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): August 1, 2019
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||
Suite 700 | |||||
(Zip Code) | |||||
(Address of principal executive offices) | |||||
(412 ) 454-2200
(Registrant's telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class | Trading Symbol(s) | Name of Exchange on which registered | ||
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:
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 | ||||
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. ☐ | ||||
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 August 1, 2019 , WESCO International, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2019. 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 2019 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.
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) | ||
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 2019 Results
Second quarter highlights:
• | Record consolidated net sales of $2.2 billion, up 2% versus prior year |
– | Organic sales growth of 1.9% |
• | Cost of goods sold as a percentage of net sales of 81.0% |
– | Gross margin of 19.0%, flat versus prior year |
• | Operating profit of $98 million, up 7% versus prior year |
– | Operating margin of 4.6%, up 30 basis points versus prior year |
• | Net income of $64 million, up 10% versus prior year |
• | Earnings per diluted share of $1.45, up 19% |
• | Initiated the repurchase of $150 million of shares |
PITTSBURGH, August 1, 2019 /PRNewswire/ -- WESCO International, Inc. (NYSE: WCC), a leading provider of electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturer (OEM) products, construction materials, and advanced supply chain management and logistics services, announces its results for the second quarter of 2019.
Mr. John J. Engel, WESCO's Chairman, President and CEO, commented, “As expected, all of our end markets grew on both a year-over-year and sequential basis. We achieved record sales in the second quarter due to the continued strength in Canada, Utility and Datacom offset by slower growth than anticipated in the U.S. After a slow start in April and May in the U.S., our sales growth strengthened in June but was impacted by increasing headwinds in the economy and in our end markets. Operating margin expanded 30 basis points, in-line with expectations, driven by continued effective cost management and strong operating profit pull through. EPS grew 19% versus prior year and we repurchased $150 million of our common stock, above our share repurchase forecast for the second quarter.”
The following are results for the three months ended June 30, 2019 compared to the three months ended June 30, 2018:
• | Net sales were $2.2 billion for the second quarter of 2019, compared to $2.1 billion for the second quarter of 2018, an increase of 2.2%. Organic sales for the second quarter of 2019 grew by 1.9% as foreign exchange rates negatively impacted net sales by 1.0%, while acquisitions positively impacted net sales by 1.3%. Sequentially, net sales increased 9.6% and organic sales increased 7.2%. |
• | Cost of goods sold for the second quarter of 2019 and 2018 was $1.7 billion, and gross profit was $409.0 million and $399.9 million, respectively. As a percentage of net sales, gross profit was 19.0% for the second quarter of 2019 and 2018. Gross profit as a percentage of net sales for the second quarter of 2019 reflects the positive impact from the SLS acquisition offset by business mix. |
• | Selling, general and administrative expenses were $295.9 million, or 13.8% of net sales, for the second quarter of 2019, compared to $292.9 million, or 13.9% of net sales, for the second quarter of 2018. |
• | Operating profit was $97.9 million for the second quarter of 2019, compared to $91.2 million for the second quarter of 2018, an increase of 7.3%. Operating profit as a percentage of net sales was 4.6% for the current quarter, compared to 4.3% for the second quarter of the prior year. |
• | Net interest and other for the second quarter of 2019 was $17.3 million, compared to $17.7 million for the second quarter of 2018. |
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• | The effective tax rate for the second quarter of 2019 was 21.6%, compared to 21.5% for the second quarter of 2018. |
• | Net income attributable to WESCO International, Inc. was $63.5 million for the second quarter of 2019, compared to $58.0 million for the second quarter of 2018, an increase of 9.5%. |
• | Earnings per diluted share for the second quarter of 2019 was $1.45, based on 43.8 million diluted shares, compared to $1.22 for the second quarter of 2018, based on 47.6 million diluted shares, an increase of 18.9%. |
• | Operating cash flow for the second quarter of 2019 was an outflow of $37.7 million, compared to an inflow of $33.8 million for the second quarter of 2018. Free cash flow for the second quarter of 2018 was $25.1 million. The net cash outflow in the second quarter of 2019 was primarily driven by working capital growth as a result of higher sales in the latter part of the quarter. Additionally, the Company repurchased $150 million of shares in the second quarter of 2019. |
The following are results for the six months ended June 30, 2019 compared to the six months ended June 30, 2018:
• | Net sales were $4.1 billion for the first six months of 2019 and 2018. Organic sales for the first six months of 2019 grew by 1.5% as foreign exchange rates and the number of workdays negatively impacted net sales by 1.2% and 0.8%, respectively, while acquisitions positively impacted net sales by 0.8%. |
• | Cost of goods sold for the first six months of 2019 and 2018 was $3.3 billion, and gross profit was $791.5 million and $779.8 million, respectively. As a percentage of net sales, gross profit was 19.3% and 19.0% for the first six months of 2019 and 2018, respectively. |
• | Selling, general and administrative expenses were $592.4 million, or 14.4% of net sales, for the first six months of 2019, compared to $583.7 million, or 14.2% of net sales, for the first six months of 2018. |
• | Operating profit was $168.7 million for the first six months of 2019, compared to $164.4 million for the first six months of 2018, an increase of 2.6%. Operating profit as a percentage of net sales was 4.1% for the current six month period, compared to 4.0% for the prior six month period. |
• | Net interest and other for the first six months of 2019 was $34.4 million, compared to $37.5 million for the first six months of 2018. For the six months ended June 30, 2018, net interest and other includes a foreign exchange loss of $3.0 million from the remeasurement of a financial instrument, as well as accelerated amortization of debt discount and debt issuance costs totaling $0.8 million due to early repayments on our then outstanding term loan facility. |
• | The effective tax rate for the first six months of 2019 was 21.7%, compared to 20.7% for the first six months of 2018. The higher effective tax rate in the current year is primarily due to the full application of the international provisions of U.S. tax reform. |
• | Net income attributable to WESCO International, Inc. was $105.8 million for the first six months of 2019, compared to $102.3 million for the first six months of 2018, an increase of 3.4%. |
• | Earnings per diluted share for the first six months of 2019 was $2.37, based on 44.7 million diluted shares, compared to $2.15 for the first six months of 2018, based on 47.6 million diluted shares, an increase of 10.2%. |
• | Operating cash flow for the first six months of 2019 was an outflow of $8.7 million, compared to an inflow of $86.8 million for the first six months of 2018. Free cash flow for the first six months of 2018 was $70.4 million. The net cash outflow in the first six months of 2019 was primarily driven by changes in working capital to support sales growth. |
Mr. Engel continued, “As a result of lower market growth rate expectations in our end markets, we are revising our 2019 full year outlook for sales growth of 1% to 4%, operating margin of 4.2% to 4.5%, tax rate of 21% to 23%, and EPS of $5.00 to $5.60. We reaffirm our full year free cash flow generation of at least 90% of net income. Our focus remains on executing our 2019 plan priorities of sales growth, margin improvement, investments in our people and processes, and maintaining our cost and cash management discipline. Despite the slowing momentum and increased uncertainties in our end markets, customers continue to seek improvement in their operations and supply chains. Our talented team of associates and our robust portfolio of products and value-added services differentiate WESCO by providing our customers with complete solutions for their MRO, OEM and capital project needs.”
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Webcast and Teleconference Access
WESCO will conduct a webcast and teleconference to discuss the second quarter of 2019 earnings as described in this News Release on Thursday, August 1, 2019, at 10:00 a.m. E.T. The call will be broadcast live over the internet and can be accessed from the Investor Relations page of the Company's website at www.wesco.investorroom.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 manufacturer (OEM) products, construction materials, and advanced supply chain management and logistic services. 2018 annual sales were approximately $8.2 billion. The company employs approximately 9,300 people, maintains relationships with approximately 30,000 suppliers, and serves approximately 70,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WESCO operates 10 fully automated distribution centers and approximately 500 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, 2018, as well as the Company's other reports filed with the Securities and Exchange Commission.
Contact Information:
Will Ruthrauff, Director, Investor Relations
(412) 454-4220
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, 2019 | June 30, 2018 | ||||||||||
Net sales | $ | 2,150.1 | $ | 2,104.0 | |||||||
Cost of goods sold (excluding | 1,741.1 | 81.0 | % | 1,704.1 | 81.0 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 295.9 | 13.8 | % | 292.9 | 13.9 | % | |||||
Depreciation and amortization | 15.2 | 15.8 | |||||||||
Income from operations | 97.9 | 4.6 | % | 91.2 | 4.3 | % | |||||
Net interest and other | 17.3 | 17.7 | |||||||||
Income before income taxes | 80.6 | 3.7 | % | 73.5 | 3.5 | % | |||||
Provision for income taxes | 17.4 | 15.8 | |||||||||
Net income | 63.2 | 2.9 | % | 57.7 | 2.7 | % | |||||
Net loss attributable to noncontrolling interests | (0.3 | ) | (0.3 | ) | |||||||
Net income attributable to WESCO International, Inc. | $ | 63.5 | 3.0 | % | $ | 58.0 | 2.8 | % | |||
Earnings per diluted common share | $ | 1.45 | $ | 1.22 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
common share (in millions) | 43.8 | 47.6 | |||||||||
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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, 2019 | June 30, 2018 | ||||||||||
Net sales | $ | 4,111.4 | $ | 4,097.9 | |||||||
Cost of goods sold (excluding | 3,319.9 | 80.7 | % | 3,318.1 | 81.0 | % | |||||
depreciation and amortization) | |||||||||||
Selling, general and administrative expenses | 592.4 | 14.4 | % | 583.7 | 14.2 | % | |||||
Depreciation and amortization | 30.4 | 31.7 | |||||||||
Income from operations | 168.7 | 4.1 | % | 164.4 | 4.0 | % | |||||
Net interest and other | 34.4 | 37.5 | |||||||||
Income before income taxes | 134.3 | 3.3 | % | 126.9 | 3.1 | % | |||||
Provision for income taxes | 29.1 | 26.3 | |||||||||
Net income | 105.2 | 2.6 | % | 100.6 | 2.5 | % | |||||
Net loss attributable to noncontrolling interests | (0.6 | ) | (1.7 | ) | |||||||
Net income attributable to WESCO International, Inc. | $ | 105.8 | 2.6 | % | $ | 102.3 | 2.5 | % | |||
Earnings per diluted common share | $ | 2.37 | $ | 2.15 | |||||||
Weighted-average common shares outstanding and common | |||||||||||
share equivalents used in computing earnings per diluted | |||||||||||
common share (in millions) | 44.7 | 47.6 | |||||||||
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions)
(Unaudited)
June 30, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 87.2 | $ | 96.3 | |||
Trade accounts receivable, net | 1,355.5 | 1,166.6 | |||||
Inventories | 1,004.1 | 948.7 | |||||
Other current assets | 138.0 | 174.0 | |||||
Total current assets | 2,584.8 | 2,385.6 | |||||
Other assets (1) | 2,483.1 | 2,219.4 | |||||
Total assets | $ | 5,067.9 | $ | 4,605.0 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 868.6 | $ | 794.3 | |||
Short-term borrowings and current debt | 27.6 | 56.2 | |||||
Other current liabilities (1) | 228.6 | 211.4 | |||||
Total current liabilities | 1,124.8 | 1,061.9 | |||||
Long-term debt, net | 1,399.5 | 1,167.3 | |||||
Other noncurrent liabilities (1) | 408.8 | 246.1 | |||||
Total liabilities | 2,933.1 | 2,475.3 | |||||
Stockholders' Equity | |||||||
Total stockholders' equity | 2,134.8 | 2,129.7 | |||||
Total liabilities and stockholders' equity | $ | 5,067.9 | $ | 4,605.0 | |||
(1) | Effective January 1, 2019, the Company adopted Accounting Standards Update 2016-02, Leases, and all the related amendments (“Topic 842”) using the effective date method. The adoption of Topic 842 resulted in the recognition of right-of-use assets and lease liabilities in the balance sheet. As of June 30, 2019, other assets includes $233.4 million of operating lease assets, and other current liabilities and other noncurrent liabilities include $60.3 million and $177.9 million, respectively, of operating lease liabilities. |
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WESCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in millions)
(Unaudited)
Six Months Ended | |||||||
June 30, 2019 | June 30, 2018 | ||||||
Operating Activities: | |||||||
Net income | $ | 105.2 | $ | 100.6 | |||
Add back (deduct): | |||||||
Depreciation and amortization | 30.4 | 31.7 | |||||
Deferred income taxes | 2.0 | 6.1 | |||||
Change in trade receivables, net | (157.4 | ) | (102.6 | ) | |||
Change in inventories | (39.7 | ) | 11.4 | ||||
Change in accounts payable | 62.5 | 26.1 | |||||
Other | (11.8 | ) | 13.5 | ||||
Net cash (used in) provided by operating activities | (8.8 | ) | 86.8 | ||||
Investing Activities: | |||||||
Capital expenditures | (21.4 | ) | (16.4 | ) | |||
Other | (28.9 | ) | (8.7 | ) | |||
Net cash used in investing activities | (50.3 | ) | (25.1 | ) | |||
Financing Activities: | |||||||
Debt borrowings (repayments), net | 199.5 | (52.5 | ) | ||||
Equity activity, net | (152.7 | ) | (1.9 | ) | |||
Other | 3.3 | (9.4 | ) | ||||
Net cash provided by (used in) financing activities | 50.1 | (63.8 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (0.1 | ) | (5.0 | ) | |||
Net change in cash and cash equivalents | (9.1 | ) | (7.1 | ) | |||
Cash and cash equivalents at the beginning of the period | 96.3 | 118.0 | |||||
Cash and cash equivalents at the end of the period | $ | 87.2 | $ | 110.9 | |||
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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, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and 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, 2019 | June 30, 2019 | |||
Change in net sales | 2.2 | % | 0.3 | % | |
Impact from acquisitions | 1.3 | % | 0.8 | % | |
Impact from foreign exchange rates | (1.0 | )% | (1.2 | )% | |
Impact from number of workdays | — | % | (0.8 | )% | |
Organic sales growth | 1.9 | % | 1.5 | % | |
Three Months Ended | ||
Organic Sales Growth - Sequential: | June 30, 2019 | |
Change in net sales | 9.6 | % |
Impact from acquisitions | 1.0 | % |
Impact from foreign exchange rates | (0.2 | )% |
Impact from number of workdays | 1.6 | % |
Organic sales growth | 7.2 | % |
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, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||
Net sales | $ | 2,150.1 | $ | 2,104.0 | $ | 4,111.4 | $ | 4,097.9 | |||||||
Cost of goods sold (excluding depreciation and amortization) | 1,741.1 | 1,704.1 | 3,319.9 | 3,318.1 | |||||||||||
Gross profit | $ | 409.0 | $ | 399.9 | $ | 791.5 | $ | 779.8 | |||||||
Gross margin | 19.0 | % | 19.0 | % | 19.3 | % | 19.0 | % | |||||||
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, 2019 | December 31, 2018 | |||||
Income from operations | $ | 356.7 | $ | 352.5 | |||
Depreciation and amortization | 61.7 | 63.0 | |||||
EBITDA | $ | 418.4 | $ | 415.5 | |||
June 30, 2019 | December 31, 2018 | ||||||
Short-term borrowings and current debt | $ | 27.6 | $ | 56.2 | |||
Long-term debt | 1,399.5 | 1,167.3 | |||||
Debt discount and debt issuance costs (1) | 7.8 | 9.6 | |||||
Total debt | 1,434.9 | 1,233.1 | |||||
Less: cash and cash equivalents | 87.2 | 96.3 | |||||
Total debt, net of cash | $ | 1,347.7 | $ | 1,136.8 | |||
Financial leverage ratio | 3.4 | 3.0 | |||||
Financial leverage ratio, net of cash | 3.2 | 2.7 | |||||
(1) | Long-term debt is presented in the condensed consolidated balance sheets net of debt discount and debt issuance costs. |
Note: Financial leverage measures the use of debt. Financial leverage ratio is calculated by dividing total debt, including debt discount and debt issuance costs, by EBITDA. Financial leverage ratio, net of cash is calculated by dividing total debt, including debt discount and debt issuance costs, net of cash, 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, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||
Cash flow (used in) provided by operations | $ | (37.7 | ) | $ | 33.8 | $ | (8.8 | ) | $ | 86.8 | |||||
Less: capital expenditures | (10.6 | ) | (8.7 | ) | (21.4 | ) | (16.4 | ) | |||||||
Free cash flow | $ | (48.3 | ) | $ | 25.1 | $ | (30.2 | ) | $ | 70.4 | |||||
Percentage of net income | (76 | )% | 44 | % | (29 | )% | 70 | % | |||||||
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 investing and financing activities.
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Q2 2019 Earnings Webcast Presentation August 1, 2019 1
Forward Looking Statements All statements made herein that are not historical facts should be considered as “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to: adverse economic conditions; increase in competition; expansion of business activities; disruptions in operations or information technology systems; supply chain disruptions, changes in supplier strategy or loss of key suppliers; personnel turnover or labor cost increases; risks related to acquisitions, including the integration of acquired businesses; changes in tax laws, regulations and guidance, and uncertainties regarding their application, and challenges by tax authorities to the company’s tax positions; exchange rate fluctuations; debt levels, terms, financial market conditions or interest rate fluctuations; stock market, economic or political instability; legal or regulatory matters; litigation, disputes, contingencies or claims; and other factors described in detail in the Form 10-K for WESCO International, Inc. for the year ended December 31, 2018 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. Non-GAAP Measures This presentation includes certain non-GAAP financial measures. These financial measures include organic sales growth, gross profit, financial leverage, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. The Company believes that these non-GAAP measures are useful to investors as they provide a better understanding of sales performance, and 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. 2
Q2 2019 Highlights Organic Sales Growth versus Prior Year Annual Quarter Second Quarter • Reported sales up 2.2% – Record sales in Q2 with strength in Canada, Utility, and 9.0% April +1% Datacom May +1% • Organic sales up 1.9% June +5% 6.2% – Up 10.9% on a two year stack basis U.S. +2% Canada +6% – Up 7.2% sequentially 4.5% International (8)% – YOY and sequential growth in all end markets • Operating margin up 30 basis points versus prior year 1.9% on strong operating profit pull through 1.0% • Estimated pricing impact +2% 2017 2018 2Q17 2Q18 2Q19 • Diluted EPS up 19% over prior year • Initiated $150 million share repurchase transaction • Preliminary July sales up mid single digits Note: Organic growth excludes the impact of acquisitions in the first year of ownership, foreign exchange rates and differences in the number of workdays. See appendix for non-GAAP reconciliations. 3
Q2 2019 Results Versus Q2 Millions, except per share amounts Q2 2018 Q2 2019 prior year Outlook Sales $2,104 $2,150 2.2% 3% – 6% Gross Profit $400 $409 2.3% % of Sales 19.0% 19.0% flat SG&A $293 $296 1% % of Sales 13.9% 13.8% (10) bps Operating Profit $91 $98 7% % of Sales 4.3% 4.6% 30 bps 4.5% – 4.8% Effective Tax Rate 21.5% 21.6% 10 bps ~23% Diluted EPS $1.22 $1.45 19% Note: See appendix for non-GAAP reconciliations. 4
Diluted EPS and Sales Growth Walk Diluted EPS Walk Sales Growth Walk Q2 2018 Diluted EPS $1.22 Q2 2018 Sales $2,104 M Core operations $0.13 U.S. 130 bps Canada 110 bps SLS acquisition $0.01 International (50) bps Foreign exchange rates $(0.02) Organic Growth 1.9% Tax $0.00 Foreign exchange rates (100) bps Lower share count $0.11 SLS acquisition 130 bps Q2 2019 Diluted EPS $1.45 Q2 2019 Sales $2,150 M Reported Growth 19% Reported Growth 2.2% 5
Industrial End Market Organic Sales Growth versus Prior Year Annual Quarter • Q2 2019 organic sales − Up 1% versus prior year − U.S. up 2%; Canada up 6% in local currency − Up 2% sequentially • Industrial growth continues but at a slower pace 8.0% • Year-over-year and sequential strength in metals and 6.0% 5.8% mining, petrochemical, and food & beverage markets 4.3% • Production and capacity utilization remain strong while 1.0% labor constraints persist • Global Account and Integrated Supply opportunity 2017 2018 2Q17 2Q18 2Q19 pipeline is strong; bidding activity levels remain high Global Integrated General OEM Awarded a new three year contract with a medical device manufacturer to provide an Accounts Supply Industrial integrated supply program for MRO and OEM materials with estimated total revenues 36% of WESCO Sales of more than $30 million. Note: See appendix for non-GAAP reconciliations. 6
Construction End Market Organic Sales Growth versus Prior Year Annual Quarter • Q2 2019 organic sales − Up 3% versus prior year − Down 1% in the U.S.; up 9% in Canada in local currency − Up 9% sequentially • Backlog at historically strong level but ~7% lower than 7.9% prior year record level 5.1% • Contractors are bullish on project activity but challenged 2.6% by tariff-related budget pressures 1.7% • Construction market remains exceptionally tight for skilled trade labor (4.4)% 2017 2018 2Q17 2Q18 2Q19 Non-Residential | Contractors Awarded a multi-million dollar contract to provide electrical equipment and lighting for 33% of WESCO Sales the construction of a new facility for a healthcare manufacturer. Note: See appendix for non-GAAP reconciliations. 7
Utility End Market Organic Sales Growth versus Prior Year Annual Quarter • Q2 2019 organic sales − Up 3% versus prior year; on top of toughest quarterly comparison 18.8% − Up 6% in the U.S. and down 28% in Canada in local currency due to non-renewal of Canadian contract in Q418 − Up 11% sequentially 10.2% • Continue to drive product and service scope expansion with investor owned utility, public power, and generation customers 2.3% 3.3% • Interest in Integrated Supply solution offering remains high (4.4)% • Positioned well to benefit from industry consolidation, 2017 2018 2Q17 2Q18 2Q19 favorable economic conditions, improvement in construction market, and growth in renewable energy Investor Owned | Public Power | Utility Contractors Renewed our contract with a U.S. investor-owned utility to provide electrical and MRO materials for its generation, transmission, and distribution operations for three years 16% of WESCO Sales with estimated total revenues of over $400 million. Note: See appendix for non-GAAP reconciliations. 8
CIG End Market Organic Sales Growth versus Prior Year Annual Quarter • Q2 2019 organic sales − Up 1% versus prior year − Up 1% in the U.S. and 10% in Canada in local currency − Up 14% sequentially 9.4% 9.4% • Supply chain solutions driving results in datacenter and cloud technology projects 7.4% • LED lighting renovation and retrofits, FTTX 4.8% deployments and broadband build outs continue 1.4% 2017 2018 2Q17 2Q18 2Q19 Commercial | Institutional | Government Awarded a multi-million dollar order for data communications material in support of a 15% of WESCO Sales new datacenter for a large U.S. public university. Note: See appendix for non-GAAP reconciliations. 9
Free Cash Flow & Leverage Free Cash Flow Leverage ($ Millions) (Debt, Net of Cash to TTM EBITDA) ~ $1.1B of free cash flow target leverage over last 5 years 4.0x 2.0x – 3.5x $70.4 3.5x 70% of net income 3.0x 3.2x 2.5x $(30.2) 2.0x (29)% of net income 1.5x 2018 YTD 2019 YTD Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Lower free cash flow versus prior year driven by increase in 2017 2018 2019 accounts receivables due to strong sales in June Note: See appendix for non-GAAP reconciliations. 10
2019 Outlook Q3 Full Year Full Year (current) (prior) Sales 3% to 5% 1% to 4% 3% to 6% Operating Margin 4.3% to 4.7% 4.2% to 4.5% 4.3% to 4.7% Effective Tax Rate ~22% 21% to 23% 22% to 24% Diluted EPS $5.00 to $5.60 $5.10 to $5.70 Free Cash Flow ~ 90% of net income ~ 90% of net income Notes Excludes unannounced acquisitions. Assumes a CAD/USD exchange rate of 0.76 in Q3. FY 2019 has one fewer workday than FY 2018. See appendix for non-GAAP reconciliations. 11
APPENDIX
Trailing Twelve Month Sales Mix 15% 8% 10% 36% 41% 16% End 11% Products Markets 14% 33% 16% Industrial General Supplies Construction Communications & Security Utility Wire, Cable & Conduit CIG Lighting & Sustainability Electrical Distribution & Controls Automation, Controls & Motors 13
Organic Sales Growth ($ Millions) YEAR OVER YEAR Three Months Ended, Core Less: Less: Organic END MARKET June 30, 2018 June 30, 2019 Growth Fx Impact Workday Impact Growth Industrial core sales 764 764 0.0% (1.0)% 0.0% 1.0% Construction core sales 686 694 1.1% (1.5)% 0.0% 2.6% Utility core sales 338 348 3.0% (0.3)% 0.0% 3.3% CIG core sales 324 325 0.3% (1.1)% 0.0% 1.4% Total core sales $ 2,112 $ 2,131 0.9% (1.0)% 0.0% 1.9% GEOGRAPHY U.S. core sales 1,569 1,597 1.8% 0.0% 0.0% 1.8% Canada core sales 408 415 1.8% (4.1)% 0.0% 5.9% International core sales 135 119 (11.7)% (4.0)% 0.0% (7.7)% Total core sales $ 2,112 $ 2,131 0.9% (1.0)% 0.0% 1.9% Plus: SLS sales - 28 Total gross sales $ 2,112 $ 2,159 Less: sales reductions / discounts (8) (9) Total net sales $ 2,104 $ 2,150 SEQUENTIAL Three Months Ended, Core Less: Less: Organic END MARKET March 31, 2019 June 30, 2019 Growth Fx Impact Workday Impact Growth Industrial core sales 740 764 3.3% (0.2)% 1.6% 1.9% Construction core sales 633 694 9.7% (0.4)% 1.6% 8.5% Utility core sales 309 348 12.6% (0.1)% 1.6% 11.1% CIG core sales 281 325 15.7% (0.3)% 1.6% 14.4% Total core sales $ 1,963 $ 2,131 8.6% (0.2)% 1.6% 7.2% Plus: SLS sales 6 28 Total gross sales $ 1,969 $ 2,159 Less: sales reductions / discounts (8) (9) Total net sales $ 1,961 $ 2,150 Note: Prior period end market amounts may contain reclassifications to conform to current period presentation. 14
Capital Structure and Leverage ($ Millions) EBITDA Twelve Months Ended, December 31,2018 June 30, 2019 Income from operations 353 357 Depreciation and amortization 63 62 EBITDA 416 419 DEBT Outstanding as of, Maturity December 31, 2018 June 30, 2019 AR Revolver (variable) 275 495 2020 Inventory Revolver (variable) 52 61 2020 2019 Term Loans (variable) 25 - 2019 2021 Senior Notes (fixed) 500 500 2021 2024 Senior Notes (fixed) 350 350 2024 Foreign Lines of Credit (variable) 31 29 NA Total Debt1 1,233 1,435 Less: cash and cash equivalents 96 87 Total debt, net of cash 1,137 1,348 Leverage 3.0x 3.4x Leverage, net of cash 2.7x 3.2x LIQUIDITY Liquidity2 824 587 (1) Long-term debt is presented in the consolidated balance sheet as of June 30, 2019 net of debt discount issuance costs. (2) Total availability under asset-backed credit facilities plus cash in investment accounts. Note: For financial leverage ratio in prior periods, see quarterly earnings webcasts as previously furnished to the Securities & Exchange Commission, which can be obtained from the Investor Relations page of WESCO’s website at www.wesco.com. 15
Gross Margin and Free Cash Flow ($ Millions) GROSS MARGIN Three Months Ended, June 30, 2018 June 30, 2019 Net sales 2,104 2,150 Cost of goods sold1 1,704 1,741 Gross profit2 400 409 Gross margin 2 19.0% 19.0% FREE CASH FLOW Six Months Ended, June 30, 2018 June 30, 2019 Net cash provided (used) by operating activities 87 (9) Less: capital expenditures (16) (21) Free cash flow3 70 (30) Net income 101 105 % of net income 70.0% (28.6)% 1 Excluding depreciation and amortization. 2 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. 3 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 investing and financing activities. Note: For gross margin in prior periods, see quarterly earnings webcasts as previously furnished to the Securities & Exchange Commission, which can be obtained from the Investor Relations page of WESCO’s website at www.wesco.com. 16
Work Days Q1 Q2 Q3 Q4 FY 2017 64 64 63 62 253 2018 64 64 63 62 253 2019 63 64 63 62 252 17