WESCO International(WCC) - 2020 Q3 - Quarterly Report

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