[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents WESCO International, Inc.'s unaudited Condensed Consolidated Financial Statements for Q1 2021, reflecting the Anixter acquisition's significant impact Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Total current assets** | $5,575,140 | $5,506,978 | | **Total assets** | $11,878,270 | $11,880,214 | | **Total current liabilities** | $2,726,011 | $2,986,995 | | **Total liabilities** | $8,478,567 | $8,543,825 | | **Total stockholders' equity** | $3,399,703 | $3,336,389 | Condensed Consolidated Statement of Income Highlights (unaudited) | Metric | Three Months Ended Mar 31, 2021 (in thousands) | Three Months Ended Mar 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net sales | $4,041,477 | $1,968,647 | | Income from operations | $133,251 | $60,913 | | Net income | $59,154 | $34,175 | | Net income attributable to common stockholders | $44,826 | $34,407 | | Diluted EPS | $0.87 | $0.82 | Condensed Consolidated Statement of Cash Flows Highlights (unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2021 (in thousands) | Three Months Ended Mar 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $120,490 | $31,528 | | Net cash provided by (used in) investing activities | $44,542 | $(110,265) | | Net cash (used in) provided by financing activities | $(312,173) | $278,691 | | Net change in cash and cash equivalents | $(145,248) | $191,658 | [Note 3. Revenue](index=9&type=section&id=Note%203.%20Revenue) Revenue is disaggregated by strategic business units and geography, with significant increases primarily due to the Anixter merger Net Sales by Segment (Three Months Ended March 31) | Segment | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | EES | $1,720,813 | $1,114,457 | | CSS | $1,250,615 | $223,726 | | UBS | $1,070,049 | $630,464 | | **Total** | **$4,041,477** | **$1,968,647** | Net Sales by Geography (Three Months Ended March 31) | Geography | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | United States | $2,930,435 | $1,478,491 | | Canada | $607,753 | $377,419 | | Other International | $503,289 | $112,737 | | **Total** | **$4,041,477** | **$1,968,647** | [Note 4. Acquisitions and Disposals](index=10&type=section&id=Note%204.%20Acquisitions%20and%20Disposals) This note details the Anixter acquisition and the divestiture of certain Canadian businesses, resulting in a net gain - The total preliminary estimated fair value of consideration transferred for the Anixter merger was approximately **$4.7 billion**[40](index=40&type=chunk) - In February 2021, the company completed the required divestiture of certain Canadian businesses for **$54.1 million** in cash, recognizing a net gain of **$8.9 million**[51](index=51&type=chunk) - Unaudited pro forma net sales for the three months ended March 31, 2020, as if the Anixter merger had occurred on January 1, 2019, would have been approximately **$4.04 billion**[49](index=49&type=chunk)[50](index=50&type=chunk) [Note 8. Debt](index=18&type=section&id=Note%208.%20Debt) Total debt decreased to **$4.7 billion** as of March 31, 2021, primarily due to the redemption of **$500 million** Senior Notes Outstanding Indebtedness | Debt Component | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total debt | $4,686,663 | $4,975,983 | | Total long-term debt | $4,592,734 | $4,369,953 | - On January 14, 2021, the company redeemed the entire **$500 million** aggregate principal amount of its 5.375% Senior Notes due 2021[72](index=72&type=chunk) [Note 13. Business Segments](index=21&type=section&id=Note%2013.%20Business%20Segments) Post-merger, the company operates in three segments (EES, CSS, UBS), all showing significant growth in net sales and income from operations Segment Performance (Three Months Ended March 31) | Segment | Net Sales 2021 (in thousands) | Income from Operations 2021 (in thousands) | Net Sales 2020 (in thousands) | Income from Operations 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | EES | $1,720,813 | $100,111 | $1,114,457 | $43,326 | | CSS | $1,250,615 | $73,964 | $223,726 | $9,946 | | UBS | $1,070,049 | $87,030 | $630,464 | $41,785 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Q1 2021 financial results, highlighting a **105.3%** net sales increase due to the Anixter merger, margin improvements, and debt reduction - Net sales for Q1 2021 increased by **105.3%** to **$4.0 billion**, primarily reflecting the merger with Anixter[110](index=110&type=chunk)[126](index=126&type=chunk) - Adjusted for merger-related costs and other items, earnings per diluted share for Q1 2021 was **$1.43**, compared to an adjusted **$0.91** in Q1 2020[113](index=113&type=chunk)[145](index=145&type=chunk) - The company generated **$120.5 million** in operating cash flow and reduced debt, net of cash, by approximately **$534 million** since the Anixter merger[118](index=118&type=chunk)[157](index=157&type=chunk) - The financial leverage ratio improved to **4.9x** as of March 31, 2021, down from **5.3x** as of December 31, 2020[158](index=158&type=chunk)[161](index=161&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section details Q1 results, showing **105.3%** net sales growth to **$4.0 billion** driven by the Anixter merger, with improved gross profit and operating profit Net Sales Growth by Segment (Q1 2021 vs Q1 2020) | Segment | Q1 2021 Net Sales (in billions) | YoY Growth | | :--- | :--- | :--- | | EES | $1.7 | 54.4% | | CSS | $1.3 | 459.0% | | UBS | $1.1 | 69.7% | - Cost of goods sold as a percentage of net sales decreased by **100 basis points** to **79.9%**, reflecting margin improvement initiatives[131](index=131&type=chunk) - SG&A expenses for Q1 2021 included **$46.3 million** in merger-related costs and a net gain of **$8.9 million** from the Canadian divestitures[132](index=132&type=chunk) - The effective tax rate for Q1 2021 was **9.9%**, down from **23.1%** in Q1 2020, primarily due to a discrete tax benefit of **$8.3 million** related to foreign tax credit carryforwards[142](index=142&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2021, total liquidity was **$1.0 billion**, with **$500 million** of 2021 Notes redeemed and a financial leverage ratio of **4.9x** - Total available liquidity was **$1.0 billion** as of March 31, 2021[155](index=155&type=chunk) - The company redeemed **$500 million** of its 2021 Notes on January 14, 2021, using available cash and borrowings from credit facilities[156](index=156&type=chunk) - Capital expenditures for 2021 are expected to be between **$100 million** and **$120 million**, largely for systems integration and digital tools[157](index=157&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) No material changes to market risks were reported, consistent with disclosures in the 2020 Annual Report on Form 10-K - The company refers to its 2020 Annual Report on Form 10-K for a discussion of market risks, indicating no material changes during the quarter[191](index=191&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2021, with no material changes reported - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[192](index=192&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[193](index=193&type=chunk) [PART II—OTHER INFORMATION](index=37&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings.) The company is subject to various lawsuits, but management believes pending matters will not materially affect financial condition or liquidity - Management believes that the outcome of pending litigation is unlikely to have a material adverse effect on the company's financial condition or liquidity[196](index=196&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors.) No material changes to risk factors were reported, consistent with disclosures in the 2020 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K[197](index=197&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits.) This section lists exhibits filed with the Form 10-Q, including material contracts, CEO/CFO certifications, and XBRL data files - Exhibits filed include material contracts, Rule 13a-14(a)/15d-14(a) certifications, Section 1350 certifications, and XBRL interactive data files[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) [Signatures](index=39&type=section&id=Signatures)

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business.) WESCO is a global B2B distribution and supply chain solutions provider, expanded by the 2020 Anixter acquisition, operating through EES, CSS, and UBS segments - WESCO completed the acquisition of **Anixter International Inc.** on **June 22, 2020**, significantly expanding its operations[15](index=15&type=chunk) - The company's business segments are **Electrical & Electronic Solutions (EES)**, **Communications & Security Solutions (CSS)**, and **Utility & Broadband Solutions (UBS)**[17](index=17&type=chunk) - WESCO's business strategy is built on **six planks**, with the **Anixter acquisition** being a key element in 2020[24](index=24&type=chunk)[26](index=26&type=chunk) - No single customer accounted for more than **2%** of sales in 2020, and the top ten customers accounted for approximately **12%** of sales[27](index=27&type=chunk) - The company offers a comprehensive portfolio of value-added solutions including supply chain programs, project deployment, and eBusiness services[30](index=30&type=chunk) - As of December 31, 2020, WESCO had nearly **18,000** full-time employees worldwide, with over **12,000** in the U.S. and approximately **5,800** internationally[39](index=39&type=chunk) Business Overview | Metric | Value | | :----- | :---- | | Employees | ~18,000 | | Suppliers | ~30,000 | | Customers | >125,000 | | Products | ~1,500,000 | | Branches/Warehouses/Sales Offices | ~800 | | Countries of Operation | >50 | [Item 1A. Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) WESCO faces risks from merger integration, global operations, COVID-19, cyber-attacks, supplier dependency, and substantial indebtedness - The company may not fully realize the anticipated benefits and cost savings from the **Anixter merger** due to integration difficulties and higher-than-expected costs[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - Global operations in over **50 countries** expose WESCO to political, economic, legal, and currency risks, with approximately **26%** of revenues from outside the U.S[78](index=78&type=chunk) - The **COVID-19 pandemic** has adversely affected business, causing disruptions to supply chains, reduced customer demand, and potential project delays[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - Significant disruption or failure of information systems, including **cyber-attacks**, could lead to operational interruptions and data breaches[90](index=90&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - Loss of key suppliers (**top 10** account for ~**30%** of purchases), product cost fluctuations, and a decline in large project volumes could decrease sales and profit margins[96](index=96&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - The company's outstanding indebtedness of **$5.0 billion** as of **December 31, 2020**, requires substantial debt service commitments, which could limit growth and impose restrictive covenants[109](index=109&type=chunk)[114](index=114&type=chunk) [Item 1B. Unresolved Staff Comments](index=19&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments from the SEC - No unresolved staff comments[120](index=120&type=chunk) [Item 2. Properties](index=19&type=section&id=Item%202.%20Properties) WESCO operates nearly 700 branches and 100 sales offices globally, with 8% owned and the rest leased - WESCO operates nearly **700 branches** and warehouse locations and over **100 sales offices** in more than **50 countries**[121](index=121&type=chunk) - Approximately **8%** of the company's facilities are owned, with the rest being leased[121](index=121&type=chunk) [Item 3. Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) WESCO is involved in various lawsuits, but management does not expect a material adverse effect on financial condition or liquidity - WESCO is involved in various lawsuits and claims, but management does not expect a material adverse effect on financial condition or liquidity[123](index=123&type=chunk) [Item 4. Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to WESCO International, Inc - Not applicable[125](index=125&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) WESCO's common stock trades on NYSE, with 50.16 million shares outstanding, no dividends, and limited repurchases due to debt - WESCO's common stock trades on the **NYSE** under the symbol '**WCC**'[128](index=128&type=chunk) - The company has **not paid common stock dividends** and current debt agreements limit future dividend payments and share repurchases[128](index=128&type=chunk) - Under a repurchase authorization, WESCO repurchased **5,459,030 shares** for **$275.0 million** through December 31, 2020[128](index=128&type=chunk) Market for Registrant's Common Equity | Metric | Value (as of Feb 25, 2021) | | :----- | :------------------------- | | Shares Outstanding | 50,161,831 | | Holders of Record | ~800 | [Item 6. Selected Financial Data](index=21&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data shows significant 2020 growth in sales and assets due to the Anixter merger, but decreased net income from financing costs - Year-over-year changes from 2020 to 2019 are primarily due to the merger with **Anixter** and related financing costs[132](index=132&type=chunk) Selected Income Statement Data (2016-2020) | Metric (in millions, except per share) | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------------- | :--- | :--- | :--- | :--- | :--- | | Net sales | $12,326.0 | $8,358.9 | $8,176.6 | $7,679.0 | $7,336.0 | | Income from operations | $347.1 | $346.2 | $352.5 | $319.1 | $330.5 | | Net income attributable to common stockholders | $70.5 | $223.4 | $227.4 | $163.5 | $101.6 | | Diluted EPS | $1.51 | $5.14 | $4.82 | $3.38 | $2.10 | Selected Cash Flow Data (2016-2020) | Metric (in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------- | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $543.9 | $224.4 | $296.7 | $149.1 | $300.2 | | Net cash used in investing activities | $(3,735.1) | $(60.8) | $(34.1) | $(5.3) | $(70.5) | | Net cash provided by (used in) financing activities | $3,480.7 | $(109.8) | $(275.1) | $(141.2) | $(276.3) | Selected Balance Sheet Data (2016-2020) | Metric (in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------- | :--- | :--- | :--- | :--- | :--- | | Total assets | $11,880.2 | $5,017.6 | $4,605.0 | $4,735.5 | $4,431.8 | | Total debt | $4,898.8 | $1,283.8 | $1,223.5 | $1,348.6 | $1,385.3 | | Stockholders' equity | $3,336.4 | $2,258.7 | $2,129.7 | $2,116.1 | $1,963.6 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A reviews WESCO's 2020-2018 financial performance, highlighting the Anixter merger's impact on sales, assets, debt, and net income [Company Overview](index=22&type=section&id=Company%20Overview) - WESCO completed the acquisition of **Anixter** on **June 22, 2020**, which significantly expanded its employee base, supplier relationships, customer count, and product offerings[136](index=136&type=chunk)[137](index=137&type=chunk) - Following the merger, WESCO reorganized its operating segments into **three strategic business units**: **Electrical & Electronic Solutions (EES)**, **Communications & Security Solutions (CSS)**, and **Utility and Broadband Solutions (UBS)**[138](index=138&type=chunk) [Overall Financial Performance](index=23&type=section&id=Overall%20Financial%20Performance) - The 2020 financial results reflect the half-year impact of the **Anixter merger**, partially offset by unfavorable business conditions caused by the **COVID-19 pandemic**[143](index=143&type=chunk) - The company performed interim goodwill impairment tests as of **March 31, 2020**, and in **Q3 2020**, with **no impairment losses** identified, though the EES reporting unit remains susceptible to impairment risk[148](index=148&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk) Financial Performance Overview (2020 vs 2019) | Metric | 2020 (Actual) | 2019 (Actual) | Change (%) | | :----- | :------------ | :------------ | :--------- | | Net Sales | $12.3 billion | $8.4 billion | +47.5% | | Gross Profit Margin | 18.9% | 18.9% | 0.0 pp | | Adjusted Gross Profit Margin | 19.4% | 18.9% | +0.5 pp | | SG&A as % of Net Sales | 15.1% | 14.0% | +1.1 pp | | Adjusted SG&A as % of Net Sales | 14.2% | 14.0% | +0.2 pp | | Operating Income | $347.0 million | $346.2 million | +0.2% | | Adjusted Operating Profit | $522.0 million | $349.3 million | +49.4% | | Net Income Attributable to Common Stockholders | $70.4 million | $223.4 million | -68.5% | | Adjusted Net Income Attributable to Common Stockholders | $203.6 million | $225.9 million | -9.8% | | Diluted EPS | $1.51 | $5.14 | -70.6% | | Adjusted Diluted EPS | $4.37 | $5.20 | -15.9% | [Cash Flow](index=24&type=section&id=Cash%20Flow) - Investing activities in 2020 included **$3,707.6 million** to fund a portion of the **Anixter merger**[153](index=153&type=chunk) - Financing activities in 2020 included **$2,815.0 million** net proceeds from senior unsecured notes for the **Anixter merger**, and significant borrowings/repayments related to revolving credit and accounts receivable securitization facilities[153](index=153&type=chunk) Cash Flow Summary (2020 vs 2019) | Metric (in millions) | 2020 | 2019 | | :------------------- | :--- | :--- | | Operating Cash Flow | $543.9 | $224.4 | | Investing Activities | $(3,735.1) | $(60.8) | | Financing Activities | $3,480.7 | $(109.8) | Free Cash Flow (2020 vs 2019) | Metric (in millions) | 2020 | 2019 | | :------------------- | :--- | :--- | | Cash flow provided by operations | $543.9 | $224.4 | | Less: Capital expenditures | $(56.7) | $(44.1) | | Add: Merger-related expenditures | $98.9 | $0.0 | | **Free Cash Flow** | **$586.1** | **$180.3** | [Financing Availability](index=25&type=section&id=Financing%20Availability) - WESCO entered into a new **$1,100 million** Revolving Credit Facility and amended its Accounts Receivable Securitization Facility in **June 2020**, further increasing borrowing capacities to **$1,200 million** each in **December 2020**[157](index=157&type=chunk) - The Revolving Credit Facility matures in **June 2025**, and the Receivables Facility matures in **June 2023**[158](index=158&type=chunk) Available Borrowing Capacity (as of Dec 31, 2020) | Facility | Available Capacity (in millions) | | :------- | :----------------------------- | | Revolving Credit Facility | $801.5 | | Receivables Facility | $75.0 | | **Total Liquidity (incl. cash)** | **$1,136.0** | [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Key accounting policies and estimates include **revenue recognition**, **supplier volume rebates**, allowance for **expected credit losses**, **inventories**, **goodwill and indefinite-lived intangible assets**, **definite-lived intangible assets**, **insurance programs**, and **income taxes**[159](index=159&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - The determination of **fair value** for reporting units and intangible assets involves **significant management judgment**, making estimates sensitive to changes in underlying assumptions[166](index=166&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) [2020 Compared to 2019](index=28&type=section&id=2020%20Compared%20to%202019) - Total net sales increased by **47.5%** due to the **Anixter merger**, partially offset by weakened demand from the **COVID-19 pandemic**[176](index=176&type=chunk) - Cost of goods sold as a percentage of net sales remained at **81.1%** for both years, but adjusted, it was **80.6%** in 2020[180](index=180&type=chunk) - SG&A expenses increased by **58.5%** to **$1.9 billion**, primarily due to the **Anixter merger**, but adjusted, it was **14.2%** of net sales in 2020[181](index=181&type=chunk) - Interest expense, net, increased by **244.8%** to **$226.6 million** in 2020, driven by financing activities for the **Anixter merger**[189](index=189&type=chunk) Net Sales by Segment (2020 vs 2019) | Segment | 2020 (in thousands) | 2019 (in thousands) | Growth (Decline) | | :------ | :------------------ | :------------------ | :--------------- | | EES | $5,479,760 | $4,860,541 | 12.7% | | CSS | $3,323,264 | $909,496 | 265.4% | | UBS | $3,522,971 | $2,588,880 | 36.1% | | **Total Net Sales** | **$12,325,995** | **$8,358,917** | **47.5%** | Income from Operations by Segment (2020 vs 2019) | Segment | 2020 (in thousands) | 2019 (in thousands) | | :------ | :------------------ | :------------------ | | EES | $260,207 | $261,788 | | CSS | $217,163 | $43,835 | | UBS | $231,702 | $184,931 | | Corporate | $(362,034) | $(144,337) | | **Total** | **$347,038** | **$346,217** | Net Income and EPS (2020 vs 2019) | Metric | 2020 | 2019 | | :----- | :--- | :--- | | Net income attributable to common stockholders | $70.4 million | $223.4 million | | Diluted EPS | $1.51 | $5.14 | | Adjusted Net income attributable to common stockholders | $203.6 million | $225.9 million | | Adjusted Diluted EPS | $4.37 | $5.20 | Adjusted EBITDA and Margin by Segment (2020 vs 2019) | Segment | 2020 Adjusted EBITDA (in thousands) | 2020 Margin (%) | 2019 Adjusted EBITDA (in thousands) | 2019 Margin (%) | | :------ | :---------------------------------- | :-------------- | :---------------------------------- | :-------------- | | EES | $294,929 | 5.4% | $291,473 | 6.0% | | CSS | $289,621 | 8.7% | $51,067 | 5.6% | | UBS | $264,555 | 7.5% | $198,745 | 7.7% | | **Total Adjusted EBITDA** | **$660,317** | **5.4%** | **$430,516** | **5.2%** | [2019 Compared to 2018](index=32&type=section&id=2019%20Compared%20to%202018) - Total net sales increased by **2.2%** in 2019, driven by growth in **CSS** and **UBS** segments, while **EES** saw a moderate decline[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Cost of goods sold as a percentage of net sales increased slightly to **81.1%** in 2019 from **80.8%** in 2018, negatively impacted by a challenging pricing environment[201](index=201&type=chunk) - SG&A expenses increased by **1.8%** in 2019, but improved as a percentage of net sales to **14.0%** from **14.1%**, reflecting the impact of the SLS acquisition and merger-related costs[202](index=202&type=chunk) - Net income decreased by **1.4%** to **$222.2 million** in 2019, while diluted EPS increased to **$5.14** from **$4.82**, partly due to fewer diluted shares outstanding[211](index=211&type=chunk)[212](index=212&type=chunk) Net Sales by Segment (2019 vs 2018) | Segment | 2019 (in thousands) | 2018 (in thousands) | Growth (Decline) | | :------ | :------------------ | :------------------ | :--------------- | | EES | $4,860,541 | $4,878,836 | (0.4)% | | CSS | $909,496 | $857,481 | 6.1% | | UBS | $2,588,880 | $2,440,284 | 6.1% | | **Total Net Sales** | **$8,358,917** | **$8,176,601** | **2.2%** | Income from Operations by Segment (2019 vs 2018) | Segment | 2019 (in thousands) | 2018 (in thousands) | | :------ | :------------------ | :------------------ | | EES | $261,788 | $289,065 | | CSS | $43,835 | $34,592 | | UBS | $184,931 | $165,149 | | Corporate | $(144,337) | $(136,366) | | **Total** | **$346,217** | **$352,440** | Adjusted EBITDA and Margin by Segment (2019 vs 2018) | Segment | 2019 Adjusted EBITDA (in thousands) | 2019 Margin (%) | 2018 Adjusted EBITDA (in thousands) | 2018 Margin (%) | | :------ | :---------------------------------- | :-------------- | :---------------------------------- | :-------------- | | EES | $291,473 | 6.0% | $319,868 | 6.6% | | CSS | $51,067 | 5.6% | $42,121 | 4.9% | | UBS | $198,745 | 7.7% | $178,947 | 7.3% | | **Total Adjusted EBITDA** | **$430,516** | **5.2%** | **$431,882** | **5.3%** | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - As of December 31, 2020, WESCO had **$1.1 billion** in total liquidity, comprising **$801.5 million** from the Revolving Credit Facility, **$75.0 million** from the Receivables Facility, and **$259.5 million** in cash[219](index=219&type=chunk) - The company's financial leverage ratio was **5.3** on a pro forma basis as of **December 31, 2020**, compared to **2.7** as reported at **December 31, 2019**[223](index=223&type=chunk)[225](index=225&type=chunk) - Approximately **75%** of WESCO's debt portfolio was fixed-rate debt at **December 31, 2020**[219](index=219&type=chunk) - Undistributed foreign earnings amounted to **$1,835.0 million** at **December 31, 2020**, with an estimated **$75.0 million** in additional taxes payable upon remittance[226](index=226&type=chunk)[491](index=491&type=chunk) Total Assets, Liabilities, and Equity (2020 vs 2019) | Metric (in millions) | Dec 31, 2020 | Dec 31, 2019 | | :------------------- | :----------- | :----------- | | Total assets | $11,880.2 | $5,017.6 | | Total liabilities | $8,543.8 | $2,759.0 | | Total stockholders' equity | $3,336.4 | $2,258.7 | Outstanding Indebtedness (as of Dec 31, 2020) | Debt Type | Amount (in millions) | | :-------- | :------------------- | | International lines of credit | $29.6 | | Accounts Receivable Securitization Facility | $950.0 | | Revolving Credit Facility | $250.0 | | 5.375% Senior Notes due 2021 | $500.0 | | 5.50% Senior Notes due 2023 | $58.6 | | 5.375% Senior Notes due 2024 | $350.0 | | 6.00% Senior Notes due 2025 | $4.2 | | 7.125% Senior Notes due 2025 | $1,500.0 | | 7.250% Senior Notes due 2028 | $1,315.7 | | Finance lease obligations | $17.9 | | **Total Debt** | **$4,976.0** | Required Annual Principal Repayments on Debt (as of Dec 31, 2020) | Year | Amount (in millions) | | :--- | :------------------- | | 2021 | $529.9 | | 2022 | $4.1 | | 2023 | $1,016.3 | | 2024 | $352.2 | | 2025 | $1,756.1 | | Thereafter | $1,326.7 | | **Total Payments on Debt** | **$4,985.3** | [Contractual Cash Obligations and Other Commercial Commitments](index=44&type=section&id=Contractual%20Cash%20Obligations%20and%20Other%20Commercial%20Commitments) - Liabilities for unrecognized tax benefits (**$75.1 million**) are excluded due to inability to reasonably estimate timing of cash settlements[272](index=272&type=chunk) Contractual Cash Obligations (as of Dec 31, 2020) | Obligation (in millions) | 2021 | 2022 to 2023 | 2024 to 2025 | 2026 - After | Total | | :----------------------- | :--- | :----------- | :----------- | :----------- | :---- | | Debt, excluding discount/issuance costs | $529.9 | $1,020.4 | $2,108.2 | $1,326.8 | $4,985.3 | | Interest on indebtedness | $246.4 | $479.9 | $368.3 | $240.2 | $1,334.7 | | Non-cancelable operating leases | $155.1 | $228.6 | $119.6 | $124.1 | $627.4 | | Transition tax installments | $2.6 | $8.7 | $38.3 | $13.7 | $63.3 | | Deferred compensation liability | $55.2 | $17.3 | $0.0 | $0.0 | $72.5 | | Pension plans | $29.5 | $0.0 | $0.0 | $0.0 | $29.5 | | **Total** | **$1,018.6** | **$1,754.9** | **$2,634.4** | **$1,704.8** | **$7,112.7** | [Inflation](index=44&type=section&id=Inflation) - Inflation, as measured by changes in the producer price index, did **not have a material impact** on sales for the year ended December 31, 2020[273](index=273&type=chunk) [Seasonality](index=44&type=section&id=Seasonality) - Operating results are **not significantly affected** by seasonal factors, though sales typically increase from March through October[274](index=274&type=chunk) [Impact of Recently Issued Accounting Standards](index=44&type=section&id=Impact%20of%20Recently%20Issued%20Accounting%20Standards) - The company adopted **ASU 2016-02 (Leases)** effective **January 1, 2019**, which did **not materially impact** income or cash flows, and other ASUs adopted in 2020 also had **no material impact** and are **not expected to have a material impact** in the future[275](index=275&type=chunk)[374](index=374&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk) [Guarantor Financial Statements](index=44&type=section&id=Guarantor%20Financial%20Statements) - WESCO Distribution's 2021 and 2024 Senior Notes are **fully and unconditionally guaranteed** by WESCO International and Anixter Inc[277](index=277&type=chunk) - The Notes are **effectively subordinated** to secured obligations and **structurally subordinated** to liabilities of non-Guarantor Subsidiaries[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) Summarized Balance Sheets (Guarantors, in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :----- | :----------- | :----------- | | Total current assets | $2,537,705 | $1,047,087 | | Total assets | $5,905,952 | $1,531,639 | | Total current liabilities | $3,868,448 | $3,578,401 | | Total liabilities | $8,038,087 | $4,645,887 | Summarized Statement of Income (Loss) (Guarantors, in thousands) | Metric | Year ended Dec 31, 2020 | | :----- | :---------------------- | | Net sales | $4,888,110 | | Gross profit | $901,992 | | Net loss | $(132,331) | [Item 7A. Quantitative and Qualitative Disclosures About Market Risks](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) WESCO faces foreign currency and interest rate risks, with 25% of sales from foreign subsidiaries and 75% fixed-rate debt - Approximately **25%** of WESCO's 2020 sales were from foreign subsidiaries, exposing the company to foreign currency fluctuations[288](index=288&type=chunk) - WESCO uses foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts, with approximately **$111.9 million** outstanding at **December 31, 2020**[290](index=290&type=chunk) - As of **December 31, 2020**, approximately **75%** of WESCO's debt portfolio was comprised of fixed-rate debt[291](index=291&type=chunk) - A **100 basis point change** in interest rates is **not expected to significantly impact** future earnings from floating-rate borrowings[292](index=292&type=chunk) - A **50-basis-point decline** in the assumed discount rate for pension plans would increase 2021 expense by approximately **$1.0 million** and PBO by **$80.0 million**[293](index=293&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=48&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents WESCO's audited consolidated financial statements for 2018-2020, including PwC's report and detailed notes - PricewaterhouseCoopers LLP provided an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of **December 31, 2020**[299](index=299&type=chunk)[300](index=300&type=chunk) - Anixter Inc. was **excluded** from management's assessment and PwC's audit of internal control over financial reporting, representing **30%** of consolidated total assets and **37%** of consolidated net sales for 2020[305](index=305&type=chunk) - **Critical audit matters** included interim **goodwill impairment** assessments and **customer relationship intangible assets** recognized in connection with the **Anixter acquisition**, both involving significant judgment[310](index=310&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk)[315](index=315&type=chunk) Consolidated Balance Sheets (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :----- | :----------- | :----------- | | Cash and cash equivalents | $449,135 | $150,902 | | Total current assets | $5,506,978 | $2,540,411 | | Property, buildings and equipment, net | $399,157 | $181,448 | | Operating lease assets | $534,705 | $235,834 | | Intangible assets, net | $2,065,495 | $287,275 | | Goodwill | $3,187,169 | $1,759,040 | | Total assets | $11,880,214 | $5,017,635 | | Accounts payable | $1,707,329 | $830,478 | | Total current liabilities | $2,986,995 | $1,084,059 | | Long-term debt, net | $4,369,953 | $1,257,067 | | Operating lease liabilities | $414,889 | $179,830 | | Total liabilities | $8,543,825 | $2,758,964 | | Total stockholders' equity | $3,336,389 | $2,258,671 | Consolidated Statements of Income and Comprehensive Income (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | | :----- | :--- | :--- | :--- | | Net sales | $12,325,995 | $8,358,917 | $8,176,601 | | Cost of goods sold | $9,998,329 | $6,777,456 | $6,609,220 | | SG&A expenses | $1,859,028 | $1,173,137 | $1,151,944 | | Income from operations | $347,038 | $346,217 | $352,440 | | Interest expense, net | $226,591 | $65,710 | $68,661 | | Net income attributable to WESCO International, Inc. | $100,560 | $223,426 | $227,343 | | Net income attributable to common stockholders | $70,421 | $223,426 | $227,343 | | Diluted EPS | $1.51 | $5.14 | $4.82 | Consolidated Statements of Cash Flows (in thousands) | Metric | 2020 | 2019 | 2018 | | :----- | :--- | :--- | :--- | | Net cash provided by operating activities | $543,931 | $224,367 | $296,721 | | Net cash used in investing activities | $(3,735,149) | $(60,800) | $(34,142) | | Net cash provided by (used in) financing activities | $3,480,741 | $(109,766) | $(275,094) | | Cash and cash equivalents at end of period | $449,135 | $150,902 | $96,343 | PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=97&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance.) Information on Directors, Executive Officers, and Corporate Governance is incorporated by reference from the 2021 Proxy Statement - Information on Directors, Executive Officers, and Corporate Governance is **incorporated by reference** from the 2021 Proxy Statement[589](index=589&type=chunk)[593](index=593&type=chunk) - WESCO has adopted a **Code of Business Ethics and Conduct** and a **Senior Financial Executive Code of Principles**, both available on its website[590](index=590&type=chunk)[591](index=591&type=chunk) [Item 11. Executive Compensation](index=97&type=section&id=Item%2011.%20Executive%20Compensation.) Executive compensation details are incorporated by reference from the 2021 Proxy Statement - Executive compensation details are **incorporated by reference** from the 2021 Proxy Statement[594](index=594&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=97&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) Security ownership information is incorporated by reference from the 2021 Proxy Statement, detailing equity compensation plan issuances - Security ownership information is **incorporated by reference** from the 2021 Proxy Statement[595](index=595&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :------------ | :--------------------------------------------------------------------------------------- | :----------------------------------------------------------------------- | :------------------------------------------------------------------------ | | Approved by security holders | 3,388,320 | $38.59 | 1,103,977 | | Not approved by security holders | 0 | $0.00 | 0 | | **Total** | **3,388,320** | **$38.59** | **1,103,977** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=97&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence.) Details on related party transactions and director independence are incorporated by reference from the 2021 Proxy Statement - Details on related party transactions and director independence are **incorporated by reference** from the 2021 Proxy Statement[596](index=596&type=chunk) [Item 14. Principal Accountant Fees and Services](index=97&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services.) Information on principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement - Information on principal accountant fees and services is **incorporated by reference** from the 2021 Proxy Statement[597](index=597&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedule](index=98&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule.) This section lists financial statements, Schedule II, and a comprehensive list of exhibits, including key legal and financial agreements - The financial statements required by Item 8 are **incorporated by reference**[600](index=600&type=chunk) - **Schedule II – Valuation and Qualifying Accounts** is included, detailing changes in allowance for expected credit losses and deferred tax assets[601](index=601&type=chunk)[613](index=613&type=chunk) - A **comprehensive list of exhibits** is provided, including key legal and financial agreements such as the **Anixter merger agreement**, various debt indentures, and credit facilities[601](index=601&type=chunk)[602](index=602&type=chunk)[604](index=604&type=chunk)[606](index=606&type=chunk)[608](index=608&type=chunk)[610](index=610&type=chunk) [Item 16. Form 10-K Summary](index=105&type=section&id=Item%2016.%20Form%2010-K%20Summary.) This item is not applicable to WESCO International, Inc.'s annual report - Not applicable[615](index=615&type=chunk)

Financial Data and Key Metrics Changes - In 2020, WESCO generated $586 million in free cash flow, which was more than 250% of adjusted net income, enabling a reduction in net debt by almost $400 million [23][31][33] - Adjusted gross margin was 19.6%, consistent with the prior quarter and up 10 basis points year-over-year [38] - Adjusted income from operations was $172 million in Q4, reflecting a decrease of $28 million from Q3 primarily due to increased SG&A costs [40][41] Business Line Data and Key Metrics Changes - Electrical and Electronic Systems (EES) segment sales were up 1% versus Q3 and up 6% on a comparable workday basis, driven by improving construction demand [48] - Communications and Security Solutions (CSS) segment sales were down 1% on a reported basis but up 3% on a comparable workday basis, benefiting from increased bandwidth needs [51] - Utility and Broadband Solutions (UBS) segment sales were slightly down versus Q3 but up 4% on a comparable workday basis, supported by strong utility demand [55] Market Data and Key Metrics Changes - The company expects market growth of roughly 3% to 5% in 2021, with potential sales growth of 3% to 6% overall [58][60] - The impact of divested businesses is expected to be a headwind of approximately 1% [60] - The company anticipates that foreign exchange rates will be neutral to slightly favorable for the full year [60] Company Strategy and Development Direction - The integration with Anixter is progressing well, with synergy capture exceeding expectations, raising the three-year post-merger cost synergy target from $200 million to $250 million [13][30] - The company aims to capitalize on secular growth trends in automation, electrification, and data center capacity, positioning itself as an industry leader [18][68] - WESCO plans to focus on cross-selling opportunities across its three strategic business units to drive growth [14][67] Management's Comments on Operating Environment and Future Outlook - Management expressed high confidence in the company's ability to deliver sustainable long-term value creation, despite the ongoing challenges posed by COVID-19 [25][66] - The company is optimistic about the economic recovery and expects demand to improve as vaccinations progress [58][66] - Management highlighted the importance of maintaining a strong cash flow generation model, especially during economic downturns [31][33] Other Important Information - The company completed a debt refinancing that reduces interest expense by $20 million per year, enhancing cash flow [24] - Liquidity at the end of Q4 was exceptionally strong at $1.1 billion, following an increase in bank credit facilities [35] Q&A Session Summary Question: Regarding the restoration of costs in fiscal '21 - Management clarified that the $150 million in resumed costs includes $50 million related to COVID and $100 million for incentive compensation, which was a surprise in scale [74][76] Question: On synergy recognition in Q1 - Management indicated that the expected benefits in Q1 will primarily come from SG&A, with limited cost of goods synergies anticipated in the first half of 2021 [78][80] Question: Impact of COVID-related cost actions on segments - Management noted that the electrical segment was disproportionately affected by the restoration of COVID-related costs, impacting margins [85][87] Question: Price increases due to commodity inflation - Management acknowledged the potential for passing through commodity price increases to customers but did not specifically include inflationary benefits in the 2021 outlook [95][96] Question: Expectations for adjusted EBITDA margins - Management indicated that Q4 serves as a good proxy for 2021 expectations, with Q1 typically being the lowest adjusted EBITDA margin quarter of the year [104][136] Question: Confidence in upside to sales and margins - Management confirmed high internal targets that exceed external guidance, emphasizing confidence in achieving synergy and margin expansion [144][146]

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents the company's unaudited condensed consolidated financial statements and accompanying detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) - Total Assets increased significantly from **$5.02 billion** at December 31, 2019, to **$11.87 billion** at September 30, 2020, primarily due to the Anixter acquisition[14](index=14&type=chunk) - Total Liabilities increased from **$2.76 billion** at December 31, 2019, to **$8.66 billion** at September 30, 2020, also driven by the Anixter merger and related financing[14](index=14&type=chunk) Key Balance Sheet Metrics | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $352,249 | $150,902 | | Trade accounts receivable, net | $2,492,248 | $1,187,359 | | Inventories | $2,357,634 | $1,011,674 | | Intangible assets, net | $2,078,468 | $287,275 | | Goodwill | $3,118,818 | $1,759,040 | | Accounts payable | $1,830,877 | $830,478 | | Long-term debt, net | $4,878,124 | $1,257,067 | | Total assets | $11,868,339 | $5,017,635 | | Total liabilities | $8,655,115 | $2,758,964 | | Total stockholders' equity | $3,213,224 | $2,258,671 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20(unaudited)) - Net Sales for the three months ended September 30, 2020, increased by **92.8%** year-over-year to **$4.14 billion**, while for the nine months, it increased by **31.0%** to **$8.20 billion**[15](index=15&type=chunk) - Net Income Attributable to Common Stockholders for the three months ended September 30, 2020, increased to **$66.2 million**, but for the nine months, it decreased to **$64.8 million**[15](index=15&type=chunk) Key Income Statement Metrics | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $4,141,801 | $2,148,110 | $8,197,154 | $6,259,465 | | Income from operations | $178,095 | $93,733 | $254,278 | $262,409 | | Interest expense, net | $74,540 | $14,306 | $152,281 | $49,293 | | Net income attributable to common stockholders | $66,167 | $64,495 | $64,791 | $170,329 | | Basic EPS | $1.32 | $1.53 | $1.44 | $3.91 | | Diluted EPS | $1.31 | $1.52 | $1.44 | $3.88 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) - Net cash provided by operating activities for the nine months ended September 30, 2020, significantly increased to **$418.9 million** from **$116.7 million** in the prior year[18](index=18&type=chunk) - Net cash used in investing activities for the nine months ended September 30, 2020, increased substantially to **$3.72 billion**, primarily due to the Anixter acquisition[18](index=18&type=chunk) Key Cash Flow Metrics | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $418,938 | $116,664 | | Net cash used in investing activities | $(3,723,897) | $(53,490) | | Net cash provided by (used in) financing activities | $3,507,320 | $(18,082) | | Net change in cash and cash equivalents | $201,347 | $41,817 | | Cash and cash equivalents at end of period | $352,249 | $138,160 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(unaudited)) - Total Stockholders' Equity increased from **$2.26 billion** at December 31, 2019, to **$3.21 billion** at September 30, 2020[14](index=14&type=chunk) - Common Stock Shares Issued increased from **59.3 million** at December 31, 2019, to **67.6 million** at September 30, 2020, partly due to the Anixter merger[14](index=14&type=chunk)[20](index=20&type=chunk) - Additional Capital increased from **$1.04 billion** at December 31, 2019, to **$1.94 billion** at September 30, 2020[14](index=14&type=chunk)[20](index=20&type=chunk) - Preferred stock dividends of **$15.8 million** were recorded for the nine months ended September 30, 2020, which were not present in the prior year[15](index=15&type=chunk)[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide detailed disclosures for the financial statements, covering accounting policies, acquisitions, revenue, debt, and segment reporting [1. Organization](index=11&type=section&id=1.%20ORGANIZATION) - WESCO International, Inc is a leading provider of business-to-business distribution, logistics services, and supply chain solutions[25](index=25&type=chunk) - On June 22, 2020, WESCO completed the acquisition of Anixter International Inc, which now operates as a wholly-owned subsidiary[26](index=26&type=chunk) [2. Accounting Policies](index=11&type=section&id=2.%20ACCOUNTING%20POLICIES) - The unaudited condensed consolidated financial statements are prepared in accordance with Rule 10-01 of Regulation S-X and include all necessary adjustments for fair presentation[27](index=27&type=chunk)[28](index=28&type=chunk) - In Q3 2020, new operating segments (EES, CSS, UBS) were identified following the Anixter acquisition, and prior period financial information has been recast to conform to these new segments[29](index=29&type=chunk) - Recently adopted ASUs on credit losses, fair value measurement, and cloud computing implementation costs did not have a material impact on the financial statements[31](index=31&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - Recently issued ASUs on defined benefit plans, income taxes, and reference rate reform are not expected to have a material impact or are currently being evaluated[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [3. Revenue](index=12&type=section&id=3.%20REVENUE) - WESCO distributes products and services globally across Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility & Broadband Solutions (UBS) segments[39](index=39&type=chunk) - Deferred revenue increased from **$12.3 million** at December 31, 2019, to **$27.7 million** at September 30, 2020[41](index=41&type=chunk) - Variable consideration reduced revenue by **$75.4 million** for the three months ended September 30, 2020 (vs **$26.3 million** in 2019) and by **$129.0 million** for the nine months ended September 30, 2020 (vs **$80.1 million** in 2019)[42](index=42&type=chunk) Revenue by Segment | Segment | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Electrical & Electronic Solutions | $1,653,726 | $1,250,080 | $3,811,498 | $3,626,423 | | Communications & Security Solutions | $1,388,791 | $235,920 | $1,953,967 | $681,087 | | Utility & Broadband Solutions | $1,099,284 | $662,110 | $2,431,689 | $1,951,955 | | **Total by segment** | **$4,141,801** | **$2,148,110** | **$8,197,154** | **$6,259,465** | Revenue by Geography | Geography | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $3,033,101 | $1,601,962 | $6,100,877 | $4,679,251 | | Canada | $582,700 | $431,233 | $1,311,724 | $1,230,855 | | Other International | $526,000 | $114,915 | $784,553 | $349,359 | | **Total by geography** | **$4,141,801** | **$2,148,110** | **$8,197,154** | **$6,259,465** | [4. Acquisitions](index=13&type=section&id=4.%20ACQUISITIONS) - WESCO completed the acquisition of Anixter International Inc on June 22, 2020, with a total preliminary estimated fair value of consideration transferred of **$4.70 billion**[44](index=44&type=chunk)[48](index=48&type=chunk) - The acquisition was financed through senior unsecured notes, revolving credit facility borrowings, accounts receivable securitization, and cash on hand[44](index=44&type=chunk) - Anixter's results are included in the consolidated financial statements from June 22, 2020, contributing **$2.2 billion** in net sales and **$80.0 million** in income from operations for the three months ended September 30, 2020[54](index=54&type=chunk) - WESCO is required to divest its legacy Utility and Datacom businesses in Canada (less than **$150 million** in 2019 sales) due to a Consent Agreement with the Competition Bureau of Canada[56](index=56&type=chunk) Anixter Purchase Consideration | Category | Amount (in thousands) | | :------------------------------------------------ | :-------------------- | | Cash portion attributable to common stock outstanding | $2,476,010 | | Cash portion attributable to options and restricted stock units outstanding | $87,375 | | Common stock consideration | $313,512 | | Series A preferred stock consideration | $573,786 | | Extinguishment of Anixter obligations | $1,247,653 | | **Total purchase consideration** | **$4,698,336** | [5. Goodwill and Intangible Assets](index=17&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) - Goodwill increased from **$1.76 billion** at January 1, 2020, to **$3.12 billion** at September 30, 2020, primarily due to the Anixter acquisition (**$1.37 billion**)[59](index=59&type=chunk) - An interim impairment test for goodwill and indefinite-lived intangible assets as of March 31, 2020, found **no impairment losses** despite macroeconomic disruption and a decline in share price[59](index=59&type=chunk) - The EES reporting unit, with **$809.9 million** in goodwill, had an estimated fair value exceeding its carrying value by **less than 10%**, indicating a lower margin of safety[61](index=61&type=chunk) - Amortization expense related to intangible assets totaled **$27.3 million** for the three months ended September 30, 2020 (vs **$8.6 million** in 2019) and **$45.9 million** for the nine months ended September 30, 2020 (vs **$25.7 million** in 2019)[64](index=64&type=chunk) Anixter Identifiable Intangible Assets | Identifiable Intangible Assets | Estimated Fair Value (in thousands) | Weighted-Average Estimated Useful Life (in Years) | | :---------------------- | :-------------------------------- | :---------------------------------------------- | | Customer relationships | $1,098,900 | 16 | | Trademarks | $735,000 | Indefinite | | Non-compete agreements | $4,165 | 1 | | **Total** | **$1,838,065** | | [6. Stock-Based Compensation](index=18&type=section&id=6.%20STOCK-BASED%20COMPENSATION) - WESCO's stock-based compensation plans include stock-settled stock appreciation rights, restricted stock units, and performance-based awards, measured at fair value on the grant date[66](index=66&type=chunk) - A special award of restricted stock units was granted to certain officers on July 2, 2020, vesting in tranches over a three-year period[68](index=68&type=chunk) - Non-cash stock-based compensation expense was **$6.0 million** for Q3 2020 (vs **$4.4 million** in 2019) and **$15.5 million** for 9M 2020 (vs **$14.2 million** in 2019)[73](index=73&type=chunk) - As of September 30, 2020, there was **$39.8 million** of unrecognized compensation cost related to non-vested stock-based compensation arrangements, expected to be recognized through 2023[73](index=73&type=chunk) Stock-Based Awards Granted | Award Type | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Stock-settled stock appreciation rights granted | 262,091 (Wtd-Avg FV: $13.86) | 213,618 (Wtd-Avg FV: $16.36) | | Restricted stock units granted | 655,825 (Wtd-Avg FV: $37.38) | 181,800 (Wtd-Avg FV: $54.41) | | Performance-based awards granted | 158,756 (Wtd-Avg FV: $48.67) | 126,874 (Wtd-Avg FV: $54.64) | [7. Earnings Per Share](index=20&type=section&id=7.%20EARNINGS%20PER%20SHARE) - Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding, while diluted EPS includes common share equivalents[74](index=74&type=chunk) - Approximately **2.0 million** (Q3 2020) and **3.0 million** (9M 2020) stock-based awards were excluded from diluted EPS calculation due to their antidilutive effect[75](index=75&type=chunk) - The Board authorized up to **$400 million** in common stock repurchases through December 31, 2020; **3,455,584 shares** were repurchased in the first nine months of 2019[76](index=76&type=chunk) EPS Calculation | Metric | 3 Months Ended Sep 30, 2020 (in thousands, except per share data) | 3 Months Ended Sep 30, 2019 (in thousands, except per share data) | 9 Months Ended Sep 30, 2020 (in thousands, except per share data) | 9 Months Ended Sep 30, 2019 (in thousands, except per share data) | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income attributable to common stockholders | $66,167 | $64,495 | $64,791 | $170,329 | | Weighted-average common shares outstanding (basic) | 50,043 | 42,100 | 44,873 | 43,545 | | Diluted EPS | $1.31 | $1.52 | $1.44 | $3.88 | [8. Debt](index=22&type=section&id=8.%20DEBT) - Total debt increased significantly from **$1.29 billion** at December 31, 2019, to **$4.99 billion** at September 30, 2020, primarily due to financing for the Anixter merger[79](index=79&type=chunk)[94](index=94&type=chunk) - The Accounts Receivable Securitization Facility was amended on June 22, 2020, increasing the purchase limit from **$600 million** to **$1.025 billion** and extending the term to June 22, 2023[80](index=80&type=chunk)[81](index=81&type=chunk) - A new **$1.1 billion** Revolving Credit Facility was entered into on June 22, 2020, replacing the existing one, maturing in June 2025[83](index=83&type=chunk)[84](index=84&type=chunk) - WESCO Distribution issued **$1.5 billion** of 7.125% Senior Notes due 2025 and **$1.325 billion** of 7.250% Senior Notes due 2028 on June 12, 2020, to finance the Anixter merger[91](index=91&type=chunk)[94](index=94&type=chunk) Debt Composition | Debt Type | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :------------------------------------------------ | :----------- | :----------- | | International lines of credit | $29,787 | $26,255 | | Accounts Receivable Securitization Facility | $890,000 | $415,000 | | Revolving Credit Facility | $325,000 | $0 | | 5.375% Senior Notes due 2021 | $500,000 | $500,000 | | 5.50% Senior Notes due 2023 | $58,636 | $0 | | 5.375% Senior Notes due 2024 | $350,000 | $350,000 | | 6.00% Senior Notes due 2025 | $4,173 | $0 | | 7.125% Senior Notes due 2025 | $1,500,000 | $0 | | 7.250% Senior Notes due 2028 | $1,315,357 | $0 | | Finance lease obligations | $14,891 | $1,373 | | **Total debt** | **$4,987,844** | **$1,292,628** | [9. Stockholders' Equity](index=24&type=section&id=9.%20STOCKHOLDERS'%20EQUITY) - The Board authorized **25,000 shares** of Series A Fixed-Rate Reset Cumulative Perpetual Preferred Stock, with a liquidation preference of **$25,000 per share**[99](index=99&type=chunk) - In connection with the Anixter merger, **21,611,534 depositary shares** (representing approximately 21,612 Series A Preferred Stock shares) were issued[100](index=100&type=chunk) - Holders of Series A Preferred Stock are entitled to cumulative cash dividends at an initial rate of **10.625% per annum**[100](index=100&type=chunk) - A stockholder rights plan was adopted on July 17, 2020, imposing a penalty on any person or group acquiring **10% or more** (**15% for passive investors**) of outstanding WESCO Common Stock without Board approval, expiring July 16, 2021[105](index=105&type=chunk) [10. Pension Plans, Post-Retirement Benefits and Other Benefits](index=25&type=section&id=10.%20PENSION%20PLANS%2C%20POST-RETIREMENT%20BENEFITS%20AND%20OTHER%20BENEFITS) - WESCO sponsors defined contribution plans for U.S and Canadian employees; employer matching contributions were suspended between April 16, 2020, and September 30, 2020, due to the COVID-19 pandemic[106](index=106&type=chunk)[107](index=107&type=chunk) - Anixter Inc also sponsors defined contribution plans, including the Anixter Employee Savings Plan, with employer matches and annual contributions[108](index=108&type=chunk) - WESCO and Anixter Inc sponsor deferred compensation plans for select employees, allowing pre-tax deferrals of salary and bonus[109](index=109&type=chunk)[110](index=110&type=chunk) - Net periodic benefit cost for defined benefit plans was **$2.022 million** for the nine months ended September 30, 2020, compared to **$2.401 million** in 2019[115](index=115&type=chunk) - Anixter restricted stock units were converted into cash-only settled WESCO phantom stock units post-merger, with an estimated fair value of **$13.4 million** as of September 30, 2020[117](index=117&type=chunk) [11. Fair Value of Financial Instruments](index=27&type=section&id=11.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) - The estimated fair value of WESCO's fixed-interest rate debt was **$4.02 billion** at September 30, 2020 (carrying value **$3.73 billion**), compared to **$866.2 million** at December 31, 2019 (carrying value **$850.0 million**)[119](index=119&type=chunk) - WESCO uses foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts, with gross and net notional amounts of approximately **$104.8 million** at September 30, 2020[120](index=120&type=chunk)[121](index=121&type=chunk) [12. Commitments and Contingencies](index=27&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company is subject to various lawsuits and claims, but management does not believe the ultimate outcome will have a material adverse effect on financial condition or liquidity[122](index=122&type=chunk) - WESCO has provided a standby letter of credit of up to **$7.3 million** as security for WESTEC Supplies General Trading's debt facilities; WESTEC had **$6.0 million** outstanding indebtedness at September 30, 2020[123](index=123&type=chunk) [13. Income Taxes](index=28&type=section&id=13.%20INCOME%20TAXES) - The effective tax rate for the three months ended September 30, 2020, was **23.3%** (vs 19.8% in 2019), and for the nine months ended September 30, 2020, was **22.9%** (vs 21.0% in 2019), with the increase primarily due to Anixter acquisition expenses[124](index=124&type=chunk) - Preliminary adjustments related to the Anixter acquisition included **$30.0 million** in uncertain tax positions and a **$59.4 million** foreign tax credit carryforward with a **$41.4 million** related valuation allowance[125](index=125&type=chunk) [14. Business Segments](index=28&type=section&id=14.%20BUSINESS%20SEGMENTS) - Following the Anixter merger, WESCO reorganized into three reportable segments: Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility & Broadband Solutions (UBS)[126](index=126&type=chunk) Net Sales by Segment | Segment | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | EES | $1,653,726 | $1,250,080 | $3,811,498 | $3,626,423 | | CSS | $1,388,791 | $235,920 | $1,953,967 | $681,087 | | UBS | $1,099,284 | $662,110 | $2,431,689 | $1,951,955 | | **Total** | **$4,141,801** | **$2,148,110** | **$8,197,154** | **$6,259,465** | Income from Operations by Segment | Segment | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | EES | $105,508 | $72,007 | $194,643 | $198,774 | | CSS | $89,634 | $10,555 | $127,502 | $32,501 | | UBS | $74,092 | $43,811 | $167,651 | $134,431 | | Corporate | $(91,139) | $(32,640) | $(235,518) | $(103,297) | | **Total** | **$178,095** | **$93,733** | **$254,278** | **$262,409** | Total Assets by Segment | Segment | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------------- | :----------- | :----------- | | EES | $3,838,242 | $2,523,481 | | CSS | $4,592,463 | $610,046 | | UBS | $2,990,621 | $1,747,809 | | Corporate | $447,013 | $136,299 | | **Total** | **$11,868,339** | **$5,017,635** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses financial performance, highlighting the impact of the Anixter acquisition and the COVID-19 pandemic [Company Overview](index=30&type=section&id=Company%20Overview) - WESCO completed the acquisition of Anixter International Inc on June 22, 2020, significantly expanding its operations[137](index=137&type=chunk) - The combined company now employs over **18,000 people**, serves over **150,000 customers** globally, and offers nearly **1,500,000 products**[138](index=138&type=chunk) - New operating segments (EES, CSS, UBS) were established in Q3 2020, and prior period financials were recast to conform to these new segments[139](index=139&type=chunk) - The COVID-19 pandemic negatively impacted business conditions, leading to cost reduction actions, but was offset by the Anixter merger[145](index=145&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - WESCO adopted ASU 2016-13 (Credit Losses), ASU 2018-13 (Fair Value Measurement), and ASU 2018-15 (Internal-Use Software) in Q1 2020, none of which had a material impact[153](index=153&type=chunk)[154](index=154&type=chunk) - Refer to Note 2 of the Notes to the unaudited Condensed Consolidated Financial Statements for information regarding significant accounting policies[154](index=154&type=chunk) [Results of Operations - Three Months Ended September 30, 2020 versus 2019](index=32&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030%2C%202020%20versus%202019) - Net sales increased by **92.8%** to **$4.14 billion**, primarily due to the Anixter merger, partially offset by weakened demand from the COVID-19 pandemic[157](index=157&type=chunk) - Segment Net Sales Growth (YoY): **EES +32.3%**, **CSS +488.7%**, **UBS +66.0%**[158](index=158&type=chunk) - Income from operations increased to **$178.1 million** from **$93.7 million**, while diluted EPS decreased to **$1.31** from **$1.52**; Adjusted diluted EPS was **$1.66**[165](index=165&type=chunk)[171](index=171&type=chunk)[176](index=176&type=chunk) Adjusted EBITDA by Segment | Segment | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | EES Adjusted EBITDA | $107,939 (6.5% margin) | $78,659 (6.3% margin) | | CSS Adjusted EBITDA | $120,520 (8.7% margin) | $12,385 (5.2% margin) | | UBS Adjusted EBITDA | $85,699 (7.8% margin) | $47,265 (7.1% margin) | | **Total Adjusted EBITDA** | **$251,951 (6.1% margin)** | **$113,771 (5.3% margin)** | [Results of Operations - Nine Months Ended September 30, 2020 versus 2019](index=38&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030%2C%202020%20versus%202019) - Net sales increased by **31.0%** to **$8.20 billion**, driven by the Anixter merger, partially offset by weakened demand from the COVID-19 pandemic[185](index=185&type=chunk) - Segment Net Sales Growth (YoY): **EES +5.1%**, **CSS +186.9%**, **UBS +24.6%**[186](index=186&type=chunk) - Income from operations decreased to **$254.3 million** from **$262.4 million**, and diluted EPS decreased to **$1.44** from **$3.88**; Adjusted diluted EPS was **$3.17**[192](index=192&type=chunk)[199](index=199&type=chunk)[202](index=202&type=chunk) Adjusted EBITDA by Segment | Segment | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | EES Adjusted EBITDA | $212,009 (5.6% margin) | $219,595 (6.1% margin) | | CSS Adjusted EBITDA | $164,293 (8.4% margin) | $38,011 (5.6% margin) | | UBS Adjusted EBITDA | $187,005 (7.7% margin) | $144,722 (7.4% margin) | | **Total Adjusted EBITDA** | **$450,461 (5.5% margin)** | **$322,685 (5.2% margin)** | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) - Total assets increased to **$11.9 billion** at September 30, 2020, from **$5.0 billion** at December 31, 2019, and total liabilities increased to **$8.7 billion** from **$2.8 billion**, primarily due to the Anixter merger[208](index=208&type=chunk) - As of September 30, 2020, WESCO had **$1.1 billion** in total liquidity, comprising **$727.5 million** in Revolving Credit Facility availability, **$135.0 million** in Receivables Facility availability, and **$212.6 million** in cash[209](index=209&type=chunk) - Debt financing for the Anixter merger included **$2.8 billion** in senior unsecured notes, a new **$1.1 billion** senior secured asset-based revolving credit facility, and an amended **$1.0 billion** accounts receivable securitization facility[210](index=210&type=chunk) - The company's financial leverage ratio (non-GAAP) was **5.3** on a pro forma basis at September 30, 2020, compared to **2.6** reported at December 31, 2019[212](index=212&type=chunk)[215](index=215&type=chunk) - Net cash generated from operations for the first nine months of 2020 totaled **$418.9 million**, compared to **$116.7 million** in 2019[223](index=223&type=chunk) [Contractual Cash Obligations and Other Commercial Commitments](index=46&type=section&id=Contractual%20Cash%20Obligations%20and%20Other%20Commercial%20Commitments) - There were no material changes in contractual obligations and other commercial commitments that would require an update to the disclosure provided in the 2019 Annual Report on Form 10-K[230](index=230&type=chunk) [Inflation and Seasonality](index=46&type=section&id=Inflation) - Inflation did not have a material impact on sales for the nine months ended September 30, 2020[231](index=231&type=chunk) - Operating results are not significantly affected by seasonal factors, though sales typically increase from March through October, with first and fourth quarters affected by weather[232](index=232&type=chunk) [Guarantor Financial Statements](index=46&type=section&id=Guarantor%20Financial%20Statements) - WESCO Distribution's 5.375% Senior Notes due 2021 (**$500 million**) and 2024 (**$350 million**) are fully and unconditionally guaranteed by WESCO International and Anixter Inc[233](index=233&type=chunk)[234](index=234&type=chunk) - The Notes and guarantees are effectively subordinated to secured obligations and structurally subordinated to liabilities of non-Guarantor Subsidiaries[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) Guarantor Condensed Consolidating Balance Sheet Information | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :-------------------------- | :----------- | :----------- | | Total current assets | $2,565,490 | $1,047,087 | | Total assets | $6,217,703 | $1,531,639 | | Total current liabilities | $3,187,697 | $3,578,401 | | Total liabilities | $8,034,135 | $4,645,887 | Guarantor Condensed Consolidating Statement of Operations Information | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | | :---------------- | :-------------------------- | | Net sales | $4,004,366 | | Gross profit | $728,675 | | Net loss | $(110,754) | [Forward-Looking Statements](index=48&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially[248](index=248&type=chunk) - Key risks include unexpected costs from the Anixter merger, integration difficulties, failure to realize anticipated benefits/synergies, higher leverage, the impact of COVID-19, and challenges in divesting Canadian businesses[249](index=249&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section refers to previous disclosures in the 2019 Annual Report and other SEC filings for a discussion of market risks - Refer to Part I, Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and Part II, Item 1A, 'Risk Factors' for changes to market risks[250](index=250&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and internal control over financial reporting were effective as of September 30, 2020 - Disclosure controls and procedures and internal control over financial reporting were **effective** as of September 30, 2020[251](index=251&type=chunk) - The company is transitioning Anixter's processes to its internal control environment and will continue integrating internal controls over financial reporting during the first year of the business combination[252](index=252&type=chunk) - No other material changes in internal control over financial reporting occurred during the quarterly period ended September 30, 2020[253](index=253&type=chunk) [PART II—OTHER INFORMATION](index=49&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in various lawsuits, the outcomes of which are not expected to have a material adverse effect - Management does not believe the ultimate outcome of pending legal matters is likely to have a **material adverse effect** on WESCO's financial condition or liquidity[256](index=256&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors.) This section highlights risks from the COVID-19 pandemic and the complexities of integrating the Anixter acquisition - The **COVID-19 pandemic** has adversely affected and will continue to affect WESCO's business, operations, and financial condition due to disruptions in supply chains, customer demand, and potential cybersecurity risks[258](index=258&type=chunk) - The duration and extent of the pandemic's impact remain uncertain, depending on factors like virus severity, governmental actions, and vaccine availability[259](index=259&type=chunk) - Difficulties in combining and integrating WESCO and Anixter's businesses may lead to loss of key employees, higher costs, and **failure to achieve anticipated benefits and cost savings**[264](index=264&type=chunk)[265](index=265&type=chunk) - WESCO is required to divest its legacy Utility and Datacom businesses in Canada, with no assurance of favorable terms or timely completion[266](index=266&type=chunk) - Operating in Anixter's international markets introduces additional risks related to foreign currency, political/regulatory conditions, and diverse legal/tax requirements[267](index=267&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL interactive data files - Includes certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[269](index=269&type=chunk) - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data File are filed as exhibits[271](index=271&type=chunk)

Financial Data and Key Metrics Changes - WESCO's third quarter results exceeded expectations across sales, costs, margins, profit, EPS, free cash flow generation, and reduced financial leverage [7][10] - Free cash flow generation was exceptional at over 300% of net income, with net debt reduced by $280 million, and financial leverage decreased to 4.8 times [10][47] - Adjusted diluted EPS for the quarter was $1.66, reflecting strong execution and disciplined cost management [40] Business Line Data and Key Metrics Changes - Electrical and Electronic Systems (EES) segment sales were down 10% year-over-year but up 13% sequentially, with a record backlog [41] - Communications and Security Solutions (CSS) segment sales were down 2% year-over-year but up 10% sequentially, indicating market share gains [43] - Utility and Broadband Solutions (UBS) segment sales were flat sequentially and down 2% year-over-year, with broadband sales up mid-single digits [45] Market Data and Key Metrics Changes - October Workday adjusted sales were down just 3% versus the prior year, with a book-to-bill ratio remaining above 1.0 [9][34] - Construction demand improved, with sales up double digits in North America, reflecting a strong market despite COVID-19 challenges [89] Company Strategy and Development Direction - The company is focused on integrating WESCO and Anixter, with increased synergy targets set at $100 million for year one, $180 million for year two, and $250 million for year three [12][32] - WESCO aims to leverage its expanded global footprint and cross-sell its broader product and services portfolio to drive incremental sales growth [13][24] - The company is evolving into a growth company, well-positioned to lead the digital transformation of its business and industry [26][100] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving significant upside potential and exceeding synergy targets, despite the challenging COVID-driven economic cycle [25][26] - The cultural alignment between WESCO and Anixter is seen as a key driver of initial success in the integration process [11][62] - Management noted that there have been no revenue dissynergies to date, and the integration has exceeded expectations in terms of workforce retention and cultural combination [102] Other Important Information - The company has transitioned to a new reporting structure with three strategic business units: EES, CSS, and UBS, each contributing significantly to overall business performance [15][30] - The company is actively working on divesting its legacy Canadian Utility and Datacom businesses, which represent less than $150 million in revenue [33] Q&A Session Summary Question: Insights on share gains in the combined go-to-market strategy - Management highlighted the complementary nature of the portfolios and the cultural match as key factors driving share gains [58][62] Question: Dynamics behind high free cash flow conversion - Management noted that accruals for expected interest payments are included in the free cash flow statement, impacting the run-rate [66] Question: Corporate overhead and potential for higher synergies - Management acknowledged opportunities for synergies in corporate overhead and indicated that integration teams are targeting higher internal goals [72][73] Question: Factors behind strong gross margin performance - Management indicated that the majority of the $15 million in synergies achieved was related to SG&A, with supply chain benefits still in early realization stages [82][83] Question: Growth in construction despite broader market challenges - Management noted record backlog and sequential sales growth in construction, driven by specific product categories and market dynamics [88][90]

Financial Performance - Net sales for the second quarter of 2020 were $2.1 billion, a decrease of 2.9% compared to $2.2 billion in the second quarter of 2019, with organic sales declining by 12.3%[147] - The merger with Anixter contributed positively to net sales by 10.3% during the second quarter of 2020[149] - Net loss for the second quarter of 2020 was $35.8 million, resulting in a loss per diluted share of $0.84, compared to net income of $63.5 million and earnings per diluted share of $1.45 in the same quarter of 2019[157] - Net sales for the first six months of 2020 were $4.1 billion, a decrease of 1.4% compared to the same period in 2019, with organic sales declining by 7.3%[163] - The merger with Anixter positively impacted net sales by 5.6% during the first six months of 2020[165] - Adjusted net income attributable to common stockholders for the six months ended June 30, 2020, was $95.6 million, compared to $106.0 million for the same period in 2019, reflecting a decrease of approximately 10.3%[175] Expenses and Costs - Cost of goods sold as a percentage of net sales was 81.1% for the second quarter of 2020, compared to 81.0% for the same period in 2019[150] - SG&A expenses for the second quarter of 2020 totaled $359.8 million, representing 17.2% of net sales, up from 13.8% in the second quarter of 2019[151] - Adjusted for merger-related transaction costs, SG&A expenses were $286.4 million, or 13.7% of net sales, for the second quarter of 2020[151] - SG&A expenses for the first six months of 2020 totaled $659.1 million, or 16.3% of net sales, up from $592.4 million and 14.4% in the same period of 2019[167] - Net interest and other expenses for the first six months of 2020 were $77.1 million, including $45.3 million of merger-related financing and interest costs[170] Cash Flow and Liquidity - Operating cash flow generated for the first six months of 2020 was $132.7 million[141] - Cash generated from operations for the first six months of 2020 was $132.7 million, a turnaround from a cash usage of $8.8 million in the first half of 2019[195] - The company had $584.8 million in available borrowing capacity under its Revolving Credit Facility and $65.0 million under its Receivables Facility, totaling liquidity of $818.5 million as of June 30, 2020[181] - The company anticipates maintaining sufficient liquidity through credit facilities and cash balances for at least the next twelve months[181] Assets and Liabilities - Total assets increased to $11.7 billion as of June 30, 2020, from $5.0 billion at December 31, 2019, while total liabilities rose to $8.6 billion from $2.8 billion in the same period[180] - Current liabilities increased to $3,013.4 million as of June 30, 2020, compared to $3,578.4 million at the end of 2019[217] Mergers and Acquisitions - The company incurred $3,708.3 million in investing activities to fund the merger with Anixter[141] - The company incurred merger-related transaction costs of $78.0 million and financing costs of $45.3 million, impacting the adjusted earnings per diluted share, which was $2.28 for the six months ended June 30, 2020[175] - The company made payments of $27.7 million to acquire Sylvania Lighting Solutions during the first half of 2020[197] - The company anticipates potential risks related to the integration of Anixter and the divestiture of legacy businesses, which may affect future financial performance[223] Taxation - The effective tax rate for the second quarter of 2020 was 24.0%, compared to 21.6% in the prior year, primarily due to merger-related costs[155] - The provision for income taxes was a benefit of $0.6 million for the first six months of 2020, compared to an expense of $29.1 million in the same period of 2019[171] Other Considerations - Inflation did not have a material impact on sales for the six months ended June 30, 2020[202] - The company’s operating results are not significantly affected by seasonal factors, with sales typically increasing beginning in March[203]

WESCO® Second Quarter 2020 Webcast Presentation August 13, 2020 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 Libjation Reform A Such statements involve known and unknown risks, uncertainties and other factors that may cause actual resuls to differ materially. These statements include, but are not li statements regarding the process to divest the legacy WESCO Utility and Data ...

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) Presents unaudited Condensed Consolidated Financial Statements for Q1 2020, including balance sheets, income, cash flow, and equity statements Condensed Consolidated Balance Sheet Highlights (As of March 31, 2020) | Account | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$5,230,956** | **$5,017,635** | | Total Current Assets | $2,777,478 | $2,540,411 | | Goodwill | $1,717,963 | $1,759,040 | | **Total Liabilities** | **$3,028,830** | **$2,758,964** | | Total Current Liabilities | $1,040,505 | $1,084,059 | | Long-term Debt, net | $1,542,602 | $1,257,067 | | **Total Stockholders' Equity** | **$2,202,126** | **$2,258,671** | Condensed Consolidated Statement of Income (Three Months Ended March 31) | Metric | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Net Sales | $1,968,647 | $1,961,267 | | Income from Operations | $60,913 | $70,726 | | Net Income | $34,175 | $41,950 | | Net Income Attributable to WESCO | $34,407 | $42,369 | | Diluted EPS | $0.82 | $0.93 | Condensed Consolidated Statement of Cash Flows (Three Months Ended March 31) | Cash Flow Activity | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $31,528 | $28,869 | | Net cash used in investing activities | ($110,265) | ($38,517) | | Net cash provided by financing activities | $278,691 | $19,246 | | Net change in cash and cash equivalents | $191,658 | $9,757 | [Note 3. Revenue](index=10&type=section&id=Note%203.%20Revenue) Q1 2020 revenue was **$1.97 billion**, with growth in Utility, Construction, and CIG markets, and US sales increasing Revenue by End Market (Three Months Ended March 31) | End Market | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Industrial | $702,214 | $736,906 | | Construction | $636,503 | $633,288 | | Utility | $340,945 | $308,269 | | Commercial, Institutional and Government | $288,985 | $282,804 | | **Total** | **$1,968,647** | **$1,961,267** | Revenue by Geography (Three Months Ended March 31) | Geography | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | United States | $1,478,491 | $1,460,991 | | Canada | $377,419 | $384,596 | | Other International | $112,737 | $115,680 | | **Total** | **$1,968,647** | **$1,961,267** | [Note 4. Acquisitions](index=11&type=section&id=Note%204.%20Acquisitions) Details the pending Anixter International Inc. merger, including a **$100 million** termination fee and expected Q2/Q3 2020 closing - On January 10, 2020, WESCO entered into a merger agreement with Anixter International Inc[41](index=41&type=chunk) - WESCO paid a **$100 million** termination fee to CD&R on behalf of Anixter, recorded as a prepaid expense for the merger consideration[43](index=43&type=chunk) - The merger is expected to close in Q2 or Q3 2020, pending Canadian antitrust clearance[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 5. Goodwill](index=12&type=section&id=Note%205.%20Goodwill) Q1 2020 interim goodwill impairment test found no losses, but two units with **$786.2 million** goodwill face heightened future impairment risk - COVID-19 and market capitalization decline triggered an interim goodwill impairment test in Q1 2020[47](index=47&type=chunk) - No impairment losses were identified from the interim test[48](index=48&type=chunk) - Two reporting units, with combined goodwill of **$786.2 million**, had fair values less than 5% above carrying values, indicating significant future impairment risk[48](index=48&type=chunk) [Note 7. Earnings Per Share](index=14&type=section&id=Note%207.%20Earnings%20Per%20Share) Basic and diluted EPS for Q1 2020 were **$0.82**, down from Q1 2019 due to lower net income, partially offset by share repurchases Earnings Per Share Calculation (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net income attributable to WESCO (in thousands) | $34,407 | $42,369 | | Weighted-average basic shares (in thousands) | 41,837 | 45,076 | | Weighted-average diluted shares (in thousands) | 42,075 | 45,491 | | **Basic EPS** | **$0.82** | **$0.94** | | **Diluted EPS** | **$0.82** | **$0.93** | - Approximately **2.3 million** stock-based awards were excluded from Q1 2020 diluted EPS calculation due to their antidilutive effect[60](index=60&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Q1 2020 net sales increased **0.4%** to **$2.0 billion**, with operating profit decreasing to **$60.9 million** due to merger costs and COVID-19 [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q1 2020 net sales were flat at **$2.0 billion**, with organic sales declining **1.7%**, gross margin contracting, and income from operations falling Q1 2020 vs. Q1 2019 Performance | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Sales | $2.0B | $2.0B | | Organic Sales Growth | (1.7)% | N/A | | Cost of Goods Sold (% of sales) | 80.9% | 80.5% | | SG&A Expenses (% of sales) | 15.2% | 15.1% | | Income from Operations | $60.9M | $70.7M | | Net Income Attributable to WESCO | $34.4M | $42.4M | - Q1 2020 SG&A expenses included **$4.6 million** in Anixter merger transaction costs, with adjusted SG&A at **15.0%** of net sales[97](index=97&type=chunk) Adjusted Earnings Per Diluted Share Reconciliation (Q1 2020) | Metric | Amount | | :--- | :--- | | Reported Net Income Attributable to WESCO | $38,347 (in thousands) | | Diluted Shares | 42,075 (in thousands) | | **Adjusted EPS** | **$0.91** | [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was **$731.8 million** as of March 31, 2020, with a **$100 million** precautionary draw, and leverage increased to **3.1x** - Total liquidity was **$731.8 million** as of March 31, 2020, including **$446.6 million** borrowing capacity and **$285.2 million** cash[107](index=107&type=chunk) - The company drew **$100 million** from its Revolving Credit Facility in March as a precautionary measure due to COVID-19 uncertainty[107](index=107&type=chunk) Financial Leverage Ratio | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | EBITDA (TTM, in millions) | $399.4 | $408.4 | | Total Debt, net of cash (in millions) | $1,232.7 | $1,141.7 | | **Financial Leverage Ratio** | **3.1** | **2.8** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) No material changes to market risks from the 2019 10-K are reported, with updates found in the MD&A and Risk Factors sections - No material changes to market risks from the 2019 10-K are noted, with relevant updates in the MD&A and Risk Factors sections of this report[144](index=144&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2020 - Management concluded that disclosure controls and procedures and internal control over financial reporting were effective as of the report's end[145](index=145&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings.) The company faces various lawsuits and claims, but management expects no material adverse effect on financial condition or liquidity - Various lawsuits and claims are ongoing, but management anticipates no material adverse effect on financial condition or liquidity[148](index=148&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors.) A new risk factor highlights the uncertain duration and extent of the COVID-19 pandemic's impact on business and financial condition - A new risk factor addresses the COVID-19 pandemic, which has adversely affected the company's business, suppliers, and customers[150](index=150&type=chunk) - The pandemic's uncertain duration and extent could materially affect the company's business, financial condition, operations, cash flows, and stock price[151](index=151&type=chunk)[152](index=152&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits.) Lists exhibits filed with Form 10-Q, including CEO and CFO certifications and the Interactive Data File (XBRL) - Exhibits include Rule 13a-14(a)/15d-14(a) and Section 1350 Certifications by the CEO and CFO, and the Cover Page Interactive Data File (Inline XBRL)[155](index=155&type=chunk)[156](index=156&type=chunk)

PART I [Item 1. Business.](index=3&type=section&id=Item%201.%20Business.) WESCO is a leading distributor of MRO and OEM products, pursuing a significant merger with Anixter International - WESCO is a leading North American distributor of electrical, industrial, and communications MRO and OEM products, and advanced supply chain management and logistics services[11](index=11&type=chunk) - The company serves approximately **70,000 active customers** globally through approximately 500 branches and 11 distribution centers, distributing over 1,000,000 products from 30,000 suppliers[12](index=12&type=chunk) - WESCO entered into a definitive merger agreement to acquire Anixter International Inc for approximately **$4.5 billion**, with an implied value of **$100.00 per Anixter share**; WESCO stockholders are anticipated to own 84% of the combined company[14](index=14&type=chunk) Sales by End Market (2017-2019) | End Market | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Industrial | 36% | 36% | 37% | | Construction | 33% | 33% | 33% | | Utility | 16% | 16% | 16% | | Commercial, Institutional and Government | 15% | 15% | 14% | Sales by Product Category (2017-2019) | Product Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | General Supplies | 41% | 40% | 40% | | Wire, Cable and Conduit | 14% | 14% | 15% | | Communications and Security | 16% | 16% | 15% | | Electrical Distribution and Controls | 10% | 11% | 10% | | Lighting and Sustainability | 11% | 11% | 12% | | Automation, Controls and Motors | 8% | 8% | 8% | [Item 1A. Risk Factors.](index=9&type=section&id=Item%201A.%20Risk%20Factors.) The company faces operational, financial, and merger-related risks, including economic conditions, competition, and integration challenges - Adverse global economic conditions, including market volatility and lack of liquidity, could negatively impact WESCO's operations, cash flows, and financial position by affecting customer activity and project financing[54](index=54&type=chunk) - WESCO operates in a highly competitive industry, facing risks from price reductions by competitors, new market entrants, and potential loss of market share if customer preferences are not met[57](index=57&type=chunk)[58](index=58&type=chunk) - The pending acquisition of Anixter is subject to significant risks, including failure to obtain regulatory approvals, potential business disruptions due to uncertainty, substantial transaction and integration costs, and increased indebtedness for the combined company[80](index=80&type=chunk)[86](index=86&type=chunk)[91](index=91&type=chunk)[95](index=95&type=chunk) [Item 1B. Unresolved Staff Comments.](index=16&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) There are no unresolved staff comments to report - No unresolved staff comments were reported[101](index=101&type=chunk) [Item 2. Properties.](index=17&type=section&id=Item%202.%20Properties.) WESCO operates a global network of approximately 500 branches and 11 distribution centers, mostly leased - WESCO operates approximately **500 branches globally**, with 340 in the United States, 130 in Canada, and 7 in Mexico, plus others in Africa, Asia, Europe, and South America[102](index=102&type=chunk) - Approximately **13% of the company's branches are owned facilities**, with the remainder being leased[102](index=102&type=chunk) Distribution Centers (as of December 31, 2019) | Location | Square Feet | Leased/Owned | | :--- | :--- | :--- | | Little Rock, AR | 100,000 | Leased | | Carol Stream, IL | 147,000 | Leased | | Byhalia, MS | 148,000 | Owned | | Sparks, NV | 199,000 | Leased | | Warrendale, PA | 194,000 | Owned | | Dallas, TX | 112,000 | Leased | | Madison, WI | 136,000 | Leased | | Edmonton, AB | 101,000 | Leased | | Burnaby, BC | 65,000 | Leased | | Mississauga, ON | 246,000 | Leased | | Montreal, QC | 126,000 | Leased | [Item 3. Legal Proceedings.](index=17&type=section&id=Item%203.%20Legal%20Proceedings.) The company is involved in various legal proceedings not expected to materially impact its financial condition - WESCO is involved in legal proceedings, audits, or investigations concerning commercial, product, and employment matters[103](index=103&type=chunk) - Management believes the ultimate outcome of any pending legal matters is **unlikely to have a material adverse effect** on the company's financial condition or liquidity[103](index=103&type=chunk) [Item 4. Mine Safety Disclosures.](index=17&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to WESCO International, Inc - Item 4 Mine Safety Disclosures is **not applicable**[105](index=105&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) WESCO's common stock (NYSE: WCC) has an active share repurchase program, with dividends currently suspended - WESCO's common stock is listed on the New York Stock Exchange under the symbol **"WCC"**[108](index=108&type=chunk) - As of February 21, 2020, there were **41,873,053 shares of common stock outstanding**[3](index=3&type=chunk)[108](index=108&type=chunk) - WESCO does not currently plan to pay dividends on its common stock, but evaluates the possibility from time to time, with current earnings expected to support growth initiatives and debt reduction[108](index=108&type=chunk) - As of December 31, 2019, WESCO repurchased **5,459,030 shares for $275.0 million** under a $400 million share repurchase authorization approved through December 31, 2020[108](index=108&type=chunk) [Item 6. Selected Financial Data.](index=19&type=section&id=Item%206.%20Selected%20Financial%20Data.) This section presents a five-year summary of key income statement, cash flow, and balance sheet data Selected Income Statement Data (2015-2019) | Metric (In millions, except per share data) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $8,358.9 | $8,176.6 | $7,679.0 | $7,336.0 | $7,518.5 | | Income from operations | $346.2 | $352.5 | $319.1 | $330.5 | $372.5 | | Net income attributable to WESCO International | $223.3 | $227.4 | $163.5 | $101.6 | $210.7 | | Diluted EPS | $5.14 | $4.82 | $3.38 | $2.10 | $4.18 | Selected Cash Flow Data (2015-2019) | Metric (In millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $224.4 | $296.7 | $149.1 | $300.2 | $283.1 | | Net cash used in investing activities | $(60.8) | $(34.1) | $(5.3) | $(70.5) | $(170.2) | | Net cash used in financing activities | $(109.8) | $(275.1) | $(141.2) | $(276.3) | $(67.8) | | Capital expenditures | $44.1 | $36.2 | $21.5 | $18.0 | $21.7 | Selected Balance Sheet Data (2015-2019) | Metric (In millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total assets | $5,017.6 | $4,605.0 | $4,735.5 | $4,431.8 | $4,569.7 | | Total debt | $1,283.8 | $1,223.5 | $1,348.6 | $1,385.3 | $1,483.4 | | Stockholders' equity | $2,258.7 | $2,129.7 | $2,116.1 | $1,963.6 | $1,727.5 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 2019 financial results, highlighting sales growth, cash flow, liquidity, and the pending Anixter merger - WESCO's 2019 financial results reflect **record sales** with growth in end markets and geographies, a challenging pricing environment, and effective capital deployment[116](index=116&type=chunk) - The company generated **$224.4 million in operating cash flow** in 2019 and maintained **$823.2 million in total liquidity** as of December 31, 2019, including available borrowing capacity and cash[119](index=119&type=chunk)[167](index=167&type=chunk) - Post-Anixter merger, WESCO expects to prioritize **debt reduction and integration costs**, while maintaining ample liquidity and credit availability[172](index=172&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risks](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) WESCO is exposed to foreign currency and interest rate risks, with mitigation from fixed-rate debt - Approximately **25% of WESCO's 2019 sales** were from foreign subsidiaries and denominated in foreign currencies, exposing the company to fluctuations in foreign exchange rates[210](index=210&type=chunk) - As of December 31, 2019, **66% of WESCO's debt portfolio was fixed-rate debt**, mitigating interest rate fluctuations for these instruments[211](index=211&type=chunk) - Floating rate borrowings are subject to interest rate changes, but a **100 basis point increase or decrease is not expected to significantly impact future earnings**[212](index=212&type=chunk) - The company's defined benefit pension plan is sensitive to discount rate changes; a one percent increase would decrease projected benefit obligations by **$26.0 million**, while a one percent decrease would increase them by **$35.3 million**[213](index=213&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=33&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents WESCO's audited consolidated financial statements and supplementary data for the past three fiscal years - The consolidated financial statements include the balance sheets as of December 31, 2019 and 2018, and statements of income, comprehensive income, stockholders' equity, and cash flows for the three years ended December 31, 2019[215](index=215&type=chunk) - PricewaterhouseCoopers LLP provided an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2019[219](index=219&type=chunk)[220](index=220&type=chunk) - Key financial statement notes cover critical accounting policies, details on revenue recognition, goodwill and intangible assets, debt structure, income taxes, and employee benefit plans[244](index=244&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=75&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure to report - No changes in or disagreements with accountants on accounting and financial disclosure were reported[435](index=435&type=chunk) [Item 9A. Controls and Procedures](index=75&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2019 - WESCO's management concluded that disclosure controls and procedures and internal control over financial reporting were **effective as of December 31, 2019**[436](index=436&type=chunk)[438](index=438&type=chunk) - The adoption of ASU 2016-02, Leases, effective January 1, 2019, resulted in modifications to processes and implementation of internal controls related to leases[437](index=437&type=chunk) - No other material changes in internal control over financial reporting occurred during the last fiscal quarter of 2019[440](index=440&type=chunk) [Item 9B. Other Information](index=75&type=section&id=Item%209B.%20Other%20Information) There is no other information to report under this item - No other information was reported under this item[441](index=441&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=76&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, officers, and governance is incorporated by reference from the 2020 Proxy Statement - Information on Directors, Executive Officers, and Corporate Governance is **incorporated by reference** from the 2020 Annual Meeting of Stockholders Proxy Statement[443](index=443&type=chunk)[447](index=447&type=chunk) - WESCO has adopted a Code of Business Ethics and Conduct for Directors, officers, and employees, and a Senior Financial Executive Code of Principles for senior executives, both accessible on the company's website[444](index=444&type=chunk)[445](index=445&type=chunk) [Item 11. Executive Compensation](index=76&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference from the company's 2020 Proxy Statement - Executive compensation details are **incorporated by reference** from the 'Compensation Discussion and Analysis' and 'Director Compensation' sections of the 2020 Proxy Statement[448](index=448&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=76&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the 2020 Proxy Statement and equity plan data is provided - Security ownership information is **incorporated by reference** from the 'Security Ownership' caption in the 2020 Proxy Statement[449](index=449&type=chunk) Equity Compensation Plan Information (as of December 31, 2019) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 2,896,083 | $48.19 | 2,556,535 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **2,896,083** | **$48.19** | **2,556,535** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=76&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the 2020 Proxy Statement - Information on certain relationships, related transactions, and director independence is **incorporated by reference** from the 'Transactions with Related Persons' and 'Corporate Governance' sections of the 2020 Proxy Statement[450](index=450&type=chunk) [Item 14. Principal Accountant Fees and Services](index=76&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2020 Proxy Statement - Information on principal accountant fees and services is **incorporated by reference** from the 'Independent Registered Public Accounting Firm Fees and Services' section of the 2020 Proxy Statement[451](index=451&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedule.](index=77&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule.) This section lists the financial statements, schedules, and exhibits filed as part of the annual report - The annual report includes financial statements as set forth in Item 8, and **Schedule II – Valuation and Qualifying Accounts**[454](index=454&type=chunk) - Exhibits include the **Agreement and Plan of Merger with Anixter**, corporate organizational documents (Restated Certificate of Incorporation, Amended and Restated By-laws), debt indentures for Senior Notes, and various equity compensation plan agreements[454](index=454&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002 are also filed[457](index=457&type=chunk) [Item 16. Form 10-K Summary.](index=82&type=section&id=Item%2016.%20Form%2010-K%20Summary.) This item is not applicable to WESCO International, Inc - Item 16 Form 10-K Summary is **not applicable**[462](index=462&type=chunk) [Signatures](index=83&type=section&id=Signatures) The report is duly signed by the company's principal officers and directors as of February 24, 2020 - The report is signed by **John J. Engel**, Chairman, President and Chief Executive Officer, and **David S. Schulz**, Senior Vice President and Chief Financial Officer, on February 24, 2020[465](index=465&type=chunk) - The report is also signed by the company's Directors, including Matthew J. Espe, Bobby J. Griffin, John K. Morgan, Steven A. Raymund, James L. Singleton, Easwaran Sundaram, and Laura K. Thompson[468](index=468&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-14989 WESCO International, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of inco ...