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): July 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 July 27, 2017, WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the second 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 second 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 July 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) | ||
July 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 Second Quarter 2017 Results
Second quarter highlights:
•Consolidated net sales of $1.91 billion
•Operating profit of $83.1 million
•Earnings per diluted share of $1.02
•Repurchased $50 million of shares
PITTSBURGH, July 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 second quarter of 2017.
Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, "Our second quarter results were in line with the outlook we provided in April. Notably, we returned to organic sales growth in the quarter, after eight consecutive quarters of sales declines, driven by growth in our Industrial and CIG end markets as well as in our Canadian and International businesses. Our sales momentum accelerated as the quarter progressed, and this trend has continued into July, with all geographies growing to start the third quarter. Backlog grew sequentially in the quarter versus the typical seasonal decline, with June marking the highest monthly backlog since 2012. Operating margin was also in line with our expectations, as we continue to execute our cost management and supply chain initiatives to mitigate the effects of a still-challenging and demand-constrained pricing environment. Additionally, during the quarter, we repurchased $50 million of shares, while remaining within our targeted financial leverage band.
The first half has developed as we expected, and we are encouraged with the improving momentum of our business. Our technical capabilities and service offerings promote loyal customer relationships and growth. In the second half, as our expected growth accelerates, we plan to invest to strengthen our differentiated business model and improve our competitive advantage in 2018 and beyond. Based upon our first half results and our plan for the second half, we have narrowed our full-year expectations for sales to be up 1% to 3%, operating margin to be 4.1% to 4.3%, and EPS to be $3.60 to $3.90 per diluted share with an effective tax rate of approximately 27%. We continue to expect free cash flow generation for the year to be at least 90% of net income."
The following are results for the three months ended June 30, 2017 compared to the three months ended June 30, 2016:
• | Net sales were $1.91 billion for the second quarter of 2017 and 2016. Organic sales for the second quarter of 2017 grew by 1.0% as foreign exchange rates negatively impacted net sales by 1.1%. Sequentially, net sales increased 7.7% and organic sales increased 8.0%. |
• | Cost of goods sold for the second quarter of 2017 was $1.54 billion and gross profit was $366.1 million, compared to cost of goods sold and gross profit of $1.53 billion and $379.5 million for the second quarter of 2016, respectively. As a percentage of net sales, gross profit was 19.2% and 19.9% for the second quarter of 2017 and 2016, respectively. |
• | Selling, general and administrative ("SG&A") expenses were $267.3 million, or 14.0% of net sales, for the second quarter of 2017, compared to $274.5 million, or 14.4% of net sales, for the second quarter of 2016. |
• | Operating profit was $83.1 million for the current quarter, compared to $88.0 million for the second quarter of 2016. Operating profit as a percentage of net sales was 4.4% for the second quarter of 2017, compared to 4.6% for the second quarter of 2016. |
• | Interest expense for the second quarter of 2017 was $16.8 million, compared to $19.5 million for the second quarter of 2016. Non-cash interest expense for the second 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 $2.2 million, respectively. |
1
• | The effective tax rate for the current quarter was 25.3%, compared to 27.3% for the prior year second quarter. The lower effective tax rate in the current quarter as compared to the prior year's comparable quarter is primarily the result of favorable discrete items and the mix of income earned in jurisdictions with lower tax rates. |
• | Net income attributable to WESCO International, Inc. was $49.5 million and $49.8 million for the second quarter of 2017 and 2016, respectively. |
• | Earnings per diluted share was $1.02 for the second quarter of 2017 and 2016, based on 48.8 million and 48.6 million diluted shares, respectively. |
• | Operating cash flow for the second quarter of 2017 was $19.1 million, compared to $60.0 million for the second quarter of 2016. Free cash flow for the second quarter of 2017 was $13.8 million, or 28% of net income, compared to $56.5 million, or 113% of net income, for the second quarter of 2016. Additionally, the Company completed $50 million of share repurchases in the second quarter. |
The following are results for the six months ended June 30, 2017 compared to the six months ended June 30, 2016:
• | Net sales were $3.68 billion for the first six months of 2017, compared to $3.69 billion for the first six months of 2016, a decrease of 0.1%. Acquisitions had a positive impact on net sales of 0.4% and were partially offset by a 0.2% negative impact from foreign exchange rates, resulting in a 0.3% decrease in organic sales for the first six months of 2017. |
• | Cost of goods sold for the first six months of 2017 was $2.97 billion and gross profit was $716.1 million, compared to cost of goods sold and gross profit of $2.95 billion and $734.6 million for the first six months of 2016, respectively. As a percentage of net sales, gross profit was 19.4% and 19.9% for the first six months of 2017 and 2016, respectively. |
• | Selling, general and administrative ("SG&A") expenses were $534.3 million, or 14.5% of net sales, for the first six months of 2017, compared to $543.8 million, or 14.7% of net sales, for the first six months of 2016. |
• | Operating profit was $150.2 million for the first six months of 2017, compared to $157.5 million for the first six months of 2016. Operating profit as a percentage of net sales was 4.1% for the first six months of 2017, compared to 4.3% for the first six months of 2016. |
• | Interest expense for the first six months of 2017 was $33.5 million, compared to $38.3 million for the first six months of 2016. Non-cash interest expense for the first six months of 2017 and 2016, which includes amortization of debt discounts and deferred financing fees, and interest related to uncertain tax positions, was $2.2 million and $4.2 million, respectively. |
• | The effective tax rate for the first six months of 2017 was 25.1%, compared to 29.2% for the first six months of 2016. The current year's effective tax rate is lower than the prior year primarily due to favorable discrete items, including a benefit from the exercise and vesting of stock-based awards, as well as the mix of income earned in jurisdictions with lower tax rates. |
• | Net income attributable to WESCO International, Inc. was $87.3 million for the first six months of 2017, compared to $85.9 million for the first six months of 2016. |
• | Earnings per diluted share for the first six months of 2017 was $1.78, based on 49.1 million diluted shares, compared to $1.79 for the first six months of 2016, based on 47.8 million diluted shares. |
• | Operating cash flow for the first six months of 2017 was $66.8 million, compared to $138.6 million for the first six months of 2016. Free cash flow for the first six months of 2017 was $57.0 million, or 65% of net income, compared to $131.5 million, or 156% of net income, for the first six months of 2016. |
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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 differentiated, services-oriented business model and 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 that meet their capital project, MRO, and OEM needs."
Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the second quarter earnings as described in this News Release on Thursday, July 27, 2017, at 10:00 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
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Three Months Ended | |||||||||||
June 30, 2017 | June 30, 2016 | ||||||||||
Net sales | $ | 1,909.6 | $ | 1,911.6 | |||||||
Cost of goods sold (excluding | 1,543.5 | 80.8 | % | 1,532.1 | 80.1 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 267.3 | 14.0 | % | 274.5 | 14.4 | % | |||||
Depreciation and amortization | 15.7 | 17.0 | |||||||||
Income from operations | 83.1 | 4.4 | % | 88.0 | 4.6 | % | |||||
Interest expense, net | 16.8 | 19.5 | |||||||||
Income before income taxes | 66.3 | 3.5 | % | 68.5 | 3.6 | % | |||||
Provision for income taxes | 16.8 | 18.6 | |||||||||
Net income | 49.5 | 2.6 | % | 49.9 | 2.6 | % | |||||
Net income attributable to noncontrolling interests | — | 0.1 | |||||||||
Net income attributable to WESCO International, Inc. | $ | 49.5 | 2.6 | % | $ | 49.8 | 2.6 | % | |||
Earnings per diluted common share | $ | 1.02 | $ | 1.02 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 48.8 | 48.6 | |||||||||
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in millions, except per share amounts)
(Unaudited)
Six Months Ended | |||||||||||
June 30, 2017 | June 30, 2016 | ||||||||||
Net sales | $ | 3,682.2 | $ | 3,687.5 | |||||||
Cost of goods sold (excluding | 2,966.1 | 80.6 | % | 2,952.9 | 80.1 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 534.3 | 14.5 | % | 543.8 | 14.7 | % | |||||
Depreciation and amortization | 31.6 | 33.3 | |||||||||
Income from operations | 150.2 | 4.1 | % | 157.5 | 4.3 | % | |||||
Interest expense, net | 33.5 | 38.3 | |||||||||
Income before income taxes | 116.7 | 3.2 | % | 119.2 | 3.2 | % | |||||
Provision for income taxes | 29.3 | 34.8 | |||||||||
Net income | 87.4 | 2.4 | % | 84.4 | 2.3 | % | |||||
Net income (loss) attributable to noncontrolling interests | 0.1 | (1.5 | ) | ||||||||
Net income attributable to WESCO International, Inc. | $ | 87.3 | 2.4 | % | $ | 85.9 | 2.3 | % | |||
Earnings per diluted common share | $ | 1.78 | $ | 1.79 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
share (in millions) | 49.1 | 47.8 | |||||||||
5
WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
June 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 87.8 | $ | 110.1 | |||
Trade accounts receivable, net | 1,145.0 | 1,034.4 | |||||
Inventories | 866.3 | 821.4 | |||||
Other current assets | 206.5 | 206.5 | |||||
Total current assets | 2,305.6 | 2,172.4 | |||||
Other assets | 2,318.1 | 2,318.5 | |||||
Total assets | $ | 4,623.7 | $ | 4,490.9 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 769.0 | $ | 684.7 | |||
Current debt and short-term borrowings | 25.2 | 22.1 | |||||
Other current liabilities | 170.2 | 190.0 | |||||
Total current liabilities | 964.4 | 896.8 | |||||
Long-term debt | 1,334.5 | 1,363.1 | |||||
Other noncurrent liabilities | 229.7 | 221.0 | |||||
Total liabilities | 2,528.6 | 2,480.9 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 2,095.1 | 2,010.0 | |||||
Total liabilities and stockholders' equity | $ | 4,623.7 | $ | 4,490.9 | |||
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Six Months Ended | |||||||
June 30, 2017 | June 30, 2016 | ||||||
Operating Activities: | |||||||
Net income | $ | 87.4 | $ | 84.4 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 31.6 | 33.3 | |||||
Deferred income taxes | 6.4 | 13.4 | |||||
Change in trade receivables, net | (96.0 | ) | (17.3 | ) | |||
Change in inventories | (36.9 | ) | (4.4 | ) | |||
Change in accounts payable | 76.8 | (18.8 | ) | ||||
Other | (2.5 | ) | 48.0 | ||||
Net cash provided by operating activities | 66.8 | 138.6 | |||||
Investing Activities: | |||||||
Capital expenditures | (9.8 | ) | (7.1 | ) | |||
Acquisition payments | — | (50.9 | ) | ||||
Other | 3.5 | (8.2 | ) | ||||
Net cash used in investing activities | (6.3 | ) | (66.2 | ) | |||
Financing Activities: | |||||||
Debt repayments, net | (30.0 | ) | (76.3 | ) | |||
Equity activity, net | (56.7 | ) | (0.4 | ) | |||
Other | 0.2 | 0.6 | |||||
Net cash used in financing activities | (86.5 | ) | (76.1 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 3.7 | 3.7 | |||||
Net change in cash and cash equivalents | (22.3 | ) | — | ||||
Cash and cash equivalents at the beginning of the period | 110.1 | 160.3 | |||||
Cash and cash equivalents at the end of the period | $ | 87.8 | $ | 160.3 | |||
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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 as these provide a better understanding of sales performance, the use of debt 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 organic sales data)
(Unaudited)
Three Months Ended | Six Months Ended | ||||
Organic Sales Growth: | June 30, 2017 | June 30, 2017 | |||
Change in net sales | (0.1 | )% | (0.1 | )% | |
Impact from acquisitions | — | % | 0.4 | % | |
Impact from foreign exchange rates | (1.1 | )% | (0.2 | )% | |
Impact from number of workdays | — | % | — | % | |
Organic sales growth | 1.0 | % | (0.3 | )% | |
Three Months Ended | ||
Organic Sales Growth - Sequential: | June 30, 2017 | |
Change in net sales | 7.7 | % |
Impact from acquisitions | — | % |
Impact from foreign exchange rates | (0.3 | )% |
Impact from number of workdays | — | % |
Organic sales growth | 8.0 | % |
Note: Organic sales growth is a measure of sales performance. 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 | Six Months Ended | ||||||||||||||
Gross Profit: | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||||
Net sales | $ | 1,909.6 | $ | 1,911.6 | $ | 3,682.2 | $ | 3,687.5 | |||||||
Cost of goods sold (excluding depreciation | |||||||||||||||
and amortization) | 1,543.5 | 1,532.1 | 2,966.1 | 2,952.9 | |||||||||||
Gross profit | $ | 366.1 | $ | 379.5 | $ | 716.1 | $ | 734.6 | |||||||
Gross margin | 19.2 | % | 19.9 | % | 19.4 | % | 19.9 | % | |||||||
Note: Gross profit is a financial measure commonly used within the distribution industry. 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.
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WESCO INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollar amounts in millions)
(Unaudited)
Twelve Months Ended | |||||||
Financial Leverage: | June 30, 2017 | December 31, 2016 | |||||
Income from operations | $ | 324.8 | $ | 332.0 | |||
Depreciation and amortization | 65.2 | 66.9 | |||||
EBITDA | $ | 390.0 | $ | 398.9 | |||
June 30, 2017 | December 31, 2016 | ||||||
Current debt and short-term borrowings | $ | 25.2 | $ | 22.1 | |||
Long-term debt | 1,334.5 | 1,363.1 | |||||
Debt discount and deferred financing fees(1) | 15.3 | 17.3 | |||||
Total debt | $ | 1,375.0 | $ | 1,402.5 | |||
Financial leverage ratio | 3.5 | 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 measures the use of debt. 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 | Six Months Ended | ||||||||||||||
Free Cash Flow: | June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||||
Cash flow provided by operations | $ | 19.1 | $ | 60.0 | $ | 66.8 | $ | 138.6 | |||||||
Less: Capital expenditures | (5.3 | ) | (3.5 | ) | (9.8 | ) | (7.1 | ) | |||||||
Free cash flow | $ | 13.8 | $ | 56.5 | $ | 57.0 | $ | 131.5 | |||||||
Percentage of net income | 28 | % | 113 | % | 65 | % | 156 | % | |||||||
Note: Free cash flow is a measure of liquidity. 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.
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Webcast Presentation – July 27, 2017
Q2 2017 Earnings
2 Q2 Earnings Webcast 7/27/17
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 Q2 Earnings Webcast 7/27/17
Q2 2017 Highlights
…performance in-line with outlook
• Second quarter results were in line with our outlook
• Reported sales were flat, organic sales up 1% after eight
consecutive quarters of sales decline
‒ Organic sales were down 1% in U.S.
‒ Organic sales were up 2% in Canada
• Organic sales were up 8% sequentially
• The estimated pricing impact was minimal
• Improved business momentum driven by sales growth in
the Industrial and CIG end markets, Canada, and
International
• July MTD sales up mid single digits
• Q2 backlog grew 5% sequentially versus typical seasonal
decline
• June backlog was the highest monthly backlog since 2012
• Oil & gas customers represent approximately 6% of sales
3.2
(3.0)
(5.3)
(7.6)
(6.7)
(3.1)
(6.2)
(3.6)
(1.7)
1.0
Organic Growth
(%)
Apr (2)%
May Flat
June 4%
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
Q2
4 Q2 Earnings Webcast 7/27/17
Industrial End Market
• Q2 2017 Sales
− Organic sales up 6% versus prior year (up 4% in
U.S. and up 10% in Canada in local currency)
− Up 5% sequentially
• Positive momentum driven by sequential sales growth
in most end market verticals
• Global Account and Integrated Supply opportunity
pipeline and bidding activity levels remain strong
• While still cost focused, customers are more optimistic
regarding 2017 and 2018
• Customer trends include high expectations for supply
chain process improvements, cost reductions, and
supplier consolidation
Organic Sales Growth versus Prior Year
37%
Industrial
• Global Accounts
• Integrated Supply
• OEM
• General Industrial
Renewed a multi-year contract to supply electrical and safety MRO products across multiple
plants for a global food ingredient manufacturer.
Note: See appendix for non-GAAP reconciliations.
(13.7%)
(10.1%) (10.1%)
(6.8%)
1.2%
6.0%
Q3 2016Q2 2016Q1 2016
2016
(10.2%)
Q4 2016 Q1 2017 Q2 2017
5 Q2 Earnings Webcast 7/27/17
(3.6%)
2.3%
(5.5%)
(1.9%)
(3.6%)
(4.4%)
• Q2 2017 Sales
− Organic sales down 4% versus prior year (down 6%
in U.S. and down 4% in Canada in local currency)
− Up 10% sequentially
− Growth with commercial contractors partially
offset weakness with contractors serving the
industrial market in the U.S.
• Backlog is up 7% versus prior year and is up 16% versus
December 2016 year-end, growing sequentially each
successive month in the first half
• Expecting modest uptrend in non-residential
construction in 2017
• Non-residential construction market still below its prior
peak in 2008
• Non-Residential
• Contractors
Construction
33%
Organic Sales Growth versus Prior Year
Construction End Market
Awarded a contract for interior and exterior lighting products for the construction of a new
hospital.
Note: See appendix for non-GAAP reconciliations.
Q2 2016Q1 2016 Q3 2016 Q4 2016
2016
(2.2%)
Q1 2017 Q2 2017
6 Q2 Earnings Webcast 7/27/17
Utility End Market
Organic Sales Growth versus Prior Year
15%
Utility
• Investor Owned
• Public Power
• Utility Contractors
• Q2 2017 Sales
− Organic sales down 4% versus prior year (down 4% in
U.S. and down 7% in Canada in local currency)
− Up 6% sequentially
− Excluding exited contract, organic sales up 3% versus
prior year (up 5% in U.S.)
• Continued 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
remain positive catalysts for future spending
Awarded a contract to provide transmission and distribution materials for an
infrastructure upgrade project for an investor owned utility.
Note: See appendix for non-GAAP reconciliations.
0.6% 0.6%
(1.7%)
2.6%
(4.5%) (4.4%)
2016
0.5%
Q3 2016Q2 2016Q1 2016 Q4 2016 Q1 2017 Q2 2017
7 Q2 Earnings Webcast 7/27/17
CIG End Market
• Q2 2017 Sales
− Organic sales up 7% versus prior year (up 2% in
U.S. and up 31% in Canada in local currency)
after three quarters of sales declines
− Up 14% sequentially
• Technical expertise and supply chain solutions
driving positive momentum in datacenter and cloud
technology projects
• Government and Institutional sales up low single
digits in the U.S.
• Increasing momentum seen in FTTX deployments,
broadband build outs and cyber and physical security
for critical infrastructure protection
Organic Sales Growth versus Prior Year
CIG
• Commercial
• Institutional
• Government
15%
Awarded a new long term contract to provide data communications products
for a global technology company.
Note: See appendix for non-GAAP reconciliations.
0.4% 0.8%
(1.6%)
(5.8%)
(2.0%)
7.4%
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017
2016
(1.7%)
8 Q2 Earnings Webcast 7/27/17
Q2 2017 Results
Outlook Actual YOY
Sales (2)% to 1% $1.91B Flat
Gross Margin 19.2% Down 70 bps
SG&A $267M, 14.0% Down 3%, Down 40 bps
Operating Profit $83M Down 6%
Operating Margin 4.2% to 4.6% 4.4% Down 20 bps
Effective Tax Rate ~29% 25.3% Down 200 bps
(0.8)%
Growth
40 bps
60 bps
$1.91B$1.91B
Q2 2017
Sales
Rest of
World
CanadaU.S.Q2 2016
Sales
120 bps
2.3%
Growth
27.4%
Growth
1.0%
Organic
Growth
(0.1)%
Growth
Note: See appendix for non-GAAP reconciliations.
Foreign
Exchange
110 bps
9 Q2 Earnings Webcast 7/27/17
Diluted EPS Walk
Q2
2016 $1.02)
Core operations 0.00)
Foreign exchange impact (0.03)
Tax 0.03)
Share count 0.00)
2017 $1.02)
10 Q2 Earnings Webcast 7/27/17
1.5
2
2.5
3
3.5
4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Cash Generation
131.5
57.0
2016 YTD 2017 YTD
Free Cash Flow
($ Millions)
Note: See appendix for non-GAAP reconciliations.
65%
of net
income
156%
of net
income
> $1B of free
cash flow over
last 4 years
Target
Leverage
2.0x – 3.5x
3.5X
Leverage
(Total Par Debt to TTM EBITDA)
2015 2016 2017
Lower Free Cash
Flow driven by an
increase in working
capital to support
increased sales
11 Q2 Earnings Webcast 7/27/17
2017 Outlook
Q3 FY
Sales 2% to 5% 1% to 3%
Operating Margin 4.2% to 4.6% 4.1% to 4.3%
Effective Tax Rate ~ 27% ~ 27%
Diluted EPS $3.60 to $3.90
Free Cash Flow >90% of net income
Notes: Excludes unannounced acquisitions.
Assumes a CAD/USD exchange rate of 0.78 in Q3.
See appendix for non-GAAP reconciliations.
12 Q2 Earnings Webcast 7/27/17
Appendix
NON-GAAP FINANCIAL MEASURES
This presentation 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 as these provide a better understanding of sales
performance, the use of debt, and liquidity. Management does not use these non-GAAP financial
measures for any purpose other than the reasons stated above.
13 Q2 Earnings Webcast 7/27/17
WESCO Profile 2017
37%
33%
15%
15%
40%
15%
14%
12%
11%
8%
Note: Markets & Customers and Products & Services percentages reported on a TTM consolidated basis.
Products & ServicesMarkets & 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 Q2 Earnings Webcast 7/27/17
Sales Growth
2015 2016 2017
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2
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) (0.1)
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) (0.1)
FX Impact (2.5) (3.0) (4.1) (3.7) (3.4) (2.6) (0.9) (0.3) (0.3) (1.0) 0.6 (1.1)
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) 1.0
(%)
Note: Core sales growth excludes acquisitions during the first year of ownership.
15 Q2 Earnings Webcast 7/27/17
Q2 2017 Sales Growth – Geography
U.S. Canada International Total
Change in net sales (USD) (0.8) (2.5) 24.0 (0.1)
Impact from acquisitions - - - -
Impact from foreign exchange rates - (4.8) (3.4) (1.1)
Impact from number of workdays - - - -
Organic sales growth (0.8) 2.3 27.4 1.0
(%)
16 Q2 Earnings Webcast 7/27/17
Note: The prior period end market amounts noted above may contain reclassifications to conform to current period presentation.
($ Millions)
Sales Growth-End Markets
Q2 2017 vs. Q2 2016 Q2 2017 vs. Q1 2017
Q2 Q2 Q2 Q1
2017 2016
%
Growth 2017 2017
%
Growth
Industrial Core 714 680 5.1% 714 681 4.9%
Construction Core 626 666 (5.9)% 626 574 9.1%
Utility Core 284 298 (4.9)% 284 267 6.0%
CIG Core 293 275 6.6% 293 258 13.9%
Total Core Gross Sales 1,918 1,919 (0.1)% 1,918 1,780 7.7%
Total Gross Sales from Acquisitions - - - - - -00
Total Gross Sales 1,918 1,919 (0.1)% 1,918 1,780 7.7%
Gross Sales Reductions/Discounts (8) (7) - (8) (8) -00
Total Net Sales 1,910 1,912 (0.1)% 1,910 1,773 7.7%
17 Q2 Earnings Webcast 7/27/17
Q2 2017 Organic Sales by End Market
Industrial Construction Utility CIG WESCO
Core Sales Growth 5.1 (5.9) (4.9) 6.6 (0.1)
FX Impact (0.9) (1.5) (0.5) (0.8) (1.1)
Workday Impact - - - - -
Organic Growth 6.0 (4.4) (4.4) 7.4 1.0
(%)
18 Q2 Earnings Webcast 7/27/17
Outstanding at
December 31, 2016
Outstanding at
June 30, 2017
Debt
Maturity Schedule
AR Revolver (V) 380 376 2018
Inventory Revolver (V) 4 8 2020
2019 Term Loans (V) 145 115 2019
2021 Senior Notes (F) 500 500 2021
2024 Senior Notes (F) 350 350 2024
Other (V) 24 26 N/A
Total Par Debt 1,403 1,375
Capital Structure
Key Financial Metrics
YE 2016 Q2 2017
Cash 110 88
Capital Expenditures 18 5
Free Cash Flow (1) 282 14
Liquidity (2) 705 751
($ 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.
19 Q2 Earnings Webcast 7/27/17
Financial Leverage
Twelve Months Ended
June 30, 2017
Financial leverage ratio:
Income from operations $ 325
Depreciation and amortization 65
EBITDA $ 390
June 30, 2017
Current debt and short-term borrowings $ 25
Long-term debt 1,335
Debt discount and deferred financing (1) 15
Total debt $ 1,375
Less: cash and cash equivalents $ 88
Total debt, net of cash $ 1,287
Financial leverage ratio 3.5X
Financial leverage ratio, net of cash 3.3X
(1)Long-term debt is presented in the condensed consolidated balance sheet as of June 30, 2017 net of deferred financing fees and
debt discount.
($ Millions)
20 Q2 Earnings Webcast 7/27/17
2015 2016 YTD 2017
Amortization of Debt Discount(1) 6.1 3.0 0.1
Amortization of Deferred Financing Fees 6.1 3.6 1.9
FIN 48 (8.7) 1.2 0.2
Total 3.5 7.8 2.2
Non-Cash Interest Expense
(1) Includes convertible debt and term loan; the convertible debt was redeemed in Q3 2016.
($ Millions)
21 Q2 Earnings Webcast 7/27/17
Free Cash Flow Reconciliation
YTD
2016
YTD
2017
Cash flow provided by operations 138.6 66.8
Less: Capital expenditures (7.1) (9.8)
Free cash flow 131.5 57.0
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 other investing and financing activities.
($ Millions)
22 Q2 Earnings Webcast 7/27/17
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