WESCO International(WCC) - 2021 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements 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 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 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] - 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] - 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][50] Note 8. Debt 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] Note 13. Business Segments 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) 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][126] - 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][145] - 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][157] - The financial leverage ratio improved to 4.9x as of March 31, 2021, down from 5.3x as of December 31, 2020[158][161] Results of Operations 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] - 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] - 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] Liquidity and Capital Resources 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] - The company redeemed $500 million of its 2021 Notes on January 14, 2021, using available cash and borrowings from credit facilities[156] - Capital expenditures for 2021 are expected to be between $100 million and $120 million, largely for systems integration and digital tools[157] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II—OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Exhibits 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][201][202] Signatures