PART I [Business](index=4&type=section&id=Item%201.%20Business) WESCO International, Inc. is a global B2B distribution, logistics, and supply chain solutions provider operating through EES, CSS, and UBS segments - Wesco is a leading B2B distribution and supply chain solutions provider with approximately **20,000 employees**, **50,000 suppliers**, and **150,000 customers** worldwide, operating from about **800 locations** in over **50 countries**[13](index=13&type=chunk)[14](index=14&type=chunk) Business Segments Overview | Segment | Description | Key Markets | | :--- | :--- | :--- | | **Electrical & Electronic Solutions (EES)** | Supplies electrical equipment, automation, security, lighting, wire, and MRO products | Construction, Industrial, Original Equipment Manufacturer (OEM) | | **Communications & Security Solutions (CSS)** | Provides network infrastructure (cabling, connectivity) and security solutions (video surveillance, access control) | Technology, Finance, Telecom, Government, Healthcare | | **Utility & Broadband Solutions (UBS)** | Offers products and services to utilities, public power companies, and broadband operators | Investor-owned utilities, Public power, Global service providers | - The company's business strategy is built on three core elements: extending its scale and value proposition, developing its organization and culture of excellence, and digitalizing and transforming the business[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - In 2022, the company's **top ten customers** accounted for approximately **10% of sales**, with no single customer representing more than **2%**. The **ten largest suppliers** accounted for about **28% of purchases**, with no single supplier exceeding **5%**[28](index=28&type=chunk)[30](index=30&type=chunk) - Wesco has set specific environmental goals, including a **30% reduction** in absolute direct and certain indirect GHG emissions by **2030** (from a 2019 baseline) and a **15% reduction** in landfill waste intensity by **2030** (from a 2020 baseline)[64](index=64&type=chunk)[68](index=68&type=chunk) [Executive Officers](index=12&type=section&id=Executive%20Officers) The report lists nine executive officers as of February 21, 2023, led by John J. Engel, Chairman, President, and CEO Key Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | John J. Engel | 61 | Chairman, President and Chief Executive Officer | | David S. Schulz | 57 | Executive Vice President and Chief Financial Officer | | James F. Cameron | 57 | Executive Vice President and General Manager, Utility and Broadband Solutions | | William C. Geary, II | 52 | Executive Vice President and General Manager, Communications and Security Solutions | | Nelson J. Squires III | 61 | Executive Vice President and General Manager, Electrical and Electronic Solutions | [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) Wesco faces material risks from macroeconomic factors, global operations, supply chain disruptions, IT failures, substantial debt, and regulatory compliance - The company's global operations, which generate approximately **26% of revenues** from outside the U.S., expose it to political, economic, legal, and currency risks[99](index=99&type=chunk) - The successful integration of Anixter, acquired in June 2020, is critical, with failure to realize anticipated benefits potentially resulting from loss of key employees, higher costs, or business disruption[110](index=110&type=chunk) - The business is vulnerable to supply chain challenges, including product shortages, transportation constraints, and price inflation, which could decrease sales and profit margins[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Significant reliance on information technology exposes the company to risks of system failures and cyber-attacks, which could disrupt operations, lead to data theft, and result in significant costs[116](index=116&type=chunk)[118](index=118&type=chunk) - As of December 31, 2022, the company had **$5.5 billion** of consolidated indebtedness, requiring substantial cash flow for debt service and including restrictive covenants that may limit operational flexibility[148](index=148&type=chunk)[154](index=154&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) Wesco operates approximately 800 global locations, mostly leased, including 49 regional distribution centers, with its Pittsburgh headquarters also leased - The company operates a network of approximately **800 locations**, with about **650** being branches and warehouses and **150** being sales offices[159](index=159&type=chunk) - The majority of facilities are leased, with only about **7%** being owned by the company[159](index=159&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various lawsuits and claims, but management does not expect a material adverse effect on financial condition or liquidity - The company is subject to various lawsuits and claims from time to time but does not expect any pending matters to have a material adverse effect on its financial condition or liquidity[161](index=161&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Wesco's common stock trades on NYSE, initiating quarterly dividends in Q1 2023 and authorized a $1 billion share repurchase program - The company expects to begin paying a quarterly cash dividend on its common stock starting in the **first quarter of 2023**, a change from its historical policy of not paying dividends[166](index=166&type=chunk) - On May 31, 2022, the Board of Directors authorized a new share repurchase program for up to **$1 billion** of the company's common and Series A Preferred Stock[167](index=167&type=chunk) Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased Under Program | Approx. Value Remaining Under Program (in millions) | | :--- | :--- | :--- | :--- | :--- | | Oct 2022 | 4,089 | $123.68 | — | $1,000.0 | | Nov 2022 | 88,661 | $126.50 | 87,502 | $988.9 | | Dec 2022 | 1,258 | $125.10 | — | $988.9 | | **Total** | **94,008** | **$126.36** | **87,502** | **$988.9** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Wesco's FY2022 net sales grew **17.6% to $21.4 billion**, adjusted EPS rose **64.5%**, but operating cash flow was significantly lower due to working capital investments [Overall Financial Performance](index=26&type=section&id=Overall%20Financial%20Performance) For FY2022, Wesco's net sales increased **17.6% to $21.4 billion**, income from operations rose to **$1.4 billion**, and adjusted EPS grew **64.5% to $16.42** Key Financial Highlights (2022 vs. 2021) | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $21.4 billion | $18.2 billion | +17.6% | | Income from Operations | $1.4 billion | $0.8 billion | +75.0% | | Earnings per Diluted Share | $15.33 | $7.84 | +95.5% | | Adjusted EPS | $16.42 | $9.98 | +64.5% | - Gross margin improved by **100 basis points** year-over-year, with cost of goods sold as a percentage of net sales decreasing to **78.2%** in 2022 from **79.2%** in 2021, driven by value-based pricing, inflation pass-through, and higher supplier rebates[180](index=180&type=chunk)[181](index=181&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) In 2022, net sales grew **17.6% to $21.4 billion** with **18.2% organic growth** across all segments, and income from operations increased **79.3% to $1.4 billion** Net Sales and Organic Growth by Segment (2022 vs. 2021) | Segment | 2022 Net Sales (in billions) | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | EES | $8.8 | 15.8% | 17.3% | | CSS | $6.4 | 12.0% | 11.5% | | UBS | $6.2 | 26.9% | 27.2% | | **Total** | **$21.4** | **17.6%** | **18.2%** | - In 2022, price inflation favorably impacted net sales by approximately **8%**[208](index=208&type=chunk) - SG&A expenses as a percentage of net sales decreased from **15.3%** in 2021 to **14.2%** in 2022, reflecting operating leverage and synergy realization despite higher payroll and volume-related costs[214](index=214&type=chunk) Reconciliation of EPS to Adjusted EPS (2022 vs. 2021) | Per Share Data | 2022 | 2021 | | :--- | :--- | :--- | | Diluted EPS | $15.33 | $7.84 | | Adjusted EPS | $16.42 | $9.98 | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, Wesco had **$1.0 billion** in liquidity, improved its leverage ratio to **2.9**, but operating cash flow significantly decreased to **$11.0 million** due to working capital investments - Total liquidity was **$1.0 billion** as of December 31, 2022, comprising cash and available borrowing capacity under its credit facilities[260](index=260&type=chunk) - The financial leverage ratio improved to **2.9** as of December 31, 2022, down from **3.9** as of December 31, 2021[264](index=264&type=chunk)[266](index=266&type=chunk) - Operating cash flow was **$11.0 million** in 2022, significantly lower than 2021, primarily due to an **$817.0 million** increase in inventories and a **$690.6 million** increase in trade accounts receivable to support sales growth[273](index=273&type=chunk) Material Cash Requirements from Contractual Obligations (as of Dec 31, 2022) | Obligation (in millions) | 2023 | 2024-2025 | 2026-2027 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt | $70.5 | $3,049.6 | $1,028.5 | $1,325.6 | $5,474.2 | | Interest on Indebtedness | $339.0 | $563.1 | $256.5 | $48.0 | $1,206.6 | | Operating Leases | $158.6 | $244.3 | $156.3 | $170.9 | $730.1 | | **Total** | **$580.1** | **$3,897.2** | **$1,454.9** | **$1,544.5** | **$7,476.7** | [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Wesco faces market risks from foreign currency fluctuations, mitigated by forward contracts, and interest rate changes on its variable-rate debt, with **53%** of debt fixed-rate - Foreign currency risk exists as approximately **26% of 2022 sales** were from foreign subsidiaries, and the company uses foreign currency forward contracts to mitigate this exposure[286](index=286&type=chunk) - As of December 31, 2022, approximately **53%** of the company's debt portfolio was fixed-rate, and a hypothetical **100 basis point** change in interest rates would impact annual interest expense on its variable-rate debt by **$25.7 million**[288](index=288&type=chunk)[289](index=289&type=chunk) [Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Wesco's audited consolidated financial statements for FY2022 and prior two years, including balance sheets, income statements, cash flows, and detailed notes [Notes to Consolidated Financial Statements](index=55&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on Wesco's accounting policies, revenue recognition, acquisitions, debt structure, employee benefits, and segment reporting Net Sales by Geography (in millions) | Region | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | United States | $15,857.3 | $13,157.9 | $9,110.5 | | Canada | $3,021.4 | $2,747.2 | $1,892.3 | | Other International | $2,541.4 | $2,312.5 | $1,323.2 | | **Total** | **$21,420.1** | **$18,217.5** | **$12,326.0** | - On November 1, 2022, Wesco acquired Rahi Systems for a total purchase consideration of **$255.4 million**, intended to strengthen its data center solution offerings[382](index=382&type=chunk)[383](index=383&type=chunk) Outstanding Indebtedness (as of Dec 31, 2022, in millions) | Instrument | Amount | | :--- | :--- | | Accounts Receivable Securitization Facility | $1,535.0 | | Revolving Credit Facility | $1,023.6 | | 7.125% Senior Notes due 2025 | $1,500.0 | | 7.250% Senior Notes due 2028 | $1,318.2 | | Other | $89.5 | | **Total Debt** | **$5,466.3** | - In Q4 2021, the company amended several pension plans, resulting in a curtailment gain of **$36.6 million**, and in Q4 2022, the Anixter Inc. Pension Plan was terminated[505](index=505&type=chunk)[506](index=506&type=chunk) [Controls and Procedures](index=97&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that Wesco's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, excluding the recently acquired Rahi Systems - Management concluded that the company's disclosure controls and procedures, as well as its internal control over financial reporting, were effective as of December 31, 2022[575](index=575&type=chunk)[576](index=576&type=chunk) - The assessment of internal control over financial reporting excluded Rahi Systems, which was acquired on November 1, 2022[577](index=577&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=98&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section incorporates by reference information on directors, executive officers, corporate governance, and audit committee from the 2023 Proxy Statement, and details adopted codes of conduct - Information regarding directors, executive officers, corporate governance, and the audit committee is incorporated by reference from the 2023 Annual Meeting Proxy Statement[584](index=584&type=chunk)[588](index=588&type=chunk) - The company has adopted a Code of Business Conduct and a Code of Principles for Senior Financial Executives, which are available on its website[585](index=585&type=chunk)[586](index=586&type=chunk) [Executive Compensation](index=98&type=section&id=Item%2011.%20Executive%20Compensation) This section incorporates by reference executive and director compensation details from the 2023 Proxy Statement - Details on executive and director compensation are incorporated by reference from the 2023 Proxy Statement[589](index=589&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=98&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section incorporates security ownership information from the 2023 Proxy Statement and details equity compensation plan authorizations Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining for future issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 2,445,024 | $36.01 | 1,992,652 | | Not approved by security holders | — | — | — | | **Total** | **2,445,024** | **$36.01** | **1,992,652** | [Certain Relationships and Related Transactions, and Director Independence](index=98&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section incorporates by reference information on related party transactions and director independence from the 2023 Proxy Statement - Information on related party transactions and director independence is incorporated by reference from the 2023 Proxy Statement[591](index=591&type=chunk) [Principal Accountant Fees and Services](index=98&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section incorporates by reference details on principal accountant fees and services from the 2023 Proxy Statement - Details on principal accountant fees and services are incorporated by reference from the 2023 Proxy Statement[592](index=592&type=chunk) PART IV [Exhibits and Financial Statement Schedule](index=99&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule) This section lists all financial statements, schedules, and exhibits filed or incorporated by reference as part of the annual report, including key agreements - This section provides a comprehensive list of all financial statements, schedules, and exhibits included in or incorporated by reference into the Form 10-K[595](index=595&type=chunk)

WESCO International, Inc. (NYSE:WCC) Q4 2022 Earnings Conference Call February 14, 2023 10:00 AM ET Company Participants Scott Gaffner - Senior Vice President, Investor Relations John Engel - Chairman, President and CEO Dave Schulz - Executive Vice President and CFO Conference Call Participants Deane Dray - RBC Capital Markets Sam Darkatsh - Raymond James Nigel Coe - Wolfe Research David Manthey - Baird Ken Newman - KeyBanc Capital Markets Christopher Glynn - Oppenheimer Chris Dankert - Loop Capital Operato ...

NYSE: WCC Fourth Quarter 2022 Webcast Presentation February 14, 2023 Forward-Looking Statements All statements made herein that are not historical facts should be considered as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding the expected benefits and co ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) Presents unaudited Condensed Consolidated Financial Statements for the nine months ended September 30, 2022, with key financial statements and notes Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | Sep 30, 2022 ($ thousands) | Dec 31, 2021 ($ thousands) | | :--- | :--- | :--- | | **Total current assets** | 7,897,087 | 6,350,111 | | **Total assets** | **14,080,564** | **12,617,699** | | **Total current liabilities** | 3,567,572 | 3,049,808 | | **Total liabilities** | 9,888,618 | 8,841,488 | | **Total stockholders' equity** | **4,191,946** | **3,776,211** | Condensed Consolidated Statements of Income Highlights (unaudited) | Metric | Q3 2022 ($ thousands) | Q3 2021 ($ thousands) | Nine Months 2022 ($ thousands) | Nine Months 2021 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | 5,445,916 | 4,728,325 | 15,861,622 | 13,365,592 | | **Income from operations** | 401,592 | 229,466 | 1,056,330 | 581,589 | | **Net income** | 240,210 | 120,196 | 642,990 | 298,634 | | **Diluted EPS** | $4.30 | $2.02 | $11.42 | $4.91 | Condensed Consolidated Statements of Cash Flows Highlights (unaudited) | Activity | Nine Months 2022 ($ thousands) | Nine Months 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | (410,621) | 172,670 | | Net cash (used in) provided by investing activities | (57,207) | 36,606 | | Net cash provided by (used in) financing activities | 477,251 | (410,204) | | **Net change in cash and cash equivalents** | **21,500** | **(197,336)** | [Note 3. Revenue](index=14&type=section&id=Note%203.%20Revenue) Revenue disaggregated by strategic business units (EES, CSS, UBS) and geography, showing significant year-over-year growth Net Sales by Segment (In thousands) | Segment | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Electrical & Electronic Solutions | $2,234,771 | $1,982,485 | $6,654,883 | $5,626,309 | | Communications & Security Solutions | $1,602,459 | $1,488,689 | $4,638,631 | $4,200,424 | | Utility & Broadband Solutions | $1,608,686 | $1,257,151 | $4,568,108 | $3,538,859 | | **Total** | **$5,445,916** | **$4,728,325** | **$15,861,622** | **$13,365,592** | Net Sales by Geography (In thousands) | Geography | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | United States | $4,050,924 | $3,407,437 | $11,745,090 | $9,656,183 | | Canada | $765,281 | $709,507 | $2,288,146 | $2,020,395 | | Other International | $629,711 | $611,381 | $1,828,386 | $1,689,014 | | **Total** | **$5,445,916** | **$4,728,325** | **$15,861,622** | **$13,365,592** | [Note 7. Debt](index=20&type=section&id=Note%207.%20Debt) Total debt increased to **$5.32 billion** as of September 30, 2022, with credit facilities amended Outstanding Indebtedness (In thousands) | Debt Instrument | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Accounts Receivable Securitization Facility | $1,525,000 | $1,270,000 | | Revolving Credit Facility | $883,097 | $596,959 | | 7.125% Senior Notes due 2025 | $1,500,000 | $1,500,000 | | 7.250% Senior Notes due 2028 | $1,317,845 | $1,316,912 | | **Total debt** | **$5,315,282** | **$4,772,597** | - In March and August 2022, the company amended its **Receivables Facility** and **Revolving Credit Facility** to increase purchase limits and revolving commitments, extend maturity dates, and replace **LIBOR** with **SOFR**-based interest rate options[53](index=53&type=chunk)[54](index=54&type=chunk)[57](index=57&type=chunk) [Note 12. Business Segments](index=25&type=section&id=Note%2012.%20Business%20Segments) All segments reported substantial year-over-year growth in net sales and Adjusted EBITDA, with expanding Adjusted EBITDA margins Segment Performance - Nine Months Ended Sep 30, 2022 vs 2021 (In thousands) | Segment | Net Sales 2022 | Net Sales 2021 | Adjusted EBITDA 2022 | Adjusted EBITDA 2021 | | :--- | :--- | :--- | :--- | :--- | | EES | $6,654,883 | $5,626,309 | $653,630 | $453,894 | | CSS | $4,638,631 | $4,200,424 | $429,452 | $355,521 | | UBS | $4,568,108 | $3,538,859 | $491,652 | $299,030 | | **Total** | **$15,861,622** | **$13,365,592** | **$1,274,478** | **$856,054** | Segment Adjusted EBITDA Margin % | Segment | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | EES | 10.1% | 8.8% | 9.8% | 8.1% | | CSS | 9.8% | 9.0% | 9.3% | 8.5% | | UBS | 11.6% | 9.1% | 10.8% | 8.4% | | **Total** | **8.6%** | **7.0%** | **8.0%** | **6.4%** | [Note 13. Subsequent Events](index=28&type=section&id=Note%2013.%20Subsequent%20Events) Post-quarter, the company plans to terminate a pension plan, increased credit facility capacity, and acquired Rahi Systems for **$217 million** - On November 1, 2022, Wesco acquired **Rahi Systems Holdings, Inc.**, a global hyperscale data center solutions provider, for **$217 million**, funded with cash and borrowings[94](index=94&type=chunk) - On October 31, 2022, the company amended its **Receivables Facility** and **Revolving Credit Facility** to increase their respective borrowing capacities to **$1.625 billion** and **$1.725 billion**[93](index=93&type=chunk) - The company intends to terminate the **Anixter Inc. Pension Plan** effective December 31, 2022, and anticipates that plan assets are sufficient to cover all benefit obligations[92](index=92&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Strong financial performance driven by double-digit sales growth, margin expansion, and reduced financial leverage to **3.2** [Results of Operations - Third Quarter 2022 vs 2021](index=32&type=section&id=Results%20of%20Operations%20-%20Third%20Quarter%202022%20vs%202021) Q3 2022 net sales grew **15.2%** to **$5.4 billion**, with organic sales up **16.9%**, and income from operations increased **75.0%** Q3 2022 Net Sales Growth by Segment | Segment | Reported Growth | Organic Sales Growth | | :--- | :--- | :--- | | EES | 12.7% | 14.9% | | CSS | 7.6% | 9.6% | | UBS | 28.0% | 28.6% | | **Total** | **15.2%** | **16.9%** | - Cost of goods sold as a percentage of net sales improved by **80 basis points** to **77.9%** from **78.7%** in Q3 2021, reflecting value-driven pricing and pass-through of inflationary costs[129](index=129&type=chunk) Q3 Earnings Per Share (Diluted) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | GAAP EPS | $4.30 | $2.02 | | Adjusted EPS | $4.49 | $2.74 | [Results of Operations - Nine Months 2022 vs 2021](index=38&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%202022%20vs%202021) Nine-month net sales increased **18.7%** to **$15.9 billion**, with organic sales growth of **19.5%**, and income from operations grew **81.6%** Nine Months 2022 Net Sales Growth by Segment | Segment | Reported Growth | Organic Sales Growth | | :--- | :--- | :--- | | EES | 18.3% | 19.4% | | CSS | 10.4% | 11.5% | | UBS | 29.1% | 29.1% | | **Total** | **18.7%** | **19.5%** | - Cost of goods sold as a percentage of net sales improved by **90 basis points** to **78.3%** from **79.2%** in the prior year period, driven by pricing discipline and gross margin improvement programs[161](index=161&type=chunk) Nine Months Earnings Per Share (Diluted) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | GAAP EPS | $11.42 | $4.91 | | Adjusted EPS | $12.29 | $6.80 | [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity of **$685.0 million** with operating cash flow use of **$410.6 million**, and financial leverage ratio improved to **3.2** - The **financial leverage ratio** was reduced to **3.2** as of September 30, 2022, down from **3.9** as of December 31, 2021, and a reduction of 2.5 since the Anixter merger[190](index=190&type=chunk)[193](index=193&type=chunk) - Net cash used in operations was **$410.6 million** for the first nine months of 2022, driven by an **$886.3 million** increase in inventories and a **$737.6 million** increase in trade accounts receivable[202](index=202&type=chunk) - The company was in **compliance with all financial covenants** as of September 30, 2022, and believes cash from operations and financing will be adequate for at least the next twelve months[188](index=188&type=chunk)[189](index=189&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) No material changes to market risks previously disclosed in the **2021 Annual Report on Form 10-K** - The company refers to its **2021 Form 10-K** for disclosures on market risks, noting **no material changes** during the quarter[217](index=217&type=chunk) [Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures.) Disclosure controls and internal control over financial reporting were **effective as of September 30, 2022**, with **no material changes** - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures and internal control over financial reporting were **effective as of September 30, 2022**[218](index=218&type=chunk) - There were **no changes** in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[219](index=219&type=chunk) [PART II—OTHER INFORMATION](index=49&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings.) Various lawsuits and claims are ongoing, but management does not expect a **material adverse effect** on financial condition or liquidity - While the company faces various lawsuits and claims from its business operations, management does not expect these to have a **material adverse effect** on its financial condition, though they could impact results in a specific period[222](index=222&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors.) **Russia's invasion of Ukraine** heightened previously disclosed risks, though no **material impact** on business to date - The conflict in **Ukraine** has heightened existing risks related to political instability, supply chain disruptions, and inflation, but has not **materially impacted Wesco's business** thus far[223](index=223&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q3 2022, **68,605** common shares were acquired at an average price of **$109.91** to satisfy tax withholding obligations Issuer Purchases of Common Stock (Q3 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2022 | 58,400 | $105.86 | | August 2022 | 6,363 | $134.93 | | September 2022 | 3,842 | $129.98 | | **Total** | **68,605** | **$109.91** | [Exhibits](index=49&type=section&id=Item%206.%20Exhibits.) Lists exhibits filed with Form 10-Q, primarily **CEO and CFO certifications** and **interactive data files (XBRL)** - The exhibits filed with this report include **CEO and CFO certifications** pursuant to Rule 13a-14(a) and Section 1350 of the Sarbanes-Oxley Act, along with **XBRL data files**[225](index=225&type=chunk)[227](index=227&type=chunk)[229](index=229&type=chunk)

Financial Data and Key Metrics Changes - The company reported organic sales growth of 17%, with adjusted EBITDA margin reaching a record 8.6% and adjusted EPS of $4.49, up 64% year-over-year [9][26][27] - Gross margin was the highest ever at 22.1%, an increase of 80 basis points year-over-year [25] - Adjusted EBITDA increased by 41% compared to the prior year, driven by higher sales and expanded gross margin [29] Business Line Data and Key Metrics Changes - EES segment sales grew 15% year-over-year, with adjusted EBITDA of $226 million, up 30% from the prior year [32][33] - CSS segment sales increased by 10% year-over-year, with adjusted EBITDA margin at 9.8%, 80 basis points higher than the prior year [34] - UBS segment saw exceptional growth with organic sales up 29% year-over-year and adjusted EBITDA up 62% [36][38] Market Data and Key Metrics Changes - Backlog reached a record level, up 5% sequentially and over 60% year-over-year, with no cancellations reported [23] - Preliminary October sales were up approximately 12% year-over-year, despite expected foreign exchange headwinds [24][46] Company Strategy and Development Direction - The company is focused on maximizing exposure to secular growth trends, with a recent acquisition of Rahi Systems to enhance data center solutions [11][17] - The cumulative sales synergy target has been raised to $1.4 billion, reflecting strong cross-sell momentum [16][40] - The company aims to reduce leverage, achieving a ratio of 3.2 times trailing 12-month adjusted EBITDA, down from 5.7 times since the Anixter acquisition [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment, despite supply chain constraints and inflationary pressures [47][57] - The outlook for full-year organic sales growth remains unchanged, with reported sales growth adjusted to reflect foreign exchange impacts [46][51] - Management highlighted the importance of backlog growth and inventory investments to support future sales [74] Other Important Information - The company is maintaining its adjusted EPS outlook of $15.80 to $16.20, representing growth of approximately 58% to 62% year-over-year [51] - The company expects to generate $65 million to $80 million in sales from the acquisition of Rahi Systems in the final two months of the year [49] Q&A Session Summary Question: Demand cadence since the New York Analyst Meeting - Management noted strong growth across all business units, with a backlog growth of 5% sequentially and a book-to-bill ratio above 1.0 [66] Question: Free cash flow guidance - Management expressed confidence in generating positive free cash flow in Q4, driven by a sequential step down in sales releasing working capital [70][72] Question: Pricing outlook for 2023 - Management indicated that pricing increases are expected to remain consistent with previous quarters, with a clearer view anticipated in the coming weeks [80] Question: CSS backlog trends - Management remains bullish on CSS growth prospects, stating that flat backlog trends are not unusual and do not indicate a leading indicator [95] Question: Gross margin outlook for 2023 - Management emphasized the ongoing gross margin improvement program and expressed confidence in maintaining margins despite inflationary pressures [92] Question: Rahi Systems acquisition profitability - Management confirmed that Rahi's profitability is consistent with the CSS segment and expressed excitement about the synergies expected from the acquisition [117]

WESCO International, Inc. (NYSE:WCC) Q2 2022 Results Conference Call August 4, 2022 10:00 AM ET Company Participants Scott Gaffner - SVP, IR John Engel - Chairman, President & CEO David Schulz - EVP, CFO Conference Call Participants David Manthey - Baird Deane Dray - RBC Capital Markets Ken Newman - KeyBanc Nigel Coe - Wolfe Research Sam Darkatsh - Raymond James Tommy Moll - Stephens Operator Hello, and welcome to WESCO's Second Quarter Earnings Call. [Operator Instructions] Please note that this event is b ...

PART I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) The unaudited condensed consolidated financial statements for the period ended June 30, 2022, show significant growth in revenue and profitability, with total assets increasing to **$13.86 billion** and net income rising to **$221.1 million** for the second quarter [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets were **$13.86 billion**, an increase from **$12.62 billion** at December 31, 2021, driven by higher trade accounts receivable and inventories, while total liabilities increased to **$9.75 billion** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $236,792 | $212,583 | | Trade accounts receivable, net | $3,635,840 | $2,957,613 | | Inventories | $3,165,828 | $2,666,219 | | Total current assets | $7,606,475 | $6,350,111 | | Total assets | $13,863,266 | $12,617,699 | | **Liabilities & Equity** | | | | Accounts payable | $2,652,306 | $2,140,251 | | Long-term debt, net | $5,039,857 | $4,701,542 | | Total liabilities | $9,751,959 | $8,841,488 | | Total stockholders' equity | $4,111,307 | $3,776,211 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company reported strong year-over-year growth in both the second quarter and first half of 2022, with net sales increasing to **$5.48 billion** for Q2 and **$10.42 billion** for the six months Key Performance Indicators (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $5,483,525 | $4,595,790 | $10,415,706 | $8,637,267 | | Income from operations | $370,709 | $218,872 | $654,738 | $352,123 | | Net income attributable to common stockholders | $206,354 | $104,843 | $373,245 | $149,669 | | Diluted EPS | $3.95 | $2.02 | $7.15 | $2.89 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash used in operating activities was **$304.5 million**, primarily due to investments in working capital, while financing activities provided **$340.5 million** - Net cash used in operating activities was **$304.5 million** for the first six months of 2022, compared to net cash provided of **$102.8 million** in the prior year period[18](index=18&type=chunk) - The primary use of operating cash was for working capital, with significant increases in inventories (**$530.8 million**) and trade accounts receivable (**$716.8 million**) to support sales growth[18](index=18&type=chunk) - Financing activities provided **$340.5 million** in cash, largely from net proceeds from debt issuance (**$1.7463 billion**) exceeding repayments (**$1.3540 billion**)[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's accounting policies and financial results, highlighting strong growth across all business segments and amendments to debt facilities Net Sales by Segment (Six Months Ended June 30, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Electrical & Electronic Solutions (EES) | $4,420,112 | $3,643,824 | | Communications & Security Solutions (CSS) | $3,036,172 | $2,711,735 | | Utility & Broadband Solutions (UBS) | $2,959,422 | $2,281,708 | | **Total** | **$10,415,706** | **$8,637,267** | Adjusted EBITDA by Segment (Six Months Ended June 30, in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Electrical & Electronic Solutions (EES) | $427,865 | $279,981 | | Communications & Security Solutions (CSS) | $273,081 | $221,820 | | Utility & Broadband Solutions (UBS) | $305,395 | $184,355 | | Corporate | $(197,759) | $(160,363) | | **Total** | **$808,582** | **$525,793** | - In March 2022, the company amended its Receivables Facility, increasing the purchase limit to **$1.4 billion** and extending the maturity to March 2025. The Revolving Credit Facility was also amended, increasing commitments to **$1.35 billion** and extending maturity to March 2027[56](index=56&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes the strong financial performance in the first half of 2022 to double-digit sales growth, margin expansion, and integration cost synergies, with net sales growing **20.6%** to **$10.4 billion** [Results of Operations](index=28&type=section&id=Results%20of%20Operations) For Q2 2022, net sales increased **19.3%** to **$5.5 billion**, with all segments showing strong organic growth and gross margin improving by **70 basis points** year-over-year Q2 2022 Organic Sales Growth vs. Q2 2021 | Segment | Reported Growth | Organic Sales Growth | | :--- | :--- | :--- | | EES | 21.2% | 23.1% | | CSS | 9.6% | 11.5% | | UBS | 28.0% | 28.6% | | **Total** | **19.3%** | **20.9%** | - For Q2 2022, cost of goods sold as a percentage of net sales decreased by **70 basis points** to **78.3%**, reflecting value-driven pricing, gross margin programs, and a benefit from inflation due to average cost inventory accounting[130](index=130&type=chunk) Adjusted EPS Reconciliation | Period | Adjusted EPS | | :--- | :--- | | **Q2 2022** | **$4.19** | | Q2 2021 | $2.64 | | **Six Months 2022** | **$7.82** | | Six Months 2021 | $4.06 | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, the company had total liquidity of **$571.4 million**, with the financial leverage ratio improving to **3.4x** from **3.9x** at year-end 2021, despite operating cash flow being a use of **$304.5 million** - Total liquidity was **$571.4 million** as of June 30, 2022, comprising **$117.3 million** in cash, **$429.1 million** available under the Revolving Credit Facility, and **$25.0 million** under the Receivables Facility[187](index=187&type=chunk)[189](index=189&type=chunk) Financial Leverage Ratio | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total debt, net of cash | $4,937.2 M | $4,568.1 M | | Adjusted EBITDA (TTM) | $1,458.4 M | $1,175.7 M | | **Financial leverage ratio** | **3.4x** | **3.9x** | - Subsequent to the quarter end, on August 2, 2022, the company further increased the purchase limit on its Receivables Facility to **$1.525 billion** and the commitments on its Revolving Credit Facility to **$1.525 billion**[94](index=94&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company states there have been no material changes to the market risks disclosed in its 2021 Annual Report on Form 10-K - There were no material changes to market risk disclosures from the fiscal year ended December 31, 2021[217](index=217&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2022 - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 30, 2022[218](index=218&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[219](index=219&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in various lawsuits and claims related to its business, but management does not believe the ultimate outcome will have a material adverse effect on financial condition or liquidity - Management believes that the outcome of pending lawsuits and claims is unlikely to have a material adverse effect on the company's financial condition or liquidity[222](index=222&type=chunk) [Risk Factors](index=45&type=page&id=Item%201A.%20Risk%20Factors.) Russia's invasion of Ukraine and the international response have heightened previously disclosed risks related to political instability, sanctions, cybersecurity, economic instability, supply chain challenges, and inflation - Risks related to political instability, trade sanctions, cybersecurity, economic instability, and supply chain challenges have been heightened by Russia's invasion of Ukraine[223](index=223&type=chunk) - The company's business and operations have not been materially adversely affected to date, but the future impact of the conflict is uncertain[223](index=223&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q2 2022, the company repurchased **3,209 shares** of common stock at a weighted-average price of **$131.61** per share to satisfy tax withholding obligations related to stock-based compensation Issuer Purchases of Common Stock (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2022 | 2,132 | $128.03 | | May 2022 | 870 | $140.22 | | June 2022 | 207 | $132.29 | | **Total** | **3,209** | **$131.61** | - The repurchased shares were surrendered by stock-based compensation plan participants to satisfy tax withholding obligations[224](index=224&type=chunk) [Exhibits](index=45&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as XBRL data files - Exhibits filed include CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350 of the Sarbanes-Oxley Act[225](index=225&type=chunk) - Interactive Data Files (XBRL documents) were also submitted as part of the filing[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) Signatures

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I—FINANCIAL%20INFORMATION) This section presents Wesco International, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter of 2022 [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, including balance sheets, income statements, cash flow statements, and statements of stockholders' equity, along with detailed notes explaining accounting policies, revenue, goodwill, debt, and other financial aspects for the first quarter of 2022 and 2021 [Condensed Consolidated Balance Sheets (unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) The Condensed Consolidated Balance Sheets provide a snapshot of the company's financial position, showing an increase in total assets and liabilities as of March 31, 2022, compared to December 31, 2021 Condensed Consolidated Balance Sheets (unaudited) | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total assets | $13,185.0 | $12,617.7 | | Total liabilities | $9,217.6 | $8,841.5 | | Total stockholders' equity | $3,967.5 | $3,776.2 | [Condensed Consolidated Statements of Income and Comprehensive Income (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20(unaudited)) The Condensed Consolidated Statements of Income and Comprehensive Income reflect significant year-over-year growth in net sales, income from operations, and net income attributable to common stockholders for the three months ended March 31, 2022 Condensed Consolidated Statements of Income and Comprehensive Income (unaudited) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net sales | $4,932.2 | $4,041.5 | | Income from operations | $284.0 | $133.3 | | Net income attributable to WESCO International, Inc. | $181.2 | $59.2 | | Net income attributable to common stockholders | $166.9 | $44.8 | | Basic EPS | $3.30 | $0.89 | | Diluted EPS | $3.19 | $0.87 | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) The Condensed Consolidated Statements of Cash Flows show a shift from positive to negative operating cash flow in Q1 2022, primarily due to increased investments in receivables and inventories, while financing activities provided net cash Condensed Consolidated Statements of Cash Flows (unaudited) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash (used in) provided by operating activities | $(171.9) | $120.5 | | Net cash (used in) provided by investing activities | $(15.1) | $44.5 | | Net cash provided by (used in) financing activities | $167.1 | $(312.2) | | Net change in cash and cash equivalents | $(11.1) | $(145.2) | | Cash and cash equivalents at end of period | $201.5 | $303.9 | [Condensed Consolidated Statements of Stockholders' Equity (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(unaudited)) The Condensed Consolidated Statements of Stockholders' Equity detail changes in equity components, reflecting net income, stock-based compensation, and preferred stock dividends for the three months ended March 31, 2022 and 2021 Condensed Consolidated Statements of Stockholders' Equity (unaudited) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net income attributable to WESCO International, Inc. | $181.2 | $59.2 | | Preferred stock dividends | $14.4 | $14.4 | | Foreign currency translation adjustments and other | $31.6 | $16.8 | | Total WESCO International, Inc. stockholders' equity (end of period) | $3,973.4 | $2,645.9 (Note: 2021 value is for Retained Earnings, not total equity) | [Notes to Condensed Consolidated Financial Statements (unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide essential context and detailed disclosures for the condensed consolidated financial statements, covering the company's organization, accounting policies, revenue recognition, goodwill and intangible assets, stock-based compensation, earnings per share, debt, employee benefit plans, fair value measurements, commitments, contingencies, income taxes, and business segment performance [1. ORGANIZATION](index=8&type=section&id=1.%20ORGANIZATION) WESCO International, Inc. is a leading global provider of business-to-business distribution, logistics, and supply chain solutions, operating through three strategic business units: Electrical & Electronic Solutions (EES), Communications & Security Solutions (CSS), and Utility & Broadband Solutions (UBS) - Wesco is a leading provider of business-to-business distribution, logistics services, and supply chain solutions[23](index=23&type=chunk) - The company operates through three strategic business units: **Electrical & Electronic Solutions (EES)**, **Communications & Security Solutions (CSS)**, and **Utility & Broadband Solutions (UBS)**[23](index=23&type=chunk) [2. ACCOUNTING POLICIES](index=8&type=section&id=2.%20ACCOUNTING%20POLICIES) This section outlines the basis of presentation for the unaudited financial statements, notes reclassifications, and discusses the adoption of ASU 2020-04 for reference rate reform (LIBOR to SOFR) with no material impact, and the ongoing evaluation of ASU 2021-08 for business combinations - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with Rule 10-01 of Regulation S-X[24](index=24&type=chunk) - The company adopted ASU 2020-04 (Reference Rate Reform) in Q1 2022, transitioning from LIBOR to SOFR, which did not have a **material impact** on financial statements[27](index=27&type=chunk) - Management is evaluating the impact of ASU 2021-08 (Business Combinations: Accounting for Contract Assets and Liabilities), effective for fiscal years beginning after December 15, 2022[28](index=28&type=chunk) [3. REVENUE](index=9&type=section&id=3.%20REVENUE) Wesco's net sales are disaggregated by segment and geography, with revenue recognition policies detailed for deferred revenue, contract assets, and variable consideration, which includes customer rebates and shipping/handling costs Net Sales by Segment | Segment | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Electrical & Electronic Solutions | $2,089.9 | $1,720.8 | | Communications & Security Solutions | $1,434.2 | $1,250.6 | | Utility & Broadband Solutions | $1,408.0 | $1,070.0 | | **Total by segment** | **$4,932.2** | **$4,041.5** | Net Sales by Geography | Geography | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | | United States | $3,654.3 | $2,930.4 | | Canada | $715.0 | $607.8 | | Other International | $562.8 | $503.3 | | **Total by geography** | **$4,932.2** | **$4,041.5** | - Variable consideration (rebates, returns, discounts) reduced revenue by approximately **$115.2 million** in Q1 2022 and **$105.4 million** in Q1 2021[33](index=33&type=chunk) - Shipping and handling costs, recognized as SG&A expenses, totaled **$67.6 million** in Q1 2022 and **$53.3 million** in Q1 2021[34](index=34&type=chunk) [4. GOODWILL AND INTANGIBLE ASSETS](index=10&type=section&id=4.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details the changes in goodwill, which increased due to foreign currency exchange rates, and outlines the components of intangible assets, including amortization expense and estimated future amortization schedules Goodwill and Intangible Assets | Metric | March 31, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Goodwill | $3,222.5 | $3,208.3 | | Net Intangible assets | $1,922.3 | $1,944.1 | - Goodwill increased by **$14.2 million** in Q1 2022 due to foreign currency exchange rate changes[35](index=35&type=chunk) - Amortization expense for intangible assets totaled **$25.7 million** for the three months ended March 31, 2022[36](index=36&type=chunk) Estimated Future Amortization Expense | Year Ending December 31, | Estimated Amortization Expense (in millions) | | :----------------------- | :------------------------------------------ | | 2022 (remainder) | $66.7 | | 2023 | $83.6 | | 2024 | $81.1 | | 2025 | $78.0 | | 2026 | $72.5 | | Thereafter | $744.8 | [5. STOCK-BASED COMPENSATION](index=10&type=section&id=5.%20STOCK-BASED%20COMPENSATION) This note details Wesco's stock-based compensation plans, including stock options, stock-settled stock appreciation rights, restricted stock units, and performance-based awards, outlining their vesting conditions, fair value assumptions, and the $8.9 million compensation expense recognized in Q1 2022 - Wesco recognized **$8.9 million** of non-cash stock-based compensation expense for the three months ended March 31, 2022, included in selling, general and administrative expenses[48](index=48&type=chunk) - As of March 31, 2022, total unrecognized compensation expense related to non-vested stock-based awards was **$78.2 million**, with approximately **$30.6 million** expected to be recognized over the remainder of 2022[48](index=48&type=chunk) Stock-Based Awards Granted | Award Type | Granted (3 months ended March 31, 2022) | Weighted-Average Fair Value ($) | | :-------------------------------- | :-------------------------------------- | :-------------------------- | | Stock options | 89,550 | $57.26 | | Restricted stock units | 224,946 | $122.11 | | Performance-based awards | 83,991 | $122.09 | [6. EARNINGS PER SHARE](index=13&type=section&id=6.%20EARNINGS%20PER%20SHARE) This note provides the computation of basic and diluted earnings per share, showing a significant increase in both metrics for Q1 2022, driven by higher net income attributable to common stockholders Earnings Per Share Calculation | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income attributable to common stockholders (in millions) | $166.9 | $44.8 | | Weighted-average common shares outstanding (basic, in thousands) | 50,597 | 50,124 | | Weighted-average common shares outstanding (diluted, in thousands) | 52,237 | 51,708 | | Basic EPS | $3.30 | $0.89 | | Diluted EPS | $3.19 | $0.87 | [7. DEBT](index=14&type=section&id=7.%20DEBT) Wesco's outstanding indebtedness is detailed, highlighting amendments to the Accounts Receivable Securitization Facility and Revolving Credit Facility in March 2022, which increased borrowing capacities, extended maturity dates, and transitioned from LIBOR to SOFR interest rates Outstanding Indebtedness | Debt Instrument | As of March 31, 2022 (in millions) | As of December 31, 2021 (in millions) | | :------------------------------------------ | :------------------------------------ | :------------------------------------- | | International lines of credit | $8.6 | $7.4 | | Accounts Receivable Securitization Facility | $1,300.0 | $1,270.0 | | Revolving Credit Facility | $758.0 | $597.0 | | 5.50% Anixter Senior Notes due 2023 | $58.6 | $58.6 | | 6.00% Anixter Senior Notes due 2025 | $4.2 | $4.2 | | 7.125% Senior Notes due 2025 | $1,500.0 | $1,500.0 | | 7.250% Senior Notes due 2028 | $1,317.2 | $1,316.9 | | Finance lease obligations | $19.5 | $18.6 | | **Total debt** | **$4,966.1** | **$4,772.6** | | **Total long-term debt** | **$4,836.7** | **$4,701.5** | - The Accounts Receivable Securitization Facility's purchase limit increased to **$1,400 million**, maturity extended to March 1, 2025, and interest rate spread decreased from **1.15% to 1.10%** (LIBOR to SOFR transition)[52](index=52&type=chunk) - The Revolving Credit Facility's commitments increased to **$1,350 million**, maturity extended to March 1, 2027, and transitioned to SOFR-based interest rate options[55](index=55&type=chunk) [8. EMPLOYEE BENEFIT PLANS](index=15&type=section&id=8.%20EMPLOYEE%20BENEFIT%20PLANS) This note describes Wesco's defined contribution, deferred compensation, and defined benefit plans, including the merger of Anixter's U.S. and Canadian defined contribution plans into Wesco's, and the freezing of benefits and accruals for certain defined benefit plans - Anixter's U.S. and Canadian defined contribution plans were merged into Wesco's respective plans, effective January 1, 2022[56](index=56&type=chunk)[57](index=57&type=chunk) - Wesco incurred **$18.1 million** in charges for all defined contribution plans for the three months ended March 31, 2022[58](index=58&type=chunk) - The company adopted plan amendments to freeze benefits under the Anixter Inc. Pension Plan and EECOL Plan effective December 31, 2021, and freeze benefit accruals for certain plans effective December 31, 2023[62](index=62&type=chunk) Net Periodic Pension (Benefit) Cost | Component of Net Periodic Pension (Benefit) Cost | Three Months Ended March 31, 2022 (in millions) | | :------------------------------------------ | :--------------------------------------------- | | Service cost | $2.2 | | Interest cost | $4.4 | | Expected return on plan assets | $(7.8) | | Recognized actuarial gain | $(0.2) | | **Net periodic pension (benefit) cost** | **$(1.4)** | [9. FAIR VALUE OF FINANCIAL INSTRUMENTS](index=17&type=section&id=9.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note discusses the fair value of Wesco's financial instruments, including debt and foreign currency forward contracts, which are primarily valued using observable market information and classified as Level 2 within the fair value hierarchy Fair Value of Fixed Interest Rate Debt | Metric | As of March 31, 2022 (in millions) | As of December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------------- | :---------------------------------- | | Carrying value of fixed interest rate debt | $2,880.8 | $2,880.7 | | Estimated fair value of fixed interest rate debt | $3,034.0 | $3,118.0 | - The company uses foreign currency forward contracts with gross notional amounts of approximately **$175.9 million** (March 31, 2022) to minimize the effect of fluctuating foreign currency-denominated accounts[73](index=73&type=chunk) - The inputs used to measure the fair value of the company's debt instruments and foreign currency forward contracts are classified as **Level 2** within the fair value hierarchy[70](index=70&type=chunk)[73](index=73&type=chunk) [10. COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) Wesco is subject to various lawsuits and claims in the ordinary course of business, but management believes the ultimate outcome of these matters is unlikely to have a material adverse effect on the company's financial condition or liquidity - The company faces lawsuits and claims related to commercial, product, and employment matters[74](index=74&type=chunk) - Management does not believe the ultimate outcome of these pending matters will have a **material adverse effect** on Wesco's financial condition or liquidity[74](index=74&type=chunk) [11. INCOME TAXES](index=18&type=section&id=11.%20INCOME%20TAXES) The effective tax rate for Q1 2022 was 17.2%, influenced by discrete income tax benefits from reductions to the valuation allowance against foreign tax credit carryforwards and deductible stock-based compensation Income Taxes | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate | 17.2% | 9.9% | - Discrete income tax benefits of **$13.4 million** (valuation allowance) and **$5.8 million** (stock-based compensation) reduced the effective tax rate by approximately **8.7 percentage points** in Q1 2022[76](index=76&type=chunk) [12. BUSINESS SEGMENTS](index=18&type=section&id=12.%20BUSINESS%20SEGMENTS) This note provides financial information for Wesco's three reportable segments (EES, CSS, UBS), detailing net sales, Adjusted EBITDA, and total assets, which are key metrics used by management to evaluate segment performance Segment Performance (Q1 2022) | Segment | Net Sales (Q1 2022, in millions) | Adjusted EBITDA (Q1 2022, in millions) | Adjusted EBITDA Margin % (Q1 2022) | | :-------------------------------- | :-------------------------------- | :------------------------------------ | :--------------------------------- | | Electrical & Electronic Solutions | $2,089.9 | $192.4 | 9.2% | | Communications & Security Solutions | $1,434.2 | $123.0 | 8.6% | | Utility & Broadband Solutions | $1,408.0 | $136.4 | 9.7% | | **Total** | **$4,932.2** | **$364.1** | **7.4%** | Segment Total Assets | Segment | Total Assets (March 31, 2022, in millions) | Total Assets (December 31, 2021, in millions) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------- | | Electrical & Electronic Solutions | $4,336.9 | $4,098.3 | | Communications & Security Solutions | $4,650.8 | $4,601.1 | | Utility & Broadband Solutions | $3,513.6 | $3,266.2 | | Corporate | $683.6 | $652.0 | | **Total** | **$13,185.0** | **$12,617.7** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides a comprehensive analysis of Wesco's financial condition and operational results for the first quarter of 2022, highlighting strong sales growth, margin expansion, and synergy realization, while also addressing ongoing supply chain challenges and inflationary pressures [Company Overview](index=20&type=section&id=Company%20Overview) Wesco International is a global leader in business-to-business distribution, logistics, and supply chain solutions, serving diverse markets with a broad product portfolio and value-added services across its EES, CSS, and UBS segments - Wesco employs approximately **18,000 people**, maintains relationships with **45,000 suppliers**, and serves **140,000 customers** worldwide across over **50 countries**[87](index=87&type=chunk) - The company provides innovative value-added solutions including supply chain management, logistics, procurement, warehousing, and digital solutions[87](index=87&type=chunk) - Wesco is migrating to a single, master brand architecture, while retaining the Anixter brand name due to its strong recognition[88](index=88&type=chunk) - Operating segments include **Electrical & Electronic Solutions (EES)**, **Communications & Security Solutions (CSS)**, and **Utility & Broadband Solutions (UBS)**[89](index=89&type=chunk) [Overall Financial Performance](index=21&type=section&id=Overall%20Financial%20Performance) Wesco achieved double-digit sales growth and margin expansion in Q1 2022, driven by strong demand, price inflation, and integration cost synergies, partially offset by higher SG&A expenses, and anticipates continued supply chain challenges and inflationary pressures Overall Financial Performance Summary | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Net sales | $4,932.2 million | $4,041.5 million | +22.0% | | Income from operations | $284.0 million | $133.3 million | +113.2% | | Income from operations as % of net sales | 5.8% | 3.3% | +2.5 pp | | Diluted EPS | $3.19 | $0.87 | +266.7% | | Adjusted diluted EPS | $3.63 | $1.43 | +153.8% | - Cost of goods sold as a percentage of net sales decreased by **120 basis points** to **78.7%** in Q1 2022, reflecting value-driven pricing and profit margin improvement[96](index=96&type=chunk) - Supply chain issues unfavorably impacted net sales by approximately **1% to 2%** in Q1 2022, and these challenges, along with inflationary pressures, are expected to continue into 2023[99](index=99&type=chunk)[101](index=101&type=chunk) [Cash Flow](index=22&type=section&id=Cash%20Flow) Operating cash flow for Q1 2022 was an outflow of $171.9 million, primarily driven by increased investments in receivables and inventories to support sales growth and address supply chain issues, and payments of management incentive compensation Cash Flow Activities | Cash Flow Activity | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash (used in) provided by operating activities | $(171.9) | $120.5 | | Net cash (used in) provided by investing activities | $(15.1) | $44.5 | | Net cash provided by (used in) financing activities | $167.1 | $(312.2) | - Operating cash outflow was primarily due to a **$324.6 million** increase in trade accounts receivable and a **$214.2 million** increase in inventories[103](index=103&type=chunk)[156](index=156&type=chunk) - Capital expenditures totaled **$15.2 million**, mainly for internal-use computer software and IT hardware[104](index=104&type=chunk) [Financing Availability](index=22&type=section&id=Financing%20Availability) Wesco amended its Accounts Receivable Securitization Facility and Revolving Credit Facility in March 2022, increasing borrowing capacities, extending maturity dates, and transitioning to SOFR-based interest rates, resulting in $715.4 million in total available liquidity as of March 31, 2022 - The Accounts Receivable Securitization Facility's purchase limit increased from **$1,300 million to $1,400 million**, and its maturity date was extended to March 1, 2025[106](index=106&type=chunk)[154](index=154&type=chunk) - The Revolving Credit Facility's commitments increased from **$1,200 million to $1,350 million**, and its maturity date was extended to March 1, 2027[106](index=106&type=chunk)[155](index=155&type=chunk) - As of March 31, 2022, total available liquidity was **$715.4 million**, comprising **$554.2 million** from the Revolving Credit Facility, **$100.0 million** from the Receivables Facility, and **$61.2 million** in cash[107](index=107&type=chunk)[143](index=143&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of Wesco's income statement items for Q1 2022 versus Q1 2021, showing significant improvements in net sales, gross profit margin, and income from operations across all segments, while also noting increases in SG&A expenses and depreciation/amortization [Net Sales](index=23&type=section&id=Net%20Sales) Net sales increased 22.0% to $4.9 billion in Q1 2022, driven by strong demand, approximately 8% price inflation, expanded product and service offerings, and secular growth trends, with all segments reporting double-digit organic sales growth Net Sales by Segment and Growth | Segment | Net Sales (Q1 2022, in millions) | Net Sales (Q1 2021, in millions) | Reported Growth | Organic Sales Growth | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :------------------- | | Electrical & Electronic Solutions | $2,089.9 | $1,720.8 | 21.5% | 20.8% | | Communications & Security Solutions | $1,434.2 | $1,250.6 | 14.7% | 13.9% | | Utility & Broadband Solutions | $1,408.0 | $1,070.0 | 31.6% | 30.4% | | **Total net sales** | **$4,932.2** | **$4,041.5** | **22.0%** | **21.2%** | - Pricing related to inflation favorably impacted net sales by approximately **8%** for the three months ended March 31, 2022[112](index=112&type=chunk) - Organic sales growth was positively impacted by **1.6%** due to the number of workdays, and negatively impacted by **0.5%** from foreign exchange rates and **0.3%** from divestitures[112](index=112&type=chunk) [Cost of Goods Sold](index=24&type=section&id=Cost%20of%20Goods%20Sold) Cost of goods sold increased by $0.7 billion in Q1 2022, but decreased as a percentage of net sales by 120 basis points to 78.7%, reflecting improved pricing strategies and profit margin programs, along with higher supplier volume rebate income Cost of Goods Sold | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Cost of goods sold | $3,883.1 | $3,230.4 | | Cost of goods sold as % of net sales | 78.7% | 79.9% | - The **120 basis point decrease** in cost of goods sold as a percentage of net sales reflects a focus on value-driven pricing, profit margin improvement, and higher supplier volume rebate income[117](index=117&type=chunk) [Selling, General and Administrative Expenses](index=24&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) SG&A expenses increased by $81.5 million to $718.1 million in Q1 2022, primarily due to higher payroll, variable compensation, and IT expenses for digital transformation, though as a percentage of net sales, they decreased to 14.6% Selling, General and Administrative Expenses | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Selling, general and administrative expenses | $718.1 | $636.6 | | SG&A expenses as % of net sales | 14.6% | 15.8% | | Adjusted selling, general and administrative expenses | $692.5 | $599.2 | - The increase in SG&A was driven by **$37.2 million** higher payroll and payroll-related expenses (variable and stock-based compensation, salaries) and **$44.3 million** higher non-payroll costs (shipping, IT expenses for digital transformation)[119](index=119&type=chunk)[120](index=120&type=chunk) [Depreciation and Amortization](index=24&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization increased by $5.8 million to $47.0 million in Q1 2022, including $5.3 million from accelerated amortization due to changes in the estimated useful lives of certain legacy trademarks as the company migrates to a master brand architecture Depreciation and Amortization | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Depreciation and amortization | $47.0 | $41.2 | - Q1 2022 includes **$5.3 million** in accelerated amortization expense due to changes in estimated useful lives of legacy trademarks migrating to a master brand architecture[121](index=121&type=chunk) [Income from Operations](index=25&type=section&id=Income%20from%20Operations) Income from operations significantly increased by 113.2% to $284.0 million in Q1 2022, driven by sales growth, lower cost of goods sold as a percentage of net sales, and integration cost synergies, despite higher SG&A and IT expenses, with all segments showing improved performance Income from Operations | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Income from operations | $284.0 | $133.3 | | Adjusted income from operations | $314.9 | $170.6 | Income from Operations by Segment | Segment | Income from Operations (Q1 2022, in millions) | Income from Operations (Q1 2021, in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Electrical & Electronic Solutions | $178.8 | $100.1 | | Communications & Security Solutions | $104.0 | $74.0 | | Utility & Broadband Solutions | $129.9 | $87.0 | | Corporate | $(128.7) | $(127.9) | - Income from operations for Q1 2022 was not materially affected by higher pricing related to inflation due to offsetting higher product costs[124](index=124&type=chunk) [Interest Expense, net](index=25&type=section&id=Interest%20Expense,%20net) Net interest expense decreased by $6.8 million to $63.6 million in Q1 2022, primarily due to the repayment of fixed-rate debt with variable-rate debt that has lower borrowing rates Interest Expense, Net | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | | Interest expense, net | $63.6 | $70.4 | - The decrease in interest expense reflects the repayment of fixed-rate debt with variable debt that has lower borrowing rates[129](index=129&type=chunk) [Other Expense (Income), net](index=25&type=section&id=Other%20Expense%20(Income),%20net) Wesco reported other non-operating expense of $1.1 million in Q1 2022, a shift from income in the prior year, primarily due to a $3.6 million foreign currency exchange loss, partially offset by net benefits from pension costs Other Expense (Income), Net | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Other expense (income), net | $1.1 | $(2.8) | | Foreign currency exchange loss | $3.6 | $1.0 | | Net benefits from pension costs | $3.6 | $4.1 | [Income Taxes](index=25&type=section&id=Income%20Taxes) The provision for income taxes increased to $37.7 million in Q1 2022, resulting in an effective tax rate of 17.2%, influenced by discrete income tax benefits from reductions to the valuation allowance against foreign tax credit carryforwards and deductible stock-based compensation Income Taxes | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Provision for income taxes | $37.7 | $6.5 | | Effective tax rate | 17.2% | 9.9% | | Adjusted provision for income taxes | $45.7 | $14.7 | - Discrete income tax benefits of **$13.4 million** (valuation allowance) and **$5.8 million** (stock-based compensation) reduced the estimated annual effective tax rate by approximately **8.7 percentage points** in Q1 2022[76](index=76&type=chunk)[131](index=131&type=chunk) [Net Income and Earnings per Share](index=26&type=section&id=Net%20Income%20and%20Earnings%20per%20Share) Net income for Q1 2022 more than doubled to $181.6 million, and diluted EPS significantly increased to $3.19, with adjusted figures showing even stronger growth after excluding merger-related costs and accelerated trademark amortization Net Income and Earnings Per Share | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net income | $181.6 | $59.2 | | Net income attributable to common stockholders | $166.9 | $44.8 | | Diluted EPS | $3.19 | $0.87 | | Adjusted net income attributable to common stockholders | $189.8 | $74.1 | | Adjusted diluted EPS | $3.63 | $1.43 | - Preferred stock dividends remained consistent at **$14.4 million** for both periods[135](index=135&type=chunk) - Adjusted diluted EPS increased by **153.8%** year-over-year[98](index=98&type=chunk) [EBITDA, Adjusted EBITDA and Adjusted EBITDA margin %](index=28&type=section&id=EBITDA,%20Adjusted%20EBITDA%20and%20Adjusted%20EBITDA%20margin%20%25) This section reconciles net income to EBITDA and Adjusted EBITDA, demonstrating significant increases in both metrics for Q1 2022, with Adjusted EBITDA margin improving to 7.4%, reflecting strong operational performance and synergy realization EBITDA and Adjusted EBITDA Reconciliation | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended March 31, 2021 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | EBITDA | $329.9 | $177.3 | | Adjusted EBITDA | $364.1 | $216.5 | | Adjusted EBITDA margin % | 7.4% | 5.4% | - Adjusted EBITDA is defined as EBITDA before foreign exchange and other non-operating expenses (income), non-cash stock-based compensation expense, merger-related and integration costs, and net gain on divestitures[142](index=142&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Wesco manages its liquidity through working capital, IT investments, capital expenditures, acquisitions, and debt service, maintaining a mix of fixed and variable rate debt, and expects sufficient liquidity for the next 12 months, prioritizing debt reduction, integration, and potential acquisitions - As of March 31, 2022, Wesco had **$715.4 million** in total available liquidity, including credit facilities and cash[143](index=143&type=chunk) - Approximately **58%** of the company's debt portfolio was comprised of fixed rate debt as of March 31, 2022[146](index=146&type=chunk) Financial Leverage Ratio | Metric | As of March 31, 2022 | As of December 31, 2021 | | :---------------------- | :------------------- | :-------------------- | | Financial leverage ratio | 3.6 | 3.9 | - The financial leverage ratio has been reduced by **2.1** since the merger with Anixter[148](index=148&type=chunk) - Excess liquidity is expected to be directed primarily at debt reduction, integration activities, and potential acquisitions[147](index=147&type=chunk) [Seasonality](index=31&type=section&id=Seasonality) Wesco's operating results are not significantly affected by seasonal factors, although sales typically experience a reduced level of activity in the first and fourth quarters due to weather, with increases generally observed from March through October - Operating results are not significantly affected by seasonal factors[163](index=163&type=chunk) - Sales are usually affected by reduced activity in the first and fourth quarters due to weather, and typically increase from March through October[163](index=163&type=chunk) [Critical Accounting Estimates](index=31&type=section&id=Critical%20Accounting%20Estimates) There have been no significant changes to the critical accounting estimates previously disclosed in Wesco's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No significant changes to critical accounting estimates were reported[164](index=164&type=chunk) [Recent Accounting Standards](index=32&type=section&id=Recent%20Accounting%20Standards) For a description of recently adopted and recently issued accounting standards, refer to Note 2, 'Accounting Policies' of the unaudited Condensed Consolidated Financial Statements - Refer to Note 2, 'Accounting Policies' for details on recently adopted and issued accounting standards[167](index=167&type=chunk) [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements that are subject to known and unknown risks and uncertainties, including those related to the Wesco-Anixter transaction, integration challenges, market conditions, supply chain disruptions, inflation, and geopolitical events such as the Russia-Ukraine conflict - Statements are forward-looking and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[168](index=168&type=chunk) - Key risks include unexpected costs from the transaction, integration problems, ability to retain customers and personnel, achieving synergies, leverage, natural disasters, health epidemics (COVID-19), supply chain disruptions, inflationary cost pressures, and the impact of Russia's invasion of Ukraine[169](index=169&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) For a discussion of changes to the market risks previously disclosed, 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' within this report - Refer to Item 2 ('Management's Discussion and Analysis') and Item 1A ('Risk Factors') for disclosures regarding changes to market risks[170](index=170&type=chunk) [Item 4. Controls and Procedures.](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the principal executive and financial officers, concluded that Wesco's disclosure controls and procedures and internal control over financial reporting were effective as of March 31, 2022, with no material changes occurring during the quarterly period - Disclosure controls and procedures and internal control over financial reporting were effective as of March 31, 2022[171](index=171&type=chunk) - No material changes in internal control over financial reporting occurred during the quarterly period ended March 31, 2022[172](index=172&type=chunk) [PART II—OTHER INFORMATION](index=33&type=section&id=PART%20II—OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity security sales, and a list of exhibits for the report [Item 1. Legal Proceedings.](index=33&type=section&id=Item%201.%20Legal%20Proceedings.) Wesco is involved in various lawsuits and claims related to its business operations, as detailed in Note 10, but management does not anticipate that the ultimate outcome of these matters will have a material adverse effect on the company's financial condition or liquidity - The company is subject to various lawsuits and claims, including commercial, product, and employment matters[175](index=175&type=chunk) - Management believes the ultimate outcome of these matters is unlikely to have a **material adverse effect** on financial condition or liquidity[175](index=175&type=chunk) [Item 1A. Risk Factors.](index=33&type=section&id=Item%201A.%20Risk%20Factors.) Previously disclosed risk factors, such as political instability, armed conflict, trade sanctions, cybersecurity, economic instability, supply chain challenges, commodity pricing, and inflationary pressures, have been heightened by Russia's invasion of Ukraine in Q1 2022 - Existing risk factors, including political instability, armed conflict, and supply chain disruptions, have been heightened by Russia's invasion of Ukraine[176](index=176&type=chunk) - While Wesco's business has not been materially adversely affected to date, the situation remains unstable and uncertain, making future impacts unpredictable[176](index=176&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This section details issuer purchases of common stock during Q1 2022, totaling 136,180 shares at an average price of $123.31, primarily to satisfy tax withholding obligations arising from stock-based compensation awards Issuer Purchases of Common Stock | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------------- | :----------------------------- | :--------------------------- | | January 1 – January 31, 2022 | 3,600 | $129.49 | | February 1 – February 28, 2022 | 129,944 | $123.02 | | March 1 – March 31, 2022 | 2,636 | $129.04 | | **Total** | **136,180** | **$123.31** | - Shares were purchased to satisfy tax withholding obligations from the exercise of stock-settled stock appreciation rights and vesting of restricted stock units and performance-based awards[177](index=177&type=chunk) [Item 6. Exhibits.](index=33&type=section&id=Item%206.%20Exhibits.) This section lists all exhibits filed with the Form 10-Q, including material contracts, certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Rules 13a-14(a)/15d-14(a) and Section 906 of Sarbanes-Oxley Act), and various XBRL taxonomy documents - Exhibits include material contracts, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) [Signatures](index=35&type=section&id=Signatures) The Form 10-Q report was duly signed on May 6, 2022, by David S. Schulz, Executive Vice President and Chief Financial Officer, and Matthew S. Kulasa, Senior Vice President, Corporate Controller and Chief Accounting Officer - The report was signed on May 6, 2022[187](index=187&type=chunk) - Signatories include David S. Schulz (Executive Vice President and Chief Financial Officer) and Matthew S. Kulasa (Senior Vice President, Corporate Controller and Chief Accounting Officer)[187](index=187&type=chunk)

NYSE: WCC First Quarter 2022 Webcast Presentation May 5, 2022 Forward-Looking Statements All statements made herein that are not historical facts should be considered as forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These statements include, but are not limited to, statements regarding the expected benefits and costs of ...

WESCO International, Inc. (NYSE:WCC) Q1 2022 Earnings Conference Call May 5, 2022 10:00 AM ET Company Participants John Engel – President and Chief Executive Officer David Schulz – Executive Vice President and Chief Financial Officer William Ruthrauff – Director-Investor Relations & Communications Conference Call Participants Deane Dray – RBC Capital Sam Darkatsh – Raymond James David Manthey – Baird Nigel Coe – Wolfe Research Tommy Moll – Stephens Kenneth Newman – KeyBanc Operator Hello and welcome to toda ...