%
(1.6%)
(5.8%)
(2.0%)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
2016
(1.7%)
8
Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Results
Outlook Actual YOY
Sales (3)% to Flat $1.77B Flat
Gross Margin 19.7% Down 30 bps
SG&A $267M, 15.1% Down 1%, Down 10 bps (Core down 2%)
Operating Profit $67M Down 3%
Operating Margin 3.8% to 4.1% 3.8% Down 10 bps
Effective Tax Rate ~30% 28.1% Down 20 bps
90 bps
(2.1)%
Growth
60 bps
170 bps
$1.77B $1.78B
Q1 2017
Sales
Acquisitions Rest of
World
Canada U.S. Q1 2016
Sales
60 bps
3.2%
Growth
(11.0)%
Growth
(1.7)%
Organic
Growth
(0.2)%
Growth
Note: See appendix for non-GAAP reconciliations.
Foreign
Exchange
60 bps
9
Q1 2017 Earnings Webcast, 4/27/17
Diluted EPS Walk
Q1
2016 $0.77)
Core operations (0.10)
Foreign exchange impact 0.06)
Change in accounting for stock-based awards 0.03)
Tax 0.04)
Share count (0.04)
2017 $0.76)
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Q1 2017 Earnings Webcast, 4/27/17
1.5
2
2.5
3
3.5
4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
75.0
43.1
2016 YTD 2017 YTD
Cash Generation
Free Cash Flow
($ Millions)
Note: See appendix for non-GAAP reconciliations.
114%
of net
income
217%
of net
income
> $1B of free
cash flow over
last 4 years Target Leverage
2.0x – 3.5x
3.4X
Leverage
(Total Par Debt to TTM EBITDA)
2015 2016 2017
11
Q1 2017 Earnings Webcast, 4/27/17
2017 Outlook
Q2 FY
Sales (2)% to 1% Flat to 4%
Operating Margin 4.2% to 4.6% 4.4% to 4.6%
Effective Tax Rate ~ 29% ~ 30%
Diluted EPS $3.60 to $4.00
Free Cash Flow >90% of net income
Notes: Excludes unannounced acquisitions.
Assumes a CAD/USD exchange rate of 0.75 in Q2.
See appendix for non-GAAP reconciliations.
…sales and EPS outlook in line with 2017 Outlook Call range
12
Q1 2017 Earnings Webcast, 4/27/17
Appendix
NON-GAAP FINANCIAL MEASURES
This presentation includes certain non-GAAP financial measures. These financial measures include
organic sales growth, gross profit, adjusted tax rate, 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 sales trends, effective tax rate on a comparable
basis, capital structure position, and liquidity. Management does not use these non-GAAP financial
measures for any purpose other than the reasons stated above.
13
Q1 2017 Earnings Webcast, 4/27/17
WESCO Profile 2017
36%
34%
16%
14%
40%
15%
14%
12%
11%
8%
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
Automation, Controls & Motors
Lighting & Sustainability
General Supplies
Communications & Security
Wire, Cable & Conduit
Electrical Distribution & Controls
14
Q1 2017 Earnings Webcast, 4/27/17
Sales Growth
2015 2016 2017
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1
Change in Net Sales 0.3 (4.4) (7.4) (6.7) (4.7) (2.2) (0.3) (3.6) (3.7) (2.4) (0.2)
Acquisition Impact 1.2 1.6 2.0 3.0 2.0 3.9 3.7 2.9 1.8 3.1 0.9
Core (0.9) (6.0) (9.4) (9.7) (6.7) (6.1) (4.0) (6.5) (5.5) (5.5) (1.1)
FX Impact (2.5) (3.0) (4.1) (3.7) (3.4) (2.6) (0.9) (0.3) (0.3) (1.0) 0.6
Workday Impact (1.6) 1.6 3.2 (1.6) 0.4
Organic 3.2 (3.0) (5.3) (7.6) (3.3) (6.7) (3.1) (6.2) (3.6) (4.9) (1.7)
(%)
Note: Core sales growth excludes acquisitions during the first year of ownership.
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Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Sales Growth – Geography
U.S. Canada International Total
Change in net sales (USD) (0.8) 7.4 (13.4) (0.2)
Impact from acquisitions 1.3 - - 0.9
Impact from foreign exchange rates - 4.2 (2.4) 0.6
Impact from number of workdays - - - -
Organic sales growth (2.1) 3.2 (11.0) (1.7)
(%)
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Q1 2017 Earnings Webcast, 4/27/17
Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation.
($ Millions)
Sales Growth-End Markets
Q1 2017 vs. Q1 2016 Q1 2017 vs. Q4 2016
Q1 Q1 Q1 Q4
2017 2016
%
Growth 2017 2016
%
Growth
Industrial Core 680 670 1.5 % 681 647 5.3%
Construction Core 554 567 (2.4) % 574 613 (6.4)%
Utility Core 267 279 (4.2) % 267 294 (8.9)%
CIG Core 258 262 (1.6) % 258 247 4.4%
Total Core Gross Sales 1,759 1,778 (1.1) % 1,780 1,800 (1.1)%
Total Gross Sales from Acquisitions 21 4 - - - -00
Total Gross Sales 1,780 1,782 (0.1) % 1,780 1,800 (1.1)%
Gross Sales Reductions/Discounts (8) (6) - (8) (7) -00
Total Net Sales 1,773 1,776 (0.2) % 1,773 1,793 (1.2)%
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Q1 2017 Earnings Webcast, 4/27/17
Q1 2017 Organic Sales by End Market
Industrial Construction Utility CIG WESCO
Core Sales Growth 1.5 (2.4) (4.2) (1.6) (1.1)
FX Impact 0.3 1.2 0.3 0.4 0.6
Workday Impact - - - - -
Organic Growth 1.2 (3.6) (4.5) (2.0) (1.7)
(%)
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Q1 2017 Earnings Webcast, 4/27/17
Adjusted Tax Rate
($ Millions)
Q1 2016 Q1 2017
Reported
Results
Adjustments
(1)
Adjusted
Results
Reported
Results
Adjustments
(2)
Adjusted
Results
Income before income taxes 50.7 - 50.7 50.4 - 50.4
Provision for income taxes 16.1 (1.8) 14.3 12.6 1.6 14.2
Effective tax rate 31.9% 28.3% 25.0% 28.1%
(1) Adjustment represents a discrete item related to the settlement of an outstanding tax matter in Q1 2016.
(2) Adjustment is the result of applying Accounting Standards Update No. 2016-09 to the exercise of stock-based awards in
Q1 2017.
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Q1 2017 Earnings Webcast, 4/27/17
Outstanding at
December 31, 2016
Outstanding at
March 31, 2017
Debt
Maturity Schedule
AR Revolver (V) 380 345 2018
Inventory Revolver (V) 4 - 2020
2019 Term Loans (V) 145 130 2019
2021 Senior Notes (F) 500 500 2021
2024 Senior Notes (F) 350 350 2024
Other (V) 24 31 N/A
Total Par Debt 1,403 1,356
Capital Structure
Key Financial Metrics
YE 2016 Q1 2017
Cash 110 103
Capital Expenditures 18 4
Free Cash Flow (1) 282 43
Liquidity (2) 705 727
($ Millions)
V = Variable Rate Debt 1 = Cash flow provided by operations less capital expenditures.
F = Fixed Rate Debt 2 = Total availability under asset-backed credit facilities plus invested cash.
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Q1 2017 Earnings Webcast, 4/27/17
Financial Leverage
Twelve Months Ended
March 31, 2017
Financial leverage ratio:
Income from operations $ 330
Depreciation and amortization 66
EBITDA $ 396
March 31, 2017
Current debt and short-term borrowings $ 29
Long-term debt 1,310
Debt discount and deferred financing (1) 16
Total debt $ 1,355
Less: cash and cash equivalents $ 103
Total debt, net of cash $ 1,252
Financial leverage ratio 3.4X
Financial leverage ratio, net of cash 3.2X
(1)Long-term debt is presented in the condensed consolidated balance sheet as of March 31, 2017 net of deferred financing fees
and debt discount.
($ Millions)
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Q1 2017 Earnings Webcast, 4/27/17
($ Millions)
2015 2016 Q1 2017
Amortization of Debt Discount(1) 6.1 3.0 0.1
Amortization of Deferred Financing Fees 6.1 3.6 0.9
FIN 48 (8.7) 1.2 0.1
Total 3.5 7.8 1.1
Non-Cash Interest Expense
(1) Includes convertible debt and term loan; the convertible debt was redeemed in Q3 2016.
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Q1 2017 Earnings Webcast, 4/27/17
Free Cash Flow Reconciliation
Q1
2016
Q1
2017
Cash flow provided by operations 78.6 47.6
Less: Capital expenditures (3.6) (4.5)
Free Cash Flow 75.0 43.1
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 other investing
and financing activities.
($ Millions)
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Q1 2017 Earnings Webcast, 4/27/17
Work Days
Q1
Q2 Q3 Q4 FY
2015 62 64 64 63 253
2016 64 64 64 62 254
2017 64 64 63 62 253